LabCorp 2010 Annual Report Download - page 44

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Several of these matters are in their early stages of development
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 is involved from time to time in various claims
and legal actions, including arbitrations, class actions, and
other litigation, arising in the ordinary course of business. Some
of these actions involve claims that are substantial in amount.
These matters include, but are not limited to, intellectual property
disputes, professional liability, employee related matters, and
inquiries, including subpoenas and other civil investigative
demands, from governmental agencies and Medicare or
Medicaid payers and managed care payers reviewing billing
practices or requesting comment on allegations of billing
irregularities that are brought to their attention through billing
audits or third parties. The Company receives civil investiga-
tive demands or other inquiries from various governmental
bodies in the ordinary course of its business. Such inquiries
can relate to the Company or other healthcare providers. The
Company works cooperatively to respond to appropriate
requests for information.
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.
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
laboratory 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, certifi-
cates and authorizations.
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.
At the end of the reimbursement period, approximately $119.6
of such transition payments have been billed to the Company
by UnitedHealthcare and approximately $119.6 has been
remitted by the Company. UnitedHealthcare has indicated that
there will be no further billings. The Company is amortizing the
total 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 aggre-
gated liability of claims incurred. At December 31, 2010, the
Company had provided letters of credit aggregating approxi-
mately $37.4, 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, 2010 are as follows:
Operating
2011 $ 148.4
2012 112.1
2013 73.6
2014 50.6
2015 29.0
Thereafter 74.2
Total minimum lease payments 487.9
Less:
Amounts included in restructuring and acquisition related accruals (6.9)
Non-cancelable sub-lease income (0.2)
Total minimum operating lease payments $ 480.8
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements