DGX

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How DGX rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

Significant change is taking place in the healthcare system, including as discussed above under the heading "The Clinical Testing Industry." For example, value-based reimbursement is increasing ( e.g. , UnitedHealthcare's Preferred Lab Network) and CMS has set goals for value-based reimbursement to be achieved by 2030.
In addition, the diagnostic information services industry is faced with potential changes in government regulations that could impact patient access to healthcare.
Competitors may compete using advanced technol ogy, including technology that enables more convenient or cost-effective testing ( e.g. , technology enabled by AI).
Competitors also may offer new testing services that can be performed outside of a commercial clinical laboratory, such as point-of-care testing that can be administered by physicians in their offices, complex testing that can be performed by hospitals in their own laboratories, and home testing that can be carried out without requiring the services of providers like us.
Unfortunately, by relying on laboratory reported data alone in 2017, CMS did not receive comprehensive and representative data needed to set Medicare rates that reflected the commercial market, as required under PAMA.
Independent laboratories were overrepresented, and hospitals and physician office laboratories were underrepresented, making the first round of PAMA cuts excessive.
The first three years of cuts greatly exceeded the original 10-year savings projections.
Starting in 2020, Congress has repeatedly acted to delay PAMA implementation by delaying the next round of data reporting (2020-2026) and Medicare cuts (2021-2026).
However, the structural flaws of PAMA still need to be addressed to mitigate future excessive cuts.
Congress introduced legislation in 2025, the Results Act, which would reform PAMA and create a true market-based CLFS.
The political environment impacting healthcare regulation in the United States continues to be uncertain.
The services that we offer and our result of operations could be adversely affected by legislative, enforcement, regulatory and public policy changes at the federal or state level, many of which we cannot anticipate at this time.
There continues to be pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities, which could adversely affect the funding for individual programs, including Medicare and other government programs upon which our business depends.
The potential impact of any new policies or changes to existing policies that have been or may be implemented is currently uncertain.
While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been extensively interpreted by the courts, including, among other things, many of those relating to: • billing and reimbursement of clinical testing; • certification or licensure of clinical laboratories; • the anti-self-referral and anti-kickback laws and regulations; • the laws and regulations administered by the FDA; • the laws and regulations administered by foreign governments where we conduct clinical trials and operate outside of the United States; • the corporate practice of medicine; • operational, personnel and quality requirements intended to ensure that clinical testing services are accurate, reliable and timely; • physician fee splitting; • relationships with physicians and hospitals; • marketing to consumers; • protection and privacy of patient data and other personal information; • use of AI; • safety and health of laboratory employees; and • handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials.
These laws and regulations may be interpreted or applied by a governmental, prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations, including our pricing and/or billing practices.
If we fail to comply with applicable laws and regulations, or if we fail to comply with settlement obligations, 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 business, as well as incur additional liabilities from third-party claims.
The FDA also regulates drugs-of-abuse testing for employers and insurers, testing for blood bank purposes and testing of donors of human cells for purposes such as in vitro fertilization.
We offer companion and complementary diagnostic tests to pharmaceutical companies that are regulated by the FDA.
In May 2024, the FDA announced it was phasing out its general enforcement discretion approach so that LDTs manufactured by a laboratory would generally fall under the same enforcement approach as medical devices.
District Court set aside and vacated the FDA’s LDT rule and the FDA did not appeal the court’s decision.
Accordingly, the FDA does not have the authority to regulate LDTs.
However, it is the purvey of Congress to enact new laws or amendments to CLIA or the Food, Drug and Cosmetic Act.
If this were to occur, any new legislation could have a significant impact on us and the clinical laboratory testing industry.
This new legislation could include the regulation of LDTs in a manner that is different than the prior LDT rule, while creating new avenues of opportunity and competition in clinical laboratory testing.
For more information, see above under the heading “Regulation." Failure to accurately bill for our services, or to comply with applicable laws relating to billing government healthcare programs, could have a material adverse effect on our business .
Our international operations (including in Canada) 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, among other things, affect our ability to enforce contractual rights; trade regulations and procedures and actions affecting approval, production, pricing, supply, reimbursement and marketing of products and services; existing and emerging data privacy regulations affecting the processing and transfer of personal data; new regulations relating to the use of AI; and challenges based on differing languages, cultures and unfamiliar practices.
Tariffs, sanctions and other barriers imposed or threatened by the U.S. government, and the responses to those actions from other countries, may result in adverse impacts to the global economic environment, including the global financial and trading markets, which could have a negative impact on our results of operations and financial condition.
These actions could also negatively impact our supply chain costs or availability of products we need to operate our business.
The ongoing uncertainty with the current state of global trade policy magnifies these risks.
Our international operations also require us to devote management resources to implement our controls and systems in new markets, and to comply with the U.S.
As of December 31, 2025, we had approximately $5.7 billion of debt outstanding.
This technology, including generative AI, which is in its early stages of broader commercial implementation, presents a number of risks inherent in its use, including risks related to cybersecurity, privacy and data security and use practices and our oversight of how we use AI.
Using AI successfully will require significant resources, including having the technical expertise required to develop, test and maintain AI-based testing services and continually developing the appropriate governance and oversight of our use of AI.
For example, in connection with Project Nova, we committed to a multi-year project to modernize our "Order to Cash" business processes, including the related information technology infrastructure and underlying enabling technologies.
We are partnering with Epic, a third-party licensor, to assist in the implementation of Project Nova.
It is important that we continue to strengthen our efficiency, including through the use of technology and automation, to promote our competitive position and enable us to mitigate the impact on our profitability of steps taken by government payers and health insurers to reduce the utilization and reimbursement of diagnostic information services, and to partly offset pressures from an inflationary environment, including labor and benefit cost increases, and reimbursement pressures.
We are increasingly collaborating with new entrants in the health services industry who are facilitating consumers’ growing interest in taking direct responsibility for their own healthcare, where we provide the underlying testing services for their consumer health service offerings.
These companies are increasingly handling and processing highly sensitive consumer health data and our contractual relationship with these companies could expose us to legal or regulatory risk and reputational harm if they are unable to adequately safeguard this information.
We have a broad range of stakeholders, including our stockholders, employees, customers, which include government entities, patients and communities we serve, some of whom increasingly focus on corporate responsibility considerations and many have different or conflicting expectations with respect to corporate responsibility and related matters.

and 25 more.

Gone since FY2024

Significant change is taking place in the healthcare system, including as discussed above under the heading "The Clinical Testing Industry".
For example, value-based reimbursement is increasing ( e.g. , UnitedHealthcare's Preferred Lab Network) and CMS has set goals for value-based reimbursement to be achieved by 2030.
We also believe that health plans and consumers increasingly are focusing on driving better value in laboratory testing services.
Competitors may compete using advanced technology, including technology that enables more convenient or cost-effective testing ( e.g. , technology enabled by AI).
Competitors also may offer new testing services that can be performed outside of a commercial clinical laboratory, such as point-of-care testing that can be administered by physicians in their offices, complex testing that can be performed by hospitals in their own laboratories, and home testing that can be carried out without requiring the services of outside providers.
Unfortunately, as a result of a flawed implementation of PAMA, the data collected did not accurately represent the laboratory market as required under PAMA.
Independent laboratories were overrepresented, and hospitals and physician office laboratories were underrepresented, making the first round of PAMA cuts too extreme.
The three years of cuts exceeded the original 10-year savings projections.
PAMA calls for further revision of the Medicare CLFS for years after 2020, based on future surveys of market rates.
Congress has delayed cuts five times (2021 - 2025) and delayed 2019 reporting six times (2020 - 2025).
Reimbursement rate reduction from 2026-28 is capped by PAMA at 15% annually.
Congress reintroduced federal legislation in 2023 (the Saving Access to Laboratory Services Act), which would reform PAMA and create a true market-based CLFS.
From time to time, the federal government has considered whether competitive bidding could be used to provide clinical testing services for Medicare beneficiaries while maintaining quality and access to care.
Congress also periodically considers cost-saving initiatives, which have included coinsurance for clinical testing services, co-payments for clinical testing and further laboratory physician fee schedule reductions.
There is uncertainty surrounding potential changes to the regulatory environment in the United States, particularly as it relates to healthcare regulation and related programs, following the outcome of the U.S.
Presidential election in November 2024, which may have a material adverse effect on our business.
For example, the incoming administration announced a planned advisory commission to reform federal government processes and reduce expenditures.
Pressures on and uncertainty surrounding the U.S. federal government’s budget, and potential changes in budgetary priorities, could adversely affect the funding for individual programs, including Medicare and other government programs upon which our business depends.
The potential impact of new policies that may be implemented as a result of the new administration is currently uncertain.
While we seek to conduct our business in compliance with all applicable laws, many of the laws and regulations applicable to us are vague or indefinite and have not been extensively interpreted by the courts, including, among other things, many of those relating to: • billing and reimbursement of clinical testing; • certification or licensure of clinical laboratories; • the anti-self-referral and anti-kickback laws and regulations; • the laws and regulations administered by the FDA; • the corporate practice of medicine; • operational, personnel and quality requirements intended to ensure that clinical testing services are accurate, reliable and timely; • physician fee splitting; • relationships with physicians and hospitals; • marketing to consumers; • protection and privacy of patient data and other personal information; • use of AI; • safety and health of laboratory employees; and • handling, transportation and disposal of medical specimens, infectious and hazardous waste and radioactive materials.
These laws and regulations may be interpreted or applied by a prosecutorial, regulatory or judicial authority in a manner that could require us to make changes in our operations, including our pricing and/or billing practices.
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 business, as well as incur additional liabilities from third-party claims.
We offer companion diagnostic testing services to pharmaceutical companies that are regulated by the FDA.
A number of tests we develop internally are offered as LDTs.
The FDA's regulation of clinical laboratory testing is expected to impact industry practices and participants, new competitors may enter the industry, and competition may come in new forms.
As of May 6, 2024, the FDA announced it was phasing out its general enforcement discretion approach so that LDTs manufactured by a laboratory will generally fall under the same enforcement approach as medical devices.
A number of advanced tests we develop internally are offered as LDTs.
Pursuant to the FDA’s decision to remove enforcement discretion with regard to most LDTs performed by high complexity CLIA-certified laboratories like ours, all new and significantly modified previously offered laboratory tests that do not benefit from continued enforcement discretion will have to comply with the FDCA over a four-year, five-stage process.
Compliance with the FDCA includes, among other things, new quality system regulations and premarket authorization.
One major area of the continued FDA enforcement discretion will apply to many tests that were offered for clinical use prior to May 6, 2024 and that do not afterwards undergo certain material modifications.
The removal of enforcement discretion for LDTs could result in a revitalization and passage of legislation or other Congressional action.
The current FDA policy to remove enforcement discretion and/or new legislation is expected to have a significant impact on the clinical laboratory testing industry, including regulating LDTs in new ways, while creating new avenues of opportunity and competition regarding clinical laboratory testing.
For more information, see above under the heading “Regulation".
Failure to accurately bill for our services, or to comply with applicable laws relating to billing government healthcare programs, could have a material adverse effect on our business .
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, among other things, affect our ability to enforce contractual rights; trade regulations and procedures and actions affecting approval, production, pricing, supply, reimbursement and marketing of products and services; existing and emerging data privacy regulations affecting the processing and transfer of personal data; new regulations relating to the use of AI; and challenges based on differing languages, cultures and unfamiliar practices.
International operations also require us to devote management resources to implement our controls and systems in new markets, and to comply with the U.S.
As of December 31, 2024, we had approximately $6.2 billion of debt outstanding.
This technology, including generative AI, which is in its early stages of commercial implementation, presents a number of risks inherent in its use, including risks related to cybersecurity, privacy and data security and use practices.
Using AI successfully will require significant resources, including having the technical expertise required to develop, test and maintain AI-based testing services.
For example, in February 2025, we committed to a multi-year project ("Project Nova") to modernize our "Order to Cash" business processes including related information technology infrastructure and underlying enabling technologies.

and 27 more.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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