HCA Holdings 2012 Annual Report Download - page 53

effect these changes will have on our operations, significant limits on the scope of services reimbursed and on
reimbursement rates and fees could have a material, adverse effect on our business, financial position and results
of operations. Additionally, trends in physician treatment protocols and managed care health plan design, such as
plans that shift increased costs and accountability for care to patients, could reduce our surgical volumes and
admissions in favor of lower intensity and lower cost treatment methodologies.
Our overall business results may suffer during periods of general economic weakness.
Budget deficits at federal, state and local government entities have had a negative impact on spending, and
may continue to negatively impact spending, for health and human service programs, including Medicare,
Medicaid and similar programs, which represent significant payer sources for our hospitals. Other risks we face
during periods of economic weakness and high unemployment include potential declines in the population
covered under managed care agreements, patient decisions to postpone or cancel elective and nonemergency
health care procedures (including delaying surgical procedures), potential increases in the uninsured and
underinsured populations and further difficulties in our collecting patient copayment and deductible receivables.
The industry trend towards value-based purchasing may negatively impact our revenues.
There is a trend in the health care industry towards value-based purchasing of health care services. These
value-based purchasing programs include both public reporting of quality data and preventable adverse events
tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare
currently require hospitals to report certain quality data to receive full reimbursement updates. In addition,
Medicare does not reimburse for care related to certain preventable adverse events (also called “never events”).
Many large commercial payers currently require hospitals to report quality data, and several commercial payers
do not reimburse hospitals for certain preventable adverse events. Further, we have implemented a policy
pursuant to which we do not bill patients or third-party payers for fees or expenses incurred due to certain
preventable adverse events.
The Health Reform Law also prohibits the use of federal funds under the Medicaid program to reimburse
providers for medical assistance provided to treat HACs. Beginning in federal fiscal year 2015, the 25% of
hospitals with the worst national risk-adjusted HAC rates in the previous year will receive a 1% reduction in their
total inpatient operating Medicare payments. Beginning in federal fiscal year 2013, hospitals with excess
readmission rates for conditions designated by HHS will receive a reduction in operating payments for all
Medicare inpatient discharges, not just discharges relating to the conditions subject to the excess readmission
standard. The reduction in payments to hospitals with excess readmissions is capped at 1% for federal fiscal year
2013, 2% for federal fiscal year 2014, and 3% for federal fiscal year 2015 and thereafter.
The Health Reform Law also requires HHS to implement a value-based purchasing program for inpatient
hospital services. The Health Reform Law requires HHS to reduce inpatient hospital payments for all discharges
by a percentage beginning at 1% in federal fiscal year 2013 and increasing by 0.25% each fiscal year up to 2% in
federal fiscal year 2017 and subsequent years. HHS will pool the amount collected from these reductions to fund
payments to reward hospitals that meet or exceed certain quality performance standards established by HHS.
According to the value-based purchasing program final rule, CMS estimates that it will distribute $850 million to
hospitals in federal fiscal year 2013 based on their achievement (relative to other hospitals) and improvement
ranges (relative to the hospital’s own past performance). Hospitals that meet or exceed the quality performance
standards will receive greater reimbursement under the value-based purchasing program than they would have
otherwise.
We expect value-based purchasing programs, including programs that condition reimbursement on patient
outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. We
are unable at this time to predict our future reductions and payments under these programs or how this trend will
affect our results of operations, but it could negatively impact our revenues.
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