Table of Contents
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form
 10-Q

(Mark One)

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
June 30, 2018

2019

Or

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to                 

Commission file number
1-11239

HCA Healthcare, Inc.

(Exact name of registrant as specified in its charter)

Delaware
 
27-3865930

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Voting common stock, $.01 par valueHCANew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  
☒
    No  
☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation
 S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  
☒
    No  
☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” inRule
 12b-2
of the Exchange Act.

Large accelerated filer

 

☒

 

Accelerated filer

 

☐

Non-accelerated
filer

 

☐  (Do not check if a smaller reporting company)

 

Smaller reporting company

 

☐

Emerging growth company

 

☐

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
☐

Indicate by check mark whether the registrant is a shell company (as defined inRule
 12b-2
of the Exchange Act).    Yes  
☐
    No  
☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class of Common Stock

 

Outstanding at July 31, 2018

2019

Voting common stock, $.01 par value

 346,046,000
340,982,800 shares

Table of Contents
HCA HEALTHCARE, INC.

Form 10-Q

June 30, 2018

2019
Page of
Form 10-Q
Part I.
Financial Information
    Page of
Form 10-Q		 

Part I.

Item 1.		 Financial InformationStatements (Unaudited): 

Item 1.

 Financial Statements (Unaudited): 
 

Condensed Consolidated Income Statements — for the quarters and six months ended June 30, 20182019 and 20172018

  2 
 

Condensed Consolidated Comprehensive Income Statements — for the quarters and six months ended June 30, 20182019 and 20172018

  3 
 

Condensed Consolidated Balance Sheets — June 30, 20182019 and December 31, 20172018

  4 
 

Condensed Consolidated Statements of Stockholders’ Deficit — for the quarters and six months ended June 30, 2019 and 2018
5
Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 20182019 and 20172018

5

Notes to Condensed Consolidated Financial Statements

  6 

Item 2.

 

Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

  2728 

Item 3.

 

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

  43 

Item 4.

 

Item 4.
Controls and Procedures

  43 

Part II.

 
Part II.
Other Information
 

Item 1.

 

Item 1.
Legal Proceedings

  43 

Item 1A.

Risk Factors

  43 

Item 2.

1A.		 

Risk Factors
44
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

  4344 

Item 6.

 

Item 6.
Exhibits

  45 

Signatures

  46 

1
Table of Contents
HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 20182019 AND 2017

2018

Unaudited

(Dollars in millions, except per share amounts)

   Quarter  Six Months 
   2018  2017  2018  2017 

Revenues

  $11,529  $10,733  $22,952  $21,356 

Salaries and benefits

   5,274   4,896   10,563   9,797 

Supplies

   1,917   1,795   3,832   3,592 

Other operating expenses

   2,118   1,965   4,228   3,895 

Equity in earnings of affiliates

   (7)   (13)   (16)   (23) 

Depreciation and amortization

   562   521   1,115   1,042 

Interest expense

   436   411   867   830 

Gains on sales of facilities

   (9)   (2)   (414)   (3) 
  

 

 

  

 

 

  

 

 

  

 

 

 
   10,291   9,573   20,175   19,130 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   1,238   1,160   2,777   2,226 

Provision for income taxes

   272   365   529   654 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   966   795   2,248   1,572 

Net income attributable to noncontrolling interests

   146   138   284   256 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to HCA Healthcare, Inc.

  $820  $657  $1,964  $1,316 
  

 

 

  

 

 

  

 

 

  

 

 

 

Per share data:

     

Basic earnings

  $2.35  $1.79  $5.62  $3.58 

Diluted earnings

  $2.31  $1.75  $5.50  $3.48 

Cash dividends declared

  $0.35  $—  $0.70  $— 

Shares used in earnings per share calculations (in millions):

     

Basic

   348.615   365.847   349.726   368.056 

Diluted

   355.039   375.338   357.388   377.647 

See

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Revenues
 $
12,602
  $
11,529
  $
25,119
  $
22,952
 
                 
Salaries and benefits
  
5,837
   
5,274
   
11,484
   
10,563
 
Supplies
  
2,118
   
1,917
   
4,159
   
3,832
 
Other operating expenses
  
2,362
   
2,118
   
4,661
   
4,228
 
Equity in earnings of affiliates
  
(8
)  
(7
)  
(19
)  
(16
)
Depreciation and amortization
  
636
   
562
   
1,255
   
1,115
 
Interest expense
  
477
   
436
   
938
   
867
 
Gains on sales of facilities
  
(18
)  
(9
)  
(17
)  
(414
)
                 
  
11,404
   
10,291
   
22,461
   
20,175
 
                 
Income before income taxes
  
1,198
   
1,238
   
2,658
   
2,777
 
Provision for income taxes
  
271
   
272
   
550
   
529
 
                 
Net income
  
927
   
966
   
2,108
   
2,248
 
Net income attributable to noncontrolling interests
  
144
   
146
   
286
   
284
 
                 
Net income attributable to HCA Healthcare, Inc.
 $
783
  $
820
  $
1,822
  $
1,964
 
                 
Per share data:
            
Basic earnings
 $
2.29
  $
2.35
  $
5.32
  $
5.62
 
Diluted earnings
 $
2.25
  $
2.31
  $
5.22
  $
5.50
 
Shares used in earnings per share calculations (in millions):
            
Basic
  
342.170
   
348.615
   
342.513
   
349.726
 
Diluted
  
348.373
   
355.039
   
349.334
   
357.388
 
The accompanying notes.

notes are an integral part of the condensed consolidated financial statements.

2
Table of Contents
HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 20182019 AND 2017

2018

Unaudited

(Dollars in millions)

   Quarter  Six Months 
   2018  2017  2018  2017 

Net income

  $966  $795  $2,248  $1,572 

Other comprehensive income (loss) before taxes:

     

Foreign currency translation

   (76)   45   (22)   55 

Unrealized (losses) gains onavailable-for-sale securities

   (1)   2   (6)   5 

Defined benefit plans

   —   —   —   — 

Pension costs included in salaries and benefits

   5   4   10   9 
  

 

 

  

 

 

  

 

 

  

 

 

 
   5   4   10   9 

Change in fair value of derivative financial instruments

   15   (11)   50   (8) 

Interest (benefits) costs included in interest expense

   (2)   6   (2)   13 
  

 

 

  

 

 

  

 

 

  

 

 

 
   13   (5)   48   5 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive (loss) income before taxes

   (59)   46   30   74 

Income taxes related to other comprehensive income items

   5   19   13   29 
  

 

 

  

 

 

  

 

 

  

 

 

 

Other comprehensive (loss) income

   (64)   27   17   45 
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income

   902   822   2,265   1,617 

Comprehensive income attributable to noncontrolling interests

   146   138   284   256 
  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income attributable to HCA Healthcare, Inc.

  $756  $684  $1,981  $1,361 
  

 

 

  

 

 

  

 

 

  

 

 

 

See

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Net income
 $
927
  $
966
  $
2,108
  $
2,248
 
Other comprehensive income (loss) before taxes:
            
Foreign currency translation
  
(38
)  
(76
)  
(18
)  
(22
)
                 
Unrealized gains (losses) on
available-for-sale
securities
  
6
   
(1
)  
14
   
(6
)
                 
Defined benefit plans
  
—
   
—
   
—
   
—
 
Pension costs included in salaries and benefits
  
4
   
5
   
7
   
10
 
                 
  
4
   
5
   
7
   
10
 
                 
Change in fair value of derivative financial instruments
  
(34
)  
15
   
(52
)  
50
 
Interest benefits included in interest expense
  
(6
)  
(2
)  
(11
)  
(2
)
                 
  
(40
)  
13
   
(63
)  
48
 
                 
Other comprehensive (loss) income before taxes
  
(68
)  
(59
)  
(60
)  
30
 
Income taxes (benefits) related to other comprehensive income items
  
(11
)  
5
   
(10
)  
13
 
                 
Other comprehensive (loss) income
  
(57
)  
(64
)  
(50
)  
17
 
                 
Comprehensive income
  
870
   
902
   
2,058
   
2,265
 
Comprehensive income attributable to noncontrolling interests
  
144
   
146
   
286
   
284
 
                 
Comprehensive income attributable to HCA Healthcare, Inc.
 $
726
  $
756
  $
1,772
  $
1,981
 
                 
The accompanying notes.

notes are an integral part of the condensed consolidated financial statements.

3
Table of Contents
HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

   June 30,
2018		  December 31,
2017		 
ASSETS   

Current assets:

   

Cash and cash equivalents

  $868  $732 

Accounts receivable

   6,592   6,501 

Inventories

   1,636   1,573 

Other

   1,298   1,171 
  

 

 

  

 

 

 
   10,394   9,977 

Property and equipment, at cost

   41,142   40,084 

Accumulated depreciation

   (22,598)   (22,189) 
  

 

 

  

 

 

 
   18,544   17,895 

Investments of insurance subsidiaries

   414   418 

Investments in and advances to affiliates

   234   199 

Goodwill and other intangible assets

   7,459   7,394 

Other

   697   710 
  

 

 

  

 

 

 
  $37,742  $36,593 
  

 

 

  

 

 

 
LIABILITIES AND STOCKHOLDERS’ DEFICIT   

Current liabilities:

   

Accounts payable

  $2,457  $2,606 

Accrued salaries

   1,315   1,369 

Other accrued expenses

   2,161   1,983 

Long-term debt due within one year

   1,692   200 
  

 

 

  

 

 

 
   7,625   6,158 

Long-term debt, less net debt issuance costs of $151 and $164

   31,500   32,858 

Professional liability risks

   1,283   1,198 

Income taxes and other liabilities

   1,459   1,374 

Stockholders’ deficit:

   

Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 346,760,200 shares in 2018 and 350,091,600 shares in 2017

   3   4 

Accumulated other comprehensive loss

   (261)   (278) 

Retained deficit

   (5,731)   (6,532) 
  

 

 

  

 

 

 

Stockholders’ deficit attributable to HCA Healthcare, Inc.

   (5,989)   (6,806) 

Noncontrolling interests

   1,864   1,811 
  

 

 

  

 

 

 
   (4,125)   (4,995) 
  

 

 

  

 

 

 
  $37,742  $36,593 
  

 

 

  

 

 

 

See

         
 
June 30,
2019
  
December 31,
2018
 
ASSETS
      
Current assets:
      
Cash and cash equivalents
 $
2,430
  $
502
 
Accounts receivable
  
7,219
   
6,789
 
Inventories
  
1,826
   
1,732
 
Other
  
1,394
   
1,190
 
         
  
12,869
   
10,213
 
         
Property and equipment, at cost
  
45,369
   
42,965
 
Accumulated depreciation
  
(23,902
)  
(23,208
)
         
  
21,467
   
19,757
 
         
Investments of insurance subsidiaries
  
342
   
362
 
Investments in and advances to affiliates
  
247
   
232
 
Goodwill and other intangible assets
  
8,140
   
7,953
 
Right-of-use
operating lease assets
  
1,787
   
—
 
Other
  
597
   
690
 
         
 $
45,449
  $
39,207
 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT
      
Current liabilities:
      
Accounts payable
 $
2,609
  $
2,577
 
Accrued salaries
  
1,497
   
1,580
 
Other accrued expenses
  
2,782
   
2,624
 
Long-term debt due within one year
  
2,073
   
788
 
         
  
8,961
   
7,569
 
         
Long-term debt, less debt issuance costs
and discounts
of $252 and $157
  
34,120
   
32,033
 
Professional liability risks
  
1,354
   
1,275
 
Right-of-use
operating lease obligations
  
1,460
   
—
 
Income taxes and other liabilities
  
1,324
   
1,248
 
         
Stockholders’ deficit:
      
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 341,516,800 shares in 2019 and 342,895,200 shares in 2018
  
3
   
3
 
Accumulated other comprehensive loss
  
(431
)  
(381
)
Retained deficit
  
(3,474
)  
(4,572
)
         
Stockholders’ deficit attributable to HCA Healthcare, Inc.
  
(3,902
)  
(4,950
)
Noncontrolling interests
  
2,132
   
2,032
 
         
  
(1,770
)  
(2,918
)
         
 $
45,449
  $
39,207
 
         
The accompanying notes.

notes are an integral part of the condensed consolidated financial statements.

4
Table of Contents
HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018
Unaudited
(Dollars in millions)
 
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, 2017
  
350.092
  $
4
  $
—
  $
(278
) $
(6,532
) $
1,811
  $
(4,995
)
Comprehensive income
           
81
   
1,144
   
138
   
1,363
 
Repurchase of common stock
  
(4.370
)     
114
      
(537
)     
(423
)
Share-based benefit plans
  
5.265
      
(114
)           
(114
)
Cash dividends declared ($0.35 per share)
              
(126
)     
(126
)
Distributions
                 
(92
)  
(92
)
Other
                 
(47
)  
(47
)
                             
Balances, March 31, 2018
  
350.987
   
4
   
—
   
(197
)  
(6,051
)  
1,810
   
(4,434
)
Comprehensive income
           
(64
)  
820
   
146
   
902
 
Repurchase of common stock
  
(4.670
)  
(1
)  
(93
)     
(376
)     
(470
)
Share-based benefit plans
  
0.443
      
96
            
96
 
Cash dividends declared ($0.35 per share)
              
(124
)     
(124
)
Distributions
                 
(93
)  
(93
)
Other
        
(3
)        
1
   
(2
)
                             
Balances, June 30, 2018
  
346.760
   
3
   
—
   
(261
)  
(5,731
)  
1,864
   
(4,125
)
Comprehensive income
           
(5
)  
759
   
137
   
891
 
Repurchase of common stock
  
(2.518
)     
(55
)     
(247
)     
(302
)
Share-based benefit plans
  
0.844
      
54
            
54
 
Cash dividends declared ($0.35 per share)
              
(123
)     
(123
)
Distributions
                 
(130
)  
(130
)
Other
        
1
         
4
   
5
 
                             
Balances, September 30, 2018
  
345.086
   
3
   
—
   
(266
)  
(5,342
)  
1,875
   
(3,730
)
Comprehensive income
           
(20
)  
1,064
   
181
   
1,225
 
Repurchase of common stock
  
(2.512
)     
(69
)     
(266
)     
(335
)
Share-based benefit plans
  
0.321
      
79
            
79
 
Cash dividends declared ($0.35 per share)
              
(123
)     
(123
)
Distributions
                 
(126
)  
(126
)
Other
        
(10
)  
(95
)  95
   
102
   
92
 
                             
Balances, December 31, 2018
  
342.895
   
3
   
—
   
(381
)  
(4,572
)  
2,032
   
(2,918
)
Comprehensive income
           
7
   
1,039
   
142
   
1,188
 
Repurchase of common stock
  
(2.106
)     
32
      
(310
)     
(278
)
Share-based benefit plans
  
2.242
      
(29
)           
(29
)
Cash dividends declared ($0.40 per share)
              
(140
)     
(140
)
Distributions
                 
(136
)  
(136
)
Other
        
(3
)        
61
   
58
 
                             
Balances, March 31, 2019
  
343.031
   
3
   
—
   
(374
)  
(3,983
)  
2,099
   
(2,255
)
Comprehensive income
           
(57
)  
783
   
144
   
870
 
Repurchase of common stock
  
(1.928
)     
(107
)     
(135
)     
(242
)
Share-based benefit plans
  
0.414
      
118
            
118
 
Cash dividends declared ($0.40 per share)
              
(139
)     
(139
)
Distributions
                 
(111
)  
(111
)
Other
        
(11
)           
(11
)
                             
Balances, June 30, 2019
  
341.517
  $
3
  $
—
  $
(431
) $
(3,474
) $
2,132
  $
(1,770
)
                             
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
Table of Contents
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 20182019 AND 2017

2018

Unaudited

(Dollars in millions)

   2018  2017 

Cash flows from operating activities:

   

Net income

  $2,248  $1,572 

Adjustments to reconcile net income to net cash provided by operating activities:

   

Increase (decrease) in cash from operating assets and liabilities:

   

Accounts receivable

   (233)   81 

Inventories and other assets

   (200)   (178) 

Accounts payable and accrued expenses

   31   (298) 

Depreciation and amortization

   1,115   1,042 

Income taxes

   118   267 

Gains on sales of facilities

   (414)   (3) 

Amortization of debt issuance costs

   15   16 

Share-based compensation

   134   140 

Other

   51   45 
  

 

 

  

 

 

 

Net cash provided by operating activities

   2,865   2,684 
  

 

 

  

 

 

 

Cash flows from investing activities:

   

Purchase of property and equipment

   (1,574)   (1,304) 

Acquisition of hospitals and health care entities

   (538)   (295) 

Disposal of hospitals and health care entities

   799   14 

Change in investments

   23   (11) 

Other

   (25)   5 
  

 

 

  

 

 

 

Net cash used in investing activities

   (1,315)   (1,591) 
  

 

 

  

 

 

 

Cash flows from financing activities:

   

Issuances of long-term debt

   —   1,502 

Net change in revolving bank credit facilities

   210   (1,160) 

Repayment of long-term debt

   (101)   (95) 

Distributions to noncontrolling interests

   (185)   (248) 

Payment of debt issuance costs

   (2)   (25) 

Payment of cash dividends

   (245)   — 

Repurchases of common stock

   (893)   (966) 

Other

   (192)   (42) 
  

 

 

  

 

 

 

Net cash used in financing activities

   (1,408)   (1,034) 
  

 

 

  

 

 

 

Effect of exchange rate changes on cash and cash equivalents

   (6)   — 
  

 

 

  

 

 

 

Change in cash and cash equivalents

   136   59 

Cash and cash equivalents at beginning of period

   732   646 
  

 

 

  

 

 

 

Cash and cash equivalents at end of period

  $868  $705 
  

 

 

  

 

 

 

Interest payments

  $873  $834 

Income tax payments, net

  $411  $387 

See

         
 
2019
  
2018
 
Cash flows from operating activities:
      
Net income
 $
2,108
  $
2,248
 
Adjustments to reconcile net income to net cash provided by operating activities:
      
Increase (decrease) in cash from operating assets and liabilities:
      
Accounts receivable
  
(174
)  
(233
)
Inventories and other assets
  
(231
)  
(200
)
Accounts payable and accrued expenses
  
(238
)  
31
 
Depreciation and amortization
  
1,255
   
1,115
 
Income taxes
  
27
   
118
 
Gains on sales of facilities
  
(17
)  
(414
)
Amortization of debt issuance costs and discounts  
16
   
15
 
Share-based compensation
  
158
   
134
 
Other
  
67
   
51
 
         
Net cash provided by operating activities
  
2,971
   
2,865
 
         
Cash flows from investing activities:
      
Purchase of property and equipment
  
(1,745
)  
(1,574
)
Acquisition of hospitals and health care entities
  
(1,504
)  
(538
)
Disposal of hospitals and health care entities
  
41
   
799
 
Change in investments
  
59
   
23
 
Other
  
36
   
(25
)
         
Net cash used in investing activities
  
(3,113
)  
(1,315
)
         
Cash flows from financing activities:
      
Issuances of long-term debt
  
6,451
   
—
 
Net change in revolving bank credit facilities
  
(3,040
)  
210
 
Repayment of long-term debt
  
(98
)  
(101
)
Distributions to noncontrolling interests
  
(247
)  
(185
)
Payment of debt issuance costs
  
(63
)  
(2
)
Payment of cash dividends
  
(278
)  
(245
)
Repurchases of common stock
  
(520
)  
(893
)
Other
  
(135
)  
(192
)
         
Net cash provided by (used in) financing activities
  
2,070
   
(1,408
)
         
Effect of exchange rate changes on cash and cash equivalents
  
—
   
(6
)
         
Change in cash and cash equivalents
  
1,928
   
136
 
Cash and cash equivalents at beginning of period
  
502
   
732
 
         
Cash and cash equivalents at end of period
 $
2,430
  $
868
 
         
Interest payments
 $
910
  $
873
 
Income tax payments, net
 $
523
  $
411
 
The accompanying notes.

notes are an integral part of the condensed consolidated financial statements.

6
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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

HCA Healthcare, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term “affiliates” includes direct and indirect subsidiaries of HCA Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At June 30, 2018,2019, these affiliates owned and operated 178184 hospitals, 122125 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 2021 states and England. The terms “Company,” “HCA,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA Healthcare, Inc. and its affiliates. The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of HCA and the term “employees” refers to employees of affiliates of HCA.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions toForm
 10-Q
and Article 10 ofRegulation
 S-X.
Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

The majority of our expenses are “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $83$94 million and $82$83 million for the quarters ended June 30, 20182019 and 2017,2018, respectively, and $180 million and $164 million each for the six months ended June 30, 2019 and 2018, and 2017.respectively. Operating results for the quarter and six months ended June 30, 20182019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.2019. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report onForm
 10-K
for the year ended December 31, 2017.

2018.

Revenues

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new standard related to revenue recognition. We adopted the new standard effective January 1, 2018, using the full retrospective method. The adoption of the new standard did not have an impact on our recognition of net revenues for any periods prior to adoption. The most significant impact of adopting the new standard is to the presentation of our consolidated income statements, where we no longer present the “Provision for doubtful accounts” as a separate line item and our “Revenues” are presented net of estimated implicit price concession revenue deductions. We also have eliminated the related presentation of “allowances for doubtful accounts” on our consolidated balance sheets as a result of the adoption of the new standard.

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges.
Our performance obligations for outpatient services are generally satisfied over a period of less than one day.day
. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service
rates. Our revenues for the six months ended June 30, 2019 include $86 million related to the resolution of transaction price differences regarding certain
out-of-network
services performed in prior periods. Management continually reviews the
7
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues (continued)
contractual 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.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record
self-pay
revenues at the estimated amounts we expect to collect. Our revenues from third-party payers and others (including uninsured patients) for the quarters and six months ended June 30, 20182019 and 20172018 are summarized in the following table (dollars in millions):

   Quarter 
   2018   Ratio  2017   Ratio 

Medicare

  $2,425    21.0%  $2,272    21.2% 

Managed Medicare

   1,345    11.7   1,158    10.8 

Medicaid

   357    3.1   376    3.5 

Managed Medicaid

   586    5.1   527    4.9 

Managed care and insurers

   5,993    51.9   5,729    53.4 

International (managed care and insurers)

   295    2.6   269    2.5 

Other

   528    4.6   402    3.7 
  

 

 

   

 

 

  

 

 

   

 

 

 

Revenues

  $11,529    100.0%  $10,733    100.0% 
  

 

 

   

 

 

  

 

 

   

 

 

 

   Six Months 
   2018   Ratio  2017   Ratio 

Medicare

  $4,949    21.6%  $4,633    21.7% 

Managed Medicare

   2,744    12.0   2,341    11.0 

Medicaid

   638    2.8   670    3.1 

Managed Medicaid

   1,147    5.0   1,116    5.2 

Managed care and insurers

   12,055    52.5   11,352    53.2 

International (managed care and insurers)

   600    2.6   538    2.5 

Other

   819    3.5   706    3.3 
  

 

 

   

 

 

  

 

 

   

 

 

 

Revenues

  $22,952    100.0%  $21,356    100.0% 
  

 

 

   

 

 

  

 

 

   

 

 

 

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility recorded estimates will change by a material

                 
 
Quarter
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 $
2,635
   
20.9
% $
2,425
   
21.0
%
Managed Medicare
  
1,595
   
12.7
   
1,345
   
11.7
 
Medicaid
  
416
   
3.3
   
357
   
3.1
 
Managed Medicaid
  
554
   
4.4
   
586
   
5.1
 
Managed care and insurers
  
6,425
   
50.9
   
5,993
   
51.9
 
International (managed care and insurers)
  
284
   
2.3
   
295
   
2.6
 
Other
  
693
   
5.5
   
528
   
4.6
 
                 
Revenues
 $
12,602
   
100.0
% $
11,529
   
100.0
%
                 

                 
 
Six Months
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 $
5,405
   
21.5
% $
4,949
   
21.6
%
Managed Medicare
  
3,184
   
12.7
   
2,744
   
12.0
 
Medicaid
  
763
   
3.0
   
638
   
2.8
 
Managed Medicaid
  
1,167
   
4.6
   
1,147
   
5.0
 
Managed care and insurers
  
12,851
   
51.1
   
12,055
   
52.5
 
International (managed care and insurers)
  
581
   
2.3
   
600
   
2.6
 
Other
  
1,168
   
4.8
   
819
   
3.5
 
                 
Revenues
 $
25,119
   
100.0
% $
22,952
   
100.0
%
                 
8
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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

amount. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the “cost report” filing and settlement process).

The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. Prior to November 2017, patients treated at hospitals fornon-elective care, who have income at or below 200% of the federal poverty level, were eligible for charity care. During November 2017, we expanded our charity policy to include patients who have income above 200%, but at or below 400%, of the federal poverty level and we will limit the patient responsibility amounts for these patients to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable percentage of the federal poverty level. The federal poverty level is established by the federal government and is based on income and family size. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. In implementing the uninsured discount policy, we may first attempt to provide assistance to uninsured patients to 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 uninsured discount is applied.

The collection of outstanding receivables for 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. Implicit price concessions relate primarily to amounts due directly from patients. Estimated implicit price concessions are recorded for all uninsured accounts, regardless of the aging of those accounts. Accounts are written off when all reasonable internal and external collection efforts have been performed.

The estimates for implicit price concessions are based upon management’s assessment of historical writeoffs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical writeoffs and collections at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information in estimating the collectability 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 implicit 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 in estimates have not resulted in material adjustments to the valuations of our accounts receivable orperiod-to-period comparisons of our results of operations. At June 30, 2018 and December 31, 2017, estimated implicit price concessions of $5.736 billion and $5.488 billion, respectively, had been recorded as reductions to our accounts receivable balances to enable us to record our revenues and accounts receivable at the estimated amounts we expect to collect.

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

To quantify the total impact of the trends related to uninsured accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters and six months ended June 30, 20182019 and 20172018 follows (dollars in millions):

   Quarter  Six Months 
   2018  2017  2018  2017 

Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)

  $9,871  $9,177  $19,738  $18,326 

Cost-to-charges ratio (patient care costs as percentage of gross patient charges)

   12.6%   13.0%   12.5%   12.9% 

Total uncompensated care

  $6,486  $5,721  $12,738  $11,048 

Multiply by thecost-to-charges ratio

   12.6%   13.0%   12.5%   12.9% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Estimated cost of total uncompensated care

  $817  $743  $1,592  $1,425 
  

 

 

  

 

 

  

 

 

  

 

 

 

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)
 $
10,953
  $
9,871
  $
21,559
  $
19,738
 
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
12.2
%  
12.6
%  
12.0
%  
12.5
%
Total uncompensated care
 $
7,695
  $
6,486
  $
14,780
  $
12,738
 
Multiply by the
cost-to-charges
ratio
  
12.2
%  
12.6
%  
12.0
%  
12.5
%
                 
Estimated cost of total uncompensated care
 $
938
  $
817
  $
1,774
  $
1,592
 
                 
Total uncompensated care as a percentage of the sum of revenues and total uncompensated care was 36.0%37.9% and 34.8%36.0% for the quarters ended June 30, 20182019 and 2017,2018, respectively, and 35.7%37.0% and 34.1%35.7% for the six months ended June 30, 20182019 and 2017,2018, respectively. The total uncompensated care amounts include charity care of $1.977$3.311 billion and $1.173$1.977 billion, and the related estimated costs of charity care were $249$403 million and $152$249 million, for the quarters ended June 30, 20182019 and 2017,2018, respectively, and charity care of $3.856$6.216 billion and $2.259$3.856 billion, and the related estimated costs of charity care were $482$746 million and $291$482 million, for the six months ended June 30, 2019 and 2018, and 2017, respectively.

Recent Pronouncements

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 related developments) 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.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the six months ended June 30, 2019, we paid $1.397 billion to acquire a
seven
-hospital health system in North Carolina and $107 million to acquire other nonhospital health care entities. During the six months ended June 30, 2018, we paid $360 million to acquire a hospital facility and $178 million to acquire other nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. The purchase price paid in excess of the fair value of identifiable net assets of these acquired entities aggregated $201 million for the six months ended June 30, 2019. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.
During the six months ended June 30, 2017,2019, we paid $189received proceeds of $25 million and recognized a net pretax loss of $1 million related to acquire threea sale of a hospital facilitiesfacility in one of our Louisiana markets. During the six months ended June 30, 2019, we also received proceeds of $16 million and $106recognized a net pretax gain of $18 million related to acquiresales of real estate and other nonhospital health care entities.

investments. During the six months ended June 30, 2018, we received proceeds of $758 million and recognized a net pretax gain of $372 million related to the sale of the two hospital facilities in our Oklahoma market. During the

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — ACQUISITIONS AND DISPOSITIONS (continued)

six months ended June 30, 2018, we also received 

proceeds of $41 million and recognized a net pretax gain of $42 million related to sales of real estate and other investments. During the six months ended June 30, 2017, we received proceeds
9
Table of $14 million and recognized a net pretax gain of $3 million related to sales of real estate and other investments.

Contents

HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 — INCOME TAXES

Our provision for income taxes for the quarters ended June 30, 2019 and 2018 and 2017, was $272$271 million and $365$272 million, respectively, and the effective tax rates were 24.9%25.7% and 35.8%24.9%, respectively. Our provision for income taxes for the six months ended June 30, 2019 and 2018 and 2017, was $529$550 million and $654$529 million, respectively, and the effective tax rates were 21.2%23.2% and 33.2%21.2%, respectively. The reductions in the effective tax rates were primarily related to the estimated impact of tax rate changes under the 2017 Tax Cuts and Jobs Act (the “Tax Act”). Our provision for income taxes for the quarter and six months ended June 30, 2018 included tax benefits, of $122 million and $245 million, respectively, related to the reduction in our effective tax rate related to the impact of the Tax Act. Our provision for income taxes also included tax benefits related to the settlement of employee equity awards of $4$
4
 million and $9 million for each of the quarters ended June 30, 2019 and 2018, and 2017, respectively,$
53
 million and $96 million and $76 million for the six months ended June 30, 2019 and 2018, and 2017, respectively. The Tax Act was enacted on December 22, 2017, and it significantly revised U.S. corporate income taxes, including lowering the federal statutory corporate tax rate from 35% to 21% beginning in 2018. 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 June 30, 2018.

As we complete our analysis of the Tax Act, 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 June 30, 2018. 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.

Our liability for unrecognized tax benefits was $461$510 million, including accrued interest of $54$60 million, as of June 30, 20182019 ($439435 million and $44$48 million, respectively, as of December 31, 2017)2018). Unrecognized tax benefits of $159$153 million ($145137 million as of December 31, 2017)2018) would affect the effective rate, if recognized.

The Internal Revenue Service began an examination of the Company’s 2016 and 2017 federal income tax returns during 2019. We are also subject to examination by federal, state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.

NOTE 4 — EARNINGS PER SHARE

We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding, plus the dilutive effect of outstanding equity awards and potential shares, computed using the treasury stock method.

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 — EARNINGS PER SHARE (continued)

The following table sets forth the computation of basic and diluted earnings per share for the quarters and six months ended June 30, 20182019 and 20172018 (dollars and shares in millions, except per share amounts):

   Quarter   Six Months 
   2018   2017   2018   2017 

Net income attributable to HCA Healthcare, Inc.

  $820   $657   $1,964   $1,316 

Weighted average common shares outstanding

   348.615    365.847    349.726    368.056 

Effect of dilutive incremental shares

   6.424    9.491    7.662    9.591 
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used for diluted earnings per share

   355.039    375.338    357.388    377.647 
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic earnings

  $2.35   $1.79   $5.62   $3.58 

Diluted earnings

  $2.31   $1.75   $5.50   $3.48 

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Net income attributable to HCA Healthcare, Inc.
 $
783
  $
820
  $
1,822
  $
1,964
 
                 
Weighted average common shares outstanding
  
342.170
   
348.615
   
342.513
   
349.726
 
Effect of dilutive incremental shares
  
6.203
   
6.424
   
6.821
   
7.662
 
                 
Shares used for diluted earnings per share
  
348.373
   
355.039
   
349.334
   
357.388
 
                 
Earnings per share:
            
Basic earnings
 $
2.29
  $
2.35
  $
5.32
  $
5.62
 
Diluted earnings
 $
2.25
  $
2.31
  $
5.22
  $
5.50
 
10
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at June 30, 20182019 and December 31, 20172018 follows (dollars in millions):

   June 30, 2018 
   Amortized
Cost		   Unrealized
Amounts		   Fair
Value		 
     Gains   Losses   

Debt securities

  $337   $5   $(1)   $341 

Money market funds and other

   118    —    —    118 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $455   $5   $(1)    459 
  

 

 

   

 

 

   

 

 

   

Amounts classified as current assets

         (45) 
        

 

 

 

Investment carrying value

        $414 
        

 

 

 

   December 31, 2017 
   Amortized
Cost		   Unrealized
Amounts		   Fair
Value		 
     Gains   Losses   

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 
        

 

 

 

                 
 
June 30, 2019
 
 
Amortized
Cost
  
Unrealized
Amounts
  
Fair
Value
  
 
Gains
  
Losses
  
Debt securities
 $
334
  $
17
  $
—
  $
351
 
Money market funds and other
  
104
   
—
   
—
   
104
 
                 
 $
438
  $
17
  $
—
   
455
 
                 
Amounts classified as current assets
           
(113
)
                 
Investment carrying value
          $
342
 
                 
                 
 
December 31, 2018
 
 
Amortized
Cost
  
Unrealized
Amounts
  
Fair
Value
  
 
Gains
  
Losses
  
Debt securities
 $
338
  $
5
  $
(2
) $
341
 
Money market funds and other
  
68
   
—
   
—
   
68
 
                 
 $
406
  $
5
  $
(2
)  
409
 
                 
Amounts classified as current assets
           
(47
)
                 
Investment carrying value
          $
362
 
                 
At June 30, 20182019 and December 31, 2017,2018, the investments of our insurance subsidiaries were classified as
“available-for-sale.”
Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income (loss).

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

Scheduled maturities of investments in debt securities at June 30, 20182019 were as follows (dollars in millions):

   Amortized
Cost		   Fair
Value		 

Due in one year or less

  $24   $25 

Due after one year through five years

   50    50 

Due after five years through ten years

   218    221 

Due after ten years

   45    45 
  

 

 

   

 

 

 
  $337   $341 
  

 

 

   

 

 

 

         
 
Amortized
Cost
  
Fair
Value
 
Due in one year or less
 $
3
  $
3
 
Due after one year through five years
  
74
   
77
 
Due after five years through ten years
  
192
   
203
 
Due after ten years
  
65
   
68
 
         
 $
334
  $
351
 
         
The average expected maturity of the investments in debt securities at June 30, 20182019 was 6.55.8 years, compared to the average scheduled maturity of 8.410.1 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.

11
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 — FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between two parties based on common notional principal amounts and maturity dates.
Pay-fixed
interest rate swaps effectively convert variable rate obligations to fixed interest rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at June 30, 20182019 (dollars in millions):

   Notional
Amount		   Maturity Date   Fair
Value		 

Pay-fixed interest rate swaps

  $2,000    December 2021   $83 

Pay-fixed interest rate swaps

   500    December 2022    15 

             
 
Notional
Amount
  
Maturity Date
  
Fair
Value
 
Pay-fixed
interest rate swaps
 $
2,000
   
December 2021
  $
7
 
Pay-fixed
interest rate swaps
  
500
   
December 2022
   
(7
)
During the next 12 months, we estimate $20$7 million will be reclassified from other comprehensive income (“OCI”) and will reduce interest expense.

Derivatives — Results of Operations

The following table presents the effect of our interest rate swaps on our results of operations for the six months ended June 30, 20182019 (dollars in millions):

Derivatives in Cash Flow Hedging Relationships

  Amount of Gain
Recognized in OCI on
Derivatives, Net of Tax		   Location of Gain
Reclassified from
Accumulated OCI
into Operations		   Amount of Gain
Reclassified from
Accumulated OCI
into Operations		 

Interest rate swaps

  $39    Interest expense   $2 

             
Derivatives in Cash Flow Hedging Relationships
 
Amount of Loss
Recognized in OCI on
Derivatives, Net of Tax
  
Location of Gain
Reclassified from
Accumulated OCI
into Operations
  
Amount of Gain
Reclassified from
Accumulated OCI
into Operations
 
Interest rate swaps
 $
40
   
Interest expense
  $
11
 

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 820,
Fair Value Measurements and Disclosures
(“ASC 820”), emphasizes fair value is a market-based measurement, and fair value measurements should be determined based on the assumptions market participants would use in pricing assets or liabilities. ASC 820 utilizes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable
12
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment.

Cash Traded Investments

Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.

Derivative Financial Instruments

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of these instruments.

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 June 30, 20182019 and December 31, 2017,2018, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

The following tables summarize our assets measured at fair value on a recurring basis as of June 30, 20182019 and December 31, 2017,2018, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

   June 30, 2018 
      Fair Value Measurements Using 
   Fair Value  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		  Significant Other
Observable Inputs
(Level 2)		   Significant
Unobservable Inputs
(Level 3)		 

Assets:

      

Investments of insurance subsidiaries:

      

Debt securities

  $341  $—  $341   $— 

Money market funds and other

   118   118   —    — 
  

 

 

  

 

 

  

 

 

   

 

 

 

Investments of insurance subsidiaries

   459   118   341    — 

Less amounts classified as current assets

   (45)   (45)   —    — 
  

 

 

  

 

 

  

 

 

   

 

 

 
  $414   73  $341   $— 
  

 

 

  

 

 

  

 

 

   

 

 

 

Interest rate swaps (Other)

  $98  $—  $98   $— 
   December 31, 2017 
      Fair Value Measurements Using 
   Fair Value  Quoted Prices in
Active Markets for
Identical Assets
(Level 1)		  Significant Other
Observable Inputs
(Level 2)		   Significant
Unobservable Inputs
(Level 3)		 

Assets:

      

Investments of insurance subsidiaries:

      

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   $— 

                 
 
June 30, 2019
 
   
Fair Value Measurements Using
 
 
Fair Value
  
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable Inputs
(Level 3)
 
Investments of insurance subsidiaries:
            
Debt securities
 $
351
  $
—
  $
351
  $
—
 
Money market funds and other
  
104
   
104
   
—
   
—
 
                 
Investments of insurance subsidiaries
  
455
   
104
   
351
   
—
 
Less amounts classified as current assets
  
(113
)  
(103
)  
(10
)  
—
 
                 
 $
342
   
1
  $
341
  $
—
 
                 
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
                 
 
December 31, 2018
 
   
Fair Value Measurements Using
 
 
Fair Value
  
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable Inputs
(Level 3)
 
Investments of insurance subsidiaries:
            
Debt securities
 $
341
  $
—
  $
341
  $
—
 
Money market funds and other
  
68
   
68
   
—
   
—
 
                 
Investments of insurance subsidiaries
  
409
   
68
   
341
   
—
 
Less amounts classified as current assets
  
(47
)  
(47
)  
—
   
—
 
                 
 $
362
  $
21
  $
341
  $
—
 
                 
Interest rate swaps (Other)
 $
63
  $
—
  $
63
  $
—
 
The estimated fair value of our long-term debt was $33.649$38.773 billion and $34.689$32.887 billion at June 30, 20182019 and December 31, 2017,2018, respectively, compared to carrying amounts, excluding net debt issuance costs
 and discounts
, aggregating $33.343$36.445 billion and $33.222$32.978 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — LONG-TERM DEBT

A summary of long-term debt at June 30, 20182019 and December 31, 2017,2018, including related interest rates at June 30, 2018,2019, follows (dollars in millions):

   June 30,
2018		  December 31,
2017		 

Senior secured asset-based revolving credit facility (effective interest rate of 3.6%)

  $3,750  $3,680 

Senior secured revolving credit facility (effective interest rate of 3.6%)

   140   — 

Senior secured term loan facilities (effective interest rate of 3.5%)

   3,849   3,891 

Senior secured notes (effective interest rate of 5.4%)

   15,300   15,300 

Other senior secured debt (effective interest rate of 5.8%)

   552   599 
  

 

 

  

 

 

 

Senior secured debt

   23,591   23,470 

Senior unsecured notes (effective interest rate of 6.4%)

   9,752   9,752 

Net debt issuance costs

   (151)   (164) 
  

 

 

  

 

 

 

Total debt (average life of 6.4 years, rates averaging 5.3%)

   33,192   33,058 

Less amounts due within one year

   1,692   200 
  

 

 

  

 

 

 
  $31,500  $32,858 
  

 

 

  

 

 

 

         
 
June 30,
2019
  
December 31,
2018
 
Senior secured asset-based revolving credit facility
 $
—
  $
3,040
 
Senior secured revolving credit facility
  
—
   
—
 
Senior secured term loan facilities (effective interest rate of 3.6%)
  
3,752
   
3,801
 
Senior secured notes (effective interest rate of 5.4%)
  
18,800
   
13,800
 
Other senior secured debt (effective interest rate of 5.5%)
  
641
   
585
 
         
Senior secured debt
  
23,193
   
21,226
 
Senior unsecured notes (effective interest rate of 6.3%)
  
13,252
   
11,752
 
Debt issuance costs and discounts  
(252
)  
(157
)
         
Total debt (average life of 8.2 years, rates averaging 5.5%)
  
36,193
   
32,821
 
Less amounts due within one year
  
2,073
   
788
 
         
 
$
 
34,120
  $
32,033
 
         
During January 2019, we issued $1.500 billion aggregate principal amount of senior unsecured notes comprised of $1.000 billion aggregate principal amount of 5.875% notes due 2029 and $500 million aggregate principal amount of 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.
During June 2019, we issued $5.000 billion aggregate principal amount of senior secured notes comprised of $2.000 billion aggregate principal amount of 4 1/8% notes due 2029, $1.000 billion aggregate principal amount of 5 1/8% notes due 2039 and $2.000 
billion aggregate principal amount of
 5 1/4
% notes due 2049.
14
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 — LONG-TERM DEBT (continued)
During June 2019, we used the proceeds to temporarily reduce the balance under the asset-based revolving credit facility. During July 2019, we redeemed all $600 million outstanding aggregate principal amount of 4.25% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.50% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. Pretax losses on retirement of debt totaling $211 million for these redemptions will be recognized during the quarter ending September 30, 2019.
NOTE 9 — LEASES
We adopted ASU No.
 2016-02,
Leases (Topic 842)
, which requires leases with durations greater than 12 months to be recognized on the balance sheet, effective January 1, 2019, using the modified retrospective approach. Prior period financial statement amounts and disclosures have not been adjusted to reflect the provisions of the new standard. We elected the package of transition provisions available which allowed us to carryforward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.
We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related
right-of-use
assets and
right-of-use
obligations at the present value of lease payments over the term. Many of our leases include rental escalation clauses and renewal options that are factored into our determination of lease payments when appropriate. We do not separate lease and nonlease components of contracts.
Generally, we use our estimated incremental borrowing rate to discount the lease payments based on information available at lease commencement, as most of our leases do not provide a readily determinable implicit interest rate.
The following table presents our lease-related assets and liabilities at June 30, 2019 (dollars in millions):
         
 
Balance Sheet Classification
  
June 30, 2019
 
Assets:
      
Operating leases
  
Right-of-use
 operating lease assets
  $
1,787
 
Finance leases
  
Property and equipment
   
598
 
         
Total lease assets
    $
2,385
 
         
Liabilities:
      
Current:
      
Operating leases
  
Other accrued expenses
  $
339
 
Finance leases
  
Long-term debt due within one year
   
90
 
Noncurrent:
      
Operating leases
  
Right-of-use
 operating lease obligations
   
1,460
 
Finance leases
  
Long-term debt
   
447
 
         
Total lease liabilities
    $
2,336
 
         
Weighted-average remaining term:
      
Operating leases
     
11.5 years
 
Finance leases
     
9.9 years
 
Weighted-average discount rate:
      
Operating leases(1)
     
5.5
%
Finance leases
     
6.2
%
 
 
(1)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
15
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LEASES (continued)
The following table presents certain information related to lease expense for finance and operating leases for the quarter and six months ended June 30, 2019 (dollars in millions):
         
 
2019
 
 
Quarter
  
Six
Months
 
Finance lease expense:
      
Amortization of leased assets
 $
20
  $
37
 
Interest on lease liabilities
  
9
   
15
 
Operating leases(2)
  
99
   
193
 
Short-term lease expense(2)
  
75
   
153
 
Variable lease expense(2)
  
35
   
74
 
         
 $
238
  $
472
 
         
(2)Expenses are included in “other operating expenses” in our condensed consolidated income statements.
Other Information
The following table presents supplemental cash flow information for the six months ended June 30, 2019 (dollars in millions):
2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases
$ 
267
Operating cash flows for finance leases
15
Financing cash flows for finance leases
37
Maturities of Lease Liabilities
The following table reconciles the undiscounted cash flows to the finance lease liabilities and operating lease liabilities recorded on the balance sheet at June 30, 2019 (dollars in millions):
         
 
Operating
Leases
  
Finance
Leases
 
Year 1
 $400  $115 
Year 2
  375   102 
Year 3
  282   99 
Year 4
  223   62 
Year 5
  174   60 
Thereafter  1,210   293 
         
Total minimum lease payments  2,664   731 
Less: amount of lease payments representing interest  (865)  (194)
         
Present value of future minimum lease payments  1,799   537 
Less: current obligations under leases  (339)  (90)
         
Long-term lease obligations $1,460  $447 
         
16
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 — CONTINGENCIES

We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians’ staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered 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.

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 bring
qui 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.

Texas operates a state Medicaid program pursuant to a waiver from CMS under Section 1115 of the Social Security Act (“Program”). The Program includes uncompensated-care pools; payments from these pools are intended to defray the uncompensated costs of services provided by our and other hospitals to Medicaid eligible or uninsured individuals. Separately, we and other hospitals provide charity care services in several communities in the state. We believe that our participation is and has been consistent with the requirements of the Program. In 2018, the Civil Division of the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas requested information about whether the Program, as operated in Harris County, complied with the laws and regulations applicable to provider related donations, and the Company cooperated with that request. On May 21, 2019, a
qui tam
lawsuit asserting violations of the FCA and the Texas Medicaid Fraud Prevention Act related to the Program, as operated in Harris County, was unsealed by the U.S. District Court for the Southern District of Texas. Both the federal and state governments declined to intervene in the
qui tam
lawsuit, and the Company has not yet been served with the complaint. We cannot predict what effect, if any, the
qui tam
lawsuit could have on the Company.
17
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HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1011 — CAPITAL STRUCTURE

The changes in stockholders’ deficit, including changes in stockholders’ deficit attributableSHARE REPURCHASES TRANSACTIONS AND OTHER COMPREHENSIVE LOSS

During January 2019, our Board of Directors authorized a share repurchase program for up to HCA Healthcare, Inc. and changes in equity attributable to noncontrolling interests, are as follows (dollars and shares in millions):

   Equity (Deficit) Attributable to HCA Healthcare, Inc.    
   Common Stock  Accumulated
Other
Comprehensive
Loss		  Retained
Deficit		  Equity
Attributable to
Noncontrolling
Interests		  Total 
   Shares  Par Value     

Balances at December 31, 2017

   350.092  $4  $(278)  $(6,532)  $1,811  $(4,995) 

Comprehensive income

   —   —   17   1,964   284   2,265 

Repurchase of common stock

   (9.040)   (1)   —   (892)   —   (893) 

Dividends and distributions

   —   —   —   (250)   (185)   (435) 

Share-based benefit plans

   5.708   —   —   (18)   —   (18) 

Dispositions of entities with noncontrolling interests

   —   —   —   —   (53)   (53) 

Other

   —   —   —   (3)   7   4 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances at June 30, 2018

   346.760  $3  $(261)  $(5,731)  $1,864  $(4,125) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

$2 billion of our outstanding common stock. During the six months ended June 30, 2018,2019, we repurchased 9.0404.034 million shares of our common stock at an average price of $98.73$128.88 per share through market purchases pursuant to the $2.0 billion share repurchase program authorized during October 2017.2017 (which was completed during 2019) and the $2.0 billion share repurchase program authorized during January 2019. At June 30, 2018,2019, we had $910 million$1.753 billion of repurchase authorization available under the October 2017January 2019 authorization.

The components of accumulated other comprehensive loss are as follows (dollars in millions):

   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 onavailable-for-sale securities, net of $1 income tax benefit

   (5)   —   —   —   (5) 

Foreign currency translation adjustments

   —   (22)   —   —   (22) 

Change in fair value of derivative instruments, net of $11 of income taxes

   —   —   —   39   39 

Expense (income) reclassified into operations from other comprehensive income, net of $3 income tax benefit and $- income taxes, respectively

   —   —   7   (2)   5 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances at June 30, 2018

  $2  $(171)  $(161)  $69  $(261) 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                     
 
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, 2018
 $
3
  $
(283
) $
(148
) $
47
  $
(381
)
Unrealized gains on
available-for-sale
securities, net of $3 of income taxes
  
11
   
—
   
—
   
—
   
11
 
Foreign currency translation adjustments, net of $1 income tax benefit
  
—
   
(17
)  
—
   
—
   
(17
)
Change in fair value of derivative instruments, net of $12 income tax benefits
  
—
   
—
   
—
   
(40
)  
(40
)
Expense (income) reclassified into operations from other comprehensive income, net of $2 income tax benefits and $2 of income taxes, respectively
  
—
   
—
   
5
   
(9
)  
(4
)
                     
Balances at June 30, 2019
 $
14
  $
(300
) $
(143
) $
(2
) $
(431
)
                     
NOTE 1112 — SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one line of business, which is operating hospitals and related health care entities. We operate in
two
geographically organized groups: the National and American Groups. The National Group includes 8895 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, North Carolina, South Carolina, Utah and Virginia, and the American Group includes 8483 hospitals located in

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas. We also operate

six
hospitals in England, and these facilities are included in the Corporate and other group.

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, gains on sales of facilities, income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment 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. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA and
18
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)
depreciation and amortization for the quarters and six months ended June 30, 20182019 and 20172018 are summarized in the following table (dollars in millions):

   Quarter   Six Months 
   2018   2017   2018   2017 

Revenues:

        

National Group

  $5,609   $5,160   $11,177   $10,308 

American Group

   5,390    5,093    10,717    10,088 

Corporate and other

   530    480    1,058    960 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $11,529   $10,733   $22,952   $21,356 
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in earnings of affiliates:

        

National Group

  $(2)   $(4)   $(4)   $(9) 

American Group

   (10)    (10)    (19)    (18) 

Corporate and other

   5    1    7    4 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $(7)   $(13)   $(16)   $(23) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment EBITDA:

        

National Group

  $1,284   $1,162   $2,466   $2,293 

American Group

   1,147    1,040    2,178    2,047 

Corporate and other

   (204)    (112)    (299)    (245) 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $2,227   $2,090   $4,345   $4,095 
  

 

 

   

 

 

   

 

 

   

 

 

 

Depreciation and amortization:

        

National Group

  $232   $217   $457   $431 

American Group

   255    238    507    476 

Corporate and other

   75    66    151    135 
  

 

 

   

 

 

   

 

 

   

 

 

 
  $562   $521   $1,115   $1,042 
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted segment EBITDA

  $2,227   $2,090   $4,345   $4,095 

Depreciation and amortization

   562    521    1,115    1,042 

Interest expense

   436    411    867    830 

Gains on sales of facilities

   (9)    (2)    (414)    (3) 
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  $1,238   $1,160   $2,777   $2,226 
  

 

 

   

 

 

   

 

 

   

 

 

 

 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Revenues:
            
National Group
 $
6,444
  $
5,609
  $
12,761
  $
11,177
 
American Group
  
5,626
   
5,390
   
11,221
   
10,717
 
Corporate and other
  
532
   
530
   
1,137
   
1,058
 
                 
 $
12,602
  $
11,529
  $
25,119
  $
22,952
 
                 
Equity in earnings of affiliates:
            
National Group
 $
(3
) $
(2
) $
(5
) $
(4
)
American Group
  
(11
)  
(10
)  
(22
)  
(19
)
Corporate and other
  
6
   
5
   
8
   
7
 
                 
 $
(8
) $
(7
) $
(19
) $
(16
)
                 
Adjusted segment EBITDA:
            
National Group
 $
1,364
  $
1,284
  $
2,818
  $
2,466
 
American Group
  
1,117
   
1,147
   
2,258
   
2,178
 
Corporate and other
  
(188
)  
(204
)  
(242
)  
(299
)
                 
 $
2,293
  $
2,227
  $
4,834
  $
4,345
 
                 
Depreciation and amortization:
            
National Group
 $
283
  $
232
  $
548
  $
457
 
American Group
  
270
   
255
   
551
   
507
 
Corporate and other
  
83
   
75
   
156
   
151
 
                 
 $
636
  $
562
  $
1,255
  $
1,115
 
                 
Adjusted segment EBITDA
 $
2,293
  $
2,227
  $
4,834
  $
4,345
 
Depreciation and amortization
  
636
   
562
   
1,255
   
1,115
 
Interest expense
  
477
   
436
   
938
   
867
 
Gains on sales of facilities
  
(18
)  
(9
)  
(17
)  
(414
)
                 
Income before income taxes
 $
1,198
  $
1,238
  $
2,658
  $
2,777
 
                 

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1213 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

During December 2012,

HCA Healthcare, Inc. issuedhas $1.000 billion aggregate principal amount of 6.250% senior unsecured notes due 2021.2021 outstanding. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.

HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the obligor under a significant portion of our other indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes (other than the senior unsecured notes issued by HCA Healthcare, Inc.). The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed by HCA Healthcare, Inc. The senior secured credit facilities and senior secured notes are 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 senior secured asset-based revolving credit facility).

19
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
Our summarized condensed consolidating comprehensive income statements for the quarters and six months ended June 30, 20182019 and 2017,2018, condensed consolidating balance sheets at June 30, 20182019 and December 31, 20172018 and condensed consolidating statements of cash flows for the six months ended June 30, 20182019 and 2017,2018, segregating HCA Healthcare, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary
non-guarantors
and eliminations, follow:

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTER ENDED JUNE 30, 2019
(Dollars in millions)
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
7,129
  $
5,473
  $
—
  $
12,602
 
                         
Salaries and benefits
  
—
   
—
   
3,199
   
2,638
   
—
   
5,837
 
Supplies
  
—
   
—
   
1,189
   
929
   
—
   
2,118
 
Other operating expenses
  
1
   
—
   
1,157
   
1,204
   
—
   
2,362
 
Equity in earnings of affiliates
  
(822
)  
—
   
(1
)  
(7
)  
822
   
(8
)
Depreciation and amortization
  
—
   
—
   
354
   
282
   
—
   
636
 
Interest expense (income)
  
16
   
1,010
   
(511
)  
(38
)  
—
   
477
 
Gains on sales of facilities
  
—
   
—
   
(8
)  (10)  
—
   
(18
)
Management fees
  
—
   
—
   
(205
)  
205
   
—
   
—
 
                         
  
(805
)  
1,010
   
5,174
   
5,203
   
822
   
11,404
 
                         
Income (loss) before income taxes
  
805
   
(1,010
)  
1,955
   
270
   
(822
)  
1,198
 
Provision (benefit) for income taxes
  
22
   
(235
)  
450
   
34
   
—
   
271
 
                         
Net income (loss)
  
783
   
(775
)  
1,505
   
236
   
(822
)  
927
 
Net income attributable to noncontrolling interests
  
—
   
—
   
21
   
123
   
—
   
144
 
                         
Net income (loss) attributable to HCA Healthcare, Inc.
 $
783
  $
(775
) $
1,484
  $
113
  $
(822
) $
783
 
                         
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
726
  $
(806
) $
1,487
  $
84
  $
(765
) $
726
 
                         
20
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE QUARTER ENDED JUNE 30, 2018

(Dollars in millions)

  HCA
Healthcare, Inc.
Issuer		  HCA Inc.
Issuer		  Subsidiary
Guarantors		  Subsidiary
Non-
Guarantors		  Eliminations  Condensed
Consolidated		 

Revenues

 $—  $—  $6,774  $4,755  $—  $11,529 

Salaries and benefits

  —   —   3,025   2,249   —   5,274 

Supplies

  —   —   1,127   790   —   1,917 

Other operating expenses

  4   —   1,122   992   —   2,118 

Equity in earnings of affiliates

  (852)   —   (1)   (6)   852   (7) 

Depreciation and amortization

  —   —   329   233   —   562 

Interest expense

  16   867   (389)   (58)   —   436 

Losses (gains) on sales of facilities

  —   —   23   (32)   —   (9) 

Management fees

  —   —   (157)   157   —   — 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  (832)   867   5,079   4,325   852   10,291 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes

  832   (867)   1,695   430   (852)   1,238 

Provision (benefit) for income taxes

  12   (201)   389   72   —   272 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

  820   (666)   1,306   358   (852)   966 

Net income attributable to noncontrolling interests

  —   —   22   124   —   146 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to HCA Healthcare, Inc.

 $820  $(666)  $1,284  $234  $(852)  $820 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to HCA Healthcare, Inc.

 $756  $(656)  $1,287  $157  $(788)  $756 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                         
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
6,774
  $
4,755
  $
—
  $
11,529
 
                         
Salaries and benefits
  
—
   
—
   
3,025
   
2,249
   
—
   
5,274
 
Supplies
  
—
   
—
   
1,127
   
790
   
—
   
1,917
 
Other operating expenses
  
4
   
—
   
1,122
   
992
   
—
   
2,118
 
Equity in earnings of affiliates
  
(852
)  
—
   
(1
)  
(6
)  
852
   
(7
)
Depreciation and amortization
  
—
   
—
   
329
   
233
   
—
   
562
 
Interest expense (income)  
16
   
867
   
(389
)  
(58
)  
—
   
436
 
Losses (gains) on sales of facilities
  
—
   
—
   
23
   
(32
)  
—
   
(9
)
Management fees
  
—
   
—
   
(157
)  
157
   
—
   
—
 
                         
  
(832
)  
867
   
5,079
   
4,325
   
852
   
10,291
 
                         
                         
Income (loss) before income taxes
  
832
   
(867
)  
1,695
   
430
   
(852
)  
1,238
 
Provision (benefit) for income taxes
  
12
   
(201
)  
389
   
72
   
—
   
272
 
                         
Net income (loss)
  
820
   
(666
)  
1,306
   
358
   
(852
)  
966
 
Net income attributable to noncontrolling interests
  
—
   
—
   
22
   
124
   
—
   
146
 
                         
Net income (loss) attributable to HCA Healthcare, Inc.
 $
820
  $
(666
) $
1,284
  $
234
  $
(852
) $
820
 
                         
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
756
  $
(656
) $
1,287
  $
157
  $
(788
) $
756
 
                         

21
Table of Contents
HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1213 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE QUARTERSIX MONTHS ENDED JUNE 30, 2017

2019

(Dollars in millions)

   HCA
Healthcare, Inc.
Issuer		  HCA Inc.
Issuer		  Subsidiary
Guarantors
(as  adjusted)		  Subsidiary
Non-
Guarantors
(as adjusted)		  Eliminations  Condensed
Consolidated		 

Revenues

  $—  $—  $6,369  $4,364  $—  $10,733 

Salaries and benefits

   —   —   2,870   2,026   —   4,896 

Supplies

   —   —   1,055   740   —   1,795 

Other operating expenses

   4   —   1,064   897   —   1,965 

Equity in earnings of affiliates

   (658)   —   (1)   (12)   658   (13) 

Depreciation and amortization

   —   —   302   219   —   521 

Interest expense

   16   755   (315)   (45)   —   411 

Losses (gains) on sales of facilities

   —   —   (4)   2   —   (2) 

Management fees

   —   —   (160)   160   —   — 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   (638)   755   4,811   3,987   658   9,573 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes

   638   (755)   1,558   377   (658)   1,160 

Provision (benefit) for income taxes

   (19)   (279)   565   98   —   365 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

   657   (476)   993   279   (658)   795 

Net income attributable to noncontrolling interests

   —   —   27   111   —   138 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to HCA Healthcare, Inc.

  $657  $(476)  $966  $168  $(658)  $657 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to HCA Healthcare, Inc.

  $684  $(480)  $969  $196  $(685)  $684 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                         
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
14,353
  $
10,766
  $
—
  $
25,119
 
                         
Salaries and benefits
  
—
   
—
   
6,336
   
5,148
   
—
   
11,484
 
Supplies
  
—
   
—
   
2,366
   
1,793
   
—
   
4,159
 
Other operating expenses
  
3
   
—
   
2,303
   
2,355
   
—
   
4,661
 
Equity in earnings of affiliates
  
(1,848
)  
—
   
(3
)  
(16
)  
1,848
   
(19
)
Depreciation and amortization
  
—
   
—
   
709
   
546
   
—
   
1,255
 
Interest expense (income)
  
32
   
2,005
   
(984
)  
(115
)  
—
   
938
 
Gains on sales of facilities
  
—
   
—
   
(7
)  
(10
)  
—
   
(17
)
Management fees
  
—
   
—
   
(376
)  
376
   
—
   
—
 
                         
  
(1,813
)  
2,005
   
10,344
   
10,077
   
1,848
   
22,461
 
                         
                         
Income (loss) before income taxes
  
1,813
   
(2,005
)  
4,009
   
689
   
(1,848
)  
2,658
 
Provision (benefit) for income taxes
  
(9
)  
(466
)  
922
   
103
   
—
   
550
 
                         
Net income (loss)
  
1,822
   
(1,539
)  
3,087
   
586
   
(1,848
)  
2,108
 
Net income attributable to noncontrolling interests
  
—
   
—
   
41
   
245
   
—
   
286
 
                         
Net income (loss) attributable to HCA    Healthcare, Inc.
 $
1,822
  $
(1,539
) $
3,046
  $
341
  $
(1,848
) $
1,822
 
                         
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
1,772
  $
(1,588
) $
3,051
  $
335
  $
(1,798
) $
1,772
 
                         

22
Table of Contents
HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1213 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(Dollars in millions)

   HCA
Healthcare, Inc.
Issuer		  HCA Inc.
Issuer		  Subsidiary
Guarantors		  Subsidiary
Non-
Guarantors		  Eliminations  Condensed
Consolidated		 

Revenues

  $—  $—  $13,550  $9,402  $—  $22,952 

Salaries and benefits

   —   —   6,094   4,469   —   10,563 

Supplies

   —   —   2,268   1,564   —   3,832 

Other operating expenses

   5   —   2,250   1,973   —   4,228 

Equity in earnings of affiliates

   (1,942)   —   (3)   (13)   1,942   (16) 

Depreciation and amortization

   —   —   652   463   —   1,115 

Interest expense

   32   1,704   (756)   (113)   —   867 

Gains on sales of facilities

   —   —   (372)   (42)   —   (414) 

Management fees

   —   —   (315)   315   —   — 
  

 

 

  

 

 

  

 

 

  

 

 

 ��

 

 

  

 

 

 
   (1,905)   1,704   9,818   8,616   1,942   20,175 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes

   1,905   (1,704)   3,732   786   (1,942)   2,777 

Provision (benefit) for income taxes

   (59)   (396)   856   128   —   529 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

   1,964   (1,308)   2,876   658   (1,942)   2,248 

Net income attributable to noncontrolling interests

   —   —   50   234   —   284 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to HCA Healthcare, Inc.

  $1,964  $(1,308)  $2,826  $424  $(1,942)  $1,964 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to HCA Healthcare, Inc.

  $1,981  $(1,271)  $2,833  $397  $(1,959)  $1,981 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
13,550
  $
9,402
  $
—
  $
22,952
 
                         
Salaries and benefits
  
—
   
—
   
6,094
   
4,469
   
—
   
10,563
 
Supplies
  
—
   
—
   
2,268
   
1,564
   
—
   
3,832
 
Other operating expenses
  
5
   
—
   
2,250
   
1,973
   
—
   
4,228
 
Equity in earnings of affiliates
  
(1,942
)  
—
   
(3
)  
(13
)  
1,942
   
(16
)
Depreciation and amortization
  
—
   
—
   
652
   
463
   
—
   
1,115
 
Interest expense (income)  
32
   
1,704
   
(756
)  
(113
)  
—
   
867
 
Gains on sales of facilities
  
—
   
—
   
(372
)  
(42
)  
—
   
(414
)
Management fees
  
—
   
—
   
(315
)  
315
   
—
   
—
 
                         
  
(1,905
)  
1,704
   
9,818
   
8,616
   
1,942
   
20,175
 
                         
                         
Income (loss) before income taxes
  
1,905
   
(1,704
)  
3,732
   
786
   
(1,942
)  
2,777
 
Provision (benefit) for income taxes
  
(59
)  
(396
)  
856
   
128
   
—
   
529
 
                         
Net income (loss)
  
1,964
   
(1,308
)  
2,876
   
658
   
(1,942
)  
2,248
 
Net income attributable to noncontrolling interests
  
—
   
—
   
50
   
234
   
—
   
284
 
                         
Net income (loss) attributable to HCA Healthcare, Inc.
 $
1,964
  $
(1,308
) $
2,826
  $
424
  $
(1,942
) $
1,964
 
                         
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
1,981
  $
(1,271
) $
2,833
  $
397
  $
(1,959
) $
1,981
 
                         

23
Table of Contents
HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1213 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOMEBALANCE SHEET
JUNE 30, 2019
(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
 $300  $
—
  $
1,700
  $
430
  $
—
  $
2,430
 
Accounts receivable
  —   
—
   
4,004
   
3,215
   
—
   
7,219
 
Inventories
  —   
—
   
1,194
   
632
   
—
   
1,826
 
Other
  —   
—
   
756
   
638
   
—
   
1,394
 
                         
  300    
—
   
7,654
   
4,915
   
—
   
12,869
 
                         
Property and equipment, net
  
—
   
—
   
12,749
   
8,718
   
—
   
21,467
 
Investments of insurance subsidiaries
  
—
   
—
   
—
   
342
   
—
   
342
 
Investments in and advances to affiliates
  
34,964
   
—
   
29
   
218
   
(34,964
)  
247
 
Goodwill and other intangible assets
  
—
   
—
   
5,725
   
2,415
   
—
   
8,140
 
Right-of-use
operating lease assets
  
—
   
—
   
436
   
1,351
   
—
   
1,787
 
Other
  
462
   
—
   
21
   
114
   
—
   
597
 
                         
 $
35,726
  $
—
  $
26,614
  $
18,073
  $
(34,964
) $
45,449
 
                         
LIABILITIES AND
STOCKHOLDERS’ (DEFICIT)
EQUITY
                  
Current liabilities:
                  
Accounts payable
 $
—
  $
—
  $
1,754
  $
855
  $
—
  $
2,609
 
Accrued salaries
  
—
   
—
   
908
   
589
   
—
   
1,497
 
Other accrued expenses
  
67
   
441
   
896
   
1,378
   
—
   
2,782
 
Long-term debt due within one year
  
—
   
1,976
   
53
   
44
   
—
   
2,073
 
                         
  
67
   
2,417
   
3,611
   
2,866
   
—
   
8,961
 
                         
Long-term debt, net
  
997
   
32,579
   
224
   
320
   
—
   
34,120
 
Intercompany balances
  
37,985
   
(8,618
)  
(29,356
)  
(11
)  
—
   
—
 
Professional liability risks
  
—
   
—
   
—
   
1,354
   
—
   
1,354
 
Right-of-use
operating lease obligations
  
—
   
—
   
331
   
1,129
   
—
   
1,460
 
Income taxes and other liabilities
  
579
   
—
   
232
   
513
   
—
   
1,324
 
                         
  
39,628
   
26,378
   
(24,958
)  
6,171
   
—
   
47,219
 
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.
  
(3,902
)  
(26,378
)  
51,488
   
9,854
   
(34,964
)  
(3,902
)
Noncontrolling interests
  
—
   
—
   
84
   
2,048
   
—
   
2,132
 
                         
  
(3,902
)  
(26,378
)  
51,572
   
11,902
   
(34,964
)  
(1,770
)
                         
 $
35,726
  $
—
  $
26,614
  $
18,073
  $
(34,964
) $
45,449
 
                         
24
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2018
(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
 $
—
  $
—
  $
174
  $
328
  $
—
  $
502
 
Accounts receivable
  
—
   
—
   
3,964
   
2,825
   
—
   
6,789
 
Inventories
  
—
   
—
   
1,178
   
554
   
—
   
1,732
 
Other
  
—
   
—
   
669
   
521
   
—
   
1,190
 
                         
  
—
   
—
   
5,985
   
4,228
   
—
   
10,213
 
Property and equipment, net
  
—
   
—
   
12,450
   
7,307
   
—
   
19,757
 
Investments of insurance subsidiaries
  
—
   
—
   
—
   
362
   
—
   
362
 
Investments in and advances to affiliates
  
33,166
   
—
   
29
   
203
   
(33,166
)  
232
 
Goodwill and other intangible assets
  
—
   
—
   
5,724
   
2,229
   
—
   
7,953
 
Other
  
478
   
64
   
35
   
113
   
—
   
690
 
                         
 $
33,644
  $
64
  $
24,223
  $
14,442
  $
(33,166
) $
39,207
 
                         
LIABILITIES AND
STOCKHOLDERS’ (DEFICIT)
EQUITY
                  
Current liabilities:
                  
Accounts payable
 $
—
  $
—
  $
1,721
  $
856
  $
—
  $
2,577
 
Accrued salaries
  
—
   
—
   
998
   
582
   
—
   
1,580
 
Other accrued expenses
  
142
   
403
   
905
   
1,174
   
—
   
2,624
 
Long-term debt due within one year
  
—
   
696
   
55
   
37
   
—
   
788
 
                         
  
142
   
1,099
   
3,679
   
2,649
   
—
   
7,569
 
Long-term debt, net
  
996
   
30,544
   
212
   
281
   
—
   
32,033
 
Intercompany balances
  
36,951
   
(6,789
)  
(28,415
)  
(1,747
)  
—
   
—
 
Professional liability risks
  
—
   
—
   
—
   
1,275
   
—
   
1,275
 
Income taxes and other liabilities
  
505
   
—
   
223
   
520
   
—
   
1,248
 
                         
  
38,594
   
24,854
   
(24,301
)  
2,978
   
—
   
42,125
 
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.
  
(4,950
)  
(24,790
)  
48,437
   
9,519
   
(33,166
)  
(4,950
)
Noncontrolling interests
  
—
   
—
   
87
   
1,945
   
—
   
2,032
 
                         
  
(4,950
)  
(24,790
)  
48,524
   
11,464
   
(33,166
)  
(2,918
)
                         
 $
33,644
  $
64
  $
24,223
  $
14,442
  $
(33,166
) $
39,207
 
                         
25
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATING STATEMENT

OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

2019

(Dollars in millions)

   HCA
Healthcare, Inc.
Issuer		  HCA Inc.
Issuer		  Subsidiary
Guarantors
(as  adjusted)		  Subsidiary
Non-
Guarantors
(as adjusted)		  Eliminations  Condensed
Consolidated		 

Revenues

  $—  $—  $12,705  $8,651  $—  $21,356 

Salaries and benefits

   —   —   5,774   4,023   —   9,797 

Supplies

   —   —   2,130   1,462   —   3,592 

Other operating expenses

   5   —   2,114   1,776   —   3,895 

Equity in earnings of affiliates

   (1,266)   —   (3)   (20)   1,266   (23) 

Depreciation and amortization

   —   —   612   430   —   1,042 

Interest expense

   32   1,488   (605)   (85)   —   830 

Gains on sales of facilities

   —   —   (3)   —   —   (3) 

Management fees

   —   —   (320)   320   —   — 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
   (1,229)   1,488   9,699   7,906   1,266   19,130 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Income (loss) before income taxes

   1,229   (1,488)   3,006   745   (1,266)   2,226 

Provision (benefit) for income taxes

   (87)   (549)   1,091   199   —   654 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss)

   1,316   (939)   1,915   546   (1,266)   1,572 

Net income attributable to noncontrolling interests

   —   —   50   206   —   256 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net income (loss) attributable to HCA Healthcare, Inc.

  $1,316  $(939)  $1,865  $340  $(1,266)  $1,316 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Comprehensive income (loss) attributable to HCA Healthcare, Inc.

  $1,361  $(936)  $1,871  $376  $(1,311)  $1,361 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Cash flows from operating activities:
                  
Net income (loss)
 $
1,822
  $
(1,539
) $
3,087
  $
586
  $
(1,848
) $
2,108
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                  
Changes in operating assets and liabilities
  
—
   
40
   
(305
)  
(378
)  
—
   
(643
)
Depreciation and amortization
  
—
   
—
   
709
   
546
   
—
   
1,255
 
Income taxes
  
27
   
—
   
—
   
—
   
—
   
27
 
Gains on sales of facilities
  
—
   
—
   
(7
)  
(10
)  
—
   
(17
)
Amortization of debt issuance costs and discounts  
—
   
16
   
—
   
—
   
—
   
16
 
Share-based compensation
  
—
   
—
   
158
   
—
   
—
   
158
 
Equity in earnings of affiliates
  
(1,848
)  
—
   
—
   
—
   
1,848
   
—
 
Other
  
54
   
—
   
14
   
(1
)  
—
   
67
 
                         
Net cash provided by (used in) operating activities
  
55
   
(1,483
)  
3,656
   
743
   
—
   
2,971
 
                         
Cash flows from investing activities:
                  
Purchase of property and equipment
  
—
   
—
   
(953
)  
(792
)  
—
   
(1,745
)
Acquisition of hospitals and health care entities
  
—
   
—
   
(35
)  
(1,469
)  
—
   
(1,504
)
Disposition of hospitals and health care entities
  
—
   
—
   
30
   
11
   
—
   
41
 
Change in investments
  
—
   
—
   
14
   
45
   
—
   
59
 
Other
  
—
   
—
   
(9
)  
45
   
—
   
36
 
                         
Net cash used in investing activities
  
—
   
—
   
(953
)  
(2,160
)  
—
   
(3,113
)
                         
Cash flows from financing activities:
                  
Issuance of long-term debt
  
—
   
6,451
   
—
   
—
   
—
   
6,451
 
Net change in revolving credit facilities
  
—
   
(3,040
)  
—
   
—
   
—
   
(3,040
)
Repayment of long-term debt
  
—
   
(47
)  
(31
)  
(20
)  
—
   
(98
)
Distributions to noncontrolling interests
  
—
   
—
   
(44
)  
(203
)  
—
   
(247
)
Payment of debt issuance costs
  
—
   
(63
)  
—
   
—
   
—
   
(63
)
Payment of cash dividends
  
(278
)  
—
   
—
   
—
   
—
   
(278
)
Repurchases of common stock
  
(520
)  
—
   
—
   
—
   
—
   
(520
)
Changes in intercompany balances with affiliates, net
  
1,165
   
(1,818
)  
(1,102
)  
1,755
   
—
   
—
 
Other
  
(122
)  
—
   
—
   
(13
)  
—
   
(135
)
                         
Net cash provided by (used in) financing activities  
245
   
1,483
   
(1,177
)  
1,519
   
—
   
2,070
 
                         
Change in cash and cash equivalents
  
300
   
—
   
1,526
   
102
   
—
   
1,928
 
Cash and cash equivalents at beginning of period
  
—
   
—
   
174
   
328
   
—
   
502
 
                         
Cash and cash equivalents at end of period
 $
300
  $
—
  $
1,700
  $
430
  $
—
  $
2,430
 
                         

26
Table of Contents
HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1213 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2018

(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

 $—  $—  $197  $671  $—  $868 

Accounts receivable

  —   —   3,873   2,719   —   6,592 

Inventories

  —   —   1,093   543   —   1,636 

Other

  —   —   743   555   —��  1,298 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  —   —   5,906   4,488   —   10,394 

Property and equipment, net

  —   —   11,842   6,702   —   18,544 

Investments of insurance subsidiaries

  —   —   —   414   —   414 

Investments in and advances to affiliates

  31,540   —   28   206   (31,540)   234 

Goodwill and other intangible assets

  —   —   5,429   2,030   —   7,459 

Other

  450   98   29   120   —   697 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $31,990  $98  $23,234  $13,960  $(31,540)  $37,742 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

LIABILITIES AND

STOCKHOLDERS’ (DEFICIT)

EQUITY

      

Current liabilities:

      

Accounts payable

 $1  $—  $1,683  $773  $—  $2,457 

Accrued salaries

  —   —   836   479   —   1,315 

Other accrued expenses

  101   382   670   1,008   —   2,161 

Long-term debt due within one year

  —   1,597   61   34   —   1,692 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  102   1,979   3,250   2,294   —   7,625 

Long-term debt, net

  995   30,048   282   175   —   31,500 

Intercompany balances

  36,325   (8,608)   (26,352)   (1,365)   —   — 

Professional liability risks

  —   —   —   1,283   —   1,283 

Income taxes and other liabilities

  557   —   388   514   —   1,459 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  37,979   23,419   (22,432)   2,901   —   41,867 

Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.

  (5,989)   (23,321)   45,588   9,273   (31,540)   (5,989) 

Noncontrolling interests

  —   —   78   1,786   —   1,864 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  (5,989)   (23,321)   45,666   11,059   (31,540)   (4,125) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
 $31,990  $98  $23,234  $13,960  $(31,540)  $37,742 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL 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

  —   —   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) EQUITY      

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 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 
  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 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2018

(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)

 $1,964  $(1,308)  $2,876  $658  $(1,942)  $2,248 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

      

Changes in operating assets and liabilities

  —   2   (352)   (52)   —   (402) 

Depreciation and amortization

  —   —   652   463   —   1,115 

Income taxes

  118   —   —   —   —   118 

Gains on sales of facilities

  —   —   (372)   (42)   —   (414) 

Amortization of debt issuance costs

  —   15   —   —   —   15 

Share-based compensation

  —   —   134   —   —   134 

Equity in earnings of affiliates

  (1,942)   —   —   —   1,942   — 

Other

  43   —   —   8   —   51 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) operating activities

  183   (1,291)   2,938   1,035   —   2,865 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash flows from investing activities:

      

Purchase of property and equipment

  —   —   (900)   (674)   —   (1,574) 

Acquisition of hospitals and health care entities

  —   —   (438)   (100)   —   (538) 

Disposition of hospitals and health care entities

  —   —   767   32   —   799 

Change in investments

  —   —   17   6   —   23 

Other

  —   —   (30)   5   —   (25) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

  —   —   (584)   (731)   —   (1,315) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash flows from financing activities:

      

Net change in revolving credit facilities

  —   210   —   —   —   210 

Repayment of long-term debt

  —   (41)   (38)   (22)   —   (101) 

Distributions to noncontrolling interests

  —   —   (43)   (142)   —   (185) 

Payment of debt issuance costs

  —   (2)   —   —   —   (2) 

Payment of cash dividends

  (245)   —   —   —   —   (245) 

Repurchases of common stock

  (893)   —   —   —   —   (893) 

Changes in intercompany balances with affiliates, net

  1,150   1,124   (2,188)   (86)   —   — 

Other

  (196)   —   —   4   —   (192) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by financing activities

  (184)   1,291   (2,269)   (246)   —   (1,408) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Effect on exchange rate changes on cash and cash equivalents

  —   —   —   (6)   —   (6) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in cash and cash equivalents

  (1)   —   85   52   —   136 

Cash and cash equivalents at beginning of period

  1   —   112   619   —   732 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of period

 $—  $—  $197  $671  $—  $868 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

                         
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Cash flows from operating activities:
                  
Net income (loss)
 $
1,964
  $
(1,308
) $
2,876
  $
658
  $
(1,942
) $
2,248
 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
                  
Changes in operating assets and liabilities
  
—
   
2
   
(352
)  
(52
)  
—
   
(402
)
Depreciation and amortization
  
—
   
—
   
652
   
463
   
—
   
1,115
 
Income taxes
  
118
   
—
   
—
   
—
   
—
   
118
 
Gains on sales of facilities
  
—
   
—
   
(372
)  
(42
)  
—
   
(414
)
Amortization of debt issuance costs and discounts  
—
   
15
   
—
   
—
   
—
   
15
 
Share-based compensation
  
—
   
—
   
134
   
—
   
—
   
134
 
Equity in earnings of affiliates
  
(1,942
)  
—
   
—
   
—
   
1,942
   
—
 
Other
  
43
   
—
   
—
   
8
   
—
   
51
 
                         
Net cash provided by (used in) operating activities
  
183
   
(1,291
)  
2,938
   
1,035
   
—
   
2,865
 
                         
Cash flows from investing activities:
                  
Purchase of property and equipment
  
—
   
—
   
(900
)  
(674
)  
—
   
(1,574
)
Acquisition of hospitals and health care entities
  
—
   
—
   
(438
)  
(100
)  
—
   
(538
)
Disposition of hospitals and health care entities
  
—
   
—
   
767
   
32
   
—
   
799
 
Change in investments
  
—
   
—
   
17
   
6
   
—
   
23
 
Other
  
—
   
—
   
(30
)  
5
   
—
   
(25
)
                         
Net cash used in investing activities
  
—
   
—
   
(584
)  
(731
)  
—
   
(1,315
)
                         
Cash flows from financing activities:
                  
Net change in revolving credit facilities
  
—
   
210
   
—
   
—
   
—
   
210
 
Repayment of long-term debt
  
—
   
(41
)  
(38
)  
(22
)  
—
   
(101
)
Distributions to noncontrolling interests
  
—
   
—
   
(43
)  
(142
)  
—
   
(185
)
Payment of debt issuance costs
  
—
   
(2
)  
—
   
—
   
—
   
(2
)
Payment of cash dividends
  
(245
)  
—
   
—
   
—
   
—
   
(245
)
Repurchases of common stock
  
(893
)  
—
   
—
   
—
   
—
   
(893
)
Changes in intercompany balances with affiliates, net
  
1,150
   
1,124
   
(2,188
)  
(86
)  
—
   
—
 
Other
  
(196
)  
—
   
—
   
4
   
—
   
(192
)
                         
Net cash (used in) provided by financing activities
  
(184
)  
1,291
   
(2,269
)  
(246
)  
—
   
(1,408
)
                         
Effect on exchange rate changes on cash and cash equivalents
  
—
   
—
   
—
   
(6
)  
—
   
(6
)
                         
Change in cash and cash equivalents
  
(1
)  
—
   
85
   
52
   
—
   
136
 
Cash and cash equivalents at beginning of period
  
1
   
—
   
112
   
619
   
—
   
732
 
                         
Cash and cash equivalents at end of period
 $
—
  $
—
  $
197
  $
671
  $
—
  $
868
 
                         

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

(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)

 $1,316  $(939)  $1,915  $546  $(1,266)  $1,572 

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

      

Changes in operating assets and liabilities

  1   (189)   (196)   (11)   —   (395) 

Depreciation and amortization

  —   —   612   430   —   1,042 

Income taxes

  267   —   —   —   —   267 

Gains on sales of facilities

  —   —   (3)   —   —   (3) 

Amortization of debt issuance costs

  —   16   —   —   —   16 

Share-based compensation

  —   —   140   —   —   140 

Equity in earnings of affiliates

  (1,266)   —   —   —   1,266   — 

Other

  39   —   1   5   —   45 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) operating activities

  357   (1,112)   2,469   970   —   2,684 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash flows from investing activities:

      

Purchase of property and equipment

  —   —   (729)   (575)   —   (1,304) 

Acquisition of hospitals and health care entities

  —   —   (6)   (289)   —   (295) 

Disposition of hospitals and health care entities

  —   —   10   4   —   14 

Change in investments

  —   —   —   (11)   —   (11) 

Other

  —   —   2   3   —   5 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash used in investing activities

  —   —   (723)   (868)   —   (1,591) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash flows from financing activities:

      

Issuance of long-term debt

  —   1,500   —   2   —   1,502 

Net change in revolving credit facilities

  —   (1,160)   —   —   —   (1,160) 

Repayment of long-term debt

  —   (42)   (33)   (20)   —   (95) 

Distributions to noncontrolling interests

  —   —   (79)   (169)   —   (248) 

Payment of debt issuance costs

  —   (25)   —   —   —   (25) 

Repurchases of common stock

  (966)   —   —   —   —   (966) 

Changes in intercompany balances with affiliates, net

  671   839   (1,589)   79   —   — 

Other

  (62)   —   —   20   —   (42) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net cash (used in) provided by financing activities

  (357)   1,112   (1,701)   (88)   —   (1,034) 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Change in cash and cash equivalents

  —   —   45   14   —   59 

Cash and cash equivalents at beginning of period

  —   —   113   533   —   646 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Cash and cash equivalents at end of period

 $—  $—  $158  $547  $—  $705 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)

The above supplemental condensed consolidating financial information for the quarter and six months ended June 30, 2017 has been adjusted to properly record the impact

27
Table 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. 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 the quarter and six months ended June 30, 2017 is summarized as follows (dollars in millions):

   As
Previously
Reported		   Adjustment   As Adjusted 

Quarter ended June 30, 2017

      

Net income (loss) attributable to HCA Healthcare, Inc.:

      

HCA Healthcare, Inc. Issuer

  $657   $—   $657 

HCA Inc. Issuer

   (476)    —    (476) 

Subsidiary Guarantors

   862    104    966 

SubsidiaryNon-Guarantors

   272    (104)    168 

Eliminations

   (658)    —    (658) 
  

 

 

   

 

 

   

 

 

 

Condensed Consolidated

  $657   $—   $657 
  

 

 

   

 

 

   

 

 

 

   As
Previously
Reported		   Adjustment   As Adjusted 

Six months ended June 30, 2017

      

Net income (loss) attributable to HCA Healthcare, Inc.:

      

HCA Healthcare, Inc. Issuer

  $1,316   $—   $1,316 

HCA Inc. Issuer

   (939)    —    (939) 

Subsidiary Guarantors

   1,680    185    1,865 

SubsidiaryNon-Guarantors

   525    (185)    340 

Eliminations

   (1,266)    —    (1,266) 
  

 

 

   

 

 

   

 

 

 

Condensed Consolidated

  $1,316   $—   $1,316 
  

 

 

   

 

 

   

 

 

 

   As
Previously
Reported		   Adjustment   As Adjusted 

Six months ended June 30, 2017

      

Net cash provided (used in) operating activities:

      

HCA Healthcare, Inc. Issuer

  $357   $—   $357 

HCA Inc. Issuer

   (1,112)    —    (1,112) 

Subsidiary Guarantors

   2,191    278    2,469 

SubsidiaryNon-Guarantors

   1,248    (278)    970 

Eliminations

   —    —    — 
  

 

 

   

 

 

   

 

 

 

Condensed Consolidated

  $2,684   $—   $2,684 
  

 

 

   

 

 

   

 

 

 
Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report onForm
 10-Q
includes certain disclosures which contain “forward-looking statements.” Forward-looking statements include statements regarding expected share-based compensation expense, expected capital expenditures and expected net claim payments and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, (2) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Health Reform Law”), including the effects of court challenges to, any repeal of, or changes to, the Health Reform Law or additional changes to its implementation, the possible enactment of additional federal or state health care reforms and possible changes to other federal, state or local laws or regulations affecting the health care industry, (3) the effects related to the continued implementation of the sequestration spending reductions required under the Budget Control Act of 2011, and related legislation extending these reductions, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (4) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (5) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (6) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs or Medicaid waiver programs, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (7) the highly competitive nature of the health care business, (8) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (9) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (10) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (11) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (12) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (13) changes in accounting practices, (14) changes in general economic conditions nationally and regionally in our markets, (15) the emergence of and effects related to infectious diseases, (16) future divestitures which may result in charges and possible impairments of long-lived assets, (17) changes in business strategy or development plans, (18) delays in receiving payments for services provided, (19) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (20) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (21) the impact of potential cybersecurity incidents or security breaches, (22) our ongoing ability to demonstrate meaningful use of certified electronic health record (“EHR”) technology, (23) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (24) changes in interpretations, assumptions and expectations regardingthe effects of the 2017 Tax Cuts and Jobs Act (the “Tax Act”), including additionalpotential legislation or interpretive guidance that may be issued by federal and state taxing authorities or other standard-setting bodies, and (25) other risk factors described in our annual report onForm
 10-K
for the year ended December 31, 20172018 and our other filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

28
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Quarter 20182019 Operations Summary

Revenues increased to $12.602 billion in the second quarter of 2019 from $11.529 billion in the second quarter of 2018 from $10.733 billion in the second quarter of 2017.2018. Net income attributable to HCA Healthcare, Inc. totaled $783 million, or $2.25 per diluted share, for the quarter ended June 30, 2019, compared to $820 million, or $2.31 per diluted share, for the quarter ended June 30, 2018, compared to $657 million, or $1.75 per diluted share, for the quarter ended June 30, 2017.2018. Second quarter results for 2019 and 2018 results includedinclude net gains on sales of facilities of $18 million, or $0.04 per diluted share, and $9 million, or $0.02 per diluted share. Second quarter 2018 results also included our recognition of a reduction to the provision for income taxes of $0.34 per diluted share, related to the estimated impact of tax rate changes under the 2017 Tax Cuts and Jobs Act which, along with other revisions, lowered the federal statutory corporate tax rate from 35% to 21% beginning in 2018. Cash flows from operating activities increased $178 million from $1.404 billion for the second quarter of 2017 to $1.582 billion for the second quarter of 2018. The increase in cash provided by operating activities was primarily related to the increase in net income of $171 million.respectively. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 348.373 million shares for the quarter ended June 30, 2019 and 355.039 million shares for the quarter ended June 30, 2018 and 375.338 million shares for the quarter ended June 30, 2017.2018. During 20172018 and the first six months of 2018,2019, we repurchased 25.09214.070 million shares and 9.0404.034 million shares of our common stock, respectively.

Revenues increased 7.4%9.3% on a consolidated basis and increased 6.5%4.3% on a same facility basis for the quarter ended June 30, 2018,2019, compared to the quarter ended June 30, 2017.2018. The increase in consolidated revenues can be primarily attributed to the combined impact of a 2.1%3.0% increase in revenue per equivalent admission and a 5.1%6.2% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 3.6%1.7% increase in same facility revenue per equivalent admission and a 2.8%2.6% increase in same facility equivalent admissions.

During the quarter ended June 30, 2018,2019, consolidated admissions and same facility admissions increased 4.5%4.8% and 2.7%2.1%, respectively, compared to the quarter ended June 30, 2017.2018. Surgeries increased 4.0%2.7% on a consolidated basis and 2.3%0.3% on a same facility basis during the quarter ended June 30, 2018,2019, compared to the quarter ended June 30, 2017.2018. Emergency department visits increased 1.5%4.9% on a consolidated basis and declined 0.8%3.0% on a same facility basis during the quarter ended June 30, 2018,2019, compared to the quarter ended June 30, 2017.2018. Same facility uninsured admissions increased 7.8%5.1% for the quarter ended June 30, 2018,2019, compared to the quarter ended June 30, 2017.

2018.

Cash flows from operating activities increased $415 million from $1.582 billion for the second quarter of 2018 to $1.997 billion for the second quarter of 2019. The increase in cash provided by operating activities was primarily related to positive changes of $468 million related to working capital items.
Results of Operations

Revenue/Volume Trends

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively
29
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
determined rates per discharge, per identified service or per covered member. Agreements with commercial

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service
rates. Management continually reviews the contractual 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 increased 7.4%9.3% from $10.733 billion in the second quarter of 2017 to $11.529 billion in the second quarter of 2018.2018 to $12.602 billion in the second quarter of 2019. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record
self-pay
revenues at the estimated amounts we expect to collect. Our revenues from third-party payers and others (including uninsured patients) for the quarters and six months ended June 30, 20182019 and 20172018 are summarized in the following table (dollars in millions):

   Quarter 
   2018   Ratio  2017   Ratio 

Medicare

  $2,425    21.0%  $2,272    21.2% 

Managed Medicare

   1,345    11.7   1,158    10.8 

Medicaid

   357    3.1   376    3.5 

Managed Medicaid

   586    5.1   527    4.9 

Managed care and insurers

   5,993    51.9   5,729    53.4 

International (managed care and insurers)

   295    2.6   269    2.5 

Other

   528    4.6   402    3.7 
  

 

 

   

 

 

  

 

 

   

 

 

 

Revenues

  $11,529    100.0%  $10,733    100.0% 
  

 

 

   

 

 

  

 

 

   

 

 

 

   Six Months 
   2018   Ratio  2017   Ratio 

Medicare

  $4,949    21.6%  $4,633    21.7% 

Managed Medicare

   2,744    12.0   2,341    11.0 

Medicaid

   638    2.8   670    3.1 

Managed Medicaid

   1,147    5.0   1,116    5.2 

Managed care and insurers

   12,055    52.5   11,352    53.2 

International (managed care and insurers)

   600    2.6   538    2.5 

Other

   819    3.5   706    3.3 
  

 

 

   

 

 

  

 

 

   

 

 

 

Revenues

  $22,952    100.0%  $21,356    100.0% 
  

 

 

   

 

 

  

 

 

   

 

 

 

                 
 
Quarter
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 
$
2,635
   
20.9
%
 $
2,425
   
21.0
%
Managed Medicare
  
1,595
   
12.7
   
1,345
   
11.7
 
Medicaid
  
416
   
3.3
   
357
   
3.1
 
Managed Medicaid
  
554
   
4.4
   
586
   
5.1
 
Managed care and insurers
  
6,425
   
50.9
   
5,993
   
51.9
 
International (managed care and insurers)
  
284
   
2.3
   
295
   
2.6
 
Other
  
693
   
5.5
   
528
   
4.6
 
                 
Revenues
 
$
12,602
   
100.0
%
 $
11,529
   
100.0
%
                 
                 
 
Six Months
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 
$
5,405
   
21.5
%
 $
4,949
   
21.6
%
Managed Medicare
  
3,184
   
12.7
   
2,744
   
12.0
 
Medicaid
  
763
   
3.0
   
638
   
2.8
 
Managed Medicaid
  
1,167
   
4.6
   
1,147
   
5.0
 
Managed care and insurers
  
12,851
   
51.1
   
12,055
   
52.5
 
International (managed care and insurers)
  
581
   
2.3
   
600
   
2.6
 
Other
  
1,168
   
4.8
   
819
   
3.5
 
                 
Revenues
 
$
25,119
   
100.0
%
 $
22,952
   
100.0
%
                 
Consolidated and same facility revenue per equivalent admission increased 2.1%3.0% and 3.6%1.7%, respectively, in the second quarter of 2018,2019, compared to the second quarter of 2017.2018. Consolidated and same facility equivalent admissions increased 5.1% and 2.8%, respectively, in the second quarter of 2018, compared to the second quarter of 2017. Consolidated and same facility outpatient surgeries increased 4.3%6.2% and 2.6%, respectively, in the second quarter of 2018,2019, compared to the second quarter of 2017.2018. Consolidated and same facility inpatient

outpatient surgeries increased 3.0% and 0.6%, respectively, in the


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

second quarter of 2019, compared to the second quarter of 2018. Consolidated and same facility inpatient surgeries increased 3.3%2.2% and 1.7%declined 0.1%, respectively, in the second quarter of 2018,2019, compared to the second quarter of 2017.2018. Consolidated and same facility emergency department visits increased 1.5%4.9% and declined 0.8%3.0%, respectively, in the second quarter of 2018,2019, compared to the second quarter of 2017.

2018.

To quantify the total impact of the trends related to uninsured accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters and six months ended June 30, 20182019 and 20172018 follows (dollars in millions):

   Quarter  Six Months 
   2018  2017  2018  2017 

Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)

  $9,871  $9,177  $19,738  $18,326 

Cost-to-charges ratio (patient care costs as percentage of gross patient charges)

   12.6%   13.0%   12.5%   12.9% 

Total uncompensated care

  $6,486  $5,721  $12,738  $11,048 

Multiply by thecost-to-charges ratio

   12.6%   13.0%   12.5%   12.9% 
  

 

 

  

 

 

  

 

 

  

 

 

 

Estimated cost of total uncompensated care

  $817  $743  $1,592  $1,425 
  

 

 

  

 

 

  

 

 

  

 

 

 

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)
 $
10,953
  $
9,871
  $
21,559
  $
19,738
 
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
12.2
%  
12.6
%  
12.0
%  
12.5
%
Total uncompensated care
 $
7,695
  $
6,486
  $
14,780
  $
12,738
 
Multiply by the
cost-to-charges
ratio
  
12.2
%  
12.6
%  
12.0
%  
12.5
%
                 
Estimated cost of total uncompensated care
 $
938
  $
817
  $
1,774
  $
1,592
 
                 
Total uncompensated care as a percentage of the sum of revenues and total uncompensated care was 36.0%37.9% and 34.8%36.0% for the quarters ended June 30, 20182019 and 2017,2018, respectively, and 35.7%37.0% and 34.1%35.7% for the six months ended June 30, 2019 and 2018, and 2017, respectively.

Same facility uninsured admissions increased by 2,7382,017 admissions, or 7.8%5.1%, in the second quarter of 2018,2019 compared to the second quarter of 2017.2018. Same facility uninsured admissions increased 10.1%,were flat in the first quarter of 2018,2019 compared to the first quarter of 2017.2018. Same facility uninsured admissions in 2017,2018, compared to 2016,2017, increased 6.4%7.4% in the fourth quarter of 2017,2018, increased 6.4%8.8% in the third quarter of 2017,2018, increased 4.9%7.8% in the second quarter of 20172018, and increased 3.2%10.1% in the first quarter of 2017.

2018.

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and six months ended June 30, 20182019 and 20172018 are set forth in the following table.

   Quarter  Six Months 
   2018  2017  2018  2017 

Medicare

   29%   30%   30%   31% 

Managed Medicare

   18   16   18   16 

Medicaid

   5   5   5   5 

Managed Medicaid

   12   12   12   12 

Managed care and insurers

   28   29   27   28 

Uninsured

   8   8   8   8 
  

 

 

  

 

 

  

 

 

  

 

 

 
   100%   100%   100%   100% 
  

 

 

  

 

 

  

 

 

  

 

 

 

                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Medicare
  
29
%  
29
%  
29
%  
30
%
Managed Medicare
  
18
   
18
   
19
   
18
 
Medicaid
  
5
   
5
   
5
   
5
 
Managed Medicaid
  
12
   
12
   
12
   
12
 
Managed care and insurers
  
27
   
28
   
27
   
27
 
Uninsured
  
9
   
8
   
8
   
8
 
                 
  
100
%  
100
%  
100
%  
100
%
                 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, and managed care and insurers for the quarters and six months ended June 30, 20182019 and 20172018 are set forth in the following table.

   Quarter  Six Months 
   2018  2017  2018  2017 

Medicare

   28%   28%   29%   29% 

Managed Medicare

   13   13   14   13 

Medicaid

   5   6   4   5 

Managed Medicaid

   5   5   5   5 

Managed care and insurers

   49   48   48   48 
  

 

 

  

 

 

  

 

 

  

 

 

 
   100%   100%   100%   100% 
  

 

 

  

 

 

  

 

 

  

 

 

 

31
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
                 
 
Quarter
  
Six Months
 
 
2019
  
2018
  
2019
  
2018
 
Medicare
  
28
%  
28
%  
29
%  
29
%
Managed Medicare
  
15
   
13
   
14
   
14
 
Medicaid
  
5
   
5
   
4
   
4
 
Managed Medicaid
  
5
   
5
   
5
   
5
 
Managed care and insurers
  
47
   
49
   
48
   
48
 
                 
  
100
%  
100
%  
100
%  
100
%
                 
At June 30, 2018,2019, we had 91 hospitals in the states of Texas and Florida. During the second quarter of 2018, 57%2019, 56% of our admissions and 49%48% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 70%72% of our uninsured admissions during the second quarter of 2018.

2019.

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. In December 2017, the Centers for Medicare & Medicaid Services (“CMS”) announced that it will phase out federal matching funds for Designated State Health Programs under waivers granted under sectionSection 1115 of the Social Security Act. Texas currently operates its Healthcare Transformation and Quality Improvement Program pursuant to a Medicaid 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. Our Texas Medicaid revenues included Medicaid supplemental payments of $97$106 million and $95$97 million during the second quarters of 20182019 and 2017,2018, respectively, and $195$214 million and $201$195 million during the first six months of 2019 and 2018, and 2017, respectively.

In addition, we receive supplemental payments in several other states. We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made waiver requests to CMS to replace their existing supplemental payment programs. It is possible these reviews and waiver requests will result in the restructuring of such supplemental payment programs and could result in the payment programs being reduced or eliminated. Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications, if any, may have on our results of operations.

32
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary

The following is a comparative summary of results of operations for the quarters and six months ended June 30, 20182019 and 20172018 (dollars in millions):

   Quarter 
   2018  2017 
   Amount  Ratio  Amount  Ratio 

Revenues

  $11,529   100.0  $10,733   100.0 

Salaries and benefits

   5,274   45.8   4,896   45.6 

Supplies

   1,917   16.6   1,795   16.7 

Other operating expenses

   2,118   18.4   1,965   18.3 

Equity in earnings of affiliates

   (7)   (0.1)   (13)   (0.1) 

Depreciation and amortization

   562   4.9   521   4.9 

Interest expense

   436   3.8   411   3.8 

Gains on sales of facilities

   (9)   (0.1)   (2)   — 
  

 

 

  

 

 

  

 

 

  

 

 

 
   10,291   89.3   9,573   89.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   1,238   10.7   1,160   10.8 

Provision for income taxes

   272   2.3   365   3.4 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   966   8.4   795   7.4 

Net income attributable to noncontrolling interests

   146   1.3   138   1.3 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to HCA Healthcare, Inc.

  $820   7.1  $657   6.1 
  

 

 

  

 

 

  

 

 

  

 

 

 

% changes from prior year:

     

Revenues

   7.4%    4.0%  

Income before income taxes

   6.6    2.5  

Net income attributable to HCA Healthcare, Inc.

   24.9    (0.2)  

Admissions(a)

   4.5    1.3  

Equivalent admissions(b)

   5.1    2.1  

Revenue per equivalent admission

   2.1    1.9  

Same facility % changes from prior year(c):

     

Revenues

   6.5    3.4  

Admissions(a)

   2.7    0.8  

Equivalent admissions(b)

   2.8    1.3  

Revenue per equivalent admission

   3.6    2.0  

                 
 
Quarter
 
 
2019
  
2018
 
 
Amount
  
Ratio
  
Amount
  
Ratio
 
Revenues
 
$
12,602
   
100.0
  $
11,529
   
100.0
 
                 
Salaries and benefits
  
5,837
   
46.3
   
5,274
   
45.8
 
Supplies
  
2,118
   
16.8
   
1,917
   
16.6
 
Other operating expenses
  
2,362
   
18.8
   
2,118
   
18.4
 
Equity in earnings of affiliates
  
(8
)
  
(0.1
)
  
(7
)  
(0.1
)
Depreciation and amortization
  
636
   
5.0
   
562
   
4.9
 
Interest expense
  
477
   
3.8
   
436
   
3.8
 
Gains on sales of facilities
  
(18
)
  
(0.1
)
  
(9
)  
(0.1
)
                 
  
11,404
   
90.5
   
10,291
   
89.3
 
                 
Income before income taxes
  
1,198
   
9.5
   
1,238
   
10.7
 
Provision for income taxes
  
271
   
2.1
   
272
   
2.3
 
                 
Net income
  
927
   
7.4
   
966
   
8.4
 
Net income attributable to noncontrolling interests
  
144
   
1.2
   
146
   
1.3
 
                 
Net income attributable to HCA Healthcare, Inc.
 
$
783
   
6.2
  $
820
   
7.1
 
                 
% changes from prior year:
            
Revenues
  
9.3
%
     
7.4
%   
Income before income taxes
  
(3.2
)
     
6.6
    
Net income attributable to HCA Healthcare, Inc.
  
(4.5
)
     
24.9
    
Admissions(a)
  
4.8
      
4.5
    
Equivalent admissions(b)
  
6.2
      
5.1
    
Revenue per equivalent admission
  
3.0
      
2.1
    
Same facility % changes from prior year(c):
            
Revenues
  
4.3
      
6.5
    
Admissions(a)
  
2.1
      
2.7
    
Equivalent admissions(b)
  
2.6
      
2.8
    
Revenue per equivalent admission
  
1.7
      
3.6
    


Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary (continued)

   Six Months 
   2018  2017 
   Amount  Ratio  Amount  Ratio 

Revenues

  $22,952   100.0  $21,356   100.0 

Salaries and benefits

   10,563   46.0   9,797   45.9 

Supplies

   3,832   16.7   3,592   16.8 

Other operating expenses

   4,228   18.5   3,895   18.2 

Equity in earnings of affiliates

   (16)   (0.1)   (23)   (0.1) 

Depreciation and amortization

   1,115   4.8   1,042   4.9 

Interest expense

   867   3.8   830   3.9 

Gains on sales of facilities

   (414)   (1.8)   (3)   — 
  

 

 

  

 

 

  

 

 

  

 

 

 
   20,175   87.9   19,130   89.6 
  

 

 

  

 

 

  

 

 

  

 

 

 

Income before income taxes

   2,777   12.1   2,226   10.4 

Provision for income taxes

   529   2.3   654   3.0 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income

   2,248   9.8   1,572   7.4 

Net income attributable to noncontrolling interests

   284   1.2   256   1.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

Net income attributable to HCA Healthcare, Inc.

  $1,964   8.6  $1,316   6.2 
  

 

 

  

 

 

  

 

 

  

 

 

 

% changes from prior year:

     

Revenues

   7.5%    3.8%  

Income before income taxes

   24.7    —  

Net income attributable to HCA Healthcare, Inc.

   49.3    (2.7)  

Admissions(a)

   4.5    1.3  

Equivalent admissions(b)

   4.9    1.9  

Revenue per equivalent admission

   2.5    1.8  

Same facility % changes from prior year(c):

     

Revenues

   6.2    3.3  

Admissions(a)

   2.5    1.0  

Equivalent admissions(b)

   2.3    1.5  

Revenue per equivalent admission

   3.8    1.8  

                 
 
Six Months
 
 
2019
  
2018
 
 
Amount
  
Ratio
  
Amount
  
Ratio
 
Revenues
 $
25,119
   
100.0
  $
22,952
   
100.0
 
                 
Salaries and benefits
  
11,484
   
45.7
   
10,563
   
46.0
 
Supplies
  
4,159
   
16.6
   
3,832
   
16.7
 
Other operating expenses
  
4,661
   
18.6
   
4,228
   
18.5
 
Equity in earnings of affiliates
  
(19
)  
(0.1
)  
(16
)  
(0.1
)
Depreciation and amortization
  
1,255
   
5.0
   
1,115
   
4.8
 
Interest expense
  
938
   
3.7
   
867
   
3.8
 
Gains on sales of facilities
  
(17
)  
(0.1
)  
(414
)  
(1.8
)
                 
  
22,461
   
89.4
   
20,175
   
87.9
 
                 
Income before income taxes
  
2,658
   
10.6
   
2,777
   
12.1
 
Provision for income taxes
  
550
   
2.2
   
529
   
2.3
 
                 
Net income
  
2,108
   
8.4
   
2,248
   
9.8
 
Net income attributable to noncontrolling interests
  
286
   
1.1
   
284
   
1.2
 
                 
Net income attributable to HCA Healthcare, Inc.
 $
1,822
   
7.3
  $
1,964
   
8.6
 
                 
% changes from prior year:
            
Revenues
  
9.4
%     
7.5
%   
Income before income taxes
  
(4.3
)     
24.7
    
Net income attributable to HCA Healthcare, Inc.
  
(7.2
)     
49.3
    
Admissions(a)
  
3.9
      
4.5
    
Equivalent admissions(b)
  
5.5
      
4.9
    
Revenue per equivalent admission
  
3.8
      
2.5
    
Same facility % changes from prior year(c):
            
Revenues
  
5.4
      
6.2
    
Admissions(a)
  
1.6
      
2.5
    
Equivalent admissions(b)
  
2.3
      
2.3
    
Revenue per equivalent admission
  
3.0
      
3.8
    
(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 revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues 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 which were either acquired or divested during the current and prior period.

34
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended June 30, 20182019 and 2017

2018

Revenues increased to $12.602 billion in the second quarter of 2019 from $11.529 billion in the second quarter of 2018. Net income attributable to HCA Healthcare, Inc. totaled $783 million, or $2.25 per diluted share, for the quarter ended June 30, 2019, compared to $820 million, or $2.31 per diluted share, for the second quarter of 2018, compared to $657 million, or $1.75 per diluted share, for the second quarter of 2017.ended June 30, 2018. Second quarter results for 2019 and 2018 results includedinclude net gains on sales of facilities of $18 million, or $0.04 per diluted share, and $9 million, or $0.02 per diluted share. Second quarter 2018 results also included a reduction to the provision for income taxes of $0.34 per diluted share, related to the impact of tax rate changes under the 2017 Tax Cuts and Jobs Act.respectively. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 348.373 million shares for the quarter ended June 30, 2019 and 355.039 million shares for the quarter ended June 30, 2018 and 375.338 million shares for the quarter ended June 30, 2017.2018. During 20172018 and the first six months of 2018,2019, we repurchased 25.09214.070 million shares and 9.0404.034 million shares of our common stock, respectively.

Revenues increased 7.4% primarily9.3% due to the combined impact of revenue per equivalent admission growth of 2.1%3.0% and a 5.1%6.2% increase in equivalent admissions for the second quarter of 20182019 compared to the second quarter of 2017.2018. Same facility revenues increased 6.5%4.3% due to the combined impact of a 3.6%1.7% increase in same facility revenue per equivalent admission and a 2.8%2.6% increase in same facility equivalent admissions for the second quarter of 20182019 compared to the second quarter of 2017.

2018.

Salaries and benefits, as a percentage of revenues, were 46.3% in the second quarter of 2019 and 45.8% in the second quarter of 2018 and 45.6% in the second quarter of 2017.2018. Salaries and benefits per equivalent admission increased 2.5%4.3% in the second quarter of 20182019 compared to the second quarter of 2017.2018. Same facility labor rate increases averaged 3.4%2.6% for the second quarter of 20182019 compared to the second quarter of 2017.

2018.

Supplies, as a percentage of revenues, were 16.8% in the second quarter of 2019 and 16.6% in the second quarter of 2018 and 16.7% in the second quarter of 2017.2018. Supply costs per equivalent admission increased 1.6%4.1% in the second quarter of 20182019 compared to the second quarter of 2017.2018. Supply costs per equivalent admission increased 5.2%3.9% for medical devices, 10.5% for pharmacy supplies and 3.7%1.6% for general medical and surgical items and declined 9.6% for pharmacy supplies in the second quarter of 20182019 compared to the second quarter of 2017.

2018.

Other operating expenses, as a percentage of revenues, were 18.8% in the second quarter of 2019 and 18.4% in the second quarter of 2018 and 18.3% in the second quarter of 2017.2018. Other operating expenses is 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 $132$133 million and $118$132 million for the second quarters of 2019 and 2018, and 2017, respectively.

Equity in earnings of affiliates was $7$8 million and $13$7 million in the second quarters of 2019 and 2018, and 2017, respectively.

Depreciation and amortization increased $41$74 million, from $521 million in the second quarter of 2017 to $562 million in the second quarter of 2018.2018 to $636 million in the second quarter of 2019. The increase in depreciation relates to both acquired facilities and increased capital expenditures at our existing facilities.

Interest expense was $477 million in the second quarter of 2019 and $436 million in the second quarter of 2018 and $411 million in2018. Our average debt balance was $35.079 billion for the second quarter of 2017. Our average debt balance was2019 compared to $33.214 billion for the second quarter of 2018 compared to $31.685 billion for the second quarter of 2017.2018. The average effective interest rate for our long-term debt increased to 5.3%5.5% from 5.2%5.3% for the quarters ended June 30, 2019 and 2018, and 2017, respectively.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended June 30, 2019 and 2018 and 2017 (continued)

During the second quarters of 20182019 and 2017,2018, we recorded net gains on sales of facilities of $18 million and $9 million, and $2 million, respectively.

The effective tax rates were 24.9%25.7% and 35.8%24.9% for the second quarters of 20182019 and 2017,2018, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the second quarters of 2018 and 2017 included tax benefits of $4 million and $9 million, respectively, related to employee equity award settlements. Our provision for income taxes for the second quarter of 2017 also included $10 million of reductions in interest expense (net of tax) related to taxing authority examinations. Excluding the effect of these adjustments, the effective tax rate for the second quarters of 2018 and 2017 would have been 25.2% and 37.8%, respectively. The reduction in the effective tax rate was primarily related to the estimated impact of tax rate changes under the 2017 Tax Cuts and Jobs Act which, along with other revisions, lowered the federal statutory corporate tax rate from 35% to 21% beginning in 2018.

Net income attributable to noncontrolling interests increaseddeclined from $138 million for the second quarter of 2017 to $146 million for the second quarter of 2018. The increase in net income attributable2018 to noncontrolling interests related primarily to one$144 million for the second quarter of our Texas markets.

2019.

Six Months Ended June 30, 20182019 and 2017

2018

Revenues increased to $25.119 billion in the first six months of 2019 from $22.952 billion in the first six months of 2018. Net income attributable to HCA Healthcare, Inc. totaled $1.822 billion, or $5.22 per diluted share, for the first six months ended June 30, 2019, compared to $1.964 billion, or $5.50 per diluted share, infor the first six months ended June 30, 2018, compared to $1.316 billion, or $3.48 per diluted share, in2018. Results for the six months ended June 30, 2017. The first six months of 2019 and 2018 results included net gains on sales of facilities of $17 million, or $0.04 per diluted share, and $414 million, or $0.88 per diluted share. Theshare, respectively. Revenues for the first six months of 2018 results also included a reduction to the provision for income taxes of $0.542019 include $86 million, or $0.19 per diluted share, on net income attributable to HCA Healthcare, Inc., excluding gains on sales of facilities, related to the estimated impactresolution of tax rate changes under the 2017 Tax Cuts and Jobs Act.transaction price differences regarding certain
out-of-network
services performed in prior periods. Our provisionsprovision for income taxes for the first six months of 20182019 and 2017 also2018 included tax benefits of $96$53 million, or $0.27$0.15 per diluted share, and $76$96 million, or $0.20$0.27 per diluted share, respectively, related to employee equity award settlements. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 349.334 million shares for the six months ended June 30, 2019 and 357.388 million shares for the six months ended June 30, 2018 and 377.647 million shares for the six months ended June 30, 2017.2018. During 20172018 and the first six months of 2018,2019, we repurchased 25.09214.070 million shares and 9.0404.034 million shares of our common stock, respectively.

Revenues increased 7.5%9.4% due to the combined impact of revenue per equivalent admission growth of 2.5%3.8% and a 4.9%5.5% increase in equivalent admissions for the first six months of 20182019 compared to the first six months of 2017.2018. Same facility revenues increased 6.2%5.4% due to the combined impact of a 3.8%3.0% increase in same facility revenue per equivalent admission and a 2.3% increase in same facility equivalent admissions for the first six months of 20182019 compared to the first six months of 2017.

2018.

Salaries and benefits, as a percentage of revenues, were 45.7% in the first six months of 2019 and 46.0% in the first six months of 2018 and 45.9% in the first six months of 2017.2018. Salaries and benefits per equivalent admission increased 2.8%3.1% in the first six months of 20182019 compared to the first six months of 2017.2018. Same facility labor rate increases averaged 3.4%2.7% for the first six months of 20182019 compared to the first six months of 2017.

2018.

Supplies, as a percentage of revenues, were 16.6% in the first six months of 2019 and 16.7% in the first six months of 2018 and 16.8%2018. Supply costs per equivalent admission increased 2.9% in the first six months of 2017. Supply costs per equivalent admission increased 1.8% in the first six months of 2018

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2018 and 2017 (continued)

2019 compared to the first six months of 2017.2018. Supply costs per equivalent admission increased 3.5%2.9% for medical devices, 7.6% for pharmacy supplies and 4.7%0.9% for general medical and surgical items and declined 7.8% for pharmacy supplies in the first six months of 20182019 compared to the first six months of 2017.

2018.

Other operating expenses, as a percentage of revenues, were 18.6% in the first six months of 2019 and 18.5% in the first six months of 2018 and 18.2% in the first six months of 2017.2018. Other operating expenses is primarily comprised of contract services,
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Six Months Ended June 30, 2019 and 2018 (continued)
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 $252$269 million and $237$252 million for the first six months of 2019 and 2018, and 2017, respectively.

Equity in earnings of affiliates was $16$19 million and $23$16 million in the first six months of 2019 and 2018, and 2017, respectively.

Depreciation and amortization increased $73$140 million, from $1.042 billion in the first six months of 2017 to $1.115 billion in the first six months of 2018.2018 to $1.255 billion in the first six months of 2019. The increase in depreciation relates to both acquired facilities and increased capital expenditures at our existing facilities.

Interest expense was $938 million in the first six months of 2019 and $867 million in the first six months of 2018 and $830 million in2018. Our average debt balance was $34.520 billion for the first six months of 2017. Our average debt balance was2019 compared to $33.160 billion for the first six months of 2018 compared to $31.539 billion for the first six months of 2017.2018. The average effective interest rate for our long-term debt wasincreased to 5.5% from 5.3% each for the six months ended June 30, 2019 and 2018, and 2017.

respectively.

During the first six months of 20182019 and 2017,2018, we recorded net gains on sales of facilities of $414$17 million and $3$414 million, respectively. The net gains on sales of facilities for 2018 related primarily to the sale of the two hospital facilities in our Oklahoma market.

The effective tax rates were 21.2%23.2% and 33.2%21.2% for the first six months of 20182019 and 2017,2018, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the first six months of 20182019 and 20172018 included tax benefits of $96$53 million and $76$96 million, respectively, related to employee equity award settlements. Our provision for income taxes for the first six months of 2017 also included $12 million of reductions in interest expense (net of tax) related to taxing authority examinations. Excluding the effect of these adjustments, the effective tax rate for the first six months of 20182019 and 20172018 would have been 25.1%25.4% and 37.7%25.1%, respectively. The reduction in the effective tax rate was primarily related to the estimated impact of tax rate changes under the 2017 Tax Cuts and Jobs Act which, along with other revisions, lowered the federal statutory corporate tax rate from 35% to 21% beginning in 2018.

Net income attributable to noncontrolling interests increased from $256 million for the first six months of 2017 to $284 million for the first six months of 2018. The increase in net income attributable2018 to noncontrolling interests related primarily to two$286 million for the first six months of our Texas markets.

2019.

Liquidity and Capital Resources

Cash provided by operating activities totaled $2.971 billion in the first six months of 2019 compared to $2.865 billion in the first six months of 2018 compared to $2.684 billion in the first six months of 2017.2018. The $181$106 million increase in cash provided by operating activities in the first six months of 20182019 compared to the first six months of 20172018 related primarily to the net impact of thean increase in net income, excluding gains on sales of facilities, of $265$257 million and an increase in depreciation and amortizationexpense of $73$140 million, offset by a reduction in the benefit from income tax paymentsnegative changes of $149 million.$241 million related to working capital items. The combined

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

interest payments and net tax payments in the first six months of 2019 and 2018 and 2017 were $1.284$1.433 billion and $1.221$1.284 billion, respectively. Working capital totaled $2.769$3.908 billion at June 30, 20182019 and $3.819$2.644 billion at December 31, 2017. The decline in working capital of $1.050 billion is primarily related to an increase in long-term debt due within one year of $1.492 billion.

2018.

Cash used in investing activities was $3.113 billion in the first six months of 2019 compared to $1.315 billion in the first six months of 2018 compared to $1.591 billion in the first six months of 2017.2018. Acquisitions of hospitals and health care entities increased from $295 million in the first six months of 2017 to $538 million in the first six months of 2018.2018 to $1.504 billion in the first six months of 2019, primarily related to an acquisition of a seven-hospital health system in North Carolina. Excluding acquisitions, capital expenditures were $1.745 billion in the first six months of 2019 and $1.574 billion in the first six months of 20182018. Capital
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and $1.304 billion in the first six months of 2017. Capital Resources (continued)
expenditures, excluding acquisitions, are expected to approximate $3.5$3.7 billion in 2018.2019. At June 30, 2018,2019, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.3$3.4 billion. We expect to finance capital expenditures with internally generated and borrowed funds. DisposalsCash received from disposals of hospitals and health care entities increased $785declined $758 million for the first six months of 20182019 compared to the first six months of 20172018 primarily related to the receipt of $758 million in 2018 from the sale of the two hospital facilities in our Oklahoma market.

Cash provided by financing activities totaled $2.070 billion in the first six months of 2019 compared to cash used in financing activities totaledof $1.408 billion in the first six months of 2018 compared to $1.034 billion in2018. During the first six months of 2017.2019, net cash flows provided by financing activities included a net increase of $3.313 billion in our indebtedness, payments of cash dividends of $278 million, repurchases of common stock of $520 million, distributions to noncontrolling interests of $247 million and payments of debt issuance costs of $63 million. During the first six months of 2018, net cash flows used in financing activities included a net increase of $109 million in our indebtedness, payment of cash dividends of $245 million, repurchases of common stock of $893 million and distributions to noncontrolling interests of $185 million. During the first six months of 2017, net cash flows used in financing activities included a net increase of $247 million in our indebtedness, repurchases of common stock of $966 million and distributions to noncontrolling interests of $248 million.

We are a highly leveraged company with significant debt service requirements. Our debt totaled $33.192$36.193 billion at June 30, 2018.2019. Our interest expense was $938 million for the first six months of 2019 and $867 million for the first six months of 2018 and $830 million for the first six months of 2017.

2018.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($1.8425.732 billion and $2.172$2.712 billion available as of June 30, 20182019 and July 31, 2018,2019, respectively) and anticipated access to public and private debt markets.

During March 2018,January 2019, we entered intoissued $1.500 billion aggregate principal amount of senior unsecured notes comprised of $1.000 billion aggregate principal amount of 5.875% notes due 2029 and $500 million aggregate principal amount of 5.625% notes due 2028. We used the net proceeds to fund the purchase of a joinder agreement to refinance our existingseven-hospital health system located in western North Carolina.
During June 2019, we issued $5.000 billion aggregate principal amount of senior securedterm B-8 loan notes comprised of $2.000 billion aggregate principal amount of 4 1/8% notes due 2029, $1.000 billion aggregate principal amount of 5 1/8% notes due 2039 and $2.000 billion aggregate principal amount of 5 1/4% notes due 2049. During June 2019, we used the proceeds to temporarily reduce the balance under the asset-based revolving credit facility maturing on February 15, 2024, repay a portionfacility. During July 2019, we redeemed all $600 million outstanding aggregate principal amount of our existing senior securedterm B-9 loan credit facility maturing on March 18, 2023 and pay related fees and expenses with a new $1.500 billion senior securedterm B-10 loan credit facility maturing on March 13, 2025. The4.25% senior secured termB-10 loan credit facility will bear interest at LIBOR plus an applicable marginnotes due 2019, all $3.000 billion outstanding aggregate principal amount of 2.00% or a base rate plus an applicable margin of 1.00%, compared to applicable margins of 2.25% and 1.25%, respectively, under the6.50% senior secured termB-8 loan credit facility.

During March 2018, we also entered into an additional joinder agreement to refinance a portionnotes due 2020 and all $1.350 billion outstanding aggregate principal amount of our existing senior securedterm B-9 loan credit facility maturing on March 18, 2023 and pay related fees and expenses with a new approximately $1.166 billion senior securedterm B-11 loan credit facility maturing on March 18, 2023. The5.875% senior secured termB-11 loan credit facilitynotes due 2022. Pretax losses on retirement of debt totaling $211 million for these redemptions will bear interest at LIBOR plus an applicable margin of 1.75% or a base rate plus an applicable margin of 0.75%, compared to applicable margins of 2.00% and 1.00%, respectively, underbe recognized during the senior secured termB-9 loan credit facility.

quarter ending September 30, 2019.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Investments of our professional liability insurance subsidiaries, to maintain statutory equity and pay claims, totaled $459$455 million and $472$409 million at June 30, 20182019 and December 31, 2017,2018, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $185$176 million and $194$183 million at June 30, 20182019 and December 31, 2017,2018, respectively. Our facilities are insured by a 100% owned insurance subsidiary for losses up to $50 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Net reserves for the self-insured professional liability risks retained were $1.499$1.597 billion and $1.409$1.509 billion at June 30, 20182019 and December 31, 2017,2018, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $442$454 million. We estimate that approximately $404$412 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
Management believes that cash flows from operations, amounts available under our senior secured credit facilities and our anticipated access to public and private debt markets will be sufficient to meet expected liquidity needs during the next 12 months.

Market Risk

We are exposed to market risk related to changes in market values of securities. The investments in our 100% owned insurance subsidiaries were $459$455 million at June 30, 2018.2019. These investments are carried at fair value, with changes in unrealized gains and losses being recorded as adjustments to other comprehensive income. At June 30, 2018,2019, we had a net unrealized gain of $4$17 million on the insurance subsidiaries’ investments.

We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our 100% owned insurance subsidiaries could be impaired by the inability to access the capital markets. Should the 100% owned insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize other-than-temporary impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.

We are also exposed to market risk related to changes in interest rates, and we periodically enter into interest rate swap agreements to manage our exposure to these fluctuations. Our interest rate swap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the swap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions. The interest payments under these agreements are settled on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income, and changes in the fair value of derivatives which have not been designated as hedges are recorded in operations.

With respect to our interest-bearing liabilities, approximately $5.240 billion of long-term debt at June 30, 2018 was subject to variable rates of interest, while the remaining balance in long-term debt of $27.952 billion at June 30, 2018 was subject to fixed rates of interest.

Both the general level of interest rates and, for the senior secured credit facilities, our leverage affect our variable interest rates. Our variable debt is comprised primarily of amounts outstanding under the senior secured credit facilities. Borrowings under the senior secured credit

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Market Risk (continued)

facilities bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% andor (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period. The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio. The average effective interest rate for our long-term debt was 5.5% and 5.3% each for the six months ended June 30, 2019 and 2018, and 2017.

respectively.

The estimated fair value of our total long-term debt was $33.649$38.773 billion at June 30, 2018.2019. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in interest rates, the potential annualized reduction to future pretax earnings would be approximately $52$45 million. To mitigate the impact of fluctuations in interest rates, we generally target a portion of our debt portfolio to be maintained at fixed rates.

We are exposed to currency translation risk related to our foreign operations. We currently do not consider the market risk related to foreign currency translation to be material to our consolidated financial statements or our liquidity.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Tax Examinations

The Internal Revenue Service began an examination of the Company’s 2016 and 2017 federal income tax returns during 2019. We are also subject to examination by federal, state and foreign taxing authorities. Management believes HCA Healthcare, Inc. and its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with 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.

Operating Data
         
 
2019
  
2018
 
Number of hospitals in operation at:
      
March 31
  
185
   
178
 
June 30
  
184
   
178
 
September 30
     
179
 
December 31
     
179
 
Number of freestanding outpatient surgical centers in operation at:
      
March 31
  
124
   
120
 
June 30
  
125
   
122
 
September 30
     
122
 
December 31
     
123
 
Licensed hospital beds at(a):
      
March 31
  
48,455
   
46,745
 
June 30
  
48,483
   
46,723
 
September 30
     
47,060
 
December 31
     
47,199
 
Weighted average licensed beds(b):
      
Quarter:
      
First
  
48,036
   
46,686
 
Second
  
48,429
   
46,667
 
Third
     
46,909
 
Fourth
     
47,159
 
Year
     
46,857
 
Average daily census(c):
      
Quarter:
      
First
  
28,966
   
28,130
 
Second
  
27,808
   
26,047
 
Third
     
25,991
 
Fourth
     
26,510
 
Year
     
26,663
 
Admissions(d):
      
Quarter:
      
First
  
523,196
   
507,873
 
Second
  
518,253
   
494,610
 
Third
     
497,899
 
Fourth
     
503,371
 
Year
     
2,003,753
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data

   2018   2017 

Number of hospitals in operation at:

    

March 31

   178    171 

June 30

   178    172 

September 30

     177 

December 31

     179 

Number of freestanding outpatient surgical centers in operation at:

    

March 31

   120    118 

June 30

   122    119 

September 30

     119 

December 31

     120 

Licensed hospital beds at(a):

    

March 31

   46,745    44,374 

June 30

   46,723    44,727 

September 30

     46,250 

December 31

     46,738 

Weighted average licensed beds(b):

    

Quarter:

    

First

   46,686    44,362 

Second

   46,667    44,605 

Third

     45,887 

Fourth

     46,636 

Year

     45,380 

Average daily census(c):

    

Quarter:

    

First

   28,130    26,699 

Second

   26,047    25,353 

Third

     25,653 

Fourth

     26,304 

Year

     26,000 

Admissions(d):

    

Quarter:

    

First

   507,873    485,761 

Second

   494,610    473,174 

Third

     482,557 

Fourth

     495,121 

Year

     1,936,613 

Equivalent admissions(e):

    

Quarter:

    

First

   849,164    812,192 

Second

   851,047    809,367 

Third

     818,887 

Fourth

     845,986 

Year

     3,286,432 
 (continued)

         
 
2019
  
2018
 
Equivalent admissions(e):
      
Quarter:
      
First
  
889,956
   
849,164
 
Second
  
903,419
   
851,047
 
Third
     
854,940
 
Fourth
     
865,255
 
Year
     
3,420,406
 
Average length of stay (days)(f):
      
Quarter:
      
First
  
5.0
   
5.0
 
Second
  
4.9
   
4.8
 
Third
     
4.8
 
Fourth
     
4.8
 
Emergency room visits(g):
      
Quarter:
      
First
  
2,287,440
   
2,302,112
 
Second
  
2,253,337
   
2,148,338
 
Third
     
2,139,375
 
Fourth
     
2,174,606
 
Year
     
8,764,431
 
Outpatient surgeries(h)*:
      
Quarter:
      
First
  
240,846
   
232,483
 
Second
  
253,441
   
246,013
 
Third
     
236,801
 
Fourth
     
256,240
 
Year
     
971,537
 
Inpatient surgeries(i)*:
      
Quarter:
      
First
  
137,363
   
135,036
 
Second
  
140,473
   
137,403
 
Third
     
137,156
 
Fourth
     
138,625
 
Year
     
548,220
 
Days revenues in accounts receivable(j):
      
Quarter:
      
First
  
53
   
50
 
Second
  
52
   
52
 
Third
    ��
52
 
Fourth
     
51
 

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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

   2018  2017 

Average length of stay (days)(f):

   

Quarter:

   

First

   5.0   4.9 

Second

   4.8   4.9 

Third

    4.9 

Fourth

    4.9 

Emergency room visits(g):

   

Quarter:

   

First

   2,302,112   2,163,138 

Second

   2,148,338   2,116,123 

Third

    2,130,460 

Fourth

    2,214,416 

Year

    8,624,137 

Outpatient surgeries(h):

   

Quarter:

   

First

   230,869   225,915 

Second

   244,367   234,215 

Third

    224,252 

Fourth

    250,925 

Year

    935,307 

Inpatient surgeries(i):

   

Quarter:

   

First

   136,650   133,341 

Second

   139,049   134,553 

Third

    137,187 

Fourth

    141,147 

Year

    546,228 

Days revenues in accounts receivable(j):

   

Quarter:

   

First

   50   48 

Second

   52   49 

Third

    51 

Fourth

    52 

Outpatient revenues as a % of patient revenues(k):

   

Quarter:

   

First

   37%   38% 

Second

   39%   37% 

Third

    38% 

Fourth

    39% 

Year

    38% 

         
 
2019
  
2018
 
Outpatient revenues as a % of patient revenues(k):
      
Quarter:
      
First
  
38
%  
37
%
Second
  
39
%  
39
%
Third
     
39
%
Fourth
     
38
%
Year
     
38
%
(a)Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency.
(b)Represents the average number of licensed beds, weighted based on periods owned.
(c)Represents the average number of patients in our hospital beds each day.
(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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

(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 revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues 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 number of patients treated in our emergency rooms.
(h)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. Reclassifications between inpatient surgery cases and outpatient surgery cases for 2018 have been made to conform to the 2019 presentation.
(i)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. Reclassifications between inpatient surgery cases and outpatient surgery cases for 2018 have been made to conform to the 2019 presentation.
(j)Revenues per day is calculated by dividing revenues for the quarter by the days in the quarter. Days revenues in accounts receivable is then calculated as accounts receivable at the end of the quarter divided by revenues per day.
(k)Represents the percentage of patient revenues related to patients who are not admitted to our hospitals.

*Reclassifications between inpatient surgery cases and outpatient surgery cases for the first, second and third quarters of 2018 have been made to conform to the 2019 presentation.
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Table of Contents
ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information called for by this item is provided under the caption “Market Risk” under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

HCA’s management, with participation of HCA’s chief executive officer and chief financial officer, has evaluated the effectiveness of HCA’s disclosure controls and procedures as of June 30, 2018.2019. Based on that evaluation, HCA’s chief executive officer and chief financial officer concluded that HCA’s disclosure controls and procedures were effective as of June 30, 2018.2019. There were no material changes in HCA’s internal control over financial reporting during the second quarter of 2018.

2019.

Changes in Internal Control Over Financial Reporting

During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians’ staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered 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.

Health care companies are subject to numerous investigations by various governmental agencies. Further, under the federal False Claims Act (“FCA”), private parties have the right to bring
qui 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.

Texas operates a state Medicaid program pursuant to a waiver from CMS under Section 1115 of the Social Security Act (“Program”). The Program includes uncompensated-care pools; payments from these pools are intended to defray the uncompensated costs of services provided by our and other hospitals to Medicaid eligible or uninsured individuals. Separately, we and other hospitals provide charity care services in several communities in the state. We believe that our participation is and has been consistent with the requirements of the Program. In 2018, the Civil Division of the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas requested information about whether the Program, as operated in Harris County, complied with the laws and regulations applicable to provider related donations, and the Company cooperated with that request. On May 21, 2019, a
qui tam
lawsuit asserting violations of the FCA and the Texas Medicaid Fraud Prevention Act related to the Program, as operated in Harris County, was unsealed by the U.S. District Court for the Southern District of Texas. Both the federal and state governments declined to intervene in the
qui tam
lawsuit, and the Company has not yet been served with the complaint. We cannot predict what effect, if any, the
qui tam
lawsuit could have on the Company.
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Table of Contents
ITEM 1A.    RISK FACTORS

Reference is made to the factors set forth under the caption “Forward-Looking Statements” in Part I, Item 2 of this quarterly report onForm
 10-Q
and other risk factors described in our annual report onForm
 10-K
for the year ended December 31, 2017,2018, which are incorporated herein by reference. There have not been any material changes to the risk factors previously disclosed in our annual report onForm
 10-K
for the year ended December 31, 2017.

2018.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During January 2019, our Board of Directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During the quarter ended June 30, 2018,2019, we repurchased 4,669,4741,928,157 shares of our common stock at an average price of $100.54$125.56 per share through market purchases pursuant to the $2 billion share repurchase program authorized during October 2017.January 2019. At June 30, 2018,2019, we had $910 million$1.753 billion of repurchase authorization available under the October 2017January 2019 authorization.

The following table provides certain information with respect to our repurchases of common stock from April 1, 20182019 through June 30, 20182019 (dollars in millions, except per share amounts).

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		 

April 1, 2018 through April 30, 2018

   1,742,373   $97.04    1,742,373   $1,210 

May 1, 2018 through May 31, 2018

   1,674,941   $100.55    1,674,941   $1,042 

June 1, 2018 through June 30, 2018

   1,252,160   $105.40    1,252,160   $910 
  

 

 

     

 

 

   

Total for second quarter 2018

   4,669,474   $100.54    4,669,474   $910 
  

 

 

     

 

 

   

                 
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
 
April 1, 2019 through April 30, 2019
  
745,636
  $
124.81
   
745,636
  $
1,902
 
May 1, 2019 through May 31, 2019
  
555,252
  $
124.33
   
555,252
  $
1,833
 
June 1, 2019 through June 30, 2019
  
627,269
  $
127.54
   
627,269
  $
1,753
 
                 
Total for second quarter 2019
  
1,928,157
  $
125.56
   
1,928,157
  $
1,753
 
                 
On July 25, 2018,30, 2019, our Board of Directors declared a quarterly dividend of $0.35$0.40 per share on our common stock payable on September 28, 201830, 2019 to stockholders of record on September 4, 2018.3, 2019. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Our ability to declare future dividends may also from time to time be limited by the terms of our debt agreements.

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Table of Contents
ITEM 6.    EXHIBITS

(a) List of Exhibits:

 31.1 — 

        3.1
—
Amended and Restated Certificate of Incorporation of the Company (restated for SEC filing purposes only).
        3.2
—
Amended and Restated Bylaws of the Company (restated for SEC filing purposes only).
        4.1
—
Supplemental Indenture No. 23, dated as of June 12, 2019, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed June 12, 2019 (File No. 001-11239), and incorporated herein by reference).
        4.2
—
Supplemental Indenture No. 24, dated as of June 12, 2019, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed June 12, 2019 (File No. 001-11239), and incorporated herein by reference).
        4.3
—
Supplemental Indenture No. 25, dated as of June 12, 2019, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K filed June 12, 2019 (File No. 001-11239), and incorporated herein by reference).
        4.4
—
Form of 4 1/8% Senior Secured Notes due 2029 (included in Exhibit 4.1).
        4.5
—
Form of 5 1/8% Senior Secured Notes due 2039 (included in Exhibit 4.2).
        4.6
—
Form of 5 1/4% Senior Secured Notes due 2049 (included in Exhibit 4.3).
        4.7
—
Additional Receivables Intercreditor Agreement, dated as of June 12, 2019, by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as First Lien Collateral Agent (filed as Exhibit 4.11 to the Company’s Current Report on Form 8-K filed June 12, 2019 (File No. 001-11239), and incorporated herein by reference).
      10.1
—
HCA Healthcare, Inc. 2019 Senior Officer Performance Excellence Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 2, 2019 (File No. 001-11239), and incorporated herein by reference).*
      31.1
—
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 31.2 — 

      31.2
—
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

 32 — 

      32
—
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 101 — 

      101
—
The following financial information from our quarterly report onForm
 10-Q
for the quarters and six months ended June 30, 20182019 and 2017,2018, filed with the SEC on August 3, 2018,2, 2019, formatted in Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at June 30, 20182019 and December 31, 2017,2018, (ii) the condensed consolidated income statements for the quarters and six months ended June 30, 20182019 and 2017,2018, (iii) the condensed consolidated comprehensive income statements for the quarters and six months ended June 30, 2019 and 2018, (iv) the condensed consolidated statements of stockholders’ deficit for the quarters and 2017, (iv)six months ended June 30, 2019 and 2018, (v) the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 and 2017 and (v)(vi) the notes to condensed consolidated financial statements.

The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
      104
—
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, formatted in Inline XBRL (included in Exhibit 101).

*Management compensatory plan or arrangement

Table of Contents
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HCA Healthcare, Inc.

By:

 

By:
/S/ WILLIAMs/ 
William B. RUTHERFORD

Rutherford
 
William B. Rutherford
 
Executive Vice President and Chief Financial Officer

Date: August 3, 2018

2, 2019

46