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 September 30, 2020March 31, 2021
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
  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.date
.
 
Class of Common Stock
  
Outstanding at OctoberApril 26, 20202021
   
Voting common stock, $.01 par value  338,374,700330,655,500 shares
 
 
 
Table of Contents
HCA HEALTHCARE, INC.
Form 10-Q
September 30, 2020
March 31, 2021
Page of

Form 10-Q
Part I.
  
Financial Information
  
   
 
Item 1.
Financial Statements (Unaudited):
   
   
 
Condensed Consolidated Income Statements — for the quarters ended March 31, 2021 and nine months ended September 30, 2020 and 2019
2
   
 
Condensed Consolidated Comprehensive Income Statements — for the quarters ended March 31, 2021 and nine months ended September 30, 2020 and 2019
3
   
 
Condensed Consolidated Balance Sheets — September 30, 2020March 31, 2021 and December 31, 20192020
4
   
 
Condensed Consolidated Statements of Stockholders’ Equity (Deficit) — for the quarters ended March 31, 2021 and nine months ended September 30, 2020 and 2019
5
   
 
Condensed Consolidated Statements of Cash Flows — for the nine monthsquarters ended September 30,March 31, 2021 and 2020 and 2019
6
   
 
Notes to Condensed Consolidated Financial Statements
7
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
20
18
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
40
33
   
Item 4.
Controls and Procedures
40
33
   
Part II.
Other Information
   
   
Item 1.
Legal Proceedings
40
33
   
Item 1A.
Risk Factors
41
33
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
44
33
   
Item 6.
Exhibits
45
35
  
Signatures
 
36
 
46
1
Table of Contents
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2021 AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
Unaudited
(Dollars in millions, except per share amounts)
 
  
Quarter
 
Nine Months
 
  
2020
 
2019
 
2020
 
2019
   
2021
 
2020
 
Revenues
  
$
13,311
 
 $12,694  
$
37,240
 
 $37,813   
$
13,977
 
 $12,861 
 
Salaries and benefits
  
 
6,097
 
  5,971  
 
17,545
 
  17,455   
 
6,301
 
  6,118 
Supplies
  
 
2,128
 
  2,090  
 
5,999
 
  6,249   
 
2,224
 
  2,123 
Other operating expenses
  
 
2,251
 
  2,352  
 
6,825
 
  7,013   
 
2,421
 
  2,427 
Government stimulus income reversal
  
 
822
 
 
 
—
 
 
 
0
 
 
 
—
 
Equity in earnings of affiliates
  
 
(40
) 
  (4)  
 
(48
) 
  (23)   
 
(21
) 
 
 
(7
) 
Depreciation and amortization
  
 
694
 
  647  
 
2,059
 
  1,902   
 
697
 
  674 
Interest expense
  
 
385
 
  448  
 
1,201
 
  1,386   
 
384
 
  428 
Losses (gains) on sales of facilities
   
(14
)  
 
0
 
 
 
6
 
  (17) 
Gains on sales of facilities
  
 
(2
) 
  (7) 
Losses on retirement of debt
   0   211  
 
295
 
  211    0   295 
  
 
  
 
  
 
  
 
        
  
12,323
 11,715 
33,882
 34,176   
12,004
 12,051 
  
 
  
 
  
 
  
 
        
Income before income taxes
  
 
988
 
  979  
 
3,358
 
  3,637   
 
1,973
 
  810 
Provision for income taxes
  
 
209
 
  215  
 
665
 
  765   
 
393
 
  112 
  
 
  
 
  
 
  
 
        
Net income
  
 
779
 
  764  
 
2,693
 
  2,872   
 
1,580
 
  698 
Net income attributable to noncontrolling interests
  
 
111
 
  152  
 
365
 
  438   
 
157
 
  117 
  
 
  
 
  
 
  
 
        
Net income attributable to HCA Healthcare, Inc.
  
$
668
 
 $612  
$
2,328
 
 $2,434   
$
1,423
 
 $581 
  
 
  
 
  
 
  
 
        
Per share data:
          
Basic earnings
  
$
1.97
 
 $1.80  
$
6.89
 
 $7.12   
$
4.21
 
 $1.72 
Diluted earnings
  
$
1.95
 
 $1.76  
$
6.79
 
 $6.98   
$
4.14
 
 $1.69 
Shares used in earnings per share calculations (in millions):
          
Basic
  
 
338.168
 
  340.789  
 
338.057
 
  341.932   
 
338.123
 
  338.242 
Diluted
  
 
343.346
 
  347.487  
 
343.014
 
  348.712   
 
343.321
 
  344.096 
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 ENDED MARCH 31, 2021 AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
Unaudited
(Dollars in millions)
 
  
Quarter
 
Nine Months
 
  
2020
   
2019
 
2020
 
2019
   
2021
 
2020
 
Net income
  
$
779
 
  $764  
$
2,693
 
 $2,872   
$
1,580
 
 $698 
Other comprehensive income (loss) before taxes:
             
Foreign currency translation
  
 
42
 
   (30)  
 
(39
) 
  (48)   
 
8
 
  (73) 
 
Unrealized gains on
available-for-sale
securities
  
 
1
 
   2  
 
13
 
  16 
Unrealized losses on
available-for-sale
securities
  
 
(11
) 
  (5) 
 
Defined benefit plans
  
 
0
 
   0  
 
0
 
  0   
 
0
 
  0 
Pension costs included in salaries and benefits
  
 
4
 
   3  
 
12
 
  10   
 
7
 
  4 
        
  
 
   
 
  
 
  
 
   
7
 4 
  
4
   3 
12
 10  
 
   
Change in fair value of derivative financial instruments
  
 
0
 
   (7)  
 
(66
) 
  (59)   
 
1
 
  (60) 
Interest expense (benefits) included in interest expense
  
 
9
 
   (4)  
 
15
 
  (15)   
 
9
 
  (1) 
  
 
   
 
  
 
  
 
         
  
 
9
 
   (11)  
 
(51
) 
  (74)   
 
10
 
  (61) 
  
 
   
 
  
 
  
 
         
Other comprehensive income (loss) before taxes
  
 
56
 
   (36)  
 
(65
) 
  (96)   
 
14
 
  (135) 
Income taxes (benefits) related to other comprehensive income items
  
 
9
 
   (6)  
 
(10
) 
  (16)   
 
3
 
  (24) 
  
 
   
 
  
 
  
 
         
Other comprehensive income (loss)
  
 
47
 
   (30)  
 
(55
) 
  (80)   
 
11
 
  (111) 
  
 
   
 
  
 
  
 
         
Comprehensive income
  
 
826
 
   734  
 
2,638
 
  2,792   
 
1,591
 
  587 
Comprehensive income attributable to noncontrolling interests
  
 
111
 
   152  
 
365
 
  438   
 
157
 
  117 
  
 
   
 
  
 
  
 
         
Comprehensive income attributable to HCA Healthcare, Inc.
  
$
715
 
  $582  
$
2,273
 
 $2,354   
$
1,434
 
 $470 
  
 
   
 
  
 
  
 
        
The accompanying notes are an integral part of the condensed consolidated financial statements.
 
3
Table of Contents
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
Unaudited
(Dollars in millions)
 
  
September 30,

2020
 
December 31,

2019
   
March 31,

2021
 
December 31,

2020
 
ASSETS
        
Current assets:
        
Cash and cash equivalents
  
$
6,588
 
 $621   
$
1,030
 
 $1,793 
Accounts receivable
  
 
6,433
 
  7,380   
 
7,424
 
  7,051 
Inventories
  
 
1,950
 
  1,849   
 
2,068
 
  2,025 
Other
  
 
1,295
 
  1,346   
 
1,514
 
  1,464 
  
 
  
 
         
  
 
16,266
 
  11,196   
 
12,036
 
  12,333 
 
 
 
    
Property and equipment, at cost
  
 
48,775
 
  47,235   
 
49,877
 
  49,317 
Accumulated depreciation
  
 
(25,834
) 
  (24,520)   
 
(26,689
) 
  (26,118) 
  
 
  
 
         
  
 
22,941
 
  22,715   
 
23,188
 
  23,199 
 
 
 
 
    
Investments of insurance subsidiaries
  
 
390
 
  315   
 
393
 
  388 
Investments in and advances to affiliates
  
 
335
 
  249   
 
427
 
  422 
Goodwill and other intangible assets
  
 
8,570
 
  8,269   
 
8,575
 
  8,578 
Right-of-use
operating lease assets
  
 
1,972
 
  1,834   
 
2,083
 
  2,024 
Other
  
 
542
 
  480   
 
575
 
  546 
  
 
  
 
         
  
$
51,016
 
 $45,058   
$
47,277
 
 $47,490 
  
 
  
 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
Current liabilities:
          
Accounts payable
  
$
3,270
 
 $2,905   
$
3,524
 
 $3,535 
Accrued salaries
  
 
1,971
 
  1,775   
 
1,767
 
  1,720 
Other accrued expenses
  
 
2,843
 
  2,932   
 
3,117
 
  3,240 
Government stimulus refund liability
  
 
6,123
 
  — 
Long-term debt due within one year
  
 
172
 
  145   
 
234
 
  209 
  
 
  
 
         
  
 
14,379
 
  7,757   
 
8,642
 
  8,704 
 
Long-term debt, less debt issuance costs and discounts of $245 and $239
  
 
30,792
 
  33,577 
Long-term debt, less debt issuance costs and discounts of $229 and $236
  
 
30,838
 
  30,795 
Professional liability risks
  
 
1,434
 
  1,370   
 
1,553
 
  1,486 
Right-of-use
operating lease obligations
  
 
1,635
 
  1,499   
 
1,730
 
  1,673 
Income taxes and other liabilities
  
 
1,477
 
  1,420   
 
2,032
 
  1,940 
 
Stockholders’ equity (deficit):
   
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 338,370,500 shares in 2020 and
338,445,600 shares in 2019
  
 
3
 
  3 
Stockholders’ equity:
       
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 333,714,500
shares — 2021 and
339,425,600
shares — 2020
  
 
3
 
  3 
Capital in excess of par value
  
 
185
 
  —   
 
0
 
  294 
Accumulated other comprehensive loss
  
 
(515
) 
  (460)   
 
(491
) 
  (502) 
Retained deficit
  
 
(647
) 
  (2,351) 
Retained earnings
  
 
735
 
  777 
  
 
  
 
         
Stockholders’ deficit attributable to HCA Healthcare, Inc.
  
 
(974
) 
  (2,808) 
Stockholders’ equity attributable to HCA Healthcare, Inc.
  
 
247
 
  572 
Noncontrolling interests
  
 
2,273
 
  2,243   
 
2,235
 
  2,320 
  
 
  
 
         
  
 
1,299
 
  (565)   
 
2,482
 
  2,892 
  
 
  
 
         
  
$
51,016
 
 $45,058   
$
47,277
 
 $47,490 
  
 
  
 
        
The accompanying notes are an integral part of the condensed consolidated financial statements.
 
4
Table of Contents
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE QUARTERS ENDED MARCH 31, 2021 AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
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

Earnings
(Deficit
)
 
  
Shares

(in millions)
 
Par

Value
 
  
Shares

(in millions)
 
 
Par

Value
 
Balances, December 31, 2018
   342.895  $ 3   $—  $(381)  $(4,572)  $2,032  $(2,918) 
Comprehensive income
       7   1,039   142   1,188 
Repurchase of common stock
   (2.106)     32    (310)    (278) 
Share-based benefit plans
   2.242     (29)      (29) 
Cash dividends declared ($0.40 per share)
        (140)    (140) 
Distributions
         (136)   (136) 
Other
      (3)     61   58 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Balances, March 31, 2019
   343.031   3    —   (374)   (3,983)   2,099   (2,255) 
Comprehensive income
       (57)   783   144   870 
Repurchase of common stock
   (1.928)     (107)    (135)    (242) 
Share-based benefit plans
   0.414     118      118 
Cash dividends declared ($0.40 per share)
        (139)    (139) 
Distributions
         (111)   (111) 
Other
      (11)      (11) 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Balances, June 30, 2019
   341.517   3    —   (431)   (3,474)   2,132   (1,770) 
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) 
Comprehensive income
       1   1,071   202   1,274 
Repurchase of common stock
   (2.069)     (95)    (177)    (272) 
Share-based benefit plans
   0.462     96      96 
Cash dividends declared ($0.40 per share)
        (138)    (138) 
Distributions
         (138)   (138) 
Other
      (1)     61   60 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
Balances, December 31, 2019
   338.446   3    —   (460)   (2,351)   2,243   (565) 
Balances, December 31
, 2019
  
 
338.446
 
 
 
$
 3
 
  
$
—
 
 
$
(460
) 
 
$
(2,351
) 
 
$
2,243
 
$
(565
) 
Comprehensive income
       (111)   581   117   587 
  
 
 
 
 
 
 
  
 
 
 
 
(111
) 
 
 
581
 
 
 
117
 
 
587
 
Repurchase of common stock
   (3.287)     35    (476)    (441) 
  
 
(3.287
 
) 
 
 
 
  
 
 
 
 
 
 
 
(441
) 
 
 
 
 
(441
) 
Share-based benefit plans
   2.449     (33)      (33) 
  
 
2.449
 
 
 
 
 
  
 
2
 
 
 
 
 
 
(35
) 
 
 
 
 
(33
) 
Cash dividends declared ($0.43 per share)
        (148)    (148) 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
(148
) 
 
 
 
 
(148
) 
Distributions
         (154)   (154) 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
(154
) 
 
(154
) 
Other
      (2)     53   51 
  
 
 
 
 
 
 
  
 
(2
) 
 
 
 
 
 
 
 
 
53
 
 
51
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, March 31, 2020
   337.608   3    —   (571)   (2,394)   2,259   (703) 
  
 
337.608
 
 
 
 
3
 
  
 
—
 
 
 
(571
) 
 
 
(2,394
) 
 
 
2,259
 
 
(703
) 
Comprehensive income
       9   1,079   137   1,225 
  
 
 
 
 
 
 
  
 
 
 
 
9
 
 
 
1,079
 
 
 
137
 
 
1,225
 
Share-based benefit plans
   0.352     93      93 
  
 
0.352
 
 
 
 
 
  
 
93
 
 
 
 
 
 
 
 
 
 
 
93
 
Distributions
         (45)   (45) 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
(45
) 
 
(45
) 
Other
      (5)     3   (2) 
  
 
 
 
 
 
 
  
 
(5
) 
 
 
 
 
 
 
 
 
3
 
 
(2
) 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, June 30, 2020
   337.960   3    88   (562)   (1,315)   2,354   568 
  
 
337.960
 
 
 
 
3
 
  
 
88
 
 
 
(562
) 
 
 
(1,315
) 
 
 
2,354
 
 
568
 
Comprehensive income
      
 
47
 
 
 
668
 
 
 
111
 
 
 
826
 
  
 
 
 
 
 
 
  
 
 
 
 
47
 
 
 
668
 
 
 
111
 
 
826
 
Share-based benefit plans
  
 
0.410
 
   
 
97
 
    
 
97
 
  
 
0.410
 
 
 
 
 
  
 
97
 
 
 
 
 
 
 
 
 
 
 
97
 
Distributions
        
 
(194
) 
 
 
(194
) 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
(194
) 
 
(194
) 
Other
        
 
2
 
 
 
2
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
2
 
 
2
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, September 30, 2020
  
 
338.370
 
 
$
3
 
  
$
185
 
 
$
(515
) 
 
$
(647
) 
 
$
2,273
 
 
$
1,299
 
  
 
338.370
 
 
 
 
3
 
  
 
185
 
 
 
(515
) 
 
 
(647
) 
 
 
2,273
 
 
1,299
 
Comprehensive income
  
 
 
 
 
 
 
  
 
 
 
 
13
 
 
 
1,426
 
 
 
268
 
 
1,707
 
Share-based benefit plans
  
 
1.056
 
 
 
 
 
  
 
108
 
 
 
 
 
 
 
 
 
 
 
108
 
Cash dividends declared ($
0.43 per share)
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
(2
) 
 
 
 
 
(2
) 
Distributions
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
(233
) 
 
(233
) 
Other
  
 
 
 
 
 
 
  
 
1
 
 
 
 
 
 
 
 
 
12
 
 
13
 
  
 
  
 
   
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, December 31, 2020
  
 
339.426
 
 
 
 
3
 
  
 
294
 
 
 
(502
) 
 
 
777
 
 
 
2,320
 
 
2,892
 
Comprehensive income
  
 
 
 
 
 
 
  
 
 
 
 
11
 
 
 
1,423
 
 
 
157
 
 
1,591
 
Repurchase of common stock
  
 
(8.477
 
) 
 
 
 
  
 
(225
) 
 
 
 
 
 
(1,302
) 
 
 
 
 
(1,527
) 
Share-based benefit plans
  
 
2.765
 
 
 
 
 
  
 
(75
) 
 
 
 
 
 
 
 
 
 
 
(75
) 
Cash dividends declared ($0.48 per share)
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
(163
) 
 
 
 
 
(163
) 
Distributions
  
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
(234
) 
 
(234
) 
Other
  
 
 
 
 
 
 
  
 
6
 
 
 
 
 
 
 
 
 
(8
) 
 
(2
) 
  
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances, March 31
, 2021
  
 
333.714
 
 
 
$
3
 
  
$
—
 
 
$
(491
) 
 
$
735
 
 
$
2,235
 
$
2,482
 
  
  
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.
 
5
Table of Contents
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
FOR THE NINE MONTHSQUARTERS ENDED SEPTEMBER 30,MARCH 31, 2021 AND 2020 AND 2019
Unaudited
(Dollars in millions)
 
  
2020
 
2019
   
2021
  
2020
 
Cash flows from operating activities:
        
Net income
  
$
2,693
 
 $2,872   
$
1,580
 
 $698 
Adjustments to reconcile net income to net cash provided by operating activities:
          
Increase (decrease) in cash from operating assets and liabilities:
          
Accounts receivable
  
 
930
 
  (93)   
 
(371
) 
  464 
Inventories and other assets
  
 
(36
) 
  (95)   
 
(85
) 
  (196) 
Accounts payable and accrued expenses
  
 
542
 
  (118)   
 
(371
) 
  (784) 
Government stimulus refund liability
  
 
6,123
 
  — 
Depreciation and amortization
  
 
2,059
 
  1,902   
 
697
 
  674 
Income taxes
  
 
(114
) 
  51   
 
406
 
  121 
Losses (gains) on sales of facilities
  
 
6
 
  (17) 
Gains on sales of facilities
  
 
(2
) 
  (7) 
Losses on retirement of debt
  
 
295
 
  211   
 
0
 
  295 
Amortization of debt issuance costs and discounts
  
 
22
 
  23   
 
8
 
  7 
Share-based compensation
  
 
229
 
  263   
 
97
 
  82 
Other
  
 
66
 
  98   
 
29
 
  21 
  
 
  
 
         
Net cash provided by operating activities
  
 
12,815
 
  5,097   
 
1,988
 
  1,375 
  
 
  
 
         
Cash flows from investing activities:
          
Purchase of property and equipment
  
 
(2,087
) 
  (2,884)   
 
(654
) 
  (853) 
Acquisition of hospitals and health care entities
  
 
(380
) 
  (1,592)   
 
(22
) 
  (328) 
Sales of hospitals and health care entities
  
 
68
 
  49   
 
20
 
  35 
Change in investments
  
 
(40
) 
  35   
 
(2
) 
  (1) 
Other
  
 
(44
) 
  17   
 
9
 
  2 
  
 
  
 
         
Net cash used in investing activities
  
 
(2,483
) 
  (4,375)   
 
(649
) 
  (1,145) 
  
 
  
 
         
Cash flows from financing activities:
          
Issuances of long-term debt
  
 
2,700
 
  6,451   
 
0
 
  2,700 
Net change in revolving bank credit facilities
   
(2,480
)   (30) 
Net change in revolving credit facilities
   80   1,440 
Repayment of long-term debt
  
 
(3,403
) 
  (5,289)   
 
(47
) 
  (3,327) 
Distributions to noncontrolling interests
  
 
(393
) 
  (404)   
 
(234
) 
  (154) 
Payment of debt issuance costs
  
 
(35
) 
  (71)   
 
0
 
  (34) 
Payment of dividends
  
 
(153
) 
  (414)   
 
(169
) 
  (152) 
Repurchases of common stock
  
 
(441
) 
  (759) 
Repurchase of common stock
  
 
(1,527
) 
  (441) 
Other
  
 
(156
) 
  (145)   
 
(207
) 
  (141) 
  
 
  
 
         
Net cash used in financing activities
  
 
(4,361
) 
  (661)   
 
(2,104
) 
  (109) 
  
 
  
 
         
Effect of exchange rate changes on cash and cash equivalents
  
 
(4
) 
  (4)   
 
2
 
  (11) 
  
 
  
 
         
Change in cash and cash equivalents
  
 
5,967
 
  57   
 
(763
) 
  110 
Cash and cash equivalents at beginning of period
  
 
621
 
  502   
 
1,793
 
  621 
  
 
  
 
         
Cash and cash equivalents at end of period
  
$
6,588
 
 $559   
$
1,030
 
 $731 
  
 
  
 
         
Interest payments
  
$
1,230
 
 $1,492   
$
375
 
 $468 
Income tax payments, net
  
$
779
 
 $714 
Income tax refunds, net
  
$
(13
) 
 $(9) 
 
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 September 30, 2020,March 31, 2021, these affiliates owned and operated 187186 hospitals, 121 freestanding surgery centers, 21 freestanding endoscopy centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 2120 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 $117$87 million and $88$96 million for the quarters ended September 30,March 31, 2021 and 2020, and 2019, respectively, and $289 million and $268 million for the nine months ended September 30, 2020 and 2019, respectively. Operating results for the quarter and nine months ended September 30, 2020March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021. 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, 2019.2020
.
COVID-19
Pandemic and CARES Act Funding
On March 11, 2020, the World Health Organization designated
COVID-19
as a global pandemic. Patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter of 2020 and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the
COVID-19
pandemic, that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities.
While many
of these restrictions have been eased across the U.S. and most states have lifted moratoriums on
non-emergent
procedures, some restrictions remain in place, and we are unable to predict the future impact of the pandemic on our operations.
During the nine months ended September 30, 2020, we received $4.449 billion of accelerated Medicare payments and $1.674 billion in general and targeted distributions from the Provider
Relief Fund (net of amounts returned), both
as provided for and established under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act. The Provider Relief Fund distributions were accounted for as government grants, and recognized on a systematic and rational basis as other income, once there is reasonable assurance that the applicable terms and conditions required to retain the funds will be met. Based on our analysis of the compliance and reporting requirements of the Provider Relief Fund and the impactpublic remains wary of the pandemic on our operating results from the beginning of the pandemic in March through June 30, 2020, we recognized $822 million relatedreal or perceived opportunities for exposure to the general distribution funds during the quarter ended June 30, 2020.
7
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
COVID-19
Pandemic and CARES Act Funding (continued)
During the quarter ended September 30, 2020, we continued to evaluate our operating results and gave consideration to the updated reporting guidelines issued in September by the U.S. Department of Health and Human Services that significantly changed the measurement of Provider Relief Fund distributions providers are able to retain. Based on our assessment of the likelihood of meeting the applicable terms and conditions of the Provider Relief Fund, during the quarter ended September 30, 2020 we reversed the $822 million of government stimulus income recognized during the quarter ended June 30, 2020. On October 8, 2020, we announced our decision to return, or repay early, all of our share of the Provider Relief Fund distributions of approximately $1.6 billion and the approximately $4.4 billion of Medicare accelerated payments. The total accelerated Medicare payments and Provider Relief Fund distributions received are recorded under the caption “government stimulus refund liability” in our condensed consolidated balance sheet at September 30, 20
2
0.
The CARES Act also provides for a deferral of payments of the employer portion of Social Security tax incurred during the pandemic, allowing half of such payroll taxes to be deferred until December 2021 and the remaining half until December 2022. At September 30, 2020, the Company had deferred $441 million of Social Security taxes. Additionally, the CARES Act created a payroll tax credit designed to encourage companies to retain employees during the pandemic. During the nine months ended September 30, 2020, the Company evaluated its eligibility for this credit and recorded $60 million of employee retention payroll tax credits pursuant to the CARES Act. These tax credits are recorded as a reduction of salaries and benefits in our condensed consolidated income statement.
virus. We believe the extent of the
COVID-19
pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Such factors include, but are not limited to, the scope and duration of
stay-at-home
practices and business closures and restrictions, suspensions of elective procedures, continued declines in patient volumes for an indeterminable length of time, increases in the number of uninsured and underinsured patients as a result of higher sustained rates of unemployment, incremental expenses required for supplies and personal protective equipment, and changes in professional and general liability exposure. Because of these and other uncertainties, we cannot estimate the lengthhow long or impact ofto what extent the pandemic on our business. If we incur declines in cash flows and results of operations, such declines could have an impact on the inputs and assumptions used in significant accounting estimates, including estimated implicit price concessions related to uninsured patient accounts, professional and general liability reserves, and potential impairments of goodwill and long-lived assets. During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case. However, the impact of COVID-19 in future periods may vary and could adverselywill impact our results of
operations.
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. 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
 
87
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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)
 
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 nine monthsquarter ended September 30,March 31, 2020 and 2019, respectively, include $55 
$
55
million related to the settlement of Medicare outlier calculations for prior periods and $86 million related to the resolution of transaction price differences regarding certain
out-of-network
services performed in prior periods. 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.
Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments 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 these revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for
non-elective
care, who have income at or below 400%
400
%
of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues.
Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters ended March 31, 2021 and nine months ended September 30, 2020 and 2019 are summarized in the following table (dollars in millions):
 
  
Quarter
 
  
2020
   
Ratio
 
2019
   
Ratio
   
2021
   
Ratio
 
2020
   
Ratio
Medicare
  
$
2,603
 
  
 
19.6
% 
 $2,592    20.4%   
$
2,559
 
  
 
18.3
% 
 $2,743    21.3% 
Managed Medicare
  
 
1,760
 
  
 
13.2
 
  1,615    12.7   
 
2,053
 
  
 
14.7
 
  1,826    14.2 
Medicaid
  
 
445
 
  
 
3.3
 
  361    2.8   
 
527
 
  
 
3.8
 
  414    3.2 
Managed Medicaid
  
 
707
 
  
 
5.3
 
  641    5.0   
 
725
 
  
 
5.2
 
  666    5.2 
Managed care and insurers
  
 
6,752
 
  
 
50.7
 
  6,554    51.7   
 
6,885
 
  
 
49.1
 
  6,645    51.6 
International (managed care and insurers)
  
 
307
 
  
 
2.3
 
  282    2.2   
 
333
 
  
 
2.4
 
  292    2.3 
Other
  
 
737
 
  
 
5.6
 
  649    5.2   
 
895
 
  
 
6.5
 
  275    2.2 
  
 
   
 
  
 
   
 
                
Revenues
  
$
13,311
 
  
 
100.0
% 
 $12,694    100.0%   
$
13,977
 
  
 
100.0
% 
 $12,861    100.0% 
  
 
   
 
  
 
   
 
                
 
   
Nine Months
 
   
2020
   
Ratio
  
2019
   
Ratio
 
Medicare
  
$
7,618
 
  
 
20.5
% 
 $7,997    21.2% 
Managed Medicare
  
 
5,074
 
  
 
13.6
 
  4,799    12.7 
Medicaid
  
 
1,423
 
  
 
3.8
 
  1,124    3.0 
Managed Medicaid
  
 
1,904
 
  
 
5.1
 
  1,808    4.8 
Managed care and insurers
  
 
19,028
 
  
 
51.0
 
  19,405    51.1 
International (managed care and insurers)
  
 
838
 
  
 
2.3
 
  863    2.3 
Other
  
 
1,355
 
  
 
3.7
 
  1,817    4.9 
  
 
 
   
 
 
  
 
 
   
 
 
 
Revenues
  
$
37,240
 
  
 
100.0
% 
 $37,813    100.0% 
  
 
 
   
 
 
  
 
 
   
 
 
 
98
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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)
 
To quantify the total impact of the trends related to uninsured patient 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 ended March 31, 2021 and nine months ended September 30, 2020 and 2019 follows (dollars in millions):
 
  
Quarter
 
Nine Months
 
  
2020
 
2019
 
2020
 
2019
 
  
2021
 
2020
 
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)
  
$
11,170
 
 $11,060  
$
32,428
 
 $32,619 
  
$
11,643
 
 
$
11,342
 
      
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
 
12.0
% 
  12.3%  
 
12.1
% 
  12.1% 
  
 
11.4
% 
 
 
11.9
% 
Total uncompensated care
  
$
7,023
 
 $7,923  
$
21,625
 
 $22,703 
  
$
6,821
 
 
$
7,873
 
Multiply by the
cost-to-charges
ratio
  
 
12.0
% 
  12.3%  
 
12.1
% 
  12.1% 
  
 
11.4
% 
 
 
11.9
% 
  
 
  
 
  
 
  
 
 
Estimated cost of total uncompensated care
  
$
843
 
 $975  
$
2,617
 
 $2,747 
  
$
778
 
 
$
937
 
  
 
  
 
  
 
  
 
 
  
 
 
 
  
The total uncompensated care amounts include charity care of $3.160$2.942 billion and $3.425$3.735 billion, respectively, and the related estimated costs of charity care were $376$335 million and $421$444 million,
respectively,
for the quarters ended September 30,March 31, 2021 and 2020 and 2019, respectively. The total uncompensated care amounts include charity care of $9.972 billion and $9.641 billion, respectively, and the related estimated costs of charity care were $1.207 billion and $1.167 billion, for the nine months ended September 30, 2020 and 2019, respectively.
.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE 2 — ACQUISITIONS AND DISPOSITIONS
During the nine monthsquarter ended September 30, 2020,March 31, 2021, we paid $380$22 million
to acquire a hospital in New Hampshire and other nonhospital health care entities.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 $309 million for the nine months ended September 30, 2020. During the nine monthsquarter ended September 30, 2019,March 31, 2020, we paid $1.399 billion
$328 million
to acquire a 7-hospital health systemhospital in North CarolinaNew Hampshire and $193 million to acquire other nonhospital health care entities. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.
During the nine monthsquarter ended September 30, 2020,March 31, 2021, we received proceeds of $68$20 million and recognized a net pretax lossgain of $6$2 million related to the sale of a hospital facility in Mississippi and sales of real estate and other investments. During the nine monthsquarter ended September 30, 2019,March 31, 2020, we received proceeds of $49$35 million and recognized a net pretax gain of $17$7 million related to a sale of a hospital facility in one of our Louisiana markets and sales of real estate and other investments.
NOTE 3 — INCOME TAXES
10
Our provisions for income taxes for the quarters ended March 31, 2021 and 2020 were 
$393 million and $112 million, respectively, and the effective tax rates were 21.7% and 16.2%, respectively.
Our provision for income taxes included tax benefits related to settlements of employee equity awards of 
$74 million and $53 million for the quarters ended March 31, 2021 and 2020, respectively.
Our liability for unrecognized tax benefits was $596 million, including accrued interest of $88 million, as of March 31, 2021 ($508 million and $73 million, respectively, as of December 31, 2020). Unrecognized tax benefits of $179 million ($157 million as of December 31, 2020) would affect the effective rate, if recognized.
9
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 — INCOME TAXES (continued)
Our provision for income taxes for the quarters ended September 30, 2020 and 2019 was $209 million and $215 million, respectively, and the effective tax rates were 23.8% and 26.0%, respectively. Our provision for income taxes for the nine months ended September 30, 2020 and 2019 was $665 million and $765 million, respectively, and the effective tax rates were 22.2% and 23.9%, respectively. Our provision for income taxes included tax benefits related to the settlement of employee equity awards of $59 million and $56 million for the nine months ended September 30, 2020 and 2019, respectively.
Our liability for unrecognized tax benefits was $523 million, including accrued interest of $74 million, as of September 30, 2020 ($550 million and $62 million, respectively, as of December 31, 2019). Unrecognized tax benefits of $167 million ($160 million as of December 31, 2019) would affect the effective rate, if recognized.
The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at September 30, 2020.March 31, 2021. 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 ended March 31, 2021 and nine months ended September 30, 2020 and 2019 (dollars and shares in millions, except per share amounts):
 
   
Quarter
   
Nine Months
 
   
2020
   
2019
   
2020
   
2019
 
Net income attributable to HCA Healthcare, Inc.
  
$
668
 
  $612   
$
2,328
 
  $2,434 
Weighted average common shares outstanding
  
 
338.168
 
   340.789   
 
338.057
 
   341.932 
Effect of dilutive incremental shares
  
 
5.178
 
   6.698   
 
4.957
 
   6.780 
  
 
 
   
 
 
   
 
 
   
 
 
 
Shares used for diluted earnings per share
  
 
343.346
 
   347.487   
 
343.014
 
   348.712 
  
 
 
   
 
 
   
 
 
   
 
 
 
Earnings per share:
        
Basic earnings
  
$
1.97
 
  $1.80   
$
6.89
 
  $7.12 
Diluted earnings
  
$
1.95
 
  $1.76   
$
6.79
 
  $6.98 
11
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
  
2021
 
  
2020
 
Net income attributable to HCA Healthcare, Inc.
  
$
1,423
 
  
$
581
 
   
Weighted average common shares outstanding
  
 
338.123
 
  
 
338.242
 
Effect of dilutive incremental shares
  
 
5.198
 
  
 
5.854
 
Shares used for diluted earnings per share
  
 
343.321
 
  
 
344.096
 
         
Earnings per share:
  
   
  
   
Basic earnings
  
$
4.21
 
  
$
1.72
 
Diluted earnings
  
$
4.14
 
  
$
1.69
 
NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES
A summary of our insurance subsidiaries’ investments at September 30, 2020March 31, 2021 and December 31, 20192020 follows (dollars in millions):
 
  
September 30, 2020
 
  
March 31, 2021
 
  
Amortized

Cost
   
Unrealized

Amounts
   
Fair

Value
 
  
Amortized

Cost
 
  
Unrealized

Amounts
 
  
Fair

Value
 
  
Gains
   
Losses
 
  
Gains
 
  
Losses
 
Debt securities
  
$
384
 
  
$
31
 
  
$
—
 
  
$
415
 
  
$
376
 
  
$
22
 
  
$
(1
) 
  
$
397
 
Money market funds and other
  
 
71
 
  
 
—
 
  
 
—
 
  
 
71
 
  
 
104
 
  
 
—
 
  
 
—
 
  
 
104
 
  
 
   
 
   
 
   
 
 
  
$
480
 
  
$
22
 
  
$
(1
) 
  
 
501
 
  
$
455
 
  
$
31
 
  
$
—
 
  
 
486
 
               
 
  
 
   
 
   
 
   
Amounts classified as current assets
        
 
(96
) 
  
 
  
 
  
 
  
 
(108
) 
        
 
 
Investment carrying value
        
$
390
 
  
 
  
 
  
 
  
$
393
 
        
 
              
 
   
December 31, 2019
 
   
Amortized

Cost
   
Unrealized

Amounts
   
Fair

Value
 
   
Gains
   
Losses
 
Debt securities
  $359   $18   $—   $377 
Money market funds and other
   85    —    —    85 
  
 
 
   
 
 
   
 
 
   
 
 
 
  $444   $18   $—    462 
  
 
 
   
 
 
   
 
 
   
Amounts classified as current assets
         (147) 
        
 
 
 
Investment carrying value
        $315 
        
 
 
 
10
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)
   
December 31, 2020
 
   
Amortized

Cost
   
Unrealized

Amounts
   
Fair

Value
 
   
Gains
   
Losses
 
Debt securities
  
$
384
 
  
$
32
 
  
$
—
 
  
$
416
 
Money market funds and other
  
 
88
 
  
 
—
 
  
 
—
 
  
 
88
 
   
$
472
 
  
$
32
 
  
$
—
 
  
 
504
 
                     
Amounts classified as current assets
                 
 
(116
) 
Investment carrying value
                 
$
388
 
                     
At September 30, 2020March 31, 2021 and December 31, 2019,2020, the investments in debt securities of our insurance subsidiaries were classified as
“available-for-sale.”
Changes in unrealized gains and losses that are not credit-related are recorded as adjustments to other comprehensive income (loss).
Scheduled maturities of investments in debt securities at September 30, 2020March 31, 2021 were as follows (dollars in millions):
 
  
Amortized

Cost
   
Fair

Value
   
Amortized

Cost
   
Fair

Value
 
Due in one year or less
  $4   $4   
$
4
 
  
$
4
 
Due after one year through five years
   127    135   
 
144
 
  
 
152
 
Due after five years through ten years
   175    192   
 
157
 
  
 
167
 
Due after ten years
   78    84   
 
71
 
  
 
74
 
  
 
   
 
   
$
376
 
  
$
397
 
  $384   $415         
  
 
   
 
 
The average expected maturity of the investments in debt securities at September 30, 2020March 31, 2021 was 5.55.0 years, compared to the average scheduled maturity of 9.89.2 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.
12
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 us and our counterparties 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.
11
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HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 — FINANCIAL INSTRUMENTS (continued)
Interest Rate Swap Agreements (continued)
The following table sets forth our interest rate swap agreements, which have been designated as cash
flow
hedges, at September 30, 2020March 31, 2021 (dollars in millions):
 
  
Notional

Amount
   
Maturity Date
   
Fair

Value
   
Notional

Amount
   
Maturity Date
   
Fair

Value
 
Pay-fixed
interest rate swaps
  $2,000    December 2021   $(34)   
$
2,000
 
  
 
December 2021
 
  
$
(20
) 
Pay-fixed
interest rate swaps
   500    December 2022    (21)   
 
500
 
  
 
December 2022
 
  
 
(16
) 
During the next 12 months, we estimate $36$30 million will be reclassified from other comprehensive income (“OCI”) and will be included in interest expense.
Derivatives — Results of Operations
The following table presents the effect of our interest rate swaps on our results of operations for the nine monthsquarter ended September 30, 2020March 31, 2021 (dollars in millions):
 
Derivatives in Cash Flow Hedging Relationships
  
Amount of Loss

Recognized in OCI on

Derivatives, Net of
 
Tax
   
Location of Loss

Reclassified from

Accumulated OCI

into Operations
   
Amount of Loss

Reclassified from

Accumulated OCI

into Operations
 
  
Amount of Gain

Recognized in OCI on

Derivatives, Net of Tax
 
  
Location of Loss

Reclassified from

Accumulated OCI

into Operations
 
  
Amount of Loss

Reclassified from

Accumulated OCI

into Operations
 
Interest rate swaps
  $51    Interest expense   $15 
  
$
1
 
  
 
Interest expense
 
  
$
9
 
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, 2020,March 31, 2021, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2020,March 31, 2021, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $55$37 million.
13
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 inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market marke
t
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)
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.
 
14
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
 
The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of September 30, 2020March 31, 2021 and December 31, 2019,2020, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
 
  
September 30, 2020
 
  
March 31, 2021
 
    
Fair Value Measurements Using
 
  
 
 
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)
 
  
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
  
$
415
 
 
$
—
 
 
$
415
 
 
$
—
 
  
$
397
 
 
$
—
 
 
$
397
 
 
$
—
 
Money market funds and other
  
 
71
 
 
 
71
 
 
 
—
 
 
 
—
 
  
 
104
 
 
 
104
 
 
 
—
 
 
 
—
 
  
 
  
 
  
 
  
 
 
Investments of insurance subsidiaries
  
 
486
 
 
 
71
 
 
 
415
 
 
 
—
 
  
 
501
 
 
 
104
 
 
 
397
 
 
 
—
 
Less amounts classified as current assets
  
 
(96
) 
 
 
(70
) 
 
 
(26
) 
 
 
—
 
  
 
(108
) 
 
 
(101
) 
 
 
(7
) 
 
 
—
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
$
390
 
 
$
1
 
 
$
389
 
 
$
—
 
  
$
393
 
 
$
3
 
 
$
390
 
 
$
—
 
  
 
  
 
  
 
  
 
 
  
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
     
  
 
 
 
 
 
 
 
Interest rate swaps (Income taxes and other liabilities)
  
$
55
 
 
$
—
 
 
$
55
 
 
$
—
 
  
$
36
 
 
$
—
 
 
$
36
 
 
$
—
 
     
  
December 31, 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
  $377  $—  $377  $— 
Money market funds and other
   85   85   —   — 
  
 
  
 
  
 
  
 
 
Investments of insurance subsidiaries
   462   85   377   — 
Less amounts classified as current assets
   (147)   (83)   (64)   — 
  
 
  
 
  
 
  
 
 
  $315  $2  $313  $— 
  
 
  
 
  
 
  
 
 
Interest rate swaps (Other)
  $3  $—  $3  $— 
Liabilities:
     
Interest rate swaps (Income taxes and other liabilities)
  $7  $—  $7  $— 
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)
Derivative Financial Instruments (continued)
    
 
  
December 31, 2020
 
 
  
 
 
 
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
  
$
416
 
 
$
—
 
 
$
416
 
 
$
—
 
Money market funds and other
  
 
88
 
 
 
88
 
 
 
—
 
 
 
—
 
Investments of insurance subsidiaries
  
 
504
 
 
 
88
 
 
 
416
 
 
 
—
 
Less amounts classified as current assets
  
 
(116
) 
 
 
(87
) 
 
 
(29
) 
 
 
—
 
 
  
$
388
 
 
$
1
 
 
$
387
 
 
$
—
 
                  
Liabilities:
  
   
 
   
 
   
 
   
Interest rate swaps (Income taxes and other liabilities)
  
$
46
 
 
$
—
 
 
$
46
 
 
$
—
 
The estimated fair value of our long-term debt was $34.739$34.872 billion and $37.026$35.814 billion at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, compared to carrying amounts, excluding debt issuance costs and discounts, aggregating $31.209$31.301 billion and $33.961$31.240 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.
15
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 — LONG-TERM DEBT
A summary of long-term debt at September 30, 2020March 31, 2021 and December 31, 2019,2020, including related interest rates at September 30, 2020,March 31, 2021, follows (dollars in millions):
 
  
September 30,

2020
 
December 31,

2019
 
 
March 31,

2021
 
December 31,

2020
 
Senior secured asset-based revolving credit facility
  
$
0
 
 $2,480 
Senior secured asset-based revolving credit facility (effective interest rate of 1.4%)
 
$
80
 
 
$
0
 
Senior secured revolving credit facility
  
 
0
 
  0 
 
 
0
 
 
 
0
 
Senior secured
364-day
term loan facility
  
 
0
 
  0 
Senior secured term loan facilities (effective interest rate of 2.8%)
  
 
3,684
 
  3,725 
 
 
3,657
 
 
 
3,671
 
Senior secured notes (effective interest rate of 5.1%)
  
 
13,850
 
  13,850 
 
 
13,850
 
 
 
13,850
 
Other senior secured debt (effective interest rate of 5.0%)
  
 
723
 
  654 
  
 
  
 
 
Other senior secured debt (effective interest rate of 4.6%)
 
 
762
 
 
 
767
 
Senior secured debt
  
 
18,257
 
  20,709 
 
 
18,349
 
 
 
18,288
 
Senior unsecured notes (effective interest rate of 5.5%)
  
 
12,952
 
  13,252 
 
 
12,952
 
 
 
12,952
 
Debt issuance costs and discounts
  
 
(245
) 
  (239) 
 
 
(229
) 
 
 
(236
) 
  
 
  
 
 
Total debt (average life of 9.1 years, rates averaging 5.0%)
  
 
30,964
 
  33,722 
Total debt (average life of 8.6 years, rates averaging 5.0%)
 
 
31,072
 
 
 
31,004
 
Less amounts due within one year
  
 
172
 
  145 
 
 
234
 
 
 
209
 
  
 
  
 
 
 
$
30,838
 
 
$
30,795
 
  
$
30,792
 
 $33,577 
 
 
 
 
 
 
  
 
  
 
 
During February 2020, we issued $2.700 billion aggregate principal amount
14
Table of 3.50% senior notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of Contents
HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022. The pretax loss on retirement of debt was $295 million.HEALTHCARE, INC.
In response to the risks the
COVID-19
pandemic presents to our business, during March 2020, we entered into a credit agreement that provides for
a 364-day secured
term loan facility for an aggregate principal amount of up to $2.000 billion. The facility will mature in March 2021. If drawn, amounts outstanding under the credit agreement will bear interest at either (i) the LIBOR rate plus 2.50% or (ii) an alternate base rate as defined in the credit agreement. As of September 30, 2020 there were no amounts outstanding nor draw notices pending under the facility.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — 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.
16
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 — CONTINGENCIES (continued)
Health care companies are routinely 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 the Centers for Medicare & Medicaid Services (“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. 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. The Company believes that our participation is and has been consistent with the requirements of the Program and is vigorously defending against the lawsuit being pursued by the relator. We cannot predict what effect, if any, the
qui tam
lawsuit could have on the Company.
NOTE 10 — SHARE REPURCHASE TRANSACTIONS AND OTHER COMPREHENSIVE LOSS
During January 2020 and 2019, our Board of Directors authorized share repurchase programs for up to $4 billion ($2 billion for each authorization) of our outstanding common stock. In response to the risks the
COVID-19
pandemic presents toDuring February 2021, our business, during March 2020, we announced the suspensionBoard of Directors authorized an additional $6 billion for repurchases of our share repurchase programs and expect to evaluate the resumption of the programs at a future date.outstanding common stock. During the quarter ended March 31, 2020,2021, we repurchased 3.2878.477 million shares of our common stock at an average price of $134.18$180.11 per share through market purchases pursuant to the $2.0 billion share repurchase program authorized during January 2019 and we made no repurchases(which was completed during the quarters ended June 30,first quarter of 2021) and the January 2020 or September 30, 2020.authorization. At September 30, 2020,March 31, 2021, we had $2.800$7.274 billion of repurchase authorization available under the January 20192020 and 2020 authorizations.February 2021
authorizations
.
 
17
15
Table of Contents
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 — 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, 2019
  $14   $(283)  $(187)  $(4)  $(460) 
Unrealized gains on
available-for-sale
securities, net of $3 of income taxes
   10       10 
Foreign currency translation adjustments, net of $3 income tax benefit
     (36)     (36) 
Change in fair value of derivative instruments, net of $15 income tax benefit
       (51)   (51) 
Expense reclassified into operations from other comprehensive income, net of $2 and $3 income tax benefits, respectively
      10   12   22 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
Balances at September 30, 2020
  $24   $(319)  $(177)  $(43)  $(515) 
  
 
 
   
 
 
  
 
 
  
 
 
  
 
 
 
 
 
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, 2020
 
$
25
 
 
$
(271
) 
 
$
(220
) 
 
$
(36
) 
 
$
(502
) 
Unrealized losses on
available-for-sale
securities, net of $2 income tax benefit
 
 
(9
) 
 
   
 
   
 
   
 
 
(9
) 
Foreign currency translation adjustments, net of $1 of income tax
 
   
 
 
7
 
 
   
 
   
 
 
7
 
Change in fair value of derivative instruments
 
   
 
   
 
   
 
 
1
 
 
 
1
 
Expense reclassified into operations from other comprehensive income, net of $2 and $2 income tax benefits, respectively
 
   
 
   
 
 
5
 
 
 
7
 
 
 
12
 
                     
Balances at March 31, 2021
 
$
16
 
 
$
(264
) 
 
$
(215
) 
 
$
(28
) 
 
$
(491
) 
           ��         
NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION
We operate in one line of business, which is operating hospitals and related health care entities. We operate in 2 geographically organized groups: the National and American Groups. The National Group includes 9697 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 8482 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Tennessee and Texas. We also operate 7 hospitals in England, and these facilities are included in the Corporate and other group.
18
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)
Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains)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 ended March 31, 2021 and nine months ended September 30, 2020 and 2019 are summarized in the following table (dollars in millions):
 
  
Quarter
   
Nine Months
 
  
2020
   
2019
   
2020
   
2019
   
202
1
   
2020
 
Revenues:
              
National Group
  
$
6,633
 
  $6,398   
$
18,653
 
  $19,159   
$
7,056
 
  $6,474 
American Group
  
 
6,073
 
   5,780   
 
16,920
 
   17,001   
 
6,291
 
   5,744 
Corporate and other
  
 
605
 
   516   
 
1,667
 
   1,653   
 
630
 
   643 
  
 
   
 
   
 
   
 
         
  
$
13,311
 
  $12,694   
$
37,240
 
  $37,813   
$
13,977
 
  $12,861 
  
 
   
 
   
 
   
 
         
Equity in earnings of affiliates:
        
National Group
  
$
(23
) 
  $2   
$
(26
) 
  $(3) 
American Group
  
 
(15
) 
   (10)   
 
(26
) 
   (32) 
Corporate and other
   
(2
)    4   
 
4
 
   12 
  
 
   
 
   
 
   
 
 
  
$
(40
) 
  $(4)   
$
(48
) 
  $(23) 
  
 
   
 
   
 
   
 
 
Adjusted segment EBITDA:
        
National Group
  
$
1,128
 
  $1,270   
$
3,828
 
  $4,088 
American Group
  
 
1,130
 
   1,185   
 
3,653
 
   3,443 
Corporate and other
 ��
 
(205
) 
   (170)   
 
(562
) 
   (412) 
  
 
   
 
   
 
   
 
 
  
$
2,053
 
  $2,285   
$
6,919
 
  $7,119 
  
 
   
 
   
 
   
 
 
Depreciation and amortization:
        
National Group
  
$
312
 
  $291   
$
930
 
  $839 
American Group
  
 
286
 
   277   
 
868
 
   828 
Corporate and other
  
 
96
 
   79   
 
261
 
   235 
  
 
   
 
   
 
   
 
 
  
$
694
 
  $647   
$
2,059
 
  $1,902 
  
 
   
 
   
 
   
 
 
Adjusted segment EBITDA
  
$
2,053
 
  $2,285   
$
6,919
 
  $7,119 
Depreciation and amortization
  
 
694
 
   647   
 
2,059
 
   1,902 
Interest expense
  
 
385
 
   448   
 
1,201
 
   1,386 
Losses (gains) on sales of facilities
   
(14
)    0   
 
6
 
   (17) 
Losses on retirement of debt
  
 
0
 
   211   
 
295
 
   211 
  
 
   
 
   
 
   
 
 
Income before income taxes
  
$
988
 
  $979   
$
3,358
 
  $3,637 
  
 
   
 
   
 
   
 
 
 
19
16
Table of Contents
ITEM 2. MANAGEMENT��S DISCUSSION AND ANALYSIS OF
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS
STATEMENTS (Continued)
Forward-Looking StatementsNOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)
         
   
2021
   
2020
 
Equity in earnings of affiliates:
  
 
 
 
  
 
 
 
National Group
  
$
(7
) 
  
$
1
 
American Group
  
 
(12
) 
  
 
(9
) 
Corporate and other
  
 
(2
) 
  
 
1
 
 
  
$
(21
) 
  
$
(7
) 
 
  
  
 
  
  
 
Adjusted segment EBITDA:
  
 
 
 
  
 
 
 
National Group
  
$
1,705
 
  
$
1,215
 
American Group
  
 
1,501
 
  
 
1,115
 
Corporate and other
  
 
(154
) 
  
 
(130
) 
 
  
$
3,052
 
  
$
2,200
 
 
  
  
 
  
  
 
Depreciation and amortization:
  
 
 
 
  
 
 
 
National Group
  
$
323
 
  
$
306
 
American Group
  
 
293
 
  
 
287
 
Corporate and other
  
 
81
 
  
 
81
 
 
  
$
697
 
  
$
674
 
 
  
  
 
  
  
 
Adjusted segment EBITDA
  
$
3,052
 
  
$
2,200
 
Depreciation and amortization
  
 
697
 
  
 
674
 
Interest expense
  
 
384
 
  
 
428
 
Gains on sales of facilities
  
 
(2
) 
  
 
(7
) 
Losses on retirement of debt
  
 
0
 
  
 
295
 
Income before income taxes
  
$
1,973
 
  
$
810
 
 
  
  
 
  
  
 
This quarterly report on
Form 10-Q
includes certain disclosures which contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. 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) developments related to
COVID-19,
including, without limitation, related to the length and severity of the pandemic; the volume of canceled or rescheduled procedures and the volume of
COVID-19
patients cared for across our health systems; measures we are taking to respond to the
COVID-19
pandemic; the impact and terms of government and administrative regulation and stimulus (including the Families First Coronavirus Response Act (“FFCRA”), the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act and other enacted legislation); changes in revenues due to declining patient volumes, changes in payor mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions; and the timing and availability of effective medical treatments and vaccines, (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the
COVID-19
pandemic which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of court challenges to, any repeal of, or changes to, the Affordable Care Act 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, including single-payer proposals (often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the
COVID-19
pandemic, (4) 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, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) 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, (8) the highly competitive nature of the health care business, (9) 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, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including economic and business conditions (and the impact thereof on the financial markets and banking
20
17
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” within the meaning of the federal securities laws, which involve risks and uncertainties. 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) developments related to
COVID-19,
including, without limitation, the length and severity of the pandemic and the spread of virus strains with new epidemiological characteristics; the volume of canceled or rescheduled procedures and the volume of
COVID-19
patients cared for across our health systems; measures we are taking to respond to the
COVID-19
pandemic; the impact and terms of government and administrative regulation and stimulus (including the Families First Coronavirus Response Act, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021 and other enacted and potential future legislation); changes in revenues due to declining patient volumes, changes in payer mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions; and the timing, availability and adoption of effective medical treatments and vaccines, (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the
COVID-19
pandemic which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of court challenges to, any repeal of, or changes to, the Affordable Care Act 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, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the
COVID-19
pandemic, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and those required under the Pay-As-You-Go Act of 2010 (“PAYGO Act”) as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, 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, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) 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, (8) the highly competitive nature of the health care business, (9) 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, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing
18
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Forward-Looking Statements (continued)
 
facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including economic and business conditions (and the impact thereof on the economy, financial markets and banking industry) resulting from the
COVID-19
pandemic, (16) the emergence of and effects related to other pandemics, epidemics and infectious diseases, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of potential cybersecurity incidents or security breaches, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record (“EHR”) technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (25) changes in the U.S. federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, and (26) other risk factors described in our annual report on
Form 10-K
for the year ended December 31, 2019, our quarterly report on Form
10-Q
for the quarter ended June 30, 2020 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.
COVID-19
Pandemic and CARES Act Funding
On March 11, 2020, the World Health Organization designated
COVID-19
as a global pandemic. Patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter of 2020 and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the
COVID-19
pandemic, that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities. While many of these restrictions have been eased across the U.S. and most states have lifted moratoriums on
non-emergent
procedures, some restrictions remain in place, and we are unable to predict the future impact of the pandemic on our operations.
During the nine months ended September 30, 2020, we received $4.449 billion of accelerated Medicare payments and $1.674 billion in general and targeted distributions from the Provider Relief Fund (net of amounts returned), both as provided for and established under the CARES Act. The Provider Relief Fund distributions were accounted for as government grants, and recognized on a systematic and rational basis as other income, once there is reasonable assurance that the applicable terms and conditions required to retain the funds will be met. Based on our analysis of the compliance and reporting requirements of the Provider Relief Fund and the impactpublic remains wary of the pandemic on our operating results from the beginning of the pandemic in March through June 30, 2020, we recognized $822 million relatedreal or perceived opportunities for exposure to the general distribution funds during the quarter ended June 30, 2020.
During the quarter ended September 30, 2020, we continued to evaluate our operating results and gave consideration to the updated reporting guidelines issued in September by the U.S. Department of Health and Human Services that significantly changed the measurement of Provider Relief Fund distributions providers are able to retain. Based on our assessment of the likelihood of meeting the applicable terms and conditions of the Provider Relief Fund, during the quarter ended September 30, 2020 we reversed the $822 million of government stimulus income recognized during the quarter ended June 30, 2020. On October 8, 2020, we announced our
21
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COVID-19
Pandemic and CARES Act Funding (continued)
decision to return, or repay early, all of our share of the Provider Relief Fund distributions of approximately $1.6 billion and the approximately $4.4 billion of Medicare accelerated payments. The total accelerated Medicare payments and Provider Relief Fund distributions received are recorded under the caption “government stimulus refund liability” in our condensed consolidated balance sheet at September 30, 2020.
virus. We believe the extent of the
COVID-19
pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Such factors include, but are not limited to, the scope and duration of
stay-at-home
practices and business closures and restrictions, recommended suspensions of elective procedures, continued declines in patient volumes for an indeterminable length of time, increases in the number of uninsured and underinsured patients as a result of higher sustained rates of unemployment, incremental expenses required for supplies and personal protective equipment, and changes in professional and general liability exposure. Because of these and other uncertainties, we cannot estimate the lengthhow long or severity of the impact ofto what extent the pandemic on our business. If we incur declines in cash flows and results of operations, such declines could have an impact on the inputs and assumptions used in significant accounting estimates, including estimated implicit price concessions related to uninsured patient accounts, professional and general liability reserves, and potential impairments of goodwill and long-lived assets. During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case. However, the impact of COVID-19 in future periods may vary and could adverselywill impact our results of operations.
ThirdFirst Quarter 20202021 Operations Summary
Revenues increased to $13.311$13.977 billion in the thirdfirst quarter of 20202021 from $12.694$12.861 billion in the thirdfirst quarter of 2019.2020. Net income attributable to HCA Healthcare, Inc. totaled $668 million,$1.423 billion, or $1.95$4.14 per diluted share, for the quarter ended September 30, 2020,March 31, 2021, compared to $612$581 million, or $1.76$1.69 per diluted share, for the quarter ended September 30, 2019. ThirdMarch 31, 2020. First quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in the second quarter of 2020 related to general distribution funds from the Provider Relief Fund established by the CARES Act. Third quarter results for 2020 also include gains on sales of facilities of $14 million, or $0.03 per diluted share. Third quarter results for 2019 include losses on retirement of debt of $211$295 million, or $0.47$0.66 per diluted share, and gains on sales of facilities of $7 million, or $0.02 per diluted share. Our revenues for the quarter ended March 31, 2020 include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Our provisions for income taxes for the first quarters of 2021 and 2020 included tax benefits of $74 million, or $0.22 per diluted share, and $53 million, or $0.15 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 343.346 million shares for the quarter ended September 30, 2020 and 347.487 million shares for the quarter ended September 30, 2019. During 2019 and the first nine months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.
Due to the
COVID-19
pandemic, patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the
COVID-19
pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities. Revenues increased 4.9%8.7% on a consolidated basis and 4.5%9.0% on a same facility basis for the quarter ended September 30, 2020,March 31, 2021, compared to the quarter ended September 30, 2019.March 31, 2020. The increase in consolidated revenues can be primarily attributed to the net impact of a 15.3%16.1% increase in revenue per equivalent admission offset by a 9.1%6.4% decline in equivalent admissions. The same facility revenues increase primarily resulted from the net impact of a 14.8% increase in same facility revenue per equivalent admission offset by a 9.0% decline in same facility equivalent admissions.
 
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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
ThirdFirst Quarter 20202021 Operations Summary (continued)
 
16.6% increase in same facility revenue per equivalent admission offset by a 6.5% decline in same facility equivalent admissions.
During the quarter ended September 30, 2020,March 31, 2021, consolidated admissions and same facility admissions declined 3.9%4.1% and 3.8%4.2%, respectively, compared to the quarter ended September 30, 2019.March 31, 2020. Surgeries declined 6.7%0.7% on a consolidated basis and declined 6.5%0.6% on a same facility basis during the quarter ended September 30, 2020,March 31, 2021, compared to the quarter ended September 30, 2019.March 31, 2020. Emergency department visits declined 20.1%18.7% and 20.3%18.4% on a consolidated basis and on a same facility basis, respectively, during the quarter ended September 30, 2020,March 31, 2021, compared to the quarter ended September 30, 2019.March 31, 2020. Consolidated and same facility uninsured admissions declined 12.7%15.8% and 14.2%15.7%, respectively, for the quarter ended September 30, 2020,March 31, 2021, compared to the quarter ended September 30, 2019.March 31, 2020.
Cash flows from operating activities increased $591$613 million, from $2.126$1.375 billion for the thirdfirst quarter of 20192020 to $2.717$1.988 billion for the thirdfirst quarter of 2020.2021. The increase in cash provided by operating activities was primarily related to the net effect of an increase in net income, excluding the government stimulus income reversal, gains on sales of facilities and losses on retirement of debt, of $488$659 million receiptand an increase related to income taxes of an additional $302$218 million, in Provider Relief Funds, and positiveoffset by negative changes in working capital of $277$311 million, primarily from therelated to an increase in accounts payable and accrued expenses, offset by declines related to income taxes of $486 million.receivable.
Results of Operations
Revenue/Volume Trends
Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively 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.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
Revenues increased 4.9%8.7% from $12.694$12.861 billion in the thirdfirst quarter of 20192020 to $13.311$13.977 billion in the thirdfirst quarter of 2020.2021. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual allowancesadjustments 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. Patients treated at our hospitals for
non-elective
care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and nine months ended September 30, 2020 and 2019 are summarized in the following table (dollars in millions):
   
Quarter
 
   
2020
   
Ratio
  
2019
   
Ratio
 
Medicare
  
$
2,603
 
  
 
19.6
% 
 $2,592    20.4% 
Managed Medicare
  
 
1,760
 
  
 
13.2
 
  1,615    12.7 
Medicaid
  
 
445
 
  
 
3.3
 
  361    2.8 
Managed Medicaid
  
 
707
 
  
 
5.3
 
  641    5.0 
Managed care and insurers
  
 
6,752
 
  
 
50.7
 
  6,554    51.7 
International (managed care and insurers)
  
 
307
 
  
 
2.3
 
  282    2.2 
Other
  
 
737
 
  
 
5.6
 
  649    5.2 
  
 
 
   
 
 
  
 
 
   
 
 
 
Revenues
  
$
13,311
 
  
 
100.0
% 
 $12,694    100.0% 
  
 
 
   
 
 
  
 
 
   
 
 
 
   
Nine Months
 
   
2020
   
Ratio
  
2019
   
Ratio
 
Medicare
  
$
7,618
 
  
 
20.5
% 
 $7,997    21.2% 
Managed Medicare
  
 
5,074
 
  
 
13.6
 
  4,799    12.7 
Medicaid
  
 
1,423
 
  
 
3.8
 
  1,124    3.0 
Managed Medicaid
  
 
1,904
 
  
 
5.1
 
  1,808    4.8 
Managed care and insurers
  
 
19,028
 
  
 
51.0
 
  19,405    51.1 
International (managed care and insurers)
  
 
838
 
  
 
2.3
 
  863    2.3 
Other
  
 
1,355
 
  
 
3.7
 
  1,817    4.9 
  
 
 
   
 
 
  
 
 
   
 
 
 
Revenues
  
$
37,240
 
  
 
100.0
% 
 $37,813    100.0% 
  
 
 
   
 
 
  
 
 
   
 
 
 
Consolidated and same facility revenue per equivalent admission increased 15.3% and 14.8%, respectively, in the third quarter of 2020, compared to the third quarter of 2019. Consolidated and same facility equivalent admissions declined 9.1% and 9.0%, respectively, in the third quarter of 2020, compared to the third quarter of 2019. Consolidated and same facility outpatient surgeries declined 6.7% and 6.3%, respectively, in the third quarter of 2020, compared to the third quarter of 2019. Consolidated and same facility inpatient surgeries both declined 6.8% in the third quarter of 2020, compared to the third quarter of 2019. Consolidated and same facility emergency department visits declined 20.1% and 20.3%, respectively, in the third quarter of 2020, compared to the third quarter of 2019.
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
 
Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters ended March 31, 2021 and 2020 are summarized in the following table (dollars in millions):
   
2021
   
Ratio
  
2020
   
Ratio
 
Medicare
  
$
2,559
 
  
 
18.3
% 
 $2,743    21.3% 
Managed Medicare
  
 
2,053
 
  
 
14.7
 
  1,826    14.2 
Medicaid
  
 
527
 
  
 
3.8
 
  414    3.2 
Managed Medicaid
  
 
725
 
  
 
5.2
 
  666    5.2 
Managed care and insurers
  
 
6,885
 
  
 
49.1
 
  6,645    51.6 
International (managed care and insurers)
  
 
333
 
  
 
2.4
 
  292    2.3 
Other
  
 
895
 
  
 
6.5
 
  275    2.2 
                    
Revenues
  
$
13,977
 
  
 
100.0
% 
 $12,861    100.0% 
                    
Consolidated and same facility revenue per equivalent admission increased 16.1% and 16.6%, respectively, in the first quarter of 2021, compared to the first quarter of 2020. Consolidated and same facility equivalent admissions declined 6.4% and 6.5%, respectively, in the first quarter of 2021, compared to the first quarter of 2020. Consolidated and same facility outpatient surgeries increased 2.2% and 2.3%, respectively, in the first quarter of 2021, compared to the first quarter of 2020. Consolidated and same facility inpatient surgeries declined 5.6% and 5.4%, respectively, in the first quarter of 2021, compared to the first quarter of 2020. Consolidated and same facility emergency department visits declined 18.7% and 18.4%, respectively, in the first quarter of 2021, compared to the first quarter of 2020. Our revenues increased, although our patient volumes declined, during the first quarter of 2021 compared to the first quarter of 2020 due to favorable changes in payer mix and higher acuity levels for patients treated during the first quarter of 2021, which resulted in an increase in revenue per equivalent admission. We believe these trends have been impacted by the effect of the pandemic on our operations, including the patients diagnosed with COVID-19.
To quantify the total impact of the trends related to uninsured patient 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 ended March 31, 2021 and nine months ended September 30, 2020 and 2019 follows (dollars in millions):
 
  
Quarter
 
Nine Months
 
  
2020
 
2019
 
2020
 
2019
   
2021
 
2020
 
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)
  
$
11,170
 
 $11,060  
$
32,428
 
 $32,619   
$
11,643
 
 $11,342 
       
 
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
  
 
12.0
% 
  12.3%  
 
12.1
% 
  12.1%   
 
11.4
% 
  11.9% 
       
Total uncompensated care
  
$
7,023
 
 $7,923  
$
21,625
 
 $22,703   
$
6,821
 
 $7,873 
Multiply by the
cost-to-charges
ratio
  
 
12.0
% 
  12.3%  
 
12.1
% 
  12.1%   
 
11.4
% 
  11.9% 
  
 
  
 
  
 
  
 
        
Estimated cost of total uncompensated care
  
$
843
 
 $975  
$
2,617
 
 $2,747   
$
778
 
 $937 
  
 
  
 
  
 
  
 
        
Same facility uninsured admissions declined by 6,4926,564 admissions, or 15.7%, in the first quarter of 2021 compared to the first quarter of 2020. Same facility uninsured admissions in 2020, compared to 2019, declined 9.1% in the fourth quarter, declined 14.2%, in the third quarter, declined 10.0% in the second quarter, and increased 7.1% in the first quarter. The declines in the first quarter of 2021, compared to the first quarter of 2020, and the last three quarters of 2020, compared to the third quarterlast three quarters of 2019, were primarily due to the reimbursement received, as provided for under the FFCRA and subsequent legislation for uninsured patients diagnosed with COVID-19, and the resulting classification of those patients as an insured admission. Same facility uninsured admissions declined 10.0%, in the second quarter of 2020 compared to the second quarter of 2019. Same facility uninsured admissions increased 7.1%, in the first quarter of 2020 compared to the first quarter of 2019. Same facility uninsured admissions in 2019, compared to 2018, increased 6.8% in the fourth quarter, increased 2.1% in the third quarter, increased 5.1% in the second quarter, and were flat in the first 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 nine months ended September 30, 2020 and 2019 are set forth in the following table.
 
   
Quarter
  
Nine Months
 
   
2020
  
2019
  
2020
  
2019
 
Medicare
  
 
25
% 
  28%  
 
26
% 
  29% 
Managed Medicare
  
 
19
 
  18  
 
19
 
  19 
Medicaid
  
 
5
 
  5  
 
6
 
  5 
Managed Medicaid
  
 
13
 
  12  
 
12
 
  12 
Managed care and insurers
  
 
30
 
  28  
 
29
 
  27 
Uninsured
  
 
8
 
  9  
 
8
 
  8 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
 
100
% 
  100%  
 
100
% 
  100% 
  
 
 
  
 
 
  
 
 
  
 
 
 
2521
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)
 
provided for under the Families First Coronavirus Response Act and subsequent legislation, for uninsured patients diagnosed with
COVID-19
and the resulting classification of those patients as an insured admission, as well as general declines in patient volumes resulting from the pandemic’s impact on our operations.
The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters ended March 31, 2021 and 2020 are set forth in the following table.
   
2021
  
2020
 
Medicare
  
 
24
% 
  27% 
Managed Medicare
  
 
22
 
  20 
Medicaid
  
 
5
 
  5 
Managed Medicaid
  
 
12
 
  12 
Managed care and insurers
  
 
30
 
  28 
Uninsured
  
 
7
 
  8 
          
   
 
100
% 
  100% 
          
The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters ended March 31, 2021 and nine months ended September 30, 2020 and 2019 are set forth in the following table.
 
  
Quarter
 
Nine Months
 
  
2020
 
2019
 
2020
 
2019
   
2021
 
2020
 
Medicare
  
 
25
% 
  28%  
 
27
% 
  28%   
 
24
% 
  29% 
Managed Medicare
  
 
15
 
  14  
 
15
 
  15   
 
17
 
  16 
Medicaid
  
 
5
 
  4  
 
5
 
  4   
 
5
 
  4 
Managed Medicaid
  
 
6
 
  6  
 
6
 
  5   
 
6
 
  5 
Managed care and insurers
  
 
49
 
  47  
 
47
 
  47   
 
48
 
  46 
Uninsured
  
 
—
 
  1  
 
—
 
  1 
  
 
  
 
  
 
  
 
        
  
 
100
% 
  100%  
 
100
% 
  100%   
 
100
% 
  100% 
  
 
  
 
  
 
  
 
        
At September 30, 2020,March 31, 2021, we had 9192 hospitals in the states of Texas and Florida. During the third quarter of 2020, 55%ended March 31, 2021, 56% of our admissions and 49% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 71%73% of our uninsured admissions during the third quarter of 2020.ended March 31, 2021.
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 $154$138 million and $103 million during the third quarters of 2020 and 2019, respectively, and $455 million and $317$115 million during the first nine monthsquarters of 20202021 and 2019,2020, 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 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
22
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)
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.
Key Performance Indicators
We present certain metrics and statistical information that management uses when assessing our results of operations. We believe this information is useful to investors as it provides insight to how management evaluates operational performance and trends between reporting periods. Information on how these metrics and statistical information are defined is provided in the following tables summarizing operating results and statisticaloperating data.
26
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 ended March 31, 2021 and nine months ended September 30, 2020 and 2019 (dollars in millions):
 
  
Quarter
 
  
2020
 
2019
   
2021
 
2020
 
  
Amount
 
Ratio
 
Amount
 
Ratio
   
Amount
 
Ratio
 
Amount
 
Ratio
 
Revenues
  
$
13,311
 
 
 
100.0
 
 $12,694   100.0   
$
13,977
 
 
 
100.0
 
 $12,861   100.0 
Salaries and benefits
  
 
6,097
 
 
 
45.8
 
  5,971   47.0   
 
6,301
 
 
 
45.1
 
  6,118   47.6 
Supplies
  
 
2,128
 
 
 
16.0
 
  2,090   16.5   
 
2,224
 
 
 
15.9
 
  2,123   16.5 
Other operating expenses
  
 
2,251
 
 
 
16.9
 
  2,352   18.5   
 
2,421
 
 
 
17.4
 
  2,427   18.9 
Government stimulus income reversal
  
 
822
 
 
 
6.2
 
  —   — 
Equity in earnings of affiliates
  
 
(40
) 
  
(0.3
)   (4)   —   
 
(21
) 
 
 
(0.2
) 
  (7)   (0.1) 
Depreciation and amortization
  
 
694
 
 
 
5.2
 
  647   5.1   
 
697
 
 
 
5.0
 
  674   5.3 
Interest expense
  
 
385
 
 
 
2.9
 
  448   3.5   
 
384
 
 
 
2.7
 
  428   3.3 
Gains on sales of facilities
   
(14
)   
(
0.1
)   —   —   
 
(2
) 
 
 
—
 
  (7)   (0.1) 
Losses on retirement of debt
  
 
—
 
 
 
—
 
  211   1.7   
 
—
 
 
 
—
 
  295   2.3 
  
 
  
 
  
 
  
 
              
  
 
12,323
 
 
 
92.6
 
  11,715   92.3   
 
12,004
 
 
 
85.9
 
  12,051   93.7 
  
 
  
 
  
 
  
 
              
Income before income taxes
  
 
988
 
 
 
7.4
 
  979   7.7   
 
1,973
 
 
 
14.1
 
  810   6.3 
Provision for income taxes
  
 
209
 
 
 
1.5
 
  215   1.7   
 
393
 
 
 
2.8
 
  112   0.9 
  
 
  
 
  
 
  
 
              
Net income
  
 
779
 
 
 
5.9
 
  764   6.0   
 
1,580
 
 
 
11.3
 
  698   5.4 
Net income attributable to noncontrolling interests
  
 
111
 
 
 
0.9
 
  152   1.2   
 
157
 
 
 
1.1
 
  117   0.9 
  
 
  
 
  
 
  
 
              
Net income attributable to HCA Healthcare, Inc.
  
$
668
 
 
 
5.0
 
 $612   4.8   
$
1,423
 
 
 
10.2
 
 $581   4.5 
  
 
  
 
  
 
  
 
              
% changes from prior year:
          
Revenues
  
 
4.9
% 
   10.9%    
 
8.7
% 
   2.7%  
Income before income taxes
  
 
0.9
 
   (8.4)    
 
143.6
 
   (44.5)  
Net income attributable to HCA Healthcare, Inc.
  
 
9.0
 
   (19.3)    
 
145.0
 
   (44.1)  
Admissions(a)
  
 
(3.9
) 
   5.9    
 
(4.1
) 
   1.0  
Equivalent admissions(b)
  
 
(9.1
) 
   7.5    
 
(6.4
) 
   (0.1)  
Revenue per equivalent admission
  
 
15.3
 
   3.1    
 
16.1
 
   2.9  
Same facility % changes from prior year(c):
          
Revenues
  
 
4.5
 
   6.3    
 
9.0
 
   1.2  
Admissions(a)
  
 
(3.8
) 
   3.2    
 
(4.2
) 
   0.6  
Equivalent admissions(b)
  
 
(9.0
) 
   4.2    
 
(6.5
) 
   (0.4)  
Revenue per equivalent admission
  
 
14.8
 
   2.0    
 
16.6
 
   1.6  
(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.
 
2723
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)
 
   
Nine Months
 
   
2020
  
2019
 
   
Amount
  
Ratio
  
Amount
  
Ratio
 
Revenues
  
$
37,240
 
 
 
100.0
 
 $37,813   100.0 
Salaries and benefits
  
 
17,545
 
 
 
47.1
 
  17,455   46.2 
Supplies
  
 
5,999
 
 
 
16.1
 
  6,249   16.5 
Other operating expenses
  
 
6,825
 
 
 
18.3
 
  7,013   18.6 
Equity in earnings of affiliates
  
 
(48
) 
  
(0.1
)   (23)   (0.1) 
Depreciation and amortization
  
 
2,059
 
 
 
5.6
 
  1,902   4.9 
Interest expense
  
 
1,201
 
 
 
3.2
 
  1,386   3.7 
Losses (gains) on sales of facilities
  
 
6
 
 
 
—
 
  (17)   — 
Losses on retirement of debt
  
 
295
 
 
 
0.8
 
  211   0.6 
  
 
 
  
 
 
  
 
 
  
 
 
 
  
 
33,882
 
 
 
91.0
 
  34,176   90.4 
  
 
 
  
 
 
  
 
 
  
 
 
 
Income before income taxes
  
 
3,358
 
 
 
9.0
 
  3,637   9.6 
Provision for income taxes
  
 
665
 
 
 
1.8
 
  765   2.0 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income
  
 
2,693
 
 
 
7.2
 
  2,872   7.6 
Net income attributable to noncontrolling interests
  
 
365
 
 
 
0.9
 
  438   1.2 
  
 
 
  
 
 
  
 
 
  
 
 
 
Net income attributable to HCA Healthcare, Inc.
  
$
2,328
 
 
 
6.3
 
 $2,434   6.4 
  
 
 
  
 
 
  
 
 
  
 
 
 
% changes from prior year:
     
Revenues
  
 
(1.5
)% 
   9.9%  
Income before income taxes
  
 
(7.7
) 
   (5.4)  
Net income attributable to HCA Healthcare, Inc.
  
 
(4.4
) 
   (10.6)  
Admissions(a)
  
 
(5.1
) 
   4.6  
Equivalent admissions(b)
  
 
(9.8
) 
   6.2  
Revenue per equivalent admission
  
 
9.1
 
   3.5  
Same facility % changes from prior year(c):
     
Revenues
  
 
(2.1
) 
   5.7  
Admissions(a)
  
 
(5.3
) 
   2.1  
Equivalent admissions(b)
  
 
(9.9
) 
   3.0  
Revenue per equivalent admission
  
 
8.6
 
   2.6  
(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.
28
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Quarters Ended September 30,March 31, 2021 and 2020 and 2019
Revenues increased to $13.311$13.977 billion in the thirdfirst quarter of 20202021 from $12.694$12.861 billion in the thirdfirst quarter of 2019.2020. Net income attributable to HCA Healthcare, Inc. totaled $668 million,$1.423 billion, or $1.95$4.14 per diluted share, for the quarter ended September 30, 2020,March 31, 2021, compared to $612$581 million, or $1.76$1.69 per diluted share, for the quarter ended September 30, 2019. ThirdMarch 31, 2020. First quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income previously recorded in the second quarter of 2020 related to general distribution funds from the Provider Relief Fund established by the CARES Act. Third quarter results for 2020 also include gains on sales of facilities of $14 million, or $0.03 per diluted share. Third quarter results for 2019 include losses on retirement of debt of $211$295 million, or $0.47$0.66 per diluted share, and gains on sales of facilities of $7 million, or $0.02 per diluted share. Our revenues for the quarter ended March 31, 2020 include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Our provisions for income taxes for the first quarters of 2021 and 2020 included tax benefits of $74 million, or $0.22 per diluted share, and $53 million, or $0.15 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.
Due to the
COVID-19
pandemic, patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the
COVID-19
pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities. During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case. However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations. Revenues increased 4.9%8.7% on a consolidated basis and 4.5%9.0% on a same facility basis for the quarter ended September 30, 2020,March 31, 2021, compared to the quarter ended September 30, 2019.March 31, 2020. The increase in consolidated revenues can be primarily attributed to the net impact of a 15.3%16.1% increase in revenue per equivalent admission offset by a 9.1%6.4% decline in equivalent admissions. The same facility revenues increase primarily resulted from the net impact of a 14.8%16.6% increase in same facility revenue per equivalent admission offset by a 9.0%6.5% decline in same facility equivalent admissions offset.admissions.
Salaries and benefits, as a percentage of revenues, were 45.8%45.1% in the thirdfirst quarter of 20202021 and 47.0%47.6% in the thirdfirst quarter of 2019.2020. Salaries and benefits per equivalent admission increased 12.3%10.0% in the thirdfirst quarter of 20202021 compared to the thirdfirst quarter of 2019.2020. Same facility labor rate increases averaged 5.2%6.1% for the thirdfirst quarter of 20202021 compared to the thirdfirst quarter of 2019. Due to the
COVID-19
pandemic, during the second quarter of 2020 we suspended annual merit increases and implemented temporary salary reductions. During the third quarter of 2020, we revised these compensation decisions and recorded $102 million, or $0.23 per diluted share, of additional compensation expense.2020.
Supplies, as a percentage of revenues, were 16.0%15.9% in the thirdfirst quarter of 20202021 and 16.5% in the thirdfirst quarter of 2019.2020. Supply costs per equivalent admission increased 11.9% in the thirdfirst quarter of 20202021 compared to the thirdfirst quarter of 2019.2020. Supply costs per equivalent admission increased 9.9%7.0% for medical devices, 14.0%21.0% for pharmacy supplies and 12.5%12.0% for general medical and surgical items in the thirdfirst quarter of 20202021 compared to the thirdfirst quarter of 2019.2020.
Other operating expenses, as a percentage of revenues, were 16.9%17.4% in the thirdfirst quarter of 20202021 and 18.5%18.9% in the thirdfirst quarter of 2019.2020. 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 $26$134 million and $89$140 million for the thirdfirst quarters of 2021 and 2020, respectively.
Equity in earnings of affiliates was $21 million and 2019, respectively. During$7 million in the thirdfirst quarters of 2021 and 2020, and 2019, we recorded reductions of $112 million, or $0.25 per diluted share, and $50 million, or $0.11 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.
During the third quarter of 2020, we recorded the reversal of $822 million of government stimulus income previously recorded in the second quarter of 2020 related to general distribution funds received from the Provider Relief Fund established by the CARES Act.respectively.
 
29
24
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Quarters Ended September 30,March 31, 2021 and 2020 and 2019 (continued)
 
Equity in earnings of affiliates was $40 million and $4 million in the third quarters of 2020 and 2019, respectively.
Depreciation and amortization increased $47$23 million, from $647$674 million in the thirdfirst quarter of 20192020 to $694$697 million in the thirdfirst quarter of 2020.2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.
Interest expense was $385$384 million in the thirdfirst quarter of 20202021 and $448$428 million in the thirdfirst quarter of 2019.2020. Our average debt balance was $30.952$31.019 billion for the thirdfirst quarter of 20202021 compared to $34.693$34.136 billion for the thirdfirst quarter of 2019.2020. The average effective interest rate for our long-term debt declined to 4.9%was 5.0% for both of the quarterquarters ended September 30, 2020 from 5.1% for the quarter ended September 30, 2019.March 31, 2021 and 2020.
During the third quarterfirst quarters of 2021 and 2020, we recorded gains on sales of facilities of $14 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.
The effective tax rates were 23.8% and 26.0% for the third quarters of 2020 and 2019, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.
Net income attributable to noncontrolling interests declined from $152 million for the third quarter of 2019 to $111 million for the third quarter of 2020. The decline in net income attributable to noncontrolling interests related primarily to the government stimulus income reversal for certain joint ventures.
Nine Months Ended September 30, 2020 and 2019
Revenues declined to $37.240 billion in the first nine months of 2020 from $37.813 billion in the first nine months of 2019. Net income attributable to HCA Healthcare, Inc. totaled $2.328 billion, or $6.79 per diluted share, for the nine months ended September 30, 2020, compared to $2.434 billion, or $6.98 per diluted share, for the nine months ended September 30, 2019. Results for the first nine months of 2020 included $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act. Results for the first nine months of 2020 also included losses on sales of facilities of $6 million, or $0.03 per diluted share, and losses on retirement of debt of $295 million, or $0.66 per diluted share. Results for the first nine months of 2019 included gains on sales of facilities of $17 million, or $0.04 per diluted share, and losses on retirement of debt of $211 million, or $0.47 per diluted share. Revenues for the first nine months of 2020 and 2019, respectively, include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods and $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. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 343.014 million shares for the nine months ended September 30, 2020 and 348.712 million shares for the nine months ended September 30, 2019.
30
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Nine Months Ended September 30, 2020 and 2019 (continued)
Due to the
COVID-19
pandemic, patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the
COVID-19
pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities. During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case. However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations. Revenues declined 1.5% on a consolidated basis and 2.1% on a same facility basis for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The decline in consolidated revenues can be primarily attributed to the net impact of a 9.8% decline in equivalent admissions offset by a 9.1% increase in revenue per equivalent admission. The same facility revenues decline primarily resulted from the net impact of a 9.9% decline in same facility equivalent admissions offset by an 8.6% increase in same facility revenue per equivalent admission.
Salaries and benefits, as a percentage of revenues, were 47.1% in the first nine months of 2020 and 46.2% in the first nine months of 2019. Salaries and benefits per equivalent admission increased 11.4% in the first nine months of 2020 compared to the first nine months of 2019. Same facility labor rate increases averaged 2.8% for the first nine months of 2020 compared to the first nine months of 2019.
Supplies, as a percentage of revenues, were 16.1% in the first nine months of 2020 and 16.5% in the first nine months of 2019. Supply costs per equivalent admission increased 6.4% in the first nine months of 2020 compared to the first nine months of 2019. Supply costs per equivalent admission increased 4.5% for medical devices, 5.2% for pharmacy supplies and 8.1% for general medical and surgical items in the first nine months of 2020 compared to the first nine months of 2019.
Other operating expenses, as a percentage of revenues, were 18.3% in the first nine months of 2020 and 18.6% in the first nine months of 2019. 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 $305$2 million and $358 million for the first nine months of 2020 and 2019, respectively. During the first nine months of 2020 and 2019, we recorded reductions of $112 million, or $0.25 per diluted share, and $50 million, or $0.11 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.
Equity in earnings of affiliates was $48 million and $23 million in the first nine months of 2020 and 2019, respectively.
Depreciation and amortization increased $157 million, from $1.902 billion in the first nine months of 2019 to $2.059 billion in the first nine months of 2020. The increase in depreciation relates primarily capital expenditures at our existing facilities.
Interest expense was $1.201 billion in the first nine months of 2020 and $1.386 billion in the first nine months of 2019. Our average debt balance was $32.223 billion for the first nine months of 2020 compared to $34.422 billion for the first nine months of 2019. The average effective interest rate for our long-term debt declined to 5.0% for the nine months ended September 30, 2020 from 5.4% for the nine months ended September 30, 2019.
31
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations (continued)
Nine Months Ended September 30, 2020 and 2019 (continued)
During the first nine months of 2020 and 2019, we recorded losses on sales of facilities of $6 million and gains on sales of facilities of $17$7 million, respectively.
During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior unsecured notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022. The pretax loss on retirement of debt was $295 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.
The effective tax rates were 22.2%21.7% and 23.9%16.2% for the first nine monthsquarters of 20202021 and 2019,2020, 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 nine monthsquarters of 20202021 and 20192020 included tax benefits of $59$74 million and $56$53 million, respectively, related to employee equity award settlements. Excluding the effect of these adjustments, the effective tax rate for the first nine monthsquarters of 20202021 and 20192020 would have been 24.2%25.7% and 25.7%23.8%, respectively.
Net income attributable to noncontrolling interests declinedincreased from $438$117 million for the first nine monthsquarter of 20192020 to $365$157 million for the first nine monthsquarter of 2020.2021. The declineincrease in net income attributable to noncontrolling interests related primarily to the operations of joint ventures in two of our Texas markets and our surgery center partnerships.markets.
Liquidity and Capital Resources
Cash provided by operating activities totaled $12.815$1.988 billion in the first nine monthsquarter of 20202021 compared to $5.097$1.375 billion in the first nine monthsquarter of 2019.2020. The $7.718 billion$613 million increase in cash provided by operating activities, in the first nine monthsquarter of 20202021 compared to the first nine monthsquarter of 2019,2020, related primarily to the combinednet effect of the receiptan increase in net income, excluding gains on sales of $6.123 billionfacilities and losses on retirement of debt, of $659 million and an increase related to unapplied accelerated Medicare payments and Provider Relief Funds as provided for in the CARES Act, and positiveincome taxes of $218 million, offset by negative changes in working capital of $1.742 billion,$311 million, primarily from the collection of patientrelated to an increase in accounts receivable. On October 8, 2020, we announced our decision to return, or repay early, allThe net combination of our share of the Provider Relief Fund distributions of approximately $1.6 billioninterest payments and the approximately $4.4 billion of Medicare accelerated payments that have been received under the CARES Act. The repayment of these funds will be recorded as a reduction to our cash flows from operating activities. Our cash flows from operating activities of $12.815 billion for the nine months ended September 30, 2020 includes this approximately $6 billion of funds that we have announced we will repay, and the exclusion of the impact of these cash flows would reduce our cash flows provided by operating activities fornet income tax refunds in the first nine monthsquarters of 2021 and 2020 totaled $362 million and $459 million, respectively. Working capital totaled $3.394 billion at March 31, 2021 and $3.629 billion at December 31, 2020.
Cash used in investing activities was $649 million in the first quarter of 2021 compared to $1.145 billion in the first quarter of 2020. Acquisitions of hospitals and health care entities declined from $328 million in the first quarter of 2020 to $6.815$22 million in the first quarter of 2021. Excluding acquisitions, capital expenditures were $654 million in the first quarter of 2021 and $853 million in the first quarter of 2020. Planned capital expenditures are expected to approximate $3.7 billion in 2021. At March 31, 2021, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.0 billion. We expect to finance capital expenditures with internally generated and borrowed funds.
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
 
Interest payments and net income tax payments in the first nine months of 2020 and 2019 totaled $2.009 billion and $2.206 billion, respectively. Working capital totaled $1.887 billion at September 30, 2020 and $3.439 billion at December 31, 2019. The $1.552 billion decline in working capital is primarily related to a decline in accounts receivable of $947 million and a $365 million increase in accounts payable.
Cash used in investing activities was $2.483 billion in the first nine months of 2020 compared to $4.375 billion in the first nine months of 2019. Acquisitions of hospitals and health care entities declined from $1.592 billion in the first nine months of 2019 (which included the acquisition of a seven-hospital health system in North Carolina) to $380 million in the first nine months of 2020. Excluding acquisitions, capital expenditures were $2.087 billion in the first nine months of 2020 and $2.884 billion in the first nine months of 2019. Planned capital expenditures are expected to approximate $3.0 billion in 2020. At September 30, 2020, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.1 billion. We expect to finance capital expenditures with internally generated and borrowed funds.
Cash used in financing activities totaled $4.361$2.104 billion in the first nine monthsquarter of 20202021 compared to $661$109 million in the first nine monthsquarter of 2019.2020. During the first nine monthsquarter of 2020, net cash flows used in financing activities included a net decline of $3.183 billion in our indebtedness, payments of dividends of $153 million, repurchases of common stock of $441 million, distributions to noncontrolling interests of $393 million and payments of debt issuance costs of $35 million. During the first nine months of 2019,2021, net cash flows used in financing activities included a net increase of $1.132 billion$33 million in our indebtedness, payment of dividends of $414$169 million, repurchasesrepurchase of common stock of $759$1.527 billion and distributions to noncontrolling interests of $234 million. During the first quarter of 2020, net cash flows used in financing activities included an increase of $813 million from net borrowings on our revolving credit facilities and refinancing activity, payment of dividends of $152 million, repurchase of common stock of $441 million, distributions to noncontrolling interests of $404$154 million and paymentspayment of debt issuance costs of $71$34 million.
In response to the risks the
COVID-19
pandemic presents to our business, we have suspended our share repurchase and quarterly dividend programs and reduced certain planned projects and capital expenditures. We expect to evaluate resumption of these programs at a future date.
We are a highly leveraged company with significant debt service requirements. Our debt totaled $30.964$31.072 billion at September 30, 2020.March 31, 2021. Our interest expense was $1.201 billion$384 million for the first nine monthsquarter of 20202021 and $1.386 billion$428 million for the first nine monthsquarter of 2019.2020.
In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.7105.590 billion an
d $5.140 b
illion available as of both September 30, 2020March 31, 2021 and October 26, 2020)April 29, 2021, respectively) and anticipated access to public and private debt markets.
During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022.
In response to the risks the
COVID-19
pandemic presents to our business, during March 2020, we entered into a credit agreement that provides for
a 364-day secured
term loan facility for an aggregate principal amount of up to $2.000 billion. The facility will mature in March 2021. If drawn, amounts outstanding under the credit agreement will bear interest at either (i) the LIBOR rate plus 2.50% or (ii) an alternate base rate as defined in the credit agreement. As of September 30, 2020 and October 29, 2020, there were no amounts outstanding nor draw notices pending under the facility.
33
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
During the nine months ended September 30, 2020, we received $4.449 billion of accelerated Medicare payments and $1.674 billion in general and targeted distributions from the Provider Relief Fund (net of amounts returned), both as provided for and established under the CARES Act. On October 8, 2020, we announced our decision to return, or repay early, all of our share of the Provider Relief Fund distributions of approximately $1.6 billion and the approximately $4.4 billion of Medicare accelerated payments. We expect to repay the entire amount using available cash and future cash flows from operations.
Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $486$501 million and $462$504 million at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $187$148 million and $175$188 million at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Our facilities are insured by a 100% owned insurance subsidiary for losses up to $50$75 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Additionally, the insurance subsidiary has entered into reinsurance contracts providing reimbursement for a certain portion of losses in excess of self-insured retentions. Net reserves for the self-insured professional liability risks retained were $1.702$1.816 billion and $1.606$1.736 billion at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $487$463 million. We estimate that approximately $440$422 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.
Summarized Financial Information
HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the primary obligor under a substantial portion of our indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes. The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed byguarantee
d on an unsecured basis b
y HCA Healthcare, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed subject to customary release provisions,on a senior secured basis 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). For further information regarding such guarantees, refera list of subsidiary guarantors, see Exhibit 22 to the applicable indentures that are filed as exhibits to our annualthis quarterly report on Form 10-Q.
10-K
for
The subsidiary guarantees rank senior in right of payment to all subordinated indebtedness of each subsidiary guarantor, equally in right of payment with all senior indebtedness of the year ended December 31, 2019.subsidiary guarantors and are structurally subordinated in right of payment to all indebtedness and other liabilities of any nonguarantor subsidiaries of the subsidiary guarantors (other than indebtedness and liabilities owed to one of the subsidiary guarantors). The subsidiary guarantees are secured by first-priority liens on the subsidiary guarantors’ assets,
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
Summarized Financial Information (continued)
 
subject to certain exceptions, that secure our senior secured cash flow credit facility on a first-priority basis. The subsidiary guarantees are secured by second-priority liens on the subsidiary guarantors’ assets that secure our senior secured asset-based revolving credit facility on a first-priority basis and our senior secured cash flow credit facility on a second-priority basis.
The subsidiary guarantees may be automatically and unconditionally released and discharged upon certain customary events, including in the event such guarantee is released under our senior secured credit facilities. The indentures governing the senior secured notes include a “savings clause” intended to limit each subsidiary guarantor’s obligations as necessary to prevent the guarantee from constituting a fraudulent conveyance under applicable law, which could reduce a subsidiary guarantor’s liability on its guarantee to zero. For further information regarding the guarantees, refer to the applicable indentures that are filed as exhibits to our annual report on Form 10-K for the year ended December 31, 2020.
Summarized financial information is presented on a combined basis and transactions between the combining entities have been eliminated. Financial information for nonguarantor entities has been excluded. The summarized operating results information for the nine monthsquarter ended September 30, 2020March 31, 2021 and year ended December 31, 20192020 and the summarized balance sheet information at September 30, 2020March 31, 2021 and December 31, 2019,2020, for HCA Healthcare, Inc., HCA Inc. and the subsidiary guarantors (the Parent, Subsidiary Issuer and Subsidiary Guarantors) follow (dollars in millions):
Nine MonthsQuarter Ended September 30, 2020March 31, 2021 and Year Ended December 31, 2019:2020:
 
  
Nine Months

September 30, 2020
 
Year

December 31, 2019
   
Quarter
March 31, 2021
 
Year
December 31, 2020
 
Revenues
  
$
22,406
 
 $29,220   
$
8,401
 
 $31,040 
Income before income taxes
  
 
2,642
 
  3,912   
 
1,479
 
  4,016 
Net income
  
 
2,071
 
  2,993   
 
1,168
 
  3,172 
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors
  
 
2,017
 
  2,902   
 
1,148
 
  3,091 
At September 30, 2020 and December 31, 2019:
   
At March 31, 2021 and December 31, 2020:
   
  
September 30,

2020
 
December 31,

2019
   
March 31, 2021
 
December 31, 2020
 
Current assets
  
$
11,252
 
 $6,090   
$
7,198
 
 $7,442 
Property and equipment, net
  
 
14,795
 
  13,418   
 
14,934
 
  14,939 
Goodwill and other intangible assets
  
 
5,777
 
  5,743   
 
5,762
 
  5,763 
Total noncurrent assets
  
 
21,640
 
  19,977   
 
21,801
 
  21,771 
Total assets
  
 
32,892
 
  26,067   
 
28,999
 
  29,213 
Current liabilities
  
 
9,528
 
  4,504   
 
5,178
 
  5,316 
Long-term debt, net
  
 
30,457
 
  33,227   
 
30,488
 
  30,444 
Intercompany balances
  
 
2,901
 
  (53)   
 
2,324
 
  2,090 
Income taxes and other liabilities
  
 
799
 
  879   
 
1,230
 
  1,004 
Total noncurrent liabilities
  
 
34,654
 
  34,398   
 
34,559
 
  34,035 
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors
  
 
(11,392
) 
  (12,941)   
 
(10,845
) 
  (10,247) 
Noncontrolling interests
  
 
102
 
  106   
 
107
 
  109 
27
Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Liquidity and Capital Resources (continued)
Summarized Financial Information (continued)
The first-priority liens securing the subsidiary guarantees discussed above include liens on (i) substantially all of the capital stock of substantially all wholly owned first-tier subsidiaries of HCA Inc. or of the subsidiary guarantors (but limited to 65% of the stock of any such wholly owned first-tier subsidiary that is a foreign subsidiary), subject to certain limited exceptions, and (ii) substantially all indebtedness owing to HCA Inc. or to the subsidiary guarantors, including any and all intercompany indebtedness owed by HCA Healthcare, Inc. or any subsidiary thereof to HCA Inc., or any subsidiary guarantor. For a list of affiliates whose securities are pledged as collateral for the senior secured notes, see Exhibit 22 to this quarterly report on Form 10-Q.
Under the first lien intercreditor agreement, the administrative agent for the lenders under the cash flow credit facility, subject to the occurrence of certain events, has the exclusive right to direct foreclosures and take other actions with respect to these liens, and the trustee for the senior secured notes has no right to take any such actions. In certain circumstances, including upon certain events of default under the senior secured credit facilities and the senior secured notes, the collateral agent in respect of the cash flow credit facility and the senior secured notes could proceed against the collateral granted to it to secure such indebtedness, including the aforementioned pledged capital stock and pledged indebtedness, and require such collateral to be delivered to the collateral agent to the extent not already in its possession for purposes of perfecting the lien on such assets. For further information regarding the collateral, including events or circumstances that may require delivery of the collateral, refer to the applicable indentures, the first lien intercreditor agreement, the cash flow credit agreement and the pledge agreement that are filed as exhibits to our annual report on Form 10-K for the year ended December 31, 2020.
There is no trading market for any of HCA Healthcare, Inc.’s affiliates whose securities are pledged as collateral for the senior secured notes.
Rule 13-02 of Regulation S-X requires the presentation of summarized financial information of the combined affiliates whose securities are pledged as collateral for the senior secured notes unless such information is not material. The rule provides that such information is not material if the assets, liabilities and results of operations of the combined affiliates whose securities are pledged as collateral are not materially different than the corresponding amounts presented in the consolidated financial statements of the Registrant. Healthtrust, Inc. — The Hospital Company (“Healthtrust”) is the first-tier subsidiary of HCA Inc., and the common stock of Healthtrust is pledged as collateral for the senior secured notes. Due to the corporate structure relationship of HCA Healthcare, Inc. and Healthtrust, all of HCA Healthcare, Inc.’s operating subsidiaries, including all other affiliates whose securities are pledged as collateral for the senior secured notes, are also subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrust’s consolidated financial statements related to HCA Healthcare Inc.’s debt and financial instruments, mean that the assets, liabilities and results of operations of Healthtrust (and, therefore, of the combined affiliates whose securities are pledged as collateral for the senior secured notes) are not materially different than the corresponding amounts presented in the financial statements of HCA Healthcare, Inc. As a result, summarized financial information of affiliates whose securities are pledged as collateral for the senior secured notes is not required to be presented under Rule 13-02.
Market Risk
We are exposed to market risk related to changes in market values of securities. The investments ininvestment securities held by our 100% owned insurance subsidiaries were $486recorded at $501 million at September 30, 2020.March 31, 2021. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At September 30, 2020,March 31, 2021, we had a net unrealized gain of $31$21 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
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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)
 
We are exposed to market risk related to market illiquidity. Investment securities held by our insurance subsidiaries could be impaired by the inability to access the capital markets. Should the 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 credit-related 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.
With respect to our interest-bearing liabilities, approximately $1.185$1.238 billion of long-term debt at September 30, 2020March 31, 2021 was subject to variable rates of interest, while the remaining balance in long-term debt of $29.779$29.834 billion at September 30, 2020March 31, 2021 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 5.0% for both of the quarters ended March 31, 2021 and 5.4% for the nine months ended September 30, 2020 and 2019, respectively.2020.
The estimated fair value of our total long-term debt was $34.739$34.872 billion at September 30, 2020.March 31, 2021. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in variable interest rates, the potential annualized reduction to future pretax earnings would be approximately $12 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.
Tax Examinations
The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at September 30, 2020.March 31, 2021. 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,

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Table of Contents
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Tax Examinations (continued)
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.
36
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Data
 
  
2020
   
2019
   
2021
   
2020
 
Number of hospitals in operation at:
        
March 31
  
 
186
 
   185   
 
186
 
   186 
June 30
  
 
186
 
   184      186 
September 30
  
 
187
 
   184      187 
December 31
     184      185 
Number of freestanding outpatient surgical centers in operation at:
        
March 31
  
 
123
 
   124   
 
121
 
   123 
June 30
  
 
122
 
   125      122 
September 30
  
 
121
 
   125      121 
December 31
     123      121 
Licensed hospital beds at(a):
        
March 31
  
 
49,357
 
   48,455   
 
49,561
 
   49,357 
June 30
  
 
49,403
 
   48,483      49,403 
September 30
  
 
49,473
 
   48,588      49,473 
December 31
     49,035      49,265 
Weighted average licensed beds(b):
    
Weighted average licensed beds in service(b):
    
Quarter:
        
First
  
 
49,160
 
   48,036   
 
42,363
 
   42,177 
Second
  
 
49,358
 
   48,429      42,309 
Third
  
 
49,479
 
   48,535      42,426 
Fourth
     48,911      42,072 
Year
     48,480      42,246 
Average daily census(c):
        
Quarter:
        
First
  
 
28,822
 
   28,966   
 
29,678
 
   28,822 
Second
  
 
24,844
 
   27,808      24,844 
Third
  
 
28,186
 
   27,502      28,186 
Fourth
     28,274      29,065 
Year
     28,134      27,734 
Admissions(d):
        
Quarter:
        
First
  
 
528,244
 
   523,196   
 
506,380
 
   528,244 
Second
  
 
452,992
 
   518,253      452,992 
Third
  
 
506,756
 
   527,284      506,756 
Fourth
     540,194      521,917 
Year
     2,108,927      2,009,909 
Equivalent admissions(e):
        
Quarter:
        
First
  
 
889,035
 
   889,956   
 
832,489
 
   889,035 
Second
  
 
723,136
 
   903,419      723,136 
Third
  
 
835,576
 
   918,964      835,576 
Fourth
     933,996      864,583 
Year
     3,646,335      3,312,330 
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Data (continued)
 
  
2020
 
2019
   
2021
 
2020
 
Average length of stay (days)(f):
      
Quarter:
      
First
  
 
5.0
 
  5.0   
 
5.3
 
  5.0 
Second
  
 
5.0
 
  4.9     5.0 
Third
  
 
5.1
 
  4.8     5.1 
Fourth
    4.8     5.1 
Year
    4.9     5.1 
Emergency room visits(g):
      
Quarter:
      
First
  
 
2,264,707
 
  2,287,440   
 
1,841,778
 
  2,264,707 
Second
  
 
1,516,116
 
  2,253,337     1,516,116 
Third
  
 
1,813,661
 
  2,269,364     1,813,661 
Fourth
    2,350,988     1,855,823 
Year
    9,161,129     7,450,307 
Outpatient surgeries(h):
      
Quarter:
      
First
  
 
226,319
 
  240,846   
 
231,228
 
  226,319 
Second
  
 
170,911
 
  253,441     170,911 
Third
  
 
232,493
 
  249,177     232,493 
Fourth
    266,483     252,760 
Year
    1,009,947     882,483 
Inpatient surgeries(i):
      
Quarter:
      
First
  
 
135,145
 
  137,363   
 
127,590
 
  135,145 
Second
  
 
118,591
 
  140,473     118,591 
Third
  
 
133,492
 
  143,215     133,492 
Fourth
    145,584     135,157 
Year
    566,635     522,385 
Days revenues in accounts receivable(j):
      
Quarter:
      
First
  
 
49
 
  53   
 
48
 
  49 
Second
  
 
50
 
  52     50 
Third
  
 
44
 
  52     44 
Fourth
    50     45 
Outpatient revenues as a % of patient revenues(k):
      
Quarter:
      
First
  
 
37
% 
  38%   
 
36
% 
  37% 
Second
  
 
32
% 
  39%     32% 
Third
  
 
36
% 
  39%     36% 
Fourth
    39%     35% 
Year
    39%     35% 
(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 in service, 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.
 
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Operating Data (continued)
 
(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.
(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.
(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.
 
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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 September 30, 2020.March 31, 2021. 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 September 30, 2020.March 31, 2021.
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
The information set forth in Note 9 – Contingencies in the notes to the condensed consolidated financial statements is incorporated herein by reference.
40
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, 2019,2020, which are incorporated herein by reference. The following disclosures supplementThere 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, 2019 and our quarterly report on Form
10-Q
for the quarter ended June 30, 2020.
The COVID-19 pandemic
is significantly affecting our operations, business and financial condition. Our liquidity could also be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time.
On January 31, 2020, the Secretary of U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency (“PHE”) due to a novel coronavirus. On March 11, 2020, the World Health Organization declared the outbreak
of COVID-19,
a disease caused by this novel coronavirus, a pandemic. This disease continues to spread throughout the United States and other parts of the world.
The COVID-19 pandemic
is significantly affecting our employees, patients, hospitals, communities and business operations, as well as the U.S. economy and financial markets. As
the COVID-19 crisis
continues to evolve, the full extent to which
the COVID-19 outbreak
will impact our business, results of operations, financial condition and liquidity will depend on future developments that are highly uncertain and cannot be accurately predicted. For example, we are not able to predict or control the severity or duration of the pandemic, including whether there will be additional periods of increases in the number of
COVID-19
cases in areas in which we operate, the timing and availability of effective medical treatments and vaccines or the efficacy of public health controls. Florida and Texas, our two largest markets, are and may continue to be “hot spots” of the
COVID-19
pandemic. Due to the concentration of our hospitals in Texas and Florida, we are particularly sensitive to the increase in
COVID-19
cases in those states where the pandemic could have a disproportionate effect on our business.
We have been working with federal, state and local health authorities to respond
to COVID-19 cases
in the markets we serve and continue to take and support measures to try to limit the spread of the virus and to mitigate the burden on the health care system. For example, we are subject to
COVID-19
data reporting requirements, and some states are requiring hospitals to maintain a reserve of personal protective equipment (“PPE”) and mandating
COVID-19
screening for new patients and certain hospital staff. CMS has made COVID-19 data reporting requirements a Medicare condition of participation for hospitals, such that noncompliance with these requirements could result in termination from the Medicare program. We have incurred and will continue to incur additional costs related to protecting the health and well-being and meeting the needs of our patients, employees, medical staff members and contractors, including pandemic pay programs, hoteling our staff and additional scrub laundering. We expect to continue to incur additional costs, which may be significant, as we continue to implement operational changes in response to this pandemic. Further, our management is focused on mitigating the impact of the
COVID-19
pandemic, which has required and will continue to require a substantial investment of time and resources across our enterprise.
As a front line provider of health care services, we have been and will continue to be impacted by the health and economic effects
of COVID-19.
Although we are implementing considerable safety measures, treatment
of COVID-19 patients
has associated risks to our employees, patients and physicians. These risks, and how clinical staff perceive and respond to them, may adversely affect our operating capacity. Despite considerable efforts to source vital supplies, we have experienced and may continue to experience supply chain disruptions, including delays and price increases in equipment, pharmaceuticals and medical supplies, particularly PPE, and we may experience shortages. Our current PPE inventory is satisfactory, but we cannot be certain that our supplies will remain sufficient in the future. In addition, restrictive measures taken to address the
COVID-19
pandemic may impact the availability of employed and contract labor staffing for corporate support services, including, but not limited to, coding, billing, collection and other business office functions, which could adversely affect our execution of established control procedures that may not be sufficiently mitigated through execution of our business continuity plans. Staffing, equipment, and pharmaceutical and medical supplies shortages may impact our ability to schedule, admit and treat patients. The combined impact of these factors,
41
despite our efforts to mitigate their effect, could result in reduced employee morale and increased exposure to labor unrest, work stoppages or other workforce disruptions.
Restrictions on elective procedures, travel bans, social distancing, quarantines and
stay-at-home
and
shelter-in-place
orders, and other restrictive measures have reduced, and may in the future reduce, the volume of procedures performed at our facilities, as well as the volume of emergency room and physician office visits unrelated
to COVID-19.
In the last two weeks of March 2020 and in the second quarter of 2020, we cancelled a substantial amount of elective procedures at our facilities and closed or reduced operating hours at a significant number of our surgery centers that specialize in elective procedures, resulting in significantly reduced patient volumes and operating revenues. Some state and local governments are limiting hospital volume by requiring a minimum percentage of vacant beds in case of a surge in
COVID-19
patients. Although social contact restrictions have eased across the U.S. and most states have lifted moratoriums on
non-emergent
procedures, some restrictions remain in place. Further closings and restrictions on hours and services may be imposed or
re-imposed
for an unpredictable amount of time in connection with increasing or fluctuating
COVID-19
cases. We are currently selectively suspending elective procedures at certain facilities based upon the local
COVID-19
volume trends, bed capacity and staffing levels. It is unclear whether certain markets, such as Florida and Texas, will continue to experience periods of increases or spikes in the number of
COVID-19
cases. During the third quarter of 2020, we believe
COVID-19
cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our reimbursement. However, the impacts of
COVID-19
in future periods may vary, could exert unpredictable and potentially negative effects on clinical performance metrics that impact reimbursement levels and could adversely affect our results of operations.
Some individuals may choose to postpone medical care for an undetermined period of time even in the absence of government or industry-adopted restrictions. At this time, we believe that certain of the patient volume declines we are experiencing reflect a deferral of health care services utilization to a later period, rather than a permanent reduction in demand for our services; however, we cannot provide assurances as to the recovery
of pre-pandemic patient
volumes or the ultimate impact on demand. Further, our patient volumes may be adversely impacted by the expanded use of telehealth services from other providers as a result of reduced regulatory barriers on the use and reimbursement of telehealth services and individuals becoming more comfortable with receiving remote care.
Broad economic factors resulting from the
current COVID-19 pandemic,
including high unemployment and underemployment rates and reduced consumer spending and confidence, also affect our service mix, revenue mix payer mix and patient volumes, as well as our ability to collect outstanding receivables. Business closings and layoffs in the areas where we operate may lead to increases in the uninsured and underinsured populations and adversely affect demand for our services, as well as the ability of patients and other payers to pay for services rendered. Any increase in the amount or deterioration in the collectability of patient accounts receivable will adversely affect our cash flows and results of operations, requiring an increased level of working capital. In addition, our results and financial condition may be adversely affected by federal, state or local laws, regulations, orders, or other governmental or regulatory actions addressing the
current COVID-19 pandemic
or the U.S. health care system, which could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow. We may also be subject to claims from patients, employees and others exposed
to COVID-19 at
our facilities. Such actions may involve large demands, as well as substantial defense costs, though there is no certainty at this time whether any such claims will be filed or the outcome of such claims if filed. Our professional and general liability insurance, a portion of which is provided through a 100% owned insurance subsidiary, may not cover all claims against us.
If general economic conditions continue to deteriorate or remain uncertain for an extended period of time, our liquidity and ability to repay our outstanding debt may be harmed and the trading price of our common stock could decline. Furthermore, the
current COVID-19 pandemic
may cause disruption in the financial markets and banking industry. These factors may affect the availability, terms or timing on which we may obtain any additional funding and our ability to access our cash. There can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.
42
The foregoing and other continued disruptions to our business as a result of
the COVID-19 pandemic
could heighten the risks in certain of the other risk factors described in our Annual Report on
Form 10-K for
the year ended December 31, 2019, any of which could have a material adverse effect on our results of operations and financial position.
There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and other existing or future stimulus legislation, if any. There can be no assurance as to the total amount of financial assistance or types of assistance we will receive, that we will be able to comply with the applicable terms and conditions to retain such assistance, that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for health care providers or that additional stimulus legislation will be enacted.
The CARES Act is a $2 trillion economic stimulus package signed into law on March 27, 2020, in response to
the COVID-19 pandemic.
In an effort to stabilize the U.S. economy, the CARES Act provides for cash payments to individuals and loans and grants to small businesses, among other measures. The Paycheck Protection Program and Health Care Enhancement (“PPPHCE”) Act, an expansion of the CARES Act that includes additional emergency appropriations, was signed into law on April 24, 2020. Together, the CARES Act and the PPPHCE Act authorize $175 billion in funding to be distributed to hospitals and other health care providers through the Public Health and Social Services Emergency Fund (“PHSSEF”), also known as the Provider Relief Fund. These funds are intended to reimburse eligible providers and suppliers for healthcare-related expenses or lost revenues attributable
to COVID-19.
Recipients are not required to repay PHSSEF funds, provided that they attest to and comply with certain terms and conditions, including limitations on balance billing and not using PHSSEF funds to reimburse expenses or losses that other sources are obligated to reimburse. HHS allocated $50 billion of the CARES Act provider relief funding for general distribution to Medicare providers impacted
by COVID-19,
to be distributed proportional to providers’ share of 2018 net patient revenue. HHS distributed $18 billion to eligible Medicaid and CHIP providers that did not receive a payment from the general distribution allocation and $14.4 billion to safety net hospitals. In addition, HHS has made targeted distributions for providers in areas particularly impacted by
COVID-19,
rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for treatment of uninsured Americans, among others. A portion of the available funding is being distributed to reimburse health care providers that submit claims requests for
COVID-19-related treatment
of uninsured patients at Medicare rates. HHS has not yet announced the precise method by which all future payments from the PHSSEF will be determined or allocated, so the potential impact to us is not currently known. We have received $1.674 billion in grants from the PHSSEF (net of amounts returned), including $931 million of general distributions and $743 million for targeted distributions. However, as previously disclosed, we plan to return, or repay early, all of the Company’s share of these funds from available cash and future cash flows from operations.
The CARES Act also makes other forms of financial assistance available to health care providers, including Medicare and Medicaid payments adjustments and an expansion of the Medicare Accelerated and Advance Payment Program, which makes available advance payments of Medicare funds in order to increase cash flow to providers. During the quarter ended June 30, 2020, we received approximately $4.4 billion in accelerated Medicare payments, which are required to be repaid or recouped by CMS. However, CMS is no longer accepting applications from hospitals and other Medicare Part A providers for accelerated payments and has suspended the advance payment program for physicians and other Medicare Part B providers. Recoupment of accelerated payments was due to begin in August, but CMS has delayed the recoupment process for these payments, based on amended repayment terms imposed by the Continuing Appropriations Act, 2021 and Other Extensions Act, enacted October 1, 2020, until one year after payment was issued. However, repayments can be made at any time, and, as previously disclosed, we plan to repay early all of the Company’s share of these funds from available cash and future cash flows from operations.
In addition to financial assistance, the CARES Act and related legislation include provisions intended to increase access to medical supplies and equipment and ease financial, legal and regulatory burdens on health care
43
providers. For example, the CARES Act and related legislation suspend the Medicare sequestration payment adjustment from May 1, 2020 through December 31, 2020 (but extend sequestration through 2030), provide for a 20%
add-on
payment under the hospital inpatient PPS for care provided to patients with
COVID-19,
expand access to and payment for telehealth services under Medicare, prioritize review of drug applications to help with shortages of emergency drugs, delay Medicaid DSH reductions, and provide funding to reimburse providers for conducting
COVID-19
testing for the uninsured. HHS and CMS have announced other flexibilities for health care providers in response to
COVID-19,
such as extensions for and relief from data submission requirements for providers participating in certain quality reporting programs. It is unclear how changes to these and other value-based programs will affect our financial condition.
Due to the recent enactment of the CARES Act, the PPPHCE Act and other enacted legislation, there is still a high degree of uncertainty surrounding their implementation, and the
COVID-19
pandemic continues to evolve. Some of the measures allowing for flexibility in delivery of care and various financial supports for health care providers are available only for the duration of the PHE, and it is unclear whether or for how long the PHE declaration will be extended. The current PHE determination expires January 21, 2021. The HHS Secretary may choose to renew the PHE declaration for successive
90-day
periods for as long as the emergency continues to exist and may terminate the declaration whenever he determines that the PHE no longer exists. The federal government may consider additional stimulus and relief efforts, but we are unable to predict whether additional stimulus measures will be enacted or their impact. There can be no assurance as to the total amount of financial and other types of assistance we will receive under the CARES Act, PPPHCE Act or future legislation, if any, or whether we shall retain, return or repay any such assistance, and it is difficult to predict the impact of such legislation on our operations. Further, there can be no assurance that the terms and conditions of provider relief funding or other relief programs will not change or be interpreted in ways that affect our ability to comply with such terms and conditions in the future (which could affect our ability or willingness to retain assistance), the amount of total stimulus funding we will receive or our eligibility to participate in such stimulus funding. For time periods prior to returning Provider Relief Funds, with respect to future assistance, if any, we do not return, and in those cases where our partners retain such assistance, we will continue to monitor our compliance with the terms and conditions of the Provider Relief Fund, including demonstrating that the distributions received have been used for healthcare-related expenses or lost revenue attributable to
COVID-19.
If we are unable to attest to or comply with current or future terms and conditions with respect to any assistance not voluntarily returned, our ability to retain some or all of the distributions received may be impacted. We will continue to assess the potential impact
of COVID-19 and
government responses to the pandemic on our business, results of operations, financial condition and cash flows.
 
ITEM 2.    UNREGISTERED
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During January 2020 and 2019, our Board of Directors authorized share repurchase programs for up to $4 billion ($2 billion for each authorization) of our outstanding common stock. In response to the risks the
COVID-19
pandemic presents toDuring February 2021, our business, during March 2020, we announced the suspensionBoard of our share repurchase programs and expect to evaluate the resumption of the programs at a future date. There were no shareDirectors authorized an additional $6 billion for repurchases of our outstanding common stock. During the quarter ended March 31, 2021, we repurchased 8,476,736 shares of our common stock at an average price of $180.11 per share through market purchases pursuant to the $2.0 billion share repurchase program authorized during January 2019 (which was completed during the thirdfirst quarter of 2020.2021) and the January 2020 authorization. At September 30, 2020,March 31, 2021, we had $2.800$7.274 billion of repurchase authorization available under the January 20192020 and 2020February 2021 authorizations.
In response
33
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The following table provides certain information with respect to theour repurchases of common stock from January 1, 2021 through March 31, 2021 (dollars in millions, except per share amounts).
COVID-19
pandemic concerns, the Company suspended its
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
 
January 1, 2021 through January 31, 2021
   —   $—    —   $2,800 
February 1, 2021 through February 28, 2021
   4,057,692   $175.39    4,057,692   $8,089 
March 1, 2021 through March 31, 2021
   4,419,044   $184.44    4,419,044   $7,274 
              
Total for first quarter 2021
   8,476,736   $180.11    8,476,736   $7,274 
              
On April 21, 2021, our Board of Directors declared a quarterly dividend program forof $0.48 per share on our common stock payable on June 30, 2021 to stockholders of record at the second and third quartersclose of 2020. The Company expects to evaluate resumption of the program at a future date. Any other futurebusiness on June 16, 2021. 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:
 
      10.1—
HCA Healthcare, Inc. 2021 Senior Officer Performance Excellence Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed April 9, 2021 (File No. 001-11239), and incorporated herein by reference).*
      22 —  
List of Subsidiary Guarantors (filed as Exhibit 22 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (File No. 001-11239),and incorporated herein by reference).Pledged Securities.
      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 nine monthsquarter ended September 30, 2020 and 2019,March 31, 2021 filed with the SEC on October 29, 2020,April 30, 2021, formatted in Inline Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at September 30, 2020March 31, 2021 and December 31, 2019,2020, (ii) the condensed consolidated income statements for the quarters ended March 31, 2021 and nine months ended September 30, 2020, and 2019, (iii) the condensed consolidated comprehensive income statements for the quarters ended March 31, 2021 and nine months ended September 30, 2020, and 2019, (iv) the condensed consolidated statements of stockholders’ equity (deficit) for the quarters ended March 31, 2021 and nine months ended September 30, 2020, and 2019, (v) the condensed consolidated statements of cash flows for the nine monthsquarters ended September 30,March 31, 2021 and 2020 and 2019 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 September 30, 2020,March 31, 2021, formatted in Inline XBRL (included in Exhibit 101).
 
45
*
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: October 29, 2020April 30, 2021
 
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