There are several factors, some beyond our control that could cause results to
differ significantly from our expectations. Some of these factors, as well as
other factors such as market, operational, liquidity, interest rate and other
risks, are described in Part I, Item 1A. Risk Factors and Part II, Item 7A.
Quantitative and Qualitative Disclosures about Market Risk of the 2012 Annual
Report on Form 10-K. Any factor described in this report and in the 2012 Annual
Report on Form 10-K could by itself, or together with one or more factors,
adversely affect our business, results of operations and/or financial condition.
There may be factors not described in this report or in the 2012 Annual Report
on Form 10-K that could also cause results to differ from our expectations.
We operate general acute care hospitals primarily in non-urban communities in
Competitive and Structural Environment
The environment in which our hospitals operate is extremely competitive. In addition to competitive concerns, many of our communities are experiencing slow growth, and in some cases, population losses. We believe this trend has occurred primarily as a result of challenging economic conditions because the economies in the non-urban communities in which our hospitals primarily operate are often dependent on a small number of larger employers, especially manufacturing or other facilities. This causes the economies of our communities to be more sensitive to economic downturns in the manufacturing sector than other parts of the U.S., generally.
Our hospitals face competition from other acute care hospitals, including larger tertiary hospitals located in larger markets and/or affiliated with universities; specialty hospitals that focus on one or a small number of very lucrative service lines but that are not required to operate emergency departments; stand-alone centers at which surgeries or diagnostic tests can be performed; and physicians on the medical staffs of our hospitals. In many cases, our competitors focus on the service lines that offer the highest margins. By doing so, our competitors can potentially draw the best-paying business out of our hospitals. This, in turn, can reduce the overall operating profit of our hospitals as we are often obligated to offer service lines that operate at a loss or that have much lower profit margins. We continue to see the shift of increasingly complex procedures from the inpatient to the outpatient setting and have also seen growth in the general shift of lower acuity procedures to physician offices and other non-hospital outpatient settings. These trends have, to some extent, offset our efforts to improve equivalent admission rates at many of our hospitals.