Quest Diagnostics Incorporated (DGX) CEO Steve Rusckowski on Q4 2020 Results - Earnings Call Transcript

Quest Diagnostics Incorporated (NYSE:DGX) Q4 2020 Earnings Conference Call February 4, 2021 8:30 AM ET

Company Participants

Shawn Bevec - Vice President, Investor Relations

Steve Rusckowski - Chairman, President and Chief Executive Officer

Mark Guinan - Chief Financial Officer

Conference Call Participants

Ralph Giacobbe - Citi

Justin Bowers - Deutsche Bank

Jack Meehan - Nephron Research

Adam Noble - UBS

Eugene Kim - Wolfe Research

Derik de Bruin - Bank of America

Lisa Gill - J.P. Morgan

Matt Larew - William Blair

Dan Leonard - Wells Fargo

Ricky Goldwasser - Morgan Stanley

Erin Wright - Credit Suisse

Brian Tanquilut - Jefferies

Operator

Welcome to the Quest Diagnostics Fourth Quarter and Full-Year 2020 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.

Now, I’d like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Shawn Bevec

Thank you and good morning. I’m on the line 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 our 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 insurer, government and client payer reimbursement rates for COVID-19 molecular tests, the pandemic’s impact on the U.S. healthcare system and the U.S. 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 from continuing operations and references to adjusted EPS refer to adjusted diluted EPS from continuing operations. References to base testing volumes or base business refer to testing volumes, excluding COVID-19 molecular and serology testing volumes.

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 compounded annual growth rates. Finally, revenue growth rates from acquisitions will be measured against our base business.

Now, here is Steve Rusckowski.

Steve Rusckowski

Thanks Shawn, and thanks everyone for joining us today. So, in the year dominated by the pandemic, Quest brought critical COVID-19 testing to our country, and delivered record revenues, earnings, and cash from operations for the fourth quarter and the full-year 2020. The pandemic has tested our nearly 50,000 employees and they have responded as heroes, by developing COVID-19 tests, building test capacity, innovating new testing models with our retail partners, transporting specimens, delivering results, and of course, supporting our customers.

We finished the year as one of the country’s leading providers of COVID-19 testing. I’m very proud of what we have achieved and optimistic about what we can accomplish in 2021. So, this morning I’ll discuss our performance for the fourth quarter and full-year 2020, our ongoing role in the COVID-19 pandemic, and update you on our non-COVID base business and then Mark will provide more detail on our financial results and our financial outlook for the first half of 2021.

So, before we get into the details of the quarter and the full-year 2020, we wanted to share our perspective on the new strategy for fighting the COVID-19 pandemic proposed by the new administration. We are pleased by the efforts to expand access to testing across the country, especially in the underserved communities where there are known disparities in health care.

We support the new administration’s approach to controlling the pandemic by expanding the availability of testing supplies; enhancing laboratory testing capacity; and ensuring a clarity of messaging about the use of tests and insurance coverage. We also support the efforts of COVID-19 pandemic testing board and we look forward to additional details in days and weeks ahead.

Now turning to our results, continued high demand for COVID-19 testing drove our performance throughout the quarter and the second half of the year. For the fourth quarter, total revenues grew by more than 55% to $3 billion, earnings per share increased by more than 126% on a reported basis to $4.21 and nearly 168% on an adjusted basis to $4.48.

For the full-year 2020, total revenues grew by more than 22% to $9.44 billion, earnings per share increased by nearly 71% on a reported basis to $10.47, and more than 70% on an adjusted basis to $11.18.

Cash provided by operations increased by more than 61% to $2 billion. We announced today that we are increasing our quarterly dividend by 10.7% to $0.62 per quarter. This is our tenth increase since 2011. Additionally, our Board of Directors has increased our share repurchase authorization by $1 billion. The increased authority is on top of the approximately $900 million that was available as of December 31, 2020.

In the fourth quarter, we continued to see strong COVID-19 testing volumes. Demand clearly spiked as the virus surged and people got tested in advance of holiday gatherings. We performed an average of 135,000 COVID-19 molecular tests today in the fourth quarter, well below our current capacity. We continue to innovate to further expand capacity, reduce turnaround times, and gain efficiencies.

And finally, we are focused on addressing health disparities in underserved communities through our Quest for Health Equity initiative. We recently held our first COVID-19 testing event at Abyssinian Baptist Church in Harlem in conjunction with leading Black Clergy and the United Way of New York City. Testing is more important than ever as the vaccines roll out over the coming months to get at-risk patients into care when therapy can still be effective and to isolate infected individuals.

We expect 2021 to be another very strong year for COVID testing, although demand for COVID testing is likely to decline throughout 2021 as more people become vaccinated and fewer new cases are reported. We believe that COVID-19 testing will continue into 2022.

Now, turning to our base business, organic volumes recovered rapidly throughout the summer and fall. However, the recovery stalled at the end of November and into December, due to the surge in COVID-19 infections across the country. Mark will provide and share more details regarding the trends in our base business later. With that we continue to make progress on our two-point strategy to accelerate growth and to drive operational excellence.

Let me share some of the highlights from our strategy to accelerate growth. Our M&A pipeline remains strong, and we achieved our goal to exceed a 2% growth CAGR from acquisitions in our base business over the last three years. We continue to see increasing interest from our hospital partners about how we can help them with their lab strategy, which includes discussions around both outreach acquisitions and professional lab services arrangements.

The deals we closed in 2020, particularly the Memorial Hermann outreach and MACL acquisitions, position us well to achieve our M&A growth target this year. We remain confident that this year we will execute on more similar types of outreach or tuck-in deals in our pipeline.

Last year was also a record year for our professional lab services strategy, or PLS, and this is the business that partner with hospitals to help them run their inpatient labs more efficiently. In the fourth quarter, we announced two small PLS partnerships with hospital systems in New York and Indiana; and then in December we announced our largest PLS relationship to date with Hackensack Meridian Health, the largest integrated health network in New Jersey.

Quest will manage laboratory operations and perform reference testing for 11 Hackensack Meridian Health hospitals. We also continue to execute our health plan strategy by shifting the dialogue to value-based contracting efforts from the recent past when discussions focused largely on price. We continue to make progress with our new strategic relationship with Anthem to improve quality and efficiency in the delivery of laboratory services. We’re advancing our position with United Healthcare within its Preferred Lab Network, and also are building momentum with many of our other national and regional health plan partners.

Finally, we continued to grow our direct-to-consumer services in the quarter. In December, we announced our [zero] out-of-pocket QuestDirect COVID-19 testing option. This service offers appointment scheduling and specimen collection at more than 500 participating Walmart drive-thru locations. And also in the quarter, we saw an acceleration in the number of consumers signing up for our MyQuest patient portal.

Today, roughly 15 million patients have a MyQuest account, an increase of nearly 2 million since October. And recent market research indicates that our brand is strong and has strengthened over the past year, with industry leading net promoter scores. We have a strong foundation to accelerate growth in our consumer offerings.

The second part of our two-point strategy is to drive operational excellence. We continue to pursue our goal to reduce our cost base by 3% per year. We also see more opportunities ahead to drive further productivity gains and at the same time enhancing the customer experience. Once again, our Invigorate program delivered approximately $200 million of cost savings in 2020. And we continue to see more opportunities to deliver future efficiencies in our cost base.

Our new flagship laboratory in Clifton, New Jersey went live on January 4. This is the most highly automated laboratory in our network. And over the course of 2021, we expect to consolidate volumes from Teterboro, Baltimore, and Philadelphia labs to this state-of-the-art facility.

Now, before turning it over to Mark, I’d like to announce that we plan to update you on our strategy and market overview at our upcoming virtual Investor Day and it will be held on Thursday, March 11. So, stay tuned for more details. Mark?

Mark Guinan

Thanks, Steve. In the fourth quarter, consolidated revenues were $3 billion, up nearly 56% versus the prior year. Revenues for Diagnostic Information Services grew approximately 58%, compared to the prior year, which reflected ongoing demand for COVID-19 testing services, offset by a modest decline in our base testing revenue. Volume, measured by the number of requisitions, increased 26.8% versus the prior year with acquisitions contributing 4.5%.

As we highlighted in our 2020 outlook update in mid-December, organic testing volumes ordered in our base business were down mid-to-high single digits versus the prior year in October and November. The recovery stalled in late November with organic testing volume trends down high-single-digits versus the prior year in December due to the surge in new infections across the country.

Additionally, many state and local governments imposed new orders designed to reduce the transmission of COVID-19. Compared to December, organic base volume trends remained relatively steady in January versus our pre-pandemic 2019 baseline. For the entire fourth quarter, total testing volumes declined roughly 2% versus the prior year and benefitted from M&A and new PLS partnerships that began in 2020. Excluding M&A and new PLS wins, base testing volumes declined approximately 8% in Q4 versus the prior year.

COVID-19 testing continued to be a meaningful contributor to volumes during the fourth quarter. We resulted approximately 12.5 million molecular tests and 1 million serology tests, contributing approximately 29% to volume growth in Q4. We exited the fourth quarter averaging approximately 130,000 COVID-19 molecular tests and 10,000 serology tests per day.

Revenue per requisition increased 25.2% versus the prior year driven largely by COVID-19 testing. This was partially offset by unit price headwinds of approximately 1.6% in the fourth quarter, which includes the impact of PAMA and was in-line with our prior expectations. Reported operating income in the fourth quarter was $795 million or 26.5% of revenues, compared to $363 million or 18% of revenues last year.

On an adjusted basis, operating income in Q4 was $860 million or 28.6% of revenues, compared to $329 million, or 17% of revenues last year. The year-over-year increase in operating margin was driven by the strong revenue growth in the fourth quarter, due to continued high demand for COVID-19 testing. Reported EPS was $4.21 in the quarter, compared to $1.86 a year ago.

Adjusted EPS was $4.48, compared to $1.67 last year. Cash provided by operations was approximately $2 billion for the full-year versus $1.24 billion in 2019. As a reminder, in the fourth quarter, we returned approximately $138 million of provider relief funds we had received under the CARES Act. Our financial position remains very strong.

As we announced this morning, we increased our quarterly dividend approximately 10.7% to $0.62 per share, and the board expanded our share repurchase authorization by $1 billion, so we now have nearly $2 billion available for future share repurchases. We resumed share repurchases in Q4 and bought back 250 million of company stock during the quarter.

Turning to guidance, there continues to be a lot of uncertainty around the trajectory of the pandemic and its impact on COVID-19 testing trends, as well as further recovery in our base business. Therefore, we are currently providing an outlook for only the first half of 2021 and expect to provide updates as the year progresses.

Our outlook for the first half of 2021 is as follows: Revenue is expected to be between $4.85 billion and $5.15 billion, an increase of approximately 33% to 41% versus the prior year. Reported EPS is expected to be in a range of $5.07 and $6.07, and adjusted EPS to be in a range of $5.90 and $6.90. Cash provided by operations is expected to be at least $800 million; and capital expenditures are expected to be approximately $200 million.

The demand for and duration of COVID-19 testing, as well as the continued recovery in the base business, are significant swing factors that remain challenging to forecast. With that high degree of uncertainty in mind, please consider the following: Our first half outlook generally assumes a gradual improvement in base testing volumes, but we expect the base business to remain below our pre-pandemic 2019 baseline throughout the first half of the year.

COVID-19 molecular testing volume is averaging roughly 100,000 tests per day in the first half of the year. However, we expect average daily volumes to decline throughout the first half of 2021 as more people become vaccinated. Therefore, we assume COVID-19 molecular volumes will be lower in the second quarter, compared to Q1. COVID-19 serology testing volume is averaging 15,000 tests per day for the first half of 2021, with demand expected to increase modestly throughout the first two quarters of the year.

Given the strength of our financial position and high cash balances, we expect to complete a larger amount of share repurchases in 2021 than we have done historically, while maintaining significant flexibility to execute on our M&A pipeline. However, at this point our EPS ranges only assume enough share repurchases to maintain a stable share count. We expect to share more details about our capital deployment priorities at our upcoming Investor Day in March.

While we aren’t providing a detailed outlook for the full-year at this time, I’d like to offer some additional considerations for 2021. As a reminder, there will be no Medicare reimbursement cut under PAMA this year given the one-year delay included in the CARES Act. We expect organic base testing trends to slowly recover throughout the year with volumes likely approaching a full recovery, compared to our 2019 baseline by the end of the year.

If the country vaccinates a significant portion of the population by the summer, we would expect a continued decline in COVID-19 molecular testing volumes in the second half of 2021, compared to our expectations for the first half. Similarly, demand for COVID-19 serology testing is likely to wane in the back half of the year.

Finally, COVID-19 molecular reimbursement is likely to trend lower in 2021, compared to last year. As many of you know, beginning January 1, CMS moved to a new reimbursement model, with a rate of $100 for all tests reported within two days and $75 for all other results. Several commercial payers have now moved to this new reimbursement model as well. Also, while we are encouraged that HHS now plans to extend the public health emergency throughout 2021, prospective changes to COVID molecular reimbursement are still possible.

Furthermore, direct client bill reimbursement for COVID testing services remains competitive.

I will now turn it back to Steve.

Steve Rusckowski

Thanks Mark. Well to summarize, I’d like to thank all Quest employees who have worked tirelessly over the past year. They have delivered a significant portion of the country’s COVID-19 testing, while serving the needs of people who rely on Quest every day. Thanks to their heroic efforts, we delivered record revenues, earnings, and cash from operations for the fourth quarter and the full-year 2020.

In light of the company’s strong financial performance, we have increased our dividend and share repurchase authorization while maintaining flexibility to pursue our M&A strategy. We look forward to sharing a more in-depth update on our market views and strategy at our upcoming virtual Investor Day to be held on Thursday, March 11. Stay tuned for additional details on that day.

Now, we’d be happy to take your questions. Operator?

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question comes from Ralph Giacobbe with Citi. Your line is open.

Ralph Giacobbe

Thanks. Good morning. I guess – I think I heard you say that you expected molecular reimbursement to trend lower, just wanted to flesh that out to understand that and maybe what have you seen for reimbursement with PHE likely extended for the full-year? And has there been any discussion or thoughts about proactively go into plans and perhaps not continuing to get that sort of inflated PHE reimbursement in exchange maybe for more favorable longer-term pricing escalators? Thanks.

Steve Rusckowski

Mark, you want to start it?

Mark Guinan

Sure. So, you know, we are expecting, you know, to still do quite well in terms of reimbursement in the near term. We believe we can meet the turnaround times, certainly the threshold that's required to be eligible for the higher rates, and then we get paid, obviously, based on the individual tests.

So, you know, we're still thinking in the near term that our average weighted reimbursement is going to be pretty strong, but we also recognize the reality, you know, the pressure on the industry, from all the various payers, especially the commercial payers, and so therefore, as we mentioned, you know, throughout the first half of the year, we would expect, you know, some reduction in that reimbursement, not something, you know, that would be momentous, but certainly some downward pressure.

And as we said, the client area is very, very competitive. So there's, you know, quite a few labs at this point, given the demand that have significant capacity. And so therefore, in the [client area] it’s very, very competitive. You know, in terms of your questions, I'm sure you can appreciate Ralph that first off, we don't feel we're getting paid excessively for COVID PCR, and we feel like we're being paid appropriately. But even if you could exactly forecast the volume of our COVID testing, and forecast the base business, you know, over a period of time, which obviously would be nearly impossible, you know, I'm not sure that we need to trade off anything.

We're very happy with the relationships that we built, as Steve mentioned, with the payers, we've moved away from a focus on price and move toward more of a partnership and a, you know, alignment around value creation, where, you know, they're looking for us to save the money and create value and big piece of that is moving more work to us because we're already – they're very, you know, high value compared to the rest of the industry and, you know, possible choices for patients. So, you know, good question, Ralph, certainly appreciate it, but for practical and for strategic reasons, because of where we think we are with the payers already with some of these new contracts, certainly not something that we're looking to pursue right now.

Steve Rusckowski

Let me just add to that. Speaking to demand, [indiscernible] shares that over the course of the last 10 months, we've brought up our capacity considerably, and we're going to continue to build it. And the reason for that is, we want to continue to be prepared in the event that we do have another surge. And then secondly is, we want to make sure we really have a capability to meet turnaround times that are expected in the market.

And over the last 10 months, obviously, a lot of retesting has been for the clinical purpose and what we believe as we entered the second half, and we're having many discussions in this regard, there's going to be a lot more demand for return to work programs with employers, which have been pushed out, as you all know, return to leisure activities, there's a number of cities that have large tourism bases that are thinking about what they need to do to get people back into those venues.

And there will be a lot of activity around just return to life. And I know that we are still trying to figure that out. And that's going to offer us a lot of opportunity in the future. And with that, there's always a COVID test, but there's also a number of services we provide, and those are yet to be defined. So, we're still trying to understand what that second half opportunity would be. But what we see so far, we will continue to have strong demand, but it may take a different form as we get into the second half and as we go into 22. Thanks, Ralph.

Ralph Giacobbe

Thank you.

Shawn Bevec

Operator, next question.

Operator

Pito Chickering with Deutsche Bank. Your line is open.

Justin Bowers

Hey, good morning. This is Justin Bowers on for Pito. Just with respect to the guide, can you kind of frame the high-end and the low-end for us in terms of your testing assumptions, and then also the through process on the increase in serology testing through the quarter?

Mark Guinan

Yeah. Sure Justin. So, you know it's multivariable. So there's several ways you could come to the high and low-end. So, what I would say is, you know, they're all based on the three major drivers with most of it being on the base volume recovery, and the level of PCR, you know, volume to lesser extent, serology. So, you know, if we don't see a significant fall off from where we stand today, in PCR, or if it, you know, surges up again, you know, because of these variants, or some other unknown factors, certainly that would take us, you know, to the higher-end combined with, you know, if the base business also were to continue to recover and not, you know, go the opposite direction as COVID surged again.

So, there is some negative correlation, obviously, between the two. But if they both move in the same direction, that would move us to the higher-end. And then if for some reason COVID fell off markedly, even more than we're planning, and as we talked about, we are planning for a decline over time in the first six months, as that midpoint, and the base business did not show recovery, or even, you know, potentially take a little bit of step back for economic or other reasons.

And that would take you to the low end, but you know, I can't at this point, provide exact, you know, changes in the base and COVID, because, obviously, there's multiple ways to get to either one, but directionally that's what, you know, [indiscernible] that our guidance with the midpoint being, as I said, you know, a modest recovery, but not full for the first six months of the base business. And then some step off, but still significant COVID testing for the first six months with the second quarter being, you know, markedly lower than the first quarter.

Justin Bowers

Okay, got it. And then just to clarify the earlier comments, it sounded like the base business right now is kind of running stable month-over-month from December levels, are we interpreting that correctly? And then, just in terms of the molecular tests, reported on the website at, you know, 32.8 million is that the right number, look like kind of a huge step-up from February to January, but more importantly is that kind of where you guys are now for total molecular? And I'll hop back in queue. Thank you.

Mark Guinan

Sure. Steve, do you want to take that or would you like me to.

Steve Rusckowski

Well let me – the step-up is, you know the step-up that we've seen based on the strong delivery that we had in the fourth quarter in the beginning of January. So, we are – as I said in my introductory comments, you know, we are one of the leading providers of COVID-19 testing. Second is, it does not include serology and did ask a question about serology, because we do believe there'll be an increasing role of serology throughout 2021.

We seem to see some early indications that there's interest in understanding whether you have the antibodies or not, which might inform patients and physicians around, you know, their urgency of getting vaccinated. And at the same time, we're bringing out a new capability called [quant serology] testing, and this will allow physicians and patients to see if in fact, they do get the spike protein from the vaccines. And we'll be bringing that out at platforms in the next few weeks. And you know, this can help us, you know, determining the vaccine is being effective.

So, we do believe that there will be some increased demands for serology, and this is on top of what we already do. And serology is providing a really important role for management of the disease, overall surveillance, epidemiology, and in measuring the response of what's happening pre and post-vaccinations and broad population. So, we believe there's an opportunity in front of us in 2021 in that regard.

Shawn Bevec

And Justin, just to close out on your other question, yes, 32.8 million was the total through as of Monday, and that was up 1.8 million over the prior two weeks. So, about 130,000 a day in the prior two weeks. Operate our next question.

Operator

Jack Meehan with Nephron Research. Your line is open.

Jack Meehan

Thanks.

Steve Rusckowski

Hi, Jack.

Jack Meehan

Hey, good morning. Steve, you mentioned the focus of the new administration on COVID testing, can you talk about how you think Quest role might change at all, serving the pandemic? And if we start to see greater adoption of home testing, how do you think Quest is going to be positioned for that?

Steve Rusckowski

Yeah, so I think, you know, the new administration is leveraging what we've done in the past as a country and as an industry, and taking it to the next level. I mean, you see the capacity that's out there around the country. Back a few weeks ago, we were doing about 2 million COVID-19 molecular tests. So, obviously up considerably from where we all started last March. But going forward, Jack, I do see that there'll be a change beyond the PCR test.

As I mentioned earlier, now there's going to be a greater demand, you know, for programs that get to portions of the population that help us get back to work, back to leisure activities, get back to life. And so, we're having a number of dialogues around that. And that will include the role of antigen testing, and more rapid testing workflows that allow us to see if the fact a person that wants to engage in whatever the activity is, is negative and safe for a reasonable period of time to participate.

So, when we get into that world, you know we’ll obviously be providing the testing, but as I said earlier, there's a number of services, and also IT solutions that you need to provide. And, like so much in healthcare, you see one, but we're currently engaged with a number of organizations, a number of municipalities, and a number of corporations, and what they will be doing in this regard, particularly in the second half.

I think, you know, the first quarter is outlined in our guidance [when we] start to see improvement as we get into the second quarter. I think the second quarter will be a telling quarter for us all. And we do see a lot of people getting prepared for, you know, better infection rates, you know, better position for populations to get back to work life and leisure activities, and we're going to start to see more of that and Quest has a significant role in helping in that regard.

Jack Meehan

Great. And then just to follow up, I have a two-parter on unit pricing. I was curious if you could weigh in, do you have any notable commercial contract renewals in 2021? And then maybe more broadly, as you have discussions with commercial payers now, you know, do you feel like you have a little more of a, you know good footing you know in terms of negotiating price given, you know, the role the labs have served, you know, amidst the pandemic?

Steve Rusckowski

You know, let me start with where you ended, I think our relationship with health plans has never been better. As you've seen over the last number of years, we've increased our presence, we have the best access to lives now that we've had in over a decade. And so, we are in a very strong footing. And also, during the pandemic I’ll share that we were deeply engaged with many of the plans of what they needed to take care of their membership, and also their employees.

So, the relationship is continued to strengthen. And as I said, in my introductory remarks, and Mark said, as well, we're shifting the dialogue away from exclusively price to the value we deliver. And when you go back to what we talked about in the past around what we bring to the table in terms of our value proposition around quality, our service performance, our innovation, all at a very affordable price, we believe our value proposition is really second to none. And as I said, you know in the course of the last year, we've done service, look at our reputation in the industry and net promoter scores, and those are quite strong.

So, when you bring those facts to the table Jack, our position in terms of working out, the forward-looking relationships has, you know, provided a much stronger foundation, and a better understanding on the other side that we really do deliver a lot more value. So, we're in a good position with our plans. We’re in good position with our contracts. We obviously don't provide specific details, but we feel very good about that.

And also, I shared that we continue to make progress with our united relationship with a preferred lab network and the building relationship with Anthem were quite encouraged about as well. So, we feel good about a relationship and the progress we've made, but also the opportunities in front of us to continue to build on what we've been talking about.

So, Mark anything you could like to add there?

Mark Guinan

Sure. So Jack, I understand the question and several years ago, I think there was an expectation where, you know people holding their breath, every time we extended a contract with a major payer because it would imply some sort of major price concession. I can tell you, you know, this has become largely invisible to you all, you know unless we talk about it like Anthem, which was really a new contract and brought together a number of states under a single contract, as opposed to having, you know different periods of time in which we were negotiating across the Anthem network.

We just extended with a major commercial payer. You didn't hear about it, because there was no price concession. And in fact, we made huge headway with this payer. And, you know, getting them to acknowledge that in the world of PAMA, the whole notion of a discount to the CMS NLA rates no longer will apply going forward. And that, in fact, you know, CMS will be setting the market and that they should feel confident, is a market rate that they can feel comfortable and represent to their prospective or current members.

So, you know, really that's what it's been about, as they all want to make sure that they can say, they've got good prices. And now you've got an external benchmark, you can look to. So, we just extended with a very large national. We do have one coming up this year. But I can assure you that it's not going to be – it will not come with a major price concessions, you know, we're going to continue to work on the value-based contracting and with that actually comes good pricing that we feel, you know, represents the market, and then these come with upside, whereas we performed, you know, we both share in the benefit of that upside. That's the way we're really contracting in the last couple years and how we would expect to contract going forward.

Jack Meehan

Nice, Thanks, everyone.

Shawn Bevec

Operator, next question.

Operator

Kevin Caliendo with UBS. Your line is open.

Adam Noble

Great, thanks for the question. This is Adam Noble in for Kevin. I just wanted to, I guess double back to your comments around reimbursement for COVID PCR, you know wanted just to confirm that you're assuming throughout the first half, that the PHE is extended so that the Medicare rate, you know with the add-on payment remains 100? And then you talked about the, kind of the commercial reimbursement, you know, potentially declining over time, just any thoughts around kind of what the magnitude of changes on the commercial side you guys could potentially see in PCR?

Mark Guinan

Yeah, sure. I'll comment on then Steve may want to add. So yes, we would expect that as long as the, you know, [federal health emergency] continues that this structure with the, you know, opportunity to earn $100 per test from CMS will continue now, you know, that is a very small portion of our volume. But we would expect that however, as I said in the prepared remarks, there is some risk, they could decouple it. There's no guarantee that that will continue.

So, and – you know and not only could they decouple the reimbursement with the [FHE], but they could also, like they did January 1 change the approach. However, you know, at this point, yes, we're assuming the highest probability is that as long as the [FHE] continues, CMS will continue to pay us under this new method. You know, on commercial, obviously, we're not the only player. And so, you know, while we defend, and, you know, feel like we do a good job of explaining why our reimbursement makes sense, as we've negotiated some, you know, new payment methodologies, including some who wanted to move to the Medicare methodology, and we think we've done a good job, but obviously, there are other labs as well. And, you know, to the extent that other labs, you know, don't do as good a job as we do, there could be additional pressure on us.

So that's why it's hard for us to predict exactly where this is going. But certainly, in our mind, you know, we would expect to continue to defend commercial contracts as well to the [FHE] seeing the same basis for CMS paying us at that rate should apply to the commercial payers as well. I also want to remind everybody that, as long as the zero patient out of pocket applies, that is also a huge tailwind for us because, you know, to avoid having to build patience, where historically, we've shared that we get about, you know, $0.70 on the dollar, and actually get, you know 100% of that payments from the third party is also a large enhancement to our revenue and our profitability as well. So that's, that's a factor I don't want people to forget about. Steve?

Steve Rusckowski

Yeah, just to add to the CMS new methodology for reimbursement. As you know, we are reimbursed at $100 when we report the results in two days and $75 for all other results. And to Mark's comments, we have seen a few payers to look at this model as well. But we're encouraged by the public health emergency extension through 2021. And also, just to share our timeliness of our results are quite good. We have met that threshold of 50% of COVID. Molecular tests resulted in less than two days. We did that in the last few months. And I'll share that, you know, the majority of our testers are resulted in two days or less.

So, in my other comments, I did mention that we continue to build capacity, because it just gives us a lot more operational flexibility to meet better turnaround times based upon where the demand is coming from. So, I think we're progressing well. We're very good provider of the test. You know, time is one element and quality and reliability, and also the type of testing we have done, you know, our methodology for PCR tests, both on the LDT side, and obviously, the kits are somewhat consistent throughout the industry, are really quite strong.

So, if you look at the accuracy and the quality of our testing, you know, people have come to consider us the gold standard. And I think that will bode us well going forward as well.

Adam Noble

And if I could just …

Shawn Bevec

Operator, next question.

Operator

Eugene Kim your line is open, with Wolfe Research.

Eugene Kim

Good morning and thank you for all the color around guidance. Apologies if I missed this, but have you guys provided the average reimbursement levels for the PCR testing in Q4? And can you comment whether you're embedding similar levels in the first half guidance?

Mark Guinan

Yeah. So we didn't specifically call that out, but I can tell you that it did not change much in Q4 from where it was in Q3, you know, so, you know, it was above $90. We, you know, we do have some client bill customers that are less than 100. And we don't, you know, get paid for 100% of the testing, sometimes due to missing date, and so on and so forth. We do get some denials. But you know, certainly north of 90 was AWR previously.

Now, we did talk about the fact that we expect that to have some pressure and reduce over time in the first half. That doesn't mean that it absolutely will. But in our guidance, in the midpoint of that guidance, we did make an assumption that, you know, given the new model with the $75, not just with CMS with some commercial payers, we're not going to get paid or 100% of our tests at that 100, where we have been done previously, still a large majority, as Steve said, meet that two-day turnaround time.

So, that'll create a little bit of erosion. And then also, I mentioned that, you know, there's a lot of capacity there for a very competitive environment in that client bill arena aside from the third party.

Eugene Kim

Got it, thank you. And just as a quick follow-up, on the base business, can I confirm you said, you don't think you'll get back to pre-pandemic levels in first half? And is that compared to 2019 or does that include our [acquired volume] as well? Thank you.

Mark Guinan

Yeah, that is correct. We would – I said was, you know, as we're looking at the back half, even though we're not giving guidance because there's too much uncertainty around it. We expect it to be back to pre-pandemic levels towards the end of 2021. So, in the first half, we still expect to be down versus 2019. We felt, even though the pandemic didn't start largely for our business till March, easiest compare and how to talk about it is 2019 volumes.

We did have a large growth for the first two months of 2020 as we share that in our first quarter earnings call, you know, so that compounds things a little bit on a year-to-year comparison. But, yes, we're going to talk about our volume performance relative to 2019 because it's the cleanest compare for the whole year.

Steve Rusckowski

And when we speak to that, I heard it in your question. We are looking at organic growth. And so you know, we spoke of a couple of acquisitions that we closed last year. And you know, in our organic discussions we're excluding those and any other deals we might do prospectively. So, it's organic, based business we're talking to.

Mark Guinan

And we think the best representation of utilization, so that's why we think it's important. Our organic performance versus 2019, kind of gives a sense, because of our size and reach. We think were the market overall is performing.

Steve Rusckowski

Yeah. So, the acquisition revenue will be on top of that. We obviously announced a couple of deals and what we said is, we have a good funnel and anything we might do prospectively be on top of what we said.

Operator

Derik de Bruin with Bank of America. Your line is open.

Derik de Bruin

Hi, great. Thank you and good morning. So, just one quick one. Can you provide a little bit more color on how should we think about the margin progression throughout 2021? And particularly how much of your, with the core business still being down, how much of that is the margin headwind? Just sort of thinking about the dynamics as we go from the first half, the second half with COVID volumes testing coming down, and you've returned to price to be more normal for the core business, just wanted to go get some thoughts on the margin progression of work flow, please? Thank you.

Mark Guinan

Sure. So, it depends, when you when you say is it a headwind? It depends on to what you're comparing it. So, as we, you know, expect the base business to improve. That's a significant margin tailwind versus the prior period, because we are in any given window of time, a highly fixed cost, you know, operation on our base business. And while we took some significant cost actions in the second quarter of last year in response to the significant downturn in our volume, and we've continued to manage our costs very, very tightly to the back half recoveries, and not get out in front of ourselves, you know, we're not planning on any significant restructuring in the near term with, you know, volumes that are down single digits at this point.

So, our cost structure on the basis business is, to some extent, what it is, and we'll add small, you know, pieces that are necessary as it recovers. But that, you know, growth and recovery in that base business sequentially is a nice tailwind. Now, on the other side, as we talked about, you know, expect erosion in our COVID volumes, you know that, you know, greater headwinds, and how those two pieces offset each other is hard to predict slightly, you know, [understood me] specifically. But, you know, I would at this point expect that the COVID reduction, more than offsets the base, but at least they do partially offset each other as we as we move forward.

And then the other dynamic is obviously reimbursement on the PCR test. And we shared that we expected some, you know, pressure on that as we go, you know, from the first quarter into the second quarter sequentially, and then likely, even more so in the back half of the year. So, without getting into specifics, those are kind of things you should, you know, specific numbers, those are kind of the things you should think about, as you think about where margins are going to go through the first half and into the second half of 2021.

Derik de Bruin

Thank you.

Operator

Lisa Gill with J.P. Morgan. Your line is open.

Steve Rusckowski

Hi, Lisa.

Lisa Gill

Thanks very much. Good morning. Thanks for taking my question. I just wanted to follow up on your comment around the acquisition opportunities. Steve, you know, one of the things that was anticipated that with PAMA there'd be a lot of pressure and you'd see more acquisition opportunities with PAMA now being pushed out, does that change anything? Number one. And number two, when we think about reimbursement, as we've been talking about, for molecular tests, etcetera. I would think a lot of these labs have done well during this period of time, does that change what their expectations are at all around what their business is worth as we think about acquisition opportunities?

Steve Rusckowski

Yeah. So, thanks Lisa for the question. So, the first part is really about acquisition opportunities around hospitals. And, you know, you see that we announced a couple of deals last year that we were happy we did and that's going to help us and we continue to see a nice funnel for 2021 as well. And as you all know, hospital volumes up and down through 2020. They have recovered for us. However, what we do see is, a lot of renewed interest of looking at their lab strategies, which includes, you know, acquiring their outreach business and includes professional app service agreements, like we just announced in the fourth quarter.

Now that relationship we announced in the fourth quarter with Hackensack Meridian Health system is the largest we've ever done. And I can tell you, it took a long time to get there. And I believe the prospective reality of what's happening in the healthcare market this year help bring that to a conclusion. And I believe that that will happen with a number of dialogues we have going on with hospitals right now. So that's one piece.

The second is on other commercial laboratories. Yes, you're right. Number of commercial laboratories have jumped into the COVID testing arena. You see it with, you know, all the capacity we've added in the country. However, as that starts to be pulled back, and they start to see what the prospects are, given what we're driving as an industry, with consolidation, with tighter contracts and networks around health plans, we believe that, you know, there still will be a catalyst in the marketplace for us to continue to consolidate.

So, yes, there's been a short-term opportunity for a number of labs to take advantage, if you will, the opportunity to provide COVID-19 testing. But as that starts to change, you know, as we get throughout 2021, we believe the realities of what the new world will be with, you know, tighter networks, more consolidation will play nicely into our strategy and allow us to acquire more going forward. And obviously, given our cash position and strong balance sheet, we’re in a very nice position to continue to do that. And also, Lisa, there's been a lot of discussion around all this additional capacity out there.

People have added new systems, and, you know, potentially, does this present a risk for us that these people are going to get into other businesses outside of COVID, like [women's health]? You know, we are watching it, you know, obviously, some hospitals have moved their molecular capacity to COVID. And we help them with some of the other work, but for other commercial laboratories and hospitals to use that capacity to get into competing with us, by the way, good example, [women’s health] that's a long stretch.

I mean, there's a lot to – lot more to getting a client to flip over than the lab capacity, you have to have a Salesforce, [you have to have] logistic capabilities, you have to do electronic interfaces, you have to work with the physicians, you have to be in a contract with the health plans. So, we are watching it, but at the same time, we're a little, you know, little cautious in, in the belief that some of this will have a significant effect. At the same time, we're watching it carefully to make sure it doesn't. And then we're staying on top of our clients to make sure we serve them well. Thank you.

Mark Guinan

So, if I could add Steve, just a couple things. Lisa, around your question, around our pipeline, at any given point in time, you know, we've got multiple opportunities that we're discussing, I can tell you that, you know, none of the potential sellers that we're speaking to right now are getting, you know expecting to get paid for that PCR bubble. So fortunately, I could see a mentality that, you know, hey, my value has gone up dramatically because of COVID testing. But you know, the people we're talking to right now recognize that that’s short-term, and that should not be a part of the valuation discussion.

And then the, you know, while PAMA gets a pause this year, you know, there’s still, you know, some risk. But more importantly, as you know, we've mentioned, and I'm sure you've seen, it's not just CMS, but the commercial payers are starting to, you know, put pressure on these high hospital outreach rates, you know, re-contracting, that work that's outside, you know, the patients who are in the hospital, either admitted or outpatient, at independent laboratory rate.

So it's not – this pressure is not just coming from Washington, it's coming from the commercial payers as well. And from quite frankly, patients who, you know don't like those high prices when they have a high deductible plan. So, there's a number of things that are getting the C suites of large hospital systems with outreach to think about. Do they really want to be in this business? And will this be a good time to monetize? And so therefore, I really don't see the pipeline of interest having been impacted over the last 12 months negatively.

Operator

Matt Larew with William Blair. Your line is open.

Matt Larew

Hi, good morning. As I think about the various components of your response to COVID-19, and you're role in testing, two things that stick out as step changes from a pre-COVID [world and the] capacity, and then consumer engagement. I think the number of patients using QuestDirect has doubled in the last 15 months. So, just curious, what can you do and as we move to sort of a post-COVID world to leverage that increased consumer facing presents consumer engagement, as well as the added capacity that it sounds like you're still bringing on?

Steve Rusckowski

Yeah. Thanks for the question. And we're very bullish on our consumer strategy. As you all know, we have five strategies for growth, one of which is the consumer strategy and our direct-to-consumer business that we've built over the last several years has done quite well and we do believe that the pandemic has now been an accelerator for that. We're providing COVID-19 testing through that platform. We're going to look at using it for consumer genetics. And as I said, in my introductory comments, interesting part of the pandemic is brought to the forefront the strong role of testing and overall health care. And questioning has been out there more than ever, and our brand has been built.

And our brand is really second to none in our industry. And we coupled that with our service performance. And so we have this strong foundation coupled with the change in the marketplace. And we do believe, you know, there's going to be a continuation of the number of consumers that are engaged, that will engage differently with healthcare delivery systems, and how they engage with the physician.

With telehealth, we have a very strong presence with telehealth providers and with integrated delivery systems that offer the telehealth option. But at the same time, a lot of patients as well, and consumers will want to receive their basic health checks and testing online as [they buy] so much else in their lives.

And so we're very well-positioned with reputation with capabilities. And so, we are investing in that in a significant way more so than we would have, if we did not have the pandemic. And so, we think about, you know, the growth drivers going forward, and we'll talk about this some more in our Investor Day. We're very bullish about the opportunity we have in front of us around our QuestDirect, but also the consumer opportunity in general.

Operator

Dan Leonard with Wells Fargo. Your line is open.

Dan Leonard

Thank you. Just one quick one on the deal side. Possible you could frame for us the Hackensack opportunity, the contribution to growth in 2021, and the first half guide? Thank you.

Steve Rusckowski

Mark, you want to take that?

Mark Guinan

Yeah. So, we, you know, we don't typically announce the revenue impact of deals like this, and again, I want to remind you, this is organic. So, this is not something we bought. We worked with Hackensack and demonstrate to them that we can perform the same work they do in their lab at a better cost better value. And you know, for a system that size, you know, they're significant lab spend. So this is – is going to be quite impactful and beneficial to them, and we see that as a, you know, opportunity, obviously to also get other clients, who will get their attention to see Hackensack, you know, thinks that this will work well, you know, in addition to some of the other hospital systems that we've learned over the last couple of years.

So, we're very, very excited about it. It is a large deal. It's the largest deal we've ever done. It will be, you know, material to our growth. And we talked a couple years ago at our Investor Day and we’ll likely give an update on this. We thought we could get more than 100 basis points, and you know, somewhere between 100 basis points to 200 basis points of growth every year from our PLS business and certainly this one is a large contributor to that, and might even give us an opportunity to exceed that.

So, you know, very large deal, but you know, we are not going to, we haven't had a historical precedent of pulling out the exact revenue, but it will be noticeable, and material as we go into 2021 and beyond.

Operator

Ricky Goldwasser with Morgan Stanley. Your line is open.

Ricky Goldwasser

Yeah. Hi. Good morning. So, I mean, clearly, there's a lot of uncertainty around second half in the trajectory of the combat for more normalized utilization level, but if we step away from the timing and just think about the margin trajectory, how should we think about core margin trajectory from where they were, let's say in the fourth quarter, to where they can expand to as utilization comes back to a more normalized level? So again, the question is more about the margin trajectory, as it relates to utilization, not about the timing. And then my second question is more about, sort of a market demand. So, how do you think about changes in physician behavior patterns? And you know, we're seeing telehealth becoming more integrated into the workflow. So, do you think that there's going to be any impact on longer term lab testing demand curve because of that, I don’t know if the experiences early in the year could shed some light on that?

Steve Rusckowski

Sure. Mark, you want to take the first part. I’ll take the second.

Mark Guinan

Yes. So, Ricky, obviously, the, you know, size of the revenue we've generated from COVID, which more than offset the base business has materially impacted our margins and expanded them greatly relative to our historical margins. So, as we, you know, progress. We'll talk more about this at Investor Day, but we progress into a future where, you know, COVID testing is still around for, you know, for a while. As Steve said, we don't expect it to go away completely, certainly, by 2022. It's going to be less material to our top line and to our margin.

So, where will our base business be? Once we get back to the pre-pandemic levels of 2019, I would expect our base business to be, you know, slightly higher margin than it was pre-pandemic. Because as you look at, you know, our invigorate program, which we continue to drive, even during the pandemic, and you look at the offsets of the pay for is that we usually talk about, including wage inflation and price erosion, you know, given the pause on PAMA this year, and given, you know, the fact that we've done really well and other price concessions, despite, you know, significant increases in our [SWB] that was warranted during the pandemic, you know, as we wanted to reward our employees for their incredible contributions in getting us up and running, operating well threw it, and obviously driving strong company results.

And when I net all those together, you know, that level of business should be more profitable. And then going forward from that, when we get back to the growth that you saw in 2019, and you saw in the first two months of 2020, and our ability to leverage that growth, you know, I would expect to see margin expansion on the base business, but of course, that will be partially offset for a period of time, as the COVID revenues and margins, you know, fall down. So, you know, longer-term, the good news is, you know, we were on a good path on growth and margin expansion pre-pandemic, and we will, you know, we'll get back there. But for a while, it'll be somewhat masked by the COVID decline that's inevitable, you know, over the next, certainly 18 months or so.

Steve Rusckowski

Yeah. And the question about physicians, Ricky, we're watching this carefully, because we do believe going back to an earlier question about the consumer activity there will be a transition here now going forward with physicians serving the market in a different way. You know, as we said before, about half the physicians have either sold their practices to integrate delivery systems or have strong affiliations with integrated delivery systems. And, you know, that will be consistent going forward. But the other half of the market, we believe there will be a growing percentage of that portion of physicians that are served by telehealth and we have a very strong position with those telehealth providers, and that was before the pandemic.

And those telehealth providers are not going to work with [indiscernible] of laboratories who will work with a few. And they will have a real type for lab network as you would expect. And as you would expect, Quest would be one of those options. So, we feel good about that. Second, as you see more consolidation going on in physicians and we see what's happening, particularly with one of the health insurance companies, [Optim], acquiring physicians and a number of those physician practices, or customers. You think about debt consolidation, and think about their role, not thinking about where they add value bringing all those physicians together. We believe there will be an opportunity for us to work with a consolidator, like [Optim], to provide lab services more broadly, and in really reduce the variation they have with other physicians.

And just one last point to show that, you know, this world is moving towards tighter network of lab providers. In the fourth quarter of last year, United Healthcare actually announced the removal of lot of network benefit for some of their fully insured members. And so, it's just another example of a major health plan tightening up their network. So, we think the physician side will change and there'll be a different way of providing physician services to patients going forward. And that trend, we believe is a good trend and will provide tailwind for us to consolidate the market.

Operator

Erin Wright with Credit Suisse. Your line is open.

Steve Rusckowski

Hi, Erin.

Erin Wright

Thanks. Thanks so much for sneaking me in. Just a follow up on that competitive landscape and consolidation. So it sounds like you don't expect there to be any sort of meaningful impact on your opportunity around consolidation just even given the dramatically expanded install bases, PCR instruments across the U.S. over the past year. I mean, I would assume that customers do want to monetize those investments to some extent, I'm just curious what you're seeing in terms of market share shifting outside of maybe COVID testing that you're seeing already, if that's happening at all? I mean, it sounds like everything still remains an opportunity from an M&A perspective and consolidation standpoint. And then my second question is just on how should we be thinking about the long-term dynamics as it relates to COVID testing? It will obviously diminish with the vaccine rollout, but could it evolve into something more similar to like flu testing in future years? And can you remind us of the flu testing exposure you do have? Thanks.

Steve Rusckowski

Sure. So as I said earlier, we believe that hospitals will be now increasingly looking at their options to become more efficient, given the pressure, the pandemics put on any of them. And we're encouraged by, you know, the level of discussions we had, and, you know, the deals we've closed as an example that this is happening. So, we think that's good. On the commercial laboratory side, we believe that, you know, some have gotten into the COVID testing opportunity, it's provided somewhat of an opportunity for them to get through this year. But as you know, the dust settles and testing volumes go down, you know, the reality of what we talked about in [indiscernible] doesn't change.

And we think there will be many of those that would be looking at their options. And we do believe that COVID testing will continue into 2022. We believe that this, you know will be a virus that we'll have to manage. So, it will be more flu like, and something that will, you know, will be behind us and beyond 2021. And, you know, it's hard for us to scale at this time what that will be. But you should not think that this is going to be the testing opportunity that will go away at the end of this year. But we do believe there will be with us in 2022, as well.

And as far as the flu, you know, we talked about prior earnings call that we have offered a combination panel that when a patient presents itself with symptoms, the physician wants to rule out the flu, and also COVID. And so, we have seen, you know that be accepted, but as you all know, the incidence of flu this year is down considerably because of all our behaviors in the United States. So, that has changed somewhat. Shawn or Mark, you want to add something to food testing in general and exposure to answer the PAMA point of the question?

Mark Guinan

Yeah, I don't have anything to add. Shawn.

Operator

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

Brian Tanquilut

Hey, good morning, and thanks for squeezing me in. I guess just one quick question. Mark, as I think about your capital deployment, obviously, you're generating a lot of cash. And it sounds like the hospital acquisition opportunities are the pipeline's there, but maybe a little slow in coming through. So, how should we be thinking about your willingness to buy back more aggressively in the front end? You know, and how should we be thinking about, just other capital deployment opportunities, whether it's internal, on the CapEx side for growth?

Mark Guinan

Sure. So, we are investing quite a bit internally. You know, as you may have seen or you will see our, you know, capital spend for 2020. You know, we ended up 418 million, which was above the initial range. A lot of that was related directly to the COVID capital that was necessary. But we certainly have not stepped back on investing internally, because we think that's the best way to drive returns. A lot of that, obviously, is related to our invigorate program.

You know, we are moving all of our new [indiscernible] test to a single platform, we continue to move forward on that, and then a big piece of the 2020. And the first half of 2021 was related to Quest and our new facility. Although we started operating in early January, we still have some final set out in equipment to put in a narrow drive some of the spending in the first half. So, we absolutely have a high priority on internal capital. And we'll continue to do so. You can see we guided to 200 million in the first half, which is you know, about 50% of what we spent in 2020 as we step back a little bit from COVID capital, but we have some continued spending on Clifton and then also the normal priorities on which we spend.

On share buybacks, as I mentioned, I will give a lot more color on the Investor Day. The reason for that is, you know, we do have some things that we're monitoring around potential cash deployment. We will have greater clarity on as we move over the next couple of weeks. We also wanted to get a little more of 2021, Q1, you know, behind us to see how that performance continues, and what our expectations, you know, for Q2 look like at that point, because every day, every couple of weeks, every month certainly gives us you know, better line of sight and expectations. But, you know, by announced by, you know us seeking and getting approval and announcing a billion dollar increase in our authorization, certainly you correctly are taking that as a signal.

And as I said, specifically in my prepared remarks, that we're going to do more share buybacks than we have done historically. And I'll remind you that our capital allocation strategy, which we have not changed to this point is to give the majority of our free cash flow back to our shareholders to our dividend. And our share repurchases, we suspended them for 2020 for a period of time. But even with the 250, you know, we spent in Q4 and the increase in dividend over time, you know, we're behind that 50%. So, we have some catch-up to do.

Steve Rusckowski

Let me just add to that performance we had in 2020 and the performance that we're indicating, with our guidance in 2021, is affording us an opportunity to invest in our growth strategies. And that includes what we've talked about on this call. Working on the relationships with health plans are gaining traction was presenting our lab strategy view to health systems, hospital health systems, what we're doing around advanced diagnostics, and then finally, what was asked about earlier around the consumer opportunity in front of us. So, implied in the guidance is an increase in investment for those growth drivers to accelerate growth of our base business within 2021, but as we enter 2022 as well.

So if there are no further questions. I like to thank everyone for again joining us on this call. We appreciate your continued support and interest and you have a great day. Take care.

Operator

Thank you for participating in the Quest Diagnostics fourth quarter and full-year 2020 conference call. A transcript of prepared remarks on this call will be posted later today on Quest Diagnostics website at www.questdiagnostics.com.

Comments

[Coolflippers]

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