HCA Holdings 2012 Annual Report Download - page 46

other collection indicators. At December 31, 2012, our allowance for doubtful accounts represented
approximately 93% of the $5.228 billion patient due accounts receivable balance. The sum of the provision for
doubtful accounts, uninsured discounts and charity care increased from $9.626 billion for 2010 to $11.214 billion
for 2011 and to $13.841 billion for 2012.
A continuation of the trends that have resulted in an increasing proportion of accounts receivable being
comprised of uninsured accounts and a deterioration in the collectibility of these accounts will adversely affect
our collection of accounts receivable, cash flows and results of operations. We may also be adversely affected by
the growth in patient responsibility accounts as a result of increases in the adoption of plan structures, including
health savings accounts, that shift greater responsibility for care to individuals through greater exclusions and
copayment and deductible amounts. Our facilities may experience growth in bad debts, uninsured discounts and
charity care as a result of a number of factors, including the economic downturn and continued high
unemployment. The Health Reform Law seeks to decrease, over time, the number of uninsured individuals
through reforms that mostly will become effective January 1, 2014. On June 28, 2012, the United States Supreme
Court upheld the constitutionality of the individual mandate provisions of the Health Reform Law but struck
down the provisions that would have allowed HHS to penalize states that do not implement the Medicaid
expansion provisions with the loss of existing federal Medicaid funding. As a result, states may choose not to
implement the Medicaid expansion. Thus, even after full implementation of the Health Reform Law, we may
continue to experience bad debts and have to provide uninsured discounts and charity care for individuals
residing in states that choose not to implement the Medicaid expansion. We may also continue to experience bad
debts and have to provide uninsured discounts and charity care for undocumented aliens who are not permitted to
enroll in an Exchange or government health care programs and certain others who may not have insurance
coverage. Further, implementation of the Health Reform Law could result in some patients terminating their
current insurance plans in favor of lower cost Medicaid plans or other insurance coverage with lower
reimbursement levels. Patient responsibility accounts may continue to increase even with expanded health plan
coverage as a result of increases in plan exclusions and deductibles and copayment amounts.
It is difficult to predict the full impact of the Health Reform Law due to the law’s complexity, lack of
implementing regulations or interpretive guidance, gradual and potentially delayed implementation, court
challenges and possible amendment or repeal, as well as our inability to foresee how individuals, states and
businesses will respond to the choices afforded them by the law.
Changes in government health care programs may adversely affect our revenues.
A significant portion of our patient volume is derived from government health care programs, principally
Medicare and Medicaid. Specifically, we derived 43% of our revenues from the Medicare and Medicaid
programs in 2012. Changes in government health care programs may reduce the reimbursement we receive and
could adversely affect our business and results of operations.
In recent years, legislative and regulatory changes have resulted in limitations on and, in some cases,
reductions in levels of payments to health care providers for certain services under the Medicare program. The
Budget Control Act of 2011 (the “BCA”) provides for new spending on program integrity initiatives intended to
reduce fraud and abuse under the Medicare program. The BCA requires automatic spending reductions of $1.2
trillion for federal fiscal years 2013 through 2021, minus any deficit reductions enacted by Congress and debt
service costs. However, the percentage reduction for Medicare may not be more than 2% for a fiscal year, with a
uniform percentage reduction across all Medicare programs. The American Taxpayer Relief Act of 2012 delayed
implementation of the BCA. The President and Congress continue to negotiate federal government spending
reductions, but if action is not taken by March 1, 2013, the BCA-mandated spending reductions will occur
beginning April 1, 2013. It is possible that these negotiations will result only in another temporary compromise
or will result in different spending reductions than required by the BCA. We are unable to predict how these
spending reductions will be structured, what other deficit reduction initiatives may be proposed by Congress or
whether Congress will attempt to suspend or restructure the automatic budget cuts. These reductions will be in
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