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43
1, 2012, with a cap on payments set at 80% of the lowest maximum allowance established under the federal Medicare program.
Under the terms of the Hunter Labs Settlement Agreement, the enactment of this California legislation terminates the Company's
reporting obligations (or obligation to provide a discount in lieu of reporting) under that agreement. In December 2014, DCHS
announced at a stakeholder meeting the results of its analysis of payment data reported by laboratories in 2013 and its proposed
rate methodology, on which it solicited stakeholder comments. The Company objected to the proposal by DHCS to exclude the
new rate calculations data on payments from comparable third-party payers exceeding 80% of Medicare reimbursement amounts
and its proposal to impose a 10% payment reduction enacted in Assembly Bill No. 97 after calculation of the new rates. In January
2015, after receiving stakeholder comments, DHCS instructed laboratories to submit 2014 payment data by March 27, 2015,
which DHCS will use (except for data on payment amounts exceeding 80% of Medicare reimbursement) to establish new rates
effective July 1, 2015, to which DHCS intends to apply the 10% payment reduction referenced in Assembly Bill No. 97. While
the Company continues to dispute this methodology, taken together, these changes are not expected to have a material impact on
the Company's consolidated revenues or results of operations.
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 the false claims acts
of 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's Motion to Dismiss was granted in October 2014. The Company intends to vigorously
defend the lawsuit should it proceed further.
In addition, the Company has received various 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 to
Michigan Medicaid. In June 2010, the Company received a subpoena from the State of Florida Office of the Attorney General
requesting documents related to its billing to Florida Medicaid. In October 2013, the Company received a civil investigative
demand from the State of Texas Office of the Attorney General requesting documents related to its billing to Texas Medicaid. The
Company is cooperating with these requests.
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.
On May 2, 2013, the Company was served with a False Claims Act lawsuit, State of Georgia ex rel. Hunter Laboratories, LLC
and Chris Riedel v. Quest Diagnostics Incorporated, et al., filed in the State Court of Fulton County, Georgia. The lawsuit, filed
by a competitor laboratory, alleges that the Company overcharged Georgia's Medicaid program. The case has been removed to
the United States District Court for the Northern District of Georgia. 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. The government filed a notice declining
to intervene in the case. On March 14, 2014, the Company's Motion to Dismiss was granted. The Plaintiffs' motion seeking leave
to replead their complaint was granted. The Company's Motion to Dismiss the First Amended Complaint is pending. The Company
will vigorously defend the lawsuit.
On August 19, 2013, the Company was served with a False Claims Act lawsuit, Commonwealth of Virginia ex rel. Hunter
Laboratories, LLC and Chris Riedel v. Quest Diagnostics Incorporated, et al., filed in the Circuit Court of Fairfax County,
Virginia. The lawsuit, filed by a competitor laboratory, alleged that the Company overcharged Virginia’s Medicaid program.
The case was removed to the United States District Court for the Eastern District of Virginia. The lawsuit sought actual and
treble damages and civil penalties for each alleged false claim, as well as recovery of costs, attorney's fees, and legal expenses.
The government filed a notice declining to intervene in the case. The Company's Motion to Dismiss was granted and the