Earnings Call Transcript - DGX Q1 2021

Operator, Operator

Good morning. Welcome to the Quest Diagnostics First Quarter 2021 Conference Call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and question-and-answer session that will follow, are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited.

Shawn Bevec, Senior Vice President

Thank you and good morning. I’m here with Steve Rusckowski, our Chairman, Chief Executive Officer and President; and Mark Guinan, our Chief Financial Officer. During this call, we may make forward-looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to earnings press release. Actual results may differ materially from those projected. Risks and uncertainties including the impact of the COVID-19 pandemic that may affect Quest Diagnostics' future results include, but are not limited to those described in our most recent Annual Report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, and current reports on Form 8-K. The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows, and/or its financial condition will be primarily driven by: the pandemic’s severity and duration; healthcare-insured, government, and client-payer reimbursement rates for COVID-19 molecular tests; the pandemic’s impact on the US healthcare system and the US economy; and the timing, scope, and effectiveness of federal, state and local governmental responses to the pandemic, which are drivers beyond the company’s knowledge and control. For this call, references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS. References to base testing volumes or base business refer to testing volumes, excluding COVID-19 testing. Growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth are compound annual growth rates. Finally, revenue growth rates from acquisitions will be measured against our base business. Now, here is Steve Rusckowski.

Steve Rusckowski, CEO

Thanks, Shawn, and thanks everyone for joining us today. Quest had a strong first quarter with our base businesses continuing to recover to near pre-pandemic levels. Contributions from acquisitions and PLS relationships accelerated growth in the base business and helped offset the reduction in demand for COVID-19 testing, which was in line with industry trends. In March, for the first time since the pandemic began, monthly organic revenue in the base business grew versus our 2019 baseline. As we noted at our recent Investor Day, Quest is well positioned to grow as the US exits the pandemic and people return to normal activities and address the routine care issues that have been neglected over the past year.

Mark Guinan, CFO

Thanks, Steve. In the first quarter, consolidated revenues were $2.72 billion, up 49% versus the prior year. Revenues for diagnostic information services grew approximately 52%, compared to the prior year, which reflected ongoing demand for COVID-19 testing services and, to a lesser extent, continued recovery in our base testing revenue, which increased versus the prior year. Volume, measured by the number of requisitions, increased 25.6% versus the prior year, with acquisitions contributing 4%. The impact of severe winter weather during the quarter negatively impacted volumes by approximately 2.5%. Compared to our first quarter 2019 baseline, total base testing volumes increased 1.5% and benefited from M&A and new PLS partnerships that began in 2020. Excluding the net impact of weather in the first quarter, as well as M&A and new PLS wins over the last year, base testing volumes declined approximately 7% in the first quarter versus the 2019 baseline and down 5% in March. This represents more of a same-store view of the recovery in our base business since the pandemic began. While COVID-19 testing volumes declined faster than expected throughout Q1, the decline coincided with reduced demand across the industry. Importantly, these volumes have stabilized over the last several weeks. We conducted approximately 9.1 million molecular tests and nearly 900,000 serology tests, contributing nearly 21% to volume growth in Q1 versus the prior year. We exited the first quarter averaging approximately 73,000 COVID-19 molecular tests and 8,000 serology tests per day.

Steve Rusckowski, CEO

Thanks, Mark. And to summarize, we're off to a very strong start in 2021. Our base business continues to recover back to near pre-pandemic levels as people address the routine care issues that they have neglected over the past year. And finally, I'd just like to thank all Quest employees who continue to serve the needs of people who rely on Quest every day. And so with that, we'd be happy to take your questions. Operator?

Operator, Operator

Thank you. We will now open it up to questions. At the request of the company, we ask that you please limit yourself to one question. If you have additional questions, we ask that you please fall back in the queue. Our first question comes from Kevin Caliendo with UBS. Your line is open.

Kevin Caliendo, Analyst

Hi. Thanks for taking my call.

Steve Rusckowski, CEO

Hi, Kevin.

Kevin Caliendo, Analyst

Yeah. Good morning. So I guess, some of the commentary around Q2, I want to understand the expectation, it looked like March, the base business was up year-over-year, and your guidance is suggesting that Q2 would be down year-over-year. You don't expect it to recover fully. Is there anything that changed, or was March an anomaly? Sort of, take us through what you're seeing in the base business in terms of volumes?

Steve Rusckowski, CEO

Mark?

Mark Guinan, CFO

Sure. Kevin, when we discuss the base business, I apologize for any confusion regarding its increase in March. That increase included significant new PLS wins and also came from M&A activities. Therefore, the total base business figure is not purely organic. We aimed to clarify what we refer to as same-store numbers, which compare apples to apples against 2019, to give you an idea of our expectations for utilization. This is separate from the new significant PLS wins and M&A, as we focus on the performance of the base business. When we mention that we expect a slight decline in Q2, we are referring specifically to that organic non-PLS utilization, same-store figure, rather than our overall base business performance.

Steve Rusckowski, CEO

So Mark, it’d be good to share our implied view on what's going to happen with COVID testing in Q2.

Mark Guinan, CFO

Yeah. So we talked about 100,000 a day in Q1. We talked about an expectation of about 50,000. We also shared that we exited Q1 over 70,000, so that would imply a significant ramp down throughout the second quarter. And that's based on our expectation that vaccines will continue to roll out, we'll get more and more people who'll be protected and less and less clinical demand. And of course, we'll see how that plays out, but that is certainly within the guidance that we're providing today, how we see the next several months.

Steve Rusckowski, CEO

So if you assume Kevin, our base business, it would include acquisitions in PLS and organic growth. But let's just focus on organic growth. The steady improvement that we've seen in Q1 continues in Q2. And then it's somewhat offset by what we are anticipating with COVID, and that gives us the expectation around ranges of guidance in the second quarter. So hopefully, that's helpful.

Mark Guinan, CFO

To wrap up, Kevin, I want to highlight the numbers we provided for Q1, which showed a decrease of 7% in same-store performance. March was clearly better than that figure, while February faced challenges due to the weather as we noted. However, we anticipate that the 7% decline will improve throughout Q2, even though we do not expect to reach positive growth just yet.

Operator, Operator

Our next question comes from Erin Wright with Credit Suisse. Your line is open.

Erin Wright, Analyst

Thanks.

Steve Rusckowski, CEO

Hi, Erin.

Erin Wright, Analyst

Capital deployment is still one of the biggest questions we're getting from investors. Are there any meaningful changes now in your view from an M&A pipeline perspective? And what's assumed in guidance in terms of inorganic growth? And longer term, here over the next few years, do you anticipate the pace of consolidation across the lab industry to accelerate, or do you anticipate a similar pace to what we've seen historically? And just somewhat tied to that as well, I mean, how should we be thinking about the broader excess capacity across the competitive landscape post-COVID? And how does that impact your positioning?

Mark Guinan, CFO

Hey, Steve, let me take the guidance question first, and then I'll turn it over to you. So Erin, our current guidance, obviously, is only through the second quarter, and we're not counting on any M&A that hasn't already been transacted. And even the deal that we announced, Mercy, is not going to close and generate any significant volume or revenue in the second quarter. So the current guidance does not anticipate future M&A.

Steve Rusckowski, CEO

Yeah. So we feel good about the discussions and the funnel of prospects we have for what we have characterized as our hospital strategy. There continues to be a lot of pressure on these pre-delivery systems. They are considering their last strategy as one of the options to help them. And we have a number of examples over the past six months on delivering on the strategies that we've talked about for years. And so the answer to your question is we do see a continuation of interest in the building funnel with more prospects to come. What we shared at Investor Day is we reaffirmed our outlook that we would grow through acquisition around 2% per year. What we shared is that we historically have delivered on that at the three years prior to 2021. And we believe that's still a good guidance number for us for this year, and going forward, it's implied in our outlook for growth. So finally, as we do see the trends in general, just like all health care, on consolidation. We do see systems interested in thinking about what's most important to them. And what's your strategy and Quest help them with their lab strategy. And likewise, we see, if you will, fewer and fewer in-network providers with the health clients. And if you want to think about that, that is a consolidation play as well. And when those two forces happen, there will be more share in the hands of fewer, and our plan is to gain share. So all the megatrends and changes that are happening in the industry, we believe have actually improved to support what we've said for some time, and that our view is both for what's happening with hospitals and also what's happening with health plans.

Operator, Operator

Our next question comes from Pito Chickering with Deutsche Bank. Your line is open.

Pito Chickering, Analyst

Good morning, guys. Thanks for taking my questions. Within the routine market, can you give us some more color on the strengths and weaknesses in different parts of the country? Looking at your customers, can you give us some color on doc offices versus hospitals versus the baseline and their routine tests? Any details you can give us on what types of test are normalizing and sort of what are the laggard areas?

Steve Rusckowski, CEO

Sure. So let me take a run around all the different customers the way we look at the market. So geographically, we have seen good recovery in Texas and the Southwest. We're actually seeing, really in the last several weeks, starting to see a much better recovery in California on the West Coast, which is good news. We see the Southeast starting to recover and bring us back to the 2019 levels that we spoke to earlier. So I would say those are moving in the right direction. Now, the offset to that is we've seen spikes and hotspots in the Midwest and when that happens in the lockdowns and people become concerned about going into health care delivery, that's going to affect our business. So we've seen some of that, let’s say, in the Midwest. And then finally the Northeast, including New York and Pennsylvania and going into New England. It's still behind and recovering slowly, but we're the most off, if you will, in the Northeast. So that's the geographic swing. As far as physician business versus hospital business, the hospital business is actually very close to where we were. We're encouraged by that. We see admissions getting back to 2019 levels. We see outpatient procedures getting back to 2019 levels. So that business is tracking nicely compared to where we were. And then the physician side, it all depends on what type of physician. Primary care is starting to turn on, oncology, particularly those that have postponed diagnosis and treatment for oncology, starting to turn on. At the same time, we still see our prescription drug monitoring business or mental health and behavioral health and drugs and abuse still down versus where we were at 2019. And that's an issue that varies by state. So that gives you a feel for what's going on geographically, with the type of physician, but also by what we describe as clinical franchises. Mark, anything you’d like to add?

Mark Guinan, CFO

No, I think that's a good summary, Steve. Thanks.

Steve Rusckowski, CEO

Yeah.

Operator, Operator

Our next question comes from Ralph Giacobbe with Citi. Your line is open.

Ralph Giacobbe, Analyst

Good morning.

Steve Rusckowski, CEO

Good morning.

Ralph Giacobbe, Analyst

Thanks. Good morning. The higher revenue guidance, just want to understand, is that upside from Q1? Because it sounded like COVID was maybe lower than you had expected. So just trying to understand if it reflects assumption of better core, or is it deals? Just maybe color there, reconciling the higher revenue? And then second, is the ASR included in the guidance? Because just based on the revenue increase and running through recent margin performance, it doesn't look like that's factored in, or otherwise, there would be an assumption of much lower margin. So I'm just trying to reconcile that as well. Thanks.

Mark Guinan, CFO

Yes. So let me take a shot at that, Ralph, thanks. The higher revenue is absolutely driven by stronger-than-expected recovery in the base business. So as you point out, we've acknowledged every couple of weeks that COVID testing has ramped down faster than we had anticipated throughout the first quarter. We continue to expect to have that ramp down, but the base business has recovered stronger, which is most certainly more than offset on the revenue side. In terms of the ASR, it is in the guidance. I just want to remind everyone that we have committed to $900 million in share repurchases that was already in the guidance for the first half. We did $410 million in Q1. And then part of the ASR is related to the proceeds from the sale of our 40% ownership in our JV with IQVIA, and that is slightly accretive when you consider the loss of the equity earnings. So you need to look at over $600 million of the ASR as really offsetting the foregoing those equity earnings. We had already committed to $900 million in the previous guide in the first half, so almost $500 million there. So when you combine that, the share repurchases are really just up by several hundred million. So I want to make sure everyone is clear on the math there. So it is reflected in the guidance.

Operator, Operator

Our next question comes from Brian Tanquilut with Jefferies. Your line is open.

Brian Tanquilut, Analyst

Hey, good morning, guys, congrats on the quarter. I guess, my question for you guys, Steve, as you think about what you saw in Q1, specifically in March with the assumption of volumes in the core. What are you seeing in terms of acuity levels, like the number of tests per requisition, or even revenue per requisition that you saw in March? Is that carrying over already into April? Just any color you can share with us on that? Thank you.

Steve Rusckowski, CEO

Yeah. So thanks, appreciate the question. Mark was encouraging, and we're watching April carefully. And we do look at the number of tests per requisition to see if we're getting more density, if you will, of testing for requisition, and we talked about new made explanations for the increase in the calculation of revenue per requisition which have to do with the COVID test, the straight calculation. But we have historically seen a modest expansion of the newer tests for a variety of reasons; we offer more. Second, there is a higher level of acuity and chronic disease with the aging population. So we have generally seen a general increase in that. But nothing that was really notable is standing out within March.

Operator, Operator

Our next question comes from Jack Meehan with Nephron Research. Your line is open.

Jack Meehan, Analyst

Good morning. I was wondering if you could give us an update around your thinking around COVID testing for the second half of the year? What do you expect in terms of the base in terms of testing levels, and then also if you can give us an update as to how you think the school testing opportunity could shake out? You referenced that at the beginning. How do you feel your positioning is for the upcoming awards there?

Steve Rusckowski, CEO

Yeah. So you go back to where we started off the year. What we said is we do expect COVID, PCR testing to decline throughout the year, and we mentioned in our remarks, you could see that in Q1, and we see it happening in the country. So as Mark said earlier, we do expect that continuing trend in Q2, and that will continue into the second half. Now with a little bit offset, we do see this transition from what we described as more clinical uses of the PCR testing, roll in and roll out COVID for hospitals, roll in, roll out patients seeing their physicians and moving it to return to life activities, and there's a lot of activity around that, Jack. A lot of activity; I mentioned in the remarks, what's going on around schools. There's two funding mechanisms for that from the U.S. government. We've actively engaged with a number of, let's call it, systems integrators that will be coordinating the efforts beyond the laboratory testing. We're well-positioned there. Secondly, corporations are now thinking about how they get people back physically into their places of work, maybe albeit not as full-time as they want for. But despite the vaccination progress, there are still going to be testing requirements with the return to work activities. And then let me just say the entertainment piece of this is big too. We see the sports teams wanting to put fans back in the stands. We see New York City interested in getting people back. The tourism as they get into the fall and turning back on the city, we mentioned in our prior remarks and other calls and meetings that we participated in this pilot study with New York to provide a check, if you will, provide access for an individual over the course of the day. So that type of activity will be a larger portion of what we do for COVID testing in the back half. Now with all that said, we're not providing guidance for the back half, but we do see continued PCR testing in the back half, but it's going to change in this nature. And also, we do believe COVID-19 testing and PCR testing will continue in 2022. This is not going away fast.

Operator, Operator

Our next question comes from Matt Larew with William Blair. Your line is open.

Matt Larew, Analyst

Hey, good morning, Matt.

Steve Rusckowski, CEO

Hey, good morning, Matt.

Matt Larew, Analyst

Thanks for – yeah, good morning. Thanks for taking my question. I guess, maybe a two-part. The first would just be a follow-up to Jack's question, Steve. In terms of how much of that return to life testing opportunity really is going to be in a sort of a reference lab setting with the day or two turnaround time versus a point-of-care setting. But my question though was about the consumer market. I just wanted to get your take on sort of the PWN Everlywell combination and if that changes any of your approach or the competitive dynamics in that space?

Steve Rusckowski, CEO

Yeah. So first of all, as you know, not all tests are created equal. And PCR still is the gold standard. And we do provide a solution with antigen testing, okay, as part of appropriate utilization of that testing, particularly for surveillance. But as we know, the antigen testing's sensitivity and specificity have been for, let's say, days two through day five of a potentially infected person. But the PCR test is really the gold standard to rollout, if someone has been exposed in the early days, there were rule out the pick are exposed in the late days. And so the sensitivity and specificity we have with our PCR testing is quite good. And so physicians sell that, and therefore, that’s why we're so confident that it will continue to be an important part of how we fight this pandemic. As far as the consumer, the consumers are trying to figure out to get easy access to testing, and they will get that access in a variety of forms. And by the way, our turnaround time is now for PCR testing are much better on average than the two-ish days that we often thought about several months ago. We're now delivering results in less than a day for many tests that come in. And the reason for that is, remember the remarks we're testing about 101,000 tests per day, and we have approximately 300,000 per day for capacity. So that allows us to have much better turnaround times, which we believe, as that becomes more and more visible and people want to get good access to the gold standard, they're going to rely on those places they can get access. So we continue our relationships with retailers. We're expanding our relationship with CVS has gone quite well. CVS is active on promoting good access to PCR testing around the drive-thrus and Walmart as well. And then also with our direct-to-Quest capability that we talked about at our Investor Day, we have put on that platform, both PCR testing as well as serology testing. And we are seeing high levels of interest from a consumer perspective of what they could do simply by getting a collection kit in the mail and a FedEx envelope to ship that back with good turnaround tied to start up of MyQuest. So that will continue to build, as the consumers start to return to life in a safe way. I want to be assured that even if they are vaccinated or they have natural immunity, we are not locking into a situation that they might have been exposed in some ways that they fell through the cracks with all the caveats we have with the effectiveness of the vaccines, the questions about natural immunity, and then also, with the new variants as well. So because of that, we keep on working on better and more efficient and easier ways for Americans to get access to PCR testing. And we've got now, I think, a lot of good chance to do that, and that will continue to be an opportunity for us in the back half.

Mark Guinan, CFO

Yeah. And Steve, I'd like to add. I want to make sure that Matt and others understand how the surveillance works. And in this case, when you pool, you get the economics to where it's affordable to do more broadly and more regularly, because we're going to be putting up to 10 individual samples in a single well. And so hence, the cost will be 10% or less per individual. And what you sacrifice is it's not a diagnostic, because we're not going to have the individuals identified in that well. The school or the entity that provides us the sample will have tool that they will know in test through that who the 10 people are. And if we come back to them with a positive result, they will apply a real diagnostic to those 10 individuals. So with that, we also don't have the obligation or the ability to retest. Whereas today, when we do pooling for clinical purposes, if we get a positive, we have to go back and retest the individual samples, so it actually is an inefficiency in our process. In order to get this to work, we don't do retesting of a sample. We don't have the capability of doing that. We notify the submitting entity that we had a positive in one of the pooled collection specimen tubes, and then they go forward and test those individuals.

Operator, Operator

Our next question comes from Tycho Peterson with JPMorgan. Your line is open.

Steve Rusckowski, CEO

Good morning. Hey, Tycho.

Mark Guinan, CFO

Tycho, you’re on mute.

Steve Rusckowski, CEO

You’re on mute.

Unidentified Analyst, Analyst

Hi. Sorry about that. This is Casey in for Tycho. Can you give us some color as to what the implied operating margin is for the EPS guide? And sort of what's the upside from the ASR? And then just on serology, can you talk a little bit about you're not modeling a decrease in Q2 from Q1, but PCR is going down. Can we assume the same level of serology testing throughout the back half of the year and explain maybe what the resilience is there? Thanks.

Steve Rusckowski, CEO

Mark, do you want to talk about the ASR?

Mark Guinan, CFO

The ASR is included in our updated guidance, so there is no additional upside compared to before we announced the ASR. As I explained, about $400 million of the repurchases are truly incremental in terms of an EPS lift since we had already committed to the full $900 million, and we had about $500 million remaining in Q2 that was included in the guidance. Therefore, the $1.5 billion adjusts to $1 billion in increments. A little over $600 million of that comes from the proceeds of our divestiture in Q2, which is slightly accretive but not significantly relevant to the mature equity earnings. Thus, it's really less than $400 million of share repurchases that are incremental to what we previously guided to, and that is factored into the updated guidance. Regarding the implied operating margin, we have a range, so we cannot provide a precise answer. However, if you take the midpoint, you can calculate it. As we anticipate a lower mix of COVID testing at the assumed $100 reimbursement, the realization in AWR is below that price point, and the mix leans toward the base business, which will slightly erode the margin. The good news is that if the base business recovers, we have significant leverage, which means the benefits from that recovery are likely to be much greater compared to our enterprise and historical fully loaded operating margin, although not quite as high as with COVID PCR testing.

Steve Rusckowski, CEO

Yeah. Serology, we imply that it will continue at the same level. We are pushing on the value of serology going forward. We believe that the semi-quant capability that we offer has nice insight into what response is happening in patients in general with the virus, and therefore, that has value. We also believe that between historic PCR and serology, knowing that you've had the virus is important for Americans to know, so we keep pushing on the value. We will continue to look at new tests beyond that. We will be immune response long-term, including T cells. We don't have that, but we continue to look at that as a prospect. So you should assume for now it's stable with what we've seen so far, but we continue to believe that's more and more valuable in the quarter. We continue to work on developing the test to support that.

Operator, Operator

Our next question comes from Ricky Goldwasser with Morgan Stanley. Your line is open.

Ricky Goldwasser, Analyst

Yeah, hi. Good morning. So two questions because I wanted to follow up. So when we think about the first half guidance, it does imply that meaningful operating income sequential decline. I fully realize you're still not giving second half guidance. But just to maybe everybody on the call, sorted, some sort of a framework as we think about a more normalized pace of the core business. How should we think about that margin headwind? I think it's just going to help us all as we think about the second half modeling. That's first. And then second, more is like long-term strategically. We're hearing the payers talk a lot about digital-first strategies and being like the front door to health care you guys talked about expanding your relationship with payers like Anthem. So are you having any conversations with payers on how you can be part of that digital-first strategy in those digital networks? And if so, do you see that as an opportunity to accelerate more narrow networks that will drive volume toward you, and actually, would that require any additional investments or you think you have the infrastructure for that already?

Steve Rusckowski, CEO

Mark, you take the first one, I'll take the second one.

Mark Guinan, CFO

Sure, Steve. Thanks for that, Ricky. Again, just to reiterate, the first half, we delivered over 100,000 PCR COVID tests per day. We're assuming half that in Q2. So that's certainly contributing to the margin decline, as you talked about, implied in the guidance for the first half, implicitly in Q2. When you think about the base business, we're still uncertain how all those moving parts will play out in the second half, which is why we've not provided second half guidance; we want to wait until we can confidently give guidance that we're highly confident will be delivered. So what I would point to is that's the transition period, really look at an Investor Day and how we talked about 2022. And talking about getting our base business fully recovered by the end of this year, back to growth through the growth pillars and back to a margin level pre-pandemic and then obviously improving beyond that, as we talked about a CAGR where our bottom line grows significantly faster than our top line by 700 basis points. So we feel very confident in the earnings power of the base business. Certainly, we're going to have a step down from the pandemic bubble, where we did several billion dollars of COVID testing last year and significant COVID testing this year. But the base business should be very healthy coming out of the pandemic once COVID testing drops to a minimal level. We'll be right back to the operating rhythm. Our expectation is that you saw early in 2019 when we were growing a business in January, February, more than 5% on a volume basis, and you saw strong improvements in our operating margin.

Steve Rusckowski, CEO

Yeah. Just to transition. So as you recall in our Investor Day, we went through a walk, if you will, to bridge you from the pandemic years of 2020 and 2021 into 2022. Mark went through a chart with some math, which gave you kind of our indication for 2022. And also, as I said earlier, we do believe there will be some COVID testing, but the base business will be recovering, and we'll get growing – going forward in 2022 based on our outlook. So on the last question you had, Rick, you have to deal with the digital front end and digital-first, and we're excited about this because we're very well positioned. This isn't something that we have just started working on. We've been working on it for a while. First of all, if you go back to a large provider like Quest, we're very much embedded in the ecosystem of connectivity already. We have over 500 interfaces of all the different electronic medical records, obviously, that's the big players like the Cerner, but there's hundreds of others. And so therefore, we have a real strong interoperability capability. And that's helpful because when you're in the workflow, from a disposition perspective, that allows you to streamline the different service offerings like laboratory to fewer players. Secondly, this past year, we've seen the acceptance, if you will, of telehealth, it has been growing nicely but explosively, and we did see explosive growth in 2020 and we believe that overall, that acceptance, if you will, of that front end, be an accepted way to first engage with healthcare that this system will continue. And the payers are working on that and providers are working on that, and they're working with other partners, and we're very well positioned with those other partners. So who are those partners? Those partners are some of the telehealth companies that you know. And those telehealth companies, as they become much more indebted in healthcare delivery, let's call the digital equipment, will rely on a fewer number of laboratory service providers, and therefore, we're very well positioned as more of a small handful of what just described as a deferred lab network that we are ready with United, but for this new world that we see. And with all that, we do believe that our direct-to-consumer initiative will have an opportunity as well, because consumers equally are wanting to engage with upgrade delivery. They not always need to engage with this physician. And therefore, with the prospects we see of growing that business and the opportunity for consumers to serve themselves, if you will, which is a big opportunity for us. As far as investment, we are investing. We were fortunate enough to have the capabilities in 2020 and 2021. If you again go back to what we shared at Investor Day, we said we're investing about $75 million over a period over the last two years, 2020 and 2021. Some portion of that is related to what we're discussing here. And so, we're not rate limited by investments. We're rate limited by logistics time to get some traction, and we're very well positioned with the telehealth companies, very well positioned with the plans. And yes, we do see a change. And yes, this will allow us, again, to gain share as we go forward because they can't do this with tens of laboratories, they can only do it with a select group like us. So we have another question?

Shawn Bevec, Senior Vice President

Operator?

Operator, Operator

Our next question comes from Derik De Bruin with Bank of America. Your line is open.

Derik De Bruin, Analyst

Hi. Good morning.

Steve Rusckowski, CEO

Hi, Derik.

Derik De Bruin, Analyst

Thank you for the question. I have two inquiries. First, I noticed that during the Danaher call earlier, they significantly increased their COVID testing guidance for the year and provided a very positive outlook for 2022. My first question is about the transition from decentralized testing to point-of-care testing. Is some of the volume decrease related to the increase in point-of-care platforms and their ramping capacity, resulting in a shift away from central labs? Secondly, considering that you are conducting around 100,000 tests with a capacity of 300,000, how are you optimizing that capacity? Are you scaling back your IVD platforms compared to your LDT platforms, assuming that IVDs are less profitable? I would appreciate some insights into how you’re making use of your installed base. Thank you.

Steve Rusckowski, CEO

Yes. So the first part, yes, we did see an increase in the availability and use of the antigen testing and point-of-care testing throughout the last 12 months that clearly has picked up in the back half of 2020. We see that continue in 2021. So if you look at the industry trackers of how much testing we are doing in this country, clearly it has dropped off, and therefore, volumes have dropped off as well. We believe in those tracking mechanisms, it's predominantly PCR. However, we think there could be some point-of-care antigen testing in there, but we believe it does not include all the testing that’s happening. So if you look at it, look, happy for PCR testing throughout the United States and if you look at the excellence that are coming from these point-of-care and antigen providers, you see that the actual level of testing is almost at the same level that we were in the summer, but in different forms. So the answer to your question is, yes, there is a transition from PCR is exclusively what we have to more of the capabilities around point-of-care and antigen testing. However, going back to what I said, all tests are not created equal. And so we're also working with clients to make sure they realize where antigen testing can be helpful for a period of time. And also where you can use point-of-care, and costs are not all created equal. So it has come down because of what we described, but there continues to be a strong role for PCR through the remainder of 2021 and also into 2022.

Operator, Operator

Our next question comes from Pito Chickering with Deutsche Bank. Your line is open.

Pito Chickering, Analyst

Hey, guys, thanks for the follow-up question here. Could you give us a little more details on the changes of what the UnitedHealthcare did for out-of-network providers in the quarter? What markets did they make this change in? What impacts did you see in your volumes from these changes? Thanks so much.

Steve Rusckowski, CEO

Yeah. So what we have been working on as a journey to pick up share, if you will, it can be mated what we shared in March at our Investor Day is we kicked off the network program in 2019. We saw good progress there. We're actually very encouraged by what we saw in 2020; it was very early days, and then we had the pandemic. But it didn't stop our activity. So what we shared is we actually picked up some share over that period of time, but we have more share to gain. And there's a list of activities we're working with United to support picking up share and getting it to at least that 25% level, one of which is what we're providing is limiting the other network policy and benefit design for their fully insured book. And where that has happened because we have other examples of the topic, it does move share to us. We don't provide specifics on states and specifics on how much did this contribute to share. But it did have a nice impact for us to allow us to pick up share. And so we continue that market. But I'll also share that we didn't share everything we're doing. There are many other programs, and some of this is working with their plan sponsors, their employers; some of this is working with their regions, specific opportunities with providers. When we do an outreach purchase and relationship within the geography, we work on effectively moving to a networked venue to a less expensive venue, which is Quest, and all of those are active relationships that we have to continue to build share with United and other payers is equally we will continue to work programs with the Anthem and others.

Operator, Operator

Our last question comes from Eugene Kim with Wolfe Research. Your line is open.

Eugene Kim, Analyst

Hi, good morning. Regarding 2022, at the Investor Day, the company indicated a baseline EPS range of $7.40 to $8, and I think it leans towards the higher end of that range. This was based on the assumption that the base business would recover to pre-pandemic levels by the end of the year. Given that the recovery might happen sooner than expected, how should we reevaluate the range you provided at the Investor Day? Thanks.

Steve Rusckowski, CEO

Mark?

Mark Guinan, CFO

I'm not in a position to provide an update on what we shared at Investor Day, as that could lead to a regular expectation for updates. The next time we will comment will be when we give guidance for 2022. There are many factors to consider, such as the ongoing level of COVID testing, reimbursement rates, and the status of the base business. When we gave the EPS estimate of $7.48, we anticipated the base business would fully recover this year, returning to the 2019 baseline and beginning to grow. However, the pace of initiatives from various payers, including not only United but also Anthem and others, along with the economy and potential expansion of covered lives, will influence this. We'll have a clearer picture by the end of the year before issuing guidance for 2022. A stronger recovery of the base business is positive, but I wouldn't conclude that a faster decline in COVID testing indicates anything specific for 2022, as we expect it to remain present, albeit not at the levels observed in 2020 and 2021. Additionally, we recently announced the ASR, adding further complexity. We will update on 2022 when we release our guidance. Our aim was to provide clarity at Investor Day since the pandemic has complicated the understanding of our long-term earnings potential, making it crucial to comment specifically on 2022.

Shawn Bevec, Senior Vice President

Good. So I think we've covered all the questions. We appreciate you joining the call. We appreciate your continued support, and have a great day, everybody. Take care.

Operator, Operator

Thank you for participating in the Quest Diagnostics first quarter 2021 conference call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics' website at www.questdiagnostics.com. A replay of the call may be accessed online at www.questdiagnostics.com/investor or by phone at 888-566-0490 for domestic callers or 203-369-3053 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern time on April 22, 2021, until midnight Eastern time, May 6, 2021. Goodbye.