HCA Holdings 2011 Annual Report Download - page 22

importance of obtaining contracts with managed care organizations varies from community to community,
depending on the market strength of such organizations.
State certificate of need (“CON”) laws, which place limitations on a hospital’s ability to expand hospital
services and facilities, make capital expenditures and otherwise make changes in operations, may also have the
effect of restricting competition. We currently operate health care facilities in a number of states with CON laws.
Before issuing a CON, these states consider the need for additional or expanded health care facilities or services.
In those states which have no CON laws or which set relatively high levels of expenditures before they become
reviewable by state authorities, competition in the form of new services, facilities and capital spending is more
prevalent. See Item 1, “Business — Regulation and Other Factors.”
We and the health care industry as a whole face the challenge of continuing to provide quality patient care
while dealing with rising costs and strong competition for patients. Changes in medical technology, existing and
future legislation, regulations and interpretations and managed care contracting for provider services by private
and government payers remain ongoing challenges.
Admissions, average lengths of stay and reimbursement amounts continue to be negatively affected by
payer-required pre-admission authorization, utilization review and payer pressure to maximize outpatient and
alternative health care delivery services for less acutely ill patients. The Health Reform Law potentially expands
the use of prepayment review by Medicare contractors by eliminating statutory restrictions on their use.
Increased competition, admission constraints and payer pressures are expected to continue. To meet these
challenges, we intend to expand and update our facilities or acquire or construct new facilities where appropriate,
to enhance the provision of a comprehensive array of outpatient services, offer market competitive pricing to
private payer groups, upgrade facilities and equipment and offer new or expanded programs and services.
Regulation and Other Factors
Licensure, Certification and Accreditation
Health care facility construction and operation are subject to numerous federal, state and local regulations
relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance
of adequate records, fire prevention, rate-setting and compliance with building codes and environmental
protection laws. Facilities are subject to periodic inspection by governmental and other authorities to assure
continued compliance with the various standards necessary for licensing and accreditation. We believe our health
care facilities are properly licensed under applicable state laws. Each of our acute care hospitals is certified for
participation in the Medicare and Medicaid programs and is accredited by The Joint Commission. If any facility
were to lose its Medicare or Medicaid certification, the facility would be unable to receive reimbursement from
federal health care programs. If any facility were to lose accreditation by The Joint Commission, the facility
would be subject to state surveys, potentially be subject to increased scrutiny by CMS and likely lose payment
from non-government payers. Management believes our facilities are in substantial compliance with current
applicable federal, state, local and independent review body regulations and standards. The requirements for
licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become
necessary for us to make changes in our facilities, equipment, personnel and services. The requirements for
licensure, certification and accreditation also include notification or approval in the event of the transfer or
change of ownership or certain other changes. Failure to provide required notifications or obtain necessary
approvals in these circumstances can result in the inability to complete an acquisition or change of ownership,
loss of licensure or other penalties.
Certificates of Need
In some states where we operate hospitals and other health care facilities, the construction or expansion of
health care facilities, the acquisition of existing facilities, the transfer or change of ownership and the addition of
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