HCA Healthcare, Inc. Revenue Disclosure

Revenues

Revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments. Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans and commercial insurance companies (including plans offered through the health insurance exchanges), and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts (based primarily on historical collection experience) related to uninsured accounts to record net self pay revenues at the estimated amounts we expect to collect. Our revenues from third party payers and other (including uninsured patients) for the years ended December 31, are summarized in the following table (dollars in millions):

 

		Years Ended December 31,
		2017				Ratio				2016				Ratio				2015				Ratio
Medicare		$	9,483				21.7	%		$	8,895				21.4	%		$	8,654				21.8	%
Managed Medicare			4,788				11.0				4,355				10.5				4,133				10.4
Medicaid			1,631				3.7				1,597				3.8				1,705				4.3
Managed Medicaid			2,349				5.4				2,478				6.0				2,234				5.6
Managed care and other insurers			24,813				56.9				23,441				56.5				21,882				55.2
International (managed care and other insurers)			1,097				2.5				1,195				2.9				1,295				3.3
Other			3,492				8.0				2,786				6.7				3,688				9.3
Revenues before provision for doubtful accounts			47,653				109.2				44,747				107.8				43,591				109.9
Provision for doubtful accounts			(4,039	)			(9.2	)			(3,257	)			(7.8	)			(3,913	)			(9.9	)
Revenues		$	43,614				100.0	%		$	41,490				100.0	%		$	39,678				100.0	%

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility recorded estimates will change by a material amount. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the “cost report” filing and settlement process). The adjustments to estimated Medicare and Medicaid reimbursement amounts and disproportionate-share funds related primarily to cost reports filed during the respective year resulted in net increases to revenues of $41 million, $31 million and $48 million in 2017, 2016 and 2015, respectively. The adjustments to estimated reimbursement amounts related primarily to cost reports filed during previous years resulted in net increases to revenues of $56 million, $90 million and $85 million in 2017, 2016 and 2015, respectively.

The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. Prior to November 2017, patients treated at hospitals for nonelective care, who have income at or below 200% of the federal poverty level, are eligible for charity care. During November 2017, we expanded our charity care policy to limit the patient responsibility amounts for patients who have income above 200%, but at or below 400%, of the federal poverty level to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable multiple of the federal poverty level. The federal poverty level is established by the federal government and is based on income and family size. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. In implementing the uninsured discount policy, we may first attempt to provide assistance to uninsured patients to help determine whether they may qualify for Medicaid, other federal or state assistance or charity care. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.

To quantify the total impact of and trends related to uninsured accounts, we believe it is beneficial to view charity care, uninsured discounts and the provision for doubtful accounts in combination, rather than each separately. A summary of these amounts for the years ended December 31, follows (dollars in millions):

 

		2017				Ratio				2016				Ratio				2015				Ratio
Charity care		$	4,861				21	%		$	4,151				20	%		$	3,682				20	%
Uninsured discounts			14,520				62				13,047				64				10,692				59
Provision for doubtful accounts			4,039				17				3,257				16				3,913				21
Total uncompensated care		$	23,420				100	%		$	20,455				100	%		$	18,287				100	%

A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):

 

		2017				2016				2015
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)		$	37,557			$	35,304			$	33,760
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)			12.9	%			13.5	%			14.5	%
Total uncompensated care		$	23,420			$	20,455			$	18,287
Multiply by the cost-to-charges ratio			12.9	%			13.5	%			14.5	%
Estimated cost of total uncompensated care		$	3,021			$	2,761			$	2,652

The sum of charity care, uninsured discounts and the provision for doubtful accounts, as a percentage of the sum of revenues, charity care, uninsured discounts and the provision for doubtful accounts was 34.9% for 2017, 33.0% for 2016 and 31.5% for 2015.