from your broker, bank or other holder of record authorizing you to vote and bring the proxy to the annual meeting.

How many votes will be required to elect a director or to adopt the proposals?

Can I change or revoke my proxy?

Yes. You may revoke your proxy at any time before your shares are voted by:

What if I withhold my vote or I vote to abstain?

In the election of directors, you may vote for the three directors named on the proxy card, or you may indicate that you are withholding your vote from one or more of the directors. Withheld votes will not affect the vote on the election of directors.

In connection with the proposal to ratify the appointment of our independent registered public accounting firm, you may vote for or against the proposal, or you may abstain from voting on the proposal. Shares voted “abstain” will be counted as present for purposes of that proposal and will have the same effect as shares voted against the proposal.

What happens if I do not vote?

If you are a record holder and do not vote your shares, your shares will not be voted.

If you are a participant in the Quest Diagnostics Profit Sharing Plan and you do not submit voting instructions in respect of shares held on your behalf in that plan, then, except as otherwise required by law, the plan trustee will vote your shares in the same proportion as the voting instructions that it receives from other participants in that plan. If you hold shares in the Company’s Employee Stock Purchase Plan and you do not submit voting instructions in respect of shares held in that plan, those shares will not be voted.

If your shares are held in street name through a broker and you do not provide voting instructions, your broker may be permitted to vote your shares. New York Stock Exchange member brokers may vote in their discretion on the election of directors and the ratification of the appointment of our independent registered public accounting firm. If you do not provide voting instructions with respect to a matter and your broker does not vote your shares, your shares will not be voted on that matter.

What if there is voting on other matters?

We do not know of any other matters that may be presented for action at the meeting other than those described in this proxy statement. If any other matter is properly brought before the meeting, the proxy holders will have the discretion to vote on those matters for you.

Will the directors attend the annual meeting?

Our policy is, where practical, to schedule the annual shareholders meeting on a day on which we also schedule a regular Board meeting. This year we have scheduled a regular Board meeting on the date of the annual meeting. We encourage our directors to attend each annual shareholders meeting and expect that all of our

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directors will attend the annual meeting this year. All of our directors attended the 2007 annual shareholders meeting.

How can I attend the annual meeting?

Only shareholders as of the record date (or their proxy holders) may attend the annual meeting. All shareholders seeking admission to the meeting must present photo identification. If you hold your shares in street name, to gain admission to the meeting you also must provide proof of ownership of your shares as of the record date. Proof of ownership may be a letter or account statement from your broker or bank.

What happens if the annual meeting is postponed or adjourned?

Your proxy will still be valid and may be voted at the postponed or adjourned annual meeting. You will still be able to change or revoke your proxy until it is voted.

Who will pay the expenses incurred in connection with the solicitation of my vote?

The Company pays the cost of preparing proxy materials and soliciting your vote. Our directors, officers and employees may solicit proxies on our behalf by telephone, mail, electronic or facsimile transmission, in person or by other means of communication. We also have hired Georgeson Inc. to solicit proxies and for these services we will pay an estimated fee of $12,000, plus expenses.

MATTERS TO BE CONSIDERED AT THE 2008 ANNUAL MEETING

Proposal No. 1—Election of Directors

The Company’s Restated Certificate of Incorporation requires that the Company have at least three but not more than twelve directors, as the Board determines from time to time. The Board presently consists of nine directors divided into three classes, each with three-year terms. At this meeting, three directors are seeking re-election for a three-year term expiring in 2011. Information regarding each of the nominees and continuing directors is provided below.

Nominees for Election

Based on the recommendation of the Governance Committee, the Board nominated three individuals to serve as directors for a term expiring at the 2011 annual meeting. Each nominee is currently a director of the Company. Each nominee has consented to serve if elected. The terms of these three directors seeking re-election expire at the adjournment of the 2008 annual meeting.

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Directors Continuing in Office

Directors with Terms Expiring at the 2009 Annual Meeting

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Directors with Terms Expiring at the 2010 Annual Meeting

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH NOMINEE FOR DIRECTOR.

The Audit and Finance Committee has appointed PwC to serve as our independent registered public accounting firm for 2008 and presents this appointment to the shareholders for ratification.

The Audit and Finance Committee is not bound by the vote results. The Audit and Finance Committee may change the appointment at any time if it determines that a change would be in the best interest of the Company and its shareholders.

Representatives of PwC are expected to be present at the annual meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

For information concerning the appointment of PwC, see “Report of the Audit and Finance Committee” on page 36. For information concerning fees paid to PwC, see “Fees and Services of PricewaterhouseCoopers LLP” on page 37.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2008.

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INFORMATION ABOUT OUR CORPORATE GOVERNANCE

Governance Practices

The Board of Directors believes that good corporate governance is important. The Board has adopted a set of Corporate Governance Guidelines to enhance its own effectiveness and to demonstrate its commitment to strong corporate governance for the Company. The Board reviews these Guidelines from time to time for possible revision, including to respond to changing regulatory requirements, evolving practices and the concerns of our shareholders.

The Company has adopted a Code of Business Ethics applicable to all directors, officers and employees.

Our Corporate Governance Guidelines and our Code of Business Ethics are published on our corporate governance website at www.questdiagnostics.com/governance. Paper copies are available without charge upon written request to the Corporate Secretary.

Additional highlights of our corporate governance practices are described below.

Independence of the Board of Directors

Shareholder Access and Rights

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Board Nomination Process

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Board Practices

Board Committees

In order to fulfill its responsibilities, the Board has delegated certain authority to its committees. There are five standing committees. During 2007, the Board held eight meetings. Each of our directors attended at least 75% of the total number of meetings of the Board of Directors and the committees on which he or she served. Any director may attend meetings of any committee of which the director is not a member. The following table shows the membership of each of the committees since the 2007 annual shareholders meeting and the number of meetings held by each committee in 2007.

*  Chair

For each year, a schedule of Board meetings is established before the year begins. Committee meetings are generally scheduled for the day before, or the day of, meetings of the full Board. The Board and each committee also hold such additional meetings as the Board or committee, respectively, determines necessary or appropriate.

A brief description of each of the Board committees and their functions is set forth below. Additional information about the committees can be found in the committee charters, which are available on the

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governance section of our website at www.questdiagnostics.com/governance or without charge upon written request to the Corporate Secretary.

Audit and Finance Committee

The Audit and Finance Committee:

The Board has determined that Jenne K. Britell and Gary M. Pfeiffer qualify as “audit committee financial experts” as defined by the Securities and Exchange Commission. For descriptions of the experience of Dr. Britell and Mr. Pfeiffer, see “Proposal 1—Election of Directors” beginning on page 3.

Compensation Committee

The Compensation Committee:

For a discussion of the role of executive officers and compensation consultants in connection with determining or recommending executive compensation, see “Compensation Discussion and Analysis” on page 16.

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Governance Committee

The Governance Committee:

Quality, Safety & Compliance Committee

The Quality, Safety & Compliance Committee:

Executive Committee

The Executive Committee:

Lead Independent Director

Daniel C. Stanzione, Ph.D., is the Company’s Lead Independent Director. The principal responsibilities of the Lead Independent Director are to:

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Director Independence

The Board of Directors assesses annually the independence of each director in accordance with the Company’s Corporate Governance Guidelines and New York Stock Exchange listing standards. The independence guidelines in the Company’s Corporate Governance Guidelines are consistent with the independence requirements in the New York Stock Exchange listing standards and include guidelines as to categories of relationships that are not considered material for purposes of director independence. The Company’s Corporate Governance Guidelines are available on our corporate governance website at www.questdiagnostics.com/governance.

The Board has determined that eight of the nine directors are independent. The Board has determined the following directors to be independent: John C. Baldwin, Jenne K. Britell, William F. Buehler, Rosanne Haggerty, Gary M. Pfeiffer, Daniel C. Stanzione, Gail R. Wilensky and John B. Ziegler. Surya N. Mohapatra, the Chairman of the Board, President and Chief Executive Officer of the Company, is not independent because he is a Company officer.

In considering the independence of Mr. Ziegler, the Board considered that prior to January 31, 2006, when he retired from GlaxoSmithKline, Mr. Ziegler was the President, Worldwide Consumer Healthcare of GlaxoSmithKline, which beneficially owns approximately 19% of the Company’s outstanding common stock. The Board also considered that Mr. Ziegler has been recommended by SmithKline Beecham for nomination as a director of the Company, and the Company’s relationship with GlaxoSmithKline, including the transactions between the Company and GlaxoSmithKline during 2007. For a discussion of the Company’s relationship with GlaxoSmithKline, including transactions between the Company and GlaxoSmithKline during 2007, see “Related Person Transactions—GlaxoSmithKline” on page 12. Mr. Ziegler was not involved with the negotiation of any of these arrangements or transactions.

Related Person Transactions

Review and Approval of Related Person Transactions

The Company has a written policy pursuant to which it evaluates proposed transactions involving a related person and the Company in which the amount involved exceeds $120,000. A related person is any director or executive officer of the Company, any immediate family member of a director or executive officer, or any person who owns 5% or more of the Company’s outstanding common stock. The office of the General Counsel is primarily responsible for the administration of the policy and for determining, based on the facts and circumstances, whether the Company or a related person has a direct or indirect material interest in the transaction. Certain transactions are defined not to be related person transactions under the policy.

The Governance Committee reviews any proposed transaction in which a related person has a direct or indirect material interest, except for any compensation arrangements involving an immediate family member of a director or an executive officer. In the event that the General Counsel becomes aware of a related person transaction not approved in advance, the General Counsel will arrange for the related person transaction to be reviewed and, if appropriate, ratified at the next regularly scheduled meeting of the Governance Committee. Any member of the Governance Committee who is a related person with respect to a transaction under review may not participate in any review, consideration or approval of the transaction.

In considering any related person transaction, the Governance Committee determines whether the transaction is fair to the Company. In considering a proposed transaction involving a director or the immediate family member of a director, the Governance Committee also assesses whether the proposed transaction could reasonably be expected to impact the independence of the director under the Company’s Corporate Governance Guidelines, the New York Stock Exchange listing standards or other applicable rules.

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Each year at the first regular meeting of the Governance Committee, the Governance Committee reviews any previously approved or ratified related person transaction that remains ongoing. After considering the Company’s contractual obligations, the Governance Committee determines whether to continue, modify or terminate the related person transaction based on the criteria outlined above.

Compensation arrangements involving an immediate family member of an executive officer are reviewed and approved by the Chief Executive Officer and the Vice President, Human Resources, unless such person is an immediate family member of the Chief Executive Officer, in which case the compensation arrangement is approved by the Compensation Committee. Compensation arrangements involving an immediate family member of a director are reviewed and approved by the Compensation Committee.

GlaxoSmithKline

SmithKline Beecham Corporation, a subsidiary of GlaxoSmithKline (“SmithKline Beecham”), owns 36,504,308 shares of the Company’s common stock, which it obtained on August 16, 1999 as partial consideration for its sale of SmithKline Beecham Clinical Labs (“SBCL”) to the Company. The issuance of the shares was approved by the Company’s shareholders at the Company’s 1999 annual shareholders meeting. In addition to the two agreements discussed below, in connection with the purchase of SBCL, SmithKline Beecham agreed to indemnify Quest Diagnostics, on an after-tax basis, against certain matters primarily related to taxes and billing and professional liability claims.

At the closing of the SBCL acquisition, SmithKline Beecham and the Company entered into a stockholders agreement. During the term of the stockholders agreement, which expires on August 16, 2009, SmithKline Beecham has the right to designate two nominees to the Board (or, if required by UK GAAP, three nominees if the Board consists of more than ten directors) as long as SmithKline Beecham owns at least 20% of our outstanding common stock and one nominee to the Board as long as SmithKline Beecham owns at least 10% of our outstanding common stock. The stockholders agreement imposes limitations on the right of SmithKline Beecham to sell or vote its shares and prohibits SmithKline Beecham from acquiring in excess of 29.5% of our outstanding common stock.

At the closing of the SBCL acquisition, SmithKline Beecham and the Company entered into a global clinical trials testing agreement, under which the Company would serve as the primary provider of SmithKline Beecham’s clinical trials testing requirements for ten years. In December 2002, the Company entered into a new long-term agreement with GlaxoSmithKline (formed from the merger of SmithKline Beecham and Glaxo Wellcome in December 2000) under which the Company has been the exclusive provider of central laboratory testing services to support GlaxoSmithKline’s clinical trial testing in certain markets. In addition, on a selected basis, the Company provides support for other early stage research and development activity. GlaxoSmithKline pays the Company based upon a fee schedule attached to the global clinical trials agreement, subject to adjustment. Net revenues with respect to services provided to GlaxoSmithKline, primarily performed under the clinical trials agreement, were approximately $79 million in 2007. This amount represents approximately one percent of the 2007 net revenues of each of the Company and GlaxoSmithKline.

Effective January 1, 2008, the Company and SmithKline Beecham entered into a Letter of Agreement supplementing and amending the December 2002 agreement. Under the Letter of Agreement, which was ratified by the Board’s Governance Committee pursuant to the Company’s related person transaction policy, the December 2002 agreement was extended until 2014 and the Company will be a principal provider of central laboratory testing services to support GlaxoSmithKline’s clinical trials testing.

During 2007, the Company and GlaxoSmithKline purchased additional goods and services from each other. These transactions were in the ordinary course of business and at prevailing market prices and were not material to either party.

W. Thomas Grant II

W. Thomas Grant II was Senior Vice President—Insurance and Employer Services of the Company before retiring on June 29, 2007. Mr. Grant was previously President of LabOne, Inc., which the Company acquired in November 2005. During 2007, LabOne employed two of Mr. Grant’s sons and his daughter-in-law. William T. Grant III, who was Manager, District Sales of LabOne through March 16, 2007, when he

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resigned from the Company, received in 2007 gross wages of $57,518, consisting primarily of salary of $27,019, a car allowance of $800 and commissions of $29,699. Joseph M. Grant, who is Manager, Sales Operations of LabOne, received in 2007 gross wages of $100,835, consisting primarily of salary of $77,483, a car allowance of $4,200 and commissions of $19,152. Shanna Shoemaker Grant, who was a Regional Account Manager during 2007, received in 2007 gross wages of $69,770, consisting primarily of salary of $46,319, a car allowance of $3,500 and commissions of $19,951.

STOCK OWNERSHIP INFORMATION

We encourage our directors, officers and employees to own our common stock; owning our common stock aligns their interests with your interests as shareholders. The Board’s stock ownership guidelines require each non-management director to own at least 6,000 shares of our common stock before the director can receive full cash settlement for his or her stock option exercises. The Company’s stock ownership guidelines require officers to maintain a minimum ownership position in our common stock before they can receive full cash settlement for their stock option exercises. See also “Compensation Discussion and Analysis” beginning on page 16.

The following table shows, as of March 18, 2008, the number of shares of the Company’s common stock beneficially owned by (1) each person who is known to the Company to own beneficially more than 5% of the Company’s common stock, (2) each director of the Company and each nominee, (3) each named executive officer and (4) all directors, nominees and executive officers of the Company as a group.

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2007 DIRECTORS COMPENSATION TABLE

The following table sets forth the compensation of the non-employee directors of the Company during 2007. Dr. Mohapatra, the only employee director, received no additional compensation for serving as a director.

Fees and Plans for Non-Employee Directors

Annual Cash Retainer Fees. Non-employee directors receive an annual cash retainer fee of $35,000, payable in quarterly installments of $8,750.

Meeting Fees. Non-employee directors receive a meeting fee of $1,500 for attending each Board or committee meeting at which a majority of directors attend in person and $750 for attending a meeting at which a majority of directors attend by telephone. Each director who serves as committee chair receives an additional $6,000 annual fee, except the Chair of the Audit and Finance Committee and the Lead Independent Director (who is also the Chair of the Governance Committee), who each receive an additional $30,000 annual fee.

Long-Term Incentive Plan for Non-Employee Directors. Each non-employee director participates in the Company’s Long-Term Incentive Plan for Non-Employee Directors (the “Director Plan”). The Director Plan currently authorizes (on the date of the annual shareholders meeting) the grant of non-qualified stock options and/or a stock award, in such proportions as the Compensation Committee may determine, covering an aggregate of not more than 20,000 shares of the Company’s common stock. If a person is appointed or elected as a director other than on the date of the annual shareholders meeting, the Board of Directors may grant to such director a prorated option and/or stock award, in such proportions as the Compensation

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Committee may determine. The Director Plan also permits a one-time grant to a non-employee director of stock options and stock awards covering an aggregate of not more than 40,000 shares of common stock of the Company upon initial election to the Board. The annual option grants become exercisable, and annual restricted stock grants generally vest, in three equal annual installments, beginning on the first anniversary of the date of grant, regardless of whether the non-employee director remains a director.

A director may elect to receive annual retainer and meeting fees in stock options or stock awards in lieu of cash. The number of options issued in lieu of cash for the retainer and meeting fees is based on the estimated value of such options using the lattice-based option-valuation model used for recognizing expense for financial statement reporting purposes pursuant to SFAS 123R. The number of shares issued in lieu of cash for the retainer and meeting fees is based on the fair market value of the stock on the date that the cash payment would otherwise be made. Options granted in lieu of retainer and meeting fees vest immediately. All options granted under the Director Plan, once vested, are exercisable through the seventh anniversary of the date of grant even if the director’s service on the Board terminates. The aggregate number of shares of the Company’s common stock which may be issued pursuant to stock awards or the exercise of options granted under the Director Plan may not exceed 2,000,000 (subject to adjustments in certain circumstances). The exercise price of all stock options issued under the Director Plan is the fair market value of our common stock on the date of the grant.

Deferred Compensation Plan for Directors. Under the Company’s Deferred Compensation Plan for Directors, each non-employee director may elect to defer, until a date specified by the director or until the director’s termination of service as a director, all or a portion of the director’s cash compensation or any stock grants awarded pursuant to the Director Plan. Cash amounts deferred may be indexed to (i) a cash account under which amounts deferred may earn interest, compounded quarterly, at the prime rate of Citibank, N.A. in effect on the first date of each calendar quarter or (ii) the Company’s common stock.

Changes in Director Compensation for 2008. Based on the recommendation of the Compensation Committee, effective at the 2008 annual shareholders meeting, the Board reduced the size of the annual equity grant to non-employee directors. The Board reduced the size of the annual stock option grant from 10,000 options to 8,000 options. The annual restricted stock grant remained unchanged at 1,667 restricted shares. This is the second time in recent years that the Board has approved a reduction in the size of the annual equity grant to non-employee directors. In 2006, based on the recommendation of the Compensation Committee, the Board reduced the size of the annual equity grant to non-employee directors from 20,000 options to a combination of 10,000 options and 1,667 restricted shares.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Compensation Philosophy and Components

The objective of our executive compensation program is to attract and retain talented executives who have the skills and experience required to help us achieve our strategic objectives and advance the long- term interests of our shareholders. The compensation opportunity for our named executive officers is directly tied to corporate performance, both financial and non-financial results, and individual performance.

The principal components of compensation for the named executive officers are:

Our executive compensation program is designed to:

Setting Executive Compensation

The Compensation Committee establishes the Company’s general compensation philosophy in consultation with our Chief Executive Officer and Vice President of Human Resources. The Committee oversees our executive compensation program and regularly monitors our executive compensation to ensure adherence to our compensation philosophy. The Committee engaged Towers Perrin as its external compensation consultant. At the Committee’s request, the consultant provides analyses and information regarding executive compensation trends and market practices, including, during 2007, an analysis of chief executive officer and director compensation. The consultant also performed calculations related to certain severance payments included in the tally sheets discussed below. In 2007, the consultant performed services for the Committee, but not for the Company.

Role of Executive Officers in Compensation Process

The Chief Executive Officer recommends to the Committee individual compensation adjustments for the executive officers, other than himself, based on market data and Company and individual performance. He also recommends incentive compensation measures to align compensation with our corporate objectives. The Chief Executive Officer is present during the portions of Committee meetings in which compensation decisions regarding the named executive officers other than the Chief Executive Officer are reviewed and decided, but the Committee retains the authority for all such decisions.

Competitive Pay Information

For each named executive officer, the Committee annually reviews performance and approves all elements of compensation, including cash and equity awards, except for our broad-based employee benefit

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programs. After the Committee approves the compensation of our named executive officers, the Committee reports the compensation to the full Board.

To assist the Committee with its review, our Human Resources department annually prepares analyses of each named executive officer’s compensation, including tally sheets. The review includes current and prior year compensation information with base salary, target and paid bonuses, deferred compensation activity and balances, aggregate equity grant values, SERP benefits, perquisites, and all other compensation, as well as estimates of the amounts payable to each named executive officer upon termination of employment under various circumstances, including termination in connection with a change in control.

The compensation targets for, and compensation earned by, each named executive officer are then analyzed relative to market data for comparable positions in the peer group, comprised of the companies in the S&P 500 Healthcare Equipment and Services Index, which includes Quest Diagnostics. Each company in the peer group is in the business of healthcare service, equipment or distribution. The peer group is used as a reference for all compensation comparisons except measuring payouts under our performance share awards, as discussed below.

For the named executive officers, the Committee establishes target compensation consistent with comparable positions in the peer group and provides our named executive officers with the opportunity to earn greater rewards for performance that exceeds established goals. We periodically review our peer group to determine if it continues to be appropriate for comparison purposes. In our 2007 analysis, our annualized revenue and market capitalization approximated the peer group median. Additionally, we considered our current business environment and strategic goals to make certain that the peer group continues to be an appropriate group of comparable companies. Based on these considerations, the Committee determined that the peer group remained appropriate.

For each named executive officer, the key elements of base salary, total cash compensation, and long-term incentives, as well as the mix of these elements of direct compensation, are compared, to the extent possible, with amounts received by executives holding similar positions at companies in our peer group. We adjust the comparisons to take account of different scope of job responsibility where appropriate. Specific consideration is given to the weighting of fixed and at risk components of pay relative to the peer group. No single element of compensation is set without considering the total direct compensation of the named executive officers relative to the marketplace, as well as the impact of any change on the other components of our pay model. The economic value of each participant’s prior equity awards at the date of grant is considered when setting annual compensation packages. We do not take into account realized or unrealized gains from previous equity awards in setting subsequent total compensation levels.

Our practice is to establish base salary, annual cash incentive targets and equity grant levels and terms to deliver total direct compensation at market competitive levels, depending upon the named executive officer’s responsibilities, expertise and experience, along with individual and Company performance. Consideration is also given to the criticality of retaining the executive. For the 2007 analysis, the total direct compensation for the Chief Executive Officer was in the 65th percentile of the peer group, while the total direct compensation for the other named executive officers ranged from the 45th to 77th percentile. The Committee believes that the total direct compensation for each named executive officer was appropriate in 2007 in light of the factors discussed above.

Pay Components

Base Salary

The Committee annually reviews and approves base salaries for the named executive officers. Consistent with our executive compensation philosophy, base salaries are set at levels competitive with the peer group. The Committee determined whether base salary adjustments were warranted following an assessment of our 2006 results and each named executive officer’s position, performance, scope of responsibility, current salary level and market comparables. After considering these factors, effective January 1, 2007, the Committee established each named executive officer’s base salary as follows:

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Dr. Miller became an executive officer in 2007. In connection with her promotion to Senior Vice President, Hospital and Anatomic Pathology Services, she received a salary increase of 17.8%, to a new annual rate of $425,000, reflecting her expanded responsibilities.

The total base salary paid to each named executive officer in 2007 is reported in the 2007 Summary Compensation Table on page 24.

SMIP

We pay annual incentives in accordance with the SMIP, which our shareholders approved at our 2003 annual shareholders meeting. The Committee selects a maximum of ten participants for inclusion in the SMIP each year. Pursuant to his employment agreement, Dr. Mohapatra, our Chief Executive Officer, must participate in the SMIP. Dr. Mohapatra’s incentive target (expressed as a percentage of base salary) is specified in his employment agreement. For each participant, the threshold, target and maximum performance criteria are established with payout opportunities set at zero, one-times (1x), and two-times (2x) target incentive, respectively. Rewards for performance levels between these levels are interpolated. All SMIP payments are subject to the achievement of specific performance goals and, if achieved, are scheduled to be paid on or before March 15th of the year following the completion of the performance year.

For 2007, the target SMIP incentives and SMIP payouts for the named executive officers are summarized below.

SMIP payouts are based on performance against both financial and non-financial goals. The principal financial goals relate to achieving revenue and earnings per share targets. In addition, SMIP payouts are based on performance against several strategic initiatives, comprised of both financial and non-financial goals. The following table summarizes the performance measures and the relative weights allocated to each measure under the SMIP for 2007 for each named executive officer.

Earnings per diluted share (EPS) from continuing operations and revenue are weighted heavily under the SMIP in order to provide the proper incentive to management to stimulate profitable growth. In calculating EPS from continuing operations, we made adjustments for the following predefined items: charges related to reorganization and restructuring programs; charges related to the acquisition or integration

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of a company or business; and gains or losses on extinguishment of debt. We made these adjustments to exclude the impact of certain unusual or nonrecurring items and to incent management to make decisions that are focused on long term value creation. For purposes of calculating revenues, we excluded revenues of entities acquired in 2007.

The targets and resulting payout factors for EPS and consolidated revenue for 2007 were:

Physician and hospital combined revenue represent approximately 90% of our 2007 consolidated revenue. The average payout factor for these measures was 1.05x.

In 2007, four strategic initiatives were SMIP goals. Each initiative was developed to deliver results during 2007 and position us for accelerated growth in revenues and earnings over the long term. The specific initiatives were set around the following four objectives:

Potential performance for each strategic initiative ranged from 0x to 2x. Actual performance against the four initiatives ranged from .4x to 1.23x.

The Committee believes that the annual incentive payments made to our named executive officers for 2007 were consistent with the objectives of our executive compensation program. Since 2005, the actual individual payouts for named executive officers in SMIP have ranged from 82% of target to 154% of target, with an average payout during that period of 112% of target. We believe that the results indicate that the targets have been set at reasonable levels.

Long-Term Incentive Awards

We design our long-term incentive awards to:

In determining the value of the long-term incentive component of each named executive officer’s compensation, the Committee considers, without limitation:

Timing of Equity Awards

It has been the Committee’s practice to make annual equity grants at a meeting held shortly after we announce our prior year’s earnings. The Committee also makes equity grants to new hires and promoted employees, and other grants in special cases, from time to time as appropriate.

The Committee has delegated to the Chief Executive Officer with the Vice President of Human Resources the authority to grant, under limited circumstances, equity grants to non-executive officers. Pursuant to this authority, they may award up to 20,000 options and 10,000 restricted or performance shares per quarter. In 2007, approximately 16,600 options and 2,800 shares were granted under this authority.

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In addition to the above authority, in December 2007, the Board approved the Committee recommendation to authorize the Chief Executive Officer to designate employees as recipients of nonqualified stock options. The Chief Executive Officer may grant options to employees, other than executive officers, annually in amounts not exceeding 25,000 per employee and 100,000 in the aggregate. The grants must have an exercise price equal to fair market value on the grant date and other terms and conditions identical to the terms and conditions most recently approved by the Committee. In 2007, no options were granted pursuant to this authority.

Management regularly reports to the Committee grants under these two delegations of authority.

2007 Equity Awards

For equity awards made in 2007, the Committee maintained the same mix of annual long-term incentive awards it had authorized in 2006. The Committee authorized approximately 1/3 of the total value of the annual equity award in performance shares, assuming the performance share awards are ultimately earned at target, and approximately 2/3 of the total value of the annual equity award in stock options. Performance shares encourage a long-term view and reinforce the link between financial results and rewards. The value that they provide depends on the level of achievement of pre-defined performance goals over the multi- year performance period. If minimum performance levels are not achieved, the performance shares are forfeited and provide no value. Stock options align incentives with shareholder interests by rewarding appreciation in stock price.

The target performance shares subject to the 2007 awards will be earned over a three-year period ending December 31, 2009, and will be paid out in shares of the Company’s common stock at the end of the term to the extent that the performance level is achieved. The Committee established baselines, targeted performance levels, and the measurement period. The performance measure is the compound annual growth rate of the Company’s earnings per share from continuing operations (subject to adjustment for predefined items and calculated in accordance with the plan), compared to the compound annual growth rate of the earnings per share of the companies included in the S&P 500 Healthcare Index (which is comprised of the peer group and the S&P 500 Pharmaceuticals, Biotechnology, and Life Sciences Index). We refer to this reference group as the Performance Share Comparator Group. The Committee selected this performance measure because it is a measure of the Company’s relative success over time. Moreover, because the reported earnings of any single company or small group of companies can be volatile, we believe that using the larger number of companies in the Performance Share Comparator Group provides a more representative measure of industry performance during the multi-year measurement period than would be the case if we used our peer group as the reference group for performance shares. The following chart shows the performance shares that can be earned based on performance relative to the Performance Share Comparator Group over the performance period (payments will be interpolated for performance between the indicated performance levels).

Determination of the shares payable pursuant to the award will be made after the performance period.

In February 2007, the Committee awarded long-term compensation for 2007 to the named executive officers pursuant to the long-term incentive program described above, resulting in the equity awards shown under “2007 Grants of Plan-Based Awards Table” on page 25. In considering the size of the award for each named executive officer, the Committee considered the factors described above, including the performance of the Company and the executive during 2006 and the competitive market for executive talent.

Changes for 2008

After discussions regarding potential changes in approach for 2008 long-term incentive awards, the Committee determined to revise the long-term incentive award program for 2008.

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For 2008, performance share awards continue to represent approximately 1/3 of the total value of the annual equity award. Performance shares encourage a long-term view and reinforce the link between financial results and rewards. The value that they provide depends on the level of achievement of pre-defined performance goals over the multi-year performance period. If minimum performance levels are not achieved, the performance shares are forfeited and provide no value. In an effort to better align executive compensation with achievement of the Company’s financial goals, we changed the performance measure for these awards to the cumulative annual growth rate of our earnings per share from continuing operations over a three year period compared to targets based on our multi-year business plan. The new performance metric for these awards is more visible to our employees. It will be easier for the Company to communicate with employees regarding the awards, and easier for employees to understand the awards and performance versus the target. We believe that the new performance measure will strengthen the incentive effect of performance share awards on our employees.

In 2008, we also continued to use stock options as a component of our equity awards. We continue to believe that stock options are an appropriate incentive to motivate our employees. For 2008, options represented approximately 1/3 of the total value of the annual equity award.

In 2008, approximately 1/3 of the total value of the annual equity award was delivered in the form of restricted stock that vests as follows: 25% on each of the first and second anniversaries of the grant date and 50% on the third anniversary of the grant date. We believe that restricted stock enhances executive retention across business cycles because it retains a portion of its value if our stock price declines from the grant date price. Restricted stock also fosters an ownership culture, helps motivate employees to perform at peak levels across business cycles and motivates increasing shareholder value. We included restricted stock as a component in our 2008 equity awards because we believe that it will positively impact employee retention and that it aligns employee interests with the interests of our shareholders over the long term.

Reload Options

We have not granted options with a “reload” feature since 2002. Some options that we granted that remain outstanding contain a “reload” feature.

Deferred Compensation

All employees who satisfy certain service requirements, including the named executive officers, are entitled to participate in our 401(k) Plan, in which participants may defer a portion of their eligible cash compensation up to limits established by law. All the named executive officers except the Chief Executive Officer also are eligible to participate in the SDCP. The purposes of the 401(k) Plan and SDCP are to provide eligible employees an opportunity to save for their retirement and, through Company matching contributions and credits, to provide supplemental retirement income to help us compete in the market for talented employees. For additional information regarding the SDCP, see “2007 Nonqualified Deferred Compensation Table” on page 29.

SERP

Dr. Mohapatra is the only named executive officer covered by a defined benefit plan. To enable us to secure the services of Dr. Mohapatra as our Chief Executive Officer, in December 2004 we established the SERP, which is an unfunded non-qualified plan, in connection with the execution of Dr. Mohapatra’s employment agreement. With the adoption of the SERP, Dr. Mohapatra waived his participation in the SDCP for 2005 and thereafter. His account balances for pre-2005 contributions continue to be invested under the SDCP. The Committee continues to believe that market conditions and the importance of maintaining Dr. Mohapatra’s services as Chief Executive Officer make it appropriate for the Company to maintain the SERP for Dr. Mohapatra. For a description of the SERP, see “2007 Pension Benefits Table” on page 28.

Perquisites

Perquisites represent a minor component of executive compensation. We provide perquisites that we believe are reasonable and competitive. Mr. Hagemann, Mr. Peters and Mr. Prevoznik are eligible to be

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reimbursed, up to certain limits, for tax and financial planning services. Pursuant to Dr. Mohapatra’s employment agreement, the Company reimbursed him for driver and vehicle costs and the Company paid legal costs in connection with his employment agreement. Additionally, the Committee approved reimbursing Dr. Mohapatra for security enhancements for his residence, and encouraged Dr. Mohapatra and his family to use Company aircraft for personal travel. In addition, pursuant to Company policy, the Company reimbursed Dr. Miller for relocation expenses that she incurred in connection with her 2007 promotion. These perquisites are disclosed in the 2007 Summary Compensation Table on page 24.

Other Benefits

As part of his or her total compensation package, each named executive officer is eligible to participate in our broad-based employee benefit plans, such as medical, dental, group life insurance and disability plans, and the employee stock purchase plan and the 401(k) Plan. Each of these benefits is provided on the same basis as available to other exempt employees. Our benefits are designed to attract and retain talented employees and to provide them with competitive benefits.

Impact of Accounting and Tax Treatment on Executive Compensation

Section 162(m) of the Code precludes a public corporation from taking a tax deduction for annual compensation in excess of $1 million paid to its chief executive officer and the three most highly paid executive officers other than the chief financial officer, unless certain specific and detailed criteria are satisfied. The anticipated tax treatment to the Company and to the executive officers is taken into consideration in the review and establishment of all compensation programs and payments. Our general policy is to attempt to preserve the tax deductibility of compensation paid to our executive officers under existing tax laws, including annual incentive awards paid under the SMIP and the grants of equity awards. As tax laws change, the Committee will consider their implications.

The SMIP limits the annual incentive award for each participant at 1% of the Company’s Earnings (as defined in the SMIP) in the fiscal year. For 2007, the annual incentive award for each SMIP participant was less than the maximum allowable incentive award payable under the SMIP.

Under his employment agreement, Dr. Mohapatra will receive a tax gross-up payment for any golden parachute excise tax consequences under Sections 280G and 4999 of the Internal Revenue Code. The other named executive officers also will receive tax gross-ups for any parachute excise tax consequences, unless a reduction of the parachute payments by not more than 5% would result in no excise tax being incurred.

See Note 13 of the Company’s consolidated financial statements for the year ended December 31, 2007 for a discussion of the accounting treatment of executive compensation plans.

CEO Employment Agreement

Dr. Mohapatra, our Chief Executive Officer, is the only named executive officer with an employment agreement with the Company. The Company entered into this employment agreement with Dr. Mohapatra in November 2003 to secure his services as Chief Executive Officer. The parties amended and restated the agreement on July 31, 2006, prior to the expiration of the initial term, to retain Dr. Mohapatra’s continued service as Chief Executive Officer. The Committee continues to believe that market conditions and the importance of maintaining Dr. Mohapatra’s services as Chief Executive Officer make it appropriate for the Company to maintain an employment agreement with Dr. Mohapatra. For a description of Dr. Mohapatra’s agreement, see “Employment Agreement” on page 26. We filed a copy of Dr. Mohapatra’s employment agreement with the Securities and Exchange Commission and it is an exhibit to our annual report on Form 10-K.

Termination and Change in Control Arrangements

The Company’s Executive Officer Severance Plan covers all named executive officers other than the Chief Executive Officer, whose severance provisions are established in his employment agreement. No named executive officer will receive any severance benefits solely as a result of a change of control, although Dr. Mohapatra has the right to terminate his employment and receive severance on certain change

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of control events. In 2007, the Committee approved certain changes to the severance plan, primarily to respond to the final regulations under Section 409A of the Internal Revenue Code. The changes do not increase or add new benefits.

In the case of any termination (other than termination for cause), each named executive officer is entitled to exercise vested stock options, to receive vested and earned performance shares, and to immediate vesting of a pro-rata portion (based on the date of the officer’s termination) of the officer’s unvested equity awards. Upon a “change of control,” as defined in the equity awards, equity awards vest immediately. See “Key Terms of Equity Awards” on page 25. In addition, on any termination, each named executive officer is entitled to receive benefits available generally to exempt employees, such as distributions under the 401(k) Plan and SDCP.

For additional information, see “2007 Potential Payments upon Termination or Change in Control” on page 30.

We believe that the severance benefits provided to our named executive officers are consistent with market practice and are appropriate recruiting and retention tools. The named executive officers have agreed to non-competition and non-solicitation covenants for a period following termination of employment.

Executive Share Retention Guidelines and Hedging Policy

In order to promote equity ownership and further align the interests of management with those of our shareholders, we adopted senior management share retention and ownership guidelines in 2005. Under these guidelines, each officer is expected to maintain a minimum ownership position before he or she can receive full cash settlement for option exercises. The minimum share ownership threshold for each named executive officer is as follows:

The Committee periodically reviews these guidelines and may adjust them. Each named executive officer has met the applicable threshold.

All employees and directors are also prohibited from entering into transactions that result in a financial benefit if our stock price declines, or any hedging transaction involving our stock, including but not limited to the use of financial derivatives (such as puts and calls), short sales or any similar transactions. In addition, our directors and executive officers, as well as certain other employees, may purchase or sell Company securities only during window periods of 30 calendar days that begin on the second business day following the issuance of our quarterly earnings releases.

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based on its review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into the Company’s annual report on Form 10-K for 2007.

COMPENSATION COMMITTEE

William F. Buehler, Chairman
Jenne K. Britell, Ph.D.
Gary M. Pfeiffer
Daniel C. Stanzione, Ph.D.
John B. Ziegler

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ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATION

2007 Summary Compensation Table

The following table summarizes the compensation for 2007 for each named executive officer.