LabCorp 2015 Annual Report Download - page 113

Index
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from Medi-Cal's otherwise applicable maximum reimbursement rate from November 1, 2011, through October 31, 2012. In June of 2012, the California
legislature enacted Assembly Bill No. 1494, Section 9 of which directed the Department of Healthcare Services (DHCS) to establish new reimbursement rates
for Medi-Cal clinical laboratory services that will be based on payments made to California clinical laboratories for similar services by other third-party
payers. With stakeholder input, DHCS established data elements and a format for laboratories to report payment data from comparable third-party payers.
Laboratories reported payment data to DHCS in the summer of 2013. On March 28, 2014, Assembly Bill No. 1124 extended the implementation deadline of
new regulations until June 30, 2016. Assembly Bill No. 1494 provides that until the new rates are set through this process, Medi-Cal payments for clinical
laboratory services will be reduced (in addition to a 10.0% payment reduction imposed by Assembly Bill No. 97 in 2011) by “up to 10 percent” for tests with
dates of service on or after July 1, 2012, with a cap on payments set at 80.0% of the lowest maximum allowance established under the Medicare program. In
April 2015, CMS approved a 10.0% payment reduction under Assembly Bill No. 1494. This cut, which applied retroactively to the period of July 1, 2012
through June 30, 2015, is being implemented through recoupments from weekly reimbursements at a rate of 5% of the amount owed until paid in full. 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, DHCS 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 from the new rate calculations data on payments from comparable third-party payers exceeding 80.0% of
Medicare reimbursement amounts and its proposal to impose the 10.0% 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 used
(except for data on payment amounts exceeding 80.0% of Medicare reimbursement) to establish new rates. DHCS obtained CMS approval of a state plan
amendment adopting the new rate methodology and rates effective July 1, 2015, and posted the new rates on the DHCS website. DHCS intends to apply the
10.0% payment reduction referenced in Assembly Bill No. 97 to the new rates. Due to an initial implementation delay, the new rates were to be implemented
prospectively until November 1, 2015. A recoupment to account for differences between the new rates and the rates paid for the period of July 1, 2015
through October 31, 2015 was to be implemented through recoupments applied to each weekly reimbursement. Therefore, until the recoupment was paid in
full, the Company was not to receive a weekly reimbursement. All retroactive recoupments were expected to be completed by February 2016. However, due
to further implementation delays, the new rates have not yet been implemented, and no recoupment has yet occurred. DHCS has instructed laboratories to
submit 2015 payment data by March 18, 2016, which will be used to establish new rates effective July 1, 2016. DHCS has not provided further direction
regarding possible recoupments. 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 U.S. 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 and Plaintiff was granted the right to replead. On January 11, 2016, Plaintiff filed a motion
requesting leave to file an amended complaint under seal and to vacate the briefing schedule for the Company's motion to dismiss, while the government
reviews the amended complaint. The Court granted the motion and vacated the briefing dates. Plaintiff then filed an amended complaint under seal. The
Company will vigorously defend the lawsuit.
In addition, the Company has received various 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 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
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