HCA Holdings 2011 Annual Report Download - page 44

Our hospitals face competition for patients from other hospitals and health care providers.
The health care business is highly competitive, and competition among hospitals and other health care
providers for patients has intensified in recent years. Generally, other hospitals in the local communities we serve
provide services similar to those offered by our hospitals. In addition, CMS publicizes on its Hospital Compare
website performance data related to quality measures and data on patient satisfaction surveys hospitals submit in
connection with their Medicare reimbursement. Federal law provides for the future expansion of the number of
quality measures that must be reported. Additional quality measures and future trends toward clinical
transparency may have an unanticipated impact on our competitive position and patient volumes. Further, the
Health Reform Law requires all hospitals to annually establish, update and make public a list of the hospital’s
standard charges for items and services. If any of our hospitals achieve poor results (or results that are lower than
our competitors) on these quality measures or on patient satisfaction surveys or if our standard charges are higher
than our competitors, our patient volumes could decline.
In addition, the number of freestanding specialty hospitals, surgery centers and diagnostic and imaging
centers in the geographic areas in which we operate has increased significantly. As a result, most of our hospitals
operate in a highly competitive environment. Some of the facilities that compete with our hospitals are owned by
governmental agencies or not-for-profit corporations supported by endowments, charitable contributions and/or
tax revenues and can finance capital expenditures and operations on a tax-exempt basis. Our hospitals face
competition from specialty hospitals, some of which are physician-owned, and from both our own and
unaffiliated freestanding surgery centers for market share in certain high margin services and for quality
physicians and personnel. If ambulatory surgery centers are better able to compete in this environment than our
hospitals, our hospitals may experience a decline in patient volume, and we may experience a decrease in margin,
even if those patients use our ambulatory surgery centers. In states that do not require a CON for the purchase,
construction or expansion of health care facilities or services, competition in the form of new services, facilities
and capital spending is more prevalent. Further, if our competitors are better able to attract patients, make capital
expenditures and maintain modern and technologically upgraded facilities and equipment, recruit physicians,
expand services or obtain favorable managed care contracts at their facilities than our hospitals and ambulatory
surgery centers, we may experience an overall decline in patient volume. See Item 1, “Business — Competition.”
The growth of uninsured and patient due accounts and a deterioration in the collectibility of these accounts
could adversely affect our results of operations.
The primary collection risks of our accounts receivable relate to the uninsured patient accounts and patient
accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but
patient responsibility amounts (exclusions, deductibles and copayments) remain outstanding. The provision for
doubtful accounts relates primarily to amounts due directly from patients. Although Medicare reimburses
hospitals for a portion of Medicare bad debts, the Jobs Creation Act will reduce the reimbursement level from
70% of eligible bad debts to 65% beginning in federal fiscal year 2013.
The amount of the provision for doubtful accounts is based upon management’s assessment of historical
write-offs and expected net collections, business and economic conditions, trends in federal and state
governmental and private employer health care coverage, the rate of growth in uninsured patient admissions and
other collection indicators. At December 31, 2011, our allowance for doubtful accounts represented
approximately 92% of the $4.478 billion patient due accounts receivable balance. The sum of the provision for
doubtful accounts, uninsured discounts and charity care increased from $8.362 billion for 2009 to $9.626 billion
for 2010 and to $11.214 billion for 2011.
A continuation of the trends that have resulted in an increasing proportion of accounts receivable being
comprised of uninsured accounts and a deterioration in the collectibility of these accounts will adversely affect
our collection of accounts receivable, cash flows and results of operations. We may also be adversely affected by
the growth in patient responsibility accounts as a result of increases in the adoption of plan structures, including
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