HCA Holdings 2011 Annual Report Download - page 74

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS — (Continued)
Results of Operations (Continued)
Revenue/Volume Trends (Continued)
could result in the payment programs being reduced or eliminated. In December 2011, CMS approved a
Medicaid waiver that allows Texas to continue receiving supplemental Medicaid reimbursement while expanding
its Medicaid managed care program, thus Texas is operating pursuant to a Waiver Program. However, we cannot
predict whether the Texas private supplemental Medicaid reimbursement program will continue or guarantee that
revenues recognized for the program will not decline. Because deliberations about these programs are ongoing,
we are unable to estimate the financial impact the program structure modifications, if any, may have on our
results of operations.
Electronic Health Record Incentive Payments
The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive
payments beginning in 2011 for eligible hospitals and professionals that adopt and meaningfully use certified
electronic health record (“EHR”) technology. We recognize income related to Medicare and Medicaid incentive
payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated
meaningful use of certified EHR technology for the applicable period and the cost report information for the full
cost report year that will determine the final calculation of the incentive payment is available.
Medicaid EHR incentive calculations and related payment amounts are based upon prior period cost report
information available at the time our eligible hospitals adopt, implement or demonstrate meaningful use of
certified EHR technology for the applicable period, and are not subject to revision for cost report data filed for a
subsequent period. Thus, incentive income recognition occurs at the point our eligible hospitals adopt, implement
or demonstrate meaningful use of certified EHR technology for the applicable period, as the cost report
information for the full cost report year that will determine the final calculation of the incentive payment is
known at that time.
Medicare EHR incentive calculations and related initial payment amounts are based upon the most current
filed cost report information available at the time our eligible hospitals demonstrate meaningful use of certified
EHR technology for the applicable period. However, unlike Medicaid, this initial payment amount will be adjusted
based upon an updated calculation using the annual cost report information for the cost report period that began
during the applicable payment year. Thus, incentive income recognition occurs at the point our eligible hospitals
demonstrate meaningful use of certified EHR technology for the applicable period and the cost report information
for the full cost report year that will determine the final calculation of the incentive payment is available.
We recognized $210 million of electronic health record incentive income related to Medicaid ($87 million)
and Medicare ($123 million) incentive programs during 2011. At December 31, 2011, we have $134 million of
deferred EHR incentive income, which represents initial incentive payments received for which EHR incentive
income has not been recognized. Actual incentive payments could vary from these 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 recognizing the expenses may not correlate with the receipt of the incentive payments and the
recognition of revenues. For 2011, we incurred $77 million of operating expenses to implement our certified
EHR technology and meet meaningful use.
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