HCA Holdings 2012 Annual Report Download - page 52

We do not always have the benefit of significant regulatory or judicial interpretation of these laws and
regulations. In the future, different interpretations or enforcement of, or amendment to, these laws and
regulations could subject our current or past practices to allegations of impropriety or illegality or could require
us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating
expenses. A determination that we have violated these laws, or the public announcement that we are being
investigated for possible violations of these laws, could have a material, adverse effect on our business, financial
condition, results of operations or prospects, and our business reputation could suffer significantly. In addition,
other legislation or regulations at the federal or state level may be adopted that adversely affect our business.
We have been and could become the subject of governmental investigations, claims and litigation.
Health care companies are subject to numerous investigations by various governmental agencies. Further,
under the FCA, private parties have the right to bring qui tam, or “whistleblower,” suits against companies that
submit false claims for payments to, or improperly retain overpayments from, the government. Some states have
adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received,
and other facilities may receive, government inquiries from, and may be subject to investigation by, federal and
state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could
be considered systemic, their resolution could have a material, adverse effect on our financial position, results of
operations and liquidity.
Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal
intermediaries and carriers, as well as the OIG, CMS and state Medicaid programs, conduct audits of our health
care operations. Private payers may conduct similar post-payment audits, and we also perform internal audits and
monitoring. Depending on the nature of the conduct found in such audits and whether the underlying conduct
could be considered systemic, the resolution of these audits could have a material, adverse effect on our financial
position, results of operations and liquidity.
As required by statute, CMS has implemented the RAC program on a nationwide basis. Under the program,
CMS contracts with RACs on a contingency fee basis to conduct post-payment reviews to detect and correct
improper payments in the fee-for-service Medicare program. In February 2012, CMS announced that it was
initiating a RAC prepayment demonstration program in 11 states. The Health Reform Law expands the RAC
program’s scope to include managed Medicare plans and to include Medicaid claims. In addition, CMS employs
MICs to perform post-payment audits of Medicaid claims and identify overpayments. The Health Reform Law
increases federal funding for the MIC program. In addition to RACs and MICs, the state Medicaid agencies and
other contractors have increased their review activities.
Should we be found out of compliance with any of these laws, regulations or programs, depending on the
nature of the findings, our business, our financial position and our results of operations could be negatively
impacted.
Physician utilization practices and treatment methodologies or governmental or managed care controls
designed to reduce inpatient services or surgical procedures may reduce our revenues.
Controls imposed by Medicare, managed Medicare, Medicaid, managed Medicaid and commercial third-
party payers designed to reduce admissions, intensity of services, surgical volumes and lengths of stay, in some
instances referred to as “utilization review,” have affected and are expected to continue to affect our facilities.
Utilization review entails the review of the admission and course of treatment of a patient by health plans.
Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payer-
required preadmission authorization and utilization review and by payer pressure to maximize outpatient and
alternative health care delivery services for less acutely ill patients. Efforts to impose more stringent cost controls
are expected to continue. For example, the Health Reform Law potentially expands the use of prepayment review
by Medicare contractors by eliminating statutory restrictions on their use. Although we are unable to predict the
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