LabCorp 2014 Annual Report Download - page 20

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Market Access Services
Covance Drug Development offers a wide range of reimbursement and healthcare economics consulting services, including
outcomes and pharmacoeconomic studies, reimbursement planning, reimbursement advocacy programs, risk evaluation and
mitigation strategy (“REMS”) services, registry services, specialty pharmacy services and managed market contracting services.
Pharmaceutical, biotechnology and medical device manufacturers purchase these services from Covance Drug Development to
help optimize their return on research and development investments. Covance Drug Development offers InTeleCenter® services
that employ state of the art phone, internet and electronic media to manage customer communications. InTeleCenter® programs
include reimbursement hotlines, patient assistance programs and patient compliance REMS programs.
Clients
The Company provides testing services to a broad range of health care providers and other customers. During the year ended
December 31, 2014, no client or group of clients under the same contract accounted for more than 9.5% of the Company’s
consolidated net sales. The primary client groups serviced by the Company include:
Independent Physicians and Physician Groups. Physicians requiring testing for their patients are one of the Company’s
primary sources of requests for testing services. Fees for clinical laboratory testing services rendered for these physicians are
billed either to the physician, to the patient or the patient’s third-party payer such as an insurance company, Medicare or
Medicaid. Billings are typically on a fee-for-service basis. If the billings are to the physician, they are based on a customer
fee schedule and are subject to negotiation. Otherwise, the patient or third-party payer is billed at the Company's patient fee
schedule, subject to third-party payer contract terms and negotiation by physicians on behalf of their patients. Patient sales
are recorded at the Company’s patient fee schedule, net of any discounts negotiated with physicians on behalf of their patients,
or fees made available through charity care or an uninsured patient program. Revenues received from Medicare and Medicaid
billings are based on government-set fee schedules and reimbursement rules.
Hospitals. The Company provides hospitals with services ranging from core and specialty testing to laboratory management
services. Hospitals generally maintain an on-site laboratory to perform immediately needed testing of patients receiving care.
However, they also refer less time sensitive procedures, less frequently needed procedures and highly specialized procedures
to outside facilities, including independent clinical laboratories and larger medical centers. The Company typically charges
hospitals for any such tests on a fee-for-service basis which is derived from the Company’s client fee schedule. Fees for
management services are typically billed monthly at contractual rates.
Managed Care Organizations. The Company serves many MCOs, and these organizations have different contracting
philosophies, that are influenced by the design of the products. Some MCOs contract with a limited number of clinical
laboratories and engage in direct negotiation of rates. Other MCOs adopt broader networks with generally uniform fee structures
for participating clinical laboratories. In addition, some MCOs use capitation to fix the cost of laboratory testing services for
their enrollees. Under a capitated reimbursement mechanism, the clinical laboratory and the MCO agree to a per member,
per month payment to pay for all authorized laboratory tests ordered.
Other Institutions. The Company serves other institutions, including government agencies, large employers, pharmaceutical
companies and other independent clinical laboratories that do not have the breadth of the Company’s testing capabilities.
These institutions typically pay on a negotiated fee-for-service basis.
With its acquisition of Covance, the Company’s client base has expanded both in size and character. Covance Drug
Development provides its services, on a global basis, primarily to the pharmaceutical and biotechnology industries. Covance
Drug Development serves in excess of 1,000 biopharmaceutical companies, ranging from the world’s largest pharmaceutical
companies and biotechnology companies to small and organizations.
Payers
Testing services are billed to Medicare, Medicaid, commercial clients, MCOs and other insurance companies, independent
physicians and physician groups, hospitals and private patients. Tests ordered by a physician may be billed to different payers
depending on the medical benefits of a particular patient. Most testing services are billed to a party other than the physician or
other authorized person who ordered the test. For the year ended December 31, 2014, requisitions (based on the total volume of