UPDATE 2-Quest CFO to leave as company restructures

Thu Mar 14, 2013 9:59am EDT

* Quest starts search for new CFO

* Departure comes during restructuring

* Shares gain 25 cents early

By Caroline Humer

March 14 (Reuters) - Laboratory tests provider Quest Diagnostics on Thursday said its Chief Financial Officer Robert Hagemann will leave at the end of May as the company continues a restructuring aimed at returning to revenue growth.

Quest, which has been making management changes and named a new chief executive last year, said it will look both internally and externally for a new CFO.

"After 21 years with the company and almost 15 years as the CFO, we agreed now is a good time for a change," Hagemann said in a statement.

Quest, the nation's largest lab testing company, has been hurt by the weak economy as people use fewer medical services and tests. The growth of high-deductible health plans has also meant less demand from consumers who are watching their out-of-pocket costs.

In addition, President Barack Obama's Affordable Care Act has put pressure on government payments for services for people with Medicare and Medicaid health insurance, also cutting into profits.

In the fourth quarter, the company missed analyst estimates and said it expected these government payments, or reimbursements, to continue to fall in the next few years. Revenue in 2012 fell to $7.4 billion from $7.5 billion in 2011.

"Utilization has been not great. And then they have some reimbursement pressures from Medicare. It's been a tough environment and people are in wait-and-see mode to see what happens with this restructuring effort," said Amanda Murphy, an analyst at William Blair & Co.

Quest has been working on a $500 million cost-cutting plan, sold its OralDNA products business in December and in February, agreed to sell its HemoCue diagnostics business for about $300 million.

The company named Steve Rusckowski, who had been head of Philips Healthcare, as CEO in April. He has worked on reducing layers of management, changing sales force incentives and cutting costs from vendors, procurement and technology systems, Murphy said.

Quest shares gained about 25 cents to $56.26 in early trading. They have fallen about 5 percent in the last year. The stock hit a 52-week closing high of $64.68 in October 2012.

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