☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
37203
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K. ☒
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||
Emerging growth company | ☐ |
Page Reference | ||||||
Part I | ||||||
Item 1. | 3 | |||||
Item 1A. | ||||||
Item 1B. | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Part II | ||||||
Item 5. | ||||||
Item 6. | ||||||
Item 7. | ||||||
Item 7A. | ||||||
Item 8. | ||||||
Item 9. | ||||||
Item 9A. | ||||||
Item 9B. | ||||||
Part III | ||||||
Item 10. | ||||||
Item 11. | ||||||
Item 12. | ||||||
Item 13. | ||||||
Item 14. | ||||||
Part IV | ||||||
Item 15. | ||||||
Item 16. | ||||||
Item 1. |
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Years Ended December 31, | ||||||||||||||||||||||||
2017 | Ratio | 2016 | Ratio | 2015 | Ratio | |||||||||||||||||||
Medicare | $ | 9,483 | 21.7 | % | $ | 8,895 | 21.4 | % | $ | 8,654 | 21.8 | % | ||||||||||||
Managed Medicare | 4,788 | 11.0 | 4,355 | 10.5 | 4,133 | 10.4 | ||||||||||||||||||
Medicaid | 1,631 | 3.7 | 1,597 | 3.8 | 1,705 | 4.3 | ||||||||||||||||||
Managed Medicaid | 2,349 | 5.4 | 2,478 | 6.0 | 2,234 | 5.6 | ||||||||||||||||||
Managed care and other insurers | 24,813 | 56.9 | 23,441 | 56.5 | 21,882 | 55.2 | ||||||||||||||||||
International (managed care and other insurers) | 1,097 | 2.5 | 1,195 | 2.9 | 1,295 | 3.3 | ||||||||||||||||||
Other | 3,492 | 8.0 | 2,786 | 6.7 | 3,688 | 9.3 | ||||||||||||||||||
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Revenues before provision for doubtful accounts | 47,653 | 109.2 | 44,747 | 107.8 | 43,591 | 109.9 | ||||||||||||||||||
Provision for doubtful accounts | (4,039 | ) | (9.2 | ) | (3,257 | ) | (7.8 | ) | (3,913 | ) | (9.9 | ) | ||||||||||||
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Revenues | $ | 43,614 | 100.0 | % | $ | 41,490 | 100.0 | % | $ | 39,678 | 100.0 | % | ||||||||||||
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Years Ended December 31, | ||||||||||||||||||||||||
2020 | Ratio | 2019 | Ratio | 2018 | Ratio | |||||||||||||||||||
Medicare | $ | 10,420 | 20.2 | % | $ | 10,798 | 21.0 | % | $ | 9,831 | 21.1 | % | ||||||||||||
Managed Medicare | 6,997 | 13.6 | 6,452 | 12.6 | 5,497 | 11.8 | ||||||||||||||||||
Medicaid | 1,965 | 3.8 | 1,572 | 3.1 | 1,358 | 2.9 | ||||||||||||||||||
Managed Medicaid | 2,621 | 5.1 | 2,450 | 4.8 | 2,403 | 5.1 | ||||||||||||||||||
Managed care and other insurers | 26,535 | 51.5 | 26,544 | 51.6 | 24,467 | 52.4 | ||||||||||||||||||
International (managed care and other insurers) | 1,120 | 2.2 | 1,162 | 2.3 | 1,156 | 2.5 | ||||||||||||||||||
Other | 1,875 | 3.6 | 2,358 | 4.6 | 1,965 | 4.2 | ||||||||||||||||||
Revenues | $ | 51,533 | 100.0 | % | $ | 51,336 | 100.0 | % | $ | 46,677 | 100.0 | % | ||||||||||||
as though the secondary diagnosis was not present. There are currently 14 categories of conditions on the list of HACs. Pursuant to the Health Reform Law,In addition, the 25% of hospitals with the worst risk-adjusted HAC ratesscores in the designated performance period receive a 1% reduction in their inpatient PPS Medicare payments. CMS has also established three National Coverage Determinations that prohibit Medicare reimbursement for erroneous surgical procedures performed on an inpatient or outpatient basis.
The Health Reform Law
The Health Reform Law additionally establishes a hospital value-based purchasing program to further link payments to quality and efficiency. For federal fiscal year 2017 and subsequent years,
Hospital Value-Based Purchasing Program.
In calendar year 2019, CMS began a
estimated 1.4%2.4%. This increase reflects a market basket increase of 2.7% adjusted by the following percentage points: a positive 0.6 productivity adjustment and negative 0.75 adjustment required by the Health Reform Law, along2.4%. Together with other policy changes.changes, CMS estimates that the calendar year 2021 rates will increase Medicare outpatient PPS payments by 2.4%. CMS requires hospitals to submit quality data relating to outpatient care to avoid receiving a 2.0 percentage point reduction toin the market basketannual payment update under the outpatient PPS.
CMS has indicated that it is working toward a unified payment system for post-acute care services, including those provided by IRFs.
In addition, MACRA required the establishment ofwhich will partially offset this reduction.
2021.
flows.
CMS is transitioning some of its other integrity programs to a consolidated model by engaging Unified Program Integrity Contractors (“UPICs”) to perform audits, investigations and other integrity activities.
However, President Biden has issued executive orders directing agencies to re-examine measures that reduce coverage or undermine Medicaid programs, including work requirements.
of services. Promoting accountability and coordination of care, ACOs are intended to produce savings as a result of improved quality and operational efficiency. ACOs that achieve quality performance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program. There are several types of ACO programs, including the Medicare Shared Savings Program, (“MSSP”), which was established pursuant to the Health Reform Law,Affordable Care Act, and the Next Generation ACO Model.
procedures, which is scheduled to run through September 30, 2021. CMS will require hospitals in selected markets to participate in bundled payment initiatives for end-stage renal disease treatment, which began January 1, 2021, and radiation oncology, beginning as early as January 1, 2022. HHS has indicated that it plans to implement additional bundled payment programs, some of which will be mandatory.
The Health Reform Law reduced Medicare CMS also distributes a payment to each DSH hospital that is allocated according to the hospital’s proportion of uncompensated care costs relative to the uncompensated care amount of other DSH hospitals.
Hospitals that provide care to a disproportionately high number oflow-income patients may receive Medicaid DSH payments. The federal government distributes federal Medicaid DSH funds to each state based on a statutory formula. The states then distribute the DSH funding among qualifying hospitals. States have broad discretion to define which hospitals qualify for Medicaid DSH payments and the amount of such payments. The Health Reform LawAffordable Care Act and subsequent legislation provide for reductions to the Medicaid DSH hospital program. However, Congress has delayed the implementation of these reductions until 2020. Under the budget bill signed into law in February 2018, Medicaid DSH payments will bewould have been reduced by $4 billion in 2020 and by $8 billion per year from 2021 through 2025.
However, Congress has delayed the implementation of these reductions through 2023, but added additional reductions for 2026 and 2027.
PPS. For outpatient services, TRICARE reimburses hospitals based on a PPS that is similar to that utilized for services furnished to Medicare beneficiaries.
Effective January 1, 2022, the No Surprises Act will require providers to send uninsured patients a good faith estimate of the expected charges for furnishing scheduled items or services, including any item or service that is reasonably expected to be provided in conjunction with the scheduled item or service or that is reasonably expected to be delivered by another provider, before the services are delivered. If the actual charges are substantially higher than the estimate, the patient can invoke a dispute resolution process to challenge the higher amount.
Years Ended December 31, | ||||||||||||||||||||
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
Number of hospitals at end of period | 179 | 170 | 168 | 166 | 165 | |||||||||||||||
Number of freestanding outpatient surgery centers at end of period | 120 | 118 | 116 | 113 | 115 | |||||||||||||||
Number of licensed beds at end of period(a) | 46,738 | 44,290 | 43,771 | 43,356 | 42,896 | |||||||||||||||
Weighted average licensed beds(b) | 45,380 | 44,077 | 43,620 | 43,132 | 42,133 | |||||||||||||||
Admissions(c) | 1,936,613 | 1,891,831 | 1,868,789 | 1,795,312 | 1,744,126 | |||||||||||||||
Equivalent admissions(d) | 3,286,432 | 3,191,519 | 3,122,746 | 2,958,674 | 2,844,670 | |||||||||||||||
Average length of stay (days)(e) | 4.9 | 4.9 | 4.9 | 4.8 | 4.8 | |||||||||||||||
Average daily census(f) | 26,000 | 25,340 | 25,084 | 23,835 | 22,853 | |||||||||||||||
Occupancy rate(g) | 57 | % | 58 | % | 58 | % | 55 | % | 54 | % | ||||||||||
Emergency room visits(h) | 8,624,137 | 8,378,340 | 8,050,159 | 7,450,748 | 6,968,115 | |||||||||||||||
Outpatient surgeries(i) | 935,307 | 932,213 | 909,386 | 891,633 | 881,883 | |||||||||||||||
Inpatient surgeries(j) | 546,228 | 537,306 | 529,900 | 518,881 | 508,793 |
2020 | 2019 | 2018 | ||||||||||
Number of hospitals at end of period | 185 | 184 | 179 | |||||||||
Number of freestanding outpatient surgery centers at end of period(a) | 121 | 123 | 123 | |||||||||
Number of licensed beds at end of period(b) | 49,265 | 49,035 | 47,199 | |||||||||
Weighted average beds in service(c) | 42,246 | 41,510 | 39,966 | |||||||||
Admissions(d) | 2,009,909 | 2,108,927 | 2,003,753 | |||||||||
Equivalent admissions(e) | 3,312,330 | 3,646,335 | 3,420,406 | |||||||||
Average length of stay (days)(f) | 5.1 | 4.9 | 4.9 | |||||||||
Average daily census(g) | 27,734 | 28,134 | 26,663 | |||||||||
Occupancy rate(h) | 66 | % | 68 | % | 67 | % | ||||||
Emergency room visits(i) | 7,450,307 | 9,161,129 | 8,764,431 | |||||||||
Outpatient surgeries(j) | 882,483 | 1,009,947 | 971,537 | |||||||||
Inpatient surgeries(k) | 522,385 | 566,635 | 548,220 | |||||||||
Days revenues in accounts receivable(l) | 45 | 50 | 51 | |||||||||
Outpatient revenues as a % of patient revenues(m) | 35 | % | 39 | % | 38 | % |
(a) | Excludes freestanding endoscopy centers (21 at December 31, 2020; 20 at December 31, 2019 and 19 at December 31, 2018). |
(b) | Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency. |
Represents the average number of |
Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume. |
Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation “equates” outpatient revenue to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume. |
Represents the average number of days admitted patients stay in our hospitals. |
Represents the average number of patients in our hospital beds each day. |
Represents the percentage of hospital |
Represents the number of patients treated in our emergency rooms. |
Represents the number of surgeries performed on patients who were not admitted to our hospitals. Pain management and endoscopy procedures are not included in outpatient surgeries. |
Represents the number of surgeries performed on patients who have been admitted to our hospitals. Pain management and endoscopy procedures are not included in inpatient surgeries. |
(l) | Revenues per day is calculated by dividing the revenues for the fourth quarter of each year by the days in the quarter. Days revenues in accounts receivable is then calculated as accounts receivable at the end of the period divided by revenues per day. |
(m) | Represents the percentage of patient revenues related to patients who are not admitted to our hospitals. |
Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, our psychiatric hospitals and units compete with both local and regional hospitals, including the psychiatric units of general, acute care hospitals.
efforts, such as the Health Reform Law’s creation of the Exchanges andAffordable Care Act’s limitations on rescissions of coverage andMost of the healthHealth plans offered through the Exchanges provide forincreasingly utilize narrow networks that restrict the number of participating providers or tiered networks that impose significantly higher cost sharing obligations on patients that obtain services from providers in a disfavored tier. These trends may continue regardless of potential repeal or replacement of, or changes to, the Health Reform Law.Affordable Care Act, or other health reform efforts. The importance of obtaining contracts with group purchasers of health care services varies from community to community, depending on the market strength of such organizations.
services, (d) free training for a physician’s office staff in areas such as management techniques and laboratory techniques, (e) guarantees which provide, if the physician’s income fails to reach a predetermined level, the hospital will pay any portion of the remainder,
services, care coordination arrangements, arrangements for patient engagement and support,
regulatory authorities enforcing these laws will determine these financial arrangements comply with the Anti-kickback Statute or other applicable laws. An adverse determination could subject us to liabilities under the Social Security Act and other laws, including criminal penalties, civil monetary penalties and exclusion from participation in Medicare, Medicaid or other federal health care programs.
The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) broadened the scope of certain
benefit programs.programs and provide for criminal penalties. The Social Security Act also imposes criminal and civil penalties for making false claims and statements to Medicare and Medicaid. False claims include, but are not limited to, billing for services not rendered or for misrepresenting actual services rendered in order to obtain higher reimbursement, billing for unnecessary goods and services and cost report fraud. Federal enforcement officials have the ability to exclude from Medicare and Medicaid any business entities and any investors, officers and managing employees associated with business entities that have committed health care fraud, even if the officer or managing employee had no knowledge of the fraud. Criminal and civil penalties may be imposed for a number of other prohibited activities, including failure to return known overpayments, certain gainsharing arrangements, billing Medicare amounts that are substantially in excess of a provider’s usual charges, offering remuneration to influence a Medicare or Medicaid beneficiary’s selection of a health care provider, contracting with an individual or entity known to be excluded from a federal health care program, making or accepting a payment to induce a physician to reduce or limit services, and soliciting or receiving any remuneration in return for referring an individual for an item or service payable by a federal health care program. Like the Anti-kickback Statute, these provisions are very broad. Civil penalties may be imposed for the failure to report and return an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. To avoid liability, providers must, among other things, carefully and accurately code claims for reimbursement, promptly return overpayments and accurately prepare cost reports.
and improper failure to report and refund amounts owed to the government in a timely manner following identification of an overpayment. An overpayment is deemed to be identified when a person has, or should have through reasonable diligence, determined that an overpayment was received and quantified the overpayment.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns. Our facilities remain subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches.
The California Consumer Privacy Act of 2018 (the “CCPA”) affords consumers expanded privacy protections effective January 1, 2020. Moreover, the California Privacy Rights Act (“CPRA”) takes effect January 1, 2022, and significantly modifies the CCPA. The potential effects of these laws
remains in place pending the appeals process. The elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.
The expansion of In addition, some states are proposing or have implemented various health coverage throughreform initiatives at the private sector as a result of the Health Reform Law has been driven by new requirements applicable to health insurers, employers and individuals.state level. For example, health insurers are prohibited from imposing annual coverage limits, dropping coverage, excluding persons based uponpre-existing conditions or denying coverage for any individual who is willing to pay the premiums for such coverage. Large employers are required to providesome states have proposed public health insurance benefitsoptions, and some states have passed or are considering legislation to their full time employees or pay a penalty if an employee obtains government-subsidized coverage through an Exchange. Although individuals are required to maintain health insurance for a minimum defined set of benefits, elimination of the penalty associated with this mandate may impact the number of individuals who elect to purchase health insurance.
Health insurers participating in an Exchange must offer a set of minimum benefits, as defined by HHS, and may offer more benefits. For individuals and families below 400% of the federal poverty level, the cost of obtaining health insurance through the Exchanges is subsidized by the federal government. However, several health insurers have limited or ended their participation in these marketplaces, creating uncertainty regarding the long-term viability of the Exchanges.
As discussed in Item 1, “Business — Sources of Revenue,” the Health Reform Law provides for spending reductions for Medicare, Medicaid and other federal health care programs. It also increasingly ties payment for services to quality outcomes, provides for the creation of ACOs and creates incentives and other initiatives to better coordinate patient care across settings and over time.
address
The Health Reform LawAffordable Care Act has had a net positive effect on the Company to date, before considering the impact of Medicare reductions that began in 2010, and it is expected that the law, as presently implemented, will
day by phone and internet portal.
Employees and Medical Staffs
At December 31, 2017, we had approximately 253,000 employees,2020), including approximately 63,00080,000 part-time employees. Referencesemployees (references herein to “employees” refer to employees of our affiliates. affiliates). Our Board of Directors and its committees oversee human capital matters through regular reporting from management and advisors.
Name | Age | Position(s) | ||
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| 60 | Chief Executive Officer and | ||
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| Senior Vice President and Chief Human Resource Officer | |||
Phillip G. Billington | 53 | Senior Vice President — Internal Audit Services | ||
Jeff E. Cohen | 49 | Senior Vice President — Government Relations | ||
Michael S. Cuffe, M.D. | 55 | President — Physician Services Group | ||
Jane D. Englebright | 63 | Senior Vice President and Chief Nursing Officer | ||
Jon M. Foster | 59 | President — American Group | ||
Charles J. Hall | 67 | President — National Group | ||
A. Bruce Moore, Jr. | 60 | President — Service Line and Operations Integration | ||
Sandra L. Morgan | 58 | Senior Vice President — Provider Relations | ||
J. William B. Morrow | 50 | Senior Vice President — Finance and Treasurer | ||
P. Martin Paslick | 61 | Senior Vice President and Chief Information Officer | ||
Jonathan B. Perlin, M.D. | 59 | President — Clinical Operations Group and Chief Medical Officer | ||
Deborah M. Reiner | 59 | Senior Vice President — Marketing and Communications | ||
William B. Rutherford | 57 | Executive Vice President and Chief Financial Officer | ||
Joseph A. Sowell, III | 64 | Senior Vice President and Chief Development Officer | ||
Kathryn A. Torres | Senior Vice President — Payer Contracting and Alignment | |||
Robert A. Waterman | Senior Vice President and General Counsel | |||
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| Senior Vice President and Chief Ethics and Compliance Officer | |||
Christopher F. Wyatt | 43 | Senior Vice President and Controller |
R. Milton Johnson
Victorand Galen Health Care, Inc.
Dr. Ravi S. Chari— Human Resources from April 2013 through October 2019.
Dr.
Samuel N. Hazenwas appointed President and Chief Operating Officer in November 2016. Prior to that time, he had served as Chief Operating Officer since January 2015. Mr. Hazen served as President — Operations of the Company from February 2011 to January 2015. Mr. Hazen served as President — Western Group from July 2001 to February 2011 and as Chief Financial Officer — Western Group of the Company from August 1995 to July 2001. Mr. Hazen served as Chief Financial Officer — North Texas Division of the Company from February 1994 to July 1995. Prior to that time, Mr. Hazen served in various hospital and regional Chief Financial Officer positions with Humana Inc. and Galen Health Care, Inc.
From 2011 to 2016, Mr. Morrow served the Company as Vice President — Development/Special Assets. Mr. Morrow served as a partner in the law firm of Waller Lansden Dortch & Davis from 2006 to October 2011. Prior to becoming a partner, Mr. Morrow was an associate at Waller Lansden Dortch & Davis and at Cleary Gottlieb Steen & Hamilton.
Joseph N. Steakleyhas served as Senior Vice President — Internal Audit Services
of the Company since November 1997. Mr. Waterman served as a partner in the law firm of Latham & Watkins from September 1993 to October 1997; he was Chair of the firm’s health care group during 1997.Alan R. Yuspehhas served as Senior Vice President and Chief Ethics and Compliance Officer of the Company since May 2007. From October 1997 to May 2007, Mr. Yuspeh served as Senior Vice President — Ethics, Compliance and Corporate Responsibility of the Company. From September 1991 until October 1997, Mr. Yuspeh was a partner with the law firm of Howrey & Simon. As a part of his law practice, Mr. Yuspeh served from 1987 to 1997 as Coordinator of the Defense Industry Initiative on Business Ethics and Conduct.deemeddeem immaterial may also constrainaffect us. Our business is subject to the following principal risks and uncertainties.
permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries.
event of default under these senior secured credit facilities, the lenders thereunder could elect to declare all amounts outstanding under the senior secured credit facilities to be immediately due and payable and terminate all commitments to extend further credit, which would also result in an event of default under a significant portion of our other outstanding indebtedness. If we were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral granted to them to secure such indebtedness. We have pledged a significant portion of our assets under our senior secured credit facilities and that collateral is also pledged as collateral under our first lien notes. If any of the lenders under the senior secured credit facilities accelerate the repayment of borrowings, there can be no assurance there will be sufficient assets to repay the senior secured credit facilities, the first lien notes and our other indebtedness.
Thereform efforts, including court challenges to, and efforts to repeal, replace or otherwise significantly change the Affordable Care Act. We are unable to predict what, if any, and when such changes will be made in the future.
In addition, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers and diagnostic and imaging centers in the geographic areas in which we operate has increased. As a result, most of our hospitals operate in a highly competitive environment, which may put pressure on our pricing as high margin services transition to outpatient facilities and may also place pressure on the Company’s strategy for volume growth. Some of the facilities that compete with our hospitals are physician-owned or are owned by governmental agencies ornot-for-profit corporations supported by endowments, charitable contributions and/or tax revenues and can finance capital expenditures and operations on atax-exempt basis. Recent consolidations ofnot-for-profit hospital entities may intensify this competitive pressure. There is also increasing consolidation in the third-party payer industry, including vertical integration efforts among third-party payers and health care providers. Health care industry participants are increasingly implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models.position. Other industry participants, such as private payers and large employer groups and their affiliates, may intensify competitive pressurealso introduce financial or delivery system reforms. We are unable to predict the nature and affectsuccess of such initiatives. Health care reform initiatives, including changes to or repeal or invalidation of the industry in ways that are difficult to predict.
Our hospitals compete with specialty hospitals and with bothAffordable Care Act, may have an adverse effect on our own and unaffiliated freestanding surgery centers for market share in certain high margin services and for quality physicians and personnel. If ASCs are better able to compete in this environment than our hospitals, our hospitals may experience a decline in patient volume, and we may experience a decrease in margin, even if those patients use our ASCs. In states that do not require a CON or other type of approval for the purchase, construction or expansion of health care facilities or services, competition in the form of new services, facilities and capital spending is more prevalent. Further, if our competitors are better able to attract patients, make capital expenditures and maintain modern and technologically upgraded facilities and equipment, recruit physicians, expand services or obtain favorable third-party payer contracts at their facilities than our hospitals and ASCs, we may experience an overall decline in patient volume. See Item 1, “Business — Competition.”
A deterioration in the collectability of uninsured and patient due accounts could adversely affect ourbusiness, results of operations.
The primary collection risks for our accounts receivable relateoperations, cash flow, capital resources, and liquidity.
which may result in reduced Medicare payments. For example, CMS plans to use data that hospitals are required to report to CMS for cost reports ending on or after January 1, 2021 regarding their median negotiated charges by
exceptions that were phased out through calendar years 2019 and 2020. CMS has also issued final rules reducing Medicare payment rates under the outpatient PPS for drugs obtained under the 340B Drug Pricing Program. CMS is also considering proposals to reduce drug costs such as the most-favored nation drug pricing model that would align payment for the 50 Medicare Part B drugs with the highest expenditures to the payment amounts for those drugs in international markets. CMS may implement further changes to how items or services are reimbursed that result in payment reductions for other services.
CMS has announced its intent to introduce additional flexibilities for Medicaid program operation, including block grants and increased use of value-based care models.
Our results of operations may be adversely affected by health care reform efforts, particularly efforts to repeal, replace or otherwise significantly change the Health Reform Law. We are unable to predict what, if any, and when such changes will be made in the future.
The Health Reform Law represents a significant shift in the way health care services are delivered, covered, and reimbursed. Although it reduced our Medicare and Medicaid reimbursement, the Health Reform Law also reduced the number of uninsured patients to whom we provide health care services, primarily through the Exchanges and Medicaid expansion. However, many insurers have exited the Exchanges in the markets served by the Company. To the extent some markets lack a sufficient number of health insurers participating in the Exchanges, it could threaten the continued viability of the Exchanges in those markets.
In addition, the presidential administration and a number of members of Congress continue to attempt to repeal, amend or replace the law, or make significant changes to its implementation. In 2017, Congress eliminated the financial penalty associated with the individual mandate, effective January 1, 2019. It is difficult to predict the impact of this change, but it may result in fewer individuals electing to purchase health insurance. Further, the President of the United States has also signed an executive order that directs agencies to minimize “economic and regulatory burdens” of the Health Reform Law, which may result in additional changes in how the law is implemented. CMS has indicated that it intends to increase flexibility in state Medicaid programs, including by expanding the scope of waivers under which states may implement Medicaid expansion provisions, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. There is uncertainty regarding whether, when, and how the Health Reform Law may be further changed. Changes by Congress or government agencies could eliminate or alter provisions beneficial to us, and it is difficult to predict the impact of changes on other health care industry participants. Government efforts to repeal or change the Health Reform Law may have an adverse effect on our business, results of operations, cash flow, capital resources, and liquidity.
If our volume of patients with private health insurance coverage declines or we are unable to retain and negotiate favorable contracts with private third-party payers, including managed care plans, our revenues may be reduced.
Private third-party payers, including HMOs, PPOs and other managed care plans, typically reimburse health care providers at a higher rate than Medicare, Medicaid or other government health care programs. Reimbursement rates are set forth by contract when our facilities arein-network, and payers utilize plan structures to encourage or require the use ofin-network providers. Revenues derived from private third-party payers (domestic only) accounted for 56.9%, 56.5% and 55.2% of our revenues for 2017, 2016 and 2015, respectively. As a result, our ability to maintain or increase patient volumes covered by private third-party payers and to maintain and obtain favorable contracts with private third-party payers significantly affects the revenues and operating results of our facilities.
Private third-party payers, including managed care plans, continue to demand discounted fee structures, and the trend toward consolidation among payers tends to increase their bargaining power over fee structures. Payers may utilize plan structures such as narrow networks and tiered networks that limit beneficiary provider choices or impose significantly higher cost sharing obligations when care is obtained from providers in a disfavored tier. Other health care providers may impact our ability to enter into managed care contracts or negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care plans to contract with us. In addition to increasing negotiating leverage of private third-party payers, alignment efforts between third-party payers and health care providers may also result in other competitive advantages, such as greater access to performance and pricing data. Our future success will depend, in part, on our ability to retain and renew our third-party payer contracts and enter into new contracts on terms favorable to us. Cost-reduction strategies by large employer groups and their affiliates may also limit our ability to negotiate favorable terms in our contracts and otherwise intensify competitive pressure. It is not clear what impact, if any, future health reform efforts or the repeal of, or changes to, the Health Reform Law will have on our ability to negotiate reimbursement increases and participate in third-party payer networks on favorable terms. If we are unable to retain and negotiate favorable contracts with third-party payers or experience reductions in payment increases or amounts received from third-party payers, our revenues may be reduced.
Our performance depends on our ability to recruit and retain quality physicians.
The success of our hospitals depends in part on the number and quality of the physicians on the medical staffs of our hospitals, the admitting and utilization practices of those physicians, maintaining good relations with those physicians and controlling costs related to the employment of physicians. Although we employ some physicians, physicians are often not employees of the hospitals at which they practice, and, in many of the markets we serve, most physicians have admitting privileges at other hospitals in addition to our hospitals. Such physicians may terminate their affiliation with our hospitals at any time. We may face increased challenges in this area as the physician population reaches retirement age, especially if there is a shortage of physicians willing and able to provide comparable services. If we are unable to provide adequate support personnel or technologically advanced equipment and hospital facilities that meet the needs of those physicians and their patients, they may be discouraged from referring patients to our facilities, admissions may decrease and our operating performance may decline.
Our hospitals face competition for staffing, which may increase labor costs and reduce profitability.
Our operations are dependent on the efforts, abilities and experience of our management and medical support personnel, such as nurses, pharmacists and lab technicians, as well as our physicians. We compete with other health care providers in recruiting and retaining qualified management and support personnel responsible for the daily operations of each of our hospitals, including nurses and other nonphysician health care professionals. In some markets, the availability of nurses and other medical support personnel has been a
significant operating issue to health care providers. We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensive temporary or contract personnel. As a result, our labor costs could increase. We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. Certain proposed changes in federal labor laws and the NLRB’s modification of its election procedures could increase the likelihood of employee unionization attempts. To the extent a significant portion of our employee base unionizes, it is possible our labor costs could increase materially. When negotiating collective bargaining agreements with unions, whether such agreements are renewals or first contracts, there is the possibility that strikes could occur during the negotiation process, and our continued operation during any strikes could increase our labor costs. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse staffing ratios already in place. State-mandated nurse-staffing ratios could significantly affect labor costs and have an adverse impact on revenues if we are required to limit admissions in order to meet the required ratios. If our labor costs increase, we may not be able to raise rates to offset these increased costs. Because a significant percentage of our revenues consists of fixed, prospective payments, our ability to pass along increased labor costs is constrained. Our failure to recruit and retain qualified management, nurses and other medical support personnel, or to control labor costs, could have a material, adverse effect on our results of operations.
We may be unable to attract, hire, and retain a highly qualified and diverse workforce, including key management.
The talents and efforts of our employees, particularly our key management, are vital to our success. Our management team has significant industry experience and would be difficult to replace. In addition, institutional knowledge may be lost in any potential managerial transition. We may be unable to retain them or to attract other highly qualified employees, particularly if we do not offer employment terms that are competitive with the rest of the labor market. Failure to attract, hire, develop, motivate, and retain highly qualified and diverse employee talent, or failure to develop and implement an adequate succession plan for the management team, could disrupt our operations and adversely affect our business and our future success.
have the authority to levy a fine in an amount that is up to the greater of €20 million or 4% of global annual turnover in the prior year. If it is determined that non-compliance is related to a non-material provision (such as failure to comply with technical measures), regulators may impose a fine in an amount that is up to the greater of €10 million or 2% of the global annual turnover from the prior year. These administrative fines are discretionary and based, in each case, on a multi-factored approach. We may also face audits or investigations by one or more domestic or foreign government agencies relating to our compliance with these regulations. An adverse outcome under any such investigation or audit could result in liability, result in adverse publicity, and adversely affect our business.
We engage in consumer debt collection for HCA-affiliated hospitals and certainnon-affiliated hospitals. The federal Fair Debt Collection Practices Act and Telephone Consumer Protection Act restrict the methods that companies may use to contact and seek payment from consumer debtors regarding past due accounts. Many states impose additional requirements on debt collection practices, and some of those requirements may be more stringent than the federal requirements.
If we fail to comply with these or other applicable laws and regulations, we could be subject to liabilities, including civil penalties, the loss of our licenses to operate one or more facilities, exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state health care programs and criminal penalties.
We have been and could become the subject of government investigations, claims and litigation.
Health care companies are subject to numerous investigations by various government agencies. Further, under the FCA, private parties have the right to bringqui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our financial position, results of operations and liquidity.
Government agencies and their agents, such as the MACs, fiscal intermediaries and carriers, as well as the OIG, CMS and state Medicaid programs, conduct audits of our health care operations. Private third-party payers may conduct similar post-payment audits, and we also perform internal audits and monitoring. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material, adverse effect on our financial position, results of operations and liquidity.
CMS contracts with RACs on a contingency fee basis to conduct post-payment reviews to detect and correct improper payments in thefee-for-service Medicare program. The Health Reform Law expanded the RAC program’s scope to include managed Medicare plans and Medicaid claims. RAC denials are appealable; however, there are currently significant delays in the assignment of new Medicare appeals to Administrative Law
Judges, which negatively impacts our ability to appeal RAC payment denials. In addition, CMS employs MICs to perform post-payment audits of Medicaid claims and identify overpayments, and state Medicaid agencies and other contractors have increased their review activities.
Should we be found out of compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be negatively impacted.
Changes to physician utilization practices and treatment methodologies, third-party payer controls designed to reduce inpatient services or surgical procedures and other factors outside our control that impact demand for medical services may reduce our revenues.
Controls imposed by Medicare, managed Medicare, Medicaid, managed Medicaid and private third-party payers designed to reduce admissions, intensity of services, surgical volumes and lengths of stay, in some instances referred to as “utilization review,” have affected and are expected to continue to affect our facilities. Utilization review entails the review of the admission and course of treatment of a patient by third-party payers. The Medicare program also issues national or local coverage determinations that restrict the circumstances under which Medicare pays for certain services. Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by third-party payers preadmission authorization requirements, coverage restrictions, utilization review and by pressure to maximize outpatient and alternative health care delivery services for less acutely ill patients. Efforts to impose more stringent cost controls are expected to continue. Additionally, trends in physician treatment protocols and managed care health plan design, such as health plans that shift increased costs and accountability for care to patients, could reduce our surgical volumes and admissions in favor of lower intensity and lower cost treatment methodologies.
Volume, admission andcase-mix trends may be impacted by other factors beyond our control, such as changes in volume of certain high acuity services, variations in the prevalence and severity of outbreaks of influenza and other illnesses and medical conditions, seasonal and severe weather conditions, changes in treatment regimens and medical technology and other advances. These factors may reduce the demand for services we offer and decrease the reimbursement that we receive. Significant limits on the scope of services reimbursed, cost controls, changes to physician utilization practices, treatment methodologies, reimbursement rates and fees and other factors beyond our control could have a material, adverse effect on our business, financial position and results of operations.
Our overall business results may suffer during periods of general economic weakness.
Budget deficits at federal, state and local government entities have had a negative impact on spending, and may continue to negatively impact spending, for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant third-party payer sources for our hospitals. We anticipate that the federal deficit, the growing magnitude of Medicare expenditures and the aging of the United States population will continue to place pressure on government health care programs. Other risks we face during periods of economic weakness and high unemployment include potential declines in the population covered under managed care agreements, increased patient decisions to postpone or cancel elective and nonemergency health care procedures (including delaying surgical procedures), potential increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients and further difficulties in collecting patient receivables for copayment and deductible receivables.
The industry trend toward value-based purchasing may negatively impact our revenues.
There is a trend in the health care industry toward value-based purchasing of health care services. These value-based purchasing programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare currently require hospitals to report certain quality data to receive full reimbursement updates. In addition,
Medicare does not reimburse for care related to certain preventable adverse events (also called “never events”). The Health Reform Law also prohibits the use of federal funds under the Medicaid program to reimburse providers for medical assistance provided to treat HACs. The 25% of hospitals with the worst risk-adjusted HAC rates in the designated performance period receive a 1% reduction in their inpatient PPS Medicare payments.
Hospitals with excess readmission rates for conditions designated by HHS will receive a reduction in their inpatient PPS operating Medicare payments for all Medicare inpatient discharges, not just discharges relating to the conditions subject to the excess readmission standard. The reduction in payments to hospitals with excess readmissions can be up to 3% of a hospital’s base payments.
HHS has implemented a value-based purchasing program for inpatient hospital services that reduces inpatient hospital payments for all discharges by 2% in federal fiscal year 2017 and for subsequent years. HHS pools the amount collected from these reductions to fund payments to reward hospitals that meet or exceed certain quality performance standards established by HHS. HHS estimates that $1.9 billion in value-based incentive payments will be available to hospitals in federal fiscal year 2018 based on achievement (relative to other hospitals) and improvement (relative to the hospital’s own past performance). Hospitals that meet or exceed the quality performance standards will receive greater reimbursement under the value-based purchasing program than they would have otherwise.
CMS has developed several alternative payment models that are intended to reduce costs and improve quality of care for Medicare beneficiaries. Examples of alternative payment models include bundled payment models in which, depending on whether overall CMS spending per episode exceeds or falls below a target specified by CMS and whether quality standards are met, hospitals may receive supplemental Medicare payments or owe repayments to CMS. Generally, participation in bundled payment programs is voluntary, but CMS requires hospitals in selected markets to participate in a bundled payment initiative for orthopedic services. Participation in mandatory or voluntary demonstration projects, particularly demonstrations with the potential to affect payment, may negatively impact our results of operations.
Many large private third-party payers currently require hospitals to report quality data, and several private third-party payers do not reimburse hospitals for certain preventable adverse events. Further, we have implemented a policy pursuant to which we do not bill patients or third-party payers for fees or expenses incurred due to certain preventable adverse events.
We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. CMS has announced aggressive goals for adopting alternative payment models, which may include additional bundled payment programs, and private third-party payers may also transition away fromfee-for-service payment models. We are unable at this time to predict our future payments or whether we will be subject to payment reductions under these programs or how this trend will affect our results of operations, but it could negatively impact our revenues.
Our operations could be impaired by a failure of our information systems.
The performance of our information systems is critical to our business operations. In addition to our shared services initiatives, our information systems are essential to a number of critical areas of our operations, including:
accounting and financial reporting;
billing and collecting accounts;
coding and compliance;
clinical systems;
medical records and document storage;
inventory management;
negotiating, pricing and administering managed care contracts and supply contracts; and
monitoring quality of care and collecting data on quality measures necessary for full Medicare payment updates.
Information systems may be vulnerable to damage from a variety of sources, including telecommunications or network failures, human acts and natural disasters. We have taken precautionary measures to prevent unanticipated problems that could affect our information systems. Nevertheless, we may experience system failures. The occurrence of any system failure could result in interruptions, delays, the loss or corruption of data and cessations or interruptions in the availability of systems, all of which could have a material, adverse effect on our financial position and results of operations and harm our business reputation.
A cybersecurity incident could result in the compromise of a facility, confidential data or critical data systems and give rise to potential harm to patients, remediation and other expenses, expose us to liability under HIPAA, consumer protection laws, or other common law theories, subject us to litigation and foreign, federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.
We, independently and through third-party vendors, collect and store on our networks sensitive information, including intellectual property, proprietary business information and personally identifiable information of our patients and employees. In addition, we have made significant investments in technology to adopt and utilize EHR and to become meaningful users of health information technology. The secure maintenance of this information and technology is critical to our business operations. We have implemented multiple layers of security measures to protect the confidentiality, integrity and availability of this data and the systems and devices that store and transmit such data. We utilize current security technologies, and our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, threats from malicious persons and groups, new vulnerabilities and advanced new attacks against information systems create risk of cybersecurity incidents. We are regularly the target of attempted cybersecurity and other threats that could have a security impact. There can be no assurance that we or our third-party vendors will not be subject to cybersecurity incidents that bypass our security measures, impact the integrity, availability or privacy of personal health information or other data subject to privacy laws or disrupt our information systems, devices or business, including our ability to provide various health care services. As a result, cybersecurity, physical security and the continued development and enhancement of our controls, processes and practices designed to protect our facilities, information systems and data from attack, damage or unauthorized access remain a priority for us. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any cybersecurity vulnerabilities. The occurrence of any of these events could result in (i) harm to patients; (ii) business interruptions and delays; (iii) the loss, misappropriation, corruption or unauthorized access of data; (iv) litigation and potential liability under privacy, security and consumer protection laws or other applicable laws; (v) reputational damage and (vi) foreign, federal and state governmental inquiries, any of which could have a material, adverse effect on our financial position and results of operations and harm our business reputation.
If we fail to continue to demonstrate meaningful use of certified electronic health record systems, our operations could be adversely affected.
Eligible hospitals and eligible professionals that fail to demonstrate meaningful use of certified EHR technology in an applicable prior reporting period are subject to reduced payments from Medicare. Failure to continue to demonstrate meaningful use of certified EHR technology could have a material, adverse effect on our financial position and results of operations.
The emergence and effects related to a pandemic, epidemic or outbreak of an infectious disease could adversely affect our operations.
If a pandemic, epidemic, outbreak of an infectious disease or other public health crisis were to occur in an area in which we operate, our operations could be adversely affected. Such a crisis could diminish the public trust
in health care facilities, especially hospitals that fail to accurately or timely diagnose, or are treating (or have treated) patients affected by infectious diseases. If any of our facilities were involved, or perceived as being involved, in treating patients from such an infectious disease, patients might cancel elective procedures or fail to seek needed care at our facilities. Further, a pandemic, epidemic or outbreak might adversely affect our operations by causing a temporary shutdown or diversion of patients, by disrupting or delaying production and delivery of materials and products in the supply chain or by causing staffing shortages in our facilities. We have disaster plans in place and operate pursuant to infectious disease protocols, but the potential emergence of a pandemic, epidemic or outbreak is difficult to predict and could adversely affect our operations.
State efforts to regulate the construction or expansion of health care facilities could impair our ability to operate and expand our operations.
We are subjectour competitors, or otherwise fail to examination byeffectively provide or coordinate the efficient delivery of quality health care services, our reputation in the industry may be negatively impacted, we may receive reduced reimbursement amounts and we may owe repayments to payers, causing our revenues to decline.
We may be subjectresponsibility to liabilities from claims brought against our facilities.
We are subject to litigation relating to our business practices, including claims and legal actions by patients and othersfurther difficulties in the ordinary course of business alleging malpractice, product liability or other legal theories. Many of these actions seek large sums of money as damagescollecting patient receivables for copayment and involve significant defense costs. We insure a portion of our professional liability risks through a 100% owned subsidiary. Management believes our reserves for self-insured retentions and insurance coverage are sufficient to cover insured claims arising out of the operation of our facilities. Our 100% owned liability insurance subsidiary has entered into certain reinsurance contracts; however, the subsidiary remains liable to the extent that the reinsurers do not meet their obligations under the reinsurance contracts. If payments for claims exceed actuarially determined estimates, are not covered by insurance, or reinsurers, if any, fail to meet their obligations, our results of operations and financial position could be adversely affected.
deductible receivables.
rates.
notional principal amounts and maturity dates. The notional amounts
common stock:
Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate.
The 2017 Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act significantly revises U.S. corporate income taxes, including lowering the statutory corporate tax rate from 35% to 21% beginning in 2018 and imposing a mandatory one-time transition tax on undistributed foreign earnings. Due to the complexity and uncertainty regarding numerous provisions of the Tax Act, we have not completed our accounting for its effects. However, we have made reasonable estimates and recorded provisional amounts in our financial statements as of December 31, 2017.
As we complete our analysis of the Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by federal and state taxing authorities or other standard-setting bodies, we may make adjustments to the provisional amounts and record additional amounts for those federal, state, and foreign tax assets and liabilities for which we were unable to make reasonable estimates as of December 31, 2017. Any adjustments or additional amounts recorded may materially impact our provision for income taxes and effective tax rate in the periods in which they are made.
Item 1B. |
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Item 2. |
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State | Hospitals | Beds | ||||||
Alaska | 1 | 250 | ||||||
California | 5 | 1,838 | ||||||
Colorado | 7 | 2,411 | ||||||
Florida | 45 | 11,980 | ||||||
Georgia | 8 | 1,847 | ||||||
Idaho | 2 | 468 | ||||||
Indiana | 1 | 278 | ||||||
Kansas | 4 | 1,374 | ||||||
Kentucky | 2 | 384 | ||||||
Louisiana | 4 | 1,066 | ||||||
Mississippi | 1 | 130 | ||||||
Missouri | 5 | 1,014 | ||||||
Nevada | 3 | 1,217 | ||||||
New Hampshire | 2 | 295 | ||||||
Oklahoma | 2 | 756 | ||||||
South Carolina | 3 | 867 | ||||||
Tennessee | 13 | 2,450 | ||||||
Texas | 46 | 12,980 | ||||||
Utah | 8 | 1,011 | ||||||
Virginia | 11 | 3,271 | ||||||
International | ||||||||
England | 6 | 851 | ||||||
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179 | 46,738 | |||||||
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2020:
State | Hospitals | Beds | ||||||
Alaska | 1 | 250 | ||||||
California | 5 | 1,852 | ||||||
Colorado | 7 | 2,451 | ||||||
Florida | 45 | 12,491 | ||||||
Georgia | 9 | 2,477 | ||||||
Idaho | 2 | 454 | ||||||
Indiana | 1 | 278 | ||||||
Kansas | 4 | 1,374 | ||||||
Kentucky | 2 | 384 | ||||||
Louisiana | 3 | 923 | ||||||
Missouri | 5 | 1,058 | ||||||
Nevada | 3 | 1,452 | ||||||
New Hampshire | 3 | 418 | ||||||
North Carolina | 7 | 1,181 | ||||||
South Carolina | 3 | 951 | ||||||
Tennessee | 13 | 2,632 | ||||||
Texas | 46 | 13,456 | ||||||
Utah | 8 | 1,011 | ||||||
Virginia | 11 | 3,284 | ||||||
International | ||||||||
England | 7 | 888 | ||||||
185 | 49,265 | |||||||
Item 3. |
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We operate
punitive damages against us which may not be coveredconsolidated financial statements is incorporated herein by insurance. We are also subject to claims by various taxing authorities for additional taxes and related interest and penalties. The resolution of any such lawsuits, claims or legal and regulatory proceedings could have a material, adverse effect on our results of operations, financial position or liquidity.
Government Investigations, Claims and Litigation
Health care companies are subject to numerous investigations by various governmental agencies. Under the federal False Claims Act (“FCA”), private parties have the right to bringqui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our results of operations, financial position or liquidity.
Item 4. |
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Item 5. |
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The following table provides certain information with respect to ouran additional $6 billion was authorized for repurchases of the Company’s outstanding common stock from October 1, 2017 through December 31, 2017 (dollars in millions, except per share amounts)($8.8 billion of total repurchase authorization including the February 2021 authorization).
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs | ||||||||||||
October 1, 2017 through October 31, 2017 | 2,953,476 | $ | 77.40 | 2,953,476 | $ | 2,150 | ||||||||||
November 1, 2017 through November 30, 2017 | 2,264,878 | $ | 76.74 | 2,264,878 | $ | 1,976 | ||||||||||
December 1, 2017 through December 31, 2017 | 2,026,500 | $ | 85.83 | 2,026,500 | $ | 1,802 | ||||||||||
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Total for Fourth Quarter 2017 | 7,244,854 | $ | 79.55 | 7,244,854 | $ | 1,802 | ||||||||||
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The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the NYSE for our common stock.
Sales Price | ||||||||
High | Low | |||||||
2017 | ||||||||
First Quarter | $ | 91.03 | $ | 73.52 | ||||
Second Quarter | 89.80 | 81.10 | ||||||
Third Quarter | 87.99 | 75.56 | ||||||
Fourth Quarter | 90.29 | 71.18 | ||||||
2016 | ||||||||
First Quarter | $ | 79.00 | $ | 60.07 | ||||
Second Quarter | 83.69 | 73.82 | ||||||
Third Quarter | 81.79 | 73.24 | ||||||
Fourth Quarter | 82.37 | 67.00 |
At the close of business on February 9, 2018,8, 2021, there were approximately 340400 holders of record of our common stock.
12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | |||||||||||||||||||
HCA Healthcare, Inc. | 100.00 | 158.14 | 243.25 | 224.16 | 245.34 | 291.15 | ||||||||||||||||||
S&P 500 | 100.00 | 132.39 | 150.51 | 152.59 | 170.84 | 208.14 | ||||||||||||||||||
S&P Health Care | 100.00 | 141.46 | 177.30 | 189.52 | 184.42 | 225.13 |
12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | 12/31/2019 | 12/31/2020 | |||||||||||||||||||
HCA Healthcare, Inc. | $ | 100.00 | $ | 109.45 | $ | 129.88 | $ | 186.23 | $ | 223.94 | $ | 250.01 | ||||||||||||
S&P 500 | 100.00 | 111.96 | 136.40 | 130.42 | 171.49 | 203.04 | ||||||||||||||||||
S&P Health Care | 100.00 | 97.31 | 118.79 | 126.47 | 152.81 | 173.36 |
Item 6. |
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SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31
(Dollars in millions, except per share amounts)
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
Summary of Operations: | ||||||||||||||||||||
Revenues before provision for doubtful accounts | $ | 47,653 | $ | 44,747 | $ | 43,591 | $ | 40,087 | $ | 38,040 | ||||||||||
Provision for doubtful accounts | 4,039 | 3,257 | 3,913 | 3,169 | 3,858 | |||||||||||||||
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Revenues | 43,614 | 41,490 | 39,678 | 36,918 | 34,182 | |||||||||||||||
Salaries and benefits | 20,059 | 18,897 | 18,115 | 16,641 | 15,646 | |||||||||||||||
Supplies | 7,316 | 6,933 | 6,638 | 6,262 | 5,970 | |||||||||||||||
Other operating expenses | 8,051 | 7,496 | 7,056 | 6,630 | 6,021 | |||||||||||||||
Equity in earnings of affiliates | (45 | ) | (54 | ) | (46 | ) | (43 | ) | (29 | ) | ||||||||||
Depreciation and amortization | 2,131 | 1,966 | 1,904 | 1,820 | 1,753 | |||||||||||||||
Interest expense | 1,690 | 1,707 | 1,665 | 1,743 | 1,848 | |||||||||||||||
Losses (gains) on sales of facilities | (8 | ) | (23 | ) | 5 | (29 | ) | 10 | ||||||||||||
Losses on retirement of debt | 39 | 4 | 135 | 335 | 17 | |||||||||||||||
Legal claim costs (benefits) | — | (246 | ) | 249 | 78 | — | ||||||||||||||
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39,233 | 36,680 | 35,721 | 33,437 | 31,236 | ||||||||||||||||
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Income before income taxes | 4,381 | 4,810 | 3,957 | 3,481 | 2,946 | |||||||||||||||
Provision for income taxes | 1,638 | 1,378 | 1,261 | 1,108 | 950 | |||||||||||||||
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Net income | 2,743 | 3,432 | 2,696 | 2,373 | 1,996 | |||||||||||||||
Net income attributable to noncontrolling interests | 527 | 542 | 567 | 498 | 440 | |||||||||||||||
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Net income attributable to HCA Healthcare, Inc. | $ | 2,216 | $ | 2,890 | $ | 2,129 | $ | 1,875 | $ | 1,556 | ||||||||||
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Per common share data: | ||||||||||||||||||||
Basic earnings per share | $ | 6.12 | $ | 7.53 | $ | 5.14 | $ | 4.30 | $ | 3.50 | ||||||||||
Diluted earnings per share | $ | 5.95 | $ | 7.30 | $ | 4.99 | $ | 4.16 | $ | 3.37 | ||||||||||
Financial Position: | ||||||||||||||||||||
Assets | $ | 36,593 | $ | 33,758 | $ | 32,744 | $ | 30,980 | $ | 28,594 | ||||||||||
Working capital | 3,819 | 3,252 | 3,716 | 3,450 | 2,342 | |||||||||||||||
Long-term debt, net, including amounts due within one year | 33,058 | 31,376 | 30,488 | 29,426 | 28,139 | |||||||||||||||
Noncontrolling interests | 1,811 | 1,669 | 1,553 | 1,396 | 1,342 | |||||||||||||||
Stockholders’ deficit | (4,995 | ) | (5,633 | ) | (6,046 | ) | (6,498 | ) | (6,928 | ) | ||||||||||
Cash Flow Data: | ||||||||||||||||||||
Cash provided by operating activities | $ | 5,426 | $ | 5,653 | $ | 4,734 | $ | 4,448 | $ | 3,680 | ||||||||||
Cash used in investing activities | (4,279 | ) | (3,240 | ) | (2,583 | ) | (2,918 | ) | (2,346 | ) | ||||||||||
Purchase of property and equipment | (3,015 | ) | (2,760 | ) | (2,375 | ) | (2,176 | ) | (1,943 | ) | ||||||||||
Cash used in financing activities | (1,061 | ) | (2,508 | ) | (1,976 | ) | (1,378 | ) | (1,625 | ) |
2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
Operating Data: | ||||||||||||||||||||
Number of hospitals at end of period | 179 | 170 | 168 | 166 | 165 | |||||||||||||||
Number of freestanding outpatient surgical centers at end of period | 120 | 118 | 116 | 113 | 115 | |||||||||||||||
Number of licensed beds at end of period(a) | 46,738 | 44,290 | 43,771 | 43,356 | 42,896 | |||||||||||||||
Weighted average licensed beds(b) | 45,380 | 44,077 | 43,620 | 43,132 | 42,133 | |||||||||||||||
Admissions(c) | 1,936,613 | 1,891,831 | 1,868,789 | 1,795,312 | 1,744,126 | |||||||||||||||
Equivalent admissions(d) | 3,286,432 | 3,191,519 | 3,122,746 | 2,958,674 | 2,844,670 | |||||||||||||||
Average length of stay (days)(e) | 4.9 | 4.9 | 4.9 | 4.8 | 4.8 | |||||||||||||||
Average daily census(f) | 26,000 | 25,340 | 25,084 | 23,835 | 22,853 | |||||||||||||||
Occupancy(g) | 57 | % | 58 | % | 58 | % | 55 | % | 54 | % | ||||||||||
Emergency room visits(h) | 8,624,137 | 8,378,340 | 8,050,159 | 7,450,748 | 6,968,115 | |||||||||||||||
Outpatient surgeries(i) | 935,307 | 932,213 | 909,386 | 891,633 | 881,883 | |||||||||||||||
Inpatient surgeries(j) | 546,228 | 537,306 | 529,900 | 518,881 | 508,793 | |||||||||||||||
Days revenues in accounts receivable(k) | 52 | 50 | 53 | 54 | 54 | |||||||||||||||
Outpatient revenues as a % of patient revenues(l) | 38 | % | 38 | % | 40 | % | 38 | % | 38 | % |
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HCA HEALTHCARE, INC.
Item 7. |
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HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Forward-Looking Statements (continued)
certified electronic health record (“EHR”) technology (23)and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (24)(25) changes in interpretations, assumptions and expectations regarding the 2017 Tax Cuts and Jobs Act,U.S. federal, state, or foreign tax laws including additionalinterpretive guidance that may be issued by federal and state taxing authorities or other standard-settingstandard setting bodies, and (25)(26) other risk factors described in this annual report on Form
2017 We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.
admission.
For 2017, the provision2019.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
2017 Operations Summary (continued)
and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care, was 34.9% for 2017, compared to 33.0% for 2016. Samesame facility uninsured admissions increased 5.9%both declined 7.0%, and consolidated and same facility uninsured emergency room visits increased 2.4%declined 20.9% and 21.0%, respectively, for 2017,2020, compared to 2016. Same facility uninsured admissions increased 3.8% and same facility uninsured emergency room visits increased 4.5% for 2016, compared to 2015.
2019.
accounts receivable.
imaging centers, as well as seeking to improve coordination of care and patient retention across our markets.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Business Strategy (continued)
Enhance Profitability.Grow the Company. the profitability of our company by fully leveraging the scale and scope of our franchise.organization. We are currently investingcontinue to invest in initiatives such as additional care navigators, clinical data exchange and centralized patient transfer operations, which will enable us to improve coordination of care and patient retention across our markets. We believe our centrally managed business processes and ability to leverage cost-saving practices across our extensive network will enable us to continue to manage costs effectively. We continue to invest in our Parallon subsidiary group to leverage key components of our support infrastructure, including revenue cycle management, health care group purchasing, supply chain management and staffing functions.
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
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Revenues (continued)
hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the conditionhave income at or make an appropriate transferbelow 400% of the individualfederal poverty level, were eligible for charity care, and we limit the patient responsibility amounts for these patients to a facility ablepercentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable percentage of the federal poverty level. Patients treated at hospitals for non-elective care, who have income above 400% of the federal poverty level, were eligible for certain other discounts which limit the patient responsibility amounts for these patients to handlea percentage of their annual household income, computed on a sliding scale based upon their annual income and the condition.applicable percentage of the federal poverty level. We apply additional discounts to limit patient responsibility for certain emergency services. The obligation to screenfederal poverty level is established by the federal government and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. Federalis based on income and state laws and regulations, including but not limited to EMTALA, require, and our commitment to providing quality patient care encourages, the provision of services to patients who are financially unable to pay for the health care services they receive.
Wefamily size. Because we do not pursue collection of amounts related to patients who meet our guidelinesdetermined to qualify foras charity care; therefore, these amountscare, they are not reported in revenues. We provide discounts from our gross charges to uninsured amounts related to patients who do not qualify for Medicaid or charity care. After the discounts are applied, we are still unableWe may attempt to collect a significant portion of uninsured patients’ accounts, and we record significant provisions for doubtful accounts (based upon our historical collection experience) relatedprovide assistance to uninsured patients into help determine whether they may qualify for Medicaid, other federal or state assistance, or charity care. If an uninsured patient does not qualify for these programs, the period the services are provided.
uninsured discount is applied.
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts
The collection of outstanding receivables from Medicare, Medicaid, managed care payers, other third-party payers and patients is our primary source of cash and is critical to our operating performance. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. The provision for doubtful accounts and the allowance for doubtful accounts
The amount of the provision for doubtful accounts is based upon management’s assessment of historical writeoffs and expected net collections, business and economic conditions, trends in federal, state and private
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts (continued)
employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical writeoffs and recoveriescollections at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information in estimating the collectibilitycollectability of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data. We believe our quarterly updates to the estimated allowance for doubtful accountsimplicit price concession amounts at each of our hospital facilities provide reasonable estimates of our revenues and valuations of our accounts receivable. These routine, quarterly changes
amounts we expect to collect.
2017 | 2016 | 2015 | ||||||||||
Charity care | $ | 4,861 | $ | 4,151 | $ | 3,682 | ||||||
Uninsured discounts | 14,520 | 13,047 | 10,692 | |||||||||
Provision for doubtful accounts | 4,039 | 3,257 | 3,913 | |||||||||
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Totals | $ | 23,420 | $ | 20,455 | $ | 18,287 | ||||||
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implicit price concessions. A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):
2017 | 2016 | 2015 | ||||||||||
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) | $ | 37,557 | $ | 35,304 | $ | 33,760 | ||||||
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Cost-to-charges ratio (patient care costs as percentage of gross patient charges) | 12.9 | % | 13.5 | % | 14.5 | % | ||||||
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Total uncompensated care | $ | 23,420 | $ | 20,455 | $ | 18,287 | ||||||
Multiply by thecost-to-charges ratio | 12.9 | % | 13.5 | % | 14.5 | % | ||||||
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Estimated cost of total uncompensated care | $ | 3,021 | $ | 2,761 | $ | 2,652 | ||||||
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The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care was 34.9% for 2017, 33.0% for 2016 and 31.5% for 2015. Days revenues in accounts receivable were 52 days, 50 days and 53 days at December 31, 2017, 2016 and 2015, respectively.
2020 | 2019 | 2018 | ||||||||||
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) | $ | 44,271 | $ | 44,118 | $ | 40,035 | ||||||
Cost-to-charges | 12.0 | % | 12.0 | % | 12.4 | % | ||||||
Total uncompensated care | $ | 29,029 | $ | 31,105 | $ | 26,757 | ||||||
Multiply by the cost-to-charges | 12.0 | % | 12.0 | % | 12.4 | % | ||||||
Estimated cost of total uncompensated care | $ | 3,483 | $ | 3,733 | $ | 3,318 | ||||||
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts (continued)
economic conditions, patient accounting service center operations, payer mix, or trends in federal, state, and private employer health care coverage could affect the collection of accounts receivable, cash flows and results of operations.
The approximate breakdown of accounts receivable by payer classification as of December 31, 2017 and 2016 is set forth in the following table:
% of Accounts Receivable | ||||||||||||
Under 91 Days | 91 — 180 Days | Over 180 Days | ||||||||||
Accounts receivable aging at December 31, 2017: | ||||||||||||
Medicare and Medicaid | 11 | % | 1 | % | 1 | % | ||||||
Managed care and other insurers | 31 | 5 | 5 | |||||||||
Uninsured | 19 | 6 | 21 | |||||||||
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Total | 61 | % | 12 | % | 27 | % | ||||||
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Accounts receivable aging at December 31, 2016: | ||||||||||||
Medicare and Medicaid | 11 | % | 1 | % | 1 | % | ||||||
Managed care and other insurers | 30 | 5 | 5 | |||||||||
Uninsured | 17 | 7 | 23 | |||||||||
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Total | 58 | % | 13 | % | 29 | % | ||||||
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During 2020, 2019 and 2018, we recorded reductions to the provision for professional liability risks of $112 million, $50 million and $70 million, respectively, due to the receipt of updated actuarial information.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Professional Liability Claims (continued)
of claims) and ultimate average severity (cost per claim); and Bornhuetter-Ferguson methods which add expected development to actual paid or incurred experience to estimate ultimate losses. These methods use our company-specific historical claims data and other information. Company-specific claim reporting and payment data collected over an approximate
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Professional Liability Claims (continued)
2017 | 2016 | 2015 | ||||||||||
Net reserves for professional liability claims, January 1 | $ | 1,494 | $ | 1,421 | $ | 1,382 | ||||||
Provision for current year claims | 467 | 428 | 408 | |||||||||
Unfavorable (favorable) development related to prior years’ claims | (1 | ) | 2 | (64 | ) | |||||||
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Total provision | 466 | 430 | 344 | |||||||||
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Payments for current year claims | 7 | 9 | 7 | |||||||||
Payments for prior years’ claims | 350 | 348 | 298 | |||||||||
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Total claim payments | 357 | 357 | 305 | |||||||||
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Net reserves for professional liability claims, December 31 | $ | 1,603 | $ | 1,494 | $ | 1,421 | ||||||
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2020 | 2019 | 2018 | ||||||||||
Net reserves for professional liability claims, January 1 | $ | 1,781 | $ | 1,692 | $ | 1,603 | ||||||
Provision for current year claims | 519 | 499 | 486 | |||||||||
Favorable development related to prior years’ claims | (84 | ) | (2 | ) | (39 | ) | ||||||
Total provision | 435 | 497 | 447 | |||||||||
Payments for current year claims | 5 | 8 | 3 | |||||||||
Payments for prior years’ claims | 287 | 400 | 355 | |||||||||
Total claim payments | 292 | 408 | 358 | |||||||||
Net reserves for professional liability claims, December 31 | $ | 1,924 | $ | 1,781 | $ | 1,692 | ||||||
Interest and penalties payable to taxing authorities are included as a component of our provision for income taxes. We have elected to treat taxes incurred on global intangible
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
Same facility revenues increased 3.8% for the year ended December 31, 2017 compared to the year ended December 31, 2016 and increased 4.1% for the year ended December 31, 2016 compared to the year ended December 31, 2015. The 3.8% increase for 2017 can be primarily attributed to the combined impact of a 2.2% increase in same facility revenue per equivalent admission and a 1.5%3.5% increase in same facility equivalent admissions. The 4.1% increase for 2016 can be attributed to the combined impact of a 2.2% increase in same facility revenue per equivalent admission and a 1.9% increase in same facility equivalent admissions.
2018.
2018.
2018.
Years Ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Medicare | 30 | % | 31 | % | 30 | % | ||||||
Managed Medicare | 16 | 15 | 15 | |||||||||
Medicaid | 6 | 6 | 6 | |||||||||
Managed Medicaid | 12 | 12 | 12 | |||||||||
Managed care and other insurers | 28 | 29 | 30 | |||||||||
Uninsured | 8 | 7 | 7 | |||||||||
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100 | % | 100 | % | 100 | % | |||||||
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Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Medicare | 26 | % | 29 | % | 30 | % | ||||||
Managed Medicare | 20 | 18 | 17 | |||||||||
Medicaid | 5 | 5 | 5 | |||||||||
Managed Medicaid | 12 | 12 | 12 | |||||||||
Managed care and insurers | 29 | 28 | 28 | |||||||||
Uninsured | 8 | 8 | 8 | |||||||||
100 | % | 100 | % | 100 | % | |||||||
(Continued)
Years Ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Medicare | 27 | % | 28 | % | 28 | % | ||||||
Managed Medicare | 12 | 12 | 12 | |||||||||
Medicaid | 5 | 5 | 6 | |||||||||
Managed Medicaid | 6 | 6 | 5 | |||||||||
Managed care and other insurers | 48 | 49 | 47 | |||||||||
Uninsured | 2 | — | 2 | |||||||||
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100 | % | 100 | % | 100 | % | |||||||
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Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Medicare | 27 | % | 28 | % | 28 | % | ||||||
Managed Medicare | 15 | 15 | 14 | |||||||||
Medicaid | 5 | 5 | 4 | |||||||||
Managed Medicaid | 6 | 5 | 6 | |||||||||
Managed care and insurers | 47 | 47 | 48 | |||||||||
100 | % | 100 | % | 100 | % | |||||||
Act. Texas currently operates its Healthcare Transformation and Quality Improvement Program pursuant to a Medicaid waiver (the “Texas Waiver Program”).waiver. In December 2017, CMS approved an extension of this waiver through September 30, 2022, but indicated that it will phase out some of the federal funding. As currently structured, the Texas Waiver Program includes two primary components: an uncompensated care component and a Delivery System Reform Incentive Payment (“DSRIP”) component. Initiatives under the DSRIP program are designed to provide incentive payments to hospitals and other providers for their investments in delivery system reforms that increase access to health care, improve the quality of care and enhance the health of patients and families they serve. CMS will provide level DSRIP funding for two years, decreased funding for the following two years, and no DSRIP funding beginning October 1, 2021. In addition, the disbursement methodology for uncompensated care pool funding will be revised to align with federal policies. Beginning October 1, 2019, Texas will not receive any federal financial participation for uncompensated care pool payments until CMS approves revised uncompensated care protocol policies for the state that will govern how hospitals’ uncompensated care entitlement is calculated and the size of the statewide uncompensated care pool. Based on the waiver renewal terms, we expect the statewide uncompensated care pool size will ultimately be reduced, but
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
it is presently unclear whether our share of the pool and its corresponding uncompensated care payments will increase or decrease. We provide charity care services directly to patients in several communities in the state of Texas, in affiliation with other hospitals. As a result of additional charitable care being provided directly to patients by private hospitals, public hospital districts or counties in Texas have available funds that were previously devoted to indigent care. The public hospital districts or counties are under no contractual or legal obligation to provide such indigent care. The public hospital districts or counties have elected to transfer some portion of these available funds to the state’s Medicaid program. Such action is at the sole discretion of the public hospital districts or counties. It is anticipated that these contributions to the state will be matched with federal Medicaid funds, as they have been for the past twelve years in Texas. The state then may make supplemental payments to hospitals in the state for Medicaid services rendered. Hospitals receiving Medicaid supplemental payments may include those that are providing additional indigent care services.
Our Texas Medicaid revenues included $351 million ($108 million DSRIP related and $243 million uncompensated care related), $370 million ($101 million DSRIP related and $269 million uncompensated care related) and $347 million ($95 million DSRIP related and $252 million uncompensated care related) during 2017, 2016 and 2015, respectively, of Medicaid supplemental waiver payments. We cannot predict whether the Texas Medicaid Waiver Program will be further extended or revised beyond September 30, 2022.
payments of $599 million, $416 million and $450 million during 2020, 2019 and 2018, respectively.
(Continued)
2017 | 2016 | 2015 | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Revenues before provision for doubtful accounts | $ | 47,653 | $ | 44,747 | $ | 43,591 | ||||||||||||||||||
Provision for doubtful accounts | 4,039 | 3,257 | 3,913 | |||||||||||||||||||||
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Revenues | 43,614 | 100.0 | 41,490 | 100.0 | 39,678 | 100.0 | ||||||||||||||||||
Salaries and benefits | 20,059 | 46.0 | 18,897 | 45.5 | 18,115 | 45.7 | ||||||||||||||||||
Supplies | 7,316 | 16.8 | 6,933 | 16.7 | 6,638 | 16.7 | ||||||||||||||||||
Other operating expenses | 8,051 | 18.4 | 7,496 | 18.1 | 7,056 | 17.8 | ||||||||||||||||||
Equity in earnings of affiliates | (45 | ) | (0.1 | ) | (54 | ) | (0.1 | ) | (46 | ) | (0.1 | ) | ||||||||||||
Depreciation and amortization | 2,131 | 4.9 | 1,966 | 4.8 | 1,904 | 4.8 | ||||||||||||||||||
Interest expense | 1,690 | 3.9 | 1,707 | 4.1 | 1,665 | 4.2 | ||||||||||||||||||
Losses (gains) on sales of facilities | (8 | ) | — | (23 | ) | (0.1 | ) | 5 | — | |||||||||||||||
Losses on retirement of debt | 39 | 0.1 | 4 | — | 135 | 0.3 | ||||||||||||||||||
Legal claim costs (benefits) | — | — | (246 | ) | (0.6 | ) | 249 | 0.6 | ||||||||||||||||
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39,233 | 90.0 | 36,680 | 88.4 | 35,721 | 90.0 | |||||||||||||||||||
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Income before income taxes | 4,381 | 10.0 | 4,810 | 11.6 | 3,957 | 10.0 | ||||||||||||||||||
Provision for income taxes | 1,638 | 3.7 | 1,378 | 3.3 | 1,261 | 3.2 | ||||||||||||||||||
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Net income | 2,743 | 6.3 | 3,432 | 8.3 | 2,696 | 6.8 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 527 | 1.2 | 542 | 1.3 | 567 | 1.4 | ||||||||||||||||||
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Net income attributable to HCA Healthcare, Inc. | $ | 2,216 | 5.1 | $ | 2,890 | 7.0 | $ | 2,129 | 5.4 | |||||||||||||||
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% changes from prior year: | ||||||||||||||||||||||||
Revenues | 5.1 | % | 4.6 | % | 7.5 | % | ||||||||||||||||||
Income before income taxes | (8.9 | ) | 21.6 | 13.7 | ||||||||||||||||||||
Net income attributable to HCA Healthcare, Inc. | (23.3 | ) | 35.8 | 13.6 | ||||||||||||||||||||
Admissions(a) | 2.4 | 1.2 | 4.1 | |||||||||||||||||||||
Equivalent admissions(b) | 3.0 | 2.2 | 5.5 | |||||||||||||||||||||
Revenue per equivalent admission | 2.1 | 2.3 | 1.8 | |||||||||||||||||||||
Same facility % changes from prior year(c): | ||||||||||||||||||||||||
Revenues | 3.8 | 4.1 | 6.4 | |||||||||||||||||||||
Admissions(a) | 1.1 | 1.1 | 3.4 | |||||||||||||||||||||
Equivalent admissions(b) | 1.5 | 1.9 | 4.6 | |||||||||||||||||||||
Revenue per equivalent admission | 2.2 | 2.2 | 1.7 |
2020 | 2019 | 2018 | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Revenues | $ | 51,533 | 100.0 | $ | 51,336 | 100.0 | $ | 46,677 | 100.0 | |||||||||||||||
Salaries and benefits | 23,874 | 46.3 | 23,560 | 45.9 | 21,425 | 45.9 | ||||||||||||||||||
Supplies | 8,369 | 16.2 | 8,481 | 16.5 | 7,724 | 16.5 | ||||||||||||||||||
Other operating expenses | 9,307 | 18.1 | 9,481 | 18.5 | 8,608 | 18.5 | ||||||||||||||||||
Equity in earnings of affiliates | (54 | ) | (0.1 | ) | (43 | ) | (0.1 | ) | (29 | ) | (0.1 | ) | ||||||||||||
Depreciation and amortization | 2,721 | 5.3 | 2,596 | 5.0 | 2,278 | 4.9 | ||||||||||||||||||
Interest expense | 1,584 | 3.1 | 1,824 | 3.6 | 1,755 | 3.8 | ||||||||||||||||||
Losses (gains) on sales of facilities | 7 | — | (18 | ) | — | (428 | ) | (0.9 | ) | |||||||||||||||
Losses on retirement of debt | 295 | 0.6 | 211 | 0.4 | 9 | — | ||||||||||||||||||
46,103 | 89.5 | 46,092 | 89.8 | 41,342 | 88.6 | |||||||||||||||||||
Income before income taxes | 5,430 | 10.5 | 5,244 | 10.2 | 5,335 | 11.4 | ||||||||||||||||||
Provision for income taxes | 1,043 | 2.0 | 1,099 | 2.1 | 946 | 2.0 | ||||||||||||||||||
Net income | 4,387 | 8.5 | 4,145 | 8.1 | 4,389 | 9.4 | ||||||||||||||||||
Net income attributable to noncontrolling interests | 633 | 1.2 | 640 | 1.3 | 602 | 1.3 | ||||||||||||||||||
Net income attributable to HCA Healthcare, Inc. | $ | 3,754 | 7.3 | $ | 3,505 | 6.8 | $ | 3,787 | 8.1 | |||||||||||||||
% changes from prior year: | ||||||||||||||||||||||||
Revenues | 0.4 | % | 10.0 | % | 7.0 | % | ||||||||||||||||||
Income before income taxes | 3.6 | (1.7 | ) | 21.8 | ||||||||||||||||||||
Net income attributable to HCA Healthcare, Inc. | 7.1 | (7.4 | ) | 70.9 | ||||||||||||||||||||
Admissions(a) | (4.7 | ) | 5.2 | 3.5 | ||||||||||||||||||||
Equivalent admissions(b) | (9.2 | ) | 6.6 | 4.1 | ||||||||||||||||||||
Revenue per equivalent admission | 10.5 | 3.2 | 2.8 | |||||||||||||||||||||
Same facility % changes from prior year(c): | ||||||||||||||||||||||||
Revenues | (0.1 | ) | 5.9 | 6.5 | ||||||||||||||||||||
Admissions(a) | (4.8 | ) | 2.8 | 2.5 | ||||||||||||||||||||
Equivalent admissions(b) | (9.3 | ) | 3.5 | 2.5 | ||||||||||||||||||||
Revenue per equivalent admission | 10.1 | 2.3 | 3.9 |
(a) | Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume. |
(b) | Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation “equates” outpatient revenue to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume. |
(c) | Same facility information excludes the operations of hospitals and their related facilities that were either acquired, divested or removed from service during the current and prior year. |
(Continued)
Operating Data: | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Number of hospitals at end of period | 185 | 184 | 179 | |||||||||
Number of freestanding outpatient surgical centers at end of period(a) | 121 | 123 | 123 | |||||||||
Number of licensed beds at end of period(b) | 49,265 | 49,035 | 47,199 | |||||||||
Weighted average beds in service(c) | 42,246 | 41,510 | 39,966 | |||||||||
Admissions(d) | 2,009,909 | 2,108,927 | 2,003,753 | |||||||||
Equivalent admissions(e) | 3,312,330 | 3,646,335 | 3,420,406 | |||||||||
Average length of stay (days)(f) | 5.1 | 4.9 | 4.9 | |||||||||
Average daily census(g) | 27,734 | 28,134 | 26,663 | |||||||||
Occupancy(h) | 66 | % | 68 | % | 67 | % | ||||||
Emergency room visits(i) | 7,450,307 | 9,161,129 | 8,764,431 | |||||||||
Outpatient surgeries(j) | 882,483 | 1,009,947 | 971,537 | |||||||||
Inpatient surgeries(k) | 522,385 | 566,635 | 548,220 | |||||||||
Days revenues in accounts receivable(l) | 45 | 50 | 51 | |||||||||
Outpatient revenues as a % of patient revenues(m) | 35 | % | 39 | % | 38 | % |
(a) | Excludes freestanding endoscopy centers (21 at December 31, 2020; 20 at December 31, 2019 and 19 at December 31, 2018). |
(b) | Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency. |
(c) | Represents the average number of beds in service, weighted based on periods owned. |
(d) | Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume. |
(e) | Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue. The equivalent admissions computation “equates” outpatient revenue to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume. |
(f) | Represents the average number of days admitted patients stay in our hospitals. |
(g) | Represents the average number of patients in our hospital beds each day. |
(h) | Represents the percentage of hospital beds in service that are occupied by patients. Both average daily census and occupancy rate provide measures of the utilization of inpatient rooms. |
(i) | Represents the number of patients treated in our emergency rooms. |
(j) | Represents the number of surgeries performed on patients who were not admitted to our hospitals. Pain management and endoscopy procedures are not included in outpatient surgeries. |
(k) | Represents the number of surgeries performed on patients who have been admitted to our hospitals. Pain management and endoscopy procedures are not included in inpatient surgeries. |
(l) | Revenues per day is calculated by dividing the revenues for the fourth quarter of each year by the days in the quarter. Days revenues in accounts receivable is then calculated as accounts receivable at the end of the period divided by revenues per day. |
(m) | Represents the percentage of patient revenues related to patients who are not admitted to our hospitals. |
2019
During 2017,2020, consolidated admissions increased 2.4%declined 4.7% and same facility admissions increased 1.1%declined 4.8% compared to 2016.2019. Consolidated inpatient surgeries increased 1.7% and same facility inpatient surgeries increased 0.3%both declined 7.8% during 20172020 compared to 2016. Consolidated outpatient surgeries increased 0.3%, and same facility outpatient surgeries declined 1.3% during 2017 compared to 2016.2019. Emergency room visits increased 2.9%declined 18.7% on a consolidated basis and increased 1.4%declined 18.8% on a same facility basis during 20172020 compared to 2016.
2019. We believe the declines in emergency room visits were primarily related to the COVID-19 pandemic and concerns regarding possible exposure to the virus.
Revenues increased 5.1% to $43.614 billion for 2017 from $41.490 billion for 2016.2019. The increase in revenues was primarily due to the combinednet impact of a 2.1%10.5% increase in revenue per equivalent admission andoffset by a 3.0% increase9.2% decline in equivalent admissions compared to 2016.2019. Same facility revenues increased 3.8%declined 0.1% due primarily to the combinednet impact of a 2.2%9.3% decline in same facility equivalent admissions offset by a 10.1% increase in same facility revenue per equivalent admission and a 1.5% increasecompared to 2019. We believe the declines in same facility equivalent admissions comparedwere primarily due to 2016.
declines in the relative percentage of outpatient service volume due to restrictions on services for certain periods and the general concerns regarding exposure to the virus.
(Continued)
averaged 3.0% for 2017 compared to 2016. Share-based compensation expense increased from $251 million in 2016 to $270 million in 2017.
2019.
During 2020 and 2019, we recorded reductions of $112 million, or $0.25 per diluted share, and $50 million, or $0.11 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.
2020 and $43 million for 2019.
2019, and the $114 million increase was due to capital expenditures and capital projects placed in service in 2020 (same facility depreciation and amortization increased $147 million).
Net2019.
2019.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2017 and 2016 (continued)
Net income attributable to noncontrolling interests declined from $542 million for 2016 to $527 million for 2017. The decline in net income attributable to noncontrolling interests related primarily to a joint venture in a Texas market.
Years Ended December 31, 2016 and 2015
Net income attributable to HCA Healthcare, Inc. totaled $2.890 billion, or $7.30 per diluted share, for 2016, compared to $2.129 billion, or $4.99 per diluted share, for 2015. Financial results for 2016 include tax benefits of $51 million, or $0.13 per diluted share, related to the resolution of federal income tax issues for our 2011 and 2012 tax years and $162 million, or $0.41 per diluted share, related to employee equity award settlements. Financial results for 2016 also include net gains on sales of facilities of $23 million, or $0.05 per diluted share, losses on retirement of debt of $4 million, or $0.01 per diluted share, and legal claim benefits of $246 million, or $0.39 per diluted share, related to the Health Midwest litigation. Financial results for 2015 include net losses on sales of facilities of $5 million, losses on retirement of debt of $135 million, or $0.20 per diluted share and legal claim costs of $249 million, or $0.37 per diluted share. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 395.851 million shares and 426.721 million shares for the years ended December 31, 2016 and 2015, respectively. During 2016 and 2015, we repurchased 36.325 million and 31.991 million shares, respectively, of our common stock.
During 2016, consolidated admissions increased 1.2% and same facility admissions increased 1.1% compared to 2015. Consolidated and same facility inpatient surgeries each increased 1.4% during 2016 compared to 2015. Consolidated outpatient surgeries increased 2.5%, and same facility outpatient surgeries increased 1.2% during 2016 compared to 2015. Emergency room visits increased 4.1% on a consolidated basis and increased 3.8% on a same facility basis during 2016 compared to 2015.
Revenues before provision for doubtful accounts increased 2.7% to $44.747 billion for 2016 from $43.591 billion for 2015. The provision for doubtful accounts declined $656 million from $3.913 billion in 2015 to $3.257 billion in 2016. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to uninsured amounts due directly from patients, including copayment and deductible amounts for patients who have health care coverage. Theself-pay revenue deductions for charity care and uninsured discounts increased $469 million and $2.355 billion, respectively, during 2016 compared to 2015. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care, was 33.0% for 2016 compared to 31.5% for 2015. At December 31, 2016, our allowance for doubtful accounts represented approximately 97.5% of the $5.116 billion total patient due accounts receivable balance, including accounts, net of estimated contractual discounts, related to patients for which eligibility for Medicaid coverage or uninsured discounts was being evaluated.
Revenues increased 4.6% to $41.490 billion for 2016 from $39.678 billion for 2015. The increase in revenues was due primarily to the combined impact of a 2.3% increase in revenue per equivalent admission and a 2.2% increase in equivalent admissions compared to 2015. Same facility revenues increased 4.1% due to the combined impact of a 2.2% increase in same facility revenue per equivalent admission and a 1.9% increase in same facility equivalent admissions compared to 2015.
Salaries and benefits, as a percentage of revenues, were 45.5% in 2016 and 45.7% in 2015. Salaries and benefits per equivalent admission increased 2.1% in 2016 compared to 2015. Same facility labor rate increases averaged 1.9% for 2016 compared to 2015. Share-based compensation expense increased from $239 million in 2015 to $251 million in 2016.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2016 and 2015 (continued)
Supplies, as a percentage of revenues, were 16.7% in both 2016 and 2015. Supply costs per equivalent admission increased 2.2% in 2016 compared to 2015. Supply costs per equivalent admission increased 4.6% for medical devices and 3.4% for pharmacy supplies and declined 0.1% for general medical and surgical items in 2016 compared to 2015.
Other operating expenses, as a percentage of revenues, was 18.1% in 2016 and 17.8% in 2015. Other operating expenses are primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. Provisions for losses related to professional liability risks were $430 million and $344 million for 2016 and 2015, respectively. The increase in provision for losses related to professional liability risks for 2016 compared to 2015 was primarily due to $64 million of favorable development related to prior years’ claims recorded in 2015.
Equity in earnings of affiliates was $54 million for 2016 and $46 million for 2015.
Depreciation and amortization, as a percentage of revenues, was 4.8% in both 2016 and 2015. Depreciation expense was $1.946 billion for 2016 and $1.880 billion for 2015.
Interest expense increased to $1.707 billion for 2016 from $1.665 billion for 2015. The increase in interest expense was due to an increase in the average debt balance. Our average debt balance was $31.048 billion for 2016 compared to $29.718 billion for 2015. The average interest rate for our long-term debt declined from 5.6% for 2015 to 5.5% for 2016.
Net gains on sales of facilities were $23 million for 2016 and related to sales of real estate and other investments. Net losses on sales of facilities were $5 million for 2015 and related to sales of real estate and other investments.
During 2016, we issued $1.200 billion aggregate principal amount of 4.500% senior secured notes due 2027. We used the net proceeds for general corporate purposes and to retire a portion of one of our senior secured term loans. We also entered into a joinder agreement to retire the remaining portion of this senior secured term loan using proceeds from a new $1.200 billion senior secured term loan facility maturing in February 2024. The pretax loss on retirement of debt was $4 million. During 2015, we redeemed all $1.525 billion aggregate principal amount of 7 3⁄4 % senior notes due 2021 and all $1.000 billion aggregate principal amount of our outstanding 6.500% senior notes due 2016. We also entered into a joinder agreement to retire certain of our existing senior secured term loans. The pretax losses on retirement of debt related to these redemptions were $135 million.
We reached a settlement agreement with the Health Care Foundation of Greater Kansas City related to a previously disclosed contractual dispute regarding our obligation to fund certain capital expenditures in connection with our purchase of hospitals from Health Midwest in 2003. The settlement agreement enabled us to reduce the accrual for this claim by $290 million and resulted in the recognition of net legal claim benefits of $246 million related to this litigation for 2016. We recorded $129 million of legal claim costs during 2015 related to this matter. We also recorded $120 million of legal claim costs during 2015 to settle a securities class action lawsuit and related derivative actions.
The effective tax rates were 32.3% and 37.2% for 2016 and 2015, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2016 and 2015 (continued)
Our provision for income taxes for 2016 included tax benefits of $51 million primarily related to the resolution of federal income tax issues for our 2011 and 2012 tax years and $162 million related to excess tax benefits from employee equity award settlements. Excluding the effect of these adjustments, the effective tax raterates for 20162020 and 2019 would have been 37.3%.
23.7% and 25.3%, respectively.
2018, refer to our annual report on Form
2018.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
repurchase of debt or equity securities have, and are expected to, come primarily from cash generated from operations and borrowed funds. On January 30, 2018,During 2019, our Board of Directors initiateddeclared four quarterly dividends of $0.40 per share, or $1.60 per share in the aggregate, on our common stock. During January 2020, our Board of Directors declared a quarterly dividend of $0.43 per share on our common stock. During April 2020 in response to the risks the
We terminated our $2.000 billion 364-day senior secured term loan facility during January 2021.
2019.
During August 2016, we issued $1.200$1.000 billion aggregate principal amount of 4.500% senior secured5.875% notes due 2027. We used the net proceeds for general corporate purposes2029 and to retire a portion of one of our senior secured term loans. We also entered into a joinder agreement to retire the remaining portion of this senior secured term loan using proceeds from a new $1.200 billion senior secured term loan facility maturing in February 2024. The pretax loss on retirement of debt was $4 million.
During June 2017, we issued $1.500 billion aggregate principal amount of 5.500% senior secured notes due 2047. We used the net proceeds for general corporate purposes, including funding the purchase of certain hospital acquisitions, and the redemption, during July 2017, of all $500 million aggregate principal amount of our existing 8.000%5.625% notes due 2028. We used the net proceeds to fund the purchase of a seven-hospital health system located in western North Carolina.
HCA HEALTHCARE, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
During June 2017,pandemic presents to our business, we amended our seniorentered into a credit agreement that provides for
agreement during January 2021.
Contractual Obligations
As of our senior secured cash flow credit facility on a second-priority basis.
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations(a) | Total | Current | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||||
Long-term debt including interest, excluding the senior secured credit facilities(b) | $ | 36,937 | $ | 1,577 | $ | 7,877 | $ | 6,509 | $ | 20,974 | ||||||||||
Loans outstanding under the senior secured credit facilities, including interest(b) | 8,806 | 363 | 1,720 | 4,126 | 2,597 | |||||||||||||||
Professional liability claims(c) | 1,627 | 429 | 693 | 357 | 148 | |||||||||||||||
Operating leases(d) | 2,279 | 289 | 517 | 355 | 1,118 | |||||||||||||||
Purchase and other obligations(d) | 29 | 19 | 6 | 2 | 2 | |||||||||||||||
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Total contractual obligations | $ | 49,678 | $ | 2,677 | $ | 10,813 | $ | 11,349 | $ | 24,839 | ||||||||||
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Commitment Expiration by Period | ||||||||||||||||||||
Other Commercial Commitments Not Recorded on the Consolidated Balance Sheet | Total | Current | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||||
Surety bonds(e) | $ | 40 | $ | 37 | $ | 3 | $ | — | $ | — | ||||||||||
Letters of credit(e) | 23 | 18 | 5 | — | — | |||||||||||||||
Physician commitments(f) | 32 | 25 | 7 | — | — | |||||||||||||||
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Total commercial commitments | $ | 95 | $ | 80 | $ | 15 | $ | — | $ | — | ||||||||||
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Year Ended December 31, 2020 | ||||
Revenues | $ | 31,040 | ||
Income before income taxes | 4,016 | |||
Net income | 3,172 | |||
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors | 3,091 | |||
At December 31, 2020: | ||||
December 31, 2020 | ||||
Current assets | $ | 7,442 | ||
Property and equipment, net | 14,939 | |||
Goodwill and other intangible assets | 5,763 | |||
Total noncurrent assets | 21,771 | |||
Total assets | 29,213 | |||
Current liabilities | 5,316 | |||
Long-term debt, net | 30,444 | |||
Intercompany balances | 2,090 | |||
Income taxes and other liabilities | 1,004 | |||
Total noncurrent liabilities | 34,035 | |||
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors | (10,247 | ) | ||
Noncontrolling interests | 109 |
2019.
(Continued)
Effects of Inflation and Changing Prices
Various federal, state and local laws have been enacted that, in certain cases, limit our ability to increase prices. Revenues for general, acute care hospital services rendered to Medicare patients are established under the federal government’s prospective payment system. Totalfee-for-service Medicare revenues were 21.7%, 21.4% and 21.8% of our revenues for 2017, 2016 and 2015, respectively.
Management believes hospital industry operating margins have been, and may continue to be, under significant pressure because of changes in payer and service mix and growth in operating expenses in excess
Tax Examinations
During 2016, the IRS completed its examination, resolving all outstanding2018 federal income tax issues for our 2011 and 2012 tax years.returns at December 31, 2020. We are also subject to examination by the IRS for tax years 2014 and later as well as by state and foreign taxing authorities.
Management believes HCA Healthcare, Inc., its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS, state and foreign taxing authorities, and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.
Item 7A. |
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Item 8. |
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Item 9. |
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Item 9A. |
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2020.
Item 9B. |
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Item 10. |
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Item 11. |
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Item 12. |
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(a) | (b) | (c) | ||||||||||
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a) ) | ||||||||||
Equity compensation plans approved by | 22,996,400 | (1) | $ | 43.47 | (1) | 31,437,200 | (2) | |||||
Equity compensation plans not approved by | — | — | — | |||||||||
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Total | 22,996,400 | $ | 43.47 | 31,437,200 | ||||||||
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(a) | (b) | (c) | ||||||||||
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a)) | ||||||||||
Equity compensation plans approved by security holders | 13.723 | (1) | $ | 91.53 | (1) | 26.139 | (2) | |||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
Total | 13.723 | $ | 91.53 | 26.139 | ||||||||
(1) | Includes |
(2) | Includes |
* | For additional information concerning our equity compensation plans, see the discussion in Note 2 — Share-Based Compensation in the notes to the consolidated financial statements. |
Item 13. |
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Item 14. |
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Item 15. |
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4.1 4.2 4.3 4.4(a)
4.5(b) | — | |||
4.5(c) | — | |||
4.5(d) | — | |||
4.5(e) | — | |||
4.5(f) | — | |||
4.5(g) | — | |||
4.5(h) | — |
4.5(i) | — | |||
4.5(j) | — | |||
4.5(k) | — | |||
4.5(l) | — | |||
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4.5(m) | ||||
4.5(n) | ||||
4.5(o) | ||||
4.6(a) | — | |||
4.6(b) | ||||
4.6(c) | ||||
4.7(a) |
4.7(b) | ||
4.7(c) | ||
4.8(a) |
4.8(b) | — | ||||
4.8(c) | — | ||||
4.8(d) | |||||
4.8(e) | |||||
4.9(a) | — | ||||
4.9(b) | |||||
4.9(c) | |||||
4.10(a) |
4.10(b) | — | |||
4.10(c) | ||||
4.10(d) | — | |||
4.10(e) | — | |||
4.10(f) | — |
4.10(g) | — | ||||
4.10(h) | — | ||||
4.10(i) | — | ||||
4.11 | — | ||||
4.12 | — |
4.13 | — | |||
4.14(a) | — | |||
4.14(b) | — | |||
4.14(c) | — | |||
4.14(d) | — | |||
4.14(e) | — | |||
4.15 | — | |||
4.16 | — |
4.17 | — | ||||
4.18 | — | ||||
4.19 | — | ||||
4.20 | — | ||||
4.21 | — | ||||
4.22 | — | ||||
4.23 | — | ||||
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4.24 | — |
4.26(a) | — | ||||
4.26(b) | |||||
4.26(c) | |||||
4.27 | |||||
4.28 | — | Form of 4.75% Senior Secured Notes due 2023 (included in Exhibit | |||
4.29 | — | ||||
4.30 | — | ||||
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4.31 | — |
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| Form of 5.00% Senior Secured Notes due 2024 (included in Exhibit | ||||
4.32 | — | ||||
4.33 | — | ||||
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4.34 | — |
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| Form of 5.25% Senior Secured Notes due 2025 (included in Exhibit |
4.35 | — | ||||
4.36 | — | ||||
4.37 | — | Form of 5.375% Senior Notes due 2025 (included in Exhibit |
4.38 | — | |||
4.39 | — | |||
4.40 | — | Form of 5.875% Senior Notes due 2026 (included in Exhibit | ||
4.41 | — | |||
4.42 | — | |||
4.43 | — | Form of 5.250% Senior Secured Notes due 2026 (included in Exhibit | ||
4.44 | — | |||
4.45 | — | |||
4.46 | — | Form of 4.500% Senior Secured Notes due 2027 (included in Exhibit | ||
4.47 | — |
4.48 | — | ||||
4.49 | — | ||||
4.50 | — | Form of 5.500% Senior Secured Notes due 2047 (included in Exhibit | |||
4.51 | — |
4.52 | ||
4.53 | ||
4.54 | ||
4.55 | ||
4.56 | ||
4.57 | ||
4.58 | ||
4.59 | ||
4.60 | ||
4.61 | ||
4.62 | ||
4.63 | ||
4.64 | ||
4.65 | ||
4.66 |
4.67 | ||||
4.68 | ||||
4.69 | ||||
4.70 | ||||
4.71 | ||||
4.72 | ||||
10.1 | ||||
10.2(a) | — | |||
10.2(b) | — | |||
10.2(c) | — | |||
10.3(a) | — | |||
10.3(b) | — | |||
10.4 | — | |||
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10.6 | — | |||
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10.7(a) | — | |||
10.7(b) | ||||
10.8(a) | — | |||
10.8(b) | — | |||
10.9(a) | — | |||
10.9(b) | — | |||
10.9(c) | — | |||
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10.9(g) | — | |||
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10.11 | — | |||
10.12 | — | |||
10.13 | — | |||
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10.23 |
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10.26 | — | |||
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10.34 | ||||
10.35 | ||||
10.36 | ||||
10.37 |
10.38 | ||||
21 | ||||
22 | ||||
23 | — | |||
31.1 | — | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2 | — | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32 | — | |||
101 | — | The following financial information from our annual report on | ||
104 | — The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, formatted in Inline XBRL (included in Exhibit 101). |
* | Management compensatory plan or arrangement. |
Item 16. |
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HCA HEALTHCARE, INC. | ||
By: | / | |
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19, 2021
Signature | Title | Date | ||
/
Samuel N. Hazen |
Chief Executive Officer and Director (Principal Executive Officer) | February | ||
/ William B. Rutherford | Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) | February | ||
/
Thomas F. Frist III | Chairman and Director | February 19, 2021 | ||
/S/ MEG G. CROFTON Meg G. Crofton | Director | February | ||
/S/ ROBERT J. DENNIS Robert J. Dennis | Director | February 19, 2021 | ||
/s/ NANCY-ANN DEPARLE Nancy-Ann DeParle | Director | February | ||
/
William R. Frist | Director | February | ||
/
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/ Charles O. Holliday, Jr. | Director | February | ||
/
Michael W. Michelson | Director | February | ||
/
Wayne J. Riley | Director | February | ||
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F-2 | ||||
Consolidated Financial Statements: | ||||
| ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Revenue Recognition | ||
Description of the Matter | For the year ended December 31, 2020, the Company’s revenues were $51.533 billion. As discussed in Note 1 to the consolidated financial statements, revenues are based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care, commercial, and governmental insurance plans are based upon the payment terms specified in the related contractual agreements or as mandated under government payer programs. Management continually reviews the contractual allowances estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care insurance coverage may have discounts applied (uninsured discounts and contractual discounts). The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues and accounts receivable at the estimated amounts the Company expects to collect. The primary collection risks relate to uninsured patient accounts, including amounts owed from patients after insurance has paid the amounts covered by the applicable agreement. Implicit price concessions relate primarily to amounts due directly from patients and are based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Auditing management’s estimates of contractual allowances and implicit price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts. | |
How We Addressed the Matter in Our Audit | We tested internal controls that address the risks of material misstatement related to the measurement and valuation of revenues, including estimation of contractual allowances and implicit price concessions. For example, we tested management’s internal controls over the key data inputs to the contractual allowances and implicit price concessions models, significant assumptions underlying management’s models, and management’s internal controls over retrospective hindsight reviews of historical reserve accuracy. To test the estimated contractual allowances and implicit price concessions, we performed audit procedures that included, among others, assessing methodologies and evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its estimates. We compared the significant assumptions used by management to current industry and economic trends and considered changes, if any, to the Company’s business and other relevant factors. We also assessed the historical accuracy of management’s estimates as a source of potential corroborative or contrary evidence. | |
Professional Liability Claims | ||
Description of the Matter | At December 31, 2020, the Company’s reserves for professional liability risks were $1.963 billion and the Company’s related provision for losses for the year ended December 31, 2020 was $435 million. As discussed in Note 1 to the consolidated financial statements, reserves for professional liability risks represent the estimated ultimate cost of all reported and unreported losses incurred and unpaid as of the consolidated balance sheet date. Management determines professional liability reserves and provisions for losses using individual case-basis valuations and actuarial analyses. Trends in the average frequency (number of claims) and ultimate average severity (cost per claim) of claims are significant assumptions in estimating the reserves. |
Auditing management’s professional liability claims reserves was complex and judgmental due to the significant estimations required in determining the reserves, particularly the actuarial methodology and assumptions related to the severity and frequency of claims. | ||
How We Addressed the Matter in Our Audit | We tested management’s internal controls that address the risks of material misstatement over the Company’s professional liability claims reserve estimation process. For example, we tested internal controls over management’s review of the actuarial methodology and significant assumptions, and the completeness and accuracy of claims data supporting the recorded reserves. To test the Company’s determination of the estimated professional liability expense and reserves, we performed audit procedures that included, among others, testing the completeness and accuracy of underlying claims data used by the Company and its actuaries in its determination of reserves and reviewing the Company’s insurance contracts to assess self-insured limits, deductibles and coverage limits. Additionally, with the involvement of our actuarial specialists, we performed audit procedures that included, among others, assessing the actuarial valuation methodologies utilized by management and its actuaries, testing the significant assumptions, including consideration of Company-specific claim reporting and payment data, assessing the accuracy of management’s historical reserve estimates, and developing an independent range of reserves for comparison to the Company’s recorded amounts. |
2018
2017 | 2016 | 2015 | ||||||||||
Revenues before provision for doubtful accounts | $ | 47,653 | $ | 44,747 | $ | 43,591 | ||||||
Provision for doubtful accounts | 4,039 | 3,257 | 3,913 | |||||||||
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|
|
|
| |||||||
Revenues | 43,614 | 41,490 | 39,678 | |||||||||
Salaries and benefits | 20,059 | 18,897 | 18,115 | |||||||||
Supplies | 7,316 | 6,933 | 6,638 | |||||||||
Other operating expenses | 8,051 | 7,496 | 7,056 | |||||||||
Equity in earnings of affiliates | (45 | ) | (54 | ) | (46 | ) | ||||||
Depreciation and amortization | 2,131 | 1,966 | 1,904 | |||||||||
Interest expense | 1,690 | 1,707 | 1,665 | |||||||||
Losses (gains) on sales of facilities | (8 | ) | (23 | ) | 5 | |||||||
Losses on retirement of debt | 39 | 4 | 135 | |||||||||
Legal claim costs (benefits) | — | (246 | ) | 249 | ||||||||
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|
|
|
| |||||||
39,233 | 36,680 | 35,721 | ||||||||||
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| |||||||
Income before income taxes | 4,381 | 4,810 | 3,957 | |||||||||
Provision for income taxes | 1,638 | 1,378 | 1,261 | |||||||||
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|
|
|
| |||||||
Net income | 2,743 | 3,432 | 2,696 | |||||||||
Net income attributable to noncontrolling interests | 527 | 542 | 567 | |||||||||
|
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|
| |||||||
Net income attributable to HCA Healthcare, Inc. | $ | 2,216 | $ | 2,890 | $ | 2,129 | ||||||
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| |||||||
Per share data: | ||||||||||||
Basic earnings per share | $ | 6.12 | $ | 7.53 | $ | 5.14 | ||||||
Diluted earnings per share | $ | 5.95 | $ | 7.30 | $ | 4.99 | ||||||
Shares used in earnings per share calculations (in millions): | ||||||||||||
Basic | 362.305 | 383.591 | 414.193 | |||||||||
Diluted | 372.221 | 395.851 | 426.721 |
2020 | 2019 | 2018 | ||||||||||
Revenues | $ | 51,533 | $ | 51,336 | $ | 46,677 | ||||||
Salaries and benefits | 23,874 | 23,560 | 21,425 | |||||||||
Supplies | 8,369 | 8,481 | 7,724 | |||||||||
Other operating expenses | 9,307 | 9,481 | 8,608 | |||||||||
Equity in earnings of affiliates | (54 | ) | (43 | ) | (29 | ) | ||||||
Depreciation and amortization | 2,721 | 2,596 | 2,278 | |||||||||
Interest expense | 1,584 | 1,824 | 1,755 | |||||||||
Losses (gains) on sales of facilities | 7 | (18 | ) | (428 | ) | |||||||
Losses on retirement of debt | 295 | 211 | 9 | |||||||||
46,103 | 46,092 | 41,342 | ||||||||||
Income before income taxes | 5,430 | 5,244 | 5,335 | |||||||||
Provision for income taxes | 1,043 | 1,099 | 946 | |||||||||
Net income | 4,387 | 4,145 | 4,389 | |||||||||
Net income attributable to noncontrolling interests | 633 | 640 | 602 | |||||||||
Net income attributable to HCA Healthcare, Inc. | $ | 3,754 | $ | 3,505 | $ | 3,787 | ||||||
Per share data: | ||||||||||||
Basic earnings per share | $ | 11.10 | $ | 10.27 | $ | 10.90 | ||||||
Diluted earnings per share | $ | 10.93 | $ | 10.07 | $ | 10.66 | ||||||
Shares used in earnings per share calculations (in millions): | ||||||||||||
Basic | 338.274 | 341.210 | 347.297 | |||||||||
Diluted | 343.605 | 348.226 | 355.303 |
2018
2017 | 2016 | 2015 | ||||||||||
Net income | $ | 2,743 | $ | 3,432 | $ | 2,696 | ||||||
Other comprehensive income (loss) before taxes: | ||||||||||||
Foreign currency translation | 97 | (224 | ) | (63 | ) | |||||||
Unrealized gains (losses) onavailable-for-sale securities | 1 | (9 | ) | 1 | ||||||||
Realized gains included in other operating expenses | (2 | ) | — | — | ||||||||
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| |||||||
(1 | ) | (9 | ) | 1 | ||||||||
Defined benefit plans | (43 | ) | (35 | ) | 30 | |||||||
Pension costs included in salaries and benefits | 18 | 18 | 32 | |||||||||
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|
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| |||||||
(25 | ) | (17 | ) | 62 | ||||||||
Change in fair value of derivative financial instruments | 11 | 20 | (36 | ) | ||||||||
Interest costs included in interest expense | 20 | 109 | 125 | |||||||||
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| |||||||
31 | 129 | 89 | ||||||||||
|
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| |||||||
Other comprehensive income (loss) before taxes | 102 | (121 | ) | 89 | ||||||||
Income taxes (benefits) related to other comprehensive income items | 42 | (48 | ) | 31 | ||||||||
|
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|
|
|
| |||||||
Other comprehensive income (loss) | 60 | (73 | ) | 58 | ||||||||
|
|
|
|
|
| |||||||
Comprehensive income | 2,803 | 3,359 | 2,754 | |||||||||
Comprehensive income attributable to noncontrolling interests | 527 | 542 | 567 | |||||||||
|
|
|
|
|
| |||||||
Comprehensive income attributable to HCA Healthcare, Inc. | $ | 2,276 | $ | 2,817 | $ | 2,187 | ||||||
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|
|
|
|
|
2020 | 2019 | 2018 | ||||||||||
Net income | $ | 4,387 | $ | 4,145 | $ | 4,389 | ||||||
Other comprehensive income (loss) before taxes: | ||||||||||||
Foreign currency translation | 18 | 5 | (71 | ) | ||||||||
Unrealized gains (losses) on available-for-sale | 14 | 15 | (7 | ) | ||||||||
Defined benefit plans | (71 | ) | (63 | ) | 44 | |||||||
Pension costs included in salaries and benefits | 28 | 13 | 21 | |||||||||
(43 | ) | (50 | ) | 65 | ||||||||
Change in fair value of derivative financial instruments | (66 | ) | (50 | ) | 23 | |||||||
Interest costs (benefits) included in interest expense | 24 | (17 | ) | (10 | ) | |||||||
(42 | ) | (67 | ) | 13 | ||||||||
Other comprehensive loss before taxes | (53 | ) | (97 | ) | 0 | |||||||
Income taxes (benefits) related to other comprehensive income items | (11 | ) | (18 | ) | 8 | |||||||
Other comprehensive loss | (42 | ) | (79 | ) | (8 | ) | ||||||
Comprehensive income | 4,345 | 4,066 | 4,381 | |||||||||
Comprehensive income attributable to noncontrolling interests | 633 | 640 | 602 | |||||||||
Comprehensive income attributable to HCA Healthcare, Inc. | $ | 3,712 | $ | 3,426 | $ | 3,779 | ||||||
2019
2017 | 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 732 | $ | 646 | ||||
Accounts receivable, less allowance for doubtful accounts of $5,488 and $4,988 | 6,501 | 5,826 | ||||||
Inventories | 1,573 | 1,503 | ||||||
Other | 1,171 | 1,111 | ||||||
|
|
|
| |||||
9,977 | 9,086 | |||||||
Property and equipment, at cost: | ||||||||
Land | 1,746 | 1,611 | ||||||
Buildings | 14,249 | 13,546 | ||||||
Equipment | 22,168 | 20,580 | ||||||
Construction in progress | 1,921 | 1,318 | ||||||
|
|
|
| |||||
40,084 | 37,055 | |||||||
Accumulated depreciation | (22,189 | ) | (20,703 | ) | ||||
|
|
|
| |||||
17,895 | 16,352 | |||||||
Investments of insurance subsidiaries | 418 | 336 | ||||||
Investments in and advances to affiliates | 199 | 206 | ||||||
Goodwill and other intangible assets | 7,394 | 6,704 | ||||||
Other | 710 | 1,074 | ||||||
|
|
|
| |||||
$ | 36,593 | $ | 33,758 | |||||
|
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|
| |||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,606 | $ | 2,318 | ||||
Accrued salaries | 1,369 | 1,265 | ||||||
Other accrued expenses | 1,983 | 2,035 | ||||||
Long-term debt due within one year | 200 | 216 | ||||||
|
|
|
| |||||
6,158 | 5,834 | |||||||
Long-term debt, less net debt issuance costs of $164 and $170 | 32,858 | 31,160 | ||||||
Professional liability risks | 1,198 | 1,148 | ||||||
Income taxes and other liabilities | 1,374 | 1,249 | ||||||
Stockholders’ deficit: | ||||||||
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 350,091,600 shares—2017 and 370,535,900 shares—2016 | 4 | 4 | ||||||
Accumulated other comprehensive loss | (278 | ) | (338 | ) | ||||
Retained deficit | (6,532 | ) | (6,968 | ) | ||||
|
|
|
| |||||
Stockholders’ deficit attributable to HCA Healthcare, Inc. | (6,806 | ) | (7,302 | ) | ||||
Noncontrolling interests | 1,811 | 1,669 | ||||||
|
|
|
| |||||
(4,995 | ) | (5,633 | ) | |||||
|
|
|
| |||||
$ | 36,593 | $ | 33,758 | |||||
|
|
|
|
2020 | 2019 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,793 | $ | 621 | ||||
Accounts receivable | 7,051 | 7,380 | ||||||
Inventories | 2,025 | 1,849 | ||||||
Other | 1,464 | 1,346 | ||||||
12,333 | 11,196 | |||||||
Property and equipment, at cost: | ||||||||
Land | 2,269 | 2,178 | ||||||
Buildings | 18,471 | 17,669 | ||||||
Equipment | 27,082 | 25,756 | ||||||
Construction in progress | 1,495 | 1,632 | ||||||
49,317 | 47,235 | |||||||
Accumulated depreciation | (26,118 | ) | (24,520 | ) | ||||
23,199 | 22,715 | |||||||
Investments of insurance subsidiaries | 388 | 315 | ||||||
Investments in and advances to affiliates | 422 | 249 | ||||||
Goodwill and other intangible assets | 8,578 | 8,269 | ||||||
Right-of-use | 2,024 | 1,834 | ||||||
Other | 546 | 480 | ||||||
$ | 47,490 | $ | 45,058 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,535 | $ | 2,905 | ||||
Accrued salaries | 1,720 | 1,775 | ||||||
Other accrued expenses | 3,240 | 2,932 | ||||||
Long-term debt due within one year | 209 | 145 | ||||||
8,704 | 7,757 | |||||||
Long-term debt, less debt issuance costs and discounts of $236 and $239 | 30,795 | 33,577 | ||||||
Professional liability risks | 1,486 | 1,370 | ||||||
Right-of-use | 1,673 | 1,499 | ||||||
Income taxes and other liabilities | 1,940 | 1,420 | ||||||
Stockholders’ equity (deficit): | ||||||||
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 339,425,600 shares — 2020 and 338,445,600 shares — 2019 | 3 | 3 | ||||||
Capital in excess of par value | 294 | 0 | ||||||
Accumulated other comprehensive loss | (502 | ) | (460 | ) | ||||
Retained earnings (deficit) | 777 | (2,351 | ) | |||||
Stockholders’ equity (deficit) attributable to HCA Healthcare, Inc. | 572 | (2,808 | ) | |||||
Noncontrolling interests | 2,320 | 2,243 | ||||||
2,892 | (565 | ) | ||||||
$ | 47,490 | $ | 45,058 | |||||
EQUITY (DEFICIT)
2018
Equity (Deficit) Attributable to HCA Healthcare, Inc. | Equity Attributable to Noncontrolling Interests | Total | ||||||||||||||||||||||||||
Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Loss | Retained Deficit | |||||||||||||||||||||||||
Shares (in millions) | Par Value | |||||||||||||||||||||||||||
Balances, December 31, 2014 | 420.478 | $ | 4 | $ | — | $ | (323 | ) | $ | (7,575 | ) | $ | 1,396 | $ | (6,498 | ) | ||||||||||||
Comprehensive income | 58 | 2,129 | 567 | 2,754 | ||||||||||||||||||||||||
Repurchase of common stock | (31.991 | ) | (505 | ) | (1,892 | ) | (2,397 | ) | ||||||||||||||||||||
Share-based benefit plans | 10.252 | 523 | 523 | |||||||||||||||||||||||||
Distributions | (495 | ) | (495 | ) | ||||||||||||||||||||||||
Acquisition of entities with noncontrolling interests | 85 | 85 | ||||||||||||||||||||||||||
Other | (18 | ) | (18 | ) | ||||||||||||||||||||||||
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| |||||||||||||||
Balances, December 31, 2015 | 398.739 | 4 | — | (265 | ) | (7,338 | ) | 1,553 | (6,046 | ) | ||||||||||||||||||
Comprehensive income (loss) | (73 | ) | 2,890 | 542 | 3,359 | |||||||||||||||||||||||
Repurchase of common stock | (36.325 | ) | (231 | ) | (2,520 | ) | (2,751 | ) | ||||||||||||||||||||
Share-based benefit plans | 8.122 | 233 | 233 | |||||||||||||||||||||||||
Distributions | (434 | ) | (434 | ) | ||||||||||||||||||||||||
Other | (2 | ) | 8 | 6 | ||||||||||||||||||||||||
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| |||||||||||||||
Balances, December 31, 2016 | 370.536 | 4 | — | (338 | ) | (6,968 | ) | 1,669 | (5,633 | ) | ||||||||||||||||||
Comprehensive income | 60 | 2,216 | 527 | 2,803 | ||||||||||||||||||||||||
Repurchase of common stock | (25.092 | ) | (271 | ) | (1,780 | ) | (2,051 | ) | ||||||||||||||||||||
Share-based benefit plans | 4.648 | 281 | 281 | |||||||||||||||||||||||||
Distributions | (448 | ) | (448 | ) | ||||||||||||||||||||||||
Acquisition of entities with noncontrolling interests | 63 | 63 | ||||||||||||||||||||||||||
Other | (10 | ) | (10 | ) | ||||||||||||||||||||||||
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Balances, December 31, 2017 | 350.092 | $ | 4 | $ | — | $ | (278 | ) | $ | (6,532 | ) | $ | 1,811 | $ | (4,995 | ) | ||||||||||||
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Equity (Deficit) Attributable to HCA Healthcare, Inc. | Equity Attributable to Noncontrolling Interests | Total | ||||||||||||||||||||||||||
Common Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Loss | Retained Earnings (Deficit) | |||||||||||||||||||||||||
Shares (in millions ) | Par Value | |||||||||||||||||||||||||||
Balances, December 31, 2017 | 350.092 | $ | 4 | $ | — | $ | (278 | ) | $ | (6,532 | ) | $ | 1,811 | $ | (4,995 | ) | ||||||||||||
Comprehensive income (loss) | (8 | ) | 3,787 | 602 | 4,381 | |||||||||||||||||||||||
Repurchase of common stock | (14.070 | ) | (1 | ) | (103 | ) | (1,426 | ) | (1,530 | ) | ||||||||||||||||||
Share-based benefit plans | 6.873 | 115 | 115 | |||||||||||||||||||||||||
Cash dividends declared ($1.40 share) | (496 | ) | (496 | ) | ||||||||||||||||||||||||
Distributions | (441 | ) | (441 | ) | ||||||||||||||||||||||||
Reclassification of stranded tax effects | (95 | ) | 95 | — | ||||||||||||||||||||||||
Other | (12 | ) | 60 | 48 | ||||||||||||||||||||||||
Balances, December 31, 2018 | 342.895 | 3 | — | (381 | ) | (4,572 | ) | 2,032 | (2,918 | ) | ||||||||||||||||||
Comprehensive income (loss) | (79 | ) | 3,505 | 640 | 4,066 | |||||||||||||||||||||||
Repurchase of common stock | (7.949 | ) | (302 | ) | (729 | ) | (1,031 | ) | ||||||||||||||||||||
Share-based benefit plans | 3.500 | 313 | 313 | |||||||||||||||||||||||||
Cash dividends declared ($1.60 share) | (555 | ) | (555 | ) | ||||||||||||||||||||||||
Distributions | (542 | ) | (542 | ) | ||||||||||||||||||||||||
Other | (11 | ) | 113 | 102 | ||||||||||||||||||||||||
Balances, December 31, 2019 | 338.446 | 3 | — | (460 | ) | (2,351 | ) | 2,243 | (565 | ) | ||||||||||||||||||
Comprehensive income (loss) | (42 | ) | 3,754 | 633 | 4,345 | |||||||||||||||||||||||
Repurchase of common stock | (3.287 | ) | (441 | ) | (441 | ) | ||||||||||||||||||||||
Share-based benefit plans | 4.267 | 300 | (35 | ) | 265 | |||||||||||||||||||||||
Cash dividends declared ($0.43 share) | (150 | ) | (150 | ) | ||||||||||||||||||||||||
Distributions | (626 | ) | (626 | ) | ||||||||||||||||||||||||
Other | (6 | ) | 70 | 64 | ||||||||||||||||||||||||
Balances, December 31, 2020 | 339.426 | $ | 3 | $ | 294 | $ | (502 | ) | $ | 777 | $ | 2,320 | $ | 2,892 | ||||||||||||||
2018
2017 | 2016 | 2015 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 2,743 | $ | 3,432 | $ | 2,696 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Increase (decrease) in cash from operating assets and liabilities: | ||||||||||||
Accounts receivable | (4,640 | ) | (3,247 | ) | (4,114 | ) | ||||||
Provision for doubtful accounts | 4,039 | 3,257 | 3,913 | |||||||||
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| |||||||
Accounts receivable, net | (601 | ) | 10 | (201 | ) | |||||||
Inventories and other assets | (69 | ) | (112 | ) | (314 | ) | ||||||
Accounts payable and accrued expenses | 374 | 144 | 192 | |||||||||
Depreciation and amortization | 2,131 | 1,966 | 1,904 | |||||||||
Income taxes | 433 | 123 | (160 | ) | ||||||||
Losses (gains) on sales of facilities | (8 | ) | (23 | ) | 5 | |||||||
Losses on retirement of debt | 39 | 4 | 135 | |||||||||
Legal claim costs (benefits) | — | (246 | ) | 149 | ||||||||
Amortization of debt issuance costs | 31 | 34 | 35 | |||||||||
Share-based compensation | 270 | 251 | 239 | |||||||||
Other | 83 | 70 | 54 | |||||||||
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| |||||||
Net cash provided by operating activities | 5,426 | 5,653 | 4,734 | |||||||||
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| |||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (3,015 | ) | (2,760 | ) | (2,375 | ) | ||||||
Acquisition of hospitals and health care entities | (1,212 | ) | (576 | ) | (351 | ) | ||||||
Disposal of hospitals and health care entities | 25 | 26 | 73 | |||||||||
Change in investments | (73 | ) | 64 | 63 | ||||||||
Other | (4 | ) | 6 | 7 | ||||||||
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| |||||||
Net cash used in investing activities | (4,279 | ) | (3,240 | ) | (2,583 | ) | ||||||
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| |||||||
Cash flows from financing activities: | ||||||||||||
Issuances of long-term debt | 1,502 | 5,400 | 5,548 | |||||||||
Net change in revolving bank credit facilities | 760 | (110 | ) | 150 | ||||||||
Repayment of long-term debt | (753 | ) | (4,475 | ) | (4,920 | ) | ||||||
Distributions to noncontrolling interests | (448 | ) | (434 | ) | (495 | ) | ||||||
Payment of debt issuance costs | (26 | ) | (40 | ) | (50 | ) | ||||||
Repurchases of common stock | (2,051 | ) | (2,751 | ) | (2,397 | ) | ||||||
Other | (45 | ) | (98 | ) | 188 | |||||||
|
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|
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|
| |||||||
Net cash used in financing activities | (1,061 | ) | (2,508 | ) | (1,976 | ) | ||||||
|
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|
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|
| |||||||
Change in cash and cash equivalents | 86 | (95 | ) | 175 | ||||||||
Cash and cash equivalents at beginning of period | 646 | 741 | 566 | |||||||||
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| |||||||
Cash and cash equivalents at end of period | $ | 732 | $ | 646 | $ | 741 | ||||||
|
|
|
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|
| |||||||
Interest payments | $ | 1,700 | $ | 1,666 | $ | 1,650 | ||||||
Income tax payments, net | $ | 1,205 | $ | 1,255 | $ | 1,186 |
2020 | 2019 | 2018 | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net income | $ | 4,387 | $ | 4,145 | $ | 4,389 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Increase (decrease) in cash from operating assets and liabilities: | ||||||||||||
Accounts receivable | 327 | (326 | ) | (423 | ) | |||||||
Inventories and other assets | (304 | ) | (158 | ) | (242 | ) | ||||||
Accounts payable and accrued expenses | 1,255 | 396 | 698 | |||||||||
Depreciation and amortization | 2,721 | 2,596 | 2,278 | |||||||||
Income taxes | 41 | 250 | 74 | |||||||||
Losses (gains) on sales of facilities | 7 | (18 | ) | (428 | ) | |||||||
Losses on retirement of debt | 295 | 211 | 9 | |||||||||
Amortization of debt issuance costs | 30 | 30 | 31 | |||||||||
Share-based compensation | 362 | 347 | 268 | |||||||||
Other | 111 | 129 | 107 | |||||||||
Net cash provided by operating activities | 9,232 | 7,602 | 6,761 | |||||||||
Cash flows from investing activities: | ||||||||||||
Purchase of property and equipment | (2,835 | ) | (4,158 | ) | (3,573 | ) | ||||||
Acquisition of hospitals and health care entities | (568 | ) | (1,682 | ) | (1,253 | ) | ||||||
Sales of hospitals and health care entities | 68 | 61 | 808 | |||||||||
Change in investments | (20 | ) | 25 | 57 | ||||||||
Other | (38 | ) | 34 | 60 | ||||||||
Net cash used in investing activities | (3,393 | ) | (5,720 | ) | (3,901 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Issuances of long-term debt | 2,700 | 6,451 | 2,000 | |||||||||
Net change in revolving credit facilities | (2,480 | ) | (560 | ) | (640 | ) | ||||||
Repayment of long-term debt | (3,437 | ) | (5,324 | ) | (1,704 | ) | ||||||
Distributions to noncontrolling interests | (626 | ) | (542 | ) | (441 | ) | ||||||
Payment of debt issuance costs | (35 | ) | (73 | ) | (25 | ) | ||||||
Payment of dividends | (153 | ) | (550 | ) | (487 | ) | ||||||
Repurchase of common stock | (441 | ) | (1,031 | ) | (1,530 | ) | ||||||
Other | (205 | ) | (142 | ) | (248 | ) | ||||||
Net cash used in financing activities | (4,677 | ) | (1,771 | ) | (3,075 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 10 | 8 | (15 | ) | ||||||||
Change in cash and cash equivalents | 1,172 | 119 | (230 | ) | ||||||||
Cash and cash equivalents at beginning of period | 621 | 502 | 732 | |||||||||
Cash and cash equivalents at end of period | $ | 1,793 | $ | 621 | $ | 502 | ||||||
Interest payments | $ | 1,607 | $ | 1,914 | $ | 1,744 | ||||||
Income tax payments, net | $ | 1,002 | $ | 849 | $ | 872 |
Revenues
Revenues consist primarily
Years Ended December 31, | ||||||||||||||||||||||||
2017 | Ratio | 2016 | Ratio | 2015 | Ratio | |||||||||||||||||||
Medicare | $ | 9,483 | 21.7 | % | $ | 8,895 | 21.4 | % | $ | 8,654 | 21.8 | % | ||||||||||||
Managed Medicare | 4,788 | 11.0 | 4,355 | 10.5 | 4,133 | 10.4 | ||||||||||||||||||
Medicaid | 1,631 | 3.7 | 1,597 | 3.8 | 1,705 | 4.3 | ||||||||||||||||||
Managed Medicaid | 2,349 | 5.4 | 2,478 | 6.0 | 2,234 | 5.6 | ||||||||||||||||||
Managed care and other insurers | 24,813 | 56.9 | 23,441 | 56.5 | 21,882 | 55.2 | ||||||||||||||||||
International (managed care and other insurers) | 1,097 | 2.5 | 1,195 | 2.9 | 1,295 | 3.3 | ||||||||||||||||||
Other | 3,492 | 8.0 | 2,786 | 6.7 | 3,688 | 9.3 | ||||||||||||||||||
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Revenues before provision for doubtful accounts | 47,653 | 109.2 | 44,747 | 107.8 | 43,591 | 109.9 | ||||||||||||||||||
Provision for doubtful accounts | (4,039 | ) | (9.2 | ) | (3,257 | ) | (7.8 | ) | (3,913 | ) | (9.9 | ) | ||||||||||||
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Revenues | $ | 43,614 | 100.0 | % | $ | 41,490 | 100.0 | % | $ | 39,678 | 100.0 | % | ||||||||||||
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Years Ended December 31, | ||||||||||||||||||||||||
2020 | Ratio | 2019 | Ratio | 2018 | Ratio | |||||||||||||||||||
Medicare | $ | 10,420 | 20.2 | % | $ | 10,798 | 21.0 | % | $ | 9,831 | 21.1 | % | ||||||||||||
Managed Medicare | 6,997 | 13.6 | 6,452 | 12.6 | 5,497 | 11.8 | ||||||||||||||||||
Medicaid | 1,965 | 3.8 | 1,572 | 3.1 | 1,358 | 2.9 | ||||||||||||||||||
Managed Medicaid | 2,621 | 5.1 | 2,450 | 4.8 | 2,403 | 5.1 | ||||||||||||||||||
Managed care and other insurers | 26,535 | 51.5 | 26,544 | 51.6 | 24,467 | 52.4 | ||||||||||||||||||
International (managed care and other insurers) | 1,120 | 2.2 | 1,162 | 2.3 | 1,156 | 2.5 | ||||||||||||||||||
Other | 1,875 | 3.6 | 2,358 | 4.6 | 1,965 | 4.2 | ||||||||||||||||||
Revenues | $ | 51,533 | 100.0 | % | $ | 51,336 | 100.0 | % | $ | 46,677 | 100.0 | % | ||||||||||||
2017 | Ratio | 2016 | Ratio | 2015 | Ratio | |||||||||||||||||||
Charity care | $ | 4,861 | 21 | % | $ | 4,151 | 20 | % | $ | 3,682 | 20 | % | ||||||||||||
Uninsured discounts | 14,520 | 62 | 13,047 | 64 | 10,692 | 59 | ||||||||||||||||||
Provision for doubtful accounts | 4,039 | 17 | 3,257 | 16 | 3,913 | 21 | ||||||||||||||||||
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Total uncompensated care | $ | 23,420 | 100 | % | $ | 20,455 | 100 | % | $ | 18,287 | 100 | % | ||||||||||||
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implicit price concessions. A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):
2017 | 2016 | 2015 | ||||||||||
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) | $ | 37,557 | $ | 35,304 | $ | 33,760 | ||||||
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Cost-to-charges ratio (patient care costs as percentage of gross patient charges) | 12.9 | % | 13.5 | % | 14.5 | % | ||||||
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Total uncompensated care | $ | 23,420 | $ | 20,455 | $ | 18,287 | ||||||
Multiply by thecost-to-charges ratio | 12.9 | % | 13.5 | % | 14.5 | % | ||||||
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Estimated cost of total uncompensated care | $ | 3,021 | $ | 2,761 | $ | 2,652 | ||||||
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2020 | 2019 | 2018 | ||||||||||
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) | $ | 44,271 | $ | 44,118 | $ | 40,035 | ||||||
Cost-to-charges | 12.0 | % | 12.0 | % | 12.4 | % | ||||||
Total uncompensated care | $ | 29,029 | $ | 31,105 | $ | 26,757 | ||||||
Multiply by the cost-to-charges | 12.0 | % | 12.0 | % | 12.4 | % | ||||||
Estimated cost of total uncompensated care | $ | 3,483 | $ | 3,733 | $ | 3,318 | ||||||
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 1 — ACCOUNTING POLICIES (continued)
Recent Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board issued a final, converged, principles-based standard on revenue recognition. Companies across all industries will use a five-step model to recognize revenue from customer contracts. The new standard, which replaces nearly all existing revenue recognition guidance, will require significant management judgments and change the way many companies recognize revenue in their financial statements. In July 2015, the FASB decided to defer the effective date of the new revenue standard by one year to annual and interim periods beginning after December 15, 2017 for public entities and permit entities to adopt one year earlier if they choose. We believe the most significant impact of adopting the new standard will be to the presentation of our income statement where the provision for doubtful accounts will be recorded as a direct reduction to revenues and will not be presented as a separate line item. We expect to adopt the new standard using the full retrospective application, and we do not believe the adoption will have a significant impact on our recognition of net revenues or related disclosures for any period.
In February 2016, the FASB issued Accounting Standards Update2016-02,Leases (“ASU2016-02”), which requires lessees to recognize assets and liabilities for most leases. ASU2016-02 is effective for public business entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. We are continuing to evaluate the provisions of ASU2016-02 (and developments concerning its transition provision options) to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to recordright-of-use assets and obligations for our leases currently classified as operating leases.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — ACCOUNTING POLICIES (continued)
Accounts Receivable (continued)
Additions to the allowance for doubtful accounts are made by means of the provision for doubtful accounts. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts and subsequent recoveries are added. The amount of the provision for doubtful accounts is based upon management’s assessment of historical and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. The provision for doubtful accounts and the allowance for doubtful accounts relate to “uninsured” amounts due directly from patients (including copayment and deductible amounts from patients who have health care coverage). Accounts are written off when all reasonable internal and external collection efforts have been performed. We consider the return of an account from the secondary collection agency to be the culmination of our reasonable collection efforts and the timing basis for writing off the account balance. Writeoffs are based upon specific identification and the writeoff process requires a writeoff adjustment entry to the patient accounting system. Management relies on the results of detailed reviews of historical writeoffs and recoveries at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information to utilize in estimating the collectibility of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data. At December 31, 2017 and 2016, the allowance for doubtful accounts represented 100% and 98%, respectively, of the $5.488 billion and $5.116 billion, respectively, patient due accounts receivable balance. The patient due accounts receivable balance represents the estimated uninsured portion of our accounts receivable. The estimated uninsured portion of Medicaid pending and uninsured discount pending accounts is included in our patient due accounts receivable balance. Days revenues in accounts receivable were 5245 days, 50 days and 5351 days at December 31, 2017, 20162020, 2019 and 2015, 2018,
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — ACCOUNTING POLICIES (continued)
2020, 2019 or 2018.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — ACCOUNTING POLICIES (continued)
and Discounts
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — ACCOUNTING POLICIES (continued)
Financial Instruments (continued)
sheets at fair value. Changes in the fair value of derivatives are recognized periodically in stockholders’ equity, as a component of other comprehensive income (loss), provided the derivative financial instrument qualifies for hedge accounting. Gains and losses on derivatives designated as cash flow hedges, to the extent they are effective, are recorded in other comprehensive income (loss), and subsequently reclassified to earnings to offset the impact of the forecasted transactions when they occur. In the event the forecasted transaction to which a cash flow hedge relates is no longer likely, the amount in other comprehensive income (loss) is recognized in earnings and generally the derivative is terminated.
NOTE 2 — SHARE-BASED COMPENSATION
for Key Employees of HCA Healthcare, Inc. and its
2020 Plan.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 — SHARE-BASED COMPENSATION (continued)
– All Plans
2017 | 2016 | 2015 | ||||||||||
Risk-free interest rate | 2.13 | % | 1.70 | % | 1.59 | % | ||||||
Expected volatility | 31 | % | 36 | % | 36 | % | ||||||
Expected life, in years | 6.17 | 6.25 | 6.25 | |||||||||
Expected dividend yield | — | — | — |
2020 | 2019 | 2018 | ||||||||||
Risk-free interest rate | 1.44 | % | 2.50 | % | 2.62 | % | ||||||
Expected volatility | 27 | % | 27 | % | 29 | % | ||||||
Expected life, in years | 6.15 | 6.18 | 6.15 | |||||||||
Expected dividend yield | 1.19 | % | 1.16 | % | 1.37 | % |
Time Stock Options and SARs | Performance Stock Options and SARs | Total Stock Options and SARs | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (dollars in millions) | |||||||||||||||||||
Options and SARs outstanding, December 31, 2014 | 15,051 | 14,744 | 29,795 | $ | 21.39 | |||||||||||||||||||
Granted | 1,746 | — | 1,746 | 69.16 | ||||||||||||||||||||
Exercised | (4,093 | ) | (3,988 | ) | (8,081 | ) | 12.77 | |||||||||||||||||
Cancelled | (539 | ) | (329 | ) | (868 | ) | 32.59 | |||||||||||||||||
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Options and SARs outstanding, December 31, 2015 | 12,165 | 10,427 | 22,592 | 27.73 | ||||||||||||||||||||
Granted | 1,601 | — | 1,601 | 69.96 | ||||||||||||||||||||
Exercised | (2,521 | ) | (4,171 | ) | (6,692 | ) | 15.85 | |||||||||||||||||
Cancelled | (309 | ) | (126 | ) | (435 | ) | 55.17 | |||||||||||||||||
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Options and SARs outstanding, December 31, 2016 | 10,936 | 6,130 | 17,066 | 35.65 | ||||||||||||||||||||
Granted | 1,879 | — | 1,879 | 81.83 | ||||||||||||||||||||
Exercised | (1,549 | ) | (1,366 | ) | (2,915 | ) | 21.49 | |||||||||||||||||
Cancelled | (110 | ) | (178 | ) | (288 | ) | 52.92 | |||||||||||||||||
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Options and SARs outstanding, December 31, 2017 | 11,156 | 4,586 | 15,742 | 43.47 | 5.4 years | $ | 699 | |||||||||||||||||
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Options and SARs exercisable, December 31, 2017 | 7,060 | 4,224 | 11,284 | $ | 32.49 | 4.4 years | $ | 625 |
Time Stock Options and SARs | Performance Stock Options and SARs | Total Stock Options and SARs | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (dollars in millions) | |||||||||||||||||||
Options and SARs outstanding, December 31, 2017 | 11,156 | 4,586 | 15,742 | $ | 43.47 | |||||||||||||||||||
Granted | 2,342 | — | 2,342 | 101.96 | ||||||||||||||||||||
Exercised | (3,917 | ) | (1,774 | ) | (5,691 | ) | 27.86 | |||||||||||||||||
Cancelled | (221 | ) | (145 | ) | (366 | ) | 68.43 | |||||||||||||||||
Options and SARs outstanding, December 31, 2018 | 9,360 | 2,667 | 12,027 | 61.49 | ||||||||||||||||||||
Granted | 1,349 | — | 1,349 | 138.31 | ||||||||||||||||||||
Exercised | (1,137 | ) | (523 | ) | (1,660 | ) | 44.45 | |||||||||||||||||
Cancelled | (522 | ) | — | (522 | ) | 93.26 | ||||||||||||||||||
Options and SARs outstanding, December 31, 2019 | 9,050 | 2,144 | 11,194 | 71.79 | ||||||||||||||||||||
Granted | 1,120 | — | 1,120 | 144.47 | ||||||||||||||||||||
Exercised | (2,159 | ) | (1,325 | ) | (3,484 | ) | 44.07 | |||||||||||||||||
Cancelled | (175 | ) | — | (175 | ) | 111.69 | ||||||||||||||||||
Options and SARs outstanding, December 31, 2020 | 7,836 | 819 | 8,655 | $ | 91.53 | 6.0 years | $ | 631 | ||||||||||||||||
Options and SARs exercisable, December 31, 2020 | 4,562 | 819 | 5,381 | $ | 71.25 | 4.8 years | $ | 502 |
Time RSUs | Performance RSUs | PSUs | Total RSUs and PSUs | Weighted Average Grant Date Fair Value | ||||||||||||||||
RSUs and PSUs outstanding, December 31, 2014 | 5,895 | 2,781 | — | 8,676 | $ | 39.89 | ||||||||||||||
Granted | 1,694 | — | 1,411 | 3,105 | 69.43 | |||||||||||||||
Vested | (1,953 | ) | (928 | ) | — | (2,881 | ) | 37.61 | ||||||||||||
Cancelled | (334 | ) | (113 | ) | (40 | ) | (487 | ) | 47.26 | |||||||||||
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RSUs and PSUs outstanding, December 31, 2015 | 5,302 | 1,740 | 1,371 | 8,413 | 51.15 | |||||||||||||||
Granted | 1,450 | — | 1,178 | 2,628 | 69.95 | |||||||||||||||
Vested | (2,242 | ) | (870 | ) | — | (3,112 | ) | 41.71 | ||||||||||||
Cancelled | (399 | ) | (80 | ) | (163 | ) | (642 | ) | 59.66 | |||||||||||
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RSUs and PSUs outstanding, December 31, 2016 | 4,111 | 790 | 2,386 | 7,287 | 61.21 | |||||||||||||||
Granted | 1,484 | — | 1,304 | 2,788 | 81.90 | |||||||||||||||
Vested | (1,824 | ) | (430 | ) | — | (2,254 | ) | 51.20 | ||||||||||||
Cancelled | (306 | ) | (133 | ) | (128 | ) | (567 | ) | 64.06 | |||||||||||
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RSUs and PSUs outstanding, December 31, 2017 | 3,465 | 227 | 3,562 | 7,254 | 72.05 | |||||||||||||||
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Time RSUs | Performance RSUs | PSUs | Total RSUs and PSUs | Weighted Average Grant Date Fair Value | ||||||||||||||||
RSUs and PSUs outstanding, December 31, 2017 | 3,465 | 227 | 3,562 | 7,254 | $ | 72.05 | ||||||||||||||
Granted | 1,464 | — | 1,261 | 2,725 | 101.85 | |||||||||||||||
Performance adjustment | — | — | 1,250 | 1,250 | 69.27 | |||||||||||||||
Vested | (1,487 | ) | (136 | ) | (2,500 | ) | (4,123 | ) | 67.33 | |||||||||||
Cancelled | (319 | ) | (91 | ) | (151 | ) | (561 | ) | 78.82 | |||||||||||
RSUs and PSUs outstanding, December 31, 2018 | 3,123 | — | 3,422 | 6,545 | 86.32 | |||||||||||||||
Granted | 973 | — | 796 | 1,769 | 138.45 | |||||||||||||||
Performance adjustment | — | — | 227 | 227 | 69.94 | |||||||||||||||
Vested | (1,216 | ) | — | (1,251 | ) | (2,467 | ) | 75.97 | ||||||||||||
Cancelled | (260 | ) | — | (159 | ) | (419 | ) | 103.27 | ||||||||||||
RSUs and PSUs outstanding, December 31, 2019 | 2,620 | — | 3,035 | 5,655 | 105.23 | |||||||||||||||
Granted | 1,048 | — | 808 | 1,856 | 144.17 | |||||||||||||||
Performance adjustment | — | — | 206 | 206 | 81.89 | |||||||||||||||
Vested | (1,030 | ) | — | (1,364 | ) | (2,394 | ) | 88.63 | ||||||||||||
Cancelled | (162 | ) | — | (93 | ) | (255 | ) | 124.50 | ||||||||||||
RSUs and PSUs outstanding, December 31, 2020 | 2,476 | — | 2,592 | 5,068 | $ | 125.40 | ||||||||||||||
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2017 | 2016 | 2015 | ||||||||||
Current: | ||||||||||||
Federal | $ | 1,067 | $ | 1,129 | $ | 1,259 | ||||||
State | 120 | 125 | 119 | |||||||||
Foreign | 19 | 37 | 40 | |||||||||
Deferred: | ||||||||||||
Federal | 423 | 75 | (163 | ) | ||||||||
State | 3 | (5 | ) | (27 | ) | |||||||
Foreign | 6 | 17 | 33 | |||||||||
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$ | 1,638 | $ | 1,378 | $ | 1,261 | |||||||
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Our provision for income taxes for the year ended December 31, 2017 included an increase of $301 million related to the estimated impact of tax rate changes under the
2020 | 2019 | 2018 | ||||||||||
Current: | ||||||||||||
Federal | $ | 1,021 | $ | 670 | $ | 759 | ||||||
State | 126 | 134 | 149 | |||||||||
Foreign | 5 | 17 | 23 | |||||||||
Deferred: | ||||||||||||
Federal | (73 | ) | 254 | 9 | ||||||||
State | (39 | ) | 29 | 13 | ||||||||
Foreign | 3 | (5 | ) | (7 | ) | |||||||
$ | 1,043 | $ | 1,099 | $ | 946 | |||||||
The Tax Act was enacted on December 22, 2017. The Tax Act significantly revisesrevised U.S. corporate income taxes, including lowering the statutory corporate tax rate from 35% to 21% beginning in 2018 and imposing a mandatory one-time transition tax on undistributed foreign earnings. Due to2018. We completed our analysis of the complexity and uncertainty regarding numerous provisionsimpact of the Tax Act we have not completed our accounting for its effects. However, we have made reasonable estimates and recorded provisional amounts in our financial statements as of December 31, 2017.
A provisional amount of $301 million related to the remeasurement of our deferred tax assets and liabilities, primarily based on the lower tax rates at which they are expected to reverse in the future, was recorded as a component ofduring 2018, reducing our provision for income taxes for the year ended December 31, 2017.
We also reclassified2018 by $67 million related to a provisional amountremeasurement of $127 million from ourcertain deferred tax liabilities for the one-time transition tax, based on our estimated undistributed post-1986 foreign earnings and profits. Because we had previously recorded U.S. taxes on these earnings, the transition tax liability, which is payable over an 8-year period, did not affect our 2017 provision for income taxes.
As we complete our analysis of the Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by federal and state taxing authorities or other standard-setting bodies, we may make adjustments to the provisional amounts and record additional amounts for those federal, state, and foreign tax assets and liabilities for which we were unable to make reasonable estimates as ofin 2017.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 — INCOME TAXES (continued)
2017 | 2016 | 2015 | ||||||||||
Federal statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal tax benefit | 2.2 | 2.1 | 1.6 | |||||||||
Change in liability for uncertain tax positions | — | (1.0 | ) | 0.2 | ||||||||
Tax benefit from settlements of employee equity awards | (2.0 | ) | (3.6 | ) | — | |||||||
Impact of rate change on deferred tax balances | 7.8 | — | — | |||||||||
Other items, net | (0.5 | ) | (0.2 | ) | 0.4 | |||||||
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Effective income tax rate on income applicable to HCA Healthcare, Inc. | 42.5 | 32.3 | 37.2 | |||||||||
Income attributable to noncontrolling interests from consolidated partnerships | (5.1 | ) | (3.6 | ) | (5.3 | ) | ||||||
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Effective income tax rate on income before income taxes | 37.4 | % | 28.7 | % | 31.9 | % | ||||||
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2020 | 2019 | 2018 | ||||||||||
Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
State income taxes, net of federal tax benefit | 1.9 | 2.7 | 2.9 | |||||||||
Change in liability for uncertain tax positions | (0.2 | ) | 0.4 | (0.1 | ) | |||||||
Tax benefit from settlements of employee equity awards | (1.8 | ) | (1.3 | ) | (2.4 | ) | ||||||
Impact of Tax Act on deferred tax balances | — | — | (1.6 | ) | ||||||||
Other items, net | 0.8 | 1.1 | 0.2 | |||||||||
Effective income tax rate on income attributable to HCA Healthcare, Inc. | 21.7 | 23.9 | 20.0 | |||||||||
Income attributable to noncontrolling interests from consolidated partnerships | (2.5 | ) | (2.9 | ) | (2.3 | ) | ||||||
Effective income tax rate on income before income taxes | 19.2 | % | 21.0 | % | 17.7 | % | ||||||
2017 | 2016 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Depreciation and fixed asset basis differences | $ | — | $ | 260 | $ | — | $ | 235 | ||||||||
Allowances for professional liability and other risks | 345 | — | 495 | — | ||||||||||||
Accounts receivable | 243 | — | 351 | — | ||||||||||||
Compensation | 263 | — | 359 | — | ||||||||||||
Other | 420 | 501 | 794 | 918 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 1,271 | $ | 761 | $ | 1,999 | $ | 1,153 | |||||||||
|
|
|
|
|
|
|
|
2020 | 2019 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Depreciation and fixed asset basis differences | $ | 0 | $ | 678 | $ | 0 | $ | 601 | ||||||||
Allowances for professional liability and other risks | 407 | 0 | 376 | 0 | ||||||||||||
Accounts receivable | 283 | 0 | 307 | 0 | ||||||||||||
Compensation | 487 | 0 | 292 | 0 | ||||||||||||
Right-of-use | 416 | 409 | 369 | 366 | ||||||||||||
Other | 485 | 606 | 461 | 538 | ||||||||||||
$ | 2,078 | $ | 1,693 | $ | 1,805 | $ | 1,505 | |||||||||
2017 | 2016 | |||||||
Balance at January 1 | $ | 377 | $ | 487 | ||||
Additions based on tax positions related to the current year | 40 | 11 | ||||||
Additions for tax positions of prior years | 11 | 8 | ||||||
Reductions for tax positions of prior years | (13 | ) | (18 | ) | ||||
Settlements | — | (101 | ) | |||||
Lapse of applicable statutes of limitations | (16 | ) | (10 | ) | ||||
|
|
|
| |||||
Balance at December 31 | $ | 399 | $ | 377 | ||||
|
|
|
|
2020 | 2019 | |||||||
Balance at January 1 | $ | 522 | $ | 390 | ||||
Additions (reductions) based on tax positions related to the current year | (3 | ) | 29 | |||||
Additions for tax positions of prior years | 13 | 119 | ||||||
Reductions for tax positions of prior years | (30 | ) | (3 | ) | ||||
Settlements | (22 | ) | 0 | |||||
Lapse of applicable statutes of limitations | (11 | ) | (13 | ) | ||||
Balance at December 31 | $ | 469 | $ | 522 | ||||
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 — INCOME TAXES (continued)
2017 | 2016 | 2015 | ||||||||||
Net income attributable to HCA Healthcare, Inc. | $ | 2,216 | $ | 2,890 | $ | 2,129 | ||||||
Weighted average common shares outstanding | 362.305 | 383.591 | 414.193 | |||||||||
Effect of dilutive incremental shares | 9.916 | 12.260 | 12.528 | |||||||||
|
|
|
|
|
| |||||||
Shares used for diluted earnings per share | 372.221 | 395.851 | 426.721 | |||||||||
|
|
|
|
|
| |||||||
Earnings per share: | ||||||||||||
Basic earnings per share | $ | 6.12 | $ | 7.53 | $ | 5.14 | ||||||
Diluted earnings per share | $ | 5.95 | $ | 7.30 | $ | 4.99 |
2020 | 2019 | 2018 | ||||||||||
Net income attributable to HCA Healthcare, Inc. | $ | 3,754 | $ | 3,505 | $ | 3,787 | ||||||
Weighted average common shares outstanding | 338.274 | 341.210 | 347.297 | |||||||||
Effect of dilutive incremental shares | 5.331 | 7.016 | 8.006 | |||||||||
Shares used for diluted earnings per share | 343.605 | 348.226 | 355.303 | |||||||||
Earnings per share: | ||||||||||||
Basic earnings per share | $ | 11.10 | $ | 10.27 | $ | 10.90 | ||||||
Diluted earnings per share | $ | 10.93 | $ | 10.07 | $ | 10.66 |
2017 | ||||||||||||||||
Amortized Cost | Unrealized Amounts | Fair Value | ||||||||||||||
Gains | Losses | |||||||||||||||
States and municipalities debt securities | $ | 361 | $ | 10 | $ | — | $ | 371 | ||||||||
Money market funds and other | 101 | — | — | 101 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 462 | $ | 10 | $ | — | 472 | ||||||||||
|
|
|
|
|
| |||||||||||
Amounts classified as current assets | (54 | ) | ||||||||||||||
|
| |||||||||||||||
Investment carrying value | $ | 418 | ||||||||||||||
|
|
2020 | ||||||||||||||||
Amortized Cost | Unrealized Amounts | Fair Value | ||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities | $ | 384 | $ | 32 | $ | — | $ | 416 | ||||||||
Money market funds and other | 88 | — | — | 88 | ||||||||||||
$ | 472 | $ | 32 | $ | — | 504 | ||||||||||
Amounts classified as current assets | (116 | ) | ||||||||||||||
Investment carrying value | $ | 388 | ||||||||||||||
2019 | ||||||||||||||||
Amortized Cost | Unrealized Amounts | Fair Value | ||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities | $ | 359 | $ | 18 | $ | — | $ | 377 | ||||||||
Money market funds and other | 85 | — | — | 85 | ||||||||||||
$ | 444 | $ | 18 | $ | — | 462 | ||||||||||
Amounts classified as current assets | (147 | ) | ||||||||||||||
Investment carrying value | $ | 315 | ||||||||||||||
2016 | ||||||||||||||||
Amortized Cost | Unrealized Amounts | Fair Value | ||||||||||||||
Gains | Losses | |||||||||||||||
States and municipalities debt securities | $ | 345 | $ | 9 | $ | (1 | ) | $ | 353 | |||||||
Money market funds and other | 29 | 3 | — | 32 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 374 | $ | 12 | $ | (1 | ) | 385 | |||||||||
|
|
|
|
|
| |||||||||||
Amounts classified as current assets | (49 | ) | ||||||||||||||
|
| |||||||||||||||
Investment carrying value | $ | 336 | ||||||||||||||
|
|
Amortized Cost | Fair Value | |||||||
Due in one year or less | $ | 31 | $ | 31 | ||||
Due after one year through five years | 84 | 86 | ||||||
Due after five years through ten years | 187 | 194 | ||||||
Due after ten years | 59 | 60 | ||||||
|
|
|
| |||||
$ | 361 | $ | 371 | |||||
|
|
|
|
Amortized Cost | Fair Value | |||||||
Due in one year or less | $ | 4 | $ | 4 | ||||
Due after one year through five years | 147 | 156 | ||||||
Due after five years through ten years | 157 | 174 | ||||||
Due after ten years | 76 | 82 | ||||||
$ | 384 | $ | 416 | |||||
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — FINANCIAL INSTRUMENTS (continued)
Interest Rate Swap Agreements (continued)
Notional Amount | Maturity Date | Fair Value | ||||||||||
Pay-fixed interest rate swaps | $ | 2,000 | December 2021 | $ | 48 | |||||||
Pay-fixed interest rate swaps | 500 | December 2022 | 2 |
Notional Amount | Maturity Date | Fair Value | ||||||||||
Pay-fixed interest rate swaps | $ | 2,000 | December 2021 | $ | (27 | ) | ||||||
Pay-fixed interest rate swaps | 500 | December 2022 | (19 | ) |
Derivatives in Cash Flow Hedging | Amount of Gain Recognized in OCI on Derivatives, Net of Tax | Location of Loss Reclassified from Accumulated OCI into Operations | Amount of Loss Reclassified from Accumulated OCI into Operations | |||||||||
Interest rate swaps | $ | 7 | Interest expense | $ | 20 |
Derivatives in Cash Flow Hedging Relationships | Amount of Loss Recognized in OCI on Derivatives, Net of Tax | Location of Loss Reclassified from Accumulated OCI into Operations | Amount of Loss Reclassified from Accumulated OCI into Operations | |||||||||
Interest rate swaps | $ | 51 | Interest expense | $ | 24 |
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 8 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
Although we determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions, and at December 31, 2017 and 2016, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.
December 31, 2017 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Assets: | ||||||||||||||||
Investments of insurance subsidiaries: | ||||||||||||||||
States and municipalities debt securities | $ | 371 | $ | — | $ | 371 | $ | — | ||||||||
Money market funds and other | 101 | 101 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Investments of insurance subsidiaries | 472 | 101 | 371 | — | ||||||||||||
Less amounts classified as current assets | (54 | ) | (54 | ) | — | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 418 | $ | 47 | $ | 371 | $ | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
Interest rate swaps (Other) | $ | 50 | $ | — | $ | 50 | $ | — |
December 31, 2020 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Assets: | ||||||||||||||||
Investments of insurance subsidiaries: | ||||||||||||||||
Debt securities | $ | 416 | $ | — | $ | 416 | $ | — | ||||||||
Money market funds and other | 88 | 88 | — | — | ||||||||||||
Investments of insurance subsidiaries | 504 | 88 | 416 | — | ||||||||||||
Less amounts classified as current assets | (116 | ) | (87 | ) | (29 | ) | — | |||||||||
$ | 388 | 1 | $ | 387 | $ | — | ||||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) | $ | 46 | $ | — | $ | 46 | $ | — |
December 31, 2019 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Assets: | ||||||||||||||||
Investments of insurance subsidiaries: | ||||||||||||||||
Debt securities | $ | 377 | $ | — | $ | 377 | $ | — | ||||||||
Money market funds and other | 85 | 85 | — | — | ||||||||||||
Investments of insurance subsidiaries | 462 | 85 | 377 | — | ||||||||||||
Less amounts classified as current assets | (147 | ) | (83 | ) | (64 | ) | — | |||||||||
$ | 315 | 2 | $ | 313 | $ | — | ||||||||||
Interest rate swaps (Other) | $ | 3 | $ | — | $ | 3 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) | $ | 7 | $ | — | $ | 7 | $ | — |
December 31, 2016 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Assets: | ||||||||||||||||
Investments of insurance subsidiaries: | ||||||||||||||||
States and municipalities debt securities | $ | 353 | $ | — | $ | 347 | $ | 6 | ||||||||
Money market funds and other | 32 | 32 | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Investments of insurance subsidiaries | 385 | 32 | 347 | 6 | ||||||||||||
Less amounts classified as current assets | (49 | ) | (28 | ) | (21 | ) | — | |||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 336 | $ | 4 | $ | 326 | $ | 6 | |||||||||
|
|
|
|
|
|
|
| |||||||||
Interest rate swaps (Other) | $ | 31 | $ | — | $ | 31 | $ | — | ||||||||
Liabilities: | ||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) | $ | 12 | $ | — | $ | 12 | $ | — |
The $6 million reduction in the Level 3 investments of our insurance subsidiaries during 2017 resulted from settlements.
2017 | 2016 | |||||||
Senior secured asset-based revolving credit facility (effective interest rate of 3.0%) | $ | 3,680 | $ | 2,920 | ||||
Senior secured revolving credit facility | — | — | ||||||
Senior secured term loan facilities (effective interest rate of 3.5%) | 3,891 | 3,981 | ||||||
Senior secured notes (effective interest rate of 5.4%) | 15,300 | 13,800 | ||||||
Other senior secured debt (effective interest rate of 5.7%) | 599 | 593 | ||||||
|
|
|
| |||||
Senior secured debt | 23,470 | 21,294 | ||||||
Senior unsecured notes (effective interest rate of 6.4%) | 9,752 | 10,252 | ||||||
Net debt issuance costs | (164 | ) | (170 | ) | ||||
|
|
|
| |||||
Total debt (average life of 6.8 years, rates averaging 5.2%) | 33,058 | 31,376 | ||||||
Less amounts due within one year | 200 | 216 | ||||||
|
|
|
| |||||
$ | 32,858 | $ | 31,160 | |||||
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LONG-TERM DEBT (continued)
2017 Activity
2020 | 2019 | |||||||
Senior secured asset-based revolving credit facility | $ | — | $ | 2,480 | ||||
Senior secured revolving credit facility | — | — | ||||||
Senior secured 364-day term loan facility | — | — | ||||||
Senior secured term loan facilities (effective interest rate of 2.8%) | 3,671 | 3,725 | ||||||
Senior secured notes (effective interest rate of 5.1%) | 13,850 | 13,850 | ||||||
Other senior secured debt (effective interest rate of 4.7%) | 767 | 654 | ||||||
Senior secured debt | 18,288 | 20,709 | ||||||
Senior unsecured notes (effective interest rate of 5.5%) | 12,952 | 13,252 | ||||||
Net debt issuance costs | (236 | ) | (239 | ) | ||||
Total debt (average life of 8.9 years, rates averaging 5.0%) | 31,004 | 33,722 | ||||||
Less amounts due within one year | 209 | 145 | ||||||
$ | 30,795 | $ | 33,577 | |||||
agreement during January 2021.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LONG-TERM DEBT (continued)
Senior Secured Credit Facilities And Other Senior Secured Debt (continued)
principal amount of 5.25% first lien notes due 2025; (viii)(iv) $1.500 billion aggregate principal amount of 5.25% first lien notes due 2026; (ix)(v) $1.200 billion aggregate principal amount of 4.50% first lien notes due 2027; and (x)(vi) $2.000 billion aggregate principal amount of 4 1/8% first lien notes due 2029; (vii) $1.000 billion aggregate principal amount of 5 1/8% first lien notes due 2039; (viii) $1.500 billion aggregate principal amount of 5.50% first lien notes due 2047. Capital2047; and (ix) $2.000 billion aggregate principal amount of 5 1/4% first lien notes due 2049. Finance leases and other secured debt totaled $599$767 million at December 31, 2017.
2020.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LONG-TERM DEBT (continued)
General Debt Information (continued)
Balance Sheet Classification | 2020 | 2019 | ||||||||||
Assets: | ||||||||||||
Operating leases | Right-of-use operating lease assets | $ | 2,024 | $ | 1,834 | |||||||
Finance leases | Property and equipment | 553 | 520 | |||||||||
Total lease assets | $ | 2,577 | $ | 2,354 | ||||||||
Liabilities: | ||||||||||||
Current: | ||||||||||||
Operating leases | Other accrued expenses | $ | 379 | $ | 350 | |||||||
Finance leases | Long-term debt due within one year | 128 | 87 | |||||||||
Noncurrent: | ||||||||||||
Operating leases | Right-of-use operating lease obligations | 1,673 | 1,499 | |||||||||
Finance leases | Long-term debt | 494 | 470 | |||||||||
Total lease liabilities | $ | 2,674 | $ | 2,406 | ||||||||
Weighted-average remaining term: | ||||||||||||
Operating leases | 10.4 years | 10.8 years | ||||||||||
Finance leases | 11.5 years | 12.0 years | ||||||||||
Weighted-average discount rate: | ||||||||||||
Operating leases | 4.8 | % | 5.3 | % | ||||||||
Finance leases | 5.4 | % | 6.0 | % |
2020 | 2019 | |||||||
Finance lease expense: | ||||||||
Depreciation and amortization | $ | 106 | $ | 93 | ||||
Interest | 31 | 32 | ||||||
Operating leases( 1 ) | 447 | 389 | ||||||
Short-term lease expense( 1 ) | 322 | 316 | ||||||
Variable lease expense( 1 ) | 154 | 150 | ||||||
$ | 1,060 | $ | 980 | |||||
( 1 ) | Expenses are included in “other operating expenses” in our consolidated income statements. |
2020 | 2019 | |||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
Operating cash flows for operating leases | $ | 445 | $ | 404 | ||||
Operating cash flows for finance leases | 31 | 32 | ||||||
Financing cash flows for finance leases | 86 | 79 |
2020 | 2019 | |||||||||||||||
Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||
Year 1 | $ | 431 | $ | 155 | $ | 411 | $ | 110 | ||||||||
Year 2 | 366 | 125 | 350 | 105 | ||||||||||||
Year 3 | 307 | 81 | 285 | 99 | ||||||||||||
Year 4 | 255 | 82 | 228 | 58 | ||||||||||||
Year 5 | 207 | 51 | 182 | 60 | ||||||||||||
Thereafter | 1,136 | 353 | 1,074 | 368 | ||||||||||||
Total minimum lease payments | 2,702 | 847 | 2,530 | 800 | ||||||||||||
Less: amount of lease payments representing interest | (650 | ) | (225 | ) | (681 | ) | (243 | ) | ||||||||
Present value of future minimum lease payments | 2,052 | 622 | 1,849 | 557 | ||||||||||||
Less: current lease obligations | (379 | ) | (128 | ) | (350 | ) | (87 | ) | ||||||||
Long-term lease obligations | $ | 1,673 | $ | 494 | $ | 1,499 | $ | 470 | ||||||||
NOTE 11 — LEASES
We lease medical office buildings and certain equipment
For the Year Ended December 31, | ||||
2018 | $ | 289 | ||
2019 | 278 | |||
2020 | 239 | |||
2021 | 198 | |||
2022 | 157 | |||
Thereafter | 1,118 | |||
|
| |||
2,279 | ||||
Less sublease income | (11 | ) | ||
|
| |||
$ | 2,268 | |||
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
January 2019 and 2020 authorizations. During November 2016, our board of directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During May 2016, the Company2019, we repurchased 9.361 million shares of its common stock beneficially owned by affiliates of Kohlberg Kravis Roberts & Co. at a purchase price of $80.12 per share, the closing price of the Company’s common stock on the New York Stock Exchange on May 10, 2016, less a discount of 1%. During 2016, we also repurchased 26.9647.949 million shares of our common stock at an average price of $74.20$129.71 per share through market purchases resulting in total repurchasespursuant to the October 2017 authorization (which was completed during the first quarter of 36.3252019) and the January 2019 authorization. During 2018, we repurchased 14.070 million shares of our common stock at an average price of $75.72 per share for the year ended December 31, 2016 pursuant to the $3 billion October 2015 (which was completed during the fourth quarter of 2016) and the $2 billion November 2016 share repurchase programs. At December 31, 2016, we had $1.853 billion of repurchase authorization available under the November 2016 authorization.
During October 2015, May 2015 and February 2015, our board of directors authorized share repurchase programs for up to $3 billion, $1 billion and $1 billion, respectively, of our outstanding common stock. During April 2015, the Company entered into an agreement to repurchase 3.806 million shares of its common stock beneficially owned by affiliates of Bain Capital Investors, LLC (the “Bain Entities”) and certain charitable organizations that received shares of common stock as charitable contributions from certain partners and other employees of the Bain Entities at a purchase price of $77.26 per share, the closing price of the Company’s common stock on the New York Stock Exchange on April 17, 2015, less a discount of 1%. During 2015, we also repurchased 28.185 million shares of our common stock at an average price of $74.62$108.74 per share through market purchases resulting in total repurchases pursuant to the October 2015, May 2015 and February 2015 authorizations2017 authorization.
the year following the participant contributions.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — EMPLOYEE BENEFIT PLANS (continued)
compensation, years of vesting service, hypothetical investment returns (gains or losses) and certain IRS limitations related to the HCA 401(k) plan.limitations. Benefits expense under this plan was $40
2019.
2019.
2019.
For the Years Ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Revenues: | ||||||||||||
National Group | $ | 20,772 | $ | 19,845 | $ | 18,756 | ||||||
American Group | 20,912 | 19,670 | 18,875 | |||||||||
Corporate and other | 1,930 | 1,975 | 2,047 | |||||||||
|
|
|
|
|
| |||||||
$ | 43,614 | $ | 41,490 | $ | 39,678 | |||||||
|
|
|
|
|
| |||||||
Equity in earnings of affiliates: | ||||||||||||
National Group | $ | (21 | ) | $ | (20 | ) | $ | (7 | ) | |||
American Group | (37 | ) | (38 | ) | (32 | ) | ||||||
Corporate and other | 13 | 4 | (7 | ) | ||||||||
|
|
|
|
|
| |||||||
$ | (45 | ) | $ | (54 | ) | $ | (46 | ) | ||||
|
|
|
|
|
| |||||||
Adjusted segment EBITDA: | ||||||||||||
National Group | $ | 4,600 | $ | 4,565 | $ | 4,271 | ||||||
American Group | 4,231 | 4,173 | 4,207 | |||||||||
Corporate and other | (598 | ) | (520 | ) | (563 | ) | ||||||
|
|
|
|
|
| |||||||
$ | 8,233 | $ | 8,218 | $ | 7,915 | |||||||
|
|
|
|
|
| |||||||
Depreciation and amortization: | ||||||||||||
National Group | $ | 867 | $ | 806 | $ | 769 | ||||||
American Group | 986 | 908 | 885 | |||||||||
Corporate and other | 278 | 252 | 250 | |||||||||
|
|
|
|
|
| |||||||
$ | 2,131 | $ | 1,966 | $ | 1,904 | |||||||
|
|
|
|
|
|
For the Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Revenues: | ||||||||||||
National Group | $ | 25,694 | $ | 25,913 | $ | 22,581 | ||||||
American Group | 23,593 | 23,173 | 21,959 | |||||||||
Corporate and other | 2,246 | 2,250 | 2,137 | |||||||||
$ | 51,533 | $ | 51,336 | $ | 46,677 | |||||||
Equity in earnings of affiliates: | ||||||||||||
National Group | $ | (28 | ) | $ | (2 | ) | $ | (4 | ) | |||
American Group | (42 | ) | (44 | ) | (40 | ) | ||||||
Corporate and other | 16 | 3 | 15 | |||||||||
$ | (54 | ) | $ | (43 | ) | $ | (29 | ) | ||||
Adjusted segment EBITDA: | ||||||||||||
National Group | $ | 5,532 | $ | 5,634 | $ | 4,980 | ||||||
American Group | 5,333 | 4,904 | 4,593 | |||||||||
Corporate and other | (828 | ) | (681 | ) | (624 | ) | ||||||
$ | 10,037 | $ | 9,857 | $ | 8,949 | |||||||
Depreciation and amortization: | ||||||||||||
National Group | $ | 1,216 | $ | 1,161 | $ | 946 | ||||||
American Group | 1,164 | 1,117 | 1,027 | |||||||||
Corporate and other | 341 | 318 | 305 | |||||||||
$ | 2,721 | $ | 2,596 | $ | 2,278 | |||||||
For the Years Ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Adjusted segment EBITDA | $ | 8,233 | $ | 8,218 | $ | 7,915 | ||||||
Depreciation and amortization | 2,131 | 1,966 | 1,904 | |||||||||
Interest expense | 1,690 | 1,707 | 1,665 | |||||||||
Losses (gains) on sales of facilities | (8 | ) | (23 | ) | 5 | |||||||
Losses on retirement of debt | 39 | 4 | 135 | |||||||||
Legal claim costs (benefits) | — | (246 | ) | 249 | ||||||||
|
|
|
|
|
| |||||||
Income before income taxes | $ | 4,381 | $ | 4,810 | $ | 3,957 | ||||||
|
|
|
|
|
| |||||||
December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Assets: | ||||||||||||
National Group | $ | 13,097 | $ | 12,320 | $ | 11,332 | ||||||
American Group | 18,136 | 16,208 | 15,240 | |||||||||
Corporate and other | 5,360 | 5,230 | 6,172 | |||||||||
|
|
|
|
|
| |||||||
$ | 36,593 | $ | 33,758 | $ | 32,744 | |||||||
|
|
|
|
|
|
National Group | American Group | Corporate and Other | Total | |||||||||||||
Goodwill and other intangible assets: | ||||||||||||||||
Balance at December 31, 2014 | $ | 1,170 | $ | 4,614 | $ | 632 | $ | 6,416 | ||||||||
Acquisitions | 318 | 27 | — | 345 | ||||||||||||
Foreign currency translation, amortization and other | (7 | ) | (3 | ) | (20 | ) | (30 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2015 | 1,481 | 4,638 | 612 | 6,731 | ||||||||||||
Acquisitions | — | 33 | 8 | 41 | ||||||||||||
Foreign currency translation, amortization and other | (23 | ) | (10 | ) | (35 | ) | (68 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2016 | 1,458 | 4,661 | 585 | 6,704 | ||||||||||||
Acquisitions | 19 | 612 | 62 | 693 | ||||||||||||
Foreign currency translation, amortization and other | (3 | ) | (8 | ) | 8 | (3 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2017 | $ | 1,474 | $ | 5,265 | $ | 655 | $ | 7,394 | ||||||||
|
|
|
|
|
|
|
|
For the Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Adjusted segment EBITDA | $ | 10,037 | $ | 9,857 | $ | 8,949 | ||||||
Depreciation and amortization | 2,721 | 2,596 | 2,278 | |||||||||
Interest expense | 1,584 | 1,824 | 1,755 | |||||||||
Losses (gains) on sales of facilities | 7 | (18 | ) | (428 | ) | |||||||
Losses on retirement of debt | 295 | 211 | 9 | |||||||||
Income before income taxes | $ | 5,430 | $ | 5,244 | $ | 5,335 | ||||||
December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Assets: | ||||||||||||
National Group | $ | 18,913 | $ | 18,290 | $ | 14,839 | ||||||
American Group | 20,760 | 20,608 | 19,122 | |||||||||
Corporate and other | 7,817 | 6,160 | 5,246 | |||||||||
$ | 47,490 | $ | 45,058 | $ | 39,207 | |||||||
National Group | American Group | Corporate and Other | Total | |||||||||||||
Goodwill and other intangible assets: | ||||||||||||||||
Balance at December 31, 2017 | $ | 1,474 | $ | 5,265 | $ | 655 | $ | 7,394 | ||||||||
Acquisitions | 132 | 504 | — | 636 | ||||||||||||
Foreign currency translation, amortization and other | (9 | ) | (40 | ) | (28 | ) | (77 | ) | ||||||||
Balance at December 31, 2018 | 1,597 | 5,729 | 627 | 7,953 | ||||||||||||
Acquisitions | 155 | 39 | 138 | 332 | ||||||||||||
Foreign currency translation, amortization and other | (13 | ) | (3 | ) | — | (16 | ) | |||||||||
Balance at December 31, 2019 | 1,739 | 5,765 | 765 | 8,269 | ||||||||||||
Acquisitions | 38 | 27 | 279 | 344 | ||||||||||||
Foreign currency translation, amortization and other | (2 | ) | (17 | ) | (16 | ) | (35 | ) | ||||||||
Balance at December 31, 2020 | $ | 1,775 | $ | 5,775 | $ | 1,028 | $ | 8,578 | ||||||||
Unrealized Gains on Available- for-Sale Securities | Foreign Currency Translation Adjustments | Defined Benefit Plans | Change in Fair Value of Derivative Instruments | Total | ||||||||||||||||
Balances at December 31, 2014 | $ | 13 | $ | (36 | ) | $ | (174 | ) | $ | (126 | ) | $ | (323 | ) | ||||||
Unrealized gains onavailable-for-sale securities, net of $1 of income taxes | — | — | — | — | — | |||||||||||||||
Foreign currency translation adjustments, net of $25 income tax benefit | — | (38 | ) | — | — | (38 | ) | |||||||||||||
Defined benefit plans, net of $11 of income taxes | — | — | 19 | — | 19 | |||||||||||||||
Change in fair value of derivative instruments, net of $14 income tax benefit | — | — | — | (22 | ) | (22 | ) | |||||||||||||
Expense reclassified into operations from other comprehensive income, net of $12 and $46, respectively, income tax benefits | — | — | 20 | 79 | 99 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balances at December 31, 2015 | 13 | (74 | ) | (135 | ) | (69 | ) | (265 | ) | |||||||||||
Unrealized losses onavailable-for-sale securities, net of $3 income tax benefit | (6 | ) | — | — | — | (6 | ) | |||||||||||||
Foreign currency translation adjustments, net of $87 income tax benefit | — | (137 | ) | — | — | (137 | ) | |||||||||||||
Defined benefit plans, net of $13 income tax benefit | — | — | (22 | ) | — | (22 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $8 of income taxes | — | — | — | 12 | 12 | |||||||||||||||
Expense reclassified into operations from other comprehensive income, net of $7 and $40, respectively, income tax benefits | — | — | 11 | 69 | 80 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balances at December 31, 2016 | 7 | (211 | ) | (146 | ) | 12 | (338 | ) | ||||||||||||
Unrealized gains onavailable-for-sale securities | 1 | — | — | — | 1 | |||||||||||||||
Foreign currency translation adjustments, net of $35 of income taxes | — | 62 | — | — | 62 | |||||||||||||||
Defined benefit plans, net of $10 income tax benefit | — | — | (33 | ) | — | (33 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $4 of income taxes | — | — | — | 7 | 7 | |||||||||||||||
Expense (income) reclassified into operations from other comprehensive income, net of $1 of income taxes and $7 and $7 income tax benefits, respectively | (1 | ) | — | 11 | 13 | 23 | ||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Balances at December 31, 2017 | $ | 7 | $ | (149 | ) | $ | (168 | ) | $ | 32 | $ | (278 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
Unrealized Gains on Available- for-Sale Securities | Foreign Currency Translation Adjustments | Defined Benefit Plans | Change in Fair Value of Derivative Instruments | Total | ||||||||||||||||
Balances at December 31, 2017 | $ | 7 | $ | (149 | ) | $ | (168 | ) | $ | 32 | $ | (278 | ) | |||||||
Unrealized losses on available-for-sale income tax benefit | (5 | ) | — | — | — | (5 | ) | |||||||||||||
Foreign currency translation adjustments, net of $8 income tax benefit | — | (63 | ) | — | — | (63 | ) | |||||||||||||
Defined benefit plans, net of $10 of income taxes | — | — | 34 | — | 34 | |||||||||||||||
Change in fair value of derivative instruments, net of $5 of income taxes | — | — | — | 18 | 18 | |||||||||||||||
Expense (income) reclassified into operations from other comprehensive income, net of $5 income tax benefit and $2 of income taxes, respectively | — | — | 16 | (8 | ) | 8 | ||||||||||||||
Reclassification of stranded tax effects | 1 | (71 | ) | (30 | ) | 5 | (95 | ) | ||||||||||||
Balances at December 31, 2018 | 3 | (283 | ) | (148 | ) | 47 | (381 | ) | ||||||||||||
Unrealized gains on available-for-sale income taxes | 11 | — | — | — | 11 | |||||||||||||||
Foreign currency translation adjustments, net of $5 of income taxes | — | — | — | — | — | |||||||||||||||
Defined benefit plans, net of $14 income tax benefit | — | — | (49 | ) | — | (49 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $13 income tax benefit | — | — | — | (37 | ) | (37 | ) | |||||||||||||
Expense (income) reclassified into operations from other comprehensive income, net of $3 income tax benefit and $3 of income taxes, respectively | — | — | 10 | (14 | ) | (4 | ) | |||||||||||||
Balances at December 31, 2019 | 14 | (283 | ) | (187 | ) | (4 | ) | (460 | ) | |||||||||||
Unrealized gains on available-for-sale income taxes | 11 | — | — | — | 11 | |||||||||||||||
Foreign currency translation adjustments, net of $6 of income taxes | — | 12 | — | — | 12 | |||||||||||||||
Defined benefit plans, net of $16 income tax benefit | — | — | (55 | ) | — | (55 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $15 income tax benefit | — | — | — | (51 | ) | (51 | ) | |||||||||||||
Expense reclassified into operations from other comprehensive income, net of $6 and $5 income tax benefits, respectively | — | — | 22 | 19 | 41 | |||||||||||||||
Balances at December 31, 2020 | $ | 25 | $ | (271 | ) | $ | (220 | ) | $ | (36 | ) | $ | (502 | ) | ||||||
2017 | 2016 | |||||||
Professional liability risks | $ | 429 | $ | 391 | ||||
Interest | 406 | 409 | ||||||
Taxes other than income | 299 | 283 | ||||||
Other | 849 | 952 | ||||||
|
|
|
| |||||
$ | 1,983 | $ | 2,035 | |||||
|
|
|
|
A summary of activity for the allowance of doubtful accounts follows (dollars in millions):
Balance at Beginning of Year | Provision for Doubtful Accounts | Accounts Written off, Net of Recoveries | Balance at End of Year | |||||||||||||
Allowance for doubtful accounts: | ||||||||||||||||
Year ended December 31, 2015 | $ | 5,011 | $ | 3,913 | $ | (3,598 | ) | $ | 5,326 | |||||||
Year ended December 31, 2016 | 5,326 | 3,257 | (3,595 | ) | 4,988 | |||||||||||
Year ended December 31, 2017 | 4,988 | 4,039 | (3,539 | ) | 5,488 |
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION
HCA Inc. is a 100% owned direct subsidiary of HCA Healthcare, Inc. On December 6, 2012, HCA Healthcare, Inc. issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.
The senior secured credit facilities and senior secured notes described in Note 9 are jointly and severally, and fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our ABL credit facility).
Our condensed consolidating balance sheets at December 31, 2017 and 2016 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2017, segregating HCA Healthcare, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiarynon-guarantors and eliminations, follow.
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2017
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors | Subsidiary Non- Guarantors | Eliminations | Condensed Consolidated | |||||||||||||||||||
Revenues before provision for doubtful accounts | $ | — | $ | — | $ | 27,992 | $ | 19,661 | $ | — | $ | 47,653 | ||||||||||||
Provision for doubtful accounts | — | — | 2,218 | 1,821 | — | 4,039 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Revenues | — | — | 25,774 | 17,840 | — | 43,614 | ||||||||||||||||||
Salaries and benefits | — | — | 11,619 | 8,440 | — | 20,059 | ||||||||||||||||||
Supplies | — | — | 4,286 | 3,030 | — | 7,316 | ||||||||||||||||||
Other operating expenses | 6 | — | 4,249 | 3,796 | — | 8,051 | ||||||||||||||||||
Equity in earnings of affiliates | (2,476 | ) | — | (6 | ) | (39 | ) | 2,476 | (45 | ) | ||||||||||||||
Depreciation and amortization | — | — | 1,237 | 894 | — | 2,131 | ||||||||||||||||||
Interest expense | 64 | 3,088 | (1,309 | ) | (153 | ) | — | 1,690 | ||||||||||||||||
Gains on sales of facilities | — | — | (2 | ) | (6 | ) | — | (8 | ) | |||||||||||||||
Losses on retirement of debt | — | 39 | — | — | — | 39 | ||||||||||||||||||
Management fees | — | — | (621 | ) | 621 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(2,406 | ) | 3,127 | 19,453 | 16,583 | 2,476 | 39,233 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) before income taxes | 2,406 | (3,127 | ) | 6,321 | 1,257 | (2,476 | ) | 4,381 | ||||||||||||||||
Provision (benefit) for income taxes | 190 | (1,154 | ) | 2,293 | 309 | — | 1,638 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | 2,216 | (1,973 | ) | 4,028 | 948 | (2,476 | ) | 2,743 | ||||||||||||||||
Net income attributable to noncontrolling interests | — | — | 108 | 419 | — | 527 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to HCA Healthcare, Inc. | $ | 2,216 | $ | (1,973 | ) | $ | 3,920 | $ | 529 | $ | (2,476 | ) | $ | 2,216 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income (loss) attributable to HCA Healthcare, Inc. | $ | 2,276 | $ | (1,953 | ) | $ | 3,898 | $ | 591 | $ | (2,536 | ) | $ | 2,276 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2020 | 2019 | |||||||
Professional liability risks | $ | 477 | $ | 457 | ||||
Defined contribution benefit plan | 547 | 528 | ||||||
Right-of-use operating lease | 379 | 350 | ||||||
Taxes other than income | 343 | 325 | ||||||
Interest | 315 | 368 | ||||||
Government stimulus refund liability | 83 | — | ||||||
Other | 1,096 | 904 | ||||||
$ | 3,240 | $ | 2,932 | |||||
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2016
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors (as adjusted) | Subsidiary Non- Guarantors (as adjusted) | Eliminations | Condensed Consolidated | |||||||||||||||||||
Revenues before provision for doubtful accounts | $ | — | $ | — | $ | 26,468 | $ | 18,279 | $ | — | $ | 44,747 | ||||||||||||
Provision for doubtful accounts | — | — | 2,041 | 1,216 | — | 3,257 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Revenues | — | — | 24,427 | 17,063 | — | 41,490 | ||||||||||||||||||
Salaries and benefits | — | — | 10,971 | 7,926 | — | 18,897 | ||||||||||||||||||
Supplies | — | — | 4,090 | 2,843 | — | 6,933 | ||||||||||||||||||
Other operating expenses | 6 | — | 3,912 | 3,578 | — | 7,496 | ||||||||||||||||||
Equity in earnings of affiliates | (2,738 | ) | — | (7 | ) | (47 | ) | 2,738 | (54 | ) | ||||||||||||||
Depreciation and amortization | — | — | 1,141 | 825 | — | 1,966 | ||||||||||||||||||
Interest expense | 64 | 2,756 | (970 | ) | (143 | ) | — | 1,707 | ||||||||||||||||
Losses (gains) on sales of facilities | — | — | 4 | (27 | ) | — | (23 | ) | ||||||||||||||||
Losses on retirement of debt | — | 4 | — | — | — | 4 | ||||||||||||||||||
Legal claim benefits | — | (246 | ) | — | — | — | (246 | ) | ||||||||||||||||
Management fees | — | — | (588 | ) | 588 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(2,668 | ) | 2,514 | 18,553 | 15,543 | 2,738 | 36,680 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) before income taxes | 2,668 | (2,514 | ) | 5,874 | 1,520 | (2,738 | ) | 4,810 | ||||||||||||||||
Provision (benefit) for income taxes | (222 | ) | (928 | ) | 2,133 | 395 | — | 1,378 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | 2,890 | (1,586 | ) | 3,741 | 1,125 | (2,738 | ) | 3,432 | ||||||||||||||||
Net income attributable to noncontrolling interests | — | — | 93 | 449 | — | 542 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to HCA Healthcare, Inc. | $ | 2,890 | $ | (1,586 | ) | $ | 3,648 | $ | 676 | $ | (2,738 | ) | $ | 2,890 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income (loss) attributable to HCA Healthcare, Inc. | $ | 2,817 | $ | (1,505 | ) | $ | 3,637 | $ | 533 | $ | (2,665 | ) | $ | 2,817 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2015
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors (as adjusted) | Subsidiary Non- Guarantors (as adjusted) | Eliminations | Condensed Consolidated | |||||||||||||||||||
Revenues before provision for doubtful accounts | $ | — | $ | — | $ | 25,711 | $ | 17,880 | $ | — | $ | 43,591 | ||||||||||||
Provision for doubtful accounts | — | — | 2,329 | 1,584 | — | 3,913 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Revenues | — | — | 23,382 | 16,296 | — | 39,678 | ||||||||||||||||||
Salaries and benefits | — | — | 10,593 | 7,522 | — | 18,115 | ||||||||||||||||||
Supplies | — | — | 3,933 | 2,705 | — | 6,638 | ||||||||||||||||||
Other operating expenses | (2 | ) | — | 3,685 | 3,373 | — | 7,056 | |||||||||||||||||
Equity in earnings of affiliates | (2,352 | ) | — | (8 | ) | (38 | ) | 2,352 | (46 | ) | ||||||||||||||
Depreciation and amortization | — | — | 1,085 | 819 | — | 1,904 | ||||||||||||||||||
Interest expense | 115 | 2,445 | (816 | ) | (79 | ) | — | 1,665 | ||||||||||||||||
Losses on sales of facilities | — | — | — | 5 | — | 5 | ||||||||||||||||||
Losses on retirement of debt | 122 | 13 | — | — | — | 135 | ||||||||||||||||||
Legal claim costs | 120 | 129 | — | — | — | 249 | ||||||||||||||||||
Management fees | — | — | (515 | ) | 515 | — | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(1,997 | ) | 2,587 | 17,957 | 14,822 | 2,352 | 35,721 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) before income taxes | 1,997 | (2,587 | ) | 5,425 | 1,474 | (2,352 | ) | 3,957 | ||||||||||||||||
Provision (benefit) for income taxes | (132 | ) | (962 | ) | 1,983 | 372 | — | 1,261 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | 2,129 | (1,625 | ) | 3,442 | 1,102 | (2,352 | ) | 2,696 | ||||||||||||||||
Net income attributable to noncontrolling interests | — | — | 92 | 475 | — | 567 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to HCA Healthcare, Inc. | $ | 2,129 | $ | (1,625 | ) | $ | 3,350 | $ | 627 | $ | (2,352 | ) | $ | 2,129 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income (loss) attributable to HCA Healthcare, Inc. | $ | 2,187 | $ | (1,568 | ) | $ | 3,389 | $ | 589 | $ | (2,410 | ) | $ | 2,187 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2017
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors | Subsidiary Non- Guarantors | Eliminations | Condensed Consolidated | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | 1 | $ | — | $ | 112 | $ | 619 | $ | — | $ | 732 | ||||||||||||
Accounts receivable, net | — | — | 3,693 | 2,808 | — | 6,501 | ||||||||||||||||||
Inventories | — | — | 1,030 | 543 | — | 1,573 | ||||||||||||||||||
Other | — | — | 663 | 508 | — | 1,171 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
1 | — | 5,498 | 4,478 | — | 9,977 | |||||||||||||||||||
Property and equipment, net | — | — | 11,110 | 6,785 | — | 17,895 | ||||||||||||||||||
Investments of insurance subsidiaries | — | — | — | 418 | — | 418 | ||||||||||||||||||
Investments in and advances to affiliates | 29,581 | — | 22 | 177 | (29,581 | ) | 199 | |||||||||||||||||
Goodwill and other intangible assets | — | — | 4,893 | 2,501 | — | 7,394 | ||||||||||||||||||
Other | 510 | 50 | 47 | 103 | — | 710 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 30,092 | $ | 50 | $ | 21,570 | $ | 14,462 | $ | (29,581 | ) | $ | 36,593 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 1,793 | $ | 813 | $ | — | $ | 2,606 | ||||||||||||
Accrued salaries | — | — | 862 | 507 | — | 1,369 | ||||||||||||||||||
Other accrued expenses | 29 | 378 | 536 | 1,040 | — | 1,983 | ||||||||||||||||||
Long-term debt due within one year | — | 97 | 64 | 39 | — | 200 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
29 | 475 | 3,255 | 2,399 | — | 6,158 | |||||||||||||||||||
Long-term debt, net | 995 | 31,367 | 307 | 189 | — | 32,858 | ||||||||||||||||||
Intercompany balances | 35,322 | (9,742 | ) | (25,228 | ) | (352 | ) | — | — | |||||||||||||||
Professional liability risks | — | — | — | 1,198 | — | 1,198 | ||||||||||||||||||
Income taxes and other liabilities | 552 | — | 357 | 465 | — | 1,374 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
36,898 | 22,100 | (21,309 | ) | 3,899 | — | 41,588 | ||||||||||||||||||
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc. | (6,806 | ) | (22,050 | ) | 42,755 | 8,876 | (29,581 | ) | (6,806 | ) | ||||||||||||||
Noncontrolling interests | — | — | 124 | 1,687 | — | 1,811 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(6,806 | ) | (22,050 | ) | 42,879 | 10,563 | (29,581 | ) | (4,995 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 30,092 | $ | 50 | $ | 21,570 | $ | 14,462 | $ | (29,581 | ) | $ | 36,593 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2016
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors (as adjusted) | Subsidiary Non- Guarantors (as adjusted) | Eliminations | Condensed Consolidated | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 113 | $ | 533 | $ | — | $ | 646 | ||||||||||||
Accounts receivable, net | — | — | 3,388 | 2,438 | — | 5,826 | ||||||||||||||||||
Inventories | — | — | 1,001 | 502 | — | 1,503 | ||||||||||||||||||
Other | — | — | 592 | 519 | — | 1,111 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
— | — | 5,094 | 3,992 | — | 9,086 | |||||||||||||||||||
Property and equipment, net | — | — | 10,464 | 5,888 | — | 16,352 | ||||||||||||||||||
Investments of insurance subsidiaries | — | — | — | 336 | — | 336 | ||||||||||||||||||
Investments in and advances to affiliates | 27,045 | — | 24 | 182 | (27,045 | ) | 206 | |||||||||||||||||
Goodwill and other intangible assets | — | — | 4,612 | 2,092 | — | 6,704 | ||||||||||||||||||
Other | 877 | — | 43 | 154 | — | 1,074 | ||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 27,922 | $ | — | $ | 20,237 | $ | 12,644 | $ | (27,045 | ) | $ | 33,758 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
| |||||||||||||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Accounts payable | $ | — | $ | — | $ | 1,607 | $ | 711 | $ | — | $ | 2,318 | ||||||||||||
Accrued salaries | — | — | 811 | 454 | — | 1,265 | ||||||||||||||||||
Other accrued expenses | 29 | 572 | 528 | 906 | — | 2,035 | ||||||||||||||||||
Long-term debt due within one year | — | 97 | 72 | 47 | — | 216 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
29 | 669 | 3,018 | 2,118 | — | 5,834 | |||||||||||||||||||
Long-term debt, net | 993 | 29,693 | 304 | 170 | — | 31,160 | ||||||||||||||||||
Intercompany balances | 33,784 | (10,277 | ) | (22,495 | ) | (1,012 | ) | — | — | |||||||||||||||
Professional liability risks | — | — | — | 1,148 | — | 1,148 | ||||||||||||||||||
Income taxes and other liabilities | 418 | 12 | 397 | 422 | — | 1,249 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
35,224 | 20,097 | (18,776 | ) | 2,846 | — | 39,391 | ||||||||||||||||||
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc. | (7,302 | ) | (20,097 | ) | 38,857 | 8,285 | (27,045 | ) | (7,302 | ) | ||||||||||||||
Noncontrolling interests | — | — | 156 | 1,513 | — | 1,669 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(7,302 | ) | (20,097 | ) | 39,013 | 9,798 | (27,045 | ) | (5,633 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 27,922 | $ | — | $ | 20,237 | $ | 12,644 | $ | (27,045 | ) | $ | 33,758 | ||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2017
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors | Subsidiary Non- Guarantors | Eliminations | Condensed Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net income (loss) | $ | 2,216 | $ | (1,973 | ) | $ | 4,028 | $ | 948 | $ | (2,476 | ) | $ | 2,743 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Change in operating assets and liabilities | — | (193 | ) | (2,437 | ) | (1,705 | ) | — | (4,335 | ) | ||||||||||||||
Provision for doubtful accounts | — | — | 2,218 | 1,821 | — | 4,039 | ||||||||||||||||||
Depreciation and amortization | — | — | 1,237 | 894 | — | 2,131 | ||||||||||||||||||
Income taxes | 433 | — | — | — | — | 433 | ||||||||||||||||||
Gains on sales of facilities | — | — | (2 | ) | (6 | ) | — | (8 | ) | |||||||||||||||
Losses on retirement of debt | — | 39 | — | — | — | 39 | ||||||||||||||||||
Amortization of debt issuance costs | — | 31 | — | — | — | 31 | ||||||||||||||||||
Share-based compensation | — | — | 270 | — | — | 270 | ||||||||||||||||||
Equity in earnings of affiliates | (2,476 | ) | — | — | — | 2,476 | — | |||||||||||||||||
Other | 78 | — | — | 5 | — | 83 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used in) operating activities | 251 | (2,096 | ) | 5,314 | 1,957 | — | 5,426 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchase of property and equipment | — | — | (1,681 | ) | (1,334 | ) | — | (3,015 | ) | |||||||||||||||
Acquisition of hospitals and health care entities | — | — | (26 | ) | (1,186 | ) | — | (1,212 | ) | |||||||||||||||
Disposal of hospitals and health care entities | — | — | 14 | 11 | — | 25 | ||||||||||||||||||
Change in investments | — | — | (1 | ) | (72 | ) | — | (73 | ) | |||||||||||||||
Other | — | — | — | (4 | ) | — | (4 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash used in investing activities | — | — | (1,694 | ) | (2,585 | ) | — | (4,279 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Issuance of long-term debt | — | 1,500 | — | 2 | — | 1,502 | ||||||||||||||||||
Net change in revolving bank credit facilities | — | 760 | — | — | — | 760 | ||||||||||||||||||
Repayment of long-term debt | — | (628 | ) | (77 | ) | (48 | ) | — | (753 | ) | ||||||||||||||
Distributions to noncontrolling interests | — | — | (140 | ) | (308 | ) | — | (448 | ) | |||||||||||||||
Payment of debt issuance costs | — | (26 | ) | — | — | — | (26 | ) | ||||||||||||||||
Repurchases of common stock | (2,051 | ) | — | — | — | — | (2,051 | ) | ||||||||||||||||
Changes in intercompany balances with affiliates, net | 1,867 | 490 | (3,404 | ) | 1,047 | — | — | |||||||||||||||||
Other | (66 | ) | — | — | 21 | — | (45 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash (used in) provided by financing activities | (250 | ) | 2,096 | (3,621 | ) | 714 | — | (1,061 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in cash and cash equivalents | 1 | — | (1 | ) | 86 | — | 86 | |||||||||||||||||
Cash and cash equivalents at beginning of period | — | — | 113 | 533 | — | 646 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents at end of period | $ | 1 | $ | — | $ | 112 | $ | 619 | $ | — | $ | 732 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2016
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors (as adjusted) | Subsidiary Non- Guarantors (as adjusted) | Eliminations | Condensed Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net income (loss) | $ | 2,890 | $ | (1,586 | ) | $ | 3,741 | $ | 1,125 | $ | (2,738 | ) | $ | 3,432 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Change in operating assets and liabilities | (25 | ) | 39 | (2,180 | ) | (1,049 | ) | — | (3,215 | ) | ||||||||||||||
Provision for doubtful accounts | — | — | 2,041 | 1,216 | — | 3,257 | ||||||||||||||||||
Depreciation and amortization | — | — | 1,141 | 825 | — | 1,966 | ||||||||||||||||||
Income taxes | 123 | — | — | — | — | 123 | ||||||||||||||||||
Losses (gains) on sales of facilities | — | — | 4 | (27 | ) | — | (23 | ) | ||||||||||||||||
Losses on retirement of debt | — | 4 | — | — | — | 4 | ||||||||||||||||||
Legal claim benefits | — | (246 | ) | — | — | — | (246 | ) | ||||||||||||||||
Amortization of debt issuance costs | 1 | 33 | — | — | — | 34 | ||||||||||||||||||
Share-based compensation | — | — | 251 | — | — | 251 | ||||||||||||||||||
Equity in earnings of affiliates | (2,738 | ) | — | — | — | 2,738 | — | |||||||||||||||||
Other | 71 | — | — | (1 | ) | — | 70 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used in) operating activities | 322 | (1,756 | ) | 4,998 | 2,089 | — | 5,653 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchase of property and equipment | — | — | (1,554 | ) | (1,206 | ) | — | (2,760 | ) | |||||||||||||||
Acquisition of hospitals and health care entities | — | — | (199 | ) | (377 | ) | — | (576 | ) | |||||||||||||||
Disposal of hospitals and health care entities | — | — | 10 | 16 | — | 26 | ||||||||||||||||||
Change in investments | — | — | (15 | ) | 79 | — | 64 | |||||||||||||||||
Other | — | — | — | 6 | — | 6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash used in investing activities | — | — | (1,758 | ) | (1,482 | ) | — | (3,240 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Issuance of long-term debt | — | 5,400 | — | — | — | 5,400 | ||||||||||||||||||
Net change in revolving bank credit facilities | — | (110 | ) | — | — | — | (110 | ) | ||||||||||||||||
Repayment of long-term debt | — | (4,358 | ) | (74 | ) | (43 | ) | — | (4,475 | ) | ||||||||||||||
Distributions to noncontrolling interests | — | — | (64 | ) | (370 | ) | — | (434 | ) | |||||||||||||||
Payment of debt issuance costs | — | (40 | ) | — | — | — | (40 | ) | ||||||||||||||||
Repurchases of common stock | (2,751 | ) | — | — | — | — | (2,751 | ) | ||||||||||||||||
Changes in intercompany balances with affiliates, net | 2,532 | 864 | (3,149 | ) | (247 | ) | — | — | ||||||||||||||||
Other | (103 | ) | — | — | 5 | — | (98 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash (used in) provided by financing activities | (322 | ) | 1,756 | (3,287 | ) | (655 | ) | — | (2,508 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in cash and cash equivalents | — | — | (47 | ) | (48 | ) | — | (95 | ) | |||||||||||||||
Cash and cash equivalents at beginning of period | — | — | 160 | 581 | — | 741 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents at end of period | $ | — | $ | — | $ | 113 | $ | 533 | $ | — | $ | 646 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2015
(Dollars in millions)
HCA Healthcare, Inc. Issuer | HCA Inc. Issuer | Subsidiary Guarantors (as adjusted) | Subsidiary Non- Guarantors (as adjusted) | Eliminations | Condensed Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net income (loss) | $ | 2,129 | $ | (1,625 | ) | $ | 3,442 | $ | 1,102 | $ | (2,352 | ) | $ | 2,696 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Change in operating assets and liabilities | (12 | ) | 44 | (2,786 | ) | (1,482 | ) | — | (4,236 | ) | ||||||||||||||
Provision for doubtful accounts | — | — | 2,329 | 1,584 | — | 3,913 | ||||||||||||||||||
Depreciation and amortization | — | — | 1,085 | 819 | — | 1,904 | ||||||||||||||||||
Income taxes | (160 | ) | — | — | — | — | (160 | ) | ||||||||||||||||
Losses on sales of facilities | — | — | — | 5 | — | 5 | ||||||||||||||||||
Losses on retirement of debt | 122 | 13 | — | — | — | 135 | ||||||||||||||||||
Legal claim costs | 20 | 129 | — | — | — | 149 | ||||||||||||||||||
Amortization of debt issuance costs | 3 | 32 | — | — | — | 35 | ||||||||||||||||||
Share-based compensation | — | — | 239 | — | — | 239 | ||||||||||||||||||
Equity in earnings of affiliates | (2,352 | ) | — | — | — | 2,352 | — | |||||||||||||||||
Other | 66 | 3 | (5 | ) | (10 | ) | — | 54 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash (used in) provided by operating activities | (184 | ) | (1,404 | ) | 4,304 | 2,018 | — | 4,734 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchase of property and equipment | — | — | (1,560 | ) | (815 | ) | — | (2,375 | ) | |||||||||||||||
Acquisition of hospitals and health care entities | — | — | (51 | ) | (300 | ) | — | (351 | ) | |||||||||||||||
Disposal of hospitals and health care entities | — | — | 48 | 25 | — | 73 | ||||||||||||||||||
Change in investments | — | — | 7 | 56 | — | 63 | ||||||||||||||||||
Other | — | — | (6 | ) | 13 | — | 7 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash used in investing activities | — | — | (1,562 | ) | (1,021 | ) | — | (2,583 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Issuance of long-term debt | — | 5,548 | — | — | — | 5,548 | ||||||||||||||||||
Net change in revolving bank credit facilities | — | 150 | — | — | — | 150 | ||||||||||||||||||
Repayment of long-term debt | (1,632 | ) | (3,189 | ) | (60 | ) | (39 | ) | — | (4,920 | ) | |||||||||||||
Distributions to noncontrolling interests | — | — | (85 | ) | (410 | ) | — | (495 | ) | |||||||||||||||
Payment of debt issuance costs | — | (50 | ) | — | — | — | (50 | ) | ||||||||||||||||
Repurchases of common stock | (2,397 | ) | — | — | — | — | (2,397 | ) | ||||||||||||||||
Changes in intercompany balances with affiliates, net | 4,006 | (1,055 | ) | (2,526 | ) | (425 | ) | — | — | |||||||||||||||
Other | 207 | — | — | (19 | ) | — | 188 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used in) financing activities | 184 | 1,404 | (2,671 | ) | (893 | ) | — | (1,976 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Change in cash and cash equivalents | — | — | 71 | 104 | — | 175 | ||||||||||||||||||
Cash and cash equivalents at beginning of period | — | — | 89 | 477 | — | 566 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash and cash equivalents at end of period | $ | — | $ | — | $ | 160 | $ | 581 | $ | — | $ | 741 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
The above supplemental condensed consolidating financial information as of December 31, 2016, and for the years ended December 31, 2016 and 2015, has been adjusted to properly record the impact of certain subsidiaries that werenon-guarantors becoming guarantors, primarily related to the Company acquiring previous noncontrolling interests ofnon-guarantor subsidiaries that then became guarantor subsidiaries. We believe the impact of these adjustments was immaterial as they had no impact to our consolidated income statements, balance sheets or statements of cash flows, had no impact on any liquidity measures of the Company, nor did they impact any financial ratios based on our consolidated balance sheets or income statements. There was also no impact to our loan covenant reporting or compliance. The impact of the adjustments was limited to reclassifications between the Subsidiary Guarantors and SubsidiaryNon-Guarantors columns of the condensed consolidating financial statements. The application of these adjustments to the consolidating information for 2016 and 2015 is summarized as follows (dollars in millions):
As Previously Reported | Adjustment | As Adjusted | ||||||||||
Year ended December 31, 2016 | ||||||||||||
Net income (loss) attributable to HCA Healthcare, Inc.: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | 2,890 | $ | — | $ | 2,890 | ||||||
HCA Inc. Issuer | (1,586 | ) | — | (1,586 | ) | |||||||
Subsidiary Guarantors | 3,235 | 413 | 3,648 | |||||||||
SubsidiaryNon-Guarantors | 1,089 | (413 | ) | 676 | ||||||||
Eliminations | (2,738 | ) | — | (2,738 | ) | |||||||
|
|
|
|
|
| |||||||
Condensed Consolidated | $ | 2,890 | $ | — | $ | 2,890 | ||||||
|
|
|
|
|
|
As Previously Reported | Adjustment | As Adjusted | ||||||||||
December 31, 2016 | ||||||||||||
Total assets: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | 27,922 | $ | — | $ | 27,922 | ||||||
HCA Inc. Issuer | — | — | — | |||||||||
Subsidiary Guarantors | 14,714 | 5,523 | (a) | 20,237 | ||||||||
SubsidiaryNon-Guarantors | 18,167 | (5,523 | )(a) | 12,644 | ||||||||
Eliminations | (27,045 | ) | — | (27,045 | ) | |||||||
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Condensed Consolidated | $ | 33,758 | $ | — | $ | 33,758 | ||||||
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HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
As Previously Reported | Adjustment | As Adjusted | ||||||||||
December 31, 2016 | ||||||||||||
Total liabilities: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | 35,224 | $ | — | $ | 35,224 | ||||||
HCA Inc. Issuer | 20,097 | — | 20,097 | |||||||||
Subsidiary Guarantors | (23,194 | ) | 4,418 | (b) | (18,776 | ) | ||||||
SubsidiaryNon-Guarantors | 7,264 | (4,418 | )(b) | 2,846 | ||||||||
Eliminations | — | — | — | |||||||||
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Condensed Consolidated | $ | 39,391 | $ | — | $ | 39,391 | ||||||
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As Previously Reported | Adjustment | As Adjusted | ||||||||||
Year ended December 31, 2016 | ||||||||||||
Net cash provided (used in) operating activities: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | 322 | $ | — | $ | 322 | ||||||
HCA Inc. Issuer | (1,756 | ) | — | (1,756 | ) | |||||||
Subsidiary Guarantors | 4,425 | 573 | 4,998 | |||||||||
SubsidiaryNon-Guarantors | 2,662 | (573 | ) | 2,089 | ||||||||
Eliminations | — | — | — | |||||||||
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Condensed Consolidated | $ | 5,653 | $ | — | $ | 5,653 | ||||||
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As Previously Reported | Adjustment | As Adjusted | ||||||||||
Year ended December 31, 2015 | ||||||||||||
Net income (loss) attributable to HCA Healthcare, Inc.: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | 2,129 | $ | — | $ | 2,129 | ||||||
HCA Inc. Issuer | (1,625 | ) | — | (1,625 | ) | |||||||
Subsidiary Guarantors | 2,970 | 380 | 3,350 | |||||||||
SubsidiaryNon-Guarantors | 1,007 | (380 | ) | 627 | ||||||||
Eliminations | (2,352 | ) | — | (2,352 | ) | |||||||
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Condensed Consolidated | $ | 2,129 | $ | — | $ | 2,129 | ||||||
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HCA HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
As Previously Reported | Adjustment | As Adjusted | ||||||||||
Year ended December 31, 2015 | ||||||||||||
Net cash provided (used in) operating activities: | ||||||||||||
HCA Healthcare, Inc. Issuer | $ | (184 | ) | $ | — | $ | (184 | ) | ||||
HCA Inc. Issuer | (1,404 | ) | — | (1,404 | ) | |||||||
Subsidiary Guarantors | 3,772 | 532 | 4,304 | |||||||||
SubsidiaryNon-Guarantors | 2,550 | (532 | ) | 2,018 | ||||||||
Eliminations | — | — | — | |||||||||
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Condensed Consolidated | $ | 4,734 | $ | — | $ | 4,734 | ||||||
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Healthtrust, Inc. — The Hospital Company (“Healthtrust”) is the first-tier subsidiary of HCA Inc. The common stock of Healthtrust has been pledged as collateral for the senior secured credit facilities and senior secured notes described in Note 9. Rule3-16 of RegulationS-X under the Securities Act requires the filing of separate financial statements for any affiliate of the registrant whose securities constitute a substantial portion of the collateral for any class of securities registered or being registered. We believe the separate financial statements requirement applies to Healthtrust due to the pledge of its common stock as collateral for the senior secured notes. Due to the corporate structure relationship of HCA and Healthtrust, HCA’s operating subsidiaries are also the operating subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrust’s consolidated financial statements related to HCA’s debt and financial instruments, results in the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA. The consolidated financial statements of HCA and Healthtrust present the identical amounts for revenues, expenses, net income, assets, liabilities, total stockholders’ deficit, net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities. Certain individual line items in the HCA consolidated statements of stockholders’ deficit are combined into one line item in the Healthtrust consolidated statements of stockholder’s deficit.
Reconciliations of the HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit presentation to the Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit presentation for the years ended December 31, 2017, 2016 and 2015 are as follows (dollars in millions):
2017 | 2016 | 2015 | ||||||||||
Presentation in HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit: | ||||||||||||
Share-based benefit plans | $ | 281 | $ | 233 | $ | 523 | ||||||
Other | (10 | ) | (2 | ) | (18 | ) | ||||||
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Presentation in Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit: | ||||||||||||
Distributions from HCA Healthcare, Inc., net of contributions to HCA Healthcare, Inc. | $ | 271 | $ | 231 | $ | 505 | ||||||
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Due to the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA, except for the items presented in the table above, the separate consolidated financial statements of Healthtrust are not presented.
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(Dollars in millions, except per share amounts)
2017 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Revenues | $ | 10,623 | $ | 10,733 | $ | 10,696 | $ | 11,562 | ||||||||
Net income | $ | 777 | (a) | $ | 795 | (b) | $ | 530 | (c) | $ | 641 | (d) | ||||
Net income attributable to HCA Healthcare, Inc. | $ | 659 | (a) | $ | 657 | (b) | $ | 426 | (c) | $ | 474 | (d) | ||||
Basic earnings per share | $ | 1.78 | $ | 1.79 | $ | 1.18 | $ | 1.34 | ||||||||
Diluted earnings per share | $ | 1.74 | $ | 1.75 | $ | 1.15 | $ | 1.30 |
2016 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Revenues | $ | 10,260 | $ | 10,319 | $ | 10,270 | $ | 10,641 | ||||||||
Net income | $ | 811 | (e) | $ | 791 | (f) | $ | 745 | (g) | $ | 1,085 | (h) | ||||
Net income attributable to HCA Healthcare, Inc. | $ | 694 | (e) | $ | 658 | (f) | $ | 618 | (g) | $ | 920 | (h) | ||||
Basic earnings per share | $ | 1.75 | $ | 1.70 | $ | 1.63 | $ | 2.46 | ||||||||
Diluted earnings per share | $ | 1.69 | $ | 1.65 | $ | 1.59 | $ | 2.39 |
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F-46