All of our hospitals are acute care hospitals, except as indicated below.
As of June 30, 2013, we leased approximately 53,200 square feet of office space at 20 Burton Hills Boulevard, Nashville, Tennessee, for our corporate headquarters.
Accountable Care Organizations. The Health Reform Law requires the establishment of MSSPs that promote accountability and coordination of care through the creation of ACOs. MSSP ACOs receive payment from Medicare on a fee-for-service basis and may receive additional “shared savings” payments based on a decrease in annual fee-for-service payments to the ACO. CMS estimates that between 50 and 270 organizations will enter into MSSP ACO agreements with an estimated aggregate median impact of $1.31 billion in bonus payments to ACOs for calendar years 2012-2015. In addition to the MSSP ACO model, CMS developed the “Pioneer ACO” model. The Pioneer ACO model generally requires compliance with the MSSP ACO program rules in the final regulations, but differs from the finalized MSSP ACO model in several ways, including, but not limited to, higher levels of sharing and the assumption of risk of repayments of CMS for shared losses, opportunity for population-based payments, requirements for outcomes-based payment contracting with other payers and a higher number of assigned beneficiaries.
See “Item 1. Business-Sources of Revenues” included elsewhere in this Annual Report on Form 10-K for a description of the types of payments we receive for services provided to patients enrolled in the traditional Medicare plan (both for inpatient and outpatient services), managed Medicare plans, Medicaid plans, managed Medicaid plans and managed care plans. In that section, we also discuss the unique reimbursement features of the traditional Medicare plan, including disproportionate share, outlier cases and direct graduate and indirect medical education, including the annual Medicare regulatory updates published by CMS in August 2013 that impact reimbursement rates under the plan for services provided during the FFY beginning October 1, 2013 and the impact of the Health Reform Law on these reimbursements.
In recent years, both the Medicare program and several large managed care companies have changed our reimbursement to link some of their payments, especially their annual increases in payments, to our performance with respect to certain quality of care measures. We expect this trend to “pay-for-performance” to increase in the future.
Our annual impairment analysis did not result in any impairments of our goodwill for the year ended June 30, 2013. The fair value of each of our reporting units exceeded carrying value by approximately 40%, except for the Arizona hospitals reporting unit which exceeded its carrying value by approximately 15%. In order to address the uncertainties in the DCF
Other operating expenses. Other operating expenses include, among others, purchased services, insurance, non-income taxes, rents and leases, repairs and maintenance and utilities. Other operating expenses as a percentage of total revenues increased to 20.9% during the current year compared to 19.7% during the prior year primarily as a result of an increase in medical specialist fees associated with payments under Bexar County, Texas UPL and community benefit programs and an increase in management fees associated with our outsourced physician services management program that began in July 2012. These increases were partially offset by positive development of malpractice losses experienced during the current year.
Our percentage of uncompensated care (defined as the sum of uninsured discounts, charity care adjustments and the provision for doubtful accounts) as a percentage of net patient revenues (prior to these uncompensated care deductions) was 19.0% during the year ended June 30, 2012 compared to 16.4% during 2011.
Our commitments to fund multiple construction projects and the routine expenditures necessary to operate our hospitals is significant. Under the terms of the DMC acquisition agreement, we committed to spend $500.0 million for specified capital projects and $350.0 million for routine capital projects for a five-year period subsequent to the acquisition. This commitment includes a requirement to spend at least $80.0 million on specified expansion projects during each calendar year as part of the $500.0 million total commitment for specified capital projects. As of June 30, 2013, we had spent $31.5 million toward calendar year 2013 specified capital projects commitment. From the date of acquisition through June 30, 2013, we had spent $321.0 million of the total $850.0 million DMC capital commitment, including $191.5 million related to the specific project list. As of June 30, 2013, we estimate our remaining commitments, excluding those for DMC, to complete all capital projects in process to be approximately $70.4 million.
Medicare regulations and the Company’s principal managed care contracts are often complex and may include multiple reimbursement mechanisms for different types of services provided in its health care facilities. To obtain reimbursement for certain services under the Medicare program, the Company must submit annual cost reports and record estimates of amounts owed to or receivable from Medicare. These cost reports include complex calculations and estimates related to indirect medical education, disproportionate share payments, reimbursable Medicare bad debts and other items that are often subject to interpretation that could result in payments that differ from recorded estimates. The Company estimates amounts owed to or
The Company receives periodic payments under the upper payment limit (“UPL”) Medicaid payment program in certain counties in Texas. UPL programs allow private hospitals to enter into indigent care affiliation agreements with governmental entities. Within the parameters of these programs, private hospitals expand charity care services to indigent patients and
The following table provides a reconciliation of the beginning and ending balances for the year ended June 30, 2012 for those fair value measurements using significant Level 3 unobservable inputs for the Company's investment in auction rate securities ("ARS") previously included within investments in securities on the accompanying consolidated balance sheets (in millions).
A summary of the components of net pension plan expense (credits) for the years ended June 30, 2011, 2012 and 2013, respectively, is as follows (in millions):
The following table sets forth the computation of basic and diluted earnings (loss) per share for the years ended June 30, 2011, 2012 and 2013 (dollars in millions, except share and per share amounts):
In September 2010, the Company received a letter, which was signed jointly by an Assistant United States Attorney in the Southern District of Florida and an attorney from the U.S. Department of Justice ("DOJ") Civil Division, stating that, among other things, (1) the DOJ is conducting an investigation to determine whether or not certain hospitals have submitted claims for payment for the implantation of implantable cardioverter defibrillators ("ICDs") which were not medically indicated and/or otherwise violated Medicare payment policy, (2) the investigation covers the time period commencing with Medicare’s expansion of coverage of ICDs in 2003 through the present, (3) the relevant CMS National Coverage Determination excludes Medicare coverage for ICDs implanted for primary prevention in patients who have had an acute myocardial infarction within the past 40 days or an angioplasty or bypass surgery within the past three months, (4) DOJ’s initial analysis of claims submitted to Medicare indicates that many of the Company's hospitals may have submitted claims for ICDs and related services that were excluded from coverage, (5) the DOJ’s review is preliminary, but continuing, and it may include medical review of patient charts and other documents, along with statements under oath, and (6) the Company and its hospitals should ensure the retention and preservation of all information, electronic or otherwise, pertaining or related to ICDs. Upon receipt of this letter, the Company immediately took steps to retain and preserve all of the Company's information and that of its hospitals related to ICDs.
The Company eliminates in consolidation those patient service revenues earned by its health care facilities attributable to services provided to members in its owned health plans and eliminates the corresponding medical claims expenses incurred by the health plans for those services.