Good day, ladies and gentlemen, and welcome to the First Quarter 2009 Bio-Reference Laboratories Earnings Conference Call. My name is Erica, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards end of this conference. (Operator Instructions). I would now like to turn the presentation over to your host for today's call Miss Tara Mackay of Investor Relations. Please Proceed.

Good morning and welcome to Bio-Reference Laboratories 2009 first quarter earnings conference call. Bio-Reference Laboratory is one of the largest independent regional full service laboratories in the country with focused marketing capabilities in the area of genomics, oncology, correctional health, and physician office pathology. Leading us on the call today will be Dr. Marc Grodman, President and Chief Executive Officer, and Sam Singer, Chief Financial Officer. Some of the commentary made in the presentation may relate to future results and events. Statements regarding the company's revenue and earnings guidance are based on the company's current expectations. Actual results in future periods may differ materially from those currently expected or desired because of a number of risks and uncertainties including, general economic and business conditions; future regulatory requirements and mandated pricing reimbursement; the service, customer and geographic market mix of any particular period; the company's ability to effectively manage its operating costs and collect its receivables in a timely fashion; on the level of demand for the company's products and services; and on the company's ability to manage its supply and delivery logistics in such an environment. Additional discussion of these and other factors affecting the company's business and prospects is contained in the company's periodic filings with the Securities and Exchange Commission. I will now turn the call over to Dr. Marc Grodman, President, and Chief Executive Officer. Marc D. Grodman: Tara, thank you very much and good morning. There are two points that I would like to make before we start the call and I turn the call over to Sam Singer to review the financial results. First of all is that we're all gratified by these results and now I came back to a time at the -- at our second quarter last year conference call. What we've done over the last year has been able to continue to grow this company, bring in new testing capabilities if you will be able to go in and introduce those efforts that we've worked to offer a good number of years, while being able to control our expenses. Our response was not to go in and run away, our response was to be able to go back to the formula which has worked for us before, which is to maintain the strength of the regional clinical laboratory, continue to grow that we've demonstrated in specialty markets and we'll be able to offer differentiating services in those specialty markets, create new ones -- cerate new markets into our services, all the same time while being able to control expenses. That's a dedication to all the people at Bio-Reference we've put kind of a state of course to be able to bring out the growth -- bring us at this point. The second point is that there was a one-time non-recurring restitution fee in this first quarter of 1.6 million. It's favorably impacted numbers but for the sake of transparency, the numbers that we'll talk about in the release will be if that 1.6 did not exit. I think it is easier for you to follow and see us on a comparative basis and where we were without including those that one-time restitution fee in the numbers. With that, let me turn the call over to Sam Singer and then I would like to be able to make a few comments. Thank you.

Thank you, Marc. Today's presentation is based on our first quarter results excluding a one-time restitution amount of 1,600 million resulting from an agreement with a discharged employee. During the first quarter of fiscal year 2009 which ended on January 31, Bio-Reference recorded net revenues of 75,735 million compared to 66,879 million in the first quarter of the prior year, an increase of 13%. Gross profit on net revenues for the quarter was 35,695 million representing a 47% gross profit margin. In the first quarter of the prior year, gross profit on net revenue was 31,651 million representing a 47% gross profit margin. On January 31, 2009, net income was 2,663 million as compared to 2,208 million for the same quarter of last year, an increase of 21%. Earnings per share on net incomes was $0.19 per share in the current quarter as compared to $0.16 per share in the prior year quarter. Patient count for the current quarter increased to 965,000 from 962,000 for the prior year quarter, an increase of 0.3%. Our net revenue per patient for the first quarter just ended was $77.79 compared to $68.83 per patient in the same quarter for the prior fiscal year an increase of 13%. On January 31, working capital was 59,650 million as compared to 58,561 million that we reported on October 31, 2008. Our day sales outstanding on January 31 -- January 31, 2009 was 115 days. Thank you. Marc D. Grodman: Sam, thank you very much. I don't have be the one to say that these are difficult economic times, where the unknown is paralyzed even the most sophisticated investors and prognosticators. But in contrast, we are not paralyzed at Bio-Reference. We've worked hard over the past few years to provide innovative clinically relevant solutions. Better science and better service ultimately do not get denied. Over the past few years, we have been through lower reimbursement rates, limitations on payments, lower volumes due to economic conditions but through it, all we have continued to grow because of the better solutions we offer. This remains true today as it has before. Over the past few years at Bio-Reference, we have dedicated a great deal of our resource and efforts toward our esoteric testing programs. It's clear from our performance that we have a unique strength in identifying areas of clinical relevance, especially testing. Once identified, we have demonstrated the clarity to bring together leading scientific thought, technical capability and marketing expertise necessary to deliver to our physician clients; meaningful answers to clinically important questions. This past September, we introduced our Next Generation Women's Health Initiative. And this program is clearly played a prominent role in the strong first quarter numbers we reported. We have greatly strengthened all aspects of our GenPath oncology program, fluid advance testing capability and which revised and improved to report formats that provide more concise information for our provider customers. We've introduced next generation sequencing of GeneDx and are the first commercial laboratory in the country. Possibly the world to provide comprehensive genetic testing utilizing this platform which will enable traditional providers and take advantage of the advances revolutionizing our understanding of genetic science. Whether it'd be is one of the dominant regional labs in the Northeast as a leading laboratory and oncology and hematological malignancies as the leader in laboratory services to correctional healthcare. As a truly unique cutting edge laboratory and genetics, the only one to achieve in outstanding reputation for service along with proficiency in three different types of tactical platforms offering state-of-the-art testing to that we've now add to a leadership position in Women's Health. With proprietary services that focus on sexually transmitted infections. These achievements happen their totality, differentiated us from our competitors. It is these initiatives that underlie our promise for the future and which have enabled us to maintain the value that we have been creating from more than two decades. These initiatives have pave their way for a solid financial result in this quarter. As I mentioned earlier, our reported numbers included non-recurring event of 1.6 million that resulted in some of our financial metrics being favorably effective. However, we've limited our discussion in our earnings release this morning and on this call to the result that have had been reported, we're not for that non-recurring event. We're pleased that our results with our results from continuing operation, we expect the top-line revenues will continue to be led by our esoteric testing programs over the upcoming quarters. It's no secret that the country has been severely impacted by global economic conditions. We've seen flatness in our routine business probably due to volume reductions on the physician level. We've also made as I've mentioned for a conscious effort over the last four quarters to deemphasize those areas where we cannot create leverage or where affect -- already effective prevailing economic conditions as manifest by lower testing volumes by the same token our efforts to reaffirm our leadership in esoteric testing has enabled by Bio-Reference continues to stay in growth. Evidence by year-over-year increase in revenue for patient from just under $69 to over, just under $78, an increase of 13%, consistent with the increase that we saw in the immediately proceeding fourth quarter of fiscal year 2008. At present of esoteric testing grew to 51% of revenues, up from 46% for the corresponding period last year. Top-line revenues invest in first quarter numbers in our corporate history. But just a significant, we've continued to maintain the discipline that we assorted after the second quarter of last year. And our actual expenses have remained relatively flat for the fourth consecutive quarter. At the beginning of 2008 -- of the 2008 fiscal year, investment in infrastructure, supporting technical, professional and sales initiatives was necessary in order to ensure continued growth and to take advantage of opportunities in the marketplace. Well, that decision had some downstream financial effect on the subsequent quarters last year. We believe that that investments made at that time has been justified. Gross profit on revenue for the first quarter was just over 47%, unchanged from the same period in the prior year. This was -- is the first period in the last year, where our gross margin was in fact not lower than the previous year same quarter. We've remained disciplined in controlling their expenses, direct employee related expenses have grown only slightly but then 4% over the past four quarters. Total direct costs of services were in fact lower than the immediately proceeding fourth quarter of last year. These numbers include our continued investment expense of around $500,000 per quarter during the past fiscal year in Research & Development cost related to the development of new testing platforms. SG&A expenses excluding sales, marketing and bad debt were up by less than 70% from the first quarter or comparable quarter of last year, a pickup of approximately 100 basis points, and essentially flat with the three proceeding quarters. In fact these SG&A expenses were lower from the expenses we reported in the second quarter of last year. On a year-over-year basis, sales and marketing expenses rose 13% during the first quarter as we started to annualize the investment we made over the past year, and remain just shy of 9% in total revenues for the quarter. The increase is in sales and marketing were predominately in our specialty testing services, such as in oncology from GenPath, our genetic testing from GeneDx and Women's Health Initiative. We expect to expand the footprint of our Women's Health program beyond the region of our traditional clinical footprint. And to that end, we've added several -- sales representatives to introduce the program, well outside the New York metropolitan area in many areas around the country. In addition, since we are now licensing the state of California, we have begun expanding our GenPath oncology program into the West Coast. We've continued to expand our capacity in the next generation, genetic testing and have opened their cardiac program to expansion both testing capability and sales efforts. All told, our sales, sales service and marketing people now number over a 150 strong nationwide. As mentioned before, we expected as a percentage of revenues these expenses will remain at about 9% of revenues. Bad debt was just under 14.5% of revenues during the first quarter about 70 basis points higher than for the same period in the prior fiscal year. This increase was not due to economic conditions but rather an isolated condition that occurred during the quarter, this resulted when we had to make refunds to our managed care program from which we were mistakenly paid over the past year for work not included in our contract. This issue was by enlarge result their indication this time are by going forward, we expect that to be comparable to experience in the past year, around 13.5% for the reaming periods of the year. DSOs at the end of the fourth quarter were 115 days, down from a 120 days in the same quarter of the prior year. Historically, it's not unusual for our first quarter DSOs to be up from the prior fourth quarter. It's a pattern that has occurred repeatedly over the years due primarily through drop at revenues associated with our first quarter in comparison to the fourth quarter -- during our first quarter, in comparison to fourth quarter of the previous year. In addition in January 2009, there were some payment delays related to our new Medicare carrier. These issues, all technical in nature had been resulted as our expectation that our DSOs will be back down in the next quarter. The tax rate for this quarter, we're just shy of 42%, pretty much the same as where it was last year although we were around 41% in the first quarter of last year. And this is where we expected to be for all the fiscal year 2009. It is and it has been for sometime our stated goal to seek out destructive technology and scientific advances in the specialty testing, and to offer those services under a superior service physician centric model. I've often stated there is no type of cancer that better illustrates the concept of personalized medicine, better hematological malignancies given the ongoing availability of tumor tissue to clinician. Each case is typically analyzed for a unique genetic changes consist with the individual case. Our R&D efforts to bring micro arrays genetic screens to the diagnosis of leukemia has been rigorous, and it's schedule to introduction this year. We believe it will have a differentiating affect. We haven't just talked about genomics. We entered -- when we entered the market we did in a substantial way to the great scientist of GeneDx with whom we have created something very special. We've not just talked about personalized medicine. We introduced our first personalized medicine requisition regarding drug therapeutics affecting this complication well over a year ago. Better science and better service enabled the physicians to provide better healthcare. Times maybe difficult but physicians still want superior testing services. When solutions are created that fulfill need those services will be utilized and the companies that offer them will grow. Bio-Reference is demonstrated that is such a company. We've also demonstrated that we can adapt, that we can control expenses while not only growing our top-line but while introducing new testing services and expanding our capabilities. Cleary we're very proud of what we've done, and where we're going. We're enthusiastic about the idea and the prospects ahead it's not based on something that just occurred, it's based on a number of user planning. We reaffirm our guidance release 15% top-line growth and 20% growth in net profits. We're excited by the profit for this year and we'll launch our collective efforts come to solution. There are some of the other comments that I would like to address before opening to questions with regards to the current climate. Most of you know that I'm fairly active in our industry. We closely monitor changes in Washington. At this time, there are no specific changes to laboratories in their proposed budget, that's where we are at this time. But it's our responsibility to make our case for being cost effective tool in promoting better healthcare. Laboratories have that responsibility because we have that potential to be a cost effective tool, I mean adequate for our industry. Technology advances and the promise of genetic discovery are lining up in our favor. The value proposition and the potential contribution of laboratory services must and will be articulated. Just one of the comments before we open up for questions. The trend is that we've done over the last year responding to high volume changes and be able to reengineer our cost of services to go in and we could figure ourselves back to our esoteric testing model to the great deal such a hard work by the people of Bio-Reference. This thing that set us apart is the first loyalty and commitment of the employees at Bio-Reference. And being on the path where we are, in times for around us that are as tenuous as they are it means a lot to be able to have people who are so committed to the future going plan of this company. Those are my comments, I'll be more than happy to answer any questions about the first quarter or beyond.

(Operator Instructions). And our first question comes from the line of Amanda Murphy with William Blair. Please proceed.

Hi, good morning. A few questions on the volume side of the business.

Sure.

So, in terms of volume growth for the quarter was that in line -- obviously deteriorated over last quarter and I know there's seasonality in there but was it in line as what you've expected or does it come in a little bit lower?

No, it was really in line. The biggest drop in patient count usually does occur from the fourth to the first quarter. I mean that invariably happens unless something happens where contracts come up that were new. There were times when there were few years ago changes in managed care contracting when they started to go and hit in January, so the volume that normal drop from fourth to first because of holidays in November, December, decrease in volumes may not be appearing but this is very much in line. The clinical volume has been worst in this year which is lower as which was documented in your reports and handed back over the years, where physician volumes were lower. In fact we've seen just in terms of stocks were pickup when we looked at last January, this January they've in fact in lower. So we kind of expected that, but what we were gratified with was the larger volume in new accounts that have occurred in the specialty areas and the specialty, and in our Women's Health Initiative. So I think that it was not for those economic changes in fact, that the patient count would clearly have been -- the other part of it is. What I've mentioned on the last two calls is that, when we saw where we were a year ago with not necessarily benefiting from some of the higher volumes which is very hard look at our business. And really did we could to go deemphasize those areas where we were just generating specimens and not generating enough revenues. And we really sought to go deemphasize those over the last year. So this is not surprising as very much in character where it was and I think, given what the times are is exactly what we expected.

In terms of your guidance for 2009, how do we think about volume growth there, is it -- are you basically assuming sort of flat with the current levels or have you kind a built-in some buffer for further deterioration?

No, we haven't really -- we have not -- I don't think -- buffer was there. I mean, we've -- what we've done over the last year was the part of the business which really will fluctuate with volumes. We've really been very careful about expenses. I mean what we've built in as I think is in many ways of improvements of where we were over the last two years and just the efficiencies as being able to go in and get a specimen through here, anyone of you who've been now to visit us have seen that we are one of the -- without commenting if you haven't been to visit us and see the automation of our front-end it is something rather impressive to see, and the savings that we've been able to occur to get from that, have been substantial, I mean so much of that has been automated. We have been able to go fix so many parts of forensic specimens, so there really is not a lot of downside risk we have in terms of volumes were fairly efficient to over with that. I think what we built in though is the capability that the volumes will return. If clinical volumes go back and if economic conditions turn, that we'll be able to response that level of positive way without substantial increase of infrastructure. So I think that we are prepared for the upside and have already taken guard against the downside of lowering volumes.

Okay, then switching gears for a second, for the Women's Health Initiative, I believe there is an impact on the clinical side as well. Do that as a case in the quarter and did you -- is there are piece of the growth, where there some market share gains in there -- do you expect that sense would improve throughout the year as you roll that platform out?

I think that we have been, as I mentioned before we have been more than gratified by our volume there, we have put a great deal of our emphasis. Where we grow our infrastructure is in areas of new testing and in growth and clearly Women's Health is been growth. There was not as much rollover into clinical as what you've might imagined because a lot of growth that we've done is that we haven't really sold it like that. We sold and said that gynecologist or authorization to gynecologist go in and get specialized testing for their own needs, and we've done that, we dedicated a sales force now which we've implemented that eradicators to their needs, and there is very little clinical spillover in the testing that we're seeing from those areas. It is also going and beyond the area, we are looking in what people in, we're looking in the Mid-Atlantic areas, we're looking in the South, we're looking out West. While this is a valuable tool we want to be able to hit the market strong. So I think that it will add to the esoteric testing, I don't know how much impact on the rollover clinical workers are going out and selling it best (ph).

Okay. Last question on the esoteric side, that growth obviously is very impressive. And just over half of your revenues --

Yeah.

... are from esoteric. Do you have a target in mind as to where even that number can go.

We go where the growth is. I am not sure makes internal -- total internal sense, but we go where the opportunity is and right now the opportunity clearly remains in hematopathology. There is more opportunities to increase our business given the services that we're rolling out this growth in Women's Health and genetic is wide open. We don't really go in and have broken out segment because we see that's where our growth has been, our growth of all of our segments in GeneDx, and all parts of the company and that's with -- everything else doing well. So it is not a target number. We'll take advantage of market opportunities in the clinical market, creative clinical market in the regional market, I think I have been affected by economic times that may pickup in the next year. It may not prepare for either way, but the focus in the growth is going to be in the specialty areas and it's going to go as high as it could go.

Okay. Thanks, very much.

Thank you.

Our next question comes from the line of Arthur Henderson from Jefferies and Company. Please proceed.

Thanks for taking the question. Very nice quarter, Marc. Sort of following-up of what Amanda asked there. You made a comment in your prepared remarks where you said, sort of deemphasizing what sounded like the routine side of your business. And maybe I got that wrong, but its strikes me that the percentage of your business is going to be dedicated or coming from the sense of esoteric is probably going to move up at a faster pace even above and beyond what we've seen lately, is that a fair statement?

There are two elements that were, there were two elements that are playing hard. One is that volume did expand greatly two years ago with the change in administrative contracting and there was a sense in fact we couldn't ignore it, as you will remember, and taking into volume. One of the things that it did clearly and over the course of the last year was that it forced us that we have to become a more efficient operator, which I think our expenses had shown over the last four quarters. There were two elements at risk, one is the emphasis we put on growing how well we can differentiate ourselves as well as the negative effect of the economy which I think it has have an effect on routine clinical business and on the physician volumes. So, I think that you're right that we are simply -- there is more opportunity in the esoteric markets, the area is a greater way to say we can come up and find better testing solutions that we can have better growth, But we don't know what the effective physician volumes are, something like that change -- can change in three months or six months or down the line. So I wouldn't want to cast anything and stone, the other part of it is that we did go in and move away from certain accounts. When I talk about deemphasizing business, I'm saying walking away from certain accounts that just generated numbers but not enough revenue. And that was a process that we did over the course of the last three quarters. So, that had an effect on lowering the numbers, the economy had an effect, but the economy can turn and physician utilization can certainly go and turn. And we continued to go in market and we still have a number of people who are out and still think that we provide innovative solutions those who've seen our cardiac program that we've done which is mostly a local regional market service, it always been rather impressed with it. And what's more is that we as Bio-Reference has gain -- has given our size in our growth and our knowledge and people who know about what we do. We -- sometimes now we're growing at market share, could there be a spillover, not in terms of same-store sales with our Women's Health Initiative in terms of bringing more clinical business from those accounts, but is a great creditability in seeing more business from related clinicians you say G wow, what are they doing over there even though they don't do Women's Health it's possible. So we're going to be opportunistic like always, we should grow more in esoteric but there are ways in which the clinical can go in and show reasonable growth also because it's kind of down points right now.

That's helpful, okay. Just give a little quick over to reimbursement, I appreciate your comments on the Obama plan, that certainly good news for the laboratory industry. But as we think about some of the issues that say managed care phase is going forward and obviously you have a very powerful set of testing capabilities that can really save a lot of cost for those providers. How should we think about your negotiations with managed care going forward, is it going to be sort of less on price, more on opportunity to drive savings for them as a whole by identifying patients that are sick. And then secondarily, as we think about this physician fee cut, obviously there's, I guess its 20% that supposed to go into effect unless it's reversed. What are you hearing about getting a fix to that and what should we'd be looking for in terms of new slow on that matter?

Good questions. The first part of that is that, I think we as laboratories have a great value proposition. However, the reason why I spend so much time, dealing or wanting to work with Medicare, is that still. Medicare is the only -- is one of the few insures that own the life, because endurably we'll all going to end up this Medicare beneficiaries. And there is when you talk and sense -- and a communication about what is good for the patient for patient care, what can you do for prevent of services. Someone who goes in and go in and get the hemoglobin A1C check, someone who ignores being in their hypertension check, someone who is not on medication or stops you because of complications. They -- these people could end up on dialysis that's Medicare. What's going to happen when they're 42 would may have been, when they're 47 they'll end up being on Medicare for dialysis services. So, it's a better conversation that we have in, which is why we spend so much time talking to Medicare, because they do listen. Incept on managed care, I don't know what the effect is going to have, I think that a lot of the interest in managed care is on genetic testing. And those things that can really save lives or save like the hospitalizations, or save expensive treatments, and I think those are promises that we are able to be able to do for genetic testing, and that's a conversation. In terms of the pressure that they're going to have, a lot of the things in the budget has to do with Medicare advantage programs, and lot of the pressure, which the budget has on those specific programs not on managed care per say. And we do very little a Medicare advantage programs, which our CEO clearly are being targeted for reductions in subsidies by the government. In term the physician's fix. It is a remarkably complicated area. And I know that a lot of people trying to say, as you would you say about a 20% cut, I mean there was an agreement on a sustained growth rate, which congressed the last few years. They said that they will control, which they have in essence just past on. So a numbers years ago, I thought that it was 5 or 10%, which would effect physician fees schedule and was put-off, and then last year was about 10% where we're simply put-off. And now the estimate already being 20, but there's no indication that no one at a time of healthcare change, in the time of finding solutions is ever believe that we're going to go in and cut the physician fee schedule by 20%, which is that estimate to go, deal with compliance with a sustained growth rate limitations. So I don't think that anyone today has a real clue how it's going to be there. It's been different than what we faced the last three years. The difference is that maybe -- and maybe the hope is that we'll look at in a real way to say was it this really. Was it real to begin with, we need this assumption or is it not? And rather in dealing with that artificial number which is in the budget, maybe it'll be dealt with in a different way. What we know about it is that at this point, we don't know, at this point, no one is really sure. A lot of discussions that have been made have been based on coverage. We know there are going to be bills to pay and we simply have is good an argument is heading to say we're part of the solution and part of the problem. So, it's not a fixed number, we don't know what it's going to be, we don't know how it's going to be handled and it's just so too early in the game to get a feel for it.

Okay. That's fair. Thanks very much. Thank you all.

Our next question comes from the line of Charles Rhyee with Oppenheimer. Please proceed.

Yeah. Hi, thanks for taking the questions. Just a couple follow-ups here. First, I don't think it's on the release what was the depreciation, amortization in the quarter?

We know what it'll be in the Q, we don't give add on this -- I have it but actually you can do that in the Q, Charles so you'll have it there, okay.

Okay. When is the Q going to be out?

It should be out about one week.

Okay. Great. Marc, getting back to the patient count I know the last question we had talked about it, with the expectation that would probably down again but the rate of decline looks like it accelerated a little bit or more I know you explained a little bit about that. What should we think about in the patient count as we go forward here now that you have sort of a reset on the contracts is going to be staying --

The area where patient count have -- the place for patient count has the greatest effect as a percentage from period-to-period for us is from the fourth to the first quarter. Because that represents -- the clinical volume at the over Thanksgiving in the last two weeks of December is invariably low.

Yeah.

So, whatever we see in terms of clinical count gets exaggerated in the first quarter. Complicated -- we're in a complicated but further affected by the fact that we have done some deemphasizing of certain business, and complicated by the fact that we started out there were lower numbers. The other thing about January, although we were very strong as esoteric is that January is also time when people start paying in newly deductibles and they have to go back for the doctor and often layout money and there maybe a delay. I don't think -- I think that we will be continue to be up in patient count, I am not going to give guidance on what that number is going to go be or how much of it. I think that we will see better comparisons and rebalance, I think it'll still be when the single-digit numbers throughout the year. But it's more of an effect of the changes in the clinical market that may occur and just there's more volume that are coming during the year than in the very, very beginning of the year. But it's still the same thing that we talked about which was clearly strong double-digit revenue growth, and anywhere depending on the changes of mid to high or single-digit growth for patient count.

Okay. Thanks. I think I missed a little bit your talking about the bad debt expense. What was it, can you --?

I'm happy to. There was -- we had a contract with the managed care company that we would not go in and be paid for certain managed care products, but we're part of the indemnity program. And we were mistakenly paid by them for these services and we had to payback a lot of that money that lot of that occurred in that first quarter if not so that, we would have been at our average, it was a one-time event, we have since worked out all logistics about that. And that we expect that our bad debt will be around 13.5% for the rest of the year.

So, you're saying that was about 700,000?

I am saying that that was -- that represents most of the difference.

Most of the --

More than the difference, yes.

More than the difference?

Yeah.

Why is that necessarily kind of bad debt?

I am not sure what the -- how orders that is going.

Okay. All right. And then when I look at the -- if I assume -- okay -- when I look at your gross margins here, where they obviously, it looks like you had some obviously improving year-over-year, where do we see most of that improvement, was it in the employee rate expense, the supplier expense, where --

Both I'll tell you, both of them -- we saw when we looked at each one of the areas and we compared all of them they were very, very strong in all areas. I mean so much of this, I mean the employee was that we made the investments in the second quarter and we've been very tough on bringing more people in. We knew we had to go make it earlier than what we would have to do. And we did and we've been very careful. We will bring in and we fund those areas of clear opportunity and growth. But we were in very tough automation as play to good role in it. And be able to not to go and cut people, but we assigned them to newer areas. So keeping overall employee cost relatively stabled. The other thing and the other result of having taken in so much business for so much relatively lower volume, which we did was that it already force us to go look at virtually everywhere, everything from purchasing, everywhere from pickup and delivery, every part of the service that we did to try to go in and determine maintain. We didn't go in and announced any cuts of this economic condition, we just reemployed people. And we use them. So of all the areas, I'm going to say that all them remain were relatively flat, it was in one area that was necessarily better than the other, but most importantly, our overall, our total employee, total cost of employees remains as I said, relatively flat over the last four quarters from the second quarter on. And the difference effort was relatively small. So to me, because that what adds the infrastructure. That's one of the best numbers that we have.

And then, what would you say as we think about your guidance here for the rest the year, should we continue to expect that employee relating expense to be relatively flattened?

Well, I don't think it's going to be relatively flat. We have a lease historically added on last year. We came down very hard to controlling that. There will be some -- clearly there will be some growth that we're going to have over the next few quarters, just related to the increasing as I say. We're adding to where we're going to grow. There were also always is in the usually February 1st we put out our increases for the year. And then we start February 1st, that's going to have an effect on employee growth. So as I mentioned before in terms of guidance and where we are, we've shown considerable leverage of our SG&A line. A 100 basis points year-over-year and I think that we've taken a great deal out of that. Of all the areas that we have in our SG&A line, we talked about marketing being about 9%, we saw that its going to remain there. The only thing which is, that is not easily controllable is where data processing, because when you start new accounts you put in new bridges. You communicate to the electronic medical record, or you communicate with your system. So there is ongoing with growth and always an increasing data processing and hardware cost that kind of goes along with that. That's something which is not leverage as long as you continue to grow the business. But what I've said before is that our goal is if we see it is to go. We fight for 20 (ph) year. And I think we can be able to do it. And I think that we'll see it, and I think that we've made a lot of improvements in our SG&A and I think we'll start to go see some of that in the gross margin, that's what our goal is.

All right. Thanks for the comments.

All right. Thank you very much.

Our next question comes from the line of Graham Schnabel with Schnabel Capital (ph). Please proceed.

Again nice quarter guys.

Thanks.

I think that the stock there, I am sure you're aware, and quite a week or recently due discussion that will bound the budget and all the massive changes, it's proposed and it will change your life (ph). And you spoke about healthcare and the whole question is, you said that you've lobby actively you know that we appreciated. But how specific have you been able to get into discussions with your (inaudible) like a feeling on it annual...

There is a huge meeting today, healthcare summit of all. It's the hottest in the town supposedly. I think as we heard about this healthcare summit, which is occurred today that everyone is trying to go and see at the table. Graham, I really think there is so much unknown. They're about what's going on. We're talking about, it's some of the effect on us is so downstream from where they are in discussion they're having, which so much has to deal with coverage. And they haven't even started to go in and deal with those art to mention before the SGR for later in the year, which is nowhere near, which is one of the reasons why anyone reacting to that SGR comment right now is so premature. It's just surely a bet. Your might as well talk about 2010 suitable in terms of what's going to happen. Because you have that is much of it a knowledge about it, you have that more knowledge about suitable.

Got it.

But it's just so far out there. So it's a process that the people have not even been there. When we have issues, it's hard even to identify what the right person is right now. This administration is so young in terms of who were the responsible party is going to be and what the agenda is. They won't always be that way. But it's going to take at least, I think three to six months before you begin to go, get us real sense about what's going to happen.

What is the inflationary cost pressure that the industry, you believe that industry should get a reimbursement in each of the next two years?

What is the inflate? We have had m we are suppose to get a cost of leaving increase over and every year we gave it up when we got rid of competitive bidding, which I still thing was important when we got rid of competitive bidding, we got took part of our- see that increase away this past year. I don't -- I think there will be a CPI increase next year once as someone was told me yesterday, one gas, one gas link prices rise, CPI will go up, what's right now may not be real. But I still think, there are a few points, its a few percentage points. Whether we get them or not, I don't know. I think that there is uncertainty about 2010. But what we have which is the advantage that I press and I talk about all the time is that we represent it means to save money and I stay on it and I believe that we have to be able to make that point especially to Washington.

Just here and just to (inaudible) my anxiety as you look at the industry leaders -- leader inside you described?

Thank you.

That one question. And their margins and ROEs are really high, I mean 20. And so I can't help to think the Obama is going to look at them now hopefully was the one to get territory Bio-Reference eventually (ph), but I just was wondering...

I think that it's true -- I don't -- with no aspirations whatsoever to my esteem callings at Lab Quest, I'm not sure President Obama is looking at either one of them right now. I don't think they really care about that, because they also understand that laboratory, and one of the things important is laboratory is not going to get with my apologies to both they consider is not quest or lab core, it's the hospital lab (ph). And other the lab in Brisker and other laboratories deals with nursing homes all over. And then people will scared enough, if there is an industry that's affected. A lot of laboratory test are being done outside. And these are people -- and it's not just guided by that, I think we're beyond that. I think that's a mindset that comes from more out of a managed care negotiation, I know the Medicare negotiation. And I think that -- it's kind of a good question. It really is, it kind of crystallizes that difference and you see that. So, I think that everyone when you look at with -- and I talked about this last year. When you see the danger is the pressures that are add (ph) on us, we all have to go be careful. And we all have a bit of uncertainty about it. July, I think it's a little bit safer, I think that it is safer for a number of reasons, not only it is a better and maybe reimbursed better, but also because of the fact that, you have a chance to differentiate yourself in growth. And one of the greatest things to mitigate against changing reimbursement rates is growth. And that's one of the best things about us, there are testing and that's one of the best things that we've done over the years, is that ratio and often new testing than we grow and that's the way that we thought. That's a laboratories in reality, it survive over the last 20 years, when you consider the changes in reimbursement. And that's why I -- we obviously where we are, we put a premium a value on growth.

Well, the other fact is that, the other thing I want to ask about with Women's Health. You're saying its contributing now and how big can that get they this year or next year?

You know why I don't give out specific number on areas like that. I think you can make this, It is -- I think it have a very good impact, but I think we're grow in esoteric. And I think that it's going to be a good part of the growth that we have. As I mentioned before we grew on the oncology market, we grew on correctional health, which is kind of a specialty area. There was lot of specialty testing within there with HIV and Hepatitis C. We clearly have grown and done well with the efforts that we made over in GeneDx. And now, it's another area where we can go in and precise growth. We hired a lot of good number of people. We've moved beyond the New York area. Now, I truly believe that this is a service that we can go and do beyond our regional footprints.

How many people you have?

Well, we have a healthy percentage of the over 150 people that are now working with Women's Health. We have a -- rather give you specific numbers. It is a reasonably good percentage. And it is in areas well beyond New York. One of the things people don't real recognize about the growth that we demonstrated is that, we talked about at least 15% on a relatively $300 million base, when you throw that into where we were the year before. We're talking almost to $100 million over two years.

Of what?

Of growth that we're talking about, that's a lot of growth, that's a lot patients, and that's a huge effort that we have done. So that's why we look at this and then we'll and we talk about it, will you think that growth is key, or find different ways to do it, we don't do it through, not an industry do it by offering, hiring more people and offering better testing capabilities and better service and I think it contribute to that and if we make those numbers and we do that it's a lot of growth over two years.

All right, congratulation. Thanks very much.

Right. Thank you

(Operator Instructions). Our next question comes from the line of Abe Willoughby with Trust Capital (ph). Please proceed.

Good morning, Marc.

Good morning.

I'm afraid that have there any numbers to help assist the risk that probably wouldn't matter as much prior to your new administration. I am looking for three numbers. The percent of revenues that are clearly identified as doctors' fees and the billing is represent that revenues that are paid directly by the combination of Medicare and your Medicaid that from those agencies and represent the new estimate come from Medicare and Medicaid indirectly via third party insurers. I know -- I know I described completely to the value where block but I am afraid we're in an environment where rational thinking may not affect you to a degree one, two years ago.

Abe, I have a lot of respect for your as a prognosticator I look that as a cautionary tail more than anything else. We have to do what we believe in I mean we do have the specific numbers you're asking me that's something that we always have in the Q and that we layout over -- that has changed from the past numbers. We do remained dependent upon third party Medicare is important and Medicare is more important in certain areas, our growth in Women's Health is not necessarily a Medicare business with younger population often because if you think about people that are worried about sexually transmitted infections and otherwise it is a dramatic sexually transmitted infections, it's a younger population clearly oncology is Medicare by and large certainly hematological malignancies are heavily skewed in that way. I do believe that we have an argument to make.

I know you do.

And so, we have to be able go do it and be active we sit in that argument will help us with down the line with others. We have to go -- we have to be able to go and proactive. So, you'll understand what I can say.

Yeah. Thanks.

Thank you.

There are no further questions at this time. I will now turn the call back over to Mr. Marc Grodman for any closing remarks.

Thank you very much. We're proud of what's happened over the last year, we're proud about the promise. It gives us a great pleasure to bring in new marketing representatives, selling Women's Health even though I didn't tell Graham how many. And seen there and see them excited, enthusiastic about operating -- offer differentiating service. Since we're meeting with people with GenPath from new people around the country and talk about the new testing that we can do, and proud about our science. This is an exciting time for us. The tough time out there I think that makes us more thankful that we have the capabilities and the people committed to making Bio-Reference successful. Thank you, very much. I'm sure I'll speak with most many of you later on today and I wish you a good day. Thank you. Bye, bye.

Thank you for your participation in today's conference. This concludes the presentation. Everyone have a great day.