Quest Diagnostics (DGX) 10-K risk factor changes: FY2018 vs FY2017

| This Report also includes forward-looking statements that involve risks or uncertainties. Our results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the risks we face described below and elsewhere. See “Cautionary Factors that May Affect Future Results” on page [removed: 43.] [added: [38](#s65F4018F235561578DDE63C8112F0380).] |

The U.S. healthcare system is [removed: evolving,] [added: evolving] and [added: medical laboratory testing market fundamentals are changing, and] our business could be adversely impacted if we fail to adapt.

In addition, uncertainty regarding the [added: status of the] ACA prior to any such repeal, amendment, replacement or reform could create uncertainty generally in the healthcare market.

Significant change is taking place in the healthcare system, including as discussed above under the heading The United States Clinical Testing Industry, beginning on page [removed: 17.][added: [13](#s083609E0150B106BC21A63C810146DDE).]

Healthcare services increasingly are being provided by non-traditional providers (e.g., physician assistants), in non-traditional venues (e.g., retail medical clinics, urgent care centers) and using new technologies (e.g., [removed: telemedicine).][added: telemedicine, digital pathology).]

Utilization of the healthcare system is being influenced by several [removed: factors,] [added: factors] and may result in a decline in the demand for diagnostic information services.

In addition, over the last several years, the federal government has [removed: continued to expand] [added: expanded] its contracts with private health insurance plans for Medicare beneficiaries, called “Medicare Advantage” programs, and has encouraged such beneficiaries to switch from the traditional programs to the private programs.

There has been [removed: continued] growth of health insurance plans offering Medicare Advantage programs, and of beneficiary enrollment in these programs.

[removed: Also, states] [added: States] have mandated that Medicaid beneficiaries enroll in private managed care arrangements.

[removed: Recently,] [added: In addition,] state budget pressures have encouraged states to consider several courses of action that may impact our business, such as delaying payments, reducing reimbursement, restricting coverage eligibility, denying claims and service coverage restrictions.

[added: Congress] periodically considers cost-saving initiatives.

[removed: Under the revised Medicare Clinical Laboratory Fee Schedule, reimbursement] [added: Reimbursement rates] for clinical laboratory testing [removed: is] [added: were reduced in 2018 and are] scheduled to be reduced [added: again by approximately 10%] in [removed: 2018,] [added: each of] 2019 and 2020.

PAMA calls for further revision of the Medicare Clinical Laboratory Fee Schedule for years after 2020, based on future surveys of market rates; [removed: further reduction in] reimbursement [removed: may result] [added: rate reduction] from [removed: such revisions.][added: 2021-23 is capped by PAMA at 15% annually.]

[removed: For example, since] [added: Since] the passage of ACA, there is increased market activity regarding alternative payment models, including bundled payment models.

In [removed: 2017,] [added: 2018,] CMS [removed: issued] [added: finalized] a [removed: draft] national coverage [removed: policy] [added: determination] for next-generation sequencing cancer panels.

The adoption of these [added: revised] codes [removed: on certain occasions] has [removed: led, and could continue to lead, to] [added: resulted in] limited coverage [removed: decisions,] [added: decisions on certain occasions,] payment denials [removed: or] [added: by some payers, and] new [removed: procedures or conditions] [added: requirements] for [added: documentation to facilitate] payment.

Business development activities are inherently [removed: risky,] [added: risky] and integrating our operations with businesses we acquire may be difficult.

If we fail to comply with applicable laws and regulations, or if we fail to maintain, renew or obtain necessary permits, licenses and approvals, we could suffer civil and criminal penalties, fines, exclusion from participation in governmental healthcare programs and the loss of various licenses, certificates and authorizations necessary to operate our [added: business, as well as incur additional liabilities from third-party claims.]

Pursuant to the 21st Century Cures Act, the FDA [removed: has] issued guidance regarding [added: its position on] the regulation of clinical decision [removed: support] software, which may be used in, or in connection with, LDTs.

The guidance [removed: has created uncertainty regarding] [added: attempts to clarify] whether FDA approval of certain [removed: tests] [added: software] is required.

[removed: Failure] [added: Hardware and software failures or delays] in our information technology systems, including failures resulting from our systems [removed: conversions,] [added: conversions or otherwise,] could disrupt our operations and cause the loss of confidential information, customers and business opportunities or otherwise adversely impact our business.

[added: Despite redundancy and backup measures and precautions that we have implemented, our] IT systems may be vulnerable to damage, disruptions and shutdown from a variety of sources, including telecommunications or network failures, system conversion or standardization initiatives, human acts and natural disasters.

[removed: We] [added: In the event of a data security breach, we] may be subject to [added: notification obligations,] litigation and governmental [removed: investigation,] [added: investigation or sanctions,] and may suffer reputational damage, [removed: as a result of the data breach,] which could have an adverse impact on our business.

[removed: Although none] [added: None] materially disrupted, interrupted, damaged or shutdown the Company's IT systems, materially disrupted the Company's performance of its business or, to the Company's knowledge, resulted in material unauthorized access to [removed: data, there can be no assurance that we will be able to similarly mitigate future attacks, viruses or intrusions.][added: data.]

We have taken, and continue to take, precautionary measures to reduce the risk of, [removed: better] [added: and] detect and respond [removed: to] [added: to,] future cyber threats, and prevent or minimize vulnerabilities in our IT systems, including the loss or theft of intellectual [removed: property and] [added: property, patient data or] other confidential information that we [removed: house] [added: obtain and store] on our systems.

There can be no assurances that our precautionary measures will [removed: prevent] [added: prevent, contain] or successfully defend against cyber [added: or information security] threats that could have a significant impact on our business.

The development of [added: new technologies may impact the healthcare industry, and the development of] new, more cost-effective solutions that can be performed by our customers or by patients, and the continued internalization of testing by hospitals or [removed: physicians,] [added: clinicians,] could negatively impact our testing volume and revenues.

Hospitals also are internalizing clinical laboratory testing, [removed: including some non-routine and advanced testing.]

As of December 31, [removed: 2017,] [added: 2018,] we had approximately [removed: $3.8] [added: $3.9] billion of debt outstanding.

We have obtained ratings on our [added: public] debt from Standard and Poor's, Moody's Investor Services and Fitch Ratings.

Our [added: business] operations and reputation may be [added: materially] impaired if we do not comply with privacy laws or information security policies.

In our business, we [removed: generate] [added: collect, generate, process] or maintain sensitive information, such as patient data and other personal information.

If we do [added: use or] not adequately safeguard that information [removed: (including] in compliance with [removed: the] [added: applicable] requirements [removed: of the European Union General Data Protection Regulation beginning in May 2018)] [added: under federal, state] and [added: international laws, or if] it were [removed: to become available] [added: disclosed] to persons or entities that should not have access to it, our business could be [added: materially] impaired, our reputation could suffer and we could be subject to fines, penalties and litigation.

International operations also require us to devote significant management resources to implement our controls and systems in new markets, [added: and] to comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws in non-U.S. [removed: jurisdictions and to overcome challenges based on differing languages and cultures.][added: jurisdictions.]

Such events may result in a [removed: temporary] decline in the number of patients who seek clinical testing services or in our employees' ability to perform their job duties.

In addition, such events may [removed: temporarily] interrupt our ability to transport specimens, to receive materials from our suppliers or otherwise to provide our services.

| (b) | Increased pricing pressure from [removed: customers] [added: customers, including payers] and [removed: payers.] [added: patients.] |

| (d) | Impact of changes in payment mix, including [added: increased patient financial responsibility and] any shift from fee-for-service to discounted, capitated or bundled fee arrangements. |

| (e) | Adverse actions by government or other third-party payers, including healthcare reform that focuses on reducing healthcare costs but does not recognize the value and importance to healthcare of clinical testing or innovative solutions, unilateral reduction of fee schedules payable to us, [removed: competitive bidding, and an increase in the practice] [added: unilateral recoupment] of [removed: negotiating for exclusive arrangements that involve aggressively priced capitated or fee-for-service payments by health insurers or other payers.] [added: amounts allegedly owed and competitive bidding.] |

| (f) | The impact upon our testing volume and collected revenue or general or administrative expenses resulting from [removed: our] compliance with [removed: Medicare and Medicaid administrative] policies and requirements [removed: of] [added: imposed by Medicare, Medicaid and other] third-party payers. These include: |

Certain aspects of the ACA have been repealed, delayed or modified.

A federal court has recently determined that the ACA is unconstitutional; that ruling has been appealed.

Uncertainty about court rulings regarding the ACA could add to uncertainty in the healthcare market.

In addition, we believe that medical laboratory testing market fundamentals are changing.

We believe that PAMA-driven reimbursement pressure will induce structural change; that health plan approaches to laboratory testing services will reduce variation in spending on these services and benefit providers like Quest; and that growing consumerization in healthcare is sharpening focus on price disparities.

Digital pathology is an example of this.

Competitors also may compete on the basis of new service offerings.

Pursuant to PAMA, which was implemented in 2018, CMS promulgated revised reimbursement rate schedules for 2018 - 2020 for clinical laboratory testing services provided under Medicare.

Examples include increased use of prior authorization requirements and increased denial of coverage for services.

Under the determination, tests that gain FDA approval or clearance as an in vitro companion diagnostic will automatically receive full coverage, provided other coverage criteria are met.

Coverage determinations for other diagnostic laboratory tests using next-generation sequencing will be made by Medicare Administrative Contractors.

Clinical laboratory services providers are discussing this determination and others with CMS and Medicare Administrative Contractors to attempt to ensure that such providers can continue to provide these essential diagnostic services, but those discussions may not be successful.

In response to requests from payers to have a strategy to report a single or at most a few codes to describe procedures used to perform molecular and toxicology testing, the American Medical Association CPT® Editorial Panel has established and replaced billing codes used to report those procedures.

While some payers have adopted the new payment methods, others have not yet modified their systems and ask that laboratories continue to report their services using the previous reporting strategies, when those codes still exist.

We are subject to laws and regulations regarding protecting the security and privacy of certain healthcare and personal information, including: (a) the federal Health Insurance Portability and Accountability Act and the regulations thereunder, which establish (i) a complex regulatory framework including requirements for safeguarding protected health information and (ii) comprehensive federal standards regarding the uses and disclosures of protected health information; (b) state laws; and (c) the European Union's General Data Protection Regulation.

As the FDA moves to regulate more clinical laboratory testing, its approach to regulation is impacting industry practices and participants, new competitors may enter the industry, and competition may come in new forms.

In late 2018, legislation was introduced in Congress that would enable the FDA to regulate LDTs, in vitro diagnostics, software and other items used in the diagnosis of disease.

If this legislation were to become law, the FDA could regulate diagnostic tests and components and platforms used as part of these tests.

If such legislation were to become law, it could have a significant impact on the clinical laboratory testing industry, including regulating LDTs in new ways and creating avenues of opportunity and competition regarding clinical laboratory testing.

New competitors may enter the industry, and competition may come in new forms.

In January 2019 the FDA issued a draft guidance on a pre-certification pilot program to help software developers have a speedier and less restrictive path to clearance or approval of their software.

A failure or delay in our IT systems could impede our ability to serve our customers and patients and protect their confidential personal data.

These issues can also arise as a result from failures by third parties with whom we do business and for which we have limited control.

Any disruption or failure of our IT systems could have a material impact on our ability to serve our customers and patients, including negatively affecting our reputation in the marketplace.

Our IT systems are also subject to potential cyber attacks or other security breaches.

These attacks, if successful, could result in shutdowns or significant disruptions of our IT systems and/or in unauthorized persons misappropriating intellectual property and other confidential information, including patient data that we obtain, transmit and store on and through our IT systems.

External actors may develop and deploy viruses and other malicious software programs, including those that target our employees, designed to attack our IT systems or otherwise exploit security vulnerabilities, such as electronic spamming, phishing, spear phishing or similar tactics.

As a result of the difficulty in detecting many of these attacks, intrusions and breaches, failures or losses may be repeated or compounded before they are discovered or rectified, which could further increase these costs and consequences.

Although the Company has robust security measures implemented, which are monitored and routinely tested both by internal resources and external parties, cyber threats continue to evolve and are often not recognized until such attacks are launched against a potential target.

There can be no assurance that the Company can anticipate all such evolving future attacks, viruses or intrusions, implement adequate preventative measures, nor remediate any security vulnerabilities.

Such breaches could expose our IT systems to attack, which could result in major disruption of our business, and compromise our customer’s confidential information, result in litigation and potential liability for the Company, government investigation, significant damage to our reputation or otherwise adversely affect our business.

Any mitigation or remediation efforts that we undertake may require expenditures of significant resources and the diversion of the attention of management.

Third parties to whom we outsource certain of our services or functions, or with whom we interface, may store our confidential, patient data or other confidential information, are also subject to the risks outlined above.

A breach or attack affecting these third parties could also harm our business, results of operations and reputation.

For example, digital pathology is an emerging technology that may change the practice of pathology.

Information technology that includes self-learning or "artificial intelligence" features is growing and may impact the healthcare industry.

including some non-routine and advanced testing.

Our international operations increase our exposure to risks inherent in doing business in non-U.S. markets, which may vary by market and include: intellectual property legal protections and remedies; weak legal systems which may affect our ability to enforce contractual rights; trade regulations and procedures and actions affecting approval, production, pricing, reimbursement and marketing of services; and challenges based on differing languages and cultures.

| (n) | Failure of the Company to maintain, defend and secure its financial, accounting, technology, customer data and other operational systems from cyberattacks, IT system outages, telecommunications failures, malicious human acts and failure of the systems of third parties upon which the Company relies. |

| (o) | Development of technologies that substantially alter the practice of clinical testing, including technology changes that lead to the development of more convenient or cost-effective testing, or testing to be performed outside of a |

The President of the United States has announced that he favors repealing the ACA.

In 2017, the federal legislature undertook efforts to repeal, revise or replace the ACA, and the individual mandate adopted as part of the ACA was repealed.

In more recent legislation, some additional aspects of the ACA were modified: another two-year moratorium was implemented on the device tax imposed on the sellers of certain medical devices in the U.S., including those purchased and used by laboratories; the tax on health insurers was delayed for a year; and the "Cadillac tax" on certain employee benefit plans was also delayed for two years.

As part of legislation enacted in early 2018, the Independent Payment Advisory Board, which under the ACA was to be responsible annually to submit proposals aimed at reducing Medicare cost growth while preserving quality, was repealed.

From time to time, Congress has legislated reductions in, or frozen updates to, the Medicare Clinical Laboratory Fee Schedule.

In recent years, reductions in the Medicare Physician Fee Schedule for anatomic pathology services adversely impacted our business relative to the business of some of our competitors whose anatomic pathology business was not as sizable as ours.

Congress

PAMA is impacting the diagnostic information services industry.

Pursuant to this legislation, CMS has revised the Medicare Clinical Laboratory Fee Schedule for 2018, 2019 and 2020.

In addition, some health plans have been willing to limit the PPO or POS laboratory network to only a single national laboratory to obtain improved fee-for-service pricing; we may cease to be a contracted provider to a health plan.

The ACA included provisions, including regarding the creation of healthcare exchanges, that may encourage health insurance plans to increase exclusive contracting.

The draft policy, were it finalized without change, would effect a de facto requirement that each laboratory test using next generation sequencing technology would need to be approved or cleared by the FDA before it is covered by Medicare.

Third parties, including health plans, have not announced any change in approach to coverage for next-generation sequencing cancer panels.

The American Medical Association CPT® Editorial Panel is continuing its process of establishing new billing codes to replace codes that describe procedures used in performing molecular testing and toxicology testing.

Payment levels for many new codes remain largely unresolved and healthcare providers continue to address implementation of the new codes.

| | |

| --- | --- |

business, as well as incur additional liabilities from third-party claims.

In 2017, the FDA published a "Discussion Document" providing its views on legislative alternatives to regulate LDTs.

New legislation could significantly impact the clinical laboratory testing business, including by increasing or modifying the regulation of LDTs, hindering our ability to develop and market new services, causing an increase in the cost of our services, delaying our ability to introduce new tests or hindering our ability to perform testing.

Unauthorized persons may seek to obtain intellectual property and other confidential information that we house on our IT systems.

However, cyber threats are constantly evolving, thereby increasing the difficulty of detecting and successfully defending against them.

Breaches of our network or data security could disrupt the security of our internal systems and business applications, impair our ability to provide services to our customers, compromise intellectual property or confidential information or otherwise adversely impact our business.

We may be subject to litigation and governmental investigation, and may suffer reputational damage, as a result of a data breach, which could have an adverse impact on our business.

Although we conduct most of our business in the United States, our international operations increase our exposure to the inherent risks of doing business in international markets.

Depending on the market, these risks include without limitation:

| • | changes in the local economic environment; |

| • | political instability; |

| • | social changes; |

| • | intellectual property legal protections and remedies; |

| • | trade regulations; |

| • | procedures and actions affecting approval, production, pricing, reimbursement and marketing of services; |

| • | exchange controls; |

| • | attracting and retaining qualified employees; |

| • | local market practices; |

| • | export and import controls; |

| • | weak legal systems which may affect our ability to enforce contractual rights; |

| • | changes in local laws or regulations; and |

| • | potentially longer payment and collection cycles. |

| (3) | increased challenges in operating as a non-contracted provider with respect to health plans; |

| See page [removed: [59](#s20C1F4539BEBB419147D5534C02F8AA2).] [added: [53](#sA0AD8731CEA2A348DA2663C7FF4AC35A).] |

We [removed: empower] [added: play a crucial role in the healthcare ecosystem, empowering] people to take action to improve health outcomes.

During [removed: 2017,] [added: 2018,] we generated net revenues of [removed: $7.7] [added: $7.5] billion.

Additional financial information concerning Quest Diagnostics, including our consolidated subsidiaries and businesses, for each of the years ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015] [added: 2016] is included in the consolidated financial statements and notes thereto in “Financial Statements and Supplementary Data” in Part II, Item 8.

[removed: | Table 1 - Vision, Goals and Values | 3 |][added: OVERVIEW, VISION, GOALS AND VALUES]

| Table [removed: 3] [added: 1] - Portfolio Growth | [removed: 4] | [added: | |]

| Table [removed: 4] [added: 2] - [removed: Strategies] [added: Approaches] to Accelerate Growth | [removed: 4 |]

| Table [removed: 5] [added: 3] - Key Professional [removed: Laboratories] [added: Laboratory] Services Offerings | [removed: 5] |

| Table [removed: 6] [added: 4] - Clinical Franchises | [removed: 5] |

| Table [removed: 7] [added: 5] - [added: Recent] Consumer-Centric Initiatives [removed: to Accelerate Growth] | [removed: 6] |

| Table [removed: 9] [added: 6] - [removed: Five] Major Themes to Drive Operational Excellence | [removed: 7] |

| Table [removed: 12] [added: 7] - Assets and Capabilities | [removed: 9] |

[removed: | Table 15 - 2017] Medical and Scientific [removed: | 13 |][added: Expertise]

[removed: | Table 17 - Quanum®] Health Information Technology Solutions [removed: | 16 |][added: and Information Assets]

| Table [removed: 19] [added: 10] - Key Trends | [removed: 18] |

| Table [removed: 20] [added: 11] - Contributing to Reducing Healthcare Costs and Improving Care | [removed: 22 |]

| Table [removed: 21] [added: 12] - Customers | [removed: 23] |

| Table [removed: 22] [added: 13] - Factors Considered When Selecting a [removed: Diagnostics] [added: Diagnostic] Information Services Provider | [removed: 25] |

[removed: | Table 23 - 2017] [added: The following table sets forth the percentage of our consolidated net revenues reimbursed under] Medicare and Medicaid [removed: Revenues as % of Consolidated Net Revenues | 29 |][added: in 2018.]

| Table [removed: 24] [added: 15] - Key Regulatory Schemes | [removed: 30] |

| Table [removed: 25] [added: 16] - Information Available at Our Corporate Governance Webpage | [removed: 32] |

| Table [removed: 26] [added: 17] - Executive Officers | [removed: 33] |

[removed: ][added: ]

[removed: ][added: ]

Our strategy to accelerate revenue growth is based on [removed: a new way of] looking at the Company’s portfolio of [removed: services.][added: services, from the perspective of growth, as discussed in the following table.]

| Advanced Diagnostics | Testing services providing faster growth through innovation testing model | Genetic and advanced molecular testing services An important part of precision medicine A growing set of unique, innovation-based competitors | Rich clinical, scientific and medical innovation expertise Quality and reliability of new assays [removed: Delivering on amplified customer expectations] [added: Ability to manage potential new regulatory requirements] |

The Company has identified [added: the following] five [removed: strategies] [added: approaches] to accelerate growth.

[removed: | Table 4 - Strategies to] Accelerate Growth [removed: |]

| [removed: Organic] [added: Plus organic] growth through: |

| [removed: 1. Partnerships] [added: 2. Partnering] with health plans, [removed: hospital systems] [added: IDNs] and other risk bearing entities |

| [removed: 2.] [added: 3.] Offering the broadest access to diagnostic innovation |

| [removed: 3. Recognition] [added: 4. Being recognized] as the consumer-friendly provider of diagnostic information services |

| [removed: 4.] [added: 5.] Supporting population health with data analytics and extended care services |

[removed: Growth] [added: Growing] through acquisitions.

The Company has maintained a [removed: strategy, unchanged] [added: strategy] since November [removed: 2012,] [added: 2012] to grow [removed: 1-2% per] [added: revenue each] year [added: by a 1-2% compound annual growth rate] through accretive, strategic acquisitions.

The Company's approach to acquisitions is discussed below on page [removed: 8,] [added: 7,] under the heading Deliver disciplined capital deployment.

[removed: Partner] [added: Partnering] with health plans, [removed: independent delivery networks] [added: IDNs] and other risk bearing entities.

We [removed: also are seeking] [added: believe that the growing challenges faced by IDNs provides us with an opportunity] to more effectively partner with [removed: IDNs, on] [added: IDNs as they reconsider] their laboratory testing strategy.

We have deployed a dedicated health systems team to strengthen our [added: relationships with IDNs, including with respect to their reference testing.]

[removed: We] [added: Through our Professional Laboratory Services offerings, we] have developed a full suite of [removed: solutions, our Professional Laboratory Services offerings,] [added: solutions] to help IDNs build and execute their laboratory strategy.

Our industry-leading [removed: offering] [added: offering, highlighted in table 3 below,] enables IDNs to improve quality, reduce the cost of care and focus on core competencies.

We have the following vision, goals and values.

We have a two-point business strategy, reviewed by our Board of Directors and most recently updated at our Investor Day in November 2018, to achieve our vision and our goals.

| 1. Delivering a compound annual revenue growth rate of more than 2% through accretive, strategic acquisitions |

At our Investor Day in November 2018, we announced that, in view of key trends in the clinical testing industry (see the discussion of Key Trends on page13, our strategy now is to generate a compound annual growth rate of more than 2%.

We attempt to build strong partnerships with health plans through engagement, including of the plans, employers, members and clinicians.

We strengthen our relationships with health plans and increase the volume of our services for their members by driving value with employers and providing strong value propositions for members and clinicians.

In 2018, the Company established a long-term strategic partnership with UnitedHealthcare, including collaborating on a variety of value-based programs, became a preferred provider to Horizon Blue Cross Blue Shield of New Jersey (with the exception of its managed Medicaid and Dual Eligible Special Needs plan beneficiaries) and became a participating provider to Blue Cross Blue Shield of Georgia.

As a result, the Company began 2019 with access to more than 43 million additional insured lives.

In 2018, we implemented a new Professional Laboratory Services relationship with Regional Medical Center Health System, a regional health care provider for a five-county service area in northeast Alabama.

| Test menu optimization and spend consolidation | Blood utilization management |

3.

The 2018 acquisitions of the U.S. laboratory services business of Oxford Immunotec, Inc. (adding the T-SPOT.TB tuberculosis and Accutix® tick-borne disease testing services to our portfolio of innovative infectious disease testing services) and ReproSource (a national leader in specialty fertility diagnostic services) demonstrate our commitment to expand the reach of diagnostic innovation.

4.

Consumers expect more from their healthcare providers.

They seek convenience, a superior and personalized experience relevant to their needs, and to be empowered to make their own healthcare decisions.

Those desires inform our design for our consumer experience.

our quality diagnostic information services.

We are a leader in unaided consumer brand awareness among lab services providers and have a high level of satisfaction among patients who have used our services.

| Enhance patient experience | • Electronic check-in at patient service centers. • Improved on-line pre-registration and appointment scheduling. • Real-time payment determination for additional payers. |

| Consumer-initiated testing | • QuestDirectTM, our consumer-initiated testing service, is now available in 48 states. • Consumers can choose from 35 test packages including general health, men's and women's health, digestive health, heart health, infectious disease and sexually transmitted disease testing. |

| Self-collection technology | • Launched proprietary, consumer-friendly self-collection technology to engage consumers at home. |

5.

We support population health by offering services designed to identify gaps in care in a population, provide clinical solutions to close the gaps and foster consumer engagement with a solution.

Our offerings include data analytics and extended care services, including services designed to capture and document information.

In 2018, we acquired Mobile Medical Examination ServiceTM, LLC, a leading national provider of home-based health risk assessments and related services with a network of mobile professionals, expanding the services that we provide and strengthening our capabilities to help close gaps in care.

| Reduce denials and patient concessions | Standardize and automate |

| Digitize the customer experience | Optimize |

For example, we completed outfitting our patient service centers with electronic patient check-in, significantly increased the number of health plans using real-time estimation of consumer bills, standardized multiple test platforms (e.g., prescription drug monitoring and hematology) and commenced construction of our new 250,000 square foot flagship laboratory in Clifton, New Jersey.

We currently aim annually to save approximately 3% of our costs, and in 2018 we achieved that goal.

Since 2012, our asset dispositions, including the 2018 sale of our diagnostic information services business in India, collectively generated approximately $1 billion of proceeds.

For many years, we have maintained a common stock repurchase program.

In 2018, we consummated seven acquisitions, including Mobile Medical Examination Services, LLC (a leading national provider of home-based health risk assessments and related services) and the U.S. laboratory services business of Oxford Immunotec, Inc. (adding the T-SPOT.TB tuberculosis and Accutix® tick-borne disease testing services to our portfolio of innovative infectious disease testing services).

We have unmatched size, scale and capabilities.

Innovation

We plan to continue to pursue strategic relationships to help accelerate growth and drive operational excellence.

As the industry leader with the largest and broadest U.S. network, we

In 2018, the Company forged several new strategic relationships, including with Rutgers University (to conduct research related to human athletic performance) and the Synaptic Alliance (establishing a pilot program applying blockchain technology in an effort to improve data quality and reduce administrative costs in healthcare).

We have strong medical and scientific expertise and aspire to be a trusted authority in diagnostics medicine, provide insights and tools to support public and personal health, lead and facilitate scientific discussion and inspire innovation.

Our medical and scientific experts regularly provide presentations, symposia and webinars regarding diagnostic testing and participate on scientific committees determining guidelines for diagnostic usage.

In 2018, we were a founding member of the Synaptic Healthcare Alliance, which is running a pilot program applying blockchain technology to improve data quality and reduce administrative costs associated with changes to health care provider demographic data.

In 2017, we celebrated 50 years of life-changing results.

The discussion below includes several tables.

The index below is a guide to those tables.

| | |

| --- | --- |

| Index to Tables | |

| Table 2 - Two Point Business Strategy | 3 |

| Table 8 - Recent Consumer-Centric Initiatives | 6 |

| Table 10 - Invigorate Cost Excellence Program - Flagship Programs | 7 |

| Table 11 - Positioned to Grow and Continue to Lead | 7 |

| Table 13 - New or Enhanced Disease Area Solutions | 10 |

| Table 14 - Sample Collaborations | 12 |

| Table 16 - 2017 Net Revenues | 14 |

| Table 18 - U.S. Clinical Testing Industry | 17 |

The discussion also uses the following defined terms:

ACA - Affordable Care Act

ACO - Accountable Care Organization

CAP - The College of American Pathologists

CLIA - Clinical Laboratory Improvement Act

CMS - Centers for Medicare and Medicaid Services

FDA - U.S. Food and Drug Administration

IDN - Independent Delivery Network (including hospital health systems)

IPA - Independent Physician Association

LDT - Laboratory-Developed Test

PAMA - The Protecting Access to Medicare Act of 2014

OUR STRATEGY AND STRENGTHS

In 2012, Quest Diagnostics launched a new vision, goals and strategy.

In November 2012, we introduced a five-point business strategy to achieve our vision and our goals.

We executed on this strategy, and at our Investor Day in November 2016, we updated our strategy to reflect our progress, narrowing our focus to two elements.

Our Board of Directors has reviewed our strategy.

Accelerate growth.

The Company's portfolio, from the perspective of growth, can be looked at as discussed in the following table.

| Table 3 - Portfolio Growth | | | |

They are set forth in the following table and discussed further below.

| Additionally: |

| 5. Grow 1-2% per year through accretive, strategic acquisitions |

The Company also plans to pursue strategic relationships to help accelerate growth.

The Company has maintained strategic partnerships over the years, and in recent years has pursued additional collaborations with leading partners.

In 2017, the Company forged several new strategic relationships, including with Wal-Mart Stores, Inc., Cleveland Clinic, McKesson Specialty Health, U.S. Oncology Network and Texas Oncology.

The Company's collaborations are discussed more fully below, in connection with table 14.

See Note [removed: 17] [added: 18] to the Consolidated Financial Statements (Part II, Item 8 of this Report) for information regarding legal proceedings in which we are involved.

For the Fiscal Year Ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate website, if any,] every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

| Non-accelerated filer o [removed: (Do not check if a smaller reporting company)] | Smaller reporting company o |

As of June 30, [removed: 2017,] [added: 2018,] the aggregate market value of the approximately [removed: 136] [added: $136] million shares of voting and non-voting common equity held by non-affiliates of the registrant was approximately [removed: $15.1] [added: $14.9] billion, based on the closing price on such date of the registrant's Common Stock on the New York Stock Exchange.

As of January 31, [removed: 2018,] [added: 2019,] there were outstanding [removed: 135,637,852] [added: 134,261,768] shares of the registrant’s common stock, $.01 par value.

| Portions of the registrant's Proxy Statement to be filed by April 30, [removed: 2018] [added: 2019] | Part III |

| Item 1. | [removed: [Business](#sDF3288EC8B14EC04285A5534C7048353)] [added: [Business](#s3F35FA6B0B1FF7FBA7FA63C80F8FF1D1)] | [removed: [1](#sDF3288EC8B14EC04285A5534C7048353)] [added: [1](#s3F35FA6B0B1FF7FBA7FA63C80F8FF1D1)] |

| | [Business [removed: Operations](#s01C5E06D82A82EE5D2D75534C75769FB)] [added: Operations](#s2C8D45301F8F3E44036663C80FF8D88C)] | [removed: [14](#s01C5E06D82A82EE5D2D75534C75769FB)] [added: [10](#s2C8D45301F8F3E44036663C80FF8D88C)] |

| | [The United States Clinical Testing [removed: Market](#sCF07A4A76155CC9E89A15534C779CE68)] [added: Industry](#s083609E0150B106BC21A63C810146DDE)] | [removed: [17](#sCF07A4A76155CC9E89A15534C779CE68)] [added: [13](#s083609E0150B106BC21A63C810146DDE)] |

| | [Available [removed: Information](#s75F2FD51EAEB4D6BC58A5534C81F113C)] [added: Information](#s7B3EA78D3FE7E63F494E63C810BBF719)] | [removed: [32](#s75F2FD51EAEB4D6BC58A5534C81F113C)] [added: [27](#s7B3EA78D3FE7E63F494E63C810BBF719)] |

| | [Executive Officers of the [removed: Company](#sEADD9F75BE4BD512AD155534C851AAB1)] [added: Company](#sBEBB0D853B07ED94ABDF63C810DB4877)] | [removed: [33](#sEADD9F75BE4BD512AD155534C851AAB1)] [added: [28](#sBEBB0D853B07ED94ABDF63C810DB4877)] |

| Item 1A. | [Risk [removed: Factors](#sE7FD25EE224C5FB841625534C8738045)] [added: Factors](#sA8FB8BEFF6E33F0C9B9263C8110E5851)] | [removed: [35](#sE7FD25EE224C5FB841625534C8738045)] [added: [30](#sA8FB8BEFF6E33F0C9B9263C8110E5851)] |

| | [Cautionary Factors That May Affect Future [removed: Results](#sD56AABD3267C2D7AA4F65534C8A590B3)] [added: Results](#s65F4018F235561578DDE63C8112F0380)] | [removed: [43](#sD56AABD3267C2D7AA4F65534C8A590B3)] [added: [38](#s65F4018F235561578DDE63C8112F0380)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sC940B13D7955B65F864C5534C8C6533C)] [added: Comments](#s3542F05B0FDE4281562763C811616825)] | [removed: [44](#sC940B13D7955B65F864C5534C8C6533C)] [added: [39](#s3542F05B0FDE4281562763C811616825)] |

| Item 2. | [removed: [Properties](#sF3B8B2945C4EB8F4C0DF5534C8F84A08)] [added: [Properties](#sB90055B488F976AB50D963C81183BD30)] | [removed: [44](#sF3B8B2945C4EB8F4C0DF5534C8F84A08)] [added: [39](#sB90055B488F976AB50D963C81183BD30)] |

| Item 3. | [Legal [removed: Proceedings](#s9D1C2E2E8CA6B7FA06935534C919AE03)] [added: Proceedings](#sDB14F69237EA53B9656D63C811B418C4)] | [removed: [45](#s9D1C2E2E8CA6B7FA06935534C919AE03)] [added: [40](#sDB14F69237EA53B9656D63C811B418C4)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s715BA07818D800396AE25534C94B25F8)] [added: Disclosures](#s15A06BB01F22F3E43B0063C811D6B9F5)] | [removed: [45](#s715BA07818D800396AE25534C94B25F8)] [added: [40](#s15A06BB01F22F3E43B0063C811D6B9F5)] |

| Item 5. | [Market for Registrant's Common Stock, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s55A70252AEC299655E135534C10131AE)] [added: Securities](#sF3C5018A7B75739E381563C7FC6B8F56)] | [removed: [46](#s55A70252AEC299655E135534C10131AE)] [added: [41](#sF3C5018A7B75739E381563C7FC6B8F56)] |

| Item 6. | [Selected Financial [removed: Data](#sB8F4D468CDB588643DCB5534C9C6D0CC)] [added: Data](#s5799739AEBAFBA9717B963C8125A5C26)] | [removed: [48](#sB8F4D468CDB588643DCB5534C9C6D0CC)] [added: [42](#s5799739AEBAFBA9717B963C8125A5C26)] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s03504263751602ED47FC5534C9F28D48)] [added: Operations](#sE75C56CCF86BF800FF3663C8127C7A33)] | [removed: [48](#s03504263751602ED47FC5534C9F28D48)] [added: [43](#sE75C56CCF86BF800FF3663C8127C7A33)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sB27D98CD7BEFEC5597F35534CA127B27)] [added: Risk](#s7D65C178E89EBC9EC07C63C812AFBE26)] | [removed: [48](#sB27D98CD7BEFEC5597F35534CA127B27)] [added: [43](#s7D65C178E89EBC9EC07C63C812AFBE26)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s8C5AEAEC4E0A4D5CCF925534CA452B49)] [added: Data](#s40177A6F24942DAE87AC63C812D0AA74)] | [removed: [48](#s8C5AEAEC4E0A4D5CCF925534CA452B49)] [added: [43](#s40177A6F24942DAE87AC63C812D0AA74)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sDB80FE23327680CB8FE55534CA67352F)] [added: Disclosure](#s839C51FD9B729345214063C813023112)] | [removed: [48](#sDB80FE23327680CB8FE55534CA67352F)] [added: [43](#s839C51FD9B729345214063C813023112)] |

| Item 9A. | [Controls and [removed: Procedures](#sD560B5466B786C2056A15534CA9919A9)] [added: Procedures](#s4592026AB1D76353146B63C8132201FB)] | [removed: [48](#sD560B5466B786C2056A15534CA9919A9)] [added: [43](#s4592026AB1D76353146B63C8132201FB)] |

| Item 9B. | [Other [removed: Information](#s741E610D9A1A292C578A5534CAB9D982)] [added: Information](#s267B6B0D74DC6BA81CB063C813559D97)] | [removed: [48](#s741E610D9A1A292C578A5534CAB9D982)] [added: [43](#s267B6B0D74DC6BA81CB063C813559D97)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#s0EA6D55CB2C714564D065534CB0D74D5)] [added: Governance](#s1E9987220538FB29ABF563C813A81D03)] | [removed: [49](#s0EA6D55CB2C714564D065534CB0D74D5)] [added: [44](#s1E9987220538FB29ABF563C813A81D03)] |

| Item 11. | [Executive [removed: Compensation](#s3C8EBCDC768D22A451CF5534CB3FF25A)] [added: Compensation](#s3A34478493A94C238D2163C813C9EA0C)] | [removed: [49](#s3C8EBCDC768D22A451CF5534CB3FF25A)] [added: [44](#s3A34478493A94C238D2163C813C9EA0C)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholders' [removed: Matters](#s052CAB2E53F102F5C15D5534CB611026)] [added: Matters](#sC1BB69555DD00722C29F63C813FCFFD3)] | [removed: [49](#s052CAB2E53F102F5C15D5534CB611026)] [added: [44](#sC1BB69555DD00722C29F63C813FCFFD3)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s88C6F7BCDB7A3C3276955534CB93E8F3)] [added: Independence](#s5766DCAAAEF313C0369863C8141D4C3B)] | [removed: [49](#s88C6F7BCDB7A3C3276955534CB93E8F3)] [added: [44](#s5766DCAAAEF313C0369863C8141D4C3B)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s363C9969107243AFCCCD5534CBB44B3D)] [added: Services](#sB6475DCDAF52C9BB0C1063C8144FD448)] | [removed: [49](#s363C9969107243AFCCCD5534CBB44B3D)] [added: [44](#sB6475DCDAF52C9BB0C1063C8144FD448)] |

| Item 15. | [Exhibits, Financial Statement [removed: Schedules](#sBC71F8BF5B4D2075CACE5534CC066F56)] [added: Schedules](#s7F84DB840E498515546563C814A342EC)] | [removed: [50](#sBC71F8BF5B4D2075CACE5534CC066F56)] [added: [45](#s7F84DB840E498515546563C814A342EC)] |

| Item 16. | [Form 10-K [removed: Summary](#s185db7c120ce4bebafa04e8e024bfe0d)] [added: Summary](#sD64BF56CF008DF99939063C814C4F23C)] | [removed: [51](#s185db7c120ce4bebafa04e8e024bfe0d)] [added: [46](#sD64BF56CF008DF99939063C814C4F23C)] |

| [Selected Historical Financial Data of Our [removed: Company](#s52CDBAB0613B7E12CB4D5534BF04A988)] [added: Company](#s0A99127B34143E9C9E4163C7FDFDFE92)] | | [removed: [54](#s52CDBAB0613B7E12CB4D5534BF04A988)] [added: [49](#s0A99127B34143E9C9E4163C7FDFDFE92)] |

| [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s20C1F4539BEBB419147D5534C02F8AA2)] [added: Operations](#sA0AD8731CEA2A348DA2663C7FF4AC35A)] | | [removed: [59](#s20C1F4539BEBB419147D5534C02F8AA2)] [added: [53](#sA0AD8731CEA2A348DA2663C7FF4AC35A)] |

| [Report of Management on Internal Control Over Financial [removed: Reporting](#sA198B98E4564FEACFF075534CD542552)] [added: Reporting](#s004B49574A8A016E03EF63C81641A36F)] | | [removed: [78](#sA198B98E4564FEACFF075534CD542552)] [added: [72](#s004B49574A8A016E03EF63C81641A36F)] |

| [Report of Independent Registered Public Accounting [removed: Firm](#s437B753D002FE2826A925534CD86E83E)] [added: Firm](#sF4117ADC98D5090341DC63C816502170)] | | [F- [removed: 1](#s437B753D002FE2826A925534CD86E83E)] [added: 1](#sF4117ADC98D5090341DC63C816502170)] |

| [Consolidated Financial Statements and Related [removed: Notes](#sA1C80CE2E0F4A033BE595534CDA87C59)] [added: Notes](#s3408F613F6D54AF9571C63C816669457)] | | [F- [removed: 3](#sA1C80CE2E0F4A033BE595534CDA87C59)] [added: 3](#s3408F613F6D54AF9571C63C816669457)] |

| [Supplementary Data: Quarterly Operating Results [removed: (unaudited)](#sBF6A8A645AA943809B165534BA311345)] [added: (unaudited)](#s4CC34CE3B0B079F240AA63C7EE893B84)] | | [F- [removed: 44](#sBF6A8A645AA943809B165534BA311345)] [added: 45](#s4CC34CE3B0B079F240AA63C7EE893B84)] |

| [Schedule II - Valuation Accounts and [removed: Reserves](#s5D7C61E20E6A74F05C3E5534BA74DA58)] [added: Reserves](#s49476B176A7ACF0EFE9063C7ECA16F8B)] | | [F- [removed: 46](#s5D7C61E20E6A74F05C3E5534BA74DA58)] [added: 47](#s49476B176A7ACF0EFE9063C7ECA16F8B)] |

10-K 1 dgx1231201810-k.htm 10-K

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

\[ \]

| | [Overview, Vision, Goals and Values](#sda0721190850436783cafa6a1621919f) | [1](#sda0721190850436783cafa6a1621919f) |

| | [Our Strategy](#s403F7F8E5381B1C7062463C80FC1609F) | [2](#s403F7F8E5381B1C7062463C80FC1609F) |

| | [Our Strengths](#sb1c85575f98d4ada862b8cad9678cdc1) | [6](#sb1c85575f98d4ada862b8cad9678cdc1) |

| | [General](#s9E63138EB95BA85BA30E63C810356FCA) | [21](#s9E63138EB95BA85BA30E63C810356FCA) |

| | [Regulation](#s9C364E77DA1377F3558563C81088C205) | [24](#s9C364E77DA1377F3558563C81088C205) |

The discussion in Item 1 below includes several defined terms:

ACA - Affordable Care Act

ACO - Accountable Care Organization

CAP - The College of American Pathologists

CLIA - Clinical Laboratory Improvement Act

CMS - Centers for Medicare and Medicaid Services

FDA - U.S. Food and Drug Administration

IDN - Independent Delivery Network (including hospital health systems)

IPA - Independent Physician Association

LDT - Laboratory-Developed Test

PAMA - The Protecting Access to Medicare Act of 2014

The discussion also includes several tables, indexed in the following guide.

| | |

| --- | --- |

| | |

| Guide to Tables | |

| Table 1 - Portfolio Growth | 3 |

| Table 2 - Approaches to Accelerate Growth | 3 |

| Table 3 - Key Professional Laboratory Services Offerings | 4 |

| Table 4 - Clinical Franchises | 4 |

| Table 5 - Recent Consumer-Centric Initiatives | 5 |

| Table 6 - Major Themes to Drive Operational Excellence | 6 |

| Table 7 - Assets and Capabilities | 8 |

| Table 8 - 2018 Net Revenues | 10 |

| Table 9 - U.S. Clinical Testing Industry | 13 |

| Table 10 - Key Trends | 13 |

| Table 11 - Contributing to Reducing Healthcare Costs and Improving Care | 17 |

| Table 12 - Customers | 18 |

| Table 13 - Factors Considered When Selecting a Diagnostics Information Services Provider | 21 |

| Table 14 - 2018 Medicare and Medicaid Revenues as % of Consolidated Net Revenues | 24 |

| Table 15 - Key Regulatory Schemes | 24 |

| Table 16 - Information Available at Our Corporate Governance Webpage | 27 |

10-K 1 dgx1231201710-k.htm 10-K

| | [Our Strategy and Strengths](#s72AD56FCEA3FB46618D75534C725618B) | [3](#s72AD56FCEA3FB46618D75534C725618B) |

| | [General](#s26E25F4FC148C851B22E5534C7AB2CA4) | [25](#s26E25F4FC148C851B22E5534C7AB2CA4) |

| | [Billing and Reimbursement](#sB23CE0D7C46D4B1591285534C7CCD427) | [28](#sB23CE0D7C46D4B1591285534C7CCD427) |

| | [Regulation](#sAFE12A5FB42CA917F8255534C7FE9463) | [29](#sAFE12A5FB42CA917F8255534C7FE9463) |

In addition, we maintain offices, patient service centers and clinical laboratories in locations outside the United States, including in Puerto [removed: Rico, Mexico, India] [added: Rico] and [removed: Ireland.][added: Mexico.]

Our common stock is listed and traded on the New York Stock Exchange under the symbol “DGX.” As of February 1, [removed: 2018,] [added: 2019,] we had approximately [removed: 2,700] [added: 2,600] record holders of our common stock; we believe that the number of beneficial holders of our common stock exceeds the number of record holders.

The table below sets forth the information with respect to purchases made by or on behalf of the Company of its common stock during the fourth quarter of [removed: 2017.][added: 2018.]

| (A) | Since the share repurchase program's inception in May 2003, our Board of Directors has authorized $8.0 billion of share repurchases of our common stock through December 31, [removed: 2017.] [added: 2018.] The share repurchase authority has no set expiration or termination date. |

Set forth below is a line graph comparing the cumulative total shareholder return on Quest Diagnostics' common stock since December 31, [removed: 2012] [added: 2013] based on the market price of the Company's common stock and assuming reinvestment of dividends, with the cumulative total shareholder return of companies on the Standard & Poor's 500 Stock Index and the S&P 500 Healthcare Equipment & Services Index.

[removed: ][added: ]

| | | Closing DGX Price | | [added: | |] Total Shareholder Return | | | | | | | | | Performance Graph Values | | | | | | | | | | |

| Date | | | DGX | | | S&P 500 | | | S&P 500 H.C. | | | DGX | | | | S&P 500 | | | | S&P 500 H.C. | | | | [added: | |]

| October 1, 2018 – October 31, 2018 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 130,414 | | | $ | 92.01 | | | 130,414 | | | $ | 755,124 | |

| Employee Transactions (B) | | 797 | | | $ | 103.14 | | | N/A | | | N/A | | |

| November 1, 2018 – November 30, 2018 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 482,952 | | | $ | 95.24 | | | 482,952 | | | $ | 709,126 | |

| Employee Transactions (B) | | 714 | | | $ | 96.06 | | | N/A | | | N/A | | |

| December 1, 2018 – December 31, 2018 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 1,365,222 | | | $ | 85.70 | | | 1,365,222 | | | $ | 592,126 | |

| Employee Transactions (B) | | 1,902 | | | $ | 82.74 | | | N/A | | | N/A | | |

| Share Repurchase Program (A) | | 1,978,588 | | | $ | 88.45 | | | 1,978,588 | | | $ | 592,126 | |

| Employee Transactions (B) | | 3,413 | | | $ | 90.29 | | | N/A | | | N/A | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | | | | |

| 12/31/2014 | | $ | 67.06 | | | 28.06 | % | | 13.69 | % | | 25.34 | % | | $ | 128.06 | | | $ | 113.69 | | | $ | 125.34 | |

| 12/31/2015 | | $ | 71.14 | | | 8.35 | % | | 1.38 | % | | 6.89 | % | | $ | 138.75 | | | $ | 115.26 | | | $ | 133.97 | |

| 12/30/2016 | | $ | 91.90 | | | 31.89 | % | | 11.96 | % | | (2.69 | )% | | $ | 183.01 | | | $ | 129.05 | | | $ | 130.37 | |

| 12/29/2017 | | $ | 98.49 | | | 9.16 | % | | 21.83 | % | | 22.08 | % | | $ | 199.77 | | | $ | 157.22 | | | $ | 159.15 | |

| 12/31/2018 | | $ | 83.27 | | | (13.84 | )% | | (4.38 | )% | | 6.47 | % | | $ | 172.12 | | | $ | 150.33 | | | $ | 169.44 | |

The following table sets forth, for the periods indicated, the high and low sales price per share as reported on the New York Stock Exchange Consolidated Tape and dividend information.

| | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | Common Stock Market Price | | | | | | | | Dividends Declared | | |

| | High | | | | Low | | | | | | |

| 2016 | | | | | | | | | | | |

| First Quarter | $ | 72.64 | | | $ | 59.66 | | | $ | 0.40 | |

| Second Quarter | 81.41 | | | | 70.92 | | | | 0.40 | | |

| Third Quarter | 86.85 | | | | 80.27 | | | | 0.40 | | |

| Fourth Quarter | 93.57 | | | | 79.12 | | | | 0.45 | | |

| 2017 | | | | | | | | | | | |

| First Quarter | $ | 100.00 | | | $ | 90.13 | | | $ | 0.45 | |

| Second Quarter | 111.87 | | | | 96.91 | | | | 0.45 | | |

| Third Quarter | 112.97 | | | | 91.67 | | | | 0.45 | | |

| Fourth Quarter | 102.62 | | | | 90.10 | | | | 0.45 | | |

We currently expect that comparable cash dividends will continue to be paid in the future.

In January 2018, we declared a common stock dividend of $0.50 per common share, payable in April 2018.

| October 1, 2017 – October 31, 2017 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 41,965 | | | $ | 95.32 | | | 41,965 | | | $ | 1,013,116 | |

| Employee Transactions (B) | | 936 | | | $ | 91.20 | | | N/A | | | N/A | | |

| November 1, 2017 – November 30, 2017 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 860,463 | | | $ | 92.97 | | | 860,463 | | | $ | 933,116 | |

| Employee Transactions (B) | | 179 | | | $ | 93.75 | | | N/A | | | N/A | | |

| December 1, 2017 – December 31, 2017 | | | | | | | | | | | | | | |

| Share Repurchase Program (A) | | 162,496 | | | $ | 98.46 | | | 162,496 | | | $ | 917,117 | |

| Employee Transactions (B) | | 763 | | | $ | 96.15 | | | N/A | | | N/A | | |

| Share Repurchase Program (A) | | 1,064,924 | | | $ | 93.90 | | | 1,064,924 | | | $ | 917,117 | |

| Employee Transactions (B) | | 1,878 | | | $ | 93.45 | | | N/A | | | N/A | | |

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| 12/31/2013 | | $53.54 | | (6.24 | )% | | 32.39 | % | | 35.05 | % | | $ | 93.76 | | | $ | 132.39 | | | $ | 135.05 | |

| 12/31/2014 | | $67.06 | | 28.06 | % | | 13.69 | % | | 25.34 | % | | $ | 120.06 | | | $ | 150.51 | | | $ | 169.27 | |

| 12/31/2015 | | $71.14 | | 8.35 | % | | 1.38 | % | | 6.89 | % | | $ | 130.09 | | | $ | 152.59 | | | $ | 180.93 | |

| 12/30/2016 | | $91.90 | | 31.89 | % | | 11.96 | % | | (2.69 | )% | | $ | 171.58 | | | $ | 170.84 | | | $ | 176.06 | |

| 12/29/2017 | | $98.49 | | 9.16 | % | | 21.83 | % | | 22.08 | % | | $ | 187.30 | | | $ | 208.14 | | | $ | 214.93 | |

| See page [removed: [54](#s52CDBAB0613B7E12CB4D5534BF04A988).] [added: [49](#s0A99127B34143E9C9E4163C7FDFDFE92).] |

| See page [removed: [78](#sA198B98E4564FEACFF075534CD542552).] [added: [72](#s004B49574A8A016E03EF63C81641A36F).] |

During the fourth quarter of [removed: 2017,] [added: 2018,] there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended) that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Information regarding the Company's executive officers is contained in Part I, Item 1 of this Report under “Executive Officers of the Company.” Information regarding the directors and executive officers of the Company appearing in our Proxy Statement to be filed by April 30, [removed: 2018] [added: 2019] (“Proxy Statement”) under the captions “Proposal No. 1 - Election of Directors,” “Director Independence,” “Board Committees” and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated by reference herein.

Information appearing in our Proxy Statement under the captions [removed: “2017] [added: “2018] Director Compensation Table,” “Compensation Discussion and Analysis,” “Information Regarding Executive Compensation” and “Compensation Committee Report” is incorporated by reference herein.

| [Report of Independent Registered Public Accounting [removed: Firm](#s437B753D002FE2826A925534CD86E83E)] [added: Firm](#sF4117ADC98D5090341DC63C816502170)] | [F- [removed: 1](#s437B753D002FE2826A925534CD86E83E)] [added: 1](#sF4117ADC98D5090341DC63C816502170)] |

| [Consolidated Balance [removed: Sheets](#s67E5D065B695EDE2D3B15534B6AD9422)] [added: Sheets](#s272D81A460C44B957A6663C7ECF3A44C)] | [F- [removed: 3](#s67E5D065B695EDE2D3B15534B6AD9422)] [added: 3](#s272D81A460C44B957A6663C7ECF3A44C)] |

| [Consolidated Statements of [removed: Operations](#s94AC28666C944107048A5534B6D3B073)] [added: Operations](#sFCC98F2249E5175BCBC863C7EF1726C9)] | [F- [removed: 4](#s94AC28666C944107048A5534B6D3B073)] [added: 4](#sFCC98F2249E5175BCBC863C7EF1726C9)] |

| [Consolidated Statements of Comprehensive [removed: Income](#s0CF88C52562FAAF7A9BD5534B6F69270)] [added: Income](#sC1C0B416CB18CE5BFEF363C7ED9F08C5)] | [F- [removed: 5](#s0CF88C52562FAAF7A9BD5534B6F69270)] [added: 5](#sC1C0B416CB18CE5BFEF363C7ED9F08C5)] |

| [Consolidated Statements of Cash [removed: Flows](#s3721FBCBBEDD740518D75534B701297E)] [added: Flows](#sF54F3644BD7134E895F163C7ECCA31A1)] | [F- [removed: 6](#s3721FBCBBEDD740518D75534B701297E)] [added: 6](#sF54F3644BD7134E895F163C7ECCA31A1)] |

| [Consolidated Statements of Stockholders' [removed: Equity](#sDEEAB9C2036499911A725534B72E471F)] [added: Equity](#s79F97613B9221C66583763C7ECE1D1D3)] | [F- [removed: 7](#sDEEAB9C2036499911A725534B72E471F)] [added: 7](#s79F97613B9221C66583763C7ECE1D1D3)] |

| [Notes to Consolidated Financial [removed: Statements](#s5243A1885B7A7CA5C0365534CF15F9ED)] [added: Statements](#sF70464E1AA55EEB9737363C817C949BA)] | [F- [removed: 8](#s5243A1885B7A7CA5C0365534CF15F9ED)] [added: 8](#sF70464E1AA55EEB9737363C817C949BA)] |

| [Supplementary Data: Quarterly Operating Results [removed: (unaudited)](#sBF6A8A645AA943809B165534BA311345)] [added: (unaudited)](#s4CC34CE3B0B079F240AA63C7EE893B84)] | [F- [removed: 44](#sBF6A8A645AA943809B165534BA311345)] [added: 45](#s4CC34CE3B0B079F240AA63C7EE893B84)] |

| [Schedule II - Valuation Accounts and [removed: Reserves](#s5D7C61E20E6A74F05C3E5534BA74DA58)] [added: Reserves](#s49476B176A7ACF0EFE9063C7ECA16F8B)] | [F- [removed: 46](#s5D7C61E20E6A74F05C3E5534BA74DA58)] [added: 47](#s49476B176A7ACF0EFE9063C7ECA16F8B)] |

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February [removed: 23, 2018.][added: 21, 2019.]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February [removed: 23, 2018.][added: 21, 2019.]

We derived the selected historical financial data for the years [removed: 2013] [added: 2016] through [removed: 2017] [added: 2018] from the audited consolidated financial statements of our Company.

| | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | |

| Net revenues | $ | [removed: 7,709] [added: 7,531] | | | $ | [removed: 7,515] [added: 7,402] | | | $ | [removed: 7,493] [added: 7,214] | | | $ | [removed: 7,435] [added: 7,493] | | | $ | [removed: 7,146] [added: 7,435] | |

| Operating income | [removed: 1,165] [added: 1,101] | | | | [removed: 1,277] [added: 1,165] | | | | [removed: 1,399] [added: 1,277] | | | | [removed: 983] [added: 1,399] | | | | [removed: 1,475] [added: 983] | | |

| Income from continuing operations | [removed: 824] [added: 788] | | | | [removed: 696] [added: 824] | | | | [removed: 753] [added: 696] | | | | [removed: 587] [added: 753] | | | | [removed: 848] [added: 587] | | |

| Income from discontinued operations, net of taxes | — | | | | — | | | | — | | | | [removed: 5] [added: —] | | | | [removed: 35] [added: 5] | | |

| Net income | [removed: 824] [added: 788] | | | | [removed: 696] [added: 824] | | | | [removed: 753] [added: 696] | | | | [removed: 592] [added: 753] | | | | [removed: 883] [added: 592] | | |

| Less: Net income attributable to noncontrolling interests | 52 | | | | [removed: 51] [added: 52] | | | | [removed: 44] [added: 51] | | | | [removed: 36] [added: 44] | | | | [removed: 34] [added: 36] | | |

| Net income attributable to Quest Diagnostics | $ | [removed: 772] [added: 736] | | | $ | [removed: 645] [added: 772] | | | $ | [removed: 709] [added: 645] | | | $ | [removed: 556] [added: 709] | | | $ | [removed: 849] [added: 556] | |

| Income from continuing operations | $ | [removed: 772] [added: 736] | | | $ | [removed: 645] [added: 772] | | | $ | [removed: 709] [added: 645] | | | $ | [removed: 551] [added: 709] | | | $ | [removed: 814] [added: 551] | |

| Net income | $ | [removed: 772] [added: 736] | | | $ | [removed: 645] [added: 772] | | | $ | [removed: 709] [added: 645] | | | $ | [removed: 556] [added: 709] | | | $ | [removed: 849] [added: 556] | |

| Income from continuing operations | $ | [removed: 5.63] [added: 5.39] | | | $ | [removed: 4.58] [added: 5.63] | | | $ | [removed: 4.92] [added: 4.58] | | | $ | [removed: 3.80] [added: 4.92] | | | $ | [removed: 5.35] [added: 3.80] | |

| Income from discontinued operations | — | | | | — | | | | — | | | | [removed: 0.03] [added: —] | | | | [removed: 0.23] [added: 0.03] | | |

| Net income | $ | [removed: 5.63] [added: 5.39] | | | $ | [removed: 4.58] [added: 5.63] | | | $ | [removed: 4.92] [added: 4.58] | | | $ | [removed: 3.83] [added: 4.92] | | | $ | [removed: 5.58] [added: 3.83] | |

| Income from continuing operations | $ | [removed: 5.50] [added: 5.29] | | | $ | [removed: 4.51] [added: 5.50] | | | $ | [removed: 4.87] [added: 4.51] | | | $ | [removed: 3.78] [added: 4.87] | | | $ | [removed: 5.31] [added: 3.78] | |

| Net income | $ | [removed: 5.50] [added: 5.29] | | | $ | [removed: 4.51] [added: 5.50] | | | $ | [removed: 4.87] [added: 4.51] | | | $ | [removed: 3.81] [added: 4.87] | | | $ | [removed: 5.54] [added: 3.81] | |

| Dividends per common share | $ | [removed: 1.80] [added: 2.03] | | | $ | [removed: 1.65] [added: 1.80] | | | $ | [removed: 1.52] [added: 1.65] | | | $ | [removed: 1.32] [added: 1.52] | | | $ | [removed: 1.20] [added: 1.32] | |

| Cash and cash equivalents | $ | [removed: 137] [added: 135] | | | $ | [removed: 359] [added: 137] | | | $ | [removed: 133] [added: 359] | | | $ | [removed: 192] [added: 133] | | | $ | [removed: 187] [added: 192] | |

| Total assets | [removed: 10,503] [added: 11,003] | | | | [removed: 10,100] [added: 10,503] | | | | [removed: 9,962] [added: 10,100] | | | | [removed: 9,857] [added: 9,962] | | | | [removed: 8,930] [added: 9,857] | | |

| Long-term debt | [removed: 3,748] [added: 3,429] | | | | [removed: 3,728] [added: 3,748] | | | | [removed: 3,492] [added: 3,728] | | | | [removed: 3,224] [added: 3,492] | | | | [removed: 3,102] [added: 3,224] | | |

| Total debt | [removed: 3,784] [added: 3,893] | | | | [removed: 3,734] [added: 3,784] | | | | [removed: 3,651] [added: 3,734] | | | | [removed: 3,742] [added: 3,651] | | | | [removed: 3,314] [added: 3,742] | | |

| Redeemable noncontrolling interest | [removed: 80] [added: 77] | | | | [removed: 77] [added: 80] | | | | [removed: 70] [added: 77] | | | | [removed: —] [added: 70] | | | | — | | |

| Net cash provided by operating activities | $ | [removed: 1,175] [added: 1,200] | | | $ | [removed: 1,069] [added: 1,175] | | | $ | [removed: 821] [added: 1,116] | | | $ | [removed: 944] [added: 967] | | | $ | [removed: 667] [added: 944] | |

| Net cash [removed: (used in) provided by] [added: used in] investing activities | [removed: (805] [added: (801] | | ) | | [removed: (152] [added: (830] | | ) | | [removed: (362] [added: (127] | | ) | | [removed: (1,025] [added: (362] | | ) | | [removed: 328] [added: (1,025] | | [added: )] |

| Net cash (used in) provided by financing activities | [removed: (592] [added: (401] | | ) | | [removed: (691] [added: (592] | | ) | | [removed: (518] [added: (738] | | ) | | [removed: 86] [added: (664] | | [added: )] | | [removed: (1,121] [added: 86] | | [removed: )] |

| Capital expenditures | [removed: 252] [added: 383] | | | | [removed: 293] [added: 252] | | | | [removed: 263] [added: 293] | | | | [removed: 308] [added: 263] | | | | [removed: 231] [added: 308] | | |

| Purchases of treasury stock | [removed: 465] [added: 322] | | | | [removed: 590] [added: 465] | | | | [removed: 224] [added: 590] | | | | [removed: 132] [added: 224] | | | | [removed: 1,037] [added: 132] | | |

| Dividends paid | [removed: 247] [added: 266] | | | | [removed: 223] [added: 247] | | | | [removed: 212] [added: 223] | | | | [removed: 187] [added: 212] | | | | [removed: 185] [added: 187] | | |

| (a) | [added: Net revenues for the years ended December 31, 2017 and 2016 have been restated to reflect the impact of new revenue recognition rules that became effective January 1, 2018 and were adopted on a retrospective basis; Net revenues for the years ended December 31, 2015 and 2014 have not been restated. Cash flow data for the years ended December 31, 2017, 2016, 2015 and 2014 have been restated to reflect the impact of the adoption of two new accounting standards that clarify presentation and classification in the statement of cash flows on a retrospective basis. See Note 2 to the consolidated financial statements for further details on the adoption of new accounting standards.] During the third quarter of 2006, we completed the wind down of NID, a test kit manufacturing subsidiary. As a result, the NID operations have been classified as discontinued operations for all periods presented. We will continue to report NID as a discontinued operation until uncertain tax benefits associated with NID are resolved. |

| [removed: (b)] [added: (d)] | On May 1, 2017, we completed the acquisition of the outreach laboratory service business of PeaceHealth Laboratories ("PHL"). On July 14, 2017, we completed the acquisition of Med Fusion, LLC and Clearpoint Diagnostic Laboratories, LLC ("Med Fusion"). On September 28, 2017, we completed the acquisition of the outreach laboratory service businesses of two hospitals of Hartford HealthCare Corporation ("HHC"), The William W. Backus Hospital and The Hospital of Central Connecticut. On December 1, 2017, we completed the acquisition of Cleveland HeartLab, Inc. ("CHL"). On December 7, 2017, we completed the acquisition of certain assets of the clinical and anatomic pathology laboratory business of Shiel Holdings, LLC ("Shiel"). Consolidated operating results for 2017 include the results of operations of PHL, Med Fusion, HHC, CHL and Shiel subsequent to the closing of the applicable acquisition. For further details regarding our acquisitions, see Note [removed: 5] [added: 6] to the consolidated financial statements. |

[removed: | (c) |] Operating [removed: income included: |][added: Income]

| • | a provisional estimated income tax benefit of $106 million associated with the [removed: Tax Cuts and Jobs Act,] [added: TCJA,] including a deferred income tax benefit of $115 million primarily due to the remeasurement of our net deferred tax liabilities and reserves at the new combined federal and state tax rate, partially offset by $9 million of current tax expense primarily due to the mandatory repatriation toll charge on undistributed foreign earnings and profits; |

| [removed: (d)] [added: (f)] | On February 29, 2016, we completed the acquisition of the outreach laboratory service business of Clinical Laboratory Partners, LLC ("CLP"), a wholly-owned subsidiary of HHC. Consolidated operating results for 2016 include the results of operations of CLP subsequent to the closing of the acquisition. On May 13, 2016, we completed the [removed: Focus Sale:] [added: sale of] our Focus Diagnostics products business [added: ("Focus Sale"). Our Focus Diagnostics products business] has not been classified as a discontinued operation. For further details regarding dispositions, see Note [removed: 6] [added: 7] to the consolidated financial statements. |

| [removed: (e)] [added: (c)] | Operating income [removed: included:] [added: included (for 2018):] |

For further details regarding our [removed: retirement of debt,] [added: share repurchases,] see Note [removed: 13] [added: 16] to the [added: audited] consolidated financial statements.

[added: |] Net cash provided by operating activities [removed: included:][added: | $ | 1,200 | | | $ | 1,175 | | | $ | 1,116 | |]

| • | [removed: $47 million of pre-tax cash charges, or $30] [added: a $17] million [removed: after the related] cash tax [removed: benefit,] [added: benefit] on the retirement of debt associated with the March 2016 cash tender offer; |

For further details regarding [removed: our financial instruments, including] the [removed: termination of interest rate swap agreements,] [added: redeemable noncontrolling interest,] see Note [removed: 14] [added: 16] to the [added: audited] consolidated financial [removed: statements][added: statements.]

| /s/Denise M. Morrison Denise M. Morrison | | Director |

| | | |

| /s/Helen I. Torley, M.B. Ch. B., M.R.C.P. Helen I. Torley, M.B. Ch. B., M.R.C.P. | | Director |

| | | |

Refer to the Note (a) below regarding the impact of adoption of new accounting standards on our consolidated financial statements.

| Income from discontinued operations | — | | | | — | | | | — | | | | — | | | | 0.03 | | |

| (b) | On February 1, 2018, we completed the acquisition of Mobile Medical Examination Services, LLC. ("MedXM"). On June 18, 2018, we completed the acquisition of the outreach laboratory service business of Cape Cod Healthcare, Inc. On September 19, 2018, we completed the acquisition of ReproSource, Inc. ("ReproSource"). On November 6, 2018, we completed the acquisition of the U.S. laboratory service business of Oxford Immunotec, Inc. ("Oxford"). Consolidated operating results for 2018 include the results of operations of MedXM, the outreach laboratory service business of Cape Cod Healthcare, Inc., ReproSource and Oxford subsequent to the closing of the applicable acquisition. For further details regarding our acquisitions, see Note 6 to the consolidated financial statements. |

| • | pre-tax charges of $2 million, primarily associated with costs incurred related to certain legal matters and a loss on the sale of a foreign subsidiary partially offset by a gain associated with the decrease in the fair value of the contingent consideration accrual associated with our MedXM acquisition and an insurance claim for hurricane related losses. |

| • | income tax benefit of $14 million primarily associated with a change in a tax return accounting method that enabled our Company to accelerate the deduction of certain expenses on its 2017 tax return at the federal corporate statutory tax rate in effect during 2017 partially offset by an income tax expense associated with finalizing the impact of the enactment of the Tax Cuts and Jobs Act ("TCJA"). |

Net cash used in financing activities included $43 million of pre-tax cash charges on the retirement of debt associated with the March 2016 cash tender offer, principally comprised of premiums paid to retire the debt.

In addition to the items included in operating income, income from continuing operations included:

| (k) | Operating income included (for 2014): |

| • | Our total net revenues of $7.5 billion were 1.7% above the prior year. |

| ◦ | Revenues of $7.2 billion increased by 1.9% compared to the prior year, which reflects the impact of recent acquisitions, partially offset by a decrease in organic revenue (revenue growth excluding the impact of acquisitions). |

| ◦ | Revenue per requisition decreased by 1.2% compared to the prior year primarily due to pricing pressure including the impact of the Protecting Access to Medicare Act ("PAMA"), increased denials and higher patient concessions. |

| • | DS revenues of $327 million were 2.3% below the prior year primarily due to certain royalty revenues received in 2017 related to a royalty agreement, retained from the sale of our products business, that has since expired. |

| • | Net income attributable to Quest Diagnostics' stockholders was $736 million, or $5.29 per diluted share, in 2018, compared to $772 million, or $5.50 per diluted share, in 2017. |

We adopted the new accounting standard for revenue recognition effective January 1, 2018 using the full retrospective method which required the restatement of certain previously reported financial results, as well as our days sales outstanding calculation.

For further details on the impact of the new accounting standard, refer to Note 2 to the audited consolidated financial statements.

Long-term Strategic Partnership with UnitedHealthcare

On May 24, 2018, we established a long-term strategic partnership with UnitedHealthcare focused on ways to create more personalized care recommendations and a simpler consumer experience for the people enrolled in UnitedHealthcare plans.

Effective January 1, 2019, we became a contracted, participating provider of clinical laboratory testing services, on a nationwide basis, for all UnitedHealthcare plans, excluding existing lab capitation arrangements.

Prior to January 1, 2019 we were in network for a limited number of UnitedHealthcare plans.

Preferred Provider for Horizon Blue Cross Blue Shield of New Jersey

On November 8, 2018, Horizon Blue Cross Blue Shield of New Jersey announced that it is expanding its laboratory network by adding Quest Diagnostics as an in-network preferred provider of diagnostic information services for its members (with the exception of its managed Medicaid and Dual Eligible Special Needs plan beneficiaries), effective January 1, 2019.

Acquisition of Mobile Medical Examination Services, LLC.

On February 1, 2018, we completed the acquisition of Mobile Medical Examination Services, LLC.

("MedXM"), in an all cash transaction for $142 million, net of $5 million cash acquired, which consisted of cash consideration of $130 million and contingent consideration initially estimated at $12 million.

On June 18, 2018, we completed the acquisition of the outreach laboratory service business of Cape Cod Healthcare, Inc. in an all cash transaction for $35 million.

On September 19, 2018, we completed the acquisition of ReproSource, Inc. ("ReproSource"), in an all cash transaction for $35 million, which consisted of cash consideration of $30 million and contingent consideration estimated at $5

million.

The contingent consideration arrangement is dependent on the achievement of certain revenue targets.

ReproSource is a national leader in specialty fertility diagnostic services.

Acquisition of the U.S. Laboratory Service Business of Oxford Immunotec, Inc.

On November 6, 2018, we completed the acquisition of the U.S. laboratory service business of Oxford Immunotec, Inc. ("Oxford"), in an all cash transaction for $170 million, net of $1 million cash acquired.

The acquisition included laboratories in Tennessee and Massachusetts that provide tuberculosis and tick-borne disease testing services.

As part of the transaction, Oxford will sell test kits and related accessories to us under a long-term supply agreement.

We currently aim annually to save approximately 3% of our costs, and in 2018 we achieved that goal.

In addition to these programs, we identified key themes to change how we operate including reducing denials and patient concessions; further digitizing our business; standardization and automation; and optimization initiatives in our lab network and patient service center network.

Additional restructuring charges may be incurred in future periods as we identify additional opportunities to achieve further cost savings.

| | |

| --- | --- |

Net cash used in investing activities included a $25 million release of escrow proceeds received in 2017 associated with the sale of our Focus Diagnostics products business ("Focus Sale").

| (j) | On January 2, 2013, we completed the acquisition of the clinical outreach and anatomic pathology businesses of UMass. On May 15, 2013, we completed the acquisition of the toxicology and clinical laboratory business of Advanced Toxicology Network ("ATN") from Concentra, a subsidiary of Humana Inc. On June 22, 2013, we completed the acquisition of certain lab-related clinical outreach service operations of Dignity Health ("Dignity"), a hospital system in California. On October 7, 2013, we completed the acquisition of ConVerge Diagnostic Services, LLC ("ConVerge"), a leading full-service laboratory providing clinical, cytology and anatomic pathology testing services to patients, physicians and hospitals in New England. Consolidated operating results for 2013 include the results of operations of UMass, ATN, Dignity and ConVerge subsequent to the closing of the applicable acquisition. In September 2013, we completed the sale of our Enterix products business, which was not classified as a discontinued operation. |

| • | pre-tax gain on sale of the ibrutinib royalty rights of $474 million; and |

| • | pre-tax loss of $40 million associated with the sale of the Enterix products business. |

| • | gain of $14 million (including foreign currency translation adjustments, partially offset by income tax expense and transaction costs) associated with the sale of our HemoCue products business; and |

| • | discrete tax benefits of $20 million associated with favorable resolution of certain tax contingencies related to our NID business. |

| • | income tax payments of $175 million associated with the sale of the ibrutinib royalty rights; and |

| • | $70 million of income tax payments which were deferred from the fourth quarter of 2012 under a program offered to companies whose principal place of business was in states most affected by Hurricane Sandy. |

| • | proceeds from the sale of the ibrutinib royalty rights of $474 million, net of transaction costs; and |

| • | proceeds from the sales of HemoCue and Enterix of $296 million. |

Prior to the contribution of our clinical trials testing business to the Q2 Solutions joint venture on July 1, 2015 ("Clinical Trials Contribution"), our clinical trials testing business was a leading provider of central laboratory testing for clinical trials.

2017 Highlights

| ◦ | Revenues of $7.4 billion increased by 3.3% compared to the prior year. |

| • | DS revenues of $339 million were 10.0% below the prior year primarily due to the Focus Sale. |

| • | Net income attributable to Quest Diagnostics' stockholders was $772 million, or $5.50 per diluted share, in 2017, compared to $645 million, or $4.51 per diluted share, in 2016. The increase of 22.0% in diluted earnings per share was primarily due to a tax benefit recorded as a result of the Tax Cuts and Jobs Act ("TCJA"). We estimate that hurricanes negatively impacted diluted earnings per share by approximately $0.14. |

On May 1, 2017, we completed the acquisition of the outreach laboratory services operations of PeaceHealth Laboratories ("PHL"), in an all-cash transaction for $101 million.

Under a professional laboratory services agreement, Quest will also manage 11 laboratories, which PHL will continue to own.

Acquisition of Med Fusion and Clearpoint

Med Fusion provides precision medicine diagnostics to aid cancer treatment nationwide and the acquired businesses form the Company's center of excellence in precision diagnostics for oncology.

The acquired laboratory service businesses are included in our DIS business.

On September 28, 2017, we completed the acquisition of the outreach laboratory service businesses of two hospitals of Hartford HealthCare Corporation, The William W.

Backus Hospital and The Hospital of Central Connecticut in an all-cash transaction for $30 million.

The acquired outreach laboratory service businesses are included in our DIS business.

CHL is a specialty clinical laboratory and disease management company, which forms the basis for our advanced diagnostics center of excellence in cardiovascular testing.

Acquisition of the Clinical and Anatomic Pathology Laboratory Business of Shiel Holdings, LLC

Shiel serves the New York-New Jersey metropolitan area.

Collaboration with Wal-Mart

In June 2017, we announced our collaboration with Wal-Mart Stores, Inc. ("Wal-Mart") to help improve access to care and, over time, help lower healthcare costs through providing basic healthcare services.

The collaboration has launched with a select number of co-branded sites opening within Wal-Mart stores that are initially providing laboratory testing services.

Over time, service offerings are expected to expand to include other basic healthcare services.

In addition to these programs, we identified key themes to change how we operate in order to meet our goal of delivering the $1.3 billion of run-rate savings as we exited 2017.

These additional key themes include: standardizing our processes, information technology systems, equipment and data; enhancing electronic enabling services; and enhancing reimbursement for work we perform.

In January 2015, we adopted a course of action related to this multi-year program.

We developed a high-level estimate of the total pre-tax charges expected to be incurred in 2015 through 2017 in connection with the course of action for the program: $300 million.

In February 2017, we developed high-level estimates of the pre-tax charges expected to be incurred in 2017 totaling $60 million to $80 million, consisting of up to $10 million of employee separation costs and $60 million to $70 million of systems conversion and integration costs.

From 2015 through December 31, 2017, the cumulative pre-tax charges incurred in connection with the Invigorate program were $242 million, including $73 million of cumulative employee separation costs and other restructuring related costs.

However, because diagnostic information services is an essential healthcare service, we believe that the industry will continue to grow over the long-term and that we are well-positioned to benefit from the long-term growth expected in the industry.

On November 17, 2017,