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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report September 13, 1999
(Date of Earliest Event Reported)
COLUMBIA/HCA HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its Charter)
DELAWARE
(State of Incorporation)
001-11239 75-2497104
(Commission (I.R.S. Employer
File Number) Identification No.)
One Park Plaza, Nashville, Tennessee 37203
(Address of principal executive offices) (Zip Code)
(615) 344-9551
(Registrant's telephone number, including area code)
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ITEM 5. OTHER EVENTS
PRO FORMA FINANCIAL INFORMATION. The Company has substantially
completed the restructuring of its operations in an effort to create a smaller
and more focused company. The restructuring has included the divestitures of
certain hospitals, surgery centers and related facilities, the spin-offs of
LifePoint Hospitals, Inc. and Triad Hospitals, Inc. and the divestitures of the
Company's home health and certain other businesses.
In July 1999, the Company filed a "shelf" registration statement and
prospectus with the Securities and Exchange Commission relating to $1.5 billion
of debt securities. The Company anticipates selling an estimated $250 million
in debt securities in September 1999, using the proceeds to repay a portion of
the borrowings under Company's senior interim term loan agreement.
The following table sets forth the Company's unaudited pro forma
combined financial information and operating data for the twelve months ended
June 30, 1999, the six-month periods ended June 30, 1999 and 1998 and the year
ended December 31, 1998. The unaudited pro forma combined financial information
and operating data are based on the Company's historical consolidated financial
information and operating data, adjusted to give effect to the Company's
proposed offering of an estimated $250 million of senior unsecured notes (the
"Notes") pursuant to a prospectus supplement dated September 13, 1999 (to a
prospectus dated August 5, 1999) and to exclude, for all periods, the financial
information and operating data related to: (i) the facilities included in the
two companies that were spun-off to the Company's stockholders in May 1999
(LifePoint Hospitals, Inc. and Triad Hospitals, Inc.); (ii) the facilities sold
during 1998 that were previously identified as the Atlantic Group; (iii) 39
outpatient surgery centers sold during 1998 and 1999; and (iv) 15 facilities
that have been identified as being held for sale. The Company believes that the
unaudited pro forma combined financial information and operating data provide
information on the remaining core assets that will provide the base for its
operations in future periods. The unaudited pro forma combined financial
information and operating data are presented for informational purposes only and
do not necessarily reflect the actual results that would have occurred, nor are
they necessarily indicative of future results of operations.
TWELVE
MONTHS
ENDED SIX MONTHS YEAR ENDED
JUNE 30, ENDED JUNE 30, DECEMBER 31,
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1999 1999 1998 1998
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(UNAUDITED; DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Revenues.................................................. $ 14,966 $ 7,806 $ 7,372 $ 14,532
Interest expense (a)...................................... 501
OPERATING DATA:
EBITDA (b)................................................ $ 2,593 $ 1,493 $ 1,460 $ 2,560
Number of hospitals at end of period (c).................. 189 189 201 200
Number of licensed beds at end of period (d).............. 41,504 41,504 42,456 41,990
Admissions (e)............................................ 1,472,200 759,600 743,000 1,455,600
Equivalent admissions (f)................................. 2,183,700 1,117,400 1,095,300 2,161,600
Average length of stay (days) (g)......................... 5.0 5.0 5.0 5.0
Average daily census (h).................................. 20,033 21,032 20,667 19,852
PERCENTAGE CHANGE FROM PRIOR YEAR PERIOD:
Revenues.................................................. 5.7% 5.9% 0.4% 2.9%
Admissions (e)............................................ 1.7 2.2 2.7 1.9
Equivalent admissions (f)................................. 1.9 2.0 3.5 2.6
Revenues per equivalent admission......................... 3.8 3.8 (3.1) 0.2
SELECTED RATIOS (a):
Ratio of pro forma EBITDA to pro forma interest expense... 5.2x
Ratio of total debt to pro forma EBITDA................... 2.6x
Ratio of total debt to total capitalization............... 52%
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(a) Pro forma interest expense and the selected ratio computations for
the twelve months ended June 30, 1999 have been prepared using the historical
total debt balance at June 30, 1999 of $6.66 billion and an average effective
interest rate of 7.51%, which includes an assumed interest rate of 9.00% on the
estimated $250 million of Notes being offered.
(b) EBITDA is defined as income from continuing operations before
depreciation and amortization, interest expense, gains on sales of facilities,
impairment of long-lived assets, restructuring of operations and
investigation-related costs, minority interests and income taxes. EBITDA is
commonly used as an analytical indicator within the health care industry, and
also serves as a measure of leverage capacity and debt service ability. EBITDA
should not be considered as a measure of financial performance under generally
accepted accounting principles. The items excluded from EBITDA are significant
components in understanding and assessing financial performance. EBITDA should
not be considered in isolation or as an alternative to net income, cash flows
generated by operating, investing or financing activities or other financial
statement data presented in the financial statements as an indicator of
financial performance or liquidity. Because EBITDA is not a measurement
determined in accordance with generally accepted accounting principles and is
thus susceptible to varying calculations, EBITDA as presented may not be
comparable to other similarly titled measures of other companies.
(c) Excludes 16 facilities at June 30, 1999, 24 facilities at June 30,
1998 and 23 facilities at December 31, 1998 that are not consolidated (accounted
for using the equity method) for financial reporting purposes.
(d) Licensed beds are those beds for which a facility has been granted
approval to operate from the applicable state licensing agency.
(e) Represents the total number of patients admitted (in the facility
for a period in excess of 23 hours) to the Company's hospitals. Management and
certain investors use admissions as a general measure of inpatient volume.
(f) Management and certain investors use equivalent admissions 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.
(g) Represents the average number of days admitted patients stay in the
Company's hospitals.
(h) Represents the average number of patients in the Company's hospital
beds each day.
LITIGATION UPDATE. In August 1999, the Company was made aware that the
case of United States ex rel. Tonya M. Atchison v. Columbia/HCA Healthcare,
Inc., El Paso Healthcare System, Ltd., Columbia West Radiology Group, P.A., West
Texas Radiology Group, Rio Grande Physicians' Services Inc., El Paso Nurses
Unlimited Inc., El Paso Healthcare Systems Limited, and El Paso Healthcare
Systems United Partnership, No. EP 97-CA234, was unsealed in the U.S. District
Court for the Western District of Texas. In general, the complaint alleges that
the defendants submitted false claims regarding the 72-hour rule, cost reports
and central business office billings, wrote-off bad debt on international
patients, inflated financial information on the sale of a hospital, improperly
billed pharmacy charges and radiology charges, improperly billed skilled nursing
facility charges, improperly accounted for discounts and rebates and improperly
billed certified first assistants in surgery, home health visits, senior health
centers, diabetic treatment and wound care centers. The complaint has not yet
been served on the Company.
On February 12, 1999, the United Sates filed a Motion before the
Judicial Panel on Multidistrict Litigation ("MDL Panel") seeking to transfer and
consolidate, pursuant to 28 U.S.C. sec. 1407, all qui tam actions against the
Company, including those sealed and unsealed, for purposes of discovery and
pretrial matters, to the United States District Court for the District of
Columbia. The MDL Panel denied the Motion on procedural grounds. On August 12,
1999, the United Sates Government filed an Application to Conduct 28 U.S.C.
sec. 1407 Consolidated Proceedings under seal with the MDL Panel. The underlying
motion to consolidate the proceedings relates to the qui tam cases against the
Company, both sealed and unsealed.
In September 1999, the District Court entered an Order granting the
defendants' motion to dismiss McCall, H. Carl, as Comptroller of the State of
New York and as Trustee of the New York State Retirement Fund, derivatively on
behalf of Columbia/HCA Healthcare Corporation v. Richard L. Scott, et al., No.
3-97-0838 with prejudice.
YEAR 2000 UPDATE. The Company has dedicated substantial resources to
address the impact of the Year 2000 problem. The Company has engaged all
relevant aspects of the organization in a coordinated effort to address the Year
2000 problem and to minimize the chance of an interruption to its operations or
impact to patient safety and health.
With respect to the information technology ("IT") infrastructure
portion of the Company's Year 2000 project, the Company has undertaken a program
to inventory, assess and correct, replace or otherwise address impacted,
vendor-supplied products (hardware, systems software, business software, and
telecommunication equipment). The Company has implemented a program to contact
vendors, analyze information provided, and to remediate, replace or otherwise
address IT products that pose a material Year 2000 impact. The Company had
anticipated completion of the IT infrastructure portion of its program by
September 30, 1999. Due to certain delays in implementation at a number of the
Company's facilities being remediated, the Company currently anticipates
completion of the IT infrastructure portion of its program in the fourth quarter
of 1999.
With respect to the non-IT infrastructure portion of its Year 2000
project, the Company has undertaken a program to inventory, assess and correct,
replace or otherwise address impacted vendor products, medical equipment and
other related equipment with embedded chips. The Company has implemented a
program to contact vendors, analyze information provided, and to remediate,
replace or otherwise address devices or equipment that pose a material Year 2000
impact. The Company had anticipated completion of the non-IT infrastructure
portion of its program by September 30, 1999. Due to certain delays in
implementation at a number of the Company's facilities being remediated, the
Company currently anticipates completion of the non-IT infrastructure portion of
its program in the fourth quarter of 1999.
PENDING IRS DISPUTE UPDATE. In connection with the examination by the
Internal Revenue Service of the Company's 1995 and 1996 federal income tax
returns, the Company had expected to receive a Statutory Notice of Deficiency (a
"Notice") during the third quarter of 1999. The Company currently expects to
receive a Notice during the fourth quarter of 1999. The Company anticipates
filing a petition with the United States Tax Court contesting claimed
deficiencies and proposed adjustments included in any such Notice during the
first quarter of 2000.
All references to "Columbia/HCA" or the "Company" refer to Columbia/HCA
Healthcare Corporation and/or its affiliates, as applicable.
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
COLUMBIA/HCA HEALTHCARE CORPORATION
/s/ R. MILTON JOHNSON
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R. Milton Johnson
Senior Vice President and Controller
DATED: September 13, 1999