HCA Holdings 2011 Annual Report Download - page 68

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Critical Accounting Policies and Estimates (Continued)
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts (Continued)
estimating the collectibility of our accounts receivable. We perform the hindsight analysis quarterly, utilizing
rolling twelve-months accounts receivable collection and writeoff data. We believe our quarterly updates to the
estimated allowance for doubtful accounts at each of our hospital facilities provide reasonable valuations of our
accounts receivable. These routine, quarterly changes in estimates have not resulted in material adjustments to
our allowance for doubtful accounts, provision for doubtful accounts or period-to-period comparisons of our
results of operations. At December 31, 2011 and 2010, the allowance for doubtful accounts represented
approximately 92% and 93%, respectively, of the $4.478 billion and $4.249 billion, respectively, patient due
accounts receivable balance. The patient due accounts receivable balance represents the estimated uninsured
portion of our accounts receivable. The estimated uninsured portion of Medicaid pending and uninsured discount
pending accounts is included in our patient due accounts receivable balance.
The revenue deductions related to uninsured accounts (charity care and uninsured discounts) generally have
the inverse effect on the provision for doubtful accounts. To quantify the total impact of and trends related to
uninsured accounts, we believe it is beneficial to view these revenue deductions and provision for doubtful
accounts in combination, rather than each separately. A summary of these amounts for the years ended
December 31, follows (dollars in millions):
2011 2010 2009
Charity care .............................................. $ 2,683 $2,337 $2,151
Uninsured discounts ........................................ 5,707 4,641 2,935
Provision for doubtful accounts ............................... 2,824 2,648 3,276
Totals ................................................... $11,214 $9,626 $8,362
Increases to our uninsured discounts have directly contributed to the declining trend in the provision for
doubtful accounts. However, the sum of the provision for doubtful accounts, uninsured discounts and charity
care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity
care increased from 23.8% for 2009 to 25.6% for 2010 and to 27.4% for 2011.
Days revenues in accounts receivable were 53 days, 50 days and 50 days at December 31, 2011, 2010 and 2009,
respectively. Management expects a continuation of the challenges related to the collection of the patient due accounts.
Adverse changes in the percentage of our patients having adequate health care coverage, general economic conditions,
patient accounting service center operations, payer mix, or trends in federal, state, and private employer health care
coverage could affect the collection of accounts receivable, cash flows and results of operations.
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