LabCorp 2014 Annual Report Download - page 110

F-31
inquiries can relate to the Company or other health care 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. The suits 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, the loss
of various licenses, certificates and authorizations, and/or exclusion from participation in government programs.
Many of the current claims and legal actions against the Company are at preliminary stages, and many of these cases seek an
indeterminate amount of damages. The Company records an aggregate legal reserve, which is determined using actuarial
calculations based on historical loss rates and assessment of trends experienced in settlements and defense costs. In accordance
with FASB Accounting Standards Codification Topic 450 “Contingencies”, the Company establishes reserves for judicial,
regulatory, and arbitration matters outside the aggregate legal reserve if and when those matters present loss contingencies that
are both probable and estimable and would exceed the aggregate legal reserve. When loss contingencies are not both probable and
estimable, the Company does not establish separate reserves.
The Company is unable to estimate a range of reasonably probable loss for cases described in more detail below in which
damages either have not been specified or, in the Company's judgment, are unsupported and/or exaggerated and (i) the proceedings
are in early stages; (ii) there is uncertainty as to the outcome of pending appeals or motions; (iii) there are significant factual issues
to be resolved; and/or (iv) there are novel legal issues to be presented. For these cases, however, the Company does not believe,
based on currently available information, that the outcomes of these proceedings will have a material adverse effect on the
Company's financial condition, though the outcomes could be material to the Company's operating results for any particular period,
depending, in part, upon the operating results for such period.
On November 4, 2013, the State of Florida through the Office of the Attorney General filed an Intervention Complaint in a
False Claims Act lawsuit, State of Florida ex rel. Hunter Laboratories, LLC and Chris Riedel v. Quest Diagnostics Incorporated,
et al. in the Circuit Court for the Second Judicial Circuit for Leon County. The complaint, originally filed by a competitor laboratory,
alleges that the Company overcharged Florida’s Medicaid program. 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 legal expenses. On January 3, 2014, the Company
filed a Petition for the Administrative Determination of the Invalidity of an Existing Rule against the Agency for Health Care
Administration (“AHCA”). The Petition sought the invalidity of Rule 59G-5.110(2) of the Florida Administrative Code, which
was relied upon by the Attorney General in its Intervention Complaint. On March 28, 2014, an Administrative Law Judge for the
State of Florida Division of Administrative Hearings issued an order finding that Rule 59G-5.110(2) of the Florida Administrative
Code was invalid. In the interim, the Attorney General filed a First Amended Intervention Complaint on January 30, 2014, which
seeks actual and treble damages and civil penalties for alleged false claims, as well as recovery of costs, attorney's fees, and legal
expenses, for allegedly overcharging Florida's Medicaid program. The Company's Motion to Dismiss was denied in February
2015. The Company will vigorously defend the lawsuit.
As previously reported, the Company responded to an October 2007 subpoena from the United States Department of Health
& Human Services Office of Inspector General's regional office in New York. On August 17, 2011, the Southern District of New
York unsealed a False Claims Act lawsuit, United States of America ex rel. NPT Associates v. Laboratory Corporation of America
Holdings, which alleges that the Company offered UnitedHealthcare kickbacks in the form of discounts in return for Medicare
business. The Plaintiff's third amended complaint further alleges that the Company's billing practices violated False Claims Acts
in fourteen states and the District of Columbia. 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 legal expenses. Neither the U.S. government nor any state government
has intervened in the lawsuit. The Company will vigorously defend the lawsuit.
In addition, the Company has received four other subpoenas since 2007 related to Medicaid billing. In October 2009, the
Company received a subpoena from the State of Michigan Department of Attorney General seeking documents related to its billing
LABORATORY CORPORATION OF AMERICA HOLDINGS AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in millions, except per share data)