HCA Holdings 2011 Annual Report Download - page 66

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and
the reported amounts of revenues and expenses. Our estimates are based on historical experience and various
other assumptions we believe are reasonable under the circumstances. We evaluate our estimates on an ongoing
basis and make changes to the estimates and related disclosures as experience develops or new information
becomes known. Actual results may differ from these estimates.
We believe the following critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements.
Revenues
Revenues are recorded during the period the health care services are provided, based upon the estimated
amounts due from payers. Estimates of contractual allowances under managed care health plans are based upon
the payment terms specified in the related contractual agreements. Laws and regulations governing the Medicare
and Medicaid programs are complex and subject to interpretation. The estimated reimbursement amounts are
made on a payer-specific basis and are recorded based on the best information available regarding management’s
interpretation of the applicable laws, regulations and contract terms. Management continually reviews the
contractual estimation process to consider and incorporate updates to laws and regulations and the frequent
changes in managed care contractual terms resulting from contract renegotiations and renewals. We have
invested significant resources to refine and improve our computerized billing systems and the information system
data used to make contractual allowance estimates. We have developed standardized calculation processes and
related training programs to improve the utility of our patient accounting systems.
The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in the
Medicare program to conduct an appropriate medical screening examination of every person who presents to the
hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition,
to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the
condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an
individual’s ability to pay for treatment. Federal and state laws and regulations, including but not limited to
EMTALA, require, and our commitment to providing quality patient care encourages, the provision of services to
patients who are financially unable to pay for the health care services they receive. The Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the
“Health Reform Law”), requires health plans to reimburse hospitals for emergency services provided to enrollees
without prior authorization and without regard to whether a participating provider contract is in place. Further, as
enacted, the Health Reform Law contains provisions that seek to decrease the number of uninsured individuals,
including requirements or incentives, which do not become effective until 2014, for individuals to obtain, and
large employers to provide, insurance coverage. These mandates may reduce the financial impact of screening
for and stabilizing emergency medical conditions. However, many factors are unknown regarding the impact of
the Health Reform Law, including the outcome of court challenges to the constitutionality of the law and
Congressional efforts to amend or repeal the law, how many previously uninsured individuals will obtain
coverage as a result of the law or the change, if any, in the volume of inpatient and outpatient hospital services
that are sought by and provided to previously uninsured individuals and the payer mix.
We do not pursue collection of amounts related to patients who meet our guidelines to qualify as charity
care; therefore, they are not reported in revenues. Patients treated at our hospitals for nonelective care, who have
income at or below 200% of the federal poverty level, are eligible for charity care. The federal poverty level is
established by the federal government and is based on income and family size. We provide discounts from our
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