Quest Diagnostics 2015 Annual Report Download - page 61

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Substantially all of the accounts receivable due from healthcare insurers represent amounts billed under negotiated
fee-for-service arrangements. Collection of such receivables is normally a function of providing complete and correct billing
information to the healthcare insurers within the various filing deadlines and typically occurs within 30 to 60 days of billing.
Provided we have billed healthcare insurers accurately with complete information prior to the established filing deadline, there
has historically been little to no collection risk. If there has been a delay in billing, we determine if the amounts in question
will likely go past the filing deadline, and if so, we will reserve accordingly for the billing.
Approximately 4% of our DIS net revenues for the year ended December 31, 2015 are reimbursed under capitated
payment arrangements, in which case the healthcare insurers typically reimburse us in the same month services are performed,
essentially giving rise to no outstanding accounts receivable at month-end. If any capitated payments are not received on a
timely basis, we determine the cause and make a separate determination as to whether or not the collection of the amount from
the healthcare insurer is at risk and, if so, would reserve accordingly.
Government payers
Payments for diagnostic information services made by the government are based on fee schedules set by governmental
authorities. Collection of such receivables is normally a function of providing the complete and correct billing information
within the various filing deadlines. Collection typically occurs within 30 days of billing. Our processes for billing, collecting
and estimating uncollectible amounts for receivables due from government payers, as well as the risk of non-collection, are
similar to those for healthcare insurers under negotiated fee-for-service arrangements.
Client payers
Client payers include physicians, hospitals, ACOs, IDNs, employers, other commercial laboratories and institutions
for which services are performed on a wholesale basis, and are billed based on a negotiated fee schedule. Credit risk and
ability to pay are more of a consideration for these payers than healthcare insurers and government payers. Collection typically
occurs within 60 to 90 days of billing. In addition to our standard approach to establishing allowances for doubtful accounts,
our approach to client payer receivables also considers specific account reviews, historical collection experience and other
factors.
Patients
Patients are billed based on established patient fee schedules, subject to any limitations on fees negotiated with
healthcare insurers or physicians on behalf of their patients. Collection of receivables due from patients is subject to credit risk
and ability of the patients to pay. In addition to our standard approach to establishing allowances for doubtful accounts, our
approach to patient receivables also considers historical collection experience and other factors. Patient receivables are
generally fully reserved for when the related billing reaches 210 days outstanding. Balances are automatically written off when
they are sent to collection agencies. Reserves are adjusted for estimated recoveries of amounts sent to collection agencies
based on historical collection experience, which is regularly monitored.
Reserves for general and professional liability claims
As a general matter, providers of diagnostic information services may be subject to lawsuits alleging negligence or
other similar legal claims. These suits could involve claims for substantial damages. Any professional liability litigation could
also have an adverse impact on our client base and reputation. We maintain various liability insurance coverages for claims
that could result from providing, or failing to provide, diagnostic information services, including inaccurate testing results, and
other exposures. Our insurance coverage limits our maximum exposure on individual claims; however, we are essentially self-
insured for a significant portion of these claims. While the basis for claims reserves is actuarially determined losses based upon
our historical and projected loss experience, the process of analyzing, assessing and establishing reserve estimates relative to
these types of claims involves a high degree of judgment. Although we believe that our present reserves and insurance
coverage are sufficient to cover currently estimated exposures, it is possible that we may incur liabilities in excess of our
recorded reserves or insurance coverage. Changes in the facts and circumstances associated with claims could have a material
impact on our results of operations (principally costs of services), cash flows and financial condition in the period that reserve
estimates are adjusted or paid.
QUEST DIAGNOSTICS 2015 ANNUAL REPORT ON FORM 10-K