HCA Holdings 2012 Annual Report Download - page 48

strengthen fraud and abuse enforcement. Further, the Health Reform Law provides for a value-based purchasing
program, the establishment of ACOs and bundled payment pilot programs, which may create sources of
additional revenue. 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. States that choose not to implement the Medicaid expansion will forego
funding established by the Health Reform Law to cover most of the expansion costs. While the expansion of
health insurance coverage under the Health Reform Law may result in a material increase in the number of
patients using our facilities who have either private or public program coverage, it is unclear how many states
will decline to implement the Medicaid expansion. Those states with relatively low income eligibility
requirements for Medicaid may have the greatest financial incentives to implement the Medicaid expansion. The
Company has a significant presence in several of these low income eligibility states, including Florida, Georgia,
Kansas, Louisiana, Missouri, Oklahoma, Texas and Virginia. However, the governors of a number of states,
including Texas, in which a significant number of the Company’s licensed beds are located, have announced
their intentions to opt out of expanding their Medicaid programs pursuant to the Health Reform Law. These
statements are not legally binding and may be subject to change.
It is difficult to predict the size of the potential revenue gains to the Company as a result of the
expanded coverage, ACO and bundled payment provisions of the Health Reform Law because of uncertainty
surrounding a number of material factors, including the following:
• how many states will implement the Medicaid expansion provisions and under what terms;
• how many previously uninsured individuals will obtain coverage as a result of the Health Reform Law
(based on the CBO’s February 2013 estimates, by 2022, the Health Reform Law will expand coverage
to 27 million additional individuals);
• what percentage of the newly insured patients will be covered under the Medicaid program and what
percentage will be covered by private health insurers;
• the extent to which states will enroll new Medicaid participants in managed care programs;
• the pace at which insurance coverage expands, including the pace of different types of coverage
expansion;
• the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and
provided to previously uninsured individuals;
• the rate paid to hospitals by private payers for newly covered individuals, including those covered
through the newly created Exchanges and those who might be covered under the Medicaid program
under contracts with the state;
• the rate paid by state governments under the Medicaid program for newly covered individuals;
• the effect of the value-based purchasing program on our hospitals’ revenues and the effects of other
quality programs;
• the percentage of individuals in the Exchanges who select the high deductible plans, since health
insurers offering those kinds of products have traditionally sought to pay lower rates to hospitals; and
• whether the net effect of the Health Reform Law, including the prohibition on excluding individuals
based on pre-existing conditions, the requirement to keep medical costs at or above a specified
minimum percentage of premium revenue, other health insurance reforms and the annual fee applied to
all health insurers, will be to put pressure on the bottom line of health insurers, which in turn might
cause them to seek to reduce payments to hospitals with respect to both newly insured individuals and
their existing business.
44