HCA Holdings 2011 Annual Report Download - page 53

• clinical systems;
• medical records and document storage;
• inventory management;
• negotiating, pricing and administering managed care contracts and supply contracts; and
• monitoring quality of care and collecting data on quality measures necessary for full Medicare payment
updates.
If we fail to effectively and timely implement electronic health record systems and transition to the ICD-10
coding system, our operations could be adversely affected.
As required by ARRA, the Secretary of HHS has developed and implemented an incentive payment
program for eligible hospitals and health care professionals that adopt and meaningfully use certified EHR
technology. HHS uses the Provider Enrollment, Chain and Ownership System (“PECOS”) to verify Medicare
enrollment prior to making EHR incentive program payments. During 2011, we received Medicare and Medicaid
incentive payments for being a meaningful user of certified EHR technology and recorded incentive income of
$210 million for the year. EHR incentive income for our eligible hospitals and professionals is estimated to range
from $325 million to $350 million for 2012. Actual incentive payments could vary from our estimates due to
certain factors such as availability of federal funding for both Medicare and Medicaid incentive payments, timing
of the approval of state Medicaid incentive payment plans by CMS and our ability to continue to demonstrate
meaningful use of certified EHR technology.
We have incurred and will continue to incur both capital costs and operating expenses in order to implement
our certified EHR technology and meet meaningful use requirements. These expenses are ongoing and are
projected to continue over all stages of implementation of meaningful use. The timing of expenses will not
correlate with the receipt of the incentive payments and the recognition of incentive income. During 2011, we
incurred $77 million of operating expenses to implement our certified EHR technology and to meet meaningful
use. We estimate that operating expenses to implement our certified EHR technology and meet meaningful use
will range from $140 million to $160 million for 2012. Actual operating expenses could vary from these
estimates. If our eligible hospitals and employed professionals are unable to meet the requirements for
participation in the incentive payment program, including having an enrollment record in PECOS, we will not be
eligible to receive incentive payments that could offset some of the costs of implementing EHR systems. Further,
eligible providers that fail to demonstrate meaningful use of certified EHR technology will be subject to reduced
payments from Medicare, beginning in federal fiscal year 2015 for eligible hospitals and calendar year 2015 for
eligible professionals. Failure to implement certified EHR systems effectively and in a timely manner could have
a material, adverse effect on our financial position and results of operations.
Health plans and providers, including our hospitals, are required to transition to the new ICD-10 coding
system, which greatly expands the number and detail of billing codes used for inpatient claims. Under current
regulations, use of the ICD-10 system is required beginning October 1, 2013, but CMS has announced its intent
to extend this deadline. Transition to the new ICD-10 system requires significant investment in coding
technology and software as well as the training of staff involved in the coding and billing process. In addition to
these upfront costs of transition to ICD-10, it is possible that our hospitals could experience disruption or delays
in payment due to technical or coding errors or other implementation issues involving our systems or the systems
and implementation efforts of health plans and their business partners. Further, the transition to the more detailed
ICD-10 coding system could result in decreased reimbursement if the use of ICD-10 codes results in conditions
being reclassified to MS-DRGs or commercial payer payment groupings with lower levels of reimbursement than
assigned under the previous system.
State efforts to regulate the construction or expansion of health care facilities could impair our ability to
operate and expand our operations.
Some states, particularly in the eastern part of the country, require health care providers to obtain prior
approval, known as a CON, for the purchase, construction or expansion of health care facilities, to make certain
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