Dr. Grodman further noted: "This past year has been tumultuous with regards to collections given the changes that have been implemented. We believe that we have been quite successful over the past few years in showing improvement in this area. The current quarter is an exception to that trend, but we believe that the exception is coming under control and we can expect to get back on track in the near term future. Since last year, we have had to deal with molecular coding changes from both Medicare and Medicaid, delays in payment related to site of service between physician office and hospital due to the end of the "grandfather" provision, as well as changes emanating from the elimination of the Blue Card program. Over the last quarter alone, there have been some delays in billing under new payer contracts while waiting for all their systems to be operational. That being said, we currently have national or subnational contracts with the five largest commercial insurers and an impressive list of participating Blue plans. We believe that the total number of lives that we cover may well rival any laboratory in the country."
Dr. Grodman continued: "Over the past quarter, the greatest increase in our DSO, almost 3 days, was by our own choice and is attributable to an issue with Horizon Blue Cross Blue Shield of New Jersey (Horizon) pursuant to which we have elected temporarily to suspend billing. Over the past several months, we have come to believe that we should have been paid for certain services rendered to Horizon under our agreement to service their PPO subscribers. We believe Horizon has mischaracterized these services as managed care and therefore not payable under our PPO agreement. Based on Horizon's characterization of these services, we had not previously billed or recognized revenues for these services. After BioReference began to bill and was initially paid by Horizon for a fraction of these previously unbilled claims, Horizon ceased paying for these disputed services and sought to recoup those payments from monies due to us for unrelated and undisputed services rendered. As a result, we suspended billing Horizon for most services while this dispute is ongoing. Directly and through counsel we are attempting to settle these issues; however, we are uncertain as to whether this matter will be resolved amicably or must be litigated. "