HCA Holdings 2012 Annual Report Download - page 77

HCA HOLDINGS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
We receive a significant portion of our revenues from government health programs, principally Medicare
and Medicaid, which are highly regulated and subject to frequent and substantial changes. We provide indigent
care services in several communities in the state of Texas, in affiliation with other hospitals. The state of Texas
has been involved in efforts to increase the indigent care provided by private hospitals. As a result of additional
indigent care being provided by private hospitals, public hospital districts or counties in Texas have available
funds that were previously devoted to indigent care. The public hospital districts or counties are under no
contractual or legal obligation to provide such indigent care. The public hospital districts or counties have elected
to transfer some portion of these available funds to the state’s Medicaid program. Such action is at the sole
discretion of the public hospital districts or counties. It is anticipated that these contributions to the state will be
matched with federal Medicaid funds. The state then may make supplemental payments to hospitals in the state
for Medicaid services rendered. Hospitals receiving Medicaid supplemental payments may include those that are
providing additional indigent care services. Our Texas Medicaid revenues included $387 million, $540 million
and $657 million during 2012, 2011 and 2010, respectively, of Medicaid supplemental payments. In addition, we
receive supplemental payments in several other states. We are aware these supplemental payment programs are
currently being reviewed by certain state agencies and some states have made waiver requests to the Centers for
Medicare and Medicaid Services (“CMS”) to replace their existing supplemental payment programs. It is
possible these reviews and waiver requests will result in the restructuring of such supplemental payment
programs and could result in the payment programs being reduced or eliminated. In December 2011, CMS
approved a Medicaid waiver that allows Texas to continue receiving supplemental Medicaid reimbursement
while expanding its Medicaid managed care program, thus Texas is operating pursuant to a Waiver Program.
However, we cannot predict whether the Texas private supplemental Medicaid reimbursement program will
continue or guarantee that revenues recognized for the program will not decline. Because deliberations about
these programs are ongoing, we are unable to estimate the financial impact the program structure modifications,
if any, may have on our results of operations.
Electronic Health Record Incentive Payments
The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive
payments, beginning in 2011, for eligible hospitals and professionals that adopt and meaningfully use certified
electronic health record (“EHR”) technology. We recognize income related to Medicare and Medicaid incentive
payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated
meaningful use of certified EHR technology for the applicable period and the cost report information for the full
cost report year that will determine the final calculation of the incentive payment is available.
Medicaid EHR incentive calculations and related payment amounts are based upon prior period cost report
information available at the time our eligible hospitals adopt, implement or demonstrate meaningful use of
certified EHR technology for the applicable period, and are not subject to revision for cost report data filed for a
subsequent period. Thus, incentive income recognition occurs at the point our eligible hospitals adopt, implement
or demonstrate meaningful use of certified EHR technology for the applicable period, as the cost report
information for the full cost report year that will determine the final calculation of the incentive payment is
known at that time.
Medicare EHR incentive calculations and related initial payment amounts are based upon the most current
filed cost report information available at the time our eligible hospitals demonstrate meaningful use of certified
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