HCA Holdings 2011 Annual Report Download - page 54

capital expenditures or to make changes in services or bed capacity. In giving approval, these states consider the
need for additional or expanded health care facilities or services. We currently operate health care facilities in a
number of states with CON laws. The failure to obtain any requested CON could impair our ability to operate or
expand operations. Any such failure could, in turn, adversely affect our ability to attract patients and physicians
to our facilities and grow our revenues, which would have an adverse effect on our results of operations.
Our facilities are heavily concentrated in Florida and Texas, which makes us sensitive to regulatory,
economic, environmental and competitive conditions and changes in those states.
We operated 163 hospitals at December 31, 2011, and 75 of those hospitals are located in Florida and Texas.
Our Florida and Texas facilities’ combined revenues represented approximately 50% of our consolidated
revenues for the year ended December 31, 2011. This concentration makes us particularly sensitive to regulatory,
economic, environmental and competitive conditions and changes in those states. Any material change in the
current payment programs or regulatory, economic, environmental or competitive conditions in those states could
have a disproportionate effect on our overall business results.
In addition, our hospitals in Florida, Texas and other areas across the Gulf Coast are located in hurricane-
prone areas. In the past, hurricanes have had a disruptive effect on the operations of our hospitals in Florida,
Texas and other coastal states, and the patient populations in those states. Our business activities could be
harmed by a particularly active hurricane season or even a single storm, and the property insurance we obtain
may not be adequate to cover losses from future hurricanes or other natural disasters.
We may be subject to liabilities from claims by the Internal Revenue Service.
We are currently contesting certain claimed deficiencies and adjustments proposed by the IRS Examination
Division in connection with its audit of HCA Inc.’s 2005 and 2006 federal income tax returns. The disputed
items include the timing of recognition of certain patient service revenues, the deductibility of certain debt
retirement costs and our method for calculating the tax allowance for doubtful accounts. The IRS Examination
Division began an audit of HCA Inc.’s 2007, 2008 and 2009 federal income tax returns in 2010.
Management believes HCA Holdings, Inc., its predecessors, subsidiaries and affiliates properly reported
taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS and
final resolution of these disputes will not have a material, adverse effect on our results of operations or financial
position. However, if payments due upon final resolution of these issues exceed our recorded estimates, such
resolutions could have a material, adverse effect on our results of operations or financial position.
We may be subject to liabilities from claims brought against our facilities.
We are subject to litigation relating to our business practices, including claims and legal actions by patients
and others in the ordinary course of business alleging malpractice, product liability or other legal theories. Many
of these actions involve large claims and significant defense costs. We insure a portion of our professional
liability risks through a wholly-owned subsidiary. Management believes our reserves for self-insured retentions
and insurance coverage are sufficient to cover insured claims arising out of the operation of our facilities. Our
wholly-owned insurance subsidiary has entered into certain reinsurance contracts, and the obligations covered by
the reinsurance contracts are included in its reserves for professional liability risks, as the subsidiary remains
liable to the extent that the reinsurers do not meet their obligations under the reinsurance contracts. If payments
for claims exceed actuarially determined estimates, are not covered by insurance, or reinsurers, if any, fail to
meet their obligations, our results of operations and financial position could be adversely affected.
We are exposed to market risks related to changes in the market values of securities and interest rate changes.
We are exposed to market risk related to changes in market values of securities. The investments in debt and
equity securities of our wholly-owned insurance subsidiaries were $621 million and $7 million, respectively, at
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