Quest Diagnostics 2012 Annual Report Download - page 18

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laboratories have achieved International Organization for Standardization, or ISO, certification for their quality management
systems.
As part of our comprehensive quality assurance program, we utilize internal proficiency testing, extensive quality
control and rigorous process audits for our diagnostic information services. For most clinical laboratory tests, quality control
samples are processed in parallel with the analysis of patient specimens. The results of tests on these quality control samples
are monitored to identify trends, biases or imprecision in our analytical processes.
We participate in external proficiency testing and have accreditation or licenses for our clinical laboratory operations
from various regulatory agencies or accrediting organizations, such as the Centers for Medicare and Medicaid Services
(“CMS”), the College of American Pathologists (“CAP”) and certain states. All of our laboratories participate in various
external quality surveillance programs. They include, but are not limited to, proficiency testing programs administered by CAP,
as well as some state agencies. CAP is an independent, nongovernmental organization of board-certified pathologists approved
by CMS to inspect clinical laboratories to determine compliance with the standards required by CLIA. CAP offers an
accreditation program to which clinical laboratories may voluntarily subscribe. All of our major regional and esoteric
laboratories, including our facility in India, and most of our rapid response laboratories, are accredited by CAP. Accreditation
includes on-site inspections and participation in the CAP (or equivalent) proficiency testing program. Also, all of our
cytotechnologists and pathologists participate in an individual proficiency testing program.
Our diagnostic products businesses maintain extensive quality assurance programs focused on ensuring that our
products are safe and effective and that we comply with applicable regulatory requirements in the United States and other
countries. They are regulated by the FDA and are required to be in compliance with the Quality Systems Regulations, 21 CFR
part 820, and with applicable standards outside the United States. In addition, our manufacturing sites are certified in
accordance with ISO 13485: 2003 standards. We endeavor to design and manufacture our diagnostics products in compliance
with Quality Systems Regulations.
Intellectual Property Rights. We own significant intellectual property, including patents, patent applications,
technology, trade secrets, know-how, copyrights and trademarks in the United States and other countries. From time to time, we
also license U.S. and non-U.S. patents, patent applications, technology, trade secrets, know-how, copyrights or trademarks
owned by others. In the aggregate, these intellectual property assets and licenses are of material importance to our business. We
believe, however, that no single patent, technology, trademark, intellectual property asset or license is material to our business
as a whole.
Our approach is to manage our intellectual property assets to safeguard them and to maximize their value to our
enterprise. We actively defend our important intellectual property assets and pursue protection of our products, processes and
other intellectual property where possible.
Our success in remaining a leading innovator in the diagnostic information services industry by continuing to
introduce new tests, technology and services will depend, in part, on our ability to license new and improved technologies on
favorable terms. Other companies or individuals, including our competitors, may obtain patents or other property rights on tests
or processes that we may be performing, particularly in such emerging areas as gene-based testing and other specialty testing,
that could prevent, limit or interfere with our ability to develop, perform or sell our tests or operate our business.
Employees. At December 31, 2012, we employed approximately 41,000 people. This total excludes employees of the
joint ventures where we do not have a majority ownership interest. We have no collective bargaining agreements with unions
covering employees in the United States, and we believe that our overall relations with our employees are good.
BILLING AND REIMBURSEMENT
Billing. We generally bill for diagnostic information services on a fee-for-service basis under one of two types of fee
schedules. These fees may be negotiated or discounted. The types of fee schedules are:
• “Client” fees charged to physicians, hospitals, and institutions for which services are performed on a wholesale
basis and which are billed on a monthly basis.
• “Patient” fees charged to individual patients and certain third-party payers on a claim-by-claim basis.
Billing for diagnostic information services is very complicated, and we maintain compliance policies and procedures
for our billing. Patients, insurance companies, Medicare, Medicaid, physicians, hospitals, IDNs and employer groups all have
different billing requirements. Some billing arrangements require us to bill multiple payers, and there are several other factors