HCA Holdings 2012 Annual Report Download - page 56

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Our facilities are heavily concentrated in Florida and Texas, which makes us sensitive to regulatory,
economic, environmental and competitive conditions and changes in those states.
We operated 162 hospitals at December 31, 2012, and 74 of those hospitals are located in Florida and Texas.
Our Florida and Texas facilities’ combined revenues represented approximately 47% of our consolidated
revenues for the year ended December 31, 2012. This concentration makes us particularly sensitive to regulatory,
economic, environmental and competitive conditions and changes in those states. Any material change in the
current payment programs or regulatory, economic, environmental or competitive conditions in those states could
have a disproportionate effect on our overall business results.
In addition, our hospitals in Florida, Texas and other areas across the Gulf Coast are located in hurricane-
prone areas. In the past, hurricanes have had a disruptive effect on the operations of our hospitals in Florida,
Texas and other coastal states, and the patient populations in those states. Our business activities could be
harmed by a particularly active hurricane season or even a single storm, and the property insurance we obtain
may not be adequate to cover losses from future hurricanes or other natural disasters.
We may be subject to liabilities from claims by the Internal Revenue Service.
The IRS Examination Division is conducting an audit of HCA Inc.’s 2007, 2008 and 2009 federal income
tax returns. We expect the IRS Examination Division will begin an audit of HCA Holdings, Inc.’s 2010 and 2011
federal income tax returns in 2013.
Management believes HCA Holdings, Inc., its predecessors, subsidiaries and affiliates properly reported
taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS and
final resolution of any disputes will not have a material, adverse effect on our results of operations or financial
position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such
resolutions could have a material, adverse effect on our results of operations or financial position.
We may be subject to liabilities from claims brought against our facilities.
We are subject to litigation relating to our business practices, including claims and legal actions by patients
and others in the ordinary course of business alleging malpractice, product liability or other legal theories. Many
of these actions seek large sums of money as damages and involve significant defense costs. We insure a portion
of our professional liability risks through a wholly-owned subsidiary. Management believes our reserves for self-
insured retentions and insurance coverage are sufficient to cover insured claims arising out of the operation of
our facilities. Our wholly-owned liability insurance subsidiary has entered into certain reinsurance contracts, and
the obligations covered by the reinsurance contracts are included in its reserves for professional liability risks, as
the subsidiary remains liable to the extent that the reinsurers do not meet their obligations under the reinsurance
contracts. If payments for claims exceed actuarially determined estimates, are not covered by insurance, or
reinsurers, if any, fail to meet their obligations, our results of operations and financial position could be adversely
affected.
We are exposed to market risks related to changes in the market values of securities and interest rate changes.
We are exposed to market risk related to changes in market values of securities. The investments in debt and
equity securities of our wholly-owned insurance subsidiaries were $567 million and $3 million, respectively, at
December 31, 2012. These investments are carried at fair value, with changes in unrealized gains and losses
being recorded as adjustments to other comprehensive income. At December 31, 2012, we had a net unrealized
gain of $18 million on the insurance subsidiaries’ investment securities.
We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our
wholly-owned insurance subsidiaries could be impaired by the inability to access the capital markets. Should the
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