XML 38 R24.htm IDEA: XBRL DOCUMENT v3.22.4
COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 31, 2022
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES COMMITMENTS AND CONTINGENCIES
Leases
The components of lease expense were as follows:
Year Ended December 31,
(In thousands)202220212020
Finance lease cost
Amortization of right-of-use assets$4,612 $5,731 $1,935 
Interest on lease liabilities808 1,018 383 
Operating lease cost36,291 31,730 22,551 
Short-term lease cost476 628 356 
Variable lease cost7,985 5,212 2,703 
Total lease Cost$50,172 $44,319 $27,928 
Supplemental disclosure of cash flow information related to the Company's cash and non-cash activities with its leases are as follows:
Year Ended December 31,
(In thousands)202220212020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$33,448$27,461$17,531
Operating cash flows from finance leases699938381
Finance cash flows from finance leases4,3455,2901,756
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities (1)24,57274,36913,261
Right-of-use assets obtained in exchange for new finance lease liabilities11,2765,46020,349
Weighted-average remaining lease term - operating leases (in years)7.438.338.75
Weighted-average remaining lease term - finance leases (in years)3.272.953.68
Weighted-average discount rate - operating leases6.37 %6.11 %6.80 %
Weighted-average discount rate - finance leases6.60 %5.36 %5.67 %
_________________________________
(1)    This includes an immaterial amount of right-of-use assets acquired as part of the business combinations described in Note 18 for the year ended December 31, 2022, and $39.6 million for the year ended December 31, 2021.
As of December 31, 2022 and 2021, the Company’s right-of-use assets from operating leases are $167.0 million and $174.2 million, respectively, which are reported in operating lease right-of-use assets in the Company’s consolidated balance sheets. As of December 31, 2022, the Company has outstanding operating lease obligations of $210.8 million, of which $28.4 million is reported in operating lease liabilities, current portion and $182.4 million is reported in operating lease liabilities, less current portion in the Company’s consolidated balance sheets. As of December 31, 2021, the Company had outstanding operating lease obligations of $201.9 million, of which $19.7 million is reported in operating lease liabilities, current portion and $182.2 million is reported in operating lease liabilities, less current portion in the Company’s consolidated balance sheets.
As of December 31, 2022 and 2021, the Company’s right-of-use assets from finance leases are $10.2 million and $18.2 million, respectively, which are reported in other long-term assets, net in the Company’s consolidated balance sheets. As of December 31, 2022, the Company has outstanding finance lease obligations of $10.6 million, of which $3.2 million is reported in other current liabilities and $7.4 million is reported in other long-term liabilities in the Company’s consolidated balance sheets. As of December 31, 2021, the Company had outstanding finance lease obligations of $18.7 million, of which $6.2 million is reported in other current liabilities and $12.5 million is reported in other long-term liabilities in the Company’s consolidated balance sheets.
On June 1, 2022, certain of the Company’s vehicle leases were amended. The Company determined that this amendment was a lease modification, effective June 1, 2022. Under the lease modification guidance within ASC 842, the Company reassessed the lease classification and remeasured the corresponding right-of-use assets and lease liabilities. The Company determined that a portion of the modified leases are to be accounted for as operating leases, and therefore derecognized the previous finance lease right-of-use asset of $10.3 million and the related finance lease liability of $10.8 million, and recognized an operating lease right-of-use asset of $8.1 million and the related operating lease liability of $8.6 million.
Maturities of operating lease liabilities on an annual basis as of December 31, 2022 were as follows:
(In thousands)
2023$38,321 
202439,122 
202534,952 
202633,322 
202732,528 
Thereafter89,098 
Total minimum lease payments267,343 
Imputed interest(56,578)
Total$210,765 
Maturities of finance lease liabilities on an annual basis as of December 31, 2022 were as follows (amounts in thousands):
(In thousands)
2023$3,692
20243,632
20253,111
20261,278
202716
Thereafter—
Total minimum lease payments11,729
Imputed interest(1,150)
Total$10,579
Legal Matters
The Company records reserves and accrues costs for certain legal proceedings and regulatory matters to the extent that it determines an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. While such reserves and accrued costs reflect the Company’s best estimate of the probable loss for such matters, the recorded amounts may differ materially from the actual amount of any such losses. In some cases, no estimate of the possible loss or range of loss in excess of amounts accrued, if any, can be made because of the inherently unpredictable nature of legal and regulatory proceedings, which may be exacerbated by various factors, including but not limited to, they may involve indeterminate claims for monetary damages or may involve fines, penalties or punitive damages; present novel legal theories or legal uncertainties; involve disputed facts; represent a shift in regulatory policy; involve a large number of parties, claimants or regulatory bodies; are in the early stages of the proceedings; involve a number of separate proceedings and/or a wide range of potential outcomes; or result in a change of business practices.
As of the date of this Annual Report on Form 10-K, amounts accrued for legal proceedings and regulatory matters were not material except for the amounts accrued related to the Medicare Date of Service Rule Investigation discussed below. However, it is possible that in a particular quarter or annual period the Company’s financial condition, results of operations, cash flow and/or liquidity could be materially adversely affected by an ultimate unfavorable resolution of, or development in, legal and/or regulatory proceedings, including as described below. Except for the proceedings discussed below, the Company believes that the ultimate outcome of any of the regulatory and legal proceedings that are currently pending against it should not have a material adverse effect on financial condition, results of operations, cash flow or liquidity.
The Company is currently responding to civil investigative demands and administrative subpoenas issued pursuant to the Health Insurance Portability and Accountability Act of 1996 by the United States Department of Justice (“DOJ”) concerning Genomic Health’s compliance with the Medicare Date of Service billing regulations (the “DOS Rule Investigation”). The Company has been cooperating with these inquiries and has produced documents in response thereto.
During the second quarter of 2021, as part of ongoing discussions between the DOJ and the Company regarding the DOS Rule Investigation, the DOJ presented an initial estimate of civil damages in the amount of $48.2 million relating to alleged non-compliance with the Medicare Date of Service billing regulations from 2007 to 2020. The initial civil damages estimate did not include potential treble damages, civil or criminal penalties or other remedies that the DOJ could seek against the Company. In December 2021, the DOJ presented a total adjusted demand of $53.8 million for civil damages, which includes a multiplier and penalties. On January 19, 2023, the Company was informed that the DOJ has closed its criminal investigation without taking any action. Based on the Company’s review and analysis of the DOJ presentation, ongoing discussions held with the DOJ, the civil damages estimate, and range of potential exposure, the Company recorded an accrual of approximately $10 million as of December 31, 2022.
As noted above, litigation outcomes are difficult to predict, and the estimation of probable losses requires an analysis of multiple possible outcomes that often depend on judgments about potential actions by third parties. Accordingly, the recorded accrual of approximately $10 million as of December 31, 2022 is based on several factors, considerations, and judgments, and the ultimate resolution of this matter could result in a material loss in excess of the recorded accrual.
On June 24, 2019, Niles Rosen M.D. filed a sealed ex parte qui tam lawsuit against the Company in the United States District Court for the Middle District of Florida, that alleged a violation of the Federal Anti-Kickback Statute and False Claims Act for offering gift cards to patients in exchange for returning the Cologuard screening test (the “Qui Tam Suit”). Dr. Rosen seeks on behalf of the U.S. government and himself an award of civil penalties, treble damages and fees and costs. On February 25, 2020, the Company received a civil investigative demand by the DOJ related to the Company’s gift card program. The Company produced documents in response thereto. On March 25, 2021, the DOJ filed a notice of its election to decline intervention in the Qui Tam Suit. This election does not prevent Dr. Rosen from continuing the Qui Tam Suit. On April 12, 2021, Dr. Rosen filed an amended complaint against the Company, alleging violations of the Federal Anti-Kickback Statute and False Claims Act. The Company first learned of the Qui Tam Suit and the DOJ’s election to decline intervention in July 2021. The Company intends to vigorously defend itself against Dr. Rosen's claims and seek, among other things, the Company’s attorneys' fees and costs incurred in defending this action. Although the Company denies Dr. Rosen's allegations and believes that it has meritorious defenses to his False Claims Act claims, neither the outcome of the litigation nor can a reasonable estimate or an estimated range of loss associated with the litigation be determined at this time.
Adverse outcomes from the DOS Rule Investigation and the Qui Tam Suit could include the Company being required to pay treble damages, incur civil and criminal penalties, paying attorneys’ fees, entering into a corporate integrity agreement, being excluded from participation in government healthcare programs, including Medicare and Medicaid, and other adverse actions that could materially affect the Company’s business, financial condition, and results of operation.