Quest Diagnostics 2013 Annual Report Download - page 21

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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, 2013, 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
that complicate billing (e.g., disparity in coverage and information requirements among various payers; and incomplete or
inaccurate billing information provided by ordering physicians). We incur additional costs as a result of our participation in
Medicare and Medicaid programs because diagnostic testing services are subject to complex, stringent and frequently
ambiguous federal and state laws and regulations, including those relating to coverage, billing and reimbursement. Changes in
laws and regulations could further complicate our billing and increase our billing expense. CMS establishes procedures and
continuously evaluates and implements changes to the reimbursement process and requirements for coverage.
As an integral part of our billing compliance program, we investigate reported failures or suspected failures to comply
with federal and state healthcare reimbursement requirements. Any Medicare or Medicaid overpayments resulting from non-
compliance are reimbursed by us. As a result of these efforts, we have periodically identified and reported overpayments,
reimbursed the payers for overpayments and taken appropriate corrective action.
We believe that most of our bad debt expense is primarily the result of missing or incorrect billing information on
requisitions and Advance Beneficiary Notices received from healthcare providers and the failure of patients to pay the portion
of the receivable that is their responsibility. Increased patient responsibility and deteriorating economic conditions may
adversely impact our bad debt expense. In general, due to the nature of our business, we perform the requested testing and
report test results regardless of whether the billing information is correct or complete. We subsequently attempt to contact the
healthcare provider or patient to obtain any missing information and to rectify incorrect billing information. Missing or
incorrect information on requisitions complicates and slows down the billing process, creates backlogs of unbilled requisitions
and generally increases the aging of accounts receivable and bad debt expense. The increased use of electronic ordering reduces
the incidence of missing or incorrect information.