LabCorp 2010 Annual Report Download - page 43

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state Medicaid program and, therefore, violated the California
False Claims Act. The lawsuit seeks actual and treble damages
and civil penalties for each alleged false claim, as well as recovery
of costs, attorney’s fees, and expenses. The original complaint
was dismissed on the basis of (i) misjoinder and (ii) lack of
particularity in the claims and a separate amended complaint
was filed against the Company on December 14, 2009. The
Company filed an answer to the new complaint on February 5,
2010. The Company participated in mediation on December 6,
2010 and February 10, 2011. The case is currently scheduled
for trial on January 30, 2012.
During the third quarter of 2010, the Company responded
to an audit from the California Department of Health Care
Services (“DHCS”) of one of the Company’s California laboratories
for the period of January 1, 2010 through June 30, 2010. DHCS
subsequently indicated that this laboratory charged the Medi-Cal
program more than what was charged to other payers for some
lab services and that this is inconsistent with DHCS’s current
interpretation of California regulations. DHCS provided the
Company with a proposed agreement related to the Company’s
billing to the Medi-Cal program, including a requirement that
the Company charge Medi-Cal the “lowest price” it charges
others for a particular laboratory test. The Company disagrees
with DHCS’ contentions and interpretation of its regulations
and believes that it has properly charged the Medi-Cal program
under all applicable laws and regulations. The Company has
subsequently received a self-audit letter and a similar audit request
relating to another Company laboratory. The Company is
continuing to cooperate with DHCS with respect to the audits.
In addition, the Company has received three other subpoenas
since 2007 related to Medicaid billing. In June 2010, the
Company received a subpoena from the State of Florida
requesting documents related to its billing to Florida Medicaid.
In February 2009, the Company received a subpoena from the
Commonwealth of Virginia seeking documents related to the
Company’s billing for state Medicaid. In October 2009, the
Company received a subpoena from the State of Michigan
seeking documents related to its billing to Michigan Medicaid.
The Company also responded to an October 2007 subpoena
from the United States Office of Inspector General’s regional
office in New York and a September 2009 subpoena from the
United States Office of Inspector General’s regional office in
Massachusetts regarding certain of its billing practices. The
Company is cooperating with the requests.
On August 19, 2010, Aetna, Inc., Aetna Health Holdings,
LLC and Aetna Health Management, LLC filed a lawsuit against
Laboratory Corporation of America Holdings in the United States
District Court for the Eastern District of Pennsylvania, alleging
unfair competition, misrepresentation, interference and breach
of contract, and violation of trade secret laws. Aetna is seeking
unspecified monetary damages and equitable relief. The
Company intends to vigorously defend the lawsuit.
The Company acquired certain assets of Westcliff Medical
Laboratories (“Westcliff”) on June 16, 2010. On June 25, 2010,
the Company and the Federal Trade Commission (“FTC”) entered
into a letter agreement (“Agreement”) whereby the Company
agreed to hold the Westcliff business separate and independent
of the Company from the date the Company acquired the
Westcliff assets until the Agreement was set to terminate on
December 3, 2010. The Company subsequently responded
to a subpoena and Civil Investigative Demand from the FTC
regarding the acquisition. On December 1, 2010, the FTC
issued an administrative complaint challenging the Westcliff
acquisition (“Administrative Proceeding”). A hearing in the
Administrative Proceeding before an FTC administrative law
judge is scheduled to begin on May 2, 2011, in Washington,
DC and the Company intends to vigorously defend itself in that
proceeding. On December 1, 2010, the FTC also filed an action
in federal court in the District of Columbia seeking a temporary
restraining order and preliminary injunction to prevent the
Company from integrating the Westcliff assets upon the expiration
of the Agreement. The Company successfully moved for transfer
of the federal district court matter to the United States District
Court for the Central District of California, and the Company
voluntarily agreed to extend the Agreement until the federal
district court ruled on the FTC’s request for a preliminary injunction.
On February 22, 2011 the federal district court denied the
preliminary injunction and dissolved the temporary restraining
order, allowing the Company to integrate the Westcliff assets
into its business operations. On February 23, 2011 the FTC filed
a notice of appeal to the Ninth Circuit Court of Appeals and a
motion with the federal district court requesting a preliminary
injunction maintaining the Agreement pending a decision from
that appeal. The Company will vigorously defend itself in
those proceedings.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements