HCA Holdings 2012 Annual Report Download - page 45

than certain European collateral securing our senior secured European term loan facility) is also pledged as
collateral under our first lien notes. If any of the lenders under the senior secured credit facilities accelerate the
repayment of borrowings, there can be no assurance there will be sufficient assets to repay the senior secured
credit facilities, the first lien notes and our other indebtedness.
Our hospitals face competition for patients from other hospitals and health care providers.
The health care business is highly competitive, and competition among hospitals and other health care
providers for patients has intensified in recent years. Generally, other hospitals in the local communities we serve
provide services similar to those offered by our hospitals. In addition, CMS publicizes on its Hospital Compare
website performance data related to quality measures and data on patient satisfaction surveys hospitals submit in
connection with their Medicare reimbursement. Federal law provides for the future expansion of the number of
quality measures that must be reported. Additional quality measures and future trends toward clinical
transparency may have an unanticipated impact on our competitive position and patient volumes. Further, the
Health Reform Law requires every hospital to establish and update annually a public listing of the hospital’s
standard charges for items and services. If any of our hospitals achieve poor results (or results that are lower than
our competitors) on these quality measures or on patient satisfaction surveys or if our standard charges are higher
than our competitors, our patient volumes could decline.
In addition, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent
care centers and diagnostic and imaging centers in the geographic areas in which we operate has increased
significantly. As a result, most of our hospitals operate in a highly competitive environment. Some of the
facilities that compete with our hospitals are physician-owned or are owned by governmental agencies or not-for-
profit corporations supported by endowments, charitable contributions and/or tax revenues and can finance
capital expenditures and operations on a tax-exempt basis. Our hospitals face competition from competitors that
are implementing physician alignment strategies, such as employing physicians, acquiring physician practice
groups and participating in ACOs or other clinical integration models. Our hospitals compete with specialty
hospitals and with both our own and unaffiliated freestanding surgery centers for market share in certain high
margin services and for quality physicians and personnel. If ambulatory surgery centers are better able to
compete in this environment than our hospitals, our hospitals may experience a decline in patient volume, and we
may experience a decrease in margin, even if those patients use our ambulatory surgery centers. In states that do
not require a CON for the purchase, construction or expansion of health care facilities or services, competition in
the form of new services, facilities and capital spending is more prevalent. Further, if our competitors are better
able to attract patients, make capital expenditures and maintain modern and technologically upgraded facilities
and equipment, recruit physicians, expand services or obtain favorable managed care contracts at their facilities
than our hospitals and ambulatory surgery centers, we may experience an overall decline in patient volume. See
Item 1, “Business — Competition.”
The growth of uninsured and patient due accounts and a deterioration in the collectibility of these accounts
could adversely affect our results of operations.
The primary collection risks of our accounts receivable relate to the uninsured patient accounts and patient
accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but
patient responsibility amounts (exclusions, deductibles and copayments) remain outstanding. The provision for
doubtful accounts relates primarily to amounts due directly from patients. Although Medicare reimburses
hospitals for a portion of Medicare bad debts, the Jobs Creation Act reduced the reimbursement level from 70%
of eligible bad debts to 65% beginning in federal fiscal year 2013.
The amount of the provision for doubtful accounts is based upon management’s assessment of historical
write-offs and expected net collections, business and economic conditions, trends in federal and state
governmental and private employer health care coverage, the rate of growth in uninsured patient admissions and
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