HCA Holdings 2011 Annual Report Download - page 52

The industry trend towards value-based purchasing may negatively impact our revenues.
There is a trend in the health care industry towards value-based purchasing of health care services. These
value-based purchasing programs include both public reporting of quality data and preventable adverse events
tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare
currently require hospitals to report certain quality data to receive full reimbursement updates. In addition,
Medicare does not reimburse for care related to certain preventable adverse events (also called “never events”).
Many large commercial payers currently require hospitals to report quality data, and several commercial payers
do not reimburse hospitals for certain preventable adverse events. Further, we have implemented a policy
pursuant to which we do not bill patients or third-party payers for fees or expenses incurred due to certain
preventable adverse events.
Effective July 1, 2011, the Health Reform Law also prohibits the use of federal funds under the Medicaid
program to reimburse providers for medical assistance provided to treat HACs. Beginning in federal fiscal year
2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous year will receive a 1%
reduction in their total inpatient operating Medicare payments. Beginning in fiscal year 2013, hospitals with
excessive readmissions for conditions designated by HHS will receive a reduction of 1% in operating payments
for all inpatient discharges, not just discharges relating to the conditions subject to the excessive readmission
standard. This rate will increase by 1% each year up to 3% in federal fiscal year 2015.
The Health Reform Law also requires HHS to implement a value-based purchasing program for inpatient
hospital services. The Health Reform Law requires HHS to reduce inpatient hospital payments for all discharges
by a percentage beginning at 1% in federal fiscal year 2013 and increasing by 0.25% each fiscal year up to 2% in
federal fiscal year 2017 and subsequent years. HHS will pool the amount collected from these reductions to fund
payments to reward hospitals that meet or exceed certain quality performance standards established by HHS.
According to the value-based purchasing program final rule, CMS estimates that it will distribute $850 million to
hospitals in federal fiscal year 2013 based on their achievement (relative to other hospitals) and improvement
ranges (relative to the hospital’s own past performance). Hospitals that meet or exceed the quality performance
standards will receive greater reimbursement under the value-based purchasing program than they would have
otherwise.
We expect value-based purchasing programs, including programs that condition reimbursement on patient
outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. We
are unable at this time to predict how this trend will affect our results of operations, but it could negatively
impact our revenues.
Our operations could be impaired by a failure of our information systems.
Any system failure that causes an interruption in service or availability of our systems could adversely affect
operations or delay the collection of revenues. Even though we have implemented network security measures,
our servers are vulnerable to computer viruses, break-ins and similar disruptions from unauthorized tampering.
The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data,
cessations in the availability of systems or liability under privacy and security laws, all of which could have a
material adverse effect on our financial position and results of operations and harm our business reputation.
The performance of our information technology and systems is critical to our business operations. In
addition to our shared services initiatives, our information systems are essential to a number of critical areas of
our operations, including:
• accounting and financial reporting;
• billing and collecting accounts;
• coding and compliance;
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