HCA Holdings 2011 Annual Report Download - page 23

new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory
agencies under a CON program. Such laws generally require the reviewing state agency to determine the public
need for additional or expanded health care facilities and services. Failure to provide required notifications or
obtain necessary state approvals can result in the inability to expand facilities, complete an acquisition or change
ownership or other penalties.
State Rate Review
Some states have adopted legislation mandating rate or budget review for hospitals or have adopted taxes on
hospital revenues, assessments or licensure fees to fund indigent health care within the state. In the aggregate,
indigent tax provisions have not materially, adversely affected our results of operations. Although we do not
currently operate facilities in states that mandate rate or budget reviews, we cannot predict whether we will
operate in such states in the future, or whether the states in which we currently operate may adopt legislation
mandating such reviews.
Federal Health Care Program Regulations
Participation in any federal health care program, including the Medicare and Medicaid programs, is heavily
regulated by statute and regulation. If a hospital fails to substantially comply with the numerous conditions of
participation in the Medicare and Medicaid programs or performs certain prohibited acts, the hospital’s
participation in the federal health care programs may be terminated, or civil and/or criminal penalties may be
imposed.
Anti-kickback Statute
A section of the Social Security Act known as the “Anti-kickback Statute” prohibits providers and others
from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating
referrals or orders for services or items covered by a federal health care program. Courts have interpreted this
statute broadly and held that there is a violation of the Anti-kickback Statute if just one purpose of the
remuneration is to generate referrals, even if there are other lawful purposes. Furthermore, the Health Reform
Law provides that knowledge of the law or the intent to violate the law is not required. Violations of the Anti-
kickback Statute may be punished by a criminal fine of up to $25,000 for each violation or imprisonment, civil
money penalties of up to $50,000 per violation and damages of up to three times the total amount of the
remuneration and/or exclusion from participation in federal health care programs, including Medicare and
Medicaid. The Health Reform Law provides that submission of a claim for services or items generated in
violation of the Anti-kickback Statute constitutes a false or fraudulent claim and may be subject to additional
penalties under the federal False Claims Act (“FCA”).
The OIG, among other regulatory agencies, is responsible for identifying and eliminating fraud, abuse and
waste. The OIG carries out this mission through a nationwide program of audits, investigations and inspections.
The OIG provides guidance to the industry through various methods including advisory opinions and “Special
Fraud Alerts.” These Special Fraud Alerts do not have the force of law, but identify features of arrangements or
transactions that the government believes may cause the arrangements or transactions to violate the Anti-
kickback Statute or other federal health care laws. The OIG has identified several incentive arrangements that
constitute suspect practices, including: (a) payment of any incentive by a hospital each time a physician refers a
patient to the hospital, (b) the use of free or significantly discounted office space or equipment in facilities
usually located close to the hospital, (c) provision of free or significantly discounted billing, nursing or other staff
services, (d) free training for a physician’s office staff in areas such as management techniques and laboratory
techniques, (e) guarantees which provide, if the physician’s income fails to reach a predetermined level, the
hospital will pay any portion of the remainder, (f) low-interest or interest-free loans, or loans which may be
forgiven if a physician refers patients to the hospital, (g) payment of the costs of a physician’s travel and
expenses for conferences, (h) coverage on the hospital’s group health insurance plans at an inappropriately low
cost to the physician, (i) payment for services (which may include consultations at the hospital) which require
few, if any, substantive duties by the physician, (j) purchasing goods or services from physicians at prices in
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