FAIR VALUE MEASUREMENTS

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table provides a summary of the recognized assets and liabilities that are measured at fair value on a recurring basis:



			Basis of Fair Value Measurements
			Quoted Prices in Active Markets for Identical Assets / Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
March 31, 2019	Total		Level 1		Level 2		Level 3
Assets:
Trading securities	$	56	$	56	$	—	$	—
Cash surrender value of life insurance policies	39		—		39		—
Total	$	95	$	56	$	39	$	—

Liabilities:
Interest rate swaps	$	77	$	—	$	77	$	—
Deferred compensation liabilities	103		—		103		—
Contingent consideration	19		—		—		19
Total	$	199	$	—	$	180	$	19



			Basis of Fair Value Measurements
December 31, 2018	Total		Level 1		Level 2		Level 3
Assets:
Trading securities	$	53	$	53	$	—	$	—
Cash surrender value of life insurance policies	34		—		34		—
Total	$	87	$	53	$	34	$	—

Liabilities:
Deferred compensation liabilities	$	96	$	—	$	96	$	—
Interest rate swaps	93		—		93		—
Contingent consideration	14		—		—		14
Total	$	203	$	—	$	189	$	14

A detailed description regarding the Company's fair value measurements is contained in Note 8 to the consolidated financial statements in the Company's 2018 Annual Report on Form 10-K.

The Company offers certain employees the opportunity to participate in non-qualified supplemental deferred compensation plans. A participant's deferrals, together with Company matching credits, are invested in a variety of participant-directed stock and bond mutual funds that are classified as trading securities. The trading securities are classified within Level 1 because the changes in the fair value of these securities are measured using quoted prices in active markets based on the market price per unit multiplied by the number of units held, exclusive of any transaction costs. A corresponding adjustment for changes in fair value of the trading securities is also reflected in the changes in fair value of the deferred compensation obligation. The deferred compensation liabilities are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the trading securities.

The Company offers certain employees the opportunity to participate in a non-qualified deferred compensation program. A participant's deferrals, together with Company matching credits, are “invested” at the direction of the employee in a hypothetical portfolio of investments which are tracked by an administrator. The Company purchases life insurance policies, with the Company named as beneficiary of the policies, for the purpose of funding the program's liability. Changes in the cash surrender value of the life insurance policies are based upon earnings and changes in the value of the underlying investments. Changes in the fair value of the deferred compensation obligation are derived using quoted prices in active markets based on the market price per unit multiplied by the number of units. The cash surrender value and the deferred compensation obligations are classified within Level 2 because their inputs are derived principally from observable market data by correlation to the hypothetical investments. Deferrals under the plan currently may only be made by participants who made deferrals under the plan in 2017.

The fair value measurements of the Company's interest rate swaps classified within Level 2 of the fair value hierarchy are model-derived valuations as of a given date in which all significant inputs are observable in active markets including certain financial information and certain assumptions regarding past, present and future market conditions.

In December 2017, and as further discussed in Note 6 and Note 8 to the consolidated financial statements in the Company's 2018 Annual Report on Form 10-K, the Company completed the acquisition of certain assets of the clinical and anatomic pathology laboratory business of Shiel Holdings, LLC ("Shiel") which provides for up to $15 million of contingent consideration to be paid based on the achievement of certain testing volume benchmarks. In connection with the acquisition, the Company initially recorded a contingent consideration liability of $6 million which was classified within Level 3 of the fair value hierarchy. The contingent consideration was measured at fair value using an option-pricing method. Significant inputs included management's estimate of volume and other market inputs including comparable company revenue volatility of 6.9% and a discount rate of 4.5%. The estimated fair value of the contingent consideration associated with the Shiel acquisition was increased to $7 million in 2018 as a result of the remeasurement of the liability. Any contingent consideration associated with Shiel is expected to be paid in 2019.

In September 2018, and as further discussed in Note 6 and Note 8 to the consolidated financial statements in the Company's 2018 Annual Report on Form 10-K, the Company completed the acquisition of ReproSource, Inc. which provides for up to $10 million of contingent consideration to be paid based on the achievement of certain revenue targets. In connection with the acquisition, the Company initially recorded a contingent consideration liability of $5 million which was classified within Level 3 of the fair value hierarchy. The contingent consideration was measured at fair value using an option-pricing method. Significant inputs included management's estimate of revenue and other market inputs including comparable company revenue volatility of 8.5% and a discount rate of 6.5%. The contingent consideration associated with ReproSource, Inc. is expected to be paid in up to two installments in 2020 and 2021.

In February 2019, the Company completed the acquisition of certain assets of the clinical laboratory services business of Boyce & Bynum which provides for up to $25 million of contingent consideration to be paid based on the achievement of certain testing volume benchmarks. In connection with the acquisition, the Company initially recorded a contingent consideration liability of $6 million, which was classified within Level 3 of the fair value hierarchy. The contingent consideration was measured at fair value using an option-pricing method. Significant inputs included management's estimate of volume and other market inputs including comparable company revenue volatility of 8% and a discount rate of 7.2%. The contingent consideration associated with Boyce & Bynum is expected to be paid in up to two installments in 2019 and 2020. For further details regarding the Boyce & Bynum acquisition, see Note 5.

The following table provides a reconciliation of the beginning and ending balances of liabilities using significant unobservable inputs (Level 3):



	Contingent Consideration

Balance, December 31, 2018	$	14
Purchases, additions and issuances	6
Settlements	(1		)
Balance, March 31, 2019	$	19

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable and accrued expenses approximate fair value based on the short maturities of these instruments. As of March 31, 2019 and December 31, 2018, the fair value of the Company’s debt was estimated at $4.4 billion and $4.0 billion, respectively. Principally all of the Company's debt is classified within Level 1 of the fair value hierarchy because the fair value of the debt is estimated based on rates currently offered to the Company with identical terms and maturities, using quoted active market prices and yields, taking into account the underlying terms of the debt instruments.