Quest Diagnostics 2011 Annual Report Download - page 24

Drug Testing; Controlled Substances. All U.S. laboratories that perform drug testing for certain public
sector employees and employees of certain federally regulated businesses are required to be certified as meeting
the detailed performance and quality standards of the Substance Abuse and Mental Health Services
Administration. To obtain access to controlled substances used to perform drugs of abuse testing in the United
States, laboratories must be licensed by the Drug Enforcement Administration. All of our laboratories that
perform such testing or that utilize controlled substances are so certified or so licensed, respectively.
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 many of those relating to billing, reimbursement
of tests and relationships with physicians and hospitals, are vague or indefinite or 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 pathology 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; and/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 statutes, 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 and state governments have 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.
Reimbursement from traditional Medicare and Medicaid programs represented approximately 18% of our net
revenues during 2011. We believe that, based on our experience with settlements and public announcements by
various government officials, the federal and state governments continue to strengthen their enforcement efforts
against healthcare fraud. In addition, legislative provisions relating to healthcare fraud and abuse provide
government enforcement personnel substantially increased funding, powers, penalties 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 includes detailed policies and procedures and 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 (the “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 Quest Diagnostics) file electronically with the SEC. Our electronic SEC filings are available to the
public at the SEC’s internet site, www.sec.gov.
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