RISK FACTORS
Risks Related to the COVID-19 Pandemic
We count on the COVID-19 pandemic to proceed to have an effect on our monetary efficiency, and such pandemic may have materials hostile results on our outcomes of operations, monetary situation, and/or our money flows if it causes public well being and/or financial circumstances within the United States to deteriorate.
As a supplier of healthcare companies, we’ve been and proceed to be considerably affected by the general public well being and financial results of the COVID-19 pandemic, which the Secretary of the U.S. Department of Health and Human Services, or HHS, first declared a public well being emergency in January 2020. Although vaccines and booster photographs for the COVID-19 virus have grow to be broadly out there within the United States, COVID-19 has continued to lead to a big variety of hospitalizations, and the long run course of the pandemic stays unsure.
We have been working with federal, state and native well being authorities to reply to COVID-19 instances within the communities we serve, and our hospitals, medical clinics, medical personnel, and workers have been actively caring for COVID-19 sufferers. Although we’ve applied appreciable security measures, therapy of COVID-19 has related dangers, which can embody the style during which sufferers, physicians, nurses and different medical personnel understand and reply to such dangers. These dangers could embody diminished working capability, impaired worker morale, labor unrest and/or different workforce disruptions. Moreover, through the pandemic, we imagine that some people have elected to postpone medical look after an undetermined time period in a way that has adversely impacted our affected person volumes compared to pre-pandemic ranges.
Although our hospitals haven’t typically skilled main capability constraints to this point arising from the therapy of COVID-19 sufferers, there are hospitals within the United States which were overwhelmed in caring for COVID-19 sufferers, which has prevented such hospitals from treating all sufferers who search care. Moreover, in sure places, authorities authorities and healthcare suppliers have re-imposed or could search to re-impose restrictions on elective medical procedures, have activated or could contemplate activating disaster requirements of care, and have deployed or could search to deploy army medical personnel, which may have an effect on a number of of our hospitals or outpatient or different amenities. Moreover, because of the focus of our hospitals in sure states, we’re significantly delicate to the rise in COVID-19 instances in these states, the place the pandemic may have a disproportionate impact on our enterprise.
We have incurred, and should proceed to incur, sure elevated bills arising from the COVID-19 pandemic, together with extra labor, provide chain, capital and different expenditures. Moreover, in current months, the U.S. financial system has skilled common inflationary pressures and vital disruptions to international provide networks. In this regard, we’ve skilled disruptions in reference to the supply of kit, prescription drugs and medical provides, together with protecting private gear, to us, in addition to inflationary pressures in reference to labor, provide chain, capital and different expenditures. While we’ve applied value containment and different measure to attempt to counteract these developments, we could also be unable to completely offset these will increase in our prices and in any other case successfully reply to provide disruptions. To the extent we proceed to expertise elevated bills and provide chain disruptions, our operations could also be adversely impacted.
The Occupational Safety and Health Administration (“OSHA”) revealed an emergency non permanent normal as an interim ultimate regulation in November 2021 which might require all employers with 100 or extra workers (together with the Company) to require their workforce to be absolutely vaccinated or, alternatively, to supply a damaging COVID-19 check end result on a weekly foundation. Additionally, the Centers for Medicare & Medicaid Services, or CMS, issued an interim ultimate rule in November 2021 that can require COVID-19 vaccinations for staff in most Medicare- and Medicaid-certified suppliers and suppliers, together with our hospitals. The rule applies to all workers, together with medical workers, people offering companies underneath preparations, volunteers, and workers who will not be concerned in direct affected person care, topic to accepted spiritual and medical exemptions. On January 13, 2022, the U.S. Supreme Court stayed the OSHA normal pending disposition of the petitions for assessment within the U.S. Court of Appeals for the Sixth Circuit after holding that it was probably that the problem that OSHA lacked the authority to undertake this normal would succeed on the deserves, and granted the U.S. authorities’s request for a keep of decrease court docket injunctions of the CMS regulation, discovering that the CMS rule fell inside the authority granted to the HHS Secretary by Congress with respect to imposing circumstances on the receipt of Medicaid and Medicare funds. It stays potential that the OSHA rule might be upheld by the U.S. Court of Appeals for the Sixth Circuit, that OSHA will difficulty a narrower emergency non permanent normal which might be accepted by the Supreme Court, and/or that Congress will go laws with respect to a “vaccine or test” program. Additionally, some states have applied, or could implement sooner or later, vaccine mandates with respect to healthcare personnel. It is at present not potential to foretell the affect that these vaccine mandates could have on us. However, these vaccine mandates may lead to worker attrition and the lack of personnel who’re unvaccinated, which may adversely have an effect on our enterprise and outcomes of operations.
Economic circumstances and different elements ensuing from the COVID-19 pandemic have affected, and should proceed to have an effect on, our service combine, income combine, payor combine and/or affected person volumes, in addition to our capability to gather excellent receivables. These elements could proceed to adversely have an effect on demand for our companies, in addition to the flexibility of sufferers and different payors to pay for companies rendered. We have noticed deterioration within the collectability of affected person accounts receivable from uninsured sufferers in comparison with pre-pandemic ranges which, if sustained, could adversely have an effect on our monetary outcomes and require an elevated stage of working capital. In addition, our monetary efficiency could proceed to be affected by federal or state legal guidelines, laws, orders, or different governmental or regulatory actions addressing the present COVID-19 pandemic or in any other case affecting the U.S. healthcare system in reference to the pandemic. We may additionally be topic to lawsuits from sufferers, workers and others uncovered to COVID-19 at our amenities. Such actions could contain giant calls for, in addition to substantial protection prices. Our skilled and common legal responsibility insurance coverage could not cowl all claims in opposition to us.
While we aren’t in a position to absolutely quantify the affect that the COVID-19 pandemic can have on our future monetary outcomes, we count on developments associated to COVID-19 to proceed to have an effect on our monetary efficiency. Moreover, the COVID-19 pandemic could have materials hostile results on our outcomes of operations, monetary place, and/or our money flows if financial and/or public well being circumstances within the United States deteriorate because of the pandemic. The ongoing affect of the pandemic on our monetary outcomes will rely upon, amongst different elements, the period and severity of the pandemic, the affect of the pandemic on financial circumstances, the amount of canceled or rescheduled procedures at our amenities, the amount of COVID-19 sufferers cared for throughout our well being techniques, the timing, availability, and acceptance of efficient medical therapies, the provision, acceptance of and want for vaccines (together with extra dosages of vaccines), the unfold of doubtless extra contagious and/or virulent types of the virus, together with any variants of the virus for which at present out there vaccines, therapies, and assessments is probably not efficient or approved, the provision of and processing instances for assessments, and the affect of presidency actions on the hospital business and broader financial system, together with via current and any future stimulus efforts in addition to vaccine and testing necessities. COVID-19 developments proceed to evolve rapidly, and extra developments could happen which we’re unable to foretell. Furthermore, the COVID-19 pandemic has resulted in, and should proceed to lead to, vital disruption of world monetary markets, which may cut back our capability to entry capital and negatively have an effect on our liquidity sooner or later.
We are unable to foretell the final word affect of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) and different stimulus laws, or the impact that such laws and different governmental responses supposed to help suppliers in responding to COVID-19, could have on our enterprise.
In response to the COVID-19 pandemic, federal and state governments have handed laws, promulgated laws and brought different administrative actions supposed to help healthcare suppliers in offering care to COVID-19 and different sufferers through the public well being emergency and to supply monetary reduction. Together, the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act (the “PPPHCE Act”), the Consolidated Appropriations Act, 2021 (the “CAA”), and the American Rescue Plan Act of 2021 (the “ARPA”) authorize over $186 billion in funding to be distributed to eligible healthcare suppliers. These funds are supposed to reimburse eligible suppliers, together with public entities and Medicare- and/or Medicaid-enrolled suppliers and suppliers, for misplaced revenues and well being care associated bills attributable to COVID-19. Recipients will not be required to repay these funds, offered that they attest to and adjust to sure phrases and circumstances, together with limitations on stability billing, not utilizing funds obtained from the PHSSEF to reimburse bills or losses that different sources are obligated to reimburse and audit and reporting necessities.
The CARES Act additionally makes different types of monetary help out there to healthcare suppliers, together with via Medicare and Medicaid funds changes, together with a 20% add-on fee for hospital inpatient care offered to sufferers with COVID-19 and delays of Medicaid disproportionate share hospital reductions. It additionally expanded the Medicare Accelerated and Advance Payment Program, which makes out there accelerated funds of Medicare funds with the intention to enhance money movement to suppliers. CMS is not accepting functions from hospitals and different Medicare Part A suppliers for accelerated funds, and it has suspended the advance fee program for physicians and different Medicare Part B well being care suppliers. Providers are required to repay accelerated funds starting one yr after the fee was issued. After such one-yr interval, Medicare funds owed to suppliers shall be recouped in keeping with the reimbursement phrases. We obtained accelerated funds underneath this program in April 2020, and by the top of 2021 all funds obtained by us had been recouped or repaid to CMS or assumed by patrons in reference to hospitals we’ve divested.
The CARES Act and associated laws suspended the Medicare sequestration fee adjustment from May 1, 2020 via March 31, 2022, which might have in any other case diminished funds to Medicare suppliers by 2% as required by the Budget Control Act of 2011, however prolonged sequestration via 2030. Congress diminished the sequestration adjustment to 1% from April 1 via June 30, 2022, and the adjustment will return to 2% on July 1, 2022. For the primary six months of fiscal yr 2030, the adjustment will enhance to 2.25%, and for the final six months of fiscal yr 2030, the adjustment will enhance to three%. The ARPA, along with offering funding for healthcare suppliers, will increase the federal funds deficit in a way that triggers a further statutorily mandated sequestration underneath the Pay-As-You-Go Act of 2010 (the “PAYGO Act”). As a end result, a further fee discount of as much as 4% was required to take impact in January 2022. However, Congress has delayed implementation of this fee discount till 2023.
Beyond monetary help, federal and state governments have enacted laws and established laws supposed to extend entry to medical provides and gear and ease authorized and regulatory burdens on healthcare suppliers. These efforts have included, for instance, increasing entry to and fee for telehealth companies and prioritizing assessment of drug functions to assist with shortages of emergency medication.
There continues to be a excessive diploma of uncertainty surrounding the implementation of the CARES Act and subsequent laws handed in response to the COVID-19 pandemic. For instance, PHSSEF funds to us are acknowledged as a discount to working prices and bills solely to the extent that we’re moderately assured that the underlying phrases and circumstances of such funds are met. HHS’ interpretation of such underlying phrases and circumstances, together with auditing and reporting necessities, continues to evolve. In June 2021, HHS issued steerage that set forth deadlines for utilizing and reporting on the usage of PHSSEF funds, relying on the dates on which the funds had been obtained. Additional steerage or new or amended interpretations of current steerage on such underlying phrases and circumstances could lead to our incapability to acknowledge extra PHSSEF funds or could end result within the derecognition of quantities beforehand acknowledged, which (in any such case) could also be materials. To the extent that any unrecognized PHSSEF funds which were or could also be obtained by us don’t qualify for reimbursement primarily based on our future operations, we could also be required to return such unrecognized funds to HHS following the top of the COVID-19 pandemic or different future time as could also be decided by HHS steerage. Further, we could also be topic to or incur prices from associated authorities actions together with fee recoupment, audits and inquiries by governmental authorities, and legal, civil or administrative penalties.
Some of the federal and state legislative and regulatory measures permitting for flexibility in supply of care and numerous monetary helps for well being care suppliers can be found solely at some point of the COVID-19 public well being emergency. Many states have ended their declared states of emergency, and it’s unclear whether or not or for the way lengthy the HHS declaration shall be prolonged. The present HHS declaration expires April 16, 2022. The HHS Secretary could select to resume the declaration for successive 90-day intervals for so long as the emergency continues to exist and should terminate the declaration every time the Secretary determines that the general public well being emergency not exists. Additionally, the federal authorities could contemplate extra stimulus and reduction efforts, however we’re unable to foretell whether or not any extra measures shall be enacted or their affect. We are unable to evaluate the extent to which anticipated ongoing impacts on us arising from the COVID-19 pandemic shall be offset by advantages which we could acknowledge or obtain sooner or later underneath the CARES Act and different stimulus laws or any future stimulus measures. Further, there could be no assurance that the phrases of supplier reduction funding or different packages won’t change in ways in which have an effect on our funding or eligibility to take part. We proceed to evaluate the potential affect of the COVID-19 pandemic and authorities responses to the pandemic on our enterprise, outcomes of operations, monetary place and money flows.
Risks Related to Our Business
If we’re unable to finish divestitures as we could deem advisable, our outcomes of operations and monetary situation might be adversely affected.
We beforehand applied a portfolio rationalization and deleveraging technique by divesting hospitals and non-hospital companies. This program concluded on the finish of 2020. Since the conclusion of this program, we’ve continued to obtain curiosity from potential acquirers for sure of our hospitals, and should, every so often, contemplate promoting extra hospitals, or our unconsolidated fairness pursuits in hospitals, if we contemplate any such disposition to be in our greatest pursuits. However, there isn’t any assurance that potential divestitures shall be accomplished or, if they’re accomplished, the mixture quantity of proceeds we’ll obtain, that potential divestitures shall be accomplished inside our focused timeframe, or that potential divestitures shall be accomplished on phrases favorable to us. Additionally, the outcomes of operations for these hospitals and non-hospital companies that we could divest and the potential good points or losses on the gross sales of these companies could adversely have an effect on our outcomes of operations. Moreover, we could incur asset impairment prices associated to potential or accomplished divestitures that cut back our profitability. In addition, after coming into right into a definitive settlement, we could also be topic to the satisfaction of pre-closing circumstances in addition to essential regulatory and governmental approvals, which, if not happy or obtained, could forestall us from finishing the sale. Divestitures may additionally contain continued monetary publicity associated to the divested enterprise, equivalent to via indemnities or retained obligations, that current danger to us.
Any future divestiture actions could current monetary, managerial, and operational dangers. Those dangers embody diversion of administration consideration from enhancing current operations; extra restructuring prices and the associated affect from separating personnel, renegotiating contracts, and restructuring monetary and different techniques; hostile results on current enterprise relationships with sufferers and third-get together payors; and the potential that the collectability of any affected person accounts receivable retained from any divested hospital could also be adversely impacted. Any of those elements may adversely have an effect on our monetary situation and outcomes of operations.
The affect of previous acquisitions, in addition to potential future acquisitions, may have a damaging impact on our operations.
Our enterprise technique has traditionally included development by acquisitions, and we could full extra acquisitions sooner or later. However, not-for-revenue hospital techniques and different for-revenue hospital corporations typically try to amass the identical kind of hospitals as we could want to amass. Some of the rivals for our acquisitions have larger monetary sources than we’ve. Furthermore, some hospitals are offered via an public sale course of, which can lead to larger buy costs than we imagine are cheap. Therefore, we could not have the ability to purchase extra hospitals on phrases favorable to us.
In addition, most of the hospitals we’ve beforehand acquired have had decrease working margins than we do and working losses incurred previous to the time we acquired them. Hospitals acquired sooner or later could have related monetary efficiency points. In the previous, we’ve skilled delays in enhancing the working margins or successfully integrating the operations of sure acquired hospitals, together with some hospitals acquired in reference to the Health Management Associates, Inc. (“HMA”) merger. In the long run, if we’re unable to enhance the working margins of acquired hospitals, function them profitably, or successfully combine their operations, our outcomes of operations and enterprise could also be adversely affected.
Moreover, hospitals that we’ve acquired, or sooner or later may purchase, could have unknown or contingent liabilities, together with liabilities related to ongoing authorized proceedings or for failure to adjust to healthcare legal guidelines and laws. Although we typically search indemnification from sellers protecting these issues, we could nonetheless have materials liabilities for previous actions of acquired hospitals.
If we’re unable to successfully compete, sufferers may use different hospitals and healthcare suppliers, and our enterprise could in any other case be adversely impacted.
The healthcare business is extremely aggressive amongst hospitals and different healthcare suppliers, equivalent to pressing care facilities and different outpatient suppliers and different business members, for sufferers, affiliations with physicians and acquisitions. Changes in licensure or different laws, recognition of latest supplier sorts or fee fashions, and business consolidation may negatively affect our aggressive place. For instance, in states with certificates of want, or CON, or related prior approval necessities, removing of those necessities may take away obstacles to entry and enhance competitors in our service areas. Our hospitals, our rivals, and different healthcare business members are more and more implementing doctor alignment methods, equivalent to buying doctor apply teams, using physicians and taking part in Medicare Shared Savings Program Accountable Care Organizations, or ACOs, or different medical integration fashions. Increasing consolidation inside the payor business, vertical integration efforts involving payors and healthcare suppliers, and price-discount methods by payors, giant employer teams and their associates could affect our capability to contract with payors on favorable phrases, take part in favorable fee tiers or supplier networks, and in any other case have an effect on our aggressive place.
The majority of our hospitals are situated in typically bigger non-city service areas during which we imagine we’re the first, if not the only, supplier of common acute care well being companies. As a end result, essentially the most vital competitors for suppliers of common acute care companies are hospitals exterior of our main service areas, usually hospitals in bigger city areas that present extra complicated companies. Patients in our main service areas could journey to different hospitals due to doctor referrals, payor networks that exclude our suppliers or the necessity for companies we don’t supply, amongst different causes. Patients who obtain companies from these different hospitals could subsequently shift their preferences to these hospitals for the companies we offer.
Our different hospitals, in chosen city service areas, could face competitors from hospitals which are extra established than our hospitals. Some of our rivals supply companies, together with intensive medical analysis and medical teaching programs, which aren’t supplied by our amenities. In addition, in sure markets the place we function, there are giant instructing hospitals that present extremely specialised amenities, gear and companies that is probably not out there at our hospitals. We additionally face competitors from different specialised care suppliers, together with outpatient surgical procedure, orthopedic, oncology and diagnostic facilities. Some rivals are implementing doctor alignment methods, equivalent to using physicians, buying doctor apply teams, and taking part in ACOs, or different medical integration fashions. Cost-reduction methods by giant employer teams and their associates could enhance this competitors.
At September 30, 2021, 49 of our hospitals competed with a couple of different non-affiliated hospital of their respective main service areas. In most markets during which we aren’t the only supplier of common acute care well being companies, our main competitor is a municipal or not-for-revenue hospital. These hospitals are owned by tax-supported governmental businesses or not-for-revenue entities supported by endowments and charitable contributions. These hospitals are exempt from gross sales, property and revenue taxes. Such exemptions and help will not be out there to our hospitals and should present the tax-supported or not-for-revenue entities a bonus in funding common and capital expenditures and providing companies extra specialised than these out there at our hospitals. If our rivals are higher in a position to appeal to sufferers with these choices, we could expertise an total decline in affected person quantity.
Trends towards transparency and worth-primarily based buying could have an effect on our aggressive place and affected person volumes in ways in which we’re unable to foretell. The CMS Care Compare web site makes out there to the general public sure information that hospitals submit in reference to Medicare reimbursement claims, together with efficiency information associated to high quality measures and affected person satisfaction surveys. Further, each hospital should set up and replace yearly a public, on-line itemizing of the hospital’s normal prices for all gadgets and companies, together with discounted money costs and payor-particular prices, together with a shopper-pleasant checklist of prices for sure “shoppable” companies. If any of our hospitals obtain poor outcomes (or outcomes which are decrease than our rivals) on the standard measures or on affected person satisfaction surveys, or if our normal prices are larger than our rivals, we could appeal to fewer sufferers. The No Surprises Act creates extra worth transparency necessities starting January 1, 2022, together with requiring suppliers to ship well being plans of insured sufferers and uninsured sufferers a superb religion estimate of the anticipated prices and diagnostic codes previous to the scheduled date of the service or merchandise. HHS is deferring enforcement of sure necessities of the No Surprises Act relevant to offering estimates to insured people. It is unclear how worth transparency necessities and related initiatives will have an effect on shopper conduct, {our relationships} with payors or our capability to set and negotiate costs.
We count on these aggressive developments to proceed. If we’re unable to compete successfully with different hospitals and different healthcare suppliers, sufferers could search healthcare companies at suppliers apart from our hospitals and affiliated companies.
We could also be adversely affected by consolidation amongst well being insurers and different business members.
In current years, plenty of well being insurers have merged or elevated efforts to consolidate with different non-governmental payors. Insurers are additionally more and more pursuing alignment initiatives with healthcare suppliers. Consolidation inside the medical health insurance business could lead to insurers having elevated negotiating leverage and aggressive benefits, equivalent to larger entry to efficiency and pricing information. Our capability to barter costs and favorable phrases with well being insurers in sure markets might be affected negatively because of this consolidation. Also, the shift towards worth-primarily based fee fashions might be accelerated if bigger insurers, together with these partaking in consolidation actions, discover these fashions to be financially helpful. We can not predict whether or not we will negotiate favorable phrases with payors and in any other case reply successfully to the affect of elevated consolidation within the payor business or vertical integration efforts.
The failure to acquire our medical provides at favorable costs may trigger our working outcomes to say no.
We have a participation settlement with HealthBelief Purchasing Group, L.P. (“HealthTrust”), a gaggle buying group (“GPO”). The present time period of this settlement extends via December 2022, with computerized renewal phrases of 1 yr except both get together terminates by giving discover of non-renewal. We haven’t obtained or offered a discover of termination with respect to this settlement and due to this fact count on it to mechanically renew for a further yr past December 2022. GPOs try and receive favorable pricing on medical provides with producers and distributors, generally by negotiating unique provide preparations in alternate for reductions. To the extent these unique provide preparations are challenged or deemed unenforceable, we may incur larger prices for our medical provides obtained via HealthBelief. Further, prices of provides and medicines could proceed to extend resulting from market stress from pharmaceutical corporations and new product releases. The COVID-19 pandemic continues to trigger elevated demand for private protecting gear and different medical provides, which has resulted in, and should proceed to lead to, larger prices and provide shortages. Also, there could be no assurance that our association with HealthBelief will present the reductions we count on to attain.
If reimbursement charges paid by federal or state healthcare packages or industrial payors are diminished, if we’re unable to keep up favorable contract phrases with payors or adjust to our payor contract obligations, if insured people transfer to insurance coverage with larger protection exclusions or narrower networks, or if insurance coverage protection is in any other case restricted or diminished, our internet working revenues could decline.
During the 9 months ended September 30, 2021, 22% of our internet working revenues got here from the Medicare and Medicaid packages. However, as federal healthcare expenditures proceed to extend and state governments proceed to face budgetary shortfalls, federal and state governments have made, and proceed to make, vital adjustments within the Medicare and Medicaid packages, together with reductions in reimbursement ranges. In addition, CMS could implement adjustments via new or modified demonstration tasks approved pursuant to Medicaid waivers. Some of those adjustments have decreased, or may lower, the sum of money we obtain for our companies relating to those packages.
In addition, authorities and industrial payors in addition to different third events from whom we obtain fee for our companies try to manage healthcare prices by, for instance, requiring hospitals to low cost funds for his or her companies in alternate for unique or most popular participation of their profit plans, proscribing protection via utilization assessment, lowering protection of inpatient and emergency room companies and shifting care to outpatient settings, requiring prior authorizations, and implementing various fee fashions. The capability of economic payors to manage healthcare prices utilizing these measures could also be enhanced by the growing consolidation of insurance coverage and managed care corporations and vertical integration of well being insurers with healthcare suppliers. Limitations on stability billing may additionally cut back the quantity that hospitals and different suppliers are in a position to acquire for out-of-community companies. For instance, efficient January 1, 2022, the No Surprises Act, prohibits suppliers from charging sufferers an quantity past the in-community value sharing quantity for companies rendered by out-of-community suppliers, topic to restricted exceptions. For companies for which stability billing is prohibited, the No Surprises Act establishes an impartial dispute decision (“IDR”) course of for suppliers and payors to deal with fee disputes that can not be resolved via direct negotiation. On October 7, 2021, HHS, along with different authorities businesses, issued an interim ultimate rule to implement the IDR provisions of the No Surprises Act. The interim ultimate rule supplies that, when making a fee dedication, the IDR entity should start with the presumption that the payor’s median contracted fee for a similar or related service in an space (the qualifying fee quantity or “QPA”) is the suitable out-of-community fee for the service at difficulty. The IDR entity should choose the supply closest to the QPA except the supplier or payor submits credible proof that clearly demonstrates the QPA is materially totally different from the suitable out-of-community fee. However, the extra elements that could be thought-about by the IDR entity are secondary to the QPA. The interim ultimate rule is at present topic to a number of authorized challenges, and it’s tough to foretell the end result of efforts to problem or modify the rule.
In addition, worth transparency initiatives could affect our capability to acquire or keep favorable contract phrases. For instance, hospitals are required by federal regulation to publish on-line payor-particular negotiated prices and de-recognized minimal and most prices. Further, the No Surprises Act requires suppliers to ship an insured affected person’s well being plan a superb religion estimate of anticipated prices, together with billing and diagnostic codes, previous to when the affected person is scheduled to obtain the merchandise or service. HHS is deferring enforcement of this requirement till it points extra laws.
During the 9 months ended September 30, 2021, 64% of our internet working revenues got here from industrial payors. Our contracts with payors require us to adjust to plenty of phrases associated to the supply of companies and billing for companies. If we’re unable to barter elevated reimbursement charges, keep current charges or different favorable contract phrases, successfully reply to payor value controls and reimbursement insurance policies or adjust to the phrases of our payor contracts, the funds we obtain for our companies could also be diminished. Also, we’re more and more concerned in disputes with payors and expertise fee denials, each prospectively and retroactively. In addition, enrollment of people in excessive-deductible well being plans, generally known as shopper-directed plans, has elevated over the past decade. In comparability to conventional well being plans, these plans are inclined to have decrease reimbursement charges for suppliers together with larger co-pays and deductibles due from the affected person, which topics us to elevated assortment value and danger. Further, excessive-deductible well being plans could exclude our hospitals and employed physicians from protection.
If we expertise continued development in self-pay quantity and revenues or if we expertise continued deterioration within the collectability of affected person accountability accounts, our monetary situation or outcomes of operations might be adversely affected.
Our main assortment dangers relate to uninsured sufferers and excellent affected person balances for which the first insurance coverage payor has paid some however not all the excellent stability, with the remaining excellent stability (typically deductibles and co-funds) owed by the affected person. Collections are impacted by the financial capability of sufferers to pay and the effectiveness of our assortment efforts. Significant adjustments in payor combine, enterprise workplace operations, financial circumstances or developments in federal and state governmental healthcare protection could have an effect on our assortment of accounts receivable and are thought-about in our estimates of accounts receivable collectability. Moreover, we’ve noticed deterioration within the collectability of affected person accounts receivable for uninsured sufferers compared to pre-pandemic ranges as the results of hostile financial circumstances arising from the COVID-19 pandemic, which deterioration, if sustained, could proceed to adversely have an effect on our monetary outcomes and require an elevated stage of working capital.
In current years, federal and state legislatures have thought-about or handed numerous proposals impacting or doubtlessly impacting the scale of the uninsured inhabitants. The quantity and id of states that select to increase or in any other case modify Medicaid packages and the phrases of growth and different program modifications proceed to evolve. The ARPA supplies extra monetary incentives to increase Medicaid for states that haven’t already performed so, quickly will increase the worth of premium tax credit score subsidies for subsidy-eligible people buying medical health insurance protection via the federal and state-run marketplaces and expands eligibility for the tax credit score subsidies to extra people. Although the federal monetary penalty related to the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010’s (the “Affordable Care Act”) mandate that people enroll in an insurance coverage plan was diminished to $0 as a part of the 2017 tax reform laws, some states have imposed particular person medical health insurance mandates with monetary penalties for noncompliance. Other states have explored or supply public medical health insurance choices. These variables, amongst others, make it tough to foretell the variety of uninsured people and what number of our complete income shall be comprised of self-pay revenues.
We could also be adversely affected by the expansion in affected person accountability accounts because of the adoption of plan constructions, together with well being financial savings accounts, slender networks and tiered networks, that shift larger accountability for care to people via larger exclusions and copayment and deductible quantities. Further, our capability to gather affected person accountability accounts could also be restricted by statutory, regulatory and investigatory initiatives, together with personal lawsuits directed at hospital prices and assortment practices for uninsured and underinsured sufferers and regulatory restrictions on prices for out-of-community companies. For instance, beginning January 1, 2022, the No Surprises Act requires suppliers to ship uninsured and self-pay sufferers a superb religion estimate of anticipated prices for gadgets and companies. The estimate should cowl gadgets and companies which are moderately anticipated to be offered along with the first merchandise or companies, together with these that could be offered by different suppliers. If the affected person receives a invoice that’s considerably larger than the anticipated prices within the good religion estimate, they could provoke a dispute decision course of established by HHS. In addition, a deterioration of financial circumstances within the United States may doubtlessly result in larger ranges of uninsured sufferers, lead to larger ranges of sufferers coated by decrease paying authorities packages, lead to fiscal uncertainties at each authorities payors and personal insurers and/or restrict the financial capability of sufferers to make funds for which they’re accountable. If we expertise development in self-pay quantity or continued deterioration in collectability of affected person accountability accounts, our monetary situation or outcomes of operations might be adversely affected.
Some of the non-city communities during which we function face difficult financial circumstances, and the failure of sure employers, or the closure of sure manufacturing and different amenities in our markets, may have a disproportionate affect on our hospitals.
Some of the non-city communities during which we function have been dealing with difficult financial circumstances which predate, and prolong past the macroeconomic challenges arising from, the COVID-19 pandemic. In addition, the economies within the non-city communities during which our hospitals primarily function are sometimes depending on a small variety of giant employers, particularly manufacturing or related amenities. These employers usually present revenue and medical health insurance for a disproportionately giant variety of neighborhood residents who could rely upon our hospitals for care. The failure of a number of giant employers, or the closure or substantial discount within the variety of people employed at manufacturing or different amenities situated in or close to most of the non-city communities during which our hospitals primarily function, may trigger affected workers to maneuver elsewhere for employment or lose insurance coverage protection that was in any other case out there to them. When sufferers are experiencing private monetary difficulties or have issues about common financial circumstances, they could delay or forgo elective procedures, select to hunt care in emergency rooms and buy excessive-deductible insurance coverage plan or no insurance coverage in any respect, which will increase a hospital’s dependence on self-pay income.
The prevalence of those occasions could trigger a discount in our revenues and adversely affect our outcomes of operations.
The demand for companies offered by our hospitals and affiliated suppliers could be impacted by elements past our management.
Our admissions and adjusted admissions in addition to acuity developments could also be impacted by elements past our management. For instance, seasonal fluctuations within the severity of influenza and different crucial sicknesses, equivalent to COVID-19, unplanned shutdowns or unavailability of our amenities resulting from climate or different unexpected occasions, decreases in developments in excessive acuity service choices, adjustments in competitors from different service suppliers, turnover in physicians affiliated with our hospitals, or adjustments in medical know-how can have an effect on the demand for companies at our hospitals and affiliated suppliers.
In addition, sure of our amenities are situated in hurricane-inclined coastal areas in Florida and different states, and our operations could also be adversely impacted by hurricanes, tornadoes, winter storms, and different extreme climate circumstances, which hostile climate circumstances could also be extra frequent and/or extreme as the results of local weather change. Moreover, we might be affected by local weather change and different environmental points to the extent such points adversely have an effect on the final financial system, adversely affect our provide chain or enhance the prices of provides wanted for our operations, or in any other case lead to disruptions impacting the communities during which our amenities are situated.
The affect of those or different elements past our management may have an hostile impact on our enterprise, monetary place and outcomes of operations.
A future pandemic, epidemic or outbreak of an infectious illness within the markets during which we function or that in any other case impacts our amenities may adversely affect our enterprise.
If a future pandemic, epidemic, or outbreak of an infectious illness or different public well being disaster had been to have an effect on our markets, our enterprise might be adversely affected. Any such disaster may diminish the general public belief in healthcare amenities, particularly hospitals that fail to precisely or well timed diagnose, or which are treating (or have handled) sufferers affected by contagious illnesses. If any of our amenities had been concerned in treating sufferers for such a contagious illness, different sufferers would possibly cancel elective procedures or fail to hunt wanted care at our amenities. Patient volumes could decline or volumes of uninsured and underinsured sufferers could enhance, relying on the financial circumstances surrounding the pandemic, epidemic, or outbreak. Further, any such pandemic would possibly adversely affect our enterprise by inflicting a short lived shutdown or diversion of sufferers, by disrupting or delaying manufacturing and supply of supplies and merchandise within the provide chain or by inflicting staffing shortages in our amenities. Although we’ve catastrophe plans in place and function pursuant to infectious illness protocols, the potential affect, in addition to the general public’s and authorities’s response to, of any such future pandemic, epidemic or outbreak of an infectious illness with respect to our markets or our amenities is tough to foretell and will adversely affect our enterprise.
Our efficiency is determined by our capability to recruit and retain high quality physicians.
The success of our healthcare amenities relies upon partially on the quantity and high quality of the physicians on the medical staffs of our healthcare amenities, our capability to make use of high quality physicians, the admitting and utilization practices of employed and impartial physicians, sustaining good relations with these physicians and controlling prices associated to the employment of physicians. Although we make use of some physicians, physicians are sometimes not workers at our healthcare amenities at which they apply. In most of the markets we serve, many physicians have admitting privileges at different healthcare amenities along with our healthcare amenities. Such physicians could terminate their affiliation with or employment by our healthcare amenities at any time. Moreover, we count on to face elevated competitors from well being insurers and personal fairness-again corporations in search of to amass or affiliate with physicians or doctor practices.
In addition, we could face elevated challenges recruiting and retaining high quality physicians because the doctor inhabitants reaches retirement age, particularly if there’s a scarcity of physicians prepared and in a position to present comparable companies. In some markets, doctor recruitment and retention could also be affected by a scarcity of physicians in sure specialties or the difficulties physicians could expertise in acquiring malpractice insurance coverage. The sorts, quantity and period of compensation and help we will present when recruiting physicians are restricted by the federal Physician Self-Referral Law (generally referred to as the Stark Law), the federal Anti-Kickback Statute, related state legal guidelines and implementing laws. If we’re unable to supply satisfactory help personnel or technologically superior gear and amenities that meet the wants of these physicians and their sufferers, our capability to recruit and retain high quality physicians could also be negatively impacted.
Our efficiency and labor prices have been, and should proceed to be, adversely affected by aggressive labor market circumstances and the scarcity of skilled nurses.
In addition to our physicians, the operations of our healthcare amenities are depending on the efforts, skills and expertise of our facility administration, healthcare professionals, equivalent to nurses, pharmacists lab technicians, and medical help personnel. We compete with different healthcare suppliers in recruiting and retaining certified facility administration and personnel accountable for the each day operations of our healthcare amenities, together with nurses, different non-doctor healthcare professionals and medical help personnel.
The healthcare business has been experiencing a aggressive labor market arising out of present financial circumstances and the COVID-19 pandemic. In some markets during which we function, the provision of nurses, different healthcare professionals and medical help personnel has been a big working difficulty for healthcare suppliers, which has been exacerbated by the present aggressive labor market. These developments have compelled, and should proceed to compel, us to reinforce wages and advantages to recruit and retain nurses, different healthcare professions and medical help personnel, or to rent costlier non permanent or contract personnel. In addition, the states during which we function may undertake necessary nurse-staffing ratios or may cut back necessary nurse-staffing ratios already in place. State-mandated nurse-staffing ratios may considerably have an effect on labor prices and have an hostile affect on revenues if we’re required to restrict admissions with the intention to meet the required ratios.
As of September 30, 2021, sure workers at six of our hospitals are represented by numerous labor unions. While we’ve not skilled work stoppages to this point which have materials and adversely affected our enterprise or outcomes of operations, elevated or ongoing labor union exercise may adversely have an effect on our labor prices or in any other case adversely affect us. In addition, when negotiating collective bargaining agreements with unions, whether or not such agreements are renewals or first contracts, there’s the likelihood that strikes may happen through the negotiation course of, and our continued operation throughout any strikes may enhance our labor prices and in any other case adversely affect us. Finally, potential adjustments to federal labor legal guidelines and laws, together with these supported by the present presidential administration, may enhance the chance of worker unionization exercise and the flexibility of workers to unionize.
If our labor prices proceed to extend, we could not have the ability to elevate charges to offset these elevated prices. Because a big share of our revenues consists of mounted, potential funds, our capability to go alongside elevated labor prices is constrained. In the occasion we aren’t solely efficient at recruiting and retaining certified facility administration, nurses and different medical help personnel, or in controlling labor prices, this might have an hostile impact on our outcomes of operations.
The business development in the direction of worth-primarily based buying could negatively affect our enterprise.
There is a development towards worth-primarily based buying of healthcare companies throughout the healthcare business amongst each authorities and industrial payors. Generally, worth-primarily based buying initiatives tie fee to the standard and effectivity of care. For instance, hospital funds could also be negatively impacted by the prevalence of hospital acquired circumstances, or HACs. Medicare doesn’t reimburse for care associated to HACs, and hospitals within the backside quartile of HAC charges obtain a 1% discount of their complete Medicare funds the next yr. In addition, federal funds is probably not used underneath the Medicaid program to reimburse suppliers for companies offered to deal with HACs. Hospitals that have extra readmissions for designated circumstances obtain diminished funds for all inpatient discharges. HHS additionally reduces Medicare inpatient hospital funds for all discharges by a required share and swimming pools the quantity collected from these reductions to fund funds to reward hospitals that meet or exceed sure high quality efficiency requirements. Further, Medicare and Medicaid require hospitals to report sure high quality information to obtain full reimbursement updates.
HHS has centered on tying Medicare funds to high quality or worth via various fee fashions, which typically purpose to make suppliers attentive to the standard and price of care they ship to sufferers. Examples of different fee fashions embody ACOs and bundled fee preparations. An ACO is a care coordination mannequin supposed to provide financial savings because of improved high quality and operational effectivity. In bundled fee fashions, suppliers obtain one fee for companies offered to sufferers for sure medical circumstances or episodes of care, accepting accountability for prices and high quality of care. Providers could obtain supplemental Medicare funds or owe repayments to CMS relying on whether or not spending exceeds or falls under a specified spending goal and whether or not sure high quality requirements are met. Generally, participation in Medicare bundled fee packages is voluntary, however CMS at present requires hospitals in chosen markets to take part in bundled fee initiatives for particular orthopedic procedures and finish-stage renal illness therapy, and a compulsory radiation oncology bundled fee mannequin is anticipated to start January 1, 2023.
In October 2021, the Center for Medicare and Medicaid Innovation (“CMS Innovation Center”) launched an overview of its technique for the subsequent decade, noting the necessity to speed up the motion to worth-primarily based care and drive broader system transformation. By 2030, the CMS Innovation Center goals to have all charge-for-service Medicare beneficiaries and the overwhelming majority of Medicaid beneficiaries in an accountable care relationship with suppliers who’re accountable for high quality and complete medical prices. The CMS Innovation Center signaled its intent to streamline its fee fashions and to extend supplier participation via implementation of extra necessary fashions.
There are additionally a number of state-pushed worth-primarily based care initiatives. For instance, some states have aligned high quality metrics throughout payors via laws or regulation. Commercial payors are transitioning towards worth-primarily based reimbursement preparations as properly. Further, many industrial payors require hospitals to report high quality information and prohibit reimbursement for sure preventable hostile occasions.
We count on worth-primarily based buying packages, together with packages that situation reimbursement on affected person consequence measures, to grow to be extra frequent and to contain a better share of reimbursement quantities. It is unclear whether or not these and different various fee fashions will efficiently coordinate care and cut back prices or whether or not they’ll lower mixture reimbursement. While we imagine we’re adapting our enterprise methods to compete in a price-primarily based reimbursement setting, we’re unable at the moment to foretell how this development will have an effect on our outcomes of operations. If we carry out at a stage under the outcomes demonstrated by our rivals, are unable to fulfill or exceed the standard efficiency requirements underneath any relevant worth-primarily based buying program, or in any other case fail to successfully present or coordinate the environment friendly supply of high quality healthcare companies, our fame within the business could also be negatively impacted, we could obtain diminished reimbursement quantities and we could owe repayments to payors, inflicting our revenues to say no.
Our revenues are considerably concentrated in a small variety of states which can make us significantly delicate to regulatory and financial adjustments in these states.
Our revenues are significantly delicate to regulatory and financial adjustments in states during which we generate a good portion of our revenues, together with Indiana, Florida and Texas. Accordingly, any change within the present demographic, financial, aggressive, or regulatory circumstances in these states may have an hostile impact on our enterprise, monetary situation, or outcomes of operations. Changes to the Medicaid packages in these states may even have an hostile impact on our enterprise, monetary situation, outcomes of operations, or money flows.
For instance, the Texas Healthcare Transformation and Quality Improvement Program, or the Texas Waiver Program, which supplies funding for uncompensated care and supply system reform initiatives, is operated underneath a waiver granted pursuant to Section 1115 of the Social Security Act. The present waiver continues via September 30, 2022. Although the earlier presidential administration accepted a ten-yr extension of the Texas Waiver Program, via September 2030, CMS rescinded this extension in April 2021. The Texas Attorney General filed a lawsuit difficult the rescission and, in August 2021, a federal district choose granted a preliminary injunction quickly reinstating the extension. While the lawsuit is pending, the Texas Health and Human Services Commission has re-submitted its utility to increase the waiver program. It is tough to foretell whether or not all or a part of the Texas Waiver Program shall be eradicated, additional prolonged or modified, any of which may negatively affect our revenues.
Risks Related to Legal Proceedings
We are the topic of assorted authorized, regulatory and governmental proceedings that, if resolved unfavorably, may have an hostile impact on us, and we could also be topic to different loss contingencies, each recognized and unknown.
We are a celebration to numerous authorized, regulatory and governmental proceedings and different associated issues. Those proceedings embody, amongst different issues, authorities investigations. In addition, we’re and should grow to be topic to different loss contingencies, each recognized and unknown, which can relate to previous, current and future information, occasions, circumstances and occurrences. Should an unfavorable consequence happen in reference to our authorized, regulatory or governmental proceedings or different loss contingencies, or if we grow to be topic to any such loss contingencies sooner or later, there might be an hostile affect on our monetary place, outcomes of operations and liquidity.
In explicit, authorities investigations, in addition to qui tam lawsuits, could result in vital fines, penalties, damages funds or different sanctions, together with exclusion from authorities healthcare packages. Settlements of lawsuits involving Medicare and Medicaid points routinely require each financial funds and company integrity agreements, every of which may have an hostile impact on our enterprise, monetary situation, outcomes of operations and/or money flows.
We might be topic to substantial uninsured liabilities or elevated insurance coverage prices because of vital authorized actions.
Physicians, hospitals and different healthcare suppliers have grow to be topic to an growing variety of authorized actions alleging malpractice, product legal responsibility, or associated authorized theories. Even in states which have imposed caps on damages, litigants are in search of recoveries underneath new theories of legal responsibility that may not be topic to the caps on damages. Many of those actions contain giant claims and vital protection prices. To shield us from the price of these claims, we keep claims made skilled malpractice legal responsibility insurance coverage and common legal responsibility insurance coverage protection in extra of these quantities for which we’re self-insured. This insurance coverage protection is in quantities that we imagine to be adequate for our operations; nonetheless, our insurance coverage protection could not proceed to be out there at an affordable value for us to keep up satisfactory ranges of insurance coverage. Additionally, our insurance coverage protection doesn’t cowl all claims in opposition to us, equivalent to fines, penalties, or different harm and authorized expense funds ensuing from qui tam lawsuits. We can not predict the end result of present or future authorized actions in opposition to us or the impact that judgments or settlements in such issues could have on us or on our insurance coverage prices. Additionally, all skilled and common legal responsibility insurance coverage we buy is topic to coverage limitations. If the mixture restrict of any of our skilled and common legal responsibility insurance policies is exhausted, in complete or partially, it may deplete or cut back the bounds out there to pay some other materials claims relevant to that coverage interval. Furthermore, a number of of our insurance coverage carriers may grow to be bancrupt and unable to meet its or their obligations to defend, pay or reimburse us when these obligations grow to be due. In that case, or if funds of claims exceed our estimates or will not be coated by our insurance coverage, it may have an hostile impact on our enterprise, monetary situation or outcomes of operations.
In reference to the ultimate auditing and reporting necessities to which we’re topic underneath the phrases of the Corporate Integrity Agreement, or CIA, we may grow to be topic to additional motion by the Office of Inspector General of HHS, or OIG, which may embody the imposition of civil financial penalties and/or the extension of the time period of the CIA.
On August 4, 2014, we introduced that we had entered right into a civil settlement with the U.S. Department of Justice, different federal businesses and recognized relators that concluded beforehand introduced investigations and litigation associated to brief keep admissions via emergency departments at sure of our affiliated hospitals. In addition to the quantities paid within the settlement, we executed the CIA with the OIG that has been integrated into our current and complete compliance program, which CIA was subsequently amended in September 2018. Although the CIA expired in September 2021, we’re nonetheless topic to ultimate audit and reporting necessities underneath the phrases of the CIA. In reference to these ultimate audit and reporting necessities, it stays potential that we’ll grow to be topic to additional motion by the OIG, which may embody the imposition of civil financial penalties and/or the extension of the time period of the CIA.
Risks Related to Government Regulation
We are unable to foretell the final word affect of well being reform initiatives, together with efforts to considerably change the Affordable Care Act, or the impact that well being reform efforts could have on our enterprise.
In current years, the U.S. Congress and sure state legislatures have launched, thought-about or handed a lot of proposals and laws designed to make main adjustments within the healthcare system, together with adjustments supposed to extend entry to medical health insurance.
The Affordable Care Act is essentially the most distinguished of those reform efforts. The regulation expanded medical health insurance protection via a mix of public program growth and personal sector medical health insurance reforms, reduces development in Medicare reimbursement to hospitals, and promotes worth-primarily based buying. However, the Affordable Care Act has been the topic of efforts by the earlier presidential administration and sure members of Congress to repeal or make vital adjustments to its scope, its implementation and/or its interpretation. For instance, efficient January 2019, the monetary penalty for people that fail to keep up insurance coverage protection related to the person mandate was diminished to $0. This change resulted in authorized challenges to the constitutionality of the person mandate and validity of the Affordable Care Act as a complete. However, in June 2021, the U.S. Supreme Court decided that the plaintiffs lacked standing and dismissed the problem to the Affordable Care Act with out particularly ruling on the constitutionality of the ACA, permitting the regulation to stay in place.
There is uncertainty concerning whether or not, when, and the way the Affordable Care Act shall be additional modified and the way the Affordable Care Act shall be interpreted and applied, though the Biden administration has typically indicated its intent to guard and strengthen the Affordable Care Act and Medicaid packages. Changes by Congress or authorities businesses to the interpretation or implementation of the Affordable Care Act may eradicate or alter provisions helpful to us whereas leaving in place provisions lowering our reimbursement, and thereby have an hostile impact on our enterprise.
There can be uncertainty concerning whether or not, when, and what different well being reform measures shall be adopted, the timing and implementation of different provisions, and the affect of different provisions on suppliers in addition to different healthcare business members. For instance, some members of Congress have proposed measures that will increase authorities-funded protection, and a few states are contemplating or have applied public medical health insurance choices. CMS directors could grant states numerous flexibilities within the administration of state Medicaid packages and make adjustments to Medicaid fee fashions, together with adopting worth-primarily based care fashions. Other well being reform initiatives and proposals, equivalent to the restrictions and prohibitions on shock billing enacted underneath the No Surprises Act and worth transparency necessities, could affect costs, our aggressive place and {our relationships} with sufferers, insurers, and ancillary suppliers (equivalent to anesthesiologists, radiologists, and pathologists). Other business members, equivalent to personal payors and enormous employer teams and their associates, may additionally introduce monetary or supply system reforms. We are unable to foretell the character and success of such initiatives. Healthcare reform initiatives, together with adjustments to the Affordable Care Act, could have an hostile affect on our enterprise.
If we fail to adjust to intensive legal guidelines and authorities laws, together with fraud and abuse legal guidelines, we may undergo penalties or be required to make vital adjustments to our operations.
The healthcare business is ruled by legal guidelines and laws on the federal, state and native authorities ranges. These legal guidelines and laws embody requirements addressing, amongst different points, licensure, certification, and enrollment with authorities packages; the need and adequacy of medical care; high quality of medical gear and companies; {qualifications} of medical and help personnel; working insurance policies and procedures; screening, stabilization and switch of people who’ve emergency medical circumstances; billing and coding for companies; correctly dealing with overpayments; classification of ranges of care offered; getting ready and submitting value reviews; relationships with referral sources and referral recipients; upkeep of satisfactory data; hospital use; fee-setting; constructing codes; environmental safety; privateness and safety; interoperability and refraining from info blocking; debt assortment; limits or prohibitions on stability billing and billing for out-of-community companies; and communications with sufferers and shoppers. Examples of those legal guidelines embody, however will not be restricted to, the Health Insurance Portability and Accountability Act of 1996, the Stark Law, the federal Anti-Kickback Statute, the federal False Claims Act, the Emergency Medical Treatment and Active Labor Act, and related state legal guidelines.
There are heightened coordinated civil and legal enforcement efforts by each federal and state authorities businesses regarding the healthcare business, together with the hospital phase. Enforcement actions have centered on monetary preparations between hospitals and physicians, billing for companies with out adequately documenting medical necessity and billing for companies exterior the protection pointers for such companies. Specific to our hospitals, we’ve obtained inquiries and subpoenas from numerous governmental businesses concerning these and different issues, and we’re additionally topic to numerous claims and lawsuits regarding such issues.
If we fail to adjust to relevant legal guidelines and laws, that are topic to alter, we might be topic to liabilities, together with civil penalties, cash damages, the lack of our licenses to function a number of amenities, exclusion of a number of amenities from participation within the Medicare, Medicaid and different federal and state well being care packages, civil lawsuits and legal penalties. The prices of compliance with, and the opposite burdens imposed by, these and different legal guidelines or regulatory actions could enhance our operational prices, lead to interruptions or delays within the availability of techniques and/or lead to a affected person quantity decline. We may additionally face audits or investigations by authorities businesses regarding our compliance with these laws. An hostile consequence underneath any such investigation or audit may lead to legal responsibility, lead to hostile publicity, and adversely have an effect on our enterprise. In the long run, evolving interpretations or enforcement of relevant legal guidelines or laws may topic our present practices to allegations of impropriety or illegality or may require us to make adjustments in our amenities or operations. In addition, different laws or laws could also be adopted that would adversely have an effect on our enterprise.
If there are delays in regulatory updates by governmental entities to federal and state healthcare packages, we could expertise elevated volatility in our working outcomes as such delays could lead to a timing distinction between when such program revenues are earned and once they grow to be recognized or estimable for functions of accounting recognition.
We derive a big quantity of our internet working revenues from governmental healthcare packages, primarily Medicare and Medicaid. The reimbursements resulting from us from these packages are topic to legislative and regulatory adjustments that may have a big affect on our working outcomes. When delays happen within the implementation of laws or passage of laws, there’s the potential for materials will increase or decreases in working revenues to be acknowledged in intervals subsequent to when such associated companies had been carried out, ensuing within the potential for an hostile impact on our consolidated monetary place and consolidated outcomes of operations.
Security breaches, lack of information, and precise or perceived failures to adjust to authorized necessities concerning the privateness and safety of well being info or different regulated, delicate or confidential info, or authorized necessities concerning information privateness or information safety, and different cybersecurity incidents, may adversely have an effect on our enterprise, outcomes of operations and monetary situation.
The information safety panorama is quickly evolving, and we’re or could grow to be topic to quite a few state and federal legal guidelines, necessities and laws governing the gathering, use, storage, processing, disclosure, retention (“Processing”), privateness and safety of well being-associated and different regulated, delicate or confidential info. For instance, the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act of 2009, every as amended, and the privateness and safety laws that implement these legal guidelines (collectively, “HIPAA”) set up nationwide privateness and safety requirements for the safety of protected well being info, or PHI, by well being plans, healthcare clearinghouses and sure healthcare suppliers, known as coated entities, and the enterprise associates with whom such coated entities contract for companies. HIPAA requires coated entities like us to develop and keep insurance policies and procedures with respect to the privateness and safety of PHI and to undertake administrative, bodily and technical safeguards to guard such info. Covered entities should notify affected people with out unreasonable delay of breaches of unsecured PHI, the HHS Office for Civil Rights (“OCR”), which enforces HIPAA, and, within the case of bigger breaches, the media. Failure to adjust to the HIPAA privateness and safety requirements may end up in civil financial penalties, decision agreements, monitoring agreements, and, in sure circumstances, legal penalties together with fines and/or imprisonment. A coated entity could also be topic to penalties because of a enterprise affiliate violating HIPAA. In addition, state attorneys common could implement the HIPAA privateness and safety laws in response to violations that threaten the privateness of state residents. Although HIPAA doesn’t create a non-public proper of motion permitting people to sue in civil court docket for violations, the legal guidelines and laws have been used as the idea for responsibility of care in state civil fits equivalent to these for negligence or recklessness within the misuse or breach of PHI.
There are quite a few different legal guidelines and legislative and regulatory initiatives on the federal and state ranges governing the confidentiality, privateness, availability, integrity and safety of PHI and different kinds of private info. Certain state legal guidelines could also be extra stringent, broader in scope or supply larger particular person rights with respect to PHI than HIPAA, state legal guidelines could differ from one another, and the interaction of federal and state legal guidelines could also be topic to various interpretations by courts and authorities businesses, all of which can complicate compliance efforts. Where state legal guidelines are extra protecting than HIPAA, we’ve to adjust to their stricter provisions. Not solely do a few of these state legal guidelines impose fines and different penalties upon violators, however some could afford personal rights of motion to people who imagine their private info has been misused. We could not stay in compliance with various privateness and safety necessities in all the jurisdictions during which we do enterprise, significantly to the extent they’re inconsistent, quickly altering and/or ambiguous and unsure as to their applicability to our enterprise practices.
In addition, we’re topic to extra common shopper safety legal guidelines and laws in reference to our enterprise actions. For instance, the Federal Trade Commission makes use of its shopper safety authority to provoke enforcement actions in response to information breaches. Our advertising and affected person engagement actions are topic to communications legal guidelines such because the Telephone Consumer Protection Act, or the TCPA, and the Controlling the Assault of Non-Solicited Pornography and Marketing Act, or CAN-SPAM. Determination by a court docket or regulatory company that our calling, texting or e-mail practices violate the TCPA or CAN-SPAM may topic us to civil penalties and will require us to alter some parts of our enterprise. Even an unsuccessful problem by sufferers or regulatory authorities of our actions may lead to hostile publicity and will require a pricey response from and protection by us.
Although we try to adjust to relevant legal guidelines and laws, the necessities associated to the Processing, privateness and safety of well being and different regulated, delicate or confidentialinformation are evolving quickly and could also be interpreted or utilized in an inconsistent method throughout jurisdictions. The value of compliance with these legal guidelines and laws is excessive and is prone to enhance sooner or later. Any failure or perceived failure by us to adjust to relevant information privateness and safety legal guidelines or laws, our inside insurance policies and procedures or our contracts governing our Processing of well being and different regulated, delicate or confidential info, or to in any other case adequately deal with privateness and safety issues, may lead to damaging publicity, authorities investigations and enforcement actions, claims by third events and harm to our fame, any of which may have a fabric hostile impact on our operations, monetary efficiency and enterprise.
If our adoption and utilization of digital well being document techniques fails to fulfill HHS requirements, our consolidated outcomes of operations might be adversely affected, and we could also be adversely affected by altering and extra burdensome interoperability necessities.
Under the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and different legal guidelines, eligible hospitals that fail to display significant use of licensed digital well being data, or EHR, know-how and haven’t utilized and certified for a hardship exception are topic to diminished reimbursement from Medicare. Eligible healthcare professionals are additionally topic to optimistic or damaging fee changes primarily based, partially, on their use of EHR know-how. Thus, if our hospitals and employed professionals are unable to correctly undertake, keep, and make the most of licensed EHR techniques, we might be topic to penalties and lawsuits that will have an hostile impact on our consolidated monetary place and consolidated outcomes of operations.
As EHR applied sciences have grow to be widespread, the federal authorities can be selling interoperability and growing affected person entry to digital well being info. The 21st Century Cures Act and implementing laws prohibit info blocking by well being care suppliers and sure different entities. Information blocking is outlined as partaking in actions which are prone to intrude with the entry, alternate or use of digital well being info, topic to restricted exceptions. We could also be topic to penalties or different disincentives or expertise reputational harm for failure to conform. Current and future initiatives associated to well being care know-how and interoperability could require adjustments to our operations, impose new and sophisticated obligations on us, have an effect on {our relationships} with suppliers, distributors, healthcare info exchanges and different third events and require investments in infrastructure. It is tough to foretell the affect of those initiatives.
State efforts to control the development, acquisition or growth of healthcare amenities may restrict our capability to construct or purchase extra healthcare amenities, renovate our amenities or increase the breadth of companies we provide.
Some states during which we function require a CON or different prior approval for the development or acquisition of healthcare amenities, capital expenditures exceeding a prescribed quantity, adjustments in mattress capability or companies and another issues. In evaluating a proposal, these states contemplate the necessity for extra or expanded healthcare amenities or companies. If we aren’t in a position to receive required CONs or different prior approvals, we won’t be able to amass, function, exchange or increase our amenities or increase the breadth of companies we provide. Furthermore, if a CON or different prior approval upon which we relied to spend money on building of a substitute or expanded facility had been to be misplaced via an attraction course of or revoked, we could not have the ability to recuperate the worth of our funding.
State efforts to control the sale of hospitals operated by municipal or not-for-revenue entities may forestall us from buying a majority of these hospitals.
Many states have adopted laws concerning the sale or different disposition of hospitals operated by municipal or not-for-revenue entities. In some states that should not have particular laws, the attorneys common have demonstrated an curiosity in these transactions underneath their common obligation to guard the usage of charitable property. These legislative and administrative efforts focus totally on the suitable valuation of the property divested and the usage of the proceeds of the sale by the non-revenue vendor. While these assessment and, in some situations, approval processes can add extra time to the closing of a hospital acquisition, we’ve not had any vital difficulties or delays in finishing acquisitions. However, future state actions may delay and even forestall our capability to amass hospitals as soon as we return to our acquisition technique.
We could incur extra tax liabilities.
We are topic to tax within the United States in addition to these states during which we do enterprise. Changes in tax legal guidelines, together with elevated charges, or interpretations of tax legal guidelines by taxing authorities or different normal setting our bodies, may enhance our tax obligations and materially and adversely affect our outcomes of operations.
Risks Related to Impairment
If the honest worth of our reporting unit declines, a fabric non-money cost to earnings from impairment of our goodwill may end result.
On an ongoing foundation, underneath typically accepted accounting ideas within the United States (“GAAP”), we consider, primarily based on the honest worth of our reporting unit, whether or not the carrying worth of our goodwill is impaired when occasions or adjustments in circumstances point out that such carrying worth is probably not recoverable. GAAP requires us to check goodwill for impairment not less than yearly.
In assessing the honest worth of this reporting unit, we contemplate, amongst different issues, the newest worth of our frequent inventory or honest worth of our lengthy-time period debt, estimates of future income and expense development, estimated market multiples, anticipated capital expenditures, revenue tax charges, and prices of invested capital. We recorded materials non-money impairment prices with respect to our hospital operations reporting unit in 2016 and 2017, and will document materials impairment prices sooner or later if our estimates or assumptions with respect to such honest worth dedication change sooner or later.
A major decline in working outcomes or different indicators of impairment at a number of of our amenities may lead to a fabric, non-money cost to earnings to impair the worth of lengthy-lived property.
Our operations are capital intensive and require vital funding in lengthy-lived property, equivalent to property, gear and different lengthy-lived intangible property, together with capitalized inside-use software program. If one in every of our amenities experiences declining working outcomes or is adversely impacted by a number of of those danger elements, we could not have the ability to recuperate the carrying worth of these property via our future working money flows. On an ongoing foundation, we consider whether or not adjustments in future undiscounted money flows mirror an impairment within the honest worth of our lengthy-lived property. Additionally, as we proceed to rationalize our portfolio of hospitals, we consider whether or not a hospital or a gaggle of hospitals is impaired primarily based on an evaluation of the promoting worth from a definitive settlement in comparison with the carrying worth of the web property being offered. If the carrying worth of our lengthy-lived property is impaired, we could incur a fabric non-money cost to earnings.
Risks Related to Cybersecurity and Technology
Our operations might be considerably impacted by interruptions or restrictions in entry to our info techniques.
Our operations rely closely on the correct perform, availability and safety of our info techniques, in addition to these of our third-get together suppliers, to gather, keep, course of and use delicate information and different medical, operational and monetary info. Information techniques require an ongoing dedication of serious sources to keep up and improve current techniques and to develop new techniques with the intention to preserve tempo with continuous adjustments in info know-how. We additionally depend on third-get together suppliers of monetary, medical, affected person accounting and community info companies, together with those who interface with our personal techniques, and, consequently, we face operational challenges in sustaining a number of supplier platforms and facilitating the interface of such techniques with each other. We depend on these third-get together suppliers to have acceptable controls to guard confidential info and different delicate or regulated information. We don’t management the data techniques of third-get together suppliers, and in some instances we could have problem accessing info archived on third-get together techniques.
Our networks and knowledge techniques are additionally topic to disruption resulting from occasions equivalent to a significant earthquake, pure catastrophe, fireplace, telecommunications failure, energy outages, new system implementations, pc viruses, ransomware or different malware, safety breaches, cyber-assaults, worker utilization errors, acts of conflict, terrorist or legal actions or different catastrophic occasions. If the data techniques on which we rely fail or are interrupted or if our entry to those techniques is proscribed sooner or later, or we expertise information loss or manipulation, it may lead to unauthorized disclosure, misuse, loss or alteration of such information, interruptions and delays in our regular enterprise operations, potential legal responsibility underneath relevant legal guidelines, regulatory penalties, and harm to our fame. Any of those may have an hostile impact on our enterprise, monetary situation or outcomes of operations.
A cyber-assault or safety breach may end result within the compromise of our amenities, confidential information or crucial information techniques and provides rise to potential hurt to sufferers, remediation and different bills, expose us to legal responsibility underneath HIPAA, privateness and information safety legal guidelines and laws, shopper safety legal guidelines, frequent regulation or different theories, topic us to litigation and federal and state governmental inquiries, harm our fame, and in any other case be disruptive to our enterprise.
We rely extensively on info know-how techniques to handle medical and monetary information, to speak with our sufferers, payors, distributors and different third events, to summarize and analyze working outcomes, and for plenty of different crucial operational features. We have made vital investments in know-how to guard our techniques, gear and medical gadgets and knowledge from cybersecurity dangers. Although we monitor and routinely check our safety techniques and processes and have redundancies in addition to different proactive measures designed to guard the integrity, safety and availability of the techniques and information we handle and management, there could be no assurance that we, or our third get together distributors and suppliers, won’t be topic to safety breaches and different cybersecurity threats, together with these associated to the usage of ransomware and different malicious software program or different makes an attempt by third events to entry, purchase, use, disclose, misappropriate or manipulate our info or disrupt our operations. In spite of our safety measures, our info know-how and infrastructure have been topic to cyber-assaults and safety breaches every so often. In explicit, as beforehand disclosed, through the second quarter of 2014, our pc community was the goal of an exterior, legal cyber-assault during which the attacker efficiently copied and transferred sure information exterior the Company. Moreover, the amount and depth of cyber-assaults on hospitals and well being techniques continues to extend. We are often the goal of tried cybersecurity and different threats that would have a safety affect, and we count on to proceed to expertise a rise in cybersecurity threats sooner or later. The preventive actions we take to cut back the chance of such incidents and shield our techniques and information is probably not adequate sooner or later. Furthermore, as a result of the strategies utilized in cyber-assaults change steadily and is probably not instantly acknowledged, we could expertise safety or information breaches that stay undetected for an prolonged time. Cybersecurity and the continued growth and enhancement of our controls, course of and practices designed to guard our info techniques from assault, harm or unauthorized entry, acquisition, use or disclosure stay a precedence for us. Our capability to recuperate from a ransomware or different cyber-assault relies on these practices, together with profitable backup techniques and different restoration procedures. As cybersecurity threats proceed to evolve, we could also be required to expend vital extra sources to proceed to change or improve our protecting measures or to analyze and remediate any info safety vulnerabilities, however we nonetheless won’t have the ability to anticipate or forestall sure assault strategies.
Further, cybersecurity threats, together with those who lead to a knowledge or safety breach, may affect the integrity, availability or safety of PHI and different information topic to privateness legal guidelines and laws, disrupt our info know-how techniques, gear, medical gadgets or enterprise, and threaten the entry and utilization of crucial info know-how and information. Further, our capability to supply numerous healthcare companies might be affected, significantly given the growing use of telehealth companies. For instance, medical gadgets that hook up with hospital networks or the web could also be susceptible to cybersecurity incidents, which can affect affected person security.
We could also be at elevated danger as a result of we outsource sure companies or features to, or have techniques that interface with, third events. Some of those third events’ info techniques are additionally topic to the dangers outlined above and should retailer or have entry to our information and should not have efficient controls, processes, or practices to guard our info from assault, harm, or unauthorized entry, acquisition, use or disclosure. A breach or assault affecting any of those third events may hurt our enterprise. In addition, the definitive agreements we enter into in reference to the divestiture of hospitals routinely obligate us to supply transition companies to the client, together with entry to our legacy info techniques, for an outlined transition interval. By offering entry to our info techniques to non-workers, we could also be uncovered to cyber-assaults, ransomware or safety or information breaches that originate exterior of our inside processes and practices designed to forestall such threats from occurring. Further, shopper confidence within the integrity, availability and confidentiality of knowledge techniques and knowledge, together with affected person info and operations information, within the healthcare business typically might be impacted to the extent there are profitable cyber-assaults at different healthcare companies corporations, which may have a fabric hostile impact on our enterprise, monetary place, or outcomes of operations.
If we or any of our third-get together service suppliers or sure different third-events are topic to cyber-assaults or safety or information breaches sooner or later, this might lead to hurt to sufferers; enterprise and operational interruptions and delays; the loss, misappropriation, corruption or unauthorized entry, acquisition, use or disclosure of knowledge or incapability to entry information; litigation and potential legal responsibility underneath privateness, safety, breach notification and shopper safety legal guidelines or different relevant legal guidelines, together with HIPAA; reputational harm, federal and state governmental inquiries, civil financial penalties, settlement agreements, corrective motion plans and monitoring necessities, any of which may have an hostile impact on our enterprise, monetary situation or outcomes of operations.
Additionally, whereas we’ve insurance coverage protection designed to handle sure points of cybersecurity dangers in place, such insurance coverage protection could also be inadequate to cowl all losses or all kinds of claims that will come up.
If we fail to adjust to our obligations underneath license or know-how agreements with third events, we could also be required to pay damages and we may lose license rights which are crucial to our enterprise.
We license sure mental property, together with applied sciences and software program from third events, that’s essential to our enterprise, and sooner or later we could enter into extra agreements that present us with licenses to precious mental property or know-how. If we fail to adjust to any of the obligations underneath our license agreements, we could also be required to pay damages and the licensor could have the suitable to terminate the license. Termination by the licensor would trigger us to lose precious rights, and will forestall us from promoting our options and companies, or adversely affect our capability to commercialize future options and companies. Our enterprise would undergo if any present or future licenses terminate, if the licensors fail to abide by the phrases of the license settlement, if the licensors fail to implement licensed mental property in opposition to infringing third events, if the licensed mental property are discovered to be invalid or unenforceable, or if we’re unable to enter into essential license agreements on acceptable phrases or in any respect. Any of the foregoing may have an hostile impact on our enterprise, monetary situation or outcomes of operations.
Disclaimer
CHS – Community Health Systems Inc. revealed this content material on 20 January 2022 and is solely accountable for the data contained therein. Distributed by Public, unedited and unaltered, on 20 January 2022 13:50:02 UTC.
Publicnow 2022
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Technical evaluation developments COMMUNITY HEALTH SYSTEMS, INC.
Short Term | Mid-Term | Long Term | |
Trends | Bullish | Neutral | Neutral |
Income Statement Evolution
Sell ![]() Buy |
|
Mean consensus | OUTPERFORM |
Number of Analysts | 11 |
Last Close Price | 14,28 $ |
Average goal worth | 16,39 $ |
Spread / Average Target | 14,8% |