HCA Holdings 2012 Annual Report Download - page 70

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Revenues (continued)
patients who are financially unable to pay for the health care services they receive. The Patient Protection and
Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the
“Health Reform Law”), requires health plans to reimburse hospitals for emergency services provided to enrollees
without prior authorization and without regard to whether a participating provider contract is in place. Further,
the Health Reform Law contains provisions that seek to decrease the number of uninsured individuals, including
requirements or incentives, which do not become effective until 2014, for individuals to obtain, and large
employers to provide, insurance coverage. In its June 2012 decision, the United States Supreme Court upheld the
constitutionality of the individual mandate provisions of the Health Reform Law. These mandates may reduce the
financial impact of screening for and stabilizing emergency medical conditions. However, many factors are
unknown regarding the impact of the Health Reform Law, including the outcome of remaining or new court
challenges to the constitutionality of the law and Congressional efforts to amend or repeal the law, how many
previously uninsured individuals will obtain coverage as a result of the law or the change, if any, in the volume
of inpatient and outpatient hospital services that are sought by and provided to previously uninsured individuals
and the payer mix.
We do not pursue collection of amounts related to patients who meet our guidelines to qualify as charity
care; therefore, they are not reported in revenues. Patients treated at our hospitals for nonelective care, who have
income at or below 200% of the federal poverty level, are eligible for charity care. The federal poverty level is
established by the federal government and is based on income and family size. We provide discounts from our
gross charges to uninsured patients who do not qualify for Medicaid or charity care. These discounts are similar
to those provided to many local managed care plans. After the discounts are applied, we are still unable to collect
a significant portion of uninsured patients’ accounts, and we record significant provisions for doubtful accounts
(based upon our historical collection experience) related to uninsured patients in the period the services are
provided.
Due to the complexities involved in the classification and documentation of health care services authorized
and provided, the estimation of revenues earned and the related reimbursement are often subject to interpretations
that could result in payments that are different from our estimates. Adjustments to estimated Medicare and
Medicaid reimbursement amounts and disproportionate-share funds, which resulted in net increases to revenues,
related primarily to cost reports filed during the respective year were $50 million, $40 million and $52 million in
2012, 2011 and 2010, respectively. The adjustments to estimated reimbursement amounts, which resulted in net
increases to revenues, related primarily to cost reports filed during previous years were $242 million, $30 million
and $50 million in 2012, 2011 and 2010, respectively. The 2012 amount related to cost reports filed during
previous years includes two adjustments to Medicare revenues that affected multiple annual cost report periods
for the majority of our hospitals (the Rural Floor Provision Settlement which increased revenues by
approximately $271 million and the implementation of revised Supplemental Security Income (“SSI”) ratios
which reduced revenues by approximately $75 million). The net effect of these Medicare adjustments was an
increase of $196 million to revenues. Excluding the effect of these Medicare adjustments, the 2012 amount
related to previous years would have been $46 million. We expect adjustments during the next 12 months related
to Medicare and Medicaid cost report filings and settlements and disproportionate-share funds will result in
increases to revenues within generally similar ranges.
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