HCA Holdings 2011 Annual Report Download - page 34

Medicare program. HHS has significant discretion to determine key elements of the program. In 2011, CMS, the
OIG and certain other federal agencies released a series of rules and guidance further defining and implementing
the ACO program. These rules and guidance provide for two different ACO tracks, the first of which allows
ACOs to share only in the savings under the MSSP. The second track requires ACOs to share in any savings or
losses under the MSSP but offers ACOs a greater share of any savings realized under the MSSP. As authorized
by the Health Reform Law, the rules and guidance also provide for certain waivers from fraud and abuse laws for
ACOs. In addition, beginning January 1, 2012, CMS has authorized 32 organizations to participate in the
“Pioneer” ACO program, which is similar to, but separate from, the ACOs created under the MSSP regulations.
Bundled Payment Pilot Programs. The Health Reform Law created the Center for Medicare and Medicaid
Innovation with responsibility for establishing demonstration projects and other initiatives in order to identify,
develop, test and encourage the adoption of new methods of delivering and paying for healthcare that create
savings under the Medicare and Medicaid programs while improving quality of care. In addition, the Health
Reform Law requires HHS to establish a five-year, voluntary national bundled payment pilot program for
Medicare services beginning no later than January 1, 2013. Under the program, providers would agree to receive
one payment for services provided to Medicare patients for certain medical conditions or episodes of care. HHS
will have the discretion to determine how the program will function. For example, HHS will determine what
medical conditions will be included in the program and the amount of the payment for each condition. In
addition, the Health Reform Law provides for a five-year bundled payment pilot program for Medicaid services.
HHS may select up to eight states to participate based on the potential to lower costs under the Medicaid program
while improving care. State programs may target particular categories of beneficiaries, selected diagnoses or
geographic regions of the state. The selected state programs will provide one payment for both hospital and
physician services provided to Medicaid patients for certain episodes of inpatient care. For both pilot programs,
HHS will determine the relationship between the programs and restrictions in certain existing laws, including the
Civil Monetary Penalty Law, the Anti-kickback Statute, the Stark Law and the HIPAA privacy, security and
transaction standard requirements. However, the Health Reform Law does not authorize HHS to waive other laws
that may impact the ability of hospitals and other eligible participants to participate in the pilot programs, such as
antitrust laws.
Ambulatory Surgery Centers. The Health Reform Law reduces reimbursement for ASCs through a
productivity adjustment to the market basket similar to the productivity adjustment for inpatient and outpatient
hospital services, beginning in federal fiscal year 2011. On November 1, 2011, CMS issued a final rule
establishing a quality reporting program for ASCs by which ASCs that fail to report on five quality measures
beginning on October 1, 2012, will receive a 2% reduction in reimbursement for calendar year 2014.
Medicare Managed Care (Medicare Advantage or “MA”). Under the MA program, the federal
government contracts with private health plans to provide inpatient and outpatient benefits to beneficiaries who
enroll in such plans. For 2012, approximately 12.8 million Medicare beneficiaries have elected to enroll in MA
plans. Effective in 2014, the Health Reform Law requires MA plans to keep annual administrative costs lower
than 15% of annual premium revenue. The Health Reform Law reduces, over a three year period starting in 2012,
premium payments to the MA plans such that CMS’ managed care per capita premium payments are, on average,
equal to traditional Medicare. In addition, the Health Reform Law implements fee payment adjustments based on
service benchmarks and quality ratings. As a result of these changes, payments to MA plans are estimated to be
reduced by $138 to $145 billion between 2010 and 2019. These reductions to MA plan premium payments may
cause some plans to raise premiums or limit benefits, which in turn might cause some Medicare beneficiaries to
terminate their MA coverage and enroll in traditional Medicare.
Specialty Hospital Limitations
Over the last decade, we have faced significant competition from hospitals that have physician ownership.
The Health Reform Law prohibits newly created physician-owned hospitals from billing for Medicare patients
referred by their physician owners. As a result, the law effectively prevents the formation of new physician-
owned hospitals after December 31, 2010. While the law grandfathers existing physician-owned hospitals, it does
not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability
to expand services.
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