LabCorp 2009 Annual Report Download - page 59

LABORATORY CORPORATION OF AMERICA 57
those states. The Company also responded to subpoenas from
the United States Office of Inspector General’s regional offices in
New York and Massachusetts regarding certain of its billing
practices. The Company is cooperating with the requests.
The Company is also named from time to time in suits
brought under the qui tam provisions of the False Claims Act
and comparable state laws. These suits typically allege that the
Company has made false statements and/or certifications in
connection with claims for payment from federal or state health
care programs. They may remain under seal (hence, unknown
to the Company) for some time while the government decides
whether to intervene on behalf of the qui tam plaintiff. Such
claims are an inevitable part of doing business in the health
care field today.
Several of these matters are in their early stages of develop-
ment and management cannot predict the outcome of such
matters. In the opinion of management, the ultimate disposition
of such matters is not expected to have a material adverse effect
on the financial position of the Company but may be material to
the Company’s results of operations or cash flows in the period
in which such matters are finally determined or resolved.
The Company believes that it is in compliance in all material
respects with all statutes, regulations and other requirements
applicable to its clinical laboratory operations. The clinical labora-
tory testing industry is, however, subject to extensive regulation,
and the courts have not interpreted many of these statutes and
regulations. There can be no assurance therefore that those
applicable statutes and regulations will not be interpreted or
applied by a prosecutorial, regulatory or judicial authority in a
manner that would adversely affect the Company. Potential
sanctions for violation of these statutes and regulations include
significant fines and the loss of various licenses, certificates and
authorizations.
During the fourth quarter of 2008, the Company recorded a
$7.5 cumulative revenue adjustment relating to certain historic
overpayments made by Medicare for claims submitted by a
subsidiary of the Company. The Company has forwarded a
detailed claims file and refund payment to the Medicare carrier.
No additional requests for information have been received
from the carrier.
Effective January 1, 2007, the Company commenced its
successful implementation of its ten-year agreement with
United Healthcare Insurance Company (“UnitedHealthcare”)
and became its exclusive national laboratory provider. During
the first three years of the ten-year agreement, the Company
committed to reimburse UnitedHealthcare up to $200.0 for
transition costs related to developing expanded networks in
defined markets during the first three years of the agreement.
Since the inception of this agreement, approximately $108.7
of such transition payments were billed to the Company by
UnitedHealthcare and approximately $102.8 had been remitted
by the Company. Based on the trend rates of the transition
payment amounts billed by UnitedHealthcare during 2009,
2008 and 2007, the Company believes that its total reimburse-
ment commitment under this agreement will be approximately
$125.6 and that the final invoices for these payments will be
processed over the first two quarters of 2010. The Company
is amortizing the total estimated transition costs over the life
of the contract.
Under the Company’s present insurance programs, coverage
is obtained for catastrophic exposure as well as those risks
required to be insured by law or contract. The Company is
responsible for the uninsured portion of losses related primarily
to general, professional and vehicle liability, certain medical
costs and workers’ compensation. The self-insured retentions
are on a per occurrence basis without any aggregate annual
limit. Provisions for losses expected under these programs are
recorded based upon the Company’s estimates of the aggregated
liability of claims incurred. At December 31, 2009, the Company
had provided letters of credit aggregating approximately $39.5,
primarily in connection with certain insurance programs. The
Company’s availability under its Revolving Facility is reduced
by the amount of these letters of credit.
The Company leases various facilities and equipment under
non-cancelable lease arrangements. Future minimum rental
commitments for leases with non-cancelable terms of one year
or more at December 31, 2009 are as follows:
Operating
2010 $ 106.1
2011 82.8
2012 56.8
2013 40.5
2014 29.5
Thereafter 64.3
Total minimum lease payments 380.0
Less:
Amounts included in restructuring and acquisition related accruals (12.8)
Non-cancelable sub-lease income (0.6)
Total minimum operating lease payments $ 366.6
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements