Quest Diagnostics 2007 Annual Report Download - page 28

The HIPAA security regulations establish requirements for safeguarding electronic patient information. We
have implemented policies and standards to comply with these regulations. The HIPAA electronic transactions
regulations establish uniform standards for electronic transactions and code sets, including the electronic
transactions and code sets used for billing claims, remittance advices, enrollment and eligibility. We have
completed conversion to the required standard format for our electronic fee-for-service claim transactions and our
electronic fee-for-service remittance transactions.
HIPAA regulations on adoption of national provider identifiers require healthcare providers to adopt new,
unique identifiers for reporting on claims transactions. We are completing compliance with these regulations by
obtaining the required information from our physician clients, and expect that the process will continue through
2008.
Compliance. We seek to conduct our business in compliance with all applicable laws and regulations. Many
of the laws and regulations applicable to us, however, including those relating to billing and reimbursement of
tests and those relating to relationships with physicians and hospitals, are vague or indefinite and have not been
interpreted by the courts. They may be interpreted or applied by a prosecutorial, regulatory or judicial authority
in a manner that could require us to make changes in our operations, including our pricing and/or billing
practices. The applicability or interpretation of laws and regulations also may not be clear in light of emerging
changes in clinical testing science and healthcare technology. Such occurrences, regardless of their outcome,
could, among other things:
•increase our operating costs including, but not limited to, those costs associated with performing clinical
or anatomic tests or manufacturing or distributing products, and administrative requirements related to
billing;
•decrease the amount of reimbursement related to testing services performed;
•damage our reputation; or
•adversely affect important business relationships with third parties.
If we fail to comply with applicable laws and regulations, we could suffer civil and criminal penalties, fines,
exclusion from participation in governmental healthcare programs and the loss of various licenses, certificates and
authorizations necessary to operate our business, as well as incur additional liabilities from third party claims, all
of which could have a material adverse effect on our business. Certain federal and state statues, regulations and
other laws, including the qui tam provisions of the federal False Claims Act, allow private individuals to bring
lawsuits against healthcare companies on behalf of government payers, private payers and/or patients alleging
inappropriate billing practices.
The federal or state governments may bring claims based on theories as to our current practices that we
believe are lawful. The federal government has substantial leverage in negotiating settlements since the amount of
potential damages far exceeds the rates at which we are reimbursed, and the government has the remedy of
excluding a non-compliant provider from participation in the Medicare and Medicaid programs, which represented
approximately 17% of our net revenues during 2007. We believe that, based on our experience with government
settlements and public announcements by various government officials, the federal government continues to
strengthen its position on health fraud. In addition, legislative provisions relating to health fraud and abuse give
federal enforcement personnel substantially increased funding, powers and remedies to pursue suspected cases of
fraud and abuse.
We have a long-standing and well-established compliance program. The Quality, Safety & Compliance
Committee of our Board of Directors oversees our compliance program and requires periodic management reports
regarding our compliance program. Our program emphasizes the development of training programs intended to
ensure the strict implementation and observance of all applicable laws, regulations and Company policies.
Further, we conduct in-depth reviews of procedures and facilities to assure regulatory compliance throughout our
operations. We conduct annual training of our employees on these compliance policies and procedures.
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the Securities and
Exchange Commission (SEC). You may read and copy any document that we file with the SEC at the SEC’s
public reference room at 100 F Street, NE, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for
information regarding the public reference room. The SEC maintains an internet site that contains annual,
quarterly and current reports, proxy and information statements and other information that issuers (including
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