HCA Holdings 2011 Annual Report Download - page 35

Program Integrity and Fraud and Abuse
The Health Reform Law makes several significant changes to health care fraud and abuse laws, provides
additional enforcement tools to the government, increases cooperation between agencies by establishing
mechanisms for the sharing of information and enhances criminal and administrative penalties for non-
compliance. For example, the Health Reform Law: (1) provides $350 million in increased federal funding over
the next 10 years to fight health care fraud, waste and abuse; (2) expands the scope of the RAC program to
include MA plans and Medicaid; (3) authorizes HHS, in consultation with the OIG, to suspend Medicare and
Medicaid payments to a provider of services or a supplier “pending an investigation of a credible allegation of
fraud;” (4) provides Medicare contractors with additional flexibility to conduct random prepayment reviews; and
(5) tightens up the rules for returning overpayments made by governmental health programs and expands FCA
liability to include failure to timely repay identified overpayments.
Impact of Health Reform Law on the Company
The expansion of health insurance coverage under the Health Reform Law may result in a material increase
in the number of patients using our facilities who have either private or public program coverage. In addition, a
disproportionately large percentage of the new Medicaid coverage is likely to be in states that currently have
relatively low income eligibility requirements. Two such states are Texas and Florida, where about one-half of
the Company’s licensed beds are located. We also have a significant presence in other relatively low income
eligibility states, including Georgia, Kansas, Louisiana, Missouri, Oklahoma and Virginia. Further, the Health
Reform Law provides for a value-based purchasing program, the establishment of ACOs and bundled payment
pilot programs, which will create possible sources of additional revenue.
However, it is difficult to predict the size of the potential revenue gains to the Company as a result of these
elements of the Health Reform Law, because of uncertainty surrounding a number of material factors, including
the following:
• how many previously uninsured individuals will obtain coverage as a result of the Health Reform Law
(while the CBO estimates 32 million by 2016 and 34 million by 2021, CMS estimates almost
34 million by 2019; both agencies made a number of assumptions to derive that figure, including how
many individuals will ignore substantial subsidies and decide to pay the penalty rather than obtain
health insurance and what percentage of people in the future will meet the new Medicaid income
eligibility requirements);
• what percentage of the newly insured patients will be covered under the Medicaid program and what
percentage will be covered by private health insurers;
• the extent to which states will enroll new Medicaid participants in managed care programs;
• the pace at which insurance coverage expands, including the pace of different types of coverage
expansion;
• the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and
provided to previously uninsured individuals;
• the rate paid to hospitals by private payers for newly covered individuals, including those covered
through the newly created Exchanges and those who might be covered under the Medicaid program
under contracts with the state;
• the rate paid by state governments under the Medicaid program for newly covered individuals;
• the effect of the value-based purchasing program on our hospitals’ revenues and the effects of other
quality programs;
• the percentage of individuals in the Exchanges who select the high deductible plans, since health
insurers offering those kinds of products have traditionally sought to pay lower rates to hospitals;
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