Tough Times for Lab Companies Translate to Uneven Benchmarks

Publicly traded laboratories tracked by G2 Intelligence during the first quarter of 2013 showed uneven performance in a variety of benchmarks. Industry analysts have noted the laboratories have been beset by reimbursement reductions and other issues that have made the business environment more difficult than in years past. As a result, the strong benchmarking gains reported in prior years have mostly vanished. The two largest national laboratories, Quest Diagnostics (Madison, N.J.) and LabCorp (Burlington, N.C.), have been confronting flat earnings in recent years, and their current benchmark numbers tend to bear that out. For the first quarter of 2013, Quest’s revenue per employee was $43,576, compared to $56,148 per employee during the first quarter of 2012. Its pretax income per employee for the quarter was $4,795, versus $6,539 during the first quarter of 2013. LabCorp was slightly more stable but still down, reporting revenue per employee of $42,379 for the first quarter, compared to $45,912 for the first quarter of 2012. Its pretax income per employee was $7,787, versus $8,696 during the first quarter of 2013. The company with by far the largest employee-to-revenue ratio is Myriad Genetics (Salt Lake City), with $133,851 per employee during its fiscal third quarter, ending March 31. That’s up from $111,015 during the same period in 2012. Pretax income per employee was $50,677 for the quarter, compared to $40,616 for the year-ago quarter (for the performance benchmark for all labs, please see the accompanying chart).

Benchmarking Data for Major U.S. Laboratories
Lab	1Q 2013 Revenue per employee	1Q 2012 Revenue per employee	1Q 2013 Pretax income per employee	1Q2012 Pretax income per employee	1Q 2013 Provision for Bad Debt	1Q 2012 Provision for Bad Debt	1Q 2013 Days Sales Outstanding	1Q 2012 Days Sales Outstanding
Quest	$43,576	$56,148	$4,795	$6,539	$71.93 million	$80.7 million	46.0	44.0
LabCorp	$42,379	$45,912	$7,787	$8,696	$198.4 million	$191.5 million	50.0	46.0
Myriad Genetics*	$133,851	$111,015	$50,677	$40,617	$6.3 million	$4.6 million	55.5	45.0
Bio-Reference	$64,729	$55,555	$7,408	$6,152	$5.4 million	$3.4 million	89.0	88.0
NeoGenomics	$59,532	$57,642	$76	$2,293	$3.6 million	$3 million	90.8	64.1
Psychemedics	$48,731	$47,301	$9,800	$10,434	$123,445.00	$121,583.00	73.8	70.7
Enzo Biochem**	$48,808	$56,045	-$12,544	-$7,462	$1.33 million	$1.17 million	53.1	48.7
*Fiscal quarter ending March 30 **Fiscal quarter ending Jan. 31 Sources: SEC filings, company press releases, Gurufocus.com

  Except for Quest and Enzo Biochem (New York City), provisions for doubtful accounts/bad debt increased among all the companies surveyed were up during the first quarter of 2013, some considerably. Quest cut its total to $71.93 million versus $80.7 million compared to a year ago, a reduction of 10 percent. LabCorp’s increased to $198.4 million during the quarter, up from $191.5 million for the first quarter of 2012. Myriad Genetics’ (Salt Lake City) provision also increased significantly, to $6.3 million versus $4.6 million, an increase of 37 percent. Bio-Reference Laboratory (Elmwood Park, N.J.), reported that its bad debt provision increased to $5.4 million for the first six months of its fiscal year, ending April 30, up 59 percent from the $3.4 million reported for the first six months of fiscal 2012. Neogenomics (Irvine, Calif.) reported a 20 percent increase, to $3.6 million from $3 million. Days sales outstanding were also up for most of the laboratories surveyed. For Quest, it increased to 46 days from 44. LabCorp reported a bigger increase, to 50.1 days versus 46 days in the year-ago quarter. Myriad Genetics reported an increase to 55.5 days, versus 45 days. It noted in a recent filing with the Securities and Exchange Commission that recent delayed Medicare payments from the regional third-party administrator, Noridian, were partly to blame, and it expected its DSO would decrease once issues were resolved in that area.