Community Health Systems 2015 Annual Report Download - page 77

Because of the many variables involved, including clarifications and modifications resulting from the rule-
making process, legislative efforts to repeal or modify the law, future 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, budgetary issues at federal and state levels, and the potential for delays in the
implementation of the Reform Legislation, it is difficult to predict the ultimate effect of the Reform Legislation.
We may not be able to fully realize the positive impact the Reform Legislation may otherwise 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.
Payment under the Medicare program for physician services, which is based upon the Medicare Physician Fee
Schedule, or MPFS, changed in April 2015 with the enactment of the Medicare Access and CHIP
Reauthorization Act of 2015, or MACRA. The law effectively eliminated a payment reduction that was
scheduled for physicians and other practitioners who treat Medicare patients. MACRA provides for a 0.5%
update to the MPFS for each calendar year through 2019. In addition, MACRA requires the establishment of the
Merit-Based Incentive Payment System, or MIPS, beginning in 2019, under which physicians will receive
performance-based payment incentives or payment reductions based on their performance with respect to clinical
quality, resource use, clinical improvement activities, and meaningful use of electronic health records. MIPS will
consolidate certain existing physician incentive programs, and also requires CMS to provide, beginning in 2019,
incentive payments for physicians and other eligible professionals that participate in alternative payment models,
such as ACOs. In addition, MACRA extended the Medicare Inpatient Low Volume payment and Medicare
Dependent Hospital programs to qualifying hospitals through September 30, 2017. If additional legislation is not
passed to extend these Medicare hospital payment programs, we could experience a reduction in future
reimbursement.
The federal government has implemented a number of regulations and programs designed to promote the use
of electronic health records, or EHR, technology and pursuant to the Health Information Technology for
Economic and Clinical Health Act, or HITECH, established requirements for a Medicare and Medicaid incentive
payments program for eligible hospitals and professionals that adopt and meaningfully use certified EHR
technology. These payments are intended to incentivize the meaningful use of EHR. Our hospital facilities have
been implementing EHR technology on a facility-by-facility basis since 2011. We recognize incentive
reimbursement related to the Medicare or Medicaid incentives as we are able to implement the certified EHR
technology and meet the defined “meaningful use criteria,” and information from completed cost report periods
is available from which to calculate the incentive reimbursement. The timing of recognizing incentive
reimbursement does not correlate with the timing of recognizing operating expenses and incurring capital costs in
connection with the implementation of EHR technology which may result in material period-to-period changes in
our future results of operations.
As of October 1, 2014, eligible hospitals and, as of January 1, 2015, professionals that have not demonstrated
meaningful use of certified EHR technology and have not applied and qualified for a hardship exception are
subject to penalties. Eligible hospitals are subject to a reduced market basket update to the inpatient prospective
payment system standardized amount as of 2015 and for each subsequent fiscal year. Eligible professionals are
subject to a 1% per year cumulative reduction applied to the Medicare physician fee schedule amount for covered
professional services, subject to a cap of 5%.
Although we believe that our hospital facilities were in compliance with the meaningful use standards during
2015, there can be no assurance that all of our facilities will remain in compliance and therefore not be subject to
the HITECH penalty provisions. We recognized approximately $160 million, $259 million and $162 million
during the years ended December 31, 2015, 2014 and 2013, respectively, for HITECH incentive reimbursements
from Medicare and Medicaid related to certain of our hospitals and for certain of our employed physicians, which
are presented as a reduction of operating expenses.
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