HCA Holdings 2011 Annual Report Download - page 46

Program in many states. For example, in May 2011, the Florida legislature passed a budget agreement for the
fiscal year beginning July 1, 2011 that reduces Medicaid reimbursements to hospitals. As a result, we estimate
that Florida Medicaid payments to our hospitals may be reduced by approximately $35 million during the first
half of calendar year 2012. Additionally, the Texas legislature passed a budget agreement effective September 1,
2011 that reduces Medicaid reimbursements to hospitals. As a result, we estimate that Texas Medicaid payments
to our hospitals may be reduced by approximately $60 million in 2012. Some states that provide Medicaid
supplemental payments are reviewing these programs or have filed waiver requests with CMS to replace these
programs, which could result in Medicaid supplemental payments being reduced or eliminated. CMS approved a
Medicaid waiver in December 2011 that allows Texas to continue receiving supplemental Medicaid
reimbursement while expanding its Medicaid managed care program. However, we cannot predict whether the
Texas private supplemental Medicaid Waiver Program will continue or guarantee that revenues recognized from
the program will not decrease.
The Health Reform Law has changed and will likely result in additional changes to the Medicaid program.
For example, the Health Reform Law provides for material reductions to Medicaid DSH funding. Effective
March 23, 2010, the Health Reform Law requires states to at least maintain Medicaid eligibility standards
established prior to the enactment of the law for adults until January 1, 2014 and for children until October 1,
2019. However, states with budget deficits may seek a waiver from this requirement to address eligibility
standards that apply to adults making more than 133% of the federal poverty level. The Health Reform Law also
provides for significant expansions to the Medicaid program, but these changes are not required until 2014. In
addition, the Health Reform Law will result in increased state legislative and regulatory changes in order for
states to comply with new federal mandates, such as the requirement to establish Exchanges, and to participate in
grants and other incentive opportunities.
In some cases, commercial third-party payers rely on all or portions of Medicare payment systems to
determine payment rates. Changes to government health care programs that reduce payments under these
programs may negatively impact payments from commercial third-party payers.
Current or future health care reform and deficit reduction efforts, changes in laws or regulations regarding
government health care programs, other changes in the administration of government health care programs and
changes to commercial third-party payers in response to health care reform and other changes to government
health care programs could have a material, adverse effect on our financial position and results of operations.
We are unable to predict the impact of the Health Reform Law, which represents a significant change to the
health care industry.
As enacted, the Health Reform Law will change how health care services are covered, delivered, and
reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending,
reductions in Medicare and Medicaid DSH payments and the establishment of programs where reimbursement is
tied to quality and integration. In addition, the law reforms certain aspects of health insurance, expands existing
efforts to tie Medicare and Medicaid payments to performance and quality, and contains provisions intended to
strengthen fraud and abuse enforcement. 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. The Company also has 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.
43