Community Health Systems 2015 Annual Report Download - page 49

The Reform Legislation also makes a number of changes to Medicare and Medicaid that could adversely
impact the reimbursement our facilities receive under these programs, such as reductions to the Medicare annual
market basket update through federal fiscal year 2019, a productivity offset to the Medicare market basket
update, and a reduction to the Medicare and Medicaid disproportionate share payments. Despite these provisions,
we believe that the Reform Legislation had a positive impact on net operating revenues and income from
continuing operations during 2014 and 2015 as the result of the expansion of private sector and Medicaid
coverage that has already occurred from the Reform Legislation. We believe that the net impact of the Reform
Legislation on our net operating revenues will continue to be positive, but there can be no assurances that such
impact will continue to remain positive in the future.
Also included in the Reform Legislation are provisions aimed at reducing fraud, waste and abuse in the
healthcare industry. These provisions allocate significant additional resources to federal enforcement agencies
and expand the use of private contractors to recover potentially inappropriate Medicare and Medicaid payments.
The Reform Legislation amends several existing federal laws, including the anti-kickback statute and the FCA,
making it easier for government agencies and private plaintiffs to prevail in lawsuits brought against healthcare
providers. These amendments also make it easier for potentially severe fines and penalties to be imposed on
healthcare providers accused of violating applicable laws and regulations.
Because of the many variables involved, including clarifications and modifications resulting from the rule-
making process, legislative efforts to repeal or modify the law, judicial interpretations resulting from court
challenges to its constitutionality and interpretation, the development of agency guidance, whether and how
many states ultimately decide to expand Medicaid coverage, the number of uninsured who elect to purchase
health insurance coverage, uncertainty regarding the long-term viability of the health insurance exchanges,
budgetary issues at federal and state levels, and the potential for delays in the implementation of the Reform
Legislation, we may not be able to realize the positive impact the Reform Legislation may have on our business,
results of operations, cash flow, capital resources and liquidity. Furthermore, we cannot predict whether we will
be able to modify certain aspects of our operations to offset any potential adverse consequences from the Reform
Legislation or other federal or state health reform initiatives.
If reimbursement rates paid by federal or state healthcare programs or commercial payors are reduced, if we
are unable to maintain favorable contract terms with payors or comply with our payor contract obligations, if
insured individuals move to insurance plans with greater coverage exclusions or narrower networks, or if
insurance coverage is otherwise restricted, our net operating revenues may decline.
In 2015, 35.3% of our operating revenues, net of contractual allowances and discounts (but before the
provision for bad debts), came from the Medicare and Medicaid programs. Federal healthcare expenditures
continue to increase and state governments continue to face budgetary shortfalls as a result of current economic
conditions and increasing Medicaid enrollment. As a result of such events and also pursuant to the Reform
Legislation, federal and state governments have made, and continue to make, significant changes in the Medicare
and Medicaid programs, including reductions in reimbursement levels and supplemental payment programs like
disproportionate share payments. Some of these changes have decreased, or could decrease, the amount of money
we receive for our services relating to these programs.
In addition, government and commercial payors as well as other third parties from whom we receive payment
for our services attempt to control healthcare costs by, for example, requiring hospitals to discount payments for
their services in exchange for exclusive or preferred participation in their benefit plans, restricting coverage
through utilization review, reducing coverage of inpatient services and shifting care to outpatient settings,
requiring prior authorizations, and implementing alternative payment models. The ability of commercial payors
to control healthcare costs using these measures may be enhanced by the increasing consolidation of insurance
and managed care companies.
In 2015, 52.4% of our operating revenues, net of contractual allowances and discounts (but before the
provision for bad debts), came from commercial payors. Our contracts with payors require us to comply with a
36