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 September 30, 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 value
 
HCA
 HCA
New 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
 S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit 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” in Rule
 12b-2
of the Exchange Act.
Large accelerated filer
 
☒
 
Accelerated filer
 
☐
Non-accelerated
filer
 
☐
 
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 in Rule
 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 JulyOctober 31, 2019
Voting common stock, $.01 par value
 
340,982,800339,178,300 shares
 
 
 
Table of Contents
 
HCA HEALTHCARE, INC.
Form 10-Q
June
Form
 10-Q
September 30, 2019
  
Page of
Form
 10-Q
Part I.
 
Financial Information
 
       
Item 1.
 
Financial Statements (Unaudited):
   
       
 
Condensed Consolidated Income Statements — for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018
  
2
 
       
 
Condensed Consolidated Comprehensive Income Statements — for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018
  
3
 
       
 
Condensed Consolidated Balance Sheets — JuneSeptember 30, 2019 and December 31, 2018
  
4
 
       
 
Condensed Consolidated Statements of Stockholders’ Deficit — for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018
  
5
 
       
 
Condensed Consolidated Statements of Cash Flows — for the sixnine months ended JuneSeptember 30, 2019 and 2018
  
6
 
       
 
Notes to Condensed Consolidated Financial Statements
7
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  28
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
7
43
Item 4.
Controls and Procedures
43 
       
Part II.
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
29
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
45
Item 4.
Controls and Procedures
45
Part II.
Other Information
   
       
Item 1.
 
Legal Proceedings
  43
45
 
       
Item 1A.
 
Risk Factors
  44
46
 
       
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
  44
46
 
       
Item 6.
 
Exhibits
  45
47
 
     
Signatures
  46
48
 
 
1
 
Table of Contents
 
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE QUARTERS AND SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
Unaudited
(Dollars in millions, except per share amounts)
                
 
Quarter
 
Six Months
  
Quarter
 
Nine Months
 
 
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
 
Revenues
 $
12,602
  $
11,529
  $
25,119
  $
22,952
  $
12,694
  $
11,451
  $
37,813
  $
34,403
 
  
Salaries and benefits
  
5,837
   
5,274
   
11,484
   
10,563
   
5,971
   
5,377
   
17,455
   
15,940
 
Supplies
  
2,118
   
1,917
   
4,159
   
3,832
   
2,090
   
1,890
   
6,249
   
5,722
 
Other operating expenses
  
2,362
   
2,118
   
4,661
   
4,228
   
2,352
   
2,097
   
7,013
   
6,325
 
Equity in earnings of affiliates
  
(8
)  
(7
)  
(19
)  
(16
)  
(4
)  
(9
)  
(23
)  
(25
)
Depreciation and amortization
  
636
   
562
   
1,255
   
1,115
   
647
   
582
   
1,902
   
1,697
 
Interest expense
  
477
   
436
   
938
   
867
   
448
   
442
   
1,386
   
1,309
 
Gains on sales of facilities
  
(18
)  
(9
)  
(17
)  
(414
)  
—
   
(6
)  
(17
)  
(420
)
Losses on retirement of debt
  
211
   
9
   
211
   
9
 
                        
  
11,404
   
10,291
   
22,461
   
20,175
   
11,715
   
10,382
   
34,176
   
30,557
 
                        
Income before income taxes
  
1,198
   
1,238
   
2,658
   
2,777
   
979
   
1,069
   
3,637
   
3,846
 
Provision for income taxes
  
271
   
272
   
550
   
529
   
215
   
173
   
765
   
702
 
                        
Net income
  
927
   
966
   
2,108
   
2,248
   
764
   
896
   
2,872
   
3,144
 
Net income attributable to noncontrolling interests
  
144
   
146
   
286
   
284
   
152
   
137
   
438
   
421
 
                        
Net income attributable to HCA Healthcare, Inc.
 $
783
  $
820
  $
1,822
  $
1,964
  $
612
  $
759
  $
2,434
  $
2,723
 
                        
Per share data:
                        
Basic earnings
 $
2.29
  $
2.35
  $
5.32
  $
5.62
  $
1.80
  $
2.20
  $
7.12
  $
7.82
 
Diluted earnings
 $
2.25
  $
2.31
  $
5.22
  $
5.50
  $
1.76
  $
2.15
  $
6.98
  $
7.65
 
Shares used in earnings per share calculations (in millions):
                        
Basic
  
342.170
   
348.615
   
342.513
   
349.726
   
340.789
   
345.823
   
341.932
   
348.411
 
Diluted
  
348.373
   
355.039
   
349.334
   
357.388
   
347.487
   
353.639
   
348.712
   
356.124
 
 
 
 
 
The accompanying 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 SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
Unaudited
(Dollars in millions)
                 
 
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
 
                 
                 
 
Quarter
  
Nine Months
 
 
2019
  
2018
  
2019
  
2018
 
Net income
 $
764
  $
896
  $
2,872
  $
3,144
 
Other comprehensive income (loss) before taxes:
            
Foreign currency translation
  
(30
)  
(13
)  
(48
)  
(35
)
                 
Unrealized gains (losses) on
available-for-sale
securities
  
2
   
(2
)  
16
   
(8
)
                 
Defined benefit plans
  
—
   
—
   
—
   
—
 
Pension costs included in salaries and benefits
  
3
   
5
   
10
   
15
 
                 
  
3
   
5
   
10
   
15
 
                 
Change in fair value of derivative financial instruments
  
(7
)  
10
   
(59
)  
60
 
Interest benefits included in interest expense
  
(4
)  
(3
)  
(15
)  
(5
)
                 
  
(11
)  
7
   
(74
)  
55
 
                 
Other comprehensive (loss) income before taxes
  
(36
)  
(3
)  
(96
)  
27
 
Income taxes (benefits) related to other comprehensive income items
  
(6
)  
2
   
(16
)  
15
 
                 
Other comprehensive (loss) income
  
(30
)  
(5
)  
(80
)  
12
 
                 
Comprehensive income
  
734
   
891
   
2,792
   
3,156
 
Comprehensive income attributable to noncontrolling interests
  
152
   
137
   
438
   
421
 
                 
Comprehensive income attributable to HCA Healthcare, Inc.
 $
582
  $
754
  $
2,354
  $
2,735
 
                 
 
 
 
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
 
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in millions)
        
 
June 30,
2019
  
December 31,
2018
  
September 30,
2019
  
December 31,
2018
 
ASSETS
            
Current assets:
            
Cash and cash equivalents
 $
2,430
  $
502
  $
559
  $
502
 
Accounts receivable
  
7,219
   
6,789
   
7,131
   
6,789
 
Inventories
  
1,826
   
1,732
   
1,769
   
1,732
 
Other
  
1,394
   
1,190
   
1,310
   
1,190
 
            
  
12,869
   
10,213
   
10,769
   
10,213
 
  
Property and equipment, at cost
  
45,369
   
42,965
   
46,295
   
42,965
 
Accumulated depreciation
  
(23,902
)  
(23,208
)  
(24,293
)  
(23,208
)
            
  
21,467
   
19,757
   
22,002
   
19,757
 
  
Investments of insurance subsidiaries
  
342
   
362
   
357
   
362
 
Investments in and advances to affiliates
  
247
   
232
   
243
   
232
 
Goodwill and other intangible assets
  
8,140
   
7,953
   
8,160
   
7,953
 
Right-of-use
operating lease assets
  
1,787
   
—
   
1,770
   
—
 
Other
  
597
   
690
   
611
   
690
 
            
 $
45,449
  $
39,207
  $
43,912
  $
39,207
 
              
LIABILITIES AND STOCKHOLDERS’ DEFICIT
            
Current liabilities:
            
Accounts payable
 $
2,609
  $
2,577
  $
2,610
  $
2,577
 
Accrued salaries
  
1,497
   
1,580
   
1,669
   
1,580
 
Other accrued expenses
  
2,782
   
2,624
   
2,697
   
2,624
 
Long-term debt due within one year
  
2,073
   
788
   
148
   
788
 
            
  
8,961
   
7,569
   
7,124
   
7,569
 
  
Long-term debt, less debt issuance costs
and discounts
of $252 and $157
  
34,120
   
32,033
 
Long-term debt, less debt issuance costs and discounts of $244 and $157
  
34,097
   
32,033
 
Professional liability risks
  
1,354
   
1,275
   
1,349
   
1,275
 
Right-of-use
operating lease obligations
  
1,460
   
—
   
1,440
   
—
 
Income taxes and other liabilities
  
1,324
   
1,248
   
1,349
   
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
 
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 340,053,100 shares in 2019 and 342,895,200 shares in 2018
  
3
   
3
 
Accumulated other comprehensive loss
  
(431
)  
(381
)  
(461
)  
(381
)
Retained deficit
  
(3,474
)  
(4,572
)  
(3,107
)  
(4,572
)
            
Stockholders’ deficit attributable to HCA Healthcare, Inc.
  
(3,902
)  
(4,950
)  
(3,565
)  
(4,950
)
Noncontrolling interests
  
2,132
   
2,032
   
2,118
   
2,032
 
            
  
(1,770
)  
(2,918
)  
(1,447
)  
(2,918
)
            
 $
45,449
  $
39,207
  $
43,912
  $
39,207
 
              
 
 
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
 
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
FOR THE QUARTERS AND SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
Unaudited
(Dollars in millions)
              
 
Equity (Deficit) Attributable to HCA Healthcare, Inc.
  
Equity
Attributable to
Noncontrolling
Interests
  
Total
   
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
   
Common Stock
  
Capital in
Excess of
Par
Value
  
Accumulated
Other
Comprehensive
Loss
  
Retained
Deficit
 
 
Shares
(in millions)
  
Par
Value
   
Shares
(in millions)
  
Par
Value
 
Balances, December 31, 2017
  
350.092
  $
4
  $
—
  $
(278
) $
(6,532
) $
1,811
  $
(4,995
)    $
4
  $
—
  $
(278
) $
(6,532
) $
1,811
  $
(4,995
)
Comprehensive income
           
81
   
1,144
   
138
   
1,363
            
81
   
1,144
   
138
   
1,363
 
Repurchase of common stock
  
(4.370
)     
114
      
(537
)     
(423
)  
(4.370
)     
114
      
(537
)     
(423
)
Share-based benefit plans
  
5.265
      
(114
)           
(114
)  
5.265
      
(114
)           
(114
)
Cash dividends declared ($0.35 per share)
              
(126
)     
(126
)              
(126
)     
(126
)
Distributions
                 
(92
)  
(92
)                 
(92
)  
(92
)
Other
                 
(47
)  
(47
)                 
(47
)  
(47
)
                                          
Balances, March 31, 2018
  
350.987
   
4
   
—
   
(197
)  
(6,051
)  
1,810
   
(4,434
)  
350.987
   
4
   
—
   
(197
)  
(6,051
)  
1,810
   
(4,434
)
Comprehensive income
           
(64
)  
820
   
146
   
902
            
(64
)  
820
   
146
   
902
 
Repurchase of common stock
  
(4.670
)  
(1
)  
(93
)     
(376
)     
(470
)  
(4.670
)  
(1
)  
(93
)     
(376
)     
(470
)
Share-based benefit plans
  
0.443
      
96
            
96
   
0.443
      
96
            
96
 
Cash dividends declared ($0.35 per share)
              
(124
)     
(124
)              
(124
)     
(124
)
Distributions
                 
(93
)  
(93
)                 
(93
)  
(93
)
Other
        
(3
)        
1
   
(2
)        
(3
)        
1
   
(2
)
                                          
Balances, June 30, 2018
  
346.760
   
3
   
—
   
(261
)  
(5,731
)  
1,864
   
(4,125
)  
346.760
   
3
   
—
   
(261
)  
(5,731
)  
1,864
   
(4,125
)
Comprehensive income
           
(5
)  
759
   
137
   
891
            
(5
)  
759
   
137
   
891
 
Repurchase of common stock
  
(2.518
)     
(55
)     
(247
)     
(302
)  
(2.518
)     
(55
)     
(247
)     
(302
)
Share-based benefit plans
  
0.844
      
54
            
54
   
0.844
      
54
            
54
 
Cash dividends declared ($0.35 per share)
              
(123
)     
(123
)              
(123
)     
(123
)
Distributions
                 
(130
)  
(130
)                 
(130
)  
(130
)
Other
        
1
         
4
   
5
         
1
         
4
   
5
 
                                          
Balances, September 30, 2018
  
345.086
   
3
   
—
   
(266
)  
(5,342
)  
1,875
   
(3,730
)  
345.086
   
3
   
—
   
(266
)  
(5,342
)  
1,875
   
(3,730
)
Comprehensive income
           
(20
)  
1,064
   
181
   
1,225
            
(20
)  
1,064
   
181
   
1,225
 
Repurchase of common stock
  
(2.512
)     
(69
)     
(266
)     
(335
)  
(2.512
)     
(69
)     
(266
)     
(335
)
Share-based benefit plans
  
0.321
      
79
            
79
   
0.321
      
79
            
79
 
Cash dividends declared ($0.35 per share)
              
(123
)     
(123
)              
(123
)     
(123
)
Distributions
                 
(126
)  
(126
)                 
(126
)  
(126
)
Other
        
(10
)  
(95
)  95
   
102
   
92
         
(10
)  
(95
)  
95
   
102
   
92
 
                                          
Balances, December 31, 2018
  
342.895
   
3
   
—
   
(381
)  
(4,572
)  
2,032
   
(2,918
)  
342.895
   
3
   
—
   
(381
)  
(4,572
)  
2,032
   
(2,918
)
Comprehensive income
           
7
   
1,039
   
142
   
1,188
            
7
   
1,039
   
142
   
1,188
 
Repurchase of common stock
  
(2.106
)     
32
      
(310
)     
(278
)  
(2.106
)     
32
      
(310
)     
(278
)
Share-based benefit plans
  
2.242
      
(29
)           
(29
)  
2.242
      
(29
)           
(29
)
Cash dividends declared ($0.40 per share)
              
(140
)     
(140
)              
(140
)     
(140
)
Distributions
                 
(136
)  
(136
)                 
(136
)  
(136
)
Other
        
(3
)        
61
   
58
         
(3
)        
61
   
58
 
                                          
Balances, March 31, 2019
  
343.031
   
3
   
—
   
(374
)  
(3,983
)  
2,099
   
(2,255
)  
343.031
   
3
   
—
   
(374
)  
(3,983
)  
2,099
   
(2,255
)
Comprehensive income
           
(57
)  
783
   
144
   
870
            
(57
)  
783
   
144
   
870
 
Repurchase of common stock
  
(1.928
)     
(107
)     
(135
)     
(242
)  
(1.928
)     
(107
)     
(135
)     
(242
)
Share-based benefit plans
  
0.414
      
118
            
118
   
0.414
      
118
            
118
 
Cash dividends declared ($0.40 per share)
              
(139
)     
(139
)              
(139
)     
(139
)
Distributions
                 
(111
)  
(111
)                 
(111
)  
(111
)
Other
        
(11
)           
(11
)        
(11
)           
(11
)
                                          
Balances, June 30, 2019
  
341.517
  $
3
  $
—
  $
(431
) $
(3,474
) $
2,132
  $
(1,770
)  
341.517
   
3
   
—
   
(431
)  
(3,474
)  
2,132
   
(1,770
)
Comprehensive income
           
(30
)  
612
   
152
   
734
 
Repurchase of common stock
  
(1.846
)     
(132
)     
(107
)     
(239
)
Share-based benefit plans
  
0.382
      
128
            
128
 
Cash dividends declared ($0.40 per share)
              
(138
)     
(138
)
Distributions
                 
(157
)  
(157
)
Other
        
4
         
(9
)  
(5
)
                                                 
Balances, September 30, 2019
  
340.053
  $
3
  $
—
  $
(461
) $
(3,107
) $
2,118
  $
(1,447
)
                     
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
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HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019 AND 2018
Unaudited
(Dollars in millions)
        
 
2019
  
2018
  
2019
  
2018
 
Cash flows from operating activities:
            
Net income
 $
2,108
  $
2,248
  $
2,872
  $
3,144
 
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
)  
(93
)  
(161
)
Inventories and other assets
  
(231
)  
(200
)  
(95
)  
(136
)
Accounts payable and accrued expenses
  
(238
)  
31
   
(118
)  
150
 
Depreciation and amortization
  
1,255
   
1,115
   
1,902
   
1,697
 
Income taxes
  
27
   
118
   
51
   
—
 
Gains on sales of facilities
  
(17
)  
(414
)  
(17
)  
(420
)
Losses on retirement of debt
  
211
   
9
 
Amortization of debt issuance costs and discounts  
16
   
15
   
23
   
23
 
Share-based compensation
  
158
   
134
   
263
   
204
 
Other
  
67
   
51
   
98
   
76
 
            
Net cash provided by operating activities
  
2,971
   
2,865
   
5,097
   
4,586
 
            
Cash flows from investing activities:
            
Purchase of property and equipment
  
(1,745
)  
(1,574
)  
(2,884
)  
(2,420
)
Acquisition of hospitals and health care entities
  
(1,504
)  
(538
)  
(1,592
)  
(1,056
)
Disposal of hospitals and health care entities
  
41
   
799
   
49
   
802
 
Change in investments
  
59
   
23
   
35
   
65
 
Other
  
36
   
(25
)  
17
   
(6
)
            
Net cash used in investing activities
  
(3,113
)  
(1,315
)  
(4,375
)  
(2,615
)
            
Cash flows from financing activities:
            
Issuances of long-term debt
  
6,451
   
—
   
6,451
   
2,000
 
Net change in revolving bank credit facilities
  
(3,040
)  
210
   
(30
)  
(330
)
Repayment of long-term debt
  
(98
)  
(101
)  
(5,289
)  
(1,652
)
Distributions to noncontrolling interests
  
(247
)  
(185
)  
(404
)  
(315
)
Payment of debt issuance costs
  
(63
)  
(2
)  
(71
)  
(24
)
Payment of cash dividends
  
(278
)  
(245
)  
(414
)  
(366
)
Repurchases of common stock
  
(520
)  
(893
)  
(759
)  
(1,195
)
Other
  
(135
)  
(192
)  
(145
)  
(232
)
            
Net cash provided by (used in) financing activities
  
2,070
   
(1,408
)
Net cash used in financing activities
  
(661
)  
(2,114
)
            
Effect of exchange rate changes on cash and cash equivalents
  
—
   
(6
)  
(4
)  
(11
)
            
Change in cash and cash equivalents
  
1,928
   
136
   
57
   
(154
)
Cash and cash equivalents at beginning of period
  
502
   
732
   
502
   
732
 
            
Cash and cash equivalents at end of period
 $
2,430
  $
868
  $
559
  $
578
 
              
Interest payments
 $
910
  $
873
  $
1,492
  $
1,422
 
Income tax payments, net
 $
523
  $
411
  $
714
  $
702
 
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
Table of Contents
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 JuneSeptember 30, 2019, these affiliates owned and operated 184 hospitals, 125 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 21 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 to Form
 10-Q
and Article 10 of Regulation
 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 $94$88 million and $83$90 million for the quarters ended JuneSeptember 30, 2019 and 2018, respectively, and $180$268 million and $164$254 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. Operating results for the quarter and sixnine months ended JuneSeptember 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form
 10-K
for the year ended December 31, 2018.
Revenues
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 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 sixnine months ended JuneSeptember 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)
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.
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 sixnine months ended JuneSeptember 30, 2019 and 2018 are summarized in the following table (dollars in millions):
        
 
Quarter
  
Quarter
 
 
2019
  
Ratio
  
2018
  
Ratio
  
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 $
2,635
   
20.9
% $
2,425
   
21.0
% $
2,592
   
20.4
% $
2,404
   
21.0
%
Managed Medicare
  
1,595
   
12.7
   
1,345
   
11.7
   
1,615
   
12.7
   
1,344
   
11.7
 
Medicaid
  
416
   
3.3
   
357
   
3.1
   
361
   
2.8
   
338
   
3.0
 
Managed Medicaid
  
554
   
4.4
   
586
   
5.1
   
641
   
5.0
   
622
   
5.4
 
Managed care and insurers
  
6,425
   
50.9
   
5,993
   
51.9
   
6,554
   
51.7
   
6,026
   
52.6
 
International (managed care and insurers)
  
284
   
2.3
   
295
   
2.6
   
282
   
2.2
   
273
   
2.4
 
Other
  
693
   
5.5
   
528
   
4.6
   
649
   
5.2
   
444
   
3.9
 
                        
Revenues
 $
12,602
   
100.0
% $
11,529
   
100.0
% $
12,694
   
100.0
% $
11,451
   
100.0
%
                        
 
Nine Months
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 $
7,997
   
21.2
% $
7,353
   
21.4
%
Managed Medicare
  
4,799
   
12.7
   
4,088
   
11.9
 
Medicaid
  
1,124
   
3.0
   
976
   
2.8
 
Managed Medicaid
  
1,808
   
4.8
   
1,769
   
5.1
 
Managed care and insurers
  
19,405
   
51.1
   
18,081
   
52.6
 
International (managed care and insurers)
  
863
   
2.3
   
873
   
2.5
 
Other
  
1,817
   
4.9
   
1,263
   
3.7
 
                 
Revenues
 $
37,813
   
100.0
% $
34,403
   
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
 
Table of Contents
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 sixnine months ended JuneSeptember 30, 2019 and 2018 follows (dollars in millions):
        
 
Quarter
 
Six Months
  
Quarter
 
Nine Months
 
 
2019
  
2018
  
2019
  
2018
  
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
  $
11,060
  $
9,946
  $
32,619
  $
29,684
 
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
12.2
%  
12.6
%  
12.0
%  
12.5
%  
12.3
%  
12.7
%  
12.1
%  
12.6
%
Total uncompensated care
 $
7,695
  $
6,486
  $
14,780
  $
12,738
  $
7,923
  $
6,786
  $
22,703
  $
19,524
 
Multiply by the
cost-to-charges
ratio
  
12.2
%  
12.6
%  
12.0
%  
12.5
%  
12.3
%  
12.7
%  
12.1
%  
12.6
%
                        
Estimated cost of total uncompensated care
 $
938
  $
817
  $
1,774
  $
1,592
  $
975
  $
862
  $
2,747
  $
2,460
 
                            
Total uncompensated care as a percentage of the sum of revenues and total uncompensated care was 37.9%38.4% and 36.0%37.2% for the quarters ended JuneSeptember 30, 2019 and 2018, respectively, and 37.0%37.5% and 35.7%36.2% for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. The total uncompensated care amounts include charity care of $3.311$3.425 billion and $1.977$2.314 billion, and the related estimated costs of charity care were $403$421 million and $249$295 million, for the quarters ended JuneSeptember 30, 2019 and 2018, respectively, and $6.216respectively. The total uncompensated care amounts include charity care of $9.641 billion and $3.856$6.170 billion, and the related estimated costs of charity care were $746 million$1.167 billion and $482$777 million, for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2 — ACQUISITIONS AND DISPOSITIONS
During the sixnine months ended JuneSeptember 30, 2019, we paid $1.397$1.399 billion to acquire a
seven
-hospital 7-hospital health system in North Carolina and $107$193 million to acquire other nonhospital health care entities. During the sixnine months ended JuneSeptember 30, 2018, we paid $360$788 million to acquire a2 hospital facilityfacilities and $178$268 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$231 million for the sixnine months ended JuneSeptember 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.significant
.
During the sixnine months ended JuneSeptember 30, 2019, we received proceeds of $25
 million and recognized a net pretax loss of $1
 million related to a sale of a hospital facility in one of our Louisiana markets. During the sixnine months ended JuneSeptember 30, 2019, we also received proceeds of $16$24
 million and recognized a net pretax gain of $18
 million related to sales of real estate and other investments. During the sixnine months ended JuneSeptember 30, 2018, we received proceeds of $758
 million and recognized a netnet​​​​​​​ pretax gain of $372 million related to the sale of the two hospital facilities in our Oklahoma market. During the sixnine months ended June
September 30, 2018, we also received
proceeds of $41$44 million and recognized a net pretax gain of $42$
48
 million related to sales of real estate and other investments.
9
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 — INCOME TAXES
Our provision for income taxes for the quarters ended JuneSeptember 30, 2019 and 2018 was $271$215 million and $272$173 million, respectively, and the effective tax rates were 25.7%26.0% and 24.9%18.6%, respectively. Our provision for income taxes for the sixnine months ended JuneSeptember 30, 2019 and 2018 was $550$765 million and $529$702 million, respectively, and the effective tax rates were 23.2%23.9% and 21.2%20.5%, respectively. Our provision for income taxes included tax benefits related to the settlement of employee equity awards of $
4
$3 million and $23 million for each of the quarters ended JuneSeptember 30, 2019 and 2018, respectively, and $
53
$56 million and $96$119 million for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. We also recorded a reduction to the provision for income taxes of $28 million during the quarter ended September 30, 2018 for tax credits related to certain 2017 hurricane-related expenses.
Our liability for unrecognized tax benefits was $510$540 million, including accrued interest of $60$56 million, as of JuneSeptember 30, 2019 ($435 million and $48 million, respectively, as of December 31, 2018). Unrecognized tax benefits of $153$147 million ($137 million as of December 31, 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 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.
The following table sets forth the computation of basic and diluted earnings per share for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018 (dollars and shares in millions, except per share amounts):
        
 
Quarter
 
Six Months
  
Quarter
 
Nine Months
 
 
2019
  
2018
  
2019
  
2018
  
2019
  
2018
  
2019
  
2018
 
Net income attributable to HCA Healthcare, Inc.
 $
783
  $
820
  $
1,822
  $
1,964
  $
612
  $
759
  $
2,434
  $
2,723
 
                 
Weighted average common shares outstanding
  
342.170
   
348.615
   
342.513
   
349.726
   
340.789
   
345.823
   
341.932
   
348.411
 
Effect of dilutive incremental shares
  
6.203
   
6.424
   
6.821
   
7.662
   
6.698
   
7.816
   
6.780
   
7.713
 
                        
Shares used for diluted earnings per share
  
348.373
   
355.039
   
349.334
   
357.388
   
347.487
   
353.639
   
348.712
   
356.124
 
                            
Earnings per share:
                        
Basic earnings
 $
2.29
  $
2.35
  $
5.32
  $
5.62
  $
1.80
  $
2.20
  $
7.12
  $
7.82
 
Diluted earnings
 $
2.25
  $
2.31
  $
5.22
  $
5.50
  $
1.76
  $
2.15
  $
6.98
  $
7.65
 
 
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 JuneSeptember 30, 2019 and December 31, 2018 follows (dollars in millions):
        
 
June 30, 2019
  
September 30, 2019
 
 
Amortized
Cost
  
Unrealized
Amounts
  
Fair
Value
   
Amortized
Cost
  
Unrealized
Amounts
  
Fair
Value
 
 
Gains
  
Losses
  
Gains
  
Losses
 
Debt securities
 $
334
  $
17
  $
—
  $
351
  $
337
  $  $
—
  $
356
 
Money market funds and other
  
104
   
—
   
—
   
104
   
97
   
—
   
—
   
97
 
                        
 $
438
  $
17
  $
—
   
455
  $
434
  $
19
  $
—
   
453
 
                         
Amounts classified as current assets
           
(113
)           
(96
)
                  
Investment carrying value
          $
342
           $
357
 
                   
 
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 JuneSeptember 30, 2019 and December 31, 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).
Scheduled maturities of investments in debt securities at JuneSeptember 30, 2019 were as follows (dollars in millions):
    
 
Amortized
Cost
  
Fair
Value
  
Amortized
Cost
  
Fair
Value
 
Due in one year or less
 $
3
  $
3
  $
12
  $
12
 
Due after one year through five years
  
74
   
77
   
76
   
79
 
Due after five years through ten years
  
192
   
203
   
183
   
195
 
Due after ten years
  
65
   
68
   
66
   
70
 
            
 $
334
  $
351
  $
337
  $
356
 
              
The average expected maturity of the investments in debt securities at JuneSeptember 30, 2019 was 5.85.6 years, compared to the average scheduled maturity of 10.110.0 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
Table of Contents
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 JuneSeptember 30, 2019 (dollars in millions):
      
 
Notional
Amount
  
Maturity Date
  
Fair
Value
  
Notional
Amount
  
Maturity Date
  
Fair
Value
 
Pay-fixed
interest rate swaps
 $
2,000
   
December 2021
  $
7
  $
2,000
   
December 2021
  $
(1
)
Pay-fixed
interest rate swaps
  
500
   
December 2022
   
(7
)  
500
   
December 2022
   
(10
)
During the next 12 months, we estimate $7$2 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 sixnine months ended JuneSeptember 30, 2019 (dollars in millions):
      
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
  
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
  $
45
   
Interest expense
  $
15
 
Credit-risk-related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2019, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2019, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $
11
 million.

 
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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 JuneSeptember 30, 2019 and December 31, 2018, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.
The following tables summarize our assets measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
                 
 
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
  $
—
 
                 
13
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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 following tables summarize our assets and liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
 
September 30, 2019
 
    
Fair Value Measurements Using
 
 
Fair Value
  
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
  
Significant Other
Observable Inputs
(Level 2)
  
Significant
Unobservable Inputs
(Level 3)
 
Assets:
            
Investments of insurance subsidiaries:
            
Debt securities
 $
356
  $
—
  $
356
  $
—
 
Money market funds and other
  
97
   
97
   
—
   
—
 
                 
Investments of insurance subsidiaries
  
453
   
97
   
356
   
—
 
Less amounts classified as current assets
  
(96
)  
(96
)  
—
   
—
 
                 
 $
357
  $
1
  $
356
  $
—
 
                 
Liabilities:
            
Interest rate swaps (Income taxes and other liabilities)
 $
11
  $
—
  $
11
  $
—
 
 
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)
 
Assets:
            
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 $38.773$37.162 billion and $32.887 billion at JuneSeptember 30, 2019 and December 31, 2018, respectively, compared to carrying amounts, excluding debt issuance costs
and discounts,
, aggregating $36.445$34.489 billion and $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.maturities
.

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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 — LONG-TERM DEBT
A summary of long-term debt at JuneSeptember 30, 2019 and December 31, 2018, including related interest rates at JuneSeptember 30, 2019, follows (dollars in millions):
    
 
June 30,
2019
  
December 31,
2018
  
September 30,
2019
  
December 31,
2018
 
Senior secured asset-based revolving credit facility
 $
—
  $
3,040
 
Senior secured asset-based revolving credit facility (effective interest rate of 3.3%)
 $
3,010
  $
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
 
Senior secured term loan facilities (effective interest rate of 3.5%)
  
3,739
   
3,801
 
Senior secured notes (effective interest rate of 5.1%)
  
13,850
   
13,800
 
Other senior secured debt (effective interest rate of 5.5%)
  
641
   
585
   
638
   
585
 
            
Senior secured debt
  
23,193
   
21,226
   
21,237
   
21,226
 
Senior unsecured notes (effective interest rate of 6.3%)
  
13,252
   
11,752
   
13,252
   
11,752
 
Debt issuance costs and discounts  
(252
)  
(157
)  
(244
)  
(157
)
            
Total debt (average life of 8.2 years, rates averaging 5.5%)
  
36,193
   
32,821
 
Total debt (average life of 8.7 years, rates averaging 5.2%)
  
34,245
   
32,821
 
Less amounts due within one year
  
2,073
   
788
   
148
   
788
 
            
 
$
 
34,120
  $
32,033
  $
34,097
  $
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%4.250​​​​​​​% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.50%6.500​​​​​​​% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. Pretax lossesThe pretax loss on retirement of debt totaling $211 million for these redemptions will be recognized during the quarter ending September 30, 2019.was $211 million.
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.

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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LEASES (continued)
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.rate
.
The following table presents our lease-related assets and liabilities at JuneSeptember 30, 2019 (dollars in millions):
    
 
Balance Sheet Classification
  
June 30, 2019
  
Balance Sheet Classification
  
September 30, 2019
 
Assets:
            
Operating leases
  
Right-of-use
 operating lease assets
  $
1,787
   
Right-of-use
 operating lease assets
  $
1,770
 
Finance leases
  
Property and equipment
   
598
   
Property and equipment
   
486
 
          
Total lease assets
    $
2,385
     $
2,256
 
           
Liabilities:
            
Current:
            
Operating leases
  
Other accrued expenses
  $
339
   
Other accrued expenses
  $
344
 
Finance leases
  
Long-term debt due within one year
   
90
   
Long-term debt due within one year
   
89
 
Noncurrent:
            
Operating leases
  
Right-of-use
 operating lease obligations
   
1,460
   
Right-of-use
 operating lease obligations
   
1,440
 
Finance leases
  
Long-term debt
   
447
   
Long-term debt
   
451
 
          
Total lease liabilities
    $
2,336
     $
2,324
 
           
Weighted-average remaining term:
            
Operating leases
     
11.5 years
      
10.8 years
 
Finance leases
     
9.9 years
      
10.6 years
 
Weighted-average discount rate:
            
Operating leases(1)
     
5.5
%     
5.4
%
Finance leases
     
6.2
%     
6.1
%
 
(1)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
The following table presents certain information related to lease expense for finance and operating leases for the quarter and nine months ended September 30, 2019 (dollars in millions):
 
2019
 
 
Quarter
  
Nine
Months
 
Finance lease expense:
      
Amortization of leased assets
 $
33
  $
70
 
Interest on lease liabilities
  
9
   
24
 
Operating leases(2)
  
94
   
287
 
Short-term lease expense(2)
  
82
   
235
 
Variable lease expense(2)
  
40
   
114
 
         
 $
258
  $
730
 
         
(2)Expenses are included in “other operating expenses” in our condensed consolidated income statements.

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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LEASES (continued)
Other Information
The following table presents supplemental cash flow information for the nine months ended September 30, 2019 (dollars in millions):
     
 
2019
 
Cash paid for amounts included in the measurement of lease liabilities:
   
Operating cash flows for operating leases
 $
293
 
Operating cash flows for finance leases
  
24
 
Financing cash flows for finance leases
  
58
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
15
Maturities of Lease Liabilities
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — LEASES (continued)
The following table presents certain information relatedreconciles the undiscounted cash flows to the finance lease expense for financeliabilities and operating leases forlease liabilities recorded on the quarter and six months ended Junebalance sheet at September 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
 
         
         
 
Operating
Leases
  
Finance
Leases
 
Year 1
 $
388
  $
107
 
Year 2
  
339
   
102
 
Year 3
  
279
   
97
 
Year 4
  
221
   
57
 
Year 5
  
175
   
61
 
Thereafter
  
1,038
   
353
 
         
Total minimum lease payments
  
2,440
   
777
 
Less: amount of lease payments representing interest
  
(656
)  
(237
)
         
Present value of future minimum lease payments
  
1,784
   
540
 
Less: current obligations under leases
  
(344
)  
(89
)
         
Long-term lease obligations
 $
1,440
  $
451
 
         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.liquidity
.

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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 — CONTINGENCIES (continued)
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
. T
he Company is vigorously defending against the
lawsuit andbeing pursued by the Company has not yet been served with the complaint.relator
. 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 11 — SHARE REPURCHASESREPURCHASE TRANSACTIONS AND OTHER COMPREHENSIVE LOSS
During January 2019, our Board of Directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During the sixnine months ended JuneSeptember 30, 2019, we repurchased 4.0345.880 million shares of our common stock at an average price of $128.88$129.12 per share through market purchases pursuant to the $2.0 billion share repurchase program authorized during October 2017 (which was completed during 2019) and the $2.0 billion share repurchase program authorized during January 2019. At JuneSeptember 30, 2019, we had $1.753$1.513 billion of repurchase authorization available under the January 2019 authorization.
18
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11 — SHARE REPURCHASE TRANSACTIONS AND OTHER COMPREHENSIVE LOSS (continued)
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, 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
)
                     
                     
 
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 $4 of income taxes
  
12
   
—
   
—
   
—
   
12
 
Foreign currency translation adjustments, net of $5 income tax benefit
  
—
   
(43
)  
—
   
—
   
(43
)
Change in fair value of derivative instruments, net of $14 income tax benefit
  
—
   
—
   
—
   
(45
)  
(45
)
Expense (income) reclassified into operations from other comprehensive income, net of $2 income tax benefit and $3 of income taxes, respectively
  
—
   
—
   
8
   
(12
)  
(4
)
                     
Balances at September 30, 2019
 $
15
  $
(326
) $
(140
) $
(10
) $
(461
)
                     
 
NOTE 12 — SEGMENT AND GEOGRAPHIC INFORMATION
We operate in one line of business, which is operating hospitals and related health care entities. We operate in
two
2 geographically organized groups: the National and American Groups. The National Group includes 95 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 83 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas. We also operate
six
6 hospitals in England, and these facilities are included in the Corporate and other group.

Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 12 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)
Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, gains on sales of facilities, losses on retirement of debt, 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 depreciation and amortization for the quarters and nine months ended September 30, 2019 and 2018 are summarized in the following table (dollars in millions):
                 
 
Quarter
  
Nine Months
 
 
2019
  
2018
  
2019
  
2018
 
Revenues:
            
National Group
 $
6,398
  $
5,542
  $
19,159
  $
16,719
 
American Group
  
5,780
   
5,396
   
17,001
   
16,113
 
Corporate and other
  
516
   
513
   
1,653
   
1,571
 
                 
 $
12,694
  $
11,451
  $
37,813
  $
34,403
 
                 
Equity in earnings of affiliates:
            
National Group
 $
2
  $
(1
) $
(3
) $
(5
)
American Group
  
(10
)  
(10
)  
(32
)  
(29
)
Corporate and other
  
4
   
2
   
12
   
9
 
                 
 $
(4
) $
(9
) $
(23
) $
(25
)
                 
Adjusted segment EBITDA:
            
National Group
 $
1,270
  $
1,127
  $
4,088
  $
3,593
 
American Group
  
1,185
   
1,072
   
3,443
   
3,250
 
Corporate and other
  
(170
)  
(103
)  
(412
)  
(402
)
                 
 $
2,285
  $
2,096
  $
7,119
  $
6,441
 
                 
Depreciation and amortization:
            
National Group
 $
291
  $
245
  $
839
  $
702
 
American Group
  
277
   
258
   
828
   
765
 
Corporate and other
  
79
   
79
   
235
   
230
 
                 
 $
647
  $
582
  $
1,902
  $
1,697
 
                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted segment EBITDA
 $
2,285
  $
2,096
  $
7,119
  $
6,441
 
Depreciation and amortization
  
647
   
582
   
1,902
   
1,697
 
Interest expense
  
448
   
442
   
1,386
   
1,309
 
Gains on sales of facilities
  
—
   
(6
)  
(17
)  
(420
)
Losses on retirement of debt
  
211
   
9
   
211
   
9
 
                 
Income before income taxes
 $
979
  $
1,069
  $
3,637
  $
3,846
 
                 
18
 
 
20
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, 2019 and 2018 are summarized in the following table (dollars in millions):
 
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
 
                 
NOTE 13 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION
HCA Healthcare, Inc. has $1.000 billion aggregate principal amount of 6.250% senior unsecured notes due 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 sixnine months ended JuneSeptember 30, 2019 and 2018, condensed consolidating balance sheets at JuneSeptember 30, 2019 and December 31, 2018 and condensed consolidating statements of cash flows for the sixnine months ended JuneSeptember 30, 2019 and 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 JUNESEPTEMBER 30, 2019
(Dollars in millions)
            
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
7,129
  $
5,473
  $
—
  $
12,602
  $
—
  $
—
  $
7,196
  $
5,498
  $
—
  $
12,694
 
  
Salaries and benefits
  
—
   
—
   
3,199
   
2,638
   
—
   
5,837
   
—
   
—
   
3,272
   
2,699
   
—
   
5,971
 
Supplies
  
—
   
—
   
1,189
   
929
   
—
   
2,118
   
—
   
—
   
1,174
   
916
   
—
   
2,090
 
Other operating expenses
  
1
   
—
   
1,157
   
1,204
   
—
   
2,362
   
4
   
—
   
1,178
   
1,170
   
—
   
2,352
 
Equity in earnings of affiliates
  
(822
)  
—
   
(1
)  
(7
)  
822
   
(8
)  
(656
)  
—
   
(2
)  
(2
)  
656
   
(4
)
Depreciation and amortization
  
—
   
—
   
354
   
282
   
—
   
636
   
—
   
—
   
362
   
285
   
—
   
647
 
Interest expense (income)
  
16
   
1,010
   
(511
)  
(38
)  
—
   
477
   
16
   
1,014
   
(505
)  
(77
)  
—
   
448
 
Gains on sales of facilities
  
—
   
—
   
(8
)  (10)  
—
   
(18
)
Losses (gains) on sales of facilities
  —   —   
(2
)  2   —   — 
Losses on retirement of debt
  
—
   
211
   
—
   
—
   
—
   
211
 
Management fees
  
—
   
—
   
(205
)  
205
   
—
   
—
   
—
   
—
   
(197
)  
197
   
—
   
—
 
                                    
  
(805
)  
1,010
   
5,174
   
5,203
   
822
   
11,404
   
(636
)  
1,225
   
5,280
   
5,190
   
656
   
11,715
 
                  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income (loss) before income taxes
  
805
   
(1,010
)  
1,955
   
270
   
(822
)  
1,198
   
636
   
(1,225
)  
1,916
   
308
   
(656
)  
979
 
Provision (benefit) for income taxes
  
22
   
(235
)  
450
   
34
   
—
   
271
   
24
   
(279
)  
429
   
41
   
—
   
215
 
                                    
Net income (loss)
  
783
   
(775
)  
1,505
   
236
   
(822
)  
927
   
612
   
(946
)  
1,487
   
267
   
(656
)  
764
 
Net income attributable to noncontrolling interests
  
—
   
—
   
21
   
123
   
—
   
144
   
—
   
—
   
23
   
129
   
—
   
152
 
                                    
Net income (loss) attributable to HCA Healthcare, Inc.
 $
783
  $
(775
) $
1,484
  $
113
  $
(822
) $
783
  $
612
  $
(946
) $
1,464
  $
138
  $
(656
) $
612
 
                                          
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
726
  $
(806
) $
1,487
  $
84
  $
(765
) $
726
  $
582
  $
(954
) $
1,467
  $
113
  $
(626
) $
582
 
                                          
2021
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 COMPREHENSIVE INCOME STATEMENT
FOR THE QUARTER ENDED JUNESEPTEMBER 30, 2018
(Dollars in millions)
                        
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
6,774
  $
4,755
  $
—
  $
11,529
  $
—
  $
—
  $
6,747
  $
4,704
  $
—
  $
11,451
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
  
—
   
—
   
3,025
   
2,249
   
—
   
5,274
   
—
   
—
   
3,090
   
2,287
   
—
   
5,377
 
Supplies
  
—
   
—
   
1,127
   
790
   
—
   
1,917
   
—
   
—
   
1,115
   
775
   
—
   
1,890
 
Other operating expenses
  
4
   
—
   
1,122
   
992
   
—
   
2,118
   
2
   
—
   
1,137
   
958
   
—
   
2,097
 
Equity in earnings of affiliates
  
(852
)  
—
   
(1
)  
(6
)  
852
   
(7
)  
(728
)  
—
   
(2
)  
(7
)  
728
   
(9
)
Depreciation and amortization
  
—
   
—
   
329
   
233
   
—
   
562
   
—
   
—
   
340
   
242
   
—
   
582
 
Interest expense (income)  
16
   
867
   
(389
)  
(58
)  
—
   
436
   
16
   
913
   
(423
)  
(64
)  
—
   
442
 
Losses (gains) on sales of facilities
  
—
   
—
   
23
   
(32
)  
—
   
(9
)  
—
   
—
   
(6
)  
—
   
—
   
(6
)
Losses on retirement of debt
  
—
   
9
   
—
   
—
   
—
   
9
 
Management fees
  
—
   
—
   
(157
)  
157
   
—
   
—
   
—
   
—
   
(158
)  
158
   
—
   
—
 
                  
  
(832
)  
867
   
5,079
   
4,325
   
852
   
10,291
                   
                    
(710
)  
922
   
5,093
   
4,349
   
728
   
10,382
 
                   
Income (loss) before income taxes
  
832
   
(867
)  
1,695
   
430
   
(852
)  
1,238
   
710
   
(922
)  
1,654
   
355
   
(728
)  
1,069
 
Provision (benefit) for income taxes
  
12
   
(201
)  
389
   
72
   
—
   
272
   
(49
)  
(214
)  
379
   
57
   
—
   
173
 
                                    
Net income (loss)
  
820
   
(666
)  
1,306
   
358
   
(852
)  
966
   
759
   
(708
)  
1,275
   
298
   
(728
)  
896
 
Net income attributable to noncontrolling interests
  
—
   
—
   
22
   
124
   
—
   
146
   
—
   
—
   
22
   
115
   
—
   
137
 
                                    
Net income (loss) attributable to HCA Healthcare, Inc.
 $
820
  $
(666
) $
1,284
  $
234
  $
(852
) $
820
  $
759
  $
(708
) $
1,253
  $
183
  $
(728
) $
759
 
                                          
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
756
  $
(656
) $
1,287
  $
157
  $
(788
) $
756
  $
754
  $
(703
) $
1,258
  $
168
  $
(723
) $
754
 
                                          
 
 
 
 
 
 
21
22
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 COMPREHENSIVE INCOME STATEMENT
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019
(Dollars in millions)
                        
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
14,353
  $
10,766
  $
—
  $
25,119
  $
—
  $
—
  $
21,549
  $
16,264
  $
—
  $
37,813
 
  
Salaries and benefits
  
—
   
—
   
6,336
   
5,148
   
—
   
11,484
   
—
   
—
   
9,608
   
7,847
   
—
   
17,455
 
Supplies
  
—
   
—
   
2,366
   
1,793
   
—
   
4,159
   
—
   
—
   
3,540
   
2,709
   
—
   
6,249
 
Other operating expenses
  
3
   
—
   
2,303
   
2,355
   
—
   
4,661
   
7
   
—
   
3,481
   
3,525
   
—
   
7,013
 
Equity in earnings of affiliates
  
(1,848
)  
—
   
(3
)  
(16
)  
1,848
   
(19
)  
(2,504
)  
—
   
(5
)  
(18
)  
2,504
   
(23
)
Depreciation and amortization
  
—
   
—
   
709
   
546
   
—
   
1,255
   
—
   
—
   
1,071
   
831
   
—
   
1,902
 
Interest expense (income)
  
32
   
2,005
   
(984
)  
(115
)  
—
   
938
   
48
   
3,019
   
(1,489
)  
(192
)  
—
   
1,386
 
Gains on sales of facilities
  
—
   
—
   
(7
)  
(10
)  
—
   
(17
)  
—
   
—
   
(9
)  
(8
)  
—
   
(17
)
Losses on retirement of debt
  
—
   
211
   
—
   
—
   
—
   
211
 
Management fees
  
—
   
—
   
(376
)  
376
   
—
   
—
   
—
   
—
   
(573
)  
573
   
—
   
—
 
                                    
  
(1,813
)  
2,005
   
10,344
   
10,077
   
1,848
   
22,461
   
(2,449
)  
3,230
   
15,624
   
15,267
   
2,504
   
34,176
 
                                    
  
Income (loss) before income taxes
  
1,813
   
(2,005
)  
4,009
   
689
   
(1,848
)  
2,658
   
2,449
   
(3,230
)  
5,925
   
997
   
(2,504
)  
3,637
 
Provision (benefit) for income taxes
  
(9
)  
(466
)  
922
   
103
   
—
   
550
   
15
   
(745
)  
1,351
   
144
   
—
   
765
 
                                    
Net income (loss)
  
1,822
   
(1,539
)  
3,087
   
586
   
(1,848
)  
2,108
   
2,434
   
(2,485
)  
4,574
   
853
   
(2,504
)  
2,872
 
Net income attributable to noncontrolling interests
  
—
   
—
   
41
   
245
   
—
   
286
   
—
   
—
   
64
   
374
   
—
   
438
 
                                    
Net income (loss) attributable to HCA Healthcare, Inc.
 $
1,822
  $
(1,539
) $
3,046
  $
341
  $
(1,848
) $
1,822
  $
2,434
  $
(2,485
) $
4,510
  $
479
  $
(2,504
) $
2,434
 
                                          
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
1,772
  $
(1,588
) $
3,051
  $
335
  $
(1,798
) $
1,772
  $
2,354
  $
(2,542
) $
4,518
  $
448
  $
(2,424
) $
2,354
 
                                          
 
 
 
 
 
 
22
23
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 COMPREHENSIVE INCOME STATEMENT
FOR THE SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2018
(Dollars in millions)
            
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
 
Revenues
 $
—
  $
—
  $
13,550
  $
9,402
  $
—
  $
22,952
  $
—
  $
—
  $
20,297
  $
14,106
  $
—
  $
34,403
 
  
Salaries and benefits
  
—
   
—
   
6,094
   
4,469
   
—
   
10,563
   
—
   
—
   
9,184
   
6,756
   
—
   
15,940
 
Supplies
  
—
   
—
   
2,268
   
1,564
   
—
   
3,832
   
—
   
—
   
3,383
   
2,339
   
—
   
5,722
 
Other operating expenses
  
5
   
—
   
2,250
   
1,973
   
—
   
4,228
   
7
   
—
   
3,387
   
2,931
   
—
   
6,325
 
Equity in earnings of affiliates
  
(1,942
)  
—
   
(3
)  
(13
)  
1,942
   
(16
)  
(2,670
)  
—
   
(5
)  
(20
)  
2,670
   
(25
)
Depreciation and amortization
  
—
   
—
   
652
   
463
   
—
   
1,115
   
—
   
—
   
992
   
705
   
—
   
1,697
 
Interest expense (income)  
32
   
1,704
   
(756
)  
(113
)  
—
   
867
   
48
   
2,617
   
(1,179
)  
(177
)  
—
   
1,309
 
Gains on sales of facilities
  
—
   
—
   
(372
)  
(42
)  
—
   
(414
)  
—
   
—
   
(378
)  
(42
)  
—
   
(420
)
Losses on retirement of debt
  
—
   
9
   
—
   
—
   
—
   
9
 
Management fees
  
—
   
—
   
(315
)  
315
   
—
   
—
   
—
   
—
   
(473
)  
473
   
—
   
—
 
                                    
  
(1,905
)  
1,704
   
9,818
   
8,616
   
1,942
   
20,175
   
(2,615
)  
2,626
   
14,911
   
12,965
   
2,670
   
30,557
 
                                    
  
Income (loss) before income taxes
  
1,905
   
(1,704
)  
3,732
   
786
   
(1,942
)  
2,777
   
2,615
   
(2,626
)  
5,386
   
1,141
   
(2,670
)  
3,846
 
Provision (benefit) for income taxes
  
(59
)  
(396
)  
856
   
128
   
—
   
529
   
(108
)  
(610
)  
1,235
   
185
   
—
   
702
 
                                    
Net income (loss)
  
1,964
   
(1,308
)  
2,876
   
658
   
(1,942
)  
2,248
   
2,723
   
(2,016
)  
4,151
   
956
   
(2,670
)  
3,144
 
Net income attributable to noncontrolling interests
  
—
   
—
   
50
   
234
   
—
   
284
   
—
   
—
   
72
   
349
   
—
   
421
 
                                    
Net income (loss) attributable to HCA Healthcare, Inc.
 $
1,964
  $
(1,308
) $
2,826
  $
424
  $
(1,942
) $
1,964
  $
2,723
  $
(2,016
) $
4,079
  $
607
  $
(2,670
) $
2,723
 
                                          
Comprehensive income (loss) attributable to HCA Healthcare, Inc.
 $
1,981
  $
(1,271
) $
2,833
  $
397
  $
(1,959
) $
1,981
  $
2,735
  $
(1,974
) $
4,091
  $
565
  $
(2,682
) $
2,735
 
                                          
2324
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
JUNESEPTEMBER 30, 2019
(Dollars in millions)
            
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
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
  $
—
  $
—
  $
130
  $
429
  $
—
  $
559
 
Accounts receivable
  —   
—
   
4,004
   
3,215
   
—
   
7,219
   
—
   
—
   
3,970
   
3,161
   
—
   
7,131
 
Inventories
  —   
—
   
1,194
   
632
   
—
   
1,826
   
—
   
—
   
1,154
   
615
   
—
   
1,769
 
Other
  —   
—
   
756
   
638
   
—
   
1,394
   
—
   
—
   
644
   
666
   
—
   
1,310
 
                                    
  300    
—
   
7,654
   
4,915
   
—
   
12,869
   
—
   
—
   
5,898
   
4,871
   
—
   
10,769
 
                         
Property and equipment, net
  
—
   
—
   
12,749
   
8,718
   
—
   
21,467
   
—
   
���
   
13,074
   
8,928
   
—
   
22,002
 
Investments of insurance subsidiaries
  
—
   
—
   
—
   
342
   
—
   
342
   
—
   
—
   
—
   
357
   
—
   
357
 
Investments in and advances to affiliates
  
34,964
   
—
   
29
   
218
   
(34,964
)  
247
   
35,590
   
—
   
29
   
214
   
(35,590
)  
243
 
Goodwill and other intangible assets
  
—
   
—
   
5,725
   
2,415
   
—
   
8,140
   
—
   
—
   
5,719
   
2,441
   
—
   
8,160
 
Right-of-use
operating lease assets
  
—
   
—
   
436
   
1,351
   
—
   
1,787
   
—
   
—
   
436
   
1,334
   
—
   
1,770
 
Other
  
462
   
—
   
21
   
114
   
—
   
597
   
434
   
—
   
34
   
143
   
—
   
611
 
                                    
 $
35,726
  $
—
  $
26,614
  $
18,073
  $
(34,964
) $
45,449
  $
36,024
  $
—
  $
25,190
  $
18,288
  $
(35,590
) $
43,912
 
                                          
LIABILITIES AND
STOCKHOLDERS’ (DEFICIT)
EQUITY
                                    
Current liabilities:
                                    
Accounts payable
 $
—
  $
—
  $
1,754
  $
855
  $
—
  $
2,609
  $
—
  $
—
  $
1,699
  $
911
  $
—
  $
2,610
 
Accrued salaries
  
—
   
—
   
908
   
589
   
—
   
1,497
   
—
   
—
   
993
   
676
   
—
   
1,669
 
Other accrued expenses
  
67
   
441
   
896
   
1,378
   
—
   
2,782
   
15
   
332
   
896
   
1,454
   
—
   
2,697
 
Long-term debt due within one year
  
—
   
1,976
   
53
   
44
   
—
   
2,073
   
—
   
55
   
49
   
44
   
—
   
148
 
                                    
  
67
   
2,417
   
3,611
   
2,866
   
—
   
8,961
   
15
   
387
   
3,637
   
3,085
   
—
   
7,124
 
                         
Long-term debt, net
  
997
   
32,579
   
224
   
320
   
—
   
34,120
   
997
   
32,555
   
213
   
332
   
—
   
34,097
 
Intercompany balances
  
37,985
   
(8,618
)  
(29,356
)  
(11
)  
—
   
—
   
37,967
   
(5,621
)  
(32,198
)  
(148
)  
—
   
—
 
Professional liability risks
  
—
   
—
   
—
   
1,354
   
—
   
1,354
   
—
   
—
   
—
   
1,349
   
—
   
1,349
 
Right-of-use
operating lease obligations
  
—
   
—
   
331
   
1,129
   
—
   
1,460
   
—
   
—
   
330
   
1,110
   
—
   
1,440
 
Income taxes and other liabilities
  
579
   
—
   
232
   
513
   
—
   
1,324
   
610
   
11
   
181
   
547
   
—
   
1,349
 
                                    
  
39,628
   
26,378
   
(24,958
)  
6,171
   
—
   
47,219
   
39,589
   
27,332
   
(27,837
)  
6,275
   
—
   
45,359
 
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.
  
(3,902
)  
(26,378
)  
51,488
   
9,854
   
(34,964
)  
(3,902
)  
(3,565
)  
(27,332
)  
52,955
   
9,967
   
(35,590
)  
(3,565
)
Noncontrolling interests
  
—
   
—
   
84
   
2,048
   
—
   
2,132
   
—
   
—
   
72
   
2,046
   
—
   
2,118
 
                                    
  
(3,902
)  
(26,378
)  
51,572
   
11,902
   
(34,964
)  
(1,770
)  
(3,565
)  
(27,332
)  
53,027
   
12,013
   
(35,590
)  
(1,447
)
                                    
 $
35,726
  $
—
  $
26,614
  $
18,073
  $
(34,964
) $
45,449
  $
36,024
  $
—
  $
25,190
  $
18,288
  $
(35,590
) $
43,912
 
                                          
2425
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
 
                         
2526
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 SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2019
(Dollars in millions)
            
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
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
  $
2,434
  $
(2,485
) $
4,574
  $
853
  $
(2,504
) $
2,872
 
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
)  
(15
)  
(69
)  
(137
)  
(85
)  
—
   
(306
)
Depreciation and amortization
  
—
   
—
   
709
   
546
   
—
   
1,255
   
—
   
—
   
1,071
   
831
   
—
   
1,902
 
Income taxes
  
27
   
—
   
—
   
—
   
—
   
27
   
51
   
—
   
—
   
—
   
—
   
51
 
Gains on sales of facilities
  
—
   
—
   
(7
)  
(10
)  
—
   
(17
)  
—
   
—
   
(9
)  
(8
)  
—
   
(17
)
Losses on retirement of debt
  
—
   
211
   
—
   
—
   
—
   
211
 
Amortization of debt issuance costs and discounts  
—
   
16
   
—
   
—
   
—
   
16
   
—
   
23
   
—
   
—
   
—
   
23
 
Share-based compensation
  
—
   
—
   
158
   
—
   
—
   
158
   
—
   
—
   
263
   
—
   
—
   
263
 
Equity in earnings of affiliates
  
(1,848
)  
—
   
—
   
—
   
1,848
   
—
   
(2,504
)  
—
   
—
   
—
   
2,504
   
—
 
Other
  
54
   
—
   
14
   
(1
)  
—
   
67
   
82
   
—
   
13
   
3
   
—
   
98
 
                                    
Net cash provided by (used in) operating activities
  
55
   
(1,483
)  
3,656
   
743
   
—
   
2,971
   
48
   
(2,320
)  
5,775
   
1,594
   
—
   
5,097
 
                                    
Cash flows from investing activities:
                                    
Purchase of property and equipment
  
—
   
—
   
(953
)  
(792
)  
—
   
(1,745
)  
—
   
—
   
(1,634
)  
(1,250
)  
—
   
(2,884
)
Acquisition of hospitals and health care entities
  
—
   
—
   
(35
)  
(1,469
)  
—
   
(1,504
)  
—
   
—
   
(39
)  
(1,553
)  
—
   
(1,592
)
Disposition of hospitals and health care entities
  
—
   
—
   
30
   
11
   
—
   
41
   
—
   
—
   
31
   
18
   
—
   
49
 
Change in investments
  
—
   
—
   
14
   
45
   
—
   
59
   
—
   
—
   
1
   
34
   
—
   
35
 
Other
  
—
   
—
   
(9
)  
45
   
—
   
36
   
—
   
—
   
(7
)  
24
   
—
   
17
 
                                    
Net cash used in investing activities
  
—
   
—
   
(953
)  
(2,160
)  
—
   
(3,113
)  
—
   
—
   
(1,648
)  
(2,727
)  
—
   
(4,375
)
                                    
Cash flows from financing activities:
                                    
Issuance of long-term debt
  
—
   
6,451
   
—
   
—
   
—
   
6,451
   
—
   
6,451
   
—
   
—
   
—
   
6,451
 
Net change in revolving credit facilities
  
—
   
(3,040
)  
—
   
—
   
—
   
(3,040
)  
—
   
(30
)  
—
   
—
   
—
   
(30
)
Repayment of long-term debt
  
—
   
(47
)  
(31
)  
(20
)  
—
   
(98
)  
—
   
(5,213
)  
(45
)  
(31
)  
—
   
(5,289
)
Distributions to noncontrolling interests
  
—
   
—
   
(44
)  
(203
)  
—
   
(247
)  
—
   
—
   
(79
)  
(325
)  
—
   
(404
)
Payment of debt issuance costs
  
—
   
(63
)  
—
   
—
   
—
   
(63
)  
—
   
(71
)  
—
   
—
   
—
   
(71
)
Payment of cash dividends
  
(278
)  
—
   
—
   
—
   
—
   
(278
)  
(414
)  
—
   
—
   
—
   
—
   
(414
)
Repurchases of common stock
  
(520
)  
—
   
—
   
—
   
—
   
(520
)  
(759
)  
—
   
—
   
—
   
—
   
(759
)
Changes in intercompany balances with affiliates, net
  
1,165
   
(1,818
)  
(1,102
)  
1,755
   
—
   
—
   
1,253
   
1,183
   
(4,047
)  
1,611
   
—
   
—
 
Other
  
(122
)  
—
   
—
   
(13
)  
—
   
(135
)  
(128
)  
—
   
—
   
(17
)  
—
   
(145
)
                                    
Net cash provided by (used in) financing activities  
245
   
1,483
   
(1,177
)  
1,519
   
—
   
2,070
 
Net cash
(
u
sed in
)
provided by financing activities
  
(48
)  
2,320
   
(4,171
)  
1,238
   
—
   
(661
)
                  
Effect on exchange rate changes on cash and cash equivalents
  
—
   
—
   
—
   
(4
)  
—
   
(4
)
                                    
Change in cash and cash equivalents
  
300
   
—
   
1,526
   
102
   
—
   
1,928
   
—
   
—
   
(44
)  
101
   
—
   
57
 
Cash and cash equivalents at beginning of period
  
—
   
—
   
174
   
328
   
—
   
502
   
—
   
—
   
174
   
328
   
—
   
502
 
                                    
Cash and cash equivalents at end of period
 $
300
  $
—
  $
1,700
  $
430
  $
—
  $
2,430
  $
—
  $
—
  $
130
  $
429
  $
—
  $
559
 
                                          
2627
 
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 SIXNINE MONTHS ENDED JUNESEPTEMBER 30, 2018
(Dollars in millions)
                        
 
HCA
Healthcare, Inc.
Issuer
  
HCA Inc.
Issuer
  
Subsidiary
Guarantors
  
Subsidiary
Non-
Guarantors
  
Eliminations
  
Condensed
Consolidated
  
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
  $
2,723
  $
(2,016
) $
4,151
  $
956
  $
(2,670
) $
3,144
 
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
)  
(15
)  
(83
)  
(154
)  
105
   
—
   
(147
)
Depreciation and amortization
  
—
   
—
   
652
   
463
   
—
   
1,115
   
—
   
—
   
992
   
705
   
—
   
1,697
 
Income taxes
  
118
   
—
   
—
   
—
   
—
   
118
 
Gains on sales of facilities
  
—
   
—
   
(372
)  
(42
)  
—
   
(414
)  
—
   
—
   
(378
)  
(42
)  
—
   
(420
)
Amortization of debt issuance costs and discounts  
—
   
15
   
—
   
—
   
—
   
15
 
Losses on retirement of debt
  
—
   
9
   
—
   
—
   
—
   
9
 
Amortization of debt issuance costs
  
—
   
23
   
—
   
—
   
—
   
23
 
Share-based compensation
  
—
   
—
   
134
   
—
   
—
   
134
   
—
   
—
   
204
   
—
   
—
   
204
 
Equity in earnings of affiliates
  
(1,942
)  
—
   
—
   
—
   
1,942
   
—
   
(2,670
)  
—
   
—
   
—
   
2,670
   
—
 
Other
  
43
   
—
   
—
   
8
   
—
   
51
   
67
   
—
   
—
   
9
   
—
   
76
 
                                    
Net cash provided by (used in) operating activities
  
183
   
(1,291
)  
2,938
   
1,035
   
—
   
2,865
   
105
   
(2,067
)  
4,815
   
1,733
   
—
   
4,586
 
                                    
Cash flows from investing activities:
                                    
Purchase of property and equipment
  
—
   
—
   
(900
)  
(674
)  
—
   
(1,574
)  
—
   
—
   
(1,425
)  
(995
)  
—
   
(2,420
)
Acquisition of hospitals and health care entities
  
—
   
—
   
(438
)  
(100
)  
—
   
(538
)  
—
   
—
   
(894
)  
(162
)  
—
   
(1,056
)
Disposition of hospitals and health care entities
  
—
   
—
   
767
   
32
   
—
   
799
   
—
   
—
   
770
   
32
   
—
   
802
 
Change in investments
  
—
   
—
   
17
   
6
   
—
   
23
   
—
   
—
   
19
   
46
   
—
   
65
 
Other
  
—
   
—
   
(30
)  
5
   
—
   
(25
)  
—
   
—
   
(18
)  
12
   
—
   
(6
)
                                    
Net cash used in investing activities
  
—
   
—
   
(584
)  
(731
)  
—
   
(1,315
)  
—
   
—
   
(1,548
)  
(1,067
)  
—
   
(2,615
)
                                    
Cash flows from financing activities:
                                    
Issuance of long-term debt
  
—
   
2,000
   
—
   
—
   
—
   
2,000
 
Net change in revolving credit facilities
  
—
   
210
   
—
   
—
   
—
   
210
   
—
   
(330
)  
—
   
—
   
—
   
(330
)
Repayment of long-term debt
  
—
   
(41
)  
(38
)  
(22
)  
—
   
(101
)  
—
   
(1,566
)  
(44
)  
(42
)  
—
   
(1,652
)
Distributions to noncontrolling interests
  
—
   
—
   
(43
)  
(142
)  
—
   
(185
)  
—
   
—
   
(63
)  
(252
)  
—
   
(315
)
Payment of debt issuance costs
  
—
   
(2
)  
—
   
—
   
—
   
(2
)  
—
   
(24
)  
—
   
—
   
—
   
(24
)
Payment of cash dividends
  
(245
)  
—
   
—
   
—
   
—
   
(245
)  
(366
)  
—
   
—
   
—
   
—
   
(366
)
Repurchases of common stock
  
(893
)  
—
   
—
   
—
   
—
   
(893
)  
(1,195
)  
—
   
—
   
—
   
—
   
(1,195
)
Changes in intercompany balances with affiliates, net
  
1,150
   
1,124
   
(2,188
)  
(86
)  
—
   
—
   
1,697
   
1,987
   
(3,167
)  
(517
)  
—
   
—
 
Other
  
(196
)  
—
   
—
   
4
   
—
   
(192
)  
(242
)  
—
   
—
   
10
   
—
   
(232
)
                                    
Net cash (used in) provided by financing activities
  
(184
)  
1,291
   
(2,269
)  
(246
)  
—
   
(1,408
)  
(106
)  
2,067
   
(3,274
)  
(801
)  
—
   
(2,114
)
                                    
Effect on exchange rate changes on cash and cash equivalents
  
—
   
—
   
—
   
(6
)  
—
   
(6
)  
—
   
—
   
—
   
(11
)  
—
   
(11
)
                                    
Change in cash and cash equivalents
  
(1
)  
—
   
85
   
52
   
—
   
136
   
(1
)  
—
   
(7
)  
(146
)  
—
   
(154
)
Cash and cash equivalents at beginning of period
  
1
   
—
   
112
   
619
   
—
   
732
   
1
   
—
   
112
   
619
   
—
   
732
 
                                    
Cash and cash equivalents at end of period
 $
—
  $
—
  $
197
  $
671
  $
—
  $
868
  $
—
  $
—
  $
105
  $
473
  $
—
  $
578
 
                                          
 
 
27
28
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This quarterly report on Form
 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) the effects of the 2017 Tax Cuts and Jobs Act (the “Tax Act”), including potential 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 on Form
 10-K
for the year ended December 31, 2018 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)
SecondThird Quarter 2019 Operations Summary
Revenues increased to $12.602$12.694 billion in the secondthird quarter of 2019 from $11.529$11.451 billion in the secondthird quarter of 2018. Net income attributable to HCA Healthcare, Inc. totaled $783$612 million, or $2.25$1.76 per diluted share, for the quarter ended JuneSeptember 30, 2019, compared to $820$759 million, or $2.31$2.15 per diluted share, for the quarter ended JuneSeptember 30, 2018. SecondThird quarter results for 2019 and 2018 include net gainslosses on salesretirement of facilitiesdebt of $18$211 million, or $0.04$0.47 per diluted share, and $9 million, or $0.02 per diluted share, respectively. During the third quarter of 2018, we recorded a reduction to the provision for income taxes of $28 million, or $0.08 per diluted share, for tax credits related to certain 2017 hurricane-related expenses. Our provisions for income taxes for the third quarters of 2019 and 2018 also included tax benefits of $3 million, or $0.01 per diluted share, and $23 million, or $0.07 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 348.373347.487 million shares for the quarter ended JuneSeptember 30, 2019 and 355.039353.639 million shares for the quarter ended JuneSeptember 30, 2018. During 2018 and the first sixnine months of 2019, we repurchased 14.070 million shares and 4.0345.880 million shares of our common stock, respectively.
Revenues increased 9.3%10.9% on a consolidated basis and increased 4.3%6.3% on a same facility basis for the quarter ended JuneSeptember 30, 2019, compared to the quarter ended JuneSeptember 30, 2018. The increase in consolidated revenues can be primarily attributed to the combined impact of a 3.0%3.1% increase in revenue per equivalent admission and a 6.2%7.5% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 1.7%2.0% increase in same facility revenue per equivalent admission and a 2.6%4.2% increase in same facility equivalent admissions.
During the quarter ended JuneSeptember 30, 2019, consolidated admissions and same facility admissions increased 4.8%5.9% and 2.1%3.2%, respectively, compared to the quarter ended JuneSeptember 30, 2018. Surgeries increased 2.7%4.9% on a consolidated basis and 0.3%2.5% on a same facility basis during the quarter ended JuneSeptember 30, 2019, compared to the quarter ended JuneSeptember 30, 2018. Emergency department visits increased 4.9%6.1% on a consolidated basis and 3.0%4.1% on a same facility basis during the quarter ended JuneSeptember 30, 2019, compared to the quarter ended JuneSeptember 30, 2018. SameConsolidated and same facility uninsured admissions increased 5.1%3.4% and 2.1%, respectively, for the quarter ended JuneSeptember 30, 2019, compared to the quarter ended JuneSeptember 30, 2018.
Cash flows from operating activities increased $415$405 million from $1.582$1.721 billion for the secondthird quarter of 2018 to $1.997$2.126 billion for the secondthird quarter of 2019. The increase in cash provided by operating activities was primarily related to the combined effect of an increase in net income, excluding losses on retirement of debt, of $70 million, positive changes of $468$142 million related to income taxes, positive changes of $82 million related to working capital items.items and an increase in depreciation expense of $65 million.
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

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)
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 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 9.3%10.9% from $11.529$11.451 billion in the secondthird quarter of 2018 to $12.602$12.694 billion in the secondthird 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 sixnine months ended JuneSeptember 30, 2019 and 2018 are summarized in the following table (dollars in millions):
                        
 
Quarter
  
Quarter
 
 
2019
  
Ratio
  
2018
  
Ratio
  
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 
$
2,635
   
20.9
%
 $
2,425
   
21.0
% $
2,592
   
20.4
% $
2,404
   
21.0
%
Managed Medicare
  
1,595
   
12.7
   
1,345
   
11.7
   
1,615
   
12.7
   
1,344
   
11.7
 
Medicaid
  
416
   
3.3
   
357
   
3.1
   
361
   
2.8
   
338
   
3.0
 
Managed Medicaid
  
554
   
4.4
   
586
   
5.1
   
641
   
5.0
   
622
   
5.4
 
Managed care and insurers
  
6,425
   
50.9
   
5,993
   
51.9
   
6,554
   
51.7
   
6,026
   
52.6
 
International (managed care and insurers)
  
284
   
2.3
   
295
   
2.6
   
282
   
2.2
   
273
   
2.4
 
Other
  
693
   
5.5
   
528
   
4.6
   
649
   
5.2
   
444
   
3.9
 
                        
Revenues
 
$
12,602
   
100.0
%
 $
11,529
   
100.0
% $
12,694
   
100.0
% $
11,451
   
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 3.0% and 1.7%, respectively, in the second quarter of 2019, compared to the second quarter of 2018. Consolidated and same facility equivalent admissions increased 6.2% and 2.6%, respectively, in the second quarter of 2019, compared to the second quarter of 2018. Consolidated and same facility outpatient surgeries increased 3.0% and 0.6%, respectively, in the

                 
 
Nine Months
 
 
2019
  
Ratio
  
2018
  
Ratio
 
Medicare
 $
7,997
   
21.2
% $
7,353
   
21.4
%
Managed Medicare
  
4,799
   
12.7
   
4,088
   
11.9
 
Medicaid
  
1,124
   
3.0
   
976
   
2.8
 
Managed Medicaid
  
1,808
   
4.8
   
1,769
   
5.1
 
Managed care and insurers
  
19,405
��  
51.1
   
18,081
   
52.6
 
International (managed care and insurers)
  
863
   
2.3
   
873
   
2.5
 
Other
  
1,817
   
4.9
   
1,263
   
3.7
 
                 
Revenues
 $
37,813
   
100.0
% $
34,403
   
100.0
%
                 
 
 
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)
second
Consolidated and same facility revenue per equivalent admission increased 3.1% and 2.0%, respectively, in the third quarter of 2019, compared to the secondthird quarter of 2018. Consolidated and same facility equivalent admissions increased 7.5% and 4.2%, respectively, in the third quarter of 2019, compared to the third quarter of 2018. Consolidated and same facility outpatient surgeries increased 5.2% and 2.6%, respectively, in the third quarter of 2019, compared to the third quarter of 2018. Consolidated and same facility inpatient surgeries increased 2.2%4.4% and declined 0.1%2.2%, respectively, in the secondthird quarter of 2019, compared to the secondthird quarter of 2018. Consolidated and same facility emergency department visits increased 4.9%6.1% and 3.0%4.1%, respectively, in the secondthird quarter of 2019, compared to the secondthird quarter of 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 sixnine months ended JuneSeptember 30, 2019 and 2018 follows (dollars in millions):
                
 
Quarter
 
Six Months
  
Quarter
 
Nine Months
 
 
2019
  
2018
  
2019
  
2018
  
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
  $
11,060
  $
9,946
  $
32,619
  $
29,684
 
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
12.2
%  
12.6
%  
12.0
%  
12.5
%  
12.3
%  
12.7
%  
12.1
%  
12.6
%
Total uncompensated care
 $
7,695
  $
6,486
  $
14,780
  $
12,738
  $
7,923
  $
6,786
  $
22,703
  $
19,524
 
Multiply by the
cost-to-charges
ratio
  
12.2
%  
12.6
%  
12.0
%  
12.5
%  
12.3
%  
12.7
%  
12.1
%  
12.6
%
                        
Estimated cost of total uncompensated care
 $
938
  $
817
  $
1,774
  $
1,592
  $
975
  $
862
  $
2,747
  $
2,460
 
                            
 
 
 
 
 
 
Total uncompensated care as a percentage of the sum of revenues and total uncompensated care was 37.9%38.4% and 36.0%37.2% for the quarters ended JuneSeptember 30, 2019 and 2018, respectively, and 37.0%37.5% and 35.7%36.2% for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.
Same facility uninsured admissions increased by 2,017919 admissions, or 2.1%, in the third quarter of 2019 compared to the third quarter of 2018. Same facility uninsured admissions increased 5.1%, in the second quarter of 2019 compared to the second quarter of 2018. Same facility uninsured admissions were flat in the first quarter of 2019 compared to the first quarter of 2018. Same facility uninsured admissions in 2018, compared to 2017, increased 7.4% in the fourth quarter, of 2018, increased 8.8% in the third quarter, of 2018, increased 7.8% in the second quarter, of 2018, and increased 10.1% in the first quarter of 2018.quarter.
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, 2019 and 2018 are set forth in the following table.
                 
 
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
%
                 
The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and six months ended June 30, 2019 and 2018 are set forth in the following table.
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
%
                 
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 nine months ended September 30, 2019 and 2018 are set forth in the following table.
                 
 
Quarter
  
Nine Months
 
 
2019
  
2018
  
2019
  
2018
 
Medicare
  
28
%  
29
%  
29
%  
30
%
Managed Medicare
  
18
   
17
   
19
   
17
 
Medicaid
  
5
   
5
   
5
   
5
 
Managed Medicaid
  
12
   
12
   
12
   
12
 
Managed care and insurers
  
28
   
28
   
27
   
28
 
Uninsured
  
9
   
9
   
8
   
8
 
                 
  
100
%  
100
%  
100
%  
100
%
                 
 
 
The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers
and the uninsured
for the quarters and nine months ended September 30, 2019 and 2018 are set forth in the following table.
                 
 
Quarter
  
Nine Months
 
 
2019
  
2018
  
2019
  
2018
 
Medicare
  
28
%  
28
%  
28
%  
28
%
Managed Medicare
  
14
   
13
   
15
   
14
 
Medicaid
  
4
   
4
   
4
   
4
 
Managed Medicaid
  
6
   
6
   
5
   
6
 
Managed care and insurers
  
47
   
49
   
47
   
48
 
Uninsured
  
1
   
—
   
1
   
—
 
                 
  
100
%  
100
%  
100
%  
100
%
                 
At JuneSeptember 30, 2019, we had 91 hospitals in the states of Texas and Florida. During the secondthird quarter of 2019, 56% of our admissions and 48% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 72% of our uninsured admissions during the secondthird quarter of 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 Section 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 $106$103 million and $97$101 million during the secondthird quarters of 2019 and 2018, respectively, and $214$317 million and $195$296 million during the first sixnine months of 2019 and 2018, 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 requests to

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)
CMS to replace their existing supplemental payment programs. It is possible these reviews and 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 sixnine months ended JuneSeptember 30, 2019 and 2018 (dollars in millions):
                        
 
Quarter
  
Quarter
 
 
2019
 
2018
  
2019
 
2018
 
 
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
 
Revenues
 
$
12,602
   
100.0
  $
11,529
   
100.0
  $
12,694
   
100.0
  $
11,451
   
100.0
 
  
Salaries and benefits
  
5,837
   
46.3
   
5,274
   
45.8
   
5,971
   
47.0
   
5,377
   
46.9
 
Supplies
  
2,118
   
16.8
   
1,917
   
16.6
   
2,090
   
16.5
   
1,890
   
16.5
 
Other operating expenses
  
2,362
   
18.8
   
2,118
   
18.4
   
2,352
   
18.5
   
2,097
   
18.4
 
Equity in earnings of affiliates
  
(8
)
  
(0.1
)
  
(7
)  
(0.1
)  
(4
)  
—
   
(9
)  
(0.1
)
Depreciation and amortization
  
636
   
5.0
   
562
   
4.9
   
647
   
5.1
   
582
   
5.1
 
Interest expense
  
477
   
3.8
   
436
   
3.8
   
448
   
3.5
   
442
   
3.9
 
Gains on sales of facilities
  
(18
)
  
(0.1
)
  
(9
)  
(0.1
)  
—
   
—
   
(6
)  
(0.1
)
Losses on retirement of debt
  
211
   
1.7
   
9
   
0.1
 
                        
  
11,404
   
90.5
   
10,291
   
89.3
   
11,715
   
92.3
   
10,382
   
90.7
 
                        
Income before income taxes
  
1,198
   
9.5
   
1,238
   
10.7
   
979
   
7.7
   
1,069
   
9.3
 
Provision for income taxes
  
271
   
2.1
   
272
   
2.3
   
215
   
1.7
   
173
   
1.5
 
                        
Net income
  
927
   
7.4
   
966
   
8.4
   
764
   
6.0
   
896
   
7.8
 
Net income attributable to noncontrolling interests
  
144
   
1.2
   
146
   
1.3
   
152
   
1.2
   
137
   
1.2
 
                        
Net income attributable to HCA Healthcare, Inc.
 
$
783
   
6.2
  $
820
   
7.1
  $
612
   
4.8
  $
759
   
6.6
 
                        
% changes from prior year:
                        
Revenues
  
9.3
%
     
7.4
%     
10.9
%     
7.1
%   
Income before income taxes
  
(3.2
)
     
6.6
      
(8.4
)     
37.5
    
Net income attributable to HCA Healthcare, Inc.
  
(4.5
)
     
24.9
      
(19.3
)     
78.3
    
Admissions(a)
  
4.8
      
4.5
      
5.9
      
3.2
    
Equivalent admissions(b)
  
6.2
      
5.1
      
7.5
      
4.4
    
Revenue per equivalent admission
  
3.0
      
2.1
      
3.1
      
2.5
    
Same facility % changes from prior year(c):
                        
Revenues
  
4.3
      
6.5
      
6.3
      
7.4
    
Admissions(a)
  
2.1
      
2.7
      
3.2
      
3.1
    
Equivalent admissions(b)
  
2.6
      
2.8
      
4.2
      
3.4
    
Revenue per equivalent admission
  
1.7
      
3.6
      
2.0
      
3.9
    

34
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
  
Nine Months
 
 
2019
 
2018
  
2019
 
2018
 
 
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
  
Amount
  
Ratio
 
Revenues
 $
25,119
   
100.0
  $
22,952
   
100.0
  $
37,813
   
100.0
  $
34,403
   
100.0
 
  
Salaries and benefits
  
11,484
   
45.7
   
10,563
   
46.0
   
17,455
   
46.2
   
15,940
   
46.3
 
Supplies
  
4,159
   
16.6
   
3,832
   
16.7
   
6,249
   
16.5
   
5,722
   
16.6
 
Other operating expenses
  
4,661
   
18.6
   
4,228
   
18.5
   
7,013
   
18.6
   
6,325
   
18.5
 
Equity in earnings of affiliates
  
(19
)  
(0.1
)  
(16
)  
(0.1
)  
(23
)  
(0.1
)  
(25
)  
(0.1
)
Depreciation and amortization
  
1,255
   
5.0
   
1,115
   
4.8
   
1,902
   
4.9
   
1,697
   
4.9
 
Interest expense
  
938
   
3.7
   
867
   
3.8
   
1,386
   
3.7
   
1,309
   
3.8
 
Gains on sales of facilities
  
(17
)  
(0.1
)  
(414
)  
(1.8
)  
(17
)  
—
   
(420
)  
(1.2
)
Losses on retirement of debt
  
211
   
0.6
   
9
   
—
 
                        
  
22,461
   
89.4
   
20,175
   
87.9
   
34,176
   
90.4
   
30,557
   
88.8
 
                        
Income before income taxes
  
2,658
   
10.6
   
2,777
   
12.1
   
3,637
   
9.6
   
3,846
   
11.2
 
Provision for income taxes
  
550
   
2.2
   
529
   
2.3
   
765
   
2.0
   
702
   
2.1
 
                        
Net income
  
2,108
   
8.4
   
2,248
   
9.8
   
2,872
   
7.6
   
3,144
   
9.1
 
Net income attributable to noncontrolling interests
  
286
   
1.1
   
284
   
1.2
   
438
   
1.2
   
421
   
1.2
 
                        
Net income attributable to HCA Healthcare, Inc.
 $
1,822
   
7.3
  $
1,964
   
8.6
  $
2,434
   
6.4
  $
2,723
   
7.9
 
                            
% changes from prior year:
                        
Revenues
  
9.4
%     
7.5
%     
9.9
%     
7.3
%   
Income before income taxes
  
(4.3
)     
24.7
      
(5.4
)     
28.0
    
Net income attributable to HCA Healthcare, Inc.
  
(7.2
)     
49.3
      
(10.6
)     
56.4
    
Admissions(a)
  
3.9
      
4.5
      
4.6
      
4.1
    
Equivalent admissions(b)
  
5.5
      
4.9
      
6.2
      
4.7
    
Revenue per equivalent admission
  
3.8
      
2.5
      
3.5
      
2.5
    
Same facility % changes from prior year(c):
                        
Revenues
  
5.4
      
6.2
      
5.7
      
6.6
    
Admissions(a)
  
1.6
      
2.5
      
2.1
      
2.7
    
Equivalent admissions(b)
  
2.3
      
2.3
      
3.0
      
2.7
    
Revenue per equivalent admission
  
3.0
      
3.8
      
2.6
      
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.
 
 
 
 
3435
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Quarters Ended JuneSeptember 30, 2019 and 2018
Revenues increased to $12.602$12.694 billion in the secondthird quarter of 2019 from $11.529$11.451 billion in the secondthird quarter of 2018. Net income attributable to HCA Healthcare, Inc. totaled $783$612 million, or $2.25$1.76 per diluted share, for the quarter ended JuneSeptember 30, 2019, compared to $820$759 million, or $2.31$2.15 per diluted share, for the quarter ended JuneSeptember 30, 2018. SecondThird quarter results for 2019 and 2018 include net gainslosses on salesretirement of facilitiesdebt of $18$211 million, or $0.04$0.47 per diluted share, and $9 million, or $0.02 per diluted share, respectively. During the third quarter of 2018, we recorded a reduction to the provision for income taxes of $28 million, or $0.08 per diluted share, for tax credits related to certain 2017 hurricane-related expenses. Our provisions for income taxes for the third quarters of 2019 and 2018 also included tax benefits of $3 million, or $0.01 per diluted share, and $23 million, or $0.07 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 348.373347.487 million shares for the quarter ended JuneSeptember 30, 2019 and 355.039353.639 million shares for the quarter ended JuneSeptember 30, 2018. During 2018 and the first sixnine months of 2019, we repurchased 14.070 million shares and 4.0345.880 million shares of our common stock, respectively.
Revenues increased 9.3%10.9% primarily due to the combined impact of revenue per equivalent admission growth of 3.0%3.1% and a 6.2%7.5% increase in equivalent admissions for the secondthird quarter of 2019 compared to the secondthird quarter of 2018. Same facility revenues increased 4.3%6.3% primarily due to the combined impact of a 1.7%2.0% increase in same facility revenue per equivalent admission and a 2.6%4.2% increase in same facility equivalent admissions for the secondthird quarter of 2019 compared to the secondthird quarter of 2018.
Salaries and benefits, as a percentage of revenues, were 46.3%47.0% in the secondthird quarter of 2019 and 45.8%46.9% in the secondthird quarter of 2018. Salaries and benefits per equivalent admission increased 4.3%3.3% in the secondthird quarter of 2019 compared to the secondthird quarter of 2018. Same facility labor rate increases averaged 2.6%2.7% for the secondthird quarter of 2019 compared to the secondthird quarter of 2018.
Supplies, as a percentage of revenues, were 16.8%16.5% in each of the third quarters of 2019 and 2018. Supply costs per equivalent admission increased 2.9% in the secondthird quarter of 2019 and 16.6% incompared to the secondthird quarter of 2018. Supply costs per equivalent admission increased 4.1%2.2% for medical devices, 9.4% for pharmacy supplies and 0.8% for general medical and surgical items in the secondthird quarter of 2019 compared to the secondthird quarter of 2018. Supply
Same facility supply costs per equivalent admission increased 3.9%0.9% in the third quarter of 2019 compared to the third quarter of 2018. Same facility supply costs per equivalent admission increased 1.5% for medical devices 10.5% for pharmacy supplies and 1.6% for general medical and surgical items and declined 2.4% for pharmacy supplies in the secondthird quarter of 2019 compared to the secondthird quarter of 2018.
Other operating expenses, as a percentage of revenues, were 18.8%18.5% in the secondthird quarter of 2019 and 18.4% in the secondthird quarter of 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 $133$89 million and $132$60 million for the secondthird quarters of 2019 and 2018, respectively. During the third quarters of 2019 and 2018, we recorded reductions of $50 million, or $0.11 per diluted share, and $70 million, or $0.15 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.
Equity in earnings of affiliates was $8$4 million and $7$9 million in the secondthird quarters of 2019 and 2018, respectively.
Depreciation and amortization increased $74 million, from $562 million in the second quarter of 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. Our average debt balance was $35.079 billion for the second quarter of 2019 compared to $33.214 billion for the second quarter of 2018. The average effective interest rate for our long-term debt increased to 5.5% from 5.3% for the quarters ended June 30, 2019 and 2018, respectively.
35
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Quarters Ended JuneSeptember 30, 2019 and 2018 (continued)
During
Depreciation and amortization increased $65 million, from $582 million in the second quartersthird quarter of 2018 to $647 million in the third quarter of 2019. The increase in depreciation relates to both acquired facilities and increased capital expenditures at our existing facilities.
Interest expense was $448 million in the third quarter of 2019 and $442 million in the third quarter of 2018. Our average debt balance was $34.693 billion for the third quarter of 2019 compared to $33.091 billion for the third quarter of 2018. The average effective interest rate for our long-term debt declined to 5.1% from 5.3% for the quarters ended September 30, 2019 and 2018, respectively.
During the third quarter of 2018, we recorded net gains on sales of facilities of $18$6 million.
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. During July 2019, we redeemed all $600 million outstanding aggregate principal amount of 4.250% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.500% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. The pretax loss on retirement of debt for these redemptions was $211 million. During August 2018, we issued $2.000 billion aggregate principal amount of senior notes comprised of $1.000 billion aggregate principal amount of 5.375% notes due 2026 and $1.000 billion aggregate principal amount of 5.625% notes due 2028. We used the net proceeds for general corporate purposes, including funding the purchase of a hospital, and the redemption of all $1.500 billion aggregate principal amount of our existing 3.750% senior secured notes maturing in March 2019. The pretax loss on retirement of debt was $9 million, respectively.million.
The effective tax rates were 25.7%26.0% and 24.9%18.6% for the secondthird quarters of 2019 and 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 third quarters of 2019 and 2018 included tax benefits of $3 million and $23 million, respectively, related to employee equity award settlements. Our provision for income taxes for the third quarter of 2018 also included $28 million of reductions for tax credits related to certain 2017 hurricane-related expenses. Excluding the effect of these adjustments, the effective tax rate for the third quarters of 2019 and 2018 would have been 26.5% and 24.1%, respectively.
Net income attributable to noncontrolling interests declinedincreased from $146$137 million for the secondthird quarter of 2018 to $144$152 million for the secondthird quarter of 2019. The largest component of the increase related to the operations of our surgery center partnerships.
SixNine Months Ended JuneSeptember 30, 2019 and 2018
Revenues increased to $25.119$37.813 billion in the first sixnine months of 2019 from $22.952$34.403 billion in the first sixnine months of 2018. Net income attributable to HCA Healthcare, Inc. totaled $1.822$2.434 billion, or $5.22$6.98 per diluted share, for the first sixnine months ended JuneSeptember 30, 2019, compared to $1.964$2.723 billion, or $5.50$7.65 per diluted share, for the first sixnine months ended JuneSeptember 30, 2018. Results for the first sixnine months of 2019 and 2018 included net gains on sales of facilities of $17 million, or $0.04 per diluted share, and $414$420 million, or $0.88$0.89 per diluted share, and losses on retirement of debt of $211 million, or $0.47 per diluted share, and $9 million, or $0.02 per diluted share, respectively. Revenues for the first sixnine months of 2019 include $86 million, or $0.19 per diluted share, related to the resolution of transaction price differences regarding certain
out-of-network
services performed in prior periods. During the nine months ended September 30, 2018, we recorded a reduction to the provision for income taxes of $28 million, or $0.08
37
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Nine Months Ended September 30, 2019 and 2018 (continued)
per diluted share, for tax credits related to certain 2017 hurricane-related expenses. Our provision for income taxes for the first sixnine months of 2019 and 2018 included tax benefits of $53$56 million, or $0.15$0.16 per diluted share, and $96$119 million, or $0.27$0.33 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 349.334348.712 million shares for the sixnine months ended JuneSeptember 30, 2019 and 357.388356.124 million shares for the sixnine months ended JuneSeptember 30, 2018. During 2018 and the first sixnine months of 2019, we repurchased 14.070 million shares and 4.0345.880 million shares of our common stock, respectively.
Revenues increased 9.4%9.9% primarily due to the combined impact of revenue per equivalent admission growth of 3.8%3.5% and a 5.5%6.2% increase in equivalent admissions for the first sixnine months of 2019 compared to the first sixnine months of 2018. Same facility revenues increased 5.4%5.7% primarily due to the combined impact of a 3.0%2.6% increase in same facility revenue per equivalent admission and a 2.3%3.0% increase in same facility equivalent admissions for the first sixnine months of 2019 compared to the first sixnine months of 2018.
Salaries and benefits, as a percentage of revenues, were 45.7%46.2% in the first sixnine months of 2019 and 46.0%46.3% in the first sixnine months of 2018. Salaries and benefits per equivalent admission increased 3.1%3.2% in the first sixnine months of 2019 compared to the first sixnine months of 2018. Same facility labor rate increases averaged 2.7% for the first sixnine months of 2019 compared to the first sixnine months of 2018.
Supplies, as a percentage of revenues, were 16.5% in the first nine months of 2019 and 16.6% in the first six months of 2019 and 16.7% in the first sixnine months of 2018. Supply costs per equivalent admission increased 2.9% in the first sixnine months of 2019 compared to the first sixnine months of 2018. Supply costs per equivalent admission increased 2.9%2.7% for medical devices, 7.6%8.1% for pharmacy supplies and 0.9% for general medical and surgical items in the first sixnine months of 2019 compared to the first sixnine months of 2018. 
Same facility supply costs per equivalent admission increased 1.0% in the first nine months of 2019 compared to the first nine months of 2018. Same facility supply costs per equivalent admission increased 1.1% for medical devices and 2.4% for general medical and surgical items and declined 2.6% for pharmacy supplies in the first nine months of 2019 compared to the first nine months of 2018.
Other operating expenses, as a percentage of revenues, were 18.6% in the first sixnine months of 2019 and 18.5% in the first sixnine months of 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 $358 million and $312 million for the first nine months of 2019 and 2018, respectively. During the first nine months of 2019 and 2018, we recorded reductions of $50 million, or $0.11 per diluted share, and $70 million, or $0.15 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.
Equity in earnings of affiliates was $23 million and $25 million in the first nine months of 2019 and 2018, respectively.
Depreciation and amortization increased $205 million, from $1.697 billion in the first nine months of 2018 to $1.902 billion in the first nine months of 2019. The increase in depreciation related to both acquired facilities and increased capital expenditures at our existing facilities.
36Interest expense was $1.386 billion in the first nine months of 2019 and $1.309 billion in the first nine months of 2018. Our average debt balance was $34.422 billion for the first nine months of 2019 compared to
38
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
SixNine Months Ended JuneSeptember 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 $269 million and $252 million for the first six months of 2019 and 2018, respectively.
Equity in earnings of affiliates was $19 million and $16 million in the first six months of 2019 and 2018, respectively.
Depreciation and amortization increased $140 million, from $1.115 billion in the first six months of 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. Our average debt balance was $34.520$33.129 billion for the first six months of 2019 compared to $33.160 billion for the first sixnine months of 2018. The average effective interest rate for our long-term debt increased to 5.5%5.4% from 5.3% for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.
During the first sixnine months of 2019 and 2018, we recorded net gains on sales of facilities of $17 million and $414$420 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.
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. During July 2019, we redeemed all $600 million outstanding aggregate principal amount of 4.250% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.500% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. The pretax loss on retirement of debt for these redemptions was $211 million. During August 2018, we issued $2.000 billion aggregate principal amount of senior notes comprised of $1.000 billion aggregate principal amount of 5.375% notes due 2026 and $1.000 billion aggregate principal amount of 5.625% notes due 2028. We used the net proceeds for general corporate purposes, including funding the purchase of a hospital, and the redemption of all $1.500 billion aggregate principal amount of our existing 3.750% senior secured notes maturing in March 2019. The pretax loss on retirement of debt was $9 million.
The effective tax rates were 23.2%23.9% and 21.2%20.5% for the first sixnine months of 2019 and 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 sixnine months of 2019 and 2018 included tax benefits of $53$56 million and $96$119 million, respectively, related to employee equity award settlements. Our provisions for income taxes for the first nine months of 2018 also included $28 million of reductions for tax credits related to certain 2017 hurricane-related expenses. Excluding the effect of these adjustments, the effective tax rate for the first sixnine months of 2019 and 2018 would have been 25.4%25.7% and 25.1%24.8%, respectively.
Net income attributable to noncontrolling interests increased from $284$421 million for the first sixnine months of 2018 to $286$438 million for the first sixnine months of 2019. The largest component of the increase related to the operations of our surgery center partnerships.
Liquidity and Capital Resources
Cash provided by operating activities totaled $2.971$5.097 billion in the first sixnine months of 2019 compared to $2.865$4.586 billion in the first sixnine months of 2018. The $106$511 million increase in cash provided by operating activities in the first sixnine months of 2019 compared to the first sixnine months of 2018 related primarily to the net impactcombined effect of an increase in net income, excluding gains on sales of facilities and losses on retirement of $257debt, of $333 million and an increase in depreciation expense of $140 million, offset by negative changes of $241 million related to working capital items.$205 million. The combined interest payments and net tax payments in the first sixnine months of 2019 and 2018 were $1.433$2.206 billion and $1.284$2.124 billion, respectively. Working capital totaled $3.908$3.645 billion at JuneSeptember 30, 2019 and $2.644 billion at December 31, 2018.
Cash used in investing activities was $3.113$4.375 billion in the first sixnine months of 2019 compared to $1.315$2.615 billion in the first sixnine months of 2018. Acquisitions of hospitals and health care entities increased from $538 million$1.056 billion in the first sixnine months of 2018 to $1.504$1.592 billion in the first sixnine months of 2019, primarily related to an acquisition of a seven-hospital health system in North Carolina. Excluding acquisitions, capital expenditures were $1.745$2.884 billion in the first sixnine months of 2019 and $1.574$2.420 billion in the first sixnine months of 2018. Capital

37
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
2018. Capital expenditures, excluding acquisitions, are expected to approximate $3.7$3.8 billion in 2019. At JuneSeptember 30, 2019, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.4$3.2 billion. We expect to finance capital expenditures with internally generated and borrowed funds. Cash received from disposals of hospitals and health care entities declined $758$753 million for the first sixnine months of 2019 compared to the first sixnine months of 2018 primarily related to the receipt of $758 million in 2018 from the sale of the two hospital facilities in our Oklahoma market.
Cash provided byused in financing activities totaled $2.070 billion$661 million in the first sixnine months of 2019 compared to cash used in financing activities of $1.408$2.114 billion in the first sixnine months of 2018. During the first sixnine months of 2019, net cash flows provided byused in financing activities included a net increase of $3.313$1.132 billion in our indebtedness, payments of cash dividends of $278$414 million, repurchases of common stock of $520$759 million, distributions to noncontrolling interests of $247$404 million and payments of debt issuance costs of $63$71 million. During the first sixnine months of 2018, net cash flows used in financing activities included a net increase of $109$18 million in our indebtedness, payment of cash dividends of $245$366 million, repurchases of common stock of $893 million$1.195 billion and distributions to noncontrolling interests of $185$315 million.
We are a highly leveraged company with significant debt service requirements. Our debt totaled $36.193$34.245 billion at JuneSeptember 30, 2019. Our interest expense was $938 million$1.386 billion for the first sixnine months of 2019 and $867 million$1.309 billion for the first sixnine months of 2018.
In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($5.7322.708 billion and $2.712$2.978 billion available as of JuneSeptember 30, 2019 and JulyOctober 31, 2019, respectively) and anticipated access to public and private debt markets.
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. 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%4.250% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.50%6.500% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. Pretax losses
During July 2019, we entered into a joinder agreement to refinance our existing $1.120 billion senior secured term
 A-5
 loan credit facility maturing on retirement of debt totaling $211 million for these redemptions will be recognized during the quarter ending September 30, 2019.June 10, 2020 with a new $1.120 billion senior secured term
 A-6
 loan credit facility maturing on July 16, 2024.
Investments of our professional liability insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $455$453 million and $409 million at JuneSeptember 30, 2019 and December 31, 2018, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $176$179 million and $183 million at JuneSeptember 30, 2019 and December 31, 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 $1.597$1.581 billion and $1.509 billion at JuneSeptember 30, 2019 and December 31, 2018, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $454 million. We estimate that approximately $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)
12 months are expected to approximate $449 million. We estimate that approximately $409 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.
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 $455$453 million at JuneSeptember 30, 2019. These investments are carried at fair value, with changes in unrealized gains and losses being recorded as adjustments to other comprehensive income. At JuneSeptember 30, 2019, we had a net unrealized gain of $17$19 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 $4.249 billion of long-term debt at September 30, 2019 was subject to variable rates of interest, while the remaining balance in long-term debt of $29.996 billion at September 30, 2019 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 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% or (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%5.4% and 5.3% for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively.
The estimated fair value of our total long-term debt was $38.773$37.162 billion at JuneSeptember 30, 2019. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
Market Risk (continued)
with the same maturities. Based on a hypothetical 1% increase in interest rates, the potential annualized reduction to future pretax earnings would be approximately $45$42 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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Table of Contents
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 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
 
         
 
2019
 
 
2018
 
Number of hospitals in operation at:
      
March 31
 
 
185
 
  
178
 
June 30
 
 
184
 
  
178
 
September 30
 
 
184
 
  
179
 
December 31
 
 
 
  
179
 
Number of freestanding outpatient surgical centers in operation at:
 
 
 
   
March 31
 
 
124
 
  
120
 
June 30
 
 
125
 
  
122
 
September 30
 
 
125
 
  
122
 
December 31
 
 
 
  
123
 
Licensed hospital beds at(a):
 
 
 
   
March 31
 
 
48,455
 
  
46,745
 
June 30
 
 
48,483
 
  
46,723
 
September 30
 
 
48,588
 
  
47,060
 
December 31
 
 
 
  
47,199
 
Weighted average licensed beds(b):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
48,036
 
  
46,686
 
Second
 
 
48,429
 
  
46,667
 
Third
 
 
48,535
 
  
46,909
 
Fourth
     
47,159
 
Year
     
46,857
 
Average daily census(c):
      
Quarter:
      
First
 
 
28,966
 
  
28,130
 
 
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Data (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
 
         
 
2019
 
 
2018
 
Second
 
 
27,808
 
  
26,047
 
Third
 
 
27,502
 
  
25,991
 
Fourth
 
 
 
  
26,510
 
Year
 
 
 
  
26,663
 
Admissions(d):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
523,196
 
  
507,873
 
Second
 
 
518,253
 
  
494,610
 
Third
 
 
527,284
 
  
497,899
 
Fourth
 
 
 
  
503,371
 
Year
 
 
 
  
2,003,753
 
Equivalent admissions(e):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
889,956
 
  
849,164
 
Second
 
 
903,419
 
  
851,047
 
Third
 
 
918,964
 
  
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
 
  
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
 
 
2,269,364
 
  
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
 
 
249,177
 
  
236,801
 
Fourth
 
 
 
  
256,240
 
Year
 
 
 
  
971,537
 
Inpatient surgeries(i):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
137,363
 
  
135,036
 
Second
 
 
140,473
 
  
137,403
 
Third
 
 
143,215
 
  
137,156
 
Fourth
 
 
 
  
138,625
 
Year
 
 
 
  
548,220
 
 
 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Data (continued)
         
 
2019
  
2018
 
Outpatient revenues as a % of patient revenues(k):
      
Quarter:
      
First
  
38
%  
37
%
Second
  
39
%  
39
%
Third
     
39
%
Fourth
     
38
%
Year
     
38
%
         
 
2019
 
 
2018
 
Days revenues in accounts receivable(j):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
53
 
  
50
 
Second
 
 
52
 
  
52
 
Third
 
 
52
 
  
52
 
Fourth
 
 
 
  
51
 
Outpatient revenues as a % of patient revenues(k):
 
 
 
   
Quarter:
 
 
 
   
First
 
 
38
%
  
37
%
Second
 
 
39
%
  
39
%
Third
 
 
39
%
  
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.
 
 
 
 
(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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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 JuneSeptember 30, 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 JuneSeptember 30, 2019. There were no material changes in HCA’s internal control over financial reporting during the secondthird quarter of 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

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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. The Company is vigorously defending against the lawsuit andbeing pursed by the Company has not yet been served with the complaint.relator. We cannot predict what effect, if any, the
qui tam
lawsuit could have on the Company.
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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 on Form
 10-Q
and other risk factors described in our annual report on Form
 10-K
for the year ended December 31, 2018, which are incorporated herein by reference. There have not been any material changes to the risk factors previously disclosed in our annual report on Form
 10-K
for the year ended December 31, 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 JuneSeptember 30, 2019, we repurchased 1,928,1571,845,444 shares of our common stock at an average price of $125.56$129.64 per share through market purchases pursuant to the $2 billion share repurchase program authorized during January 2019. At JuneSeptember 30, 2019, we had $1.753$1.513 billion of repurchase authorization available under the January 2019 authorization.
The following table provides certain information with respect to our repurchases of common stock from AprilJuly 1, 2019 through JuneSeptember 30, 2019 (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, 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
 
                 
                 
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
 
July 1, 2019 through July 31, 2019
  
632,975
  $
139.03
   
632,975
  $
1,665
 
August 1, 2019 through August 31, 2019
  
526,342
  $
125.40
   
526,342
  $
1,599
 
September 1, 2019 through September 30, 2019
  
686,127
  $
124.22
   
686,127
  $
1,513
 
                 
Total for third quarter 2019
  
1,845,444
  $
129.64
   
1,845,444
  $
1,513
 
                 
 
 
 
On July 30,October 28, 2019, our Board of Directors declared a quarterly dividend of $0.40 per share on our common stock payable on September 30,December 27, 2019 to stockholders of record on September 3,December 2, 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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ITEM 6.    EXHIBITS
(a) List of Exhibits:
       
       
 
        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 IndentureJoinder Agreement No. 23,8, dated as of June 12,July 16, 2019, by and among HCA Inc., HCA Healthcare, Inc.as borrower, the guarantors party thereto, Bank of America, N.A., as administrative agent and collateral agent, and the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agentlenders party thereto (filed as Exhibit 4.24.1 to the Company’s Current Report on Form 8-K filed June 12,July 22, 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
  
—
 
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
       
 
      32
  
—
 
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
       
 
      101
  
—
 
The following financial information from our quarterly report on Form
 10-Q
for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018, filed with the SEC on August 2,November 1, 2019, formatted in Inline Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at JuneSeptember 30, 2019 and December 31, 2018, (ii) the condensed consolidated income statements for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018, (iii) the condensed consolidated comprehensive income statements for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018, (iv) the condensed consolidated statements of stockholders’ deficit for the quarters and sixnine months ended JuneSeptember 30, 2019 and 2018, (v) the condensed consolidated statements of cash flows for the sixnine months ended JuneSeptember 30, 2019 and 2018 and (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 JuneSeptember 30, 2019, formatted in Inline XBRL (included in Exhibit 101).
*Management compensatory plan or arrangement
 

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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:
 
/s/ 
William B. Rutherford
 
William B. Rutherford
 
Executive Vice President and Chief Financial Officer
 
 
 
 
Date: August 2,November 1, 2019
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