Revenues
Revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments. Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts (based primarily on historical collection experience) related to these uninsured accounts to record net self pay revenues at the estimated amounts we expect to collect. Our revenues from third party payers and the uninsured for the years ended December 31, are summarized in the following table (dollars in millions):
| 2013 | Ratio | 2012 | Ratio | 2011 | Ratio | |||||||||||||||||||
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Medicare |
$ | 7,951 | 23.3 | % | $ | 8,292 | 25.1 | % | $ | 7,653 | 25.8 | % | ||||||||||||
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Managed Medicare |
3,279 | 9.6 | 2,954 | 8.9 | 2,442 | 8.2 | ||||||||||||||||||
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Medicaid |
1,480 | 4.3 | 1,464 | 4.4 | 1,845 | 6.2 | ||||||||||||||||||
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Managed Medicaid |
1,570 | 4.6 | 1,504 | 4.6 | 1,265 | 4.3 | ||||||||||||||||||
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Managed care and other insurers |
18,654 | 54.6 | 17,998 | 54.5 | 15,703 | 52.9 | ||||||||||||||||||
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International (managed care and other insurers) |
1,175 | 3.4 | 1,060 | 3.2 | 938 | 3.2 | ||||||||||||||||||
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| 34,109 | 99.8 | 33,272 | 100.7 | 29,846 | 100.6 | |||||||||||||||||||
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Uninsured |
2,677 | 7.8 | 2,580 | 7.8 | 1,846 | 6.2 | ||||||||||||||||||
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Other |
1,254 | 3.7 | 931 | 2.8 | 814 | 2.7 | ||||||||||||||||||
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Revenues before provision for doubtful accounts |
38,040 | 111.3 | 36,783 | 111.3 | 32,506 | 109.5 | ||||||||||||||||||
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Provision for doubtful accounts |
(3,858 | ) | (11.3 | ) | (3,770 | ) | (11.3 | ) | (2,824 | ) | (9.5 | ) | ||||||||||||
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Revenues |
$ | 34,182 | 100.0 | % | $ | 33,013 | 100.0 | % | $ | 29,682 | 100.0 | % | ||||||||||||
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Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility recorded estimates will change by a material amount. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the “cost report” filing and settlement process). The adjustments to estimated Medicare and Medicaid reimbursement amounts and disproportionate-share funds, which resulted in net increases to revenues, related primarily to cost reports filed during the respective year were $41 million, $50 million and $40 million in 2013, 2012 and 2011, respectively. The adjustments to estimated reimbursement amounts, which resulted in net increases to revenues, related primarily to cost reports filed during previous years were $68 million, $242 million and $30 million in 2013, 2012 and 2011, respectively. The 2012 amount related to cost reports filed during previous years includes two adjustments to Medicare revenues that affected multiple annual cost report periods for the majority of our hospitals (the Rural Floor Provision Settlement increased revenues by approximately $271 million and the implementation of revised Supplemental Security Income ratios reduced revenues by approximately $75 million). Excluding the effect of these Medicare adjustments, the 2012 amount related to previous years would have been $46 million.
The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Patients treated at hospitals for nonelective care, who have income at or below 200% of the federal poverty level, are eligible for charity care. The federal poverty level is established by the federal government and is based on income and family size. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. These discounts are similar to those provided to many local managed care plans. In implementing the uninsured discount policy, we first attempt to qualify uninsured patients for Medicaid, other federal or state assistance or charity care. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.
To quantify the total impact of and trends related to uninsured accounts, we believe it is beneficial to view charity care, uninsured discounts and the provision for doubtful accounts in combination, rather than each separately. A summary of these amounts for the years ended December 31, follows (dollars in millions):
| 2013 | Ratio | 2012 | Ratio | 2011 | Ratio | |||||||||||||||||||
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Charity care |
$ | 3,497 | 22 | % | $ | 3,093 | 22 | % | $ | 2,683 | 24 | % | ||||||||||||
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Uninsured discounts |
8,210 | 53 | 6,978 | 51 | 5,707 | 51 | ||||||||||||||||||
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Provision for doubtful accounts |
3,858 | 25 | 3,770 | 27 | 2,824 | 25 | ||||||||||||||||||
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Total uncompensated care |
$ | 15,565 | 100 | % | $ | 13,841 | 100 | % | $ | 11,214 | 100 | % | ||||||||||||
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A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):
| 2013 | 2012 | 2011 | ||||||||||
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Gross patient charges |
$ | 181,141 | $ | 165,614 | $ | 141,516 | ||||||
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Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) |
29,606 | 28,533 | 25,554 | |||||||||
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Cost-to-charges ratio |
16.3 | % | 17.2 | % | 18.1 | % | ||||||
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Total uncompensated care |
$ | 15,565 | $ | 13,841 | $ | 11,214 | ||||||
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Multiply by the cost-to-charges ratio |
16.3 | % | 17.2 | % | 18.1 | % | ||||||
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Estimated cost of total uncompensated care |
$ | 2,537 | $ | 2,381 | $ | 2,030 | ||||||
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The sum of charity care, uninsured discounts and the provision for doubtful accounts, as a percentage of the sum of revenues, charity care, uninsured discounts and the provision for doubtful accounts increased from 27.4% for 2011, to 29.5% for 2012 and to 31.3% for 2013.