HCA Holdings 2011 Annual Report Download - page 21

Competition
Generally, other hospitals in the local communities served by most of our hospitals provide services similar
to those offered by our hospitals. Additionally, in recent years the number of freestanding ASCs and diagnostic
centers (including facilities owned by physicians) in the geographic areas in which we operate has increased
significantly. As a result, most of our hospitals operate in a highly competitive environment. In some cases,
competing hospitals are more established than our hospitals. Some competing hospitals are owned by
tax-supported government agencies and many others are owned by not-for-profit entities that may be supported
by endowments, charitable contributions and/or tax revenues and are exempt from sales, property and income
taxes. Such exemptions and support are not available to our hospitals and may provide the tax supported or not-
for-profit entities an advantage in funding capital expenditures. In certain localities there are large teaching
hospitals that provide highly specialized facilities, equipment and services which may not be available at most of
our hospitals. We also face competition from specialty hospitals, some of which are physician-owned, and from
both our own and unaffiliated freestanding ASCs for market share in certain high margin services.
Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, our
psychiatric hospitals compete with both local and regional hospitals, including the psychiatric units of general,
acute care hospitals.
Our strategies are designed to ensure our hospitals are competitive. We believe our hospitals compete within
local communities on the basis of many factors, including the quality of care, ability to attract and retain quality
physicians, skilled clinical personnel and other health care professionals, location, breadth of services,
technology offered, quality and condition of the facilities and prices charged. The Health Reform Law requires
hospitals to publish annually a list of their standard charges for items and services. We have increased our focus
on operating outpatient services with improved accessibility and more convenient service for patients, and
increased predictability and efficiency for physicians.
Two of the most significant factors to the competitive position of a hospital are the number and quality of
physicians affiliated with or employed by the hospital. Although physicians may at any time terminate their
relationship with a hospital we operate, our hospitals seek to retain physicians with varied specialties on the
hospitals’ medical staffs and to attract other qualified physicians. We believe physicians refer patients to a
hospital on the basis of the quality and scope of services it renders to patients and physicians, the quality of
physicians on the medical staff, the location of the hospital and the quality of the hospital’s facilities, equipment
and employees. Accordingly, we strive to maintain and provide quality facilities, equipment, employees and
services for physicians and patients.
Another major factor in the competitive position of a hospital is our ability to negotiate service contracts
with purchasers of group health care services. Managed care plans attempt to direct and control the use of
hospital services and obtain discounts from hospitals’ established gross charges. In addition, employers and
traditional health insurers continue to attempt to contain costs through negotiations with hospitals for managed
care programs and discounts from established gross charges. Generally, hospitals compete for service contracts
with group health care services purchasers on the basis of price, market reputation, geographic location, quality
and range of services, quality of the medical staff and convenience. Our future success will depend, in part, on
our ability to retain and renew our managed care contracts and enter into new managed care contracts on
favorable terms. Other health care providers may impact our ability to enter into managed care contracts or
negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of our
competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of
managed care companies to contract with us. The trend toward consolidation among non-government payers
tends to increase their bargaining power over fee structures. In addition, as various provisions of the Health
Reform Law are implemented, including the establishment of American Health Benefit Exchanges
(“Exchanges”) and limitations on rescissions of coverage and pre-existing condition exclusions, non-government
payers may increasingly demand reduced fees or be unwilling to negotiate reimbursement increases. The
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