HCA Holdings 2011 Annual Report Download - page 48

On the other hand, the Health Reform Law provides for significant reductions in the growth of Medicare
spending, reductions in Medicare and Medicaid DSH payments and the establishment of programs where
reimbursement is tied to quality and integration. Since 44.5% of our revenues in 2011 were from Medicare and
Medicaid, reductions to these programs may significantly impact the Company and could offset any positive
effects of the Health Reform Law. It is difficult to predict the size of the revenue reductions to Medicare and
Medicaid spending, because of uncertainty regarding a number of material factors, including the following:
• the amount of overall revenues the Company will generate from Medicare and Medicaid business when
the reductions are implemented;
• whether reductions required by the Health Reform Law will be changed by statute or by judicial
decision prior to becoming effective;
• the size of the Health Reform Law’s annual productivity adjustment to the market basket;
• the amount of the Medicare DSH reductions that will be made, commencing in federal fiscal year 2014;
• the allocation to our hospitals of the Medicaid DSH reductions, commencing in federal fiscal year
2014;
• what the losses in revenues will be, if any, from the Health Reform Law’s quality initiatives;
• how successful ACOs will be at coordinating care and reducing costs or whether they will decrease
reimbursement;
• the scope and nature of potential changes to Medicare reimbursement methods, such as an emphasis on
bundling payments or coordination of care programs;
• whether the Company’s revenues from upper payment limit (“UPL”) programs, or other Medicaid
supplemental programs developed through a federally approved waiver program (“Waiver Program”),
will be adversely affected because there may be reductions in available state and local government
funding for the programs; and
• reductions to Medicare payments CMS may impose for “excessive readmissions.”
Because of the many variables involved, we are unable to predict the net effect on the Company of the
expected increases in insured individuals using our facilities, reductions in Medicare spending, reductions in
Medicare and Medicaid DSH funding, and numerous other provisions in the Health Reform Law that may affect
the Company. Further, it is unclear how efforts to repeal or revise the Health Reform Law and federal lawsuits
challenging its constitutionality will be resolved or what the impact would be of any resulting changes to the law.
If we are unable to retain and negotiate favorable contracts with nongovernment payers, including managed
care plans, our revenues may be reduced.
Our ability to obtain favorable contracts with nongovernment payers, including HMOs, PPOs and other
managed care plans significantly affects the revenues and operating results of our facilities. Revenues derived
from these entities and other insurers accounted for 52.9% and 52.7% of our revenues for 2011 and 2010,
respectively. Nongovernment payers, including managed care payers, continue to demand discounted fee
structures, and the trend toward consolidation among nongovernment payers tends to increase their bargaining
power over fee structures. As various provisions of the Health Reform Law are implemented, including the
establishment of the Exchanges, nongovernment payers increasingly may demand reduced fees. Our future
success will depend, in part, on our ability to retain and renew our managed care contracts and enter into new
managed care contracts on terms favorable to us. Other health care providers may impact our ability to enter into
managed care contracts or negotiate increases in our reimbursement and other favorable terms and conditions.
For example, some of our competitors may negotiate exclusivity provisions with managed care plans or
otherwise restrict the ability of managed care companies to contract with us. It is not clear what impact, if any,
the increased obligations on managed care payers and other payers imposed by the Health Reform Law will have
on our ability to negotiate reimbursement increases. If we are unable to retain and negotiate favorable contracts
with managed care plans or experience reductions in payment increases or amounts received from
nongovernment payers, our revenues may be reduced.
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