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, 2021,~~March 31, 2022, these affiliates owned and operated ~~183~~182 hospitals, ~~123~~124 freestanding surgery centers, 21 freestanding endoscopy centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 20 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 ~~$87~~$95 million and ~~$117~~$87 million for the quarters ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $301 million and $289 million for the nine months ended September 30, 2021 and 2020,~~ respectively. Operating results for the quarter ~~and nine months ended September 30, 2021~~ are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021.~~2022. 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, ~~2020.~~

2021.

COVID-19

~~Pandemic~~

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 as various policies were implemented by federal, state and local governments in response to the

~~COVID-19~~

pandemic. During the second quarter of 2021, our patient volumes experienced a strong rebound as the effects of the pandemic moderated and certain pandemic-related restrictions and policies were eased. During the third quarter of 2021, our patient volumes remained strong, with the exception of inpatient surgeries, and included a resurgence of

~~COVID-19~~

~~admissions. Inpatient surgery volumes were constrained during the quarter as capacity was used to treat the surge of COVID-19 patients.~~ We believe the extent of ~~the~~

~~COVID-19~~

~~pandemic’s~~COVID-19’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. Because of these uncertainties, we cannot estimate how long or to what extent ~~the pandemic~~COVID-19 will impact our operations.

Revenues

~~Table of Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

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

~~Revenues (continued)~~

that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected ~~charges.~~ charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one ~~day.~~day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service

rates. ~~Our revenues for the nine months ended September 30, 2021 and 2020 included $33 million and $55 million, respectively, related to the settlement of Medicare outlier calculations for 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.

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Revenues (continued)

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, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ are summarized in the following table (dollars in millions):


	2022		Ratio			2021		Ratio
Medicare	$	2,726		18.2	%	$	2,559		18.3	%
Managed Medicare		2,324		15.6			2,053		14.7
Medicaid		579		3.9			527		3.8
Managed Medicaid		1,110		7.4			725		5.2
Managed care and insurers		7,152		47.9			6,885		49.1
International (managed care and insurers)		356		2.4			333		2.4
Other		698		4.6			895		6.5
Revenues	$	14,945		100.0	%	$	13,977		100.0	%

~~Table~~

Managed Medicaid revenues for the quarter ended March 31, 2022 include $244 million, for the period September through December 2021, related to the March 2022 Centers for Medicare & Medicaid Services ("CMS") approval of ~~Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE~~a Texas directed payment program for the current program year that began September 1, ~~— BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)~~

~~Revenues (continued)~~

Nine Months


2021

    Ratio

2020

    Ratio

Medicare

$
7,816



17.9
%
$ 7,618    20.5 %
Managed Medicare


6,281



14.4

5,074    13.6
Medicaid


1,722



3.9

1,423    3.8
Managed Medicaid


2,369



5.4

1,904    5.1
Managed care and insurers


22,300



51.0

19,028    51.0
International (managed care and insurers)


995



2.3

838    2.3
Other


2,205



5.1

1,355    3.7






Revenues

$
43,688



100.0
%
$ 37,240    100.0 %

2021.

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, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ follows (dollars in millions):


	2022			2021
Patient care costs (salaries and benefits, supplies, other operating expense and depreciation and amortization)	$	12,744		$	11,643
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		11.3	%		11.4	%
Total uncompensated care	$	7,005		$	6,821
Multiply by the cost-to-charges ratio		11.3	%		11.4	%
Estimated cost of total uncompensated care	$	792		$	778

Quarter

Nine Months


2021

2020

2021

2020

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

$
12,803

$ 11,170
$
36,396

$ 32,428
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)


11.8
%
12.0 %

11.4
%
12.1 %
Total uncompensated care

$
7,782

$ 7,023
$
22,299

$ 21,625
Multiply by the
cost-to-charges
ratio


11.8
%
12.0 %

11.4
%
12.1 %


Estimated cost of total uncompensated care

$
916

$ 843
$
2,542

$ 2,617

The total uncompensated care amounts for the quarters ended March 31, 2022 and 2021 include

charity care of ~~$3.509~~$3.458 billion and ~~$3.160~~$2.942 billion, respectively, and the related estimated costs of charity care were ~~$413~~$391 million and ~~$376~~$335 million, respectively, for the quarters ended September 30, 2021 and 2020. The total uncompensated care amounts include charity care of $10.135 billion and $9.972 billion, respectively, and the related estimated costs of charity care were $1.155 billion and $1.207 billion, respectively, for the nine months ended September 30, 2021 and 2020.respectively.

Reclassifications

~~Reclassifications~~

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

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the ~~nine months~~quarters ended ~~September 30,~~March 31, 2022and 2021, we paid ~~$67~~$2 million and $22 million, respectively, to acquire ~~2 hospital facilities, 1 in southern Georgia and 1 in Tennessee, and $91 million to acquire other~~ nonhospital health care

~~entities (noncontrolling interests of $111 million were recorded).~~

We also paid $330 million and assumed certain liabilities to acquire an 80% interest (noncontrolling interests of $101 million were recorded) in a venture providing post-acute care services (home health and hospice). 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 $601 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2020, we paid $380 million to acquire a hospital in New Hampshire

~~and other nonhospital health care entities. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition~~

~~Table of Contents~~

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — ACQUISITIONS AND DISPOSITIONS (continued)

~~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 months~~quarters ended ~~September 30,~~March 31, 2022and 2021, we received proceeds of ~~$860~~$14 million and $20 million, respectively, and recognized a pretax ~~gain~~gains of ~~$655~~$10 million and $2 million, respectively, related to ~~the sale of 4 hospital facilities in Georgia (two facilities in northern Georgia and 2 facilities in southern Georgia). We received proceeds of $647 million on September 30, 2021 related to the~~ ~~sale~~ ~~of a hospital facility in northern Georgia, which sale was effective October 1, 2021. We also received proceeds of $473 million and recognized a pretax gain of $402~~

~~million related to sales of other health care entity investments and minor real estate assets. During the nine months ended September 30, 2020, we received proceeds of~~

~~million and recognized a net pretax loss of $~~

~~million related to the~~

~~sale~~

~~of a hospital facility in Mississippi and~~ sales of real estate and other health care entity investments.

NOTE 3 — INCOME TAXES

Our provisions for income taxes for the quarters ended ~~September 30,~~March 31, 2022and 2021 ~~and 2020~~ were ~~$685~~$349 million and ~~$209~~$393 million, respectively, and the effective tax rates were ~~23.2%~~21.5% and 23.8%, respectively. Our provisions for income taxes for the nine months ended September 30, 2021 and 2020 were $1.531 billion and $665 million, respectively, and the effective tax rates were 22.9% and 22.2%21.7%, respectively. Our provisions for income taxes included tax benefits related to settlements of employee equity awards of ~~$96~~$64 million and ~~$59~~$74 million for the ~~nine months~~quarters ended ~~September 30,~~March 31, 2022and 2021, ~~and 2020,~~ respectively.

Our liability for unrecognized tax benefits was ~~$626~~$654 million, including accrued interest of ~~$95~~$104 million, as of ~~September 30, 2021~~March 31, 2022 ($~~508~~642 million and ~~$73~~$99 million, respectively, as of December 31, ~~2020)~~2021). Unrecognized tax benefits of ~~$192~~$230 million ($~~157~~217 million as of December 31, ~~2020)~~2021) would affect the effective rate, if recognized.

~~The~~

At March 31, 2022, the Internal Revenue Service was conducting ~~an examination~~examinations of the Company’s 2016, 2017 and 2018 federal income tax returns ~~at September 30, 2021.~~and the 2019 return for one affiliated partnership. 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, computed using the treasury stock method.

~~Table of Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE 4 — EARNINGS PER SHARE (continued)~~

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended March 31, 2022and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ (dollars and shares in millions, except per share amounts):


	2022		2021
Net income attributable to HCA Healthcare, Inc.	$	1,273	$	1,423

Weighted average common shares outstanding		302.446		338.123
Effect of dilutive incremental shares		4.928		5.198
Shares used for diluted earnings per share		307.374		343.321
Earnings per share:
Basic earnings	$	4.21	$	4.21
Diluted earnings	$	4.14	$	4.14

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Quarter

Nine Months


2021

2020

2021

2020

Net income attributable to HCA Healthcare, Inc.

$
2,269

   $ 668
$
5,142

   $ 2,328

Weighted average common shares outstanding


318.072

   338.168

328.048

   338.057
Effect of dilutive incremental shares


5.957

   5.178

5.200

   4.957








Shares used for diluted earnings per share


324.029

   343.346

333.248

   343.014








Earnings per share:

Basic earnings

$
7.13

   $ 1.97
$
15.67

   $ 6.89
Diluted earnings

$
7.00

   $ 1.95
$
15.43

   $ 6.79

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 follows (dollars in millions):


	March 31, 2022
			Unrealized Amounts
	Amortized Cost		Gains		Losses			Fair Value
Debt securities	$	411	$	4	$	(14	)	$	401
Money market funds and other		112		—		—			112
	$	523	$	4	$	(14	)		513
Amounts classified as current assets									(105	)
Investment carrying value								$	408


	December 31, 2021
			Unrealized Amounts
	Amortized Cost		Gains		Losses			Fair Value
Debt securities	$	400	$	18	$	(2	)	$	416
Money market funds and other		125		—		—			125
	$	525	$	18	$	(2	)		541
Amounts classified as current assets									(103	)
Investment carrying value								$	438

September 30, 2021


Amortized
Cost

Unrealized
Amounts

Fair
Value


Gains

Losses

Debt securities

$
391


$
21


$
(1
)

$
411

Money market funds and other


119



—



—



119










$
510


$
21


$
(1
)


530








Amounts classified as current assets


(112
)


Investment carrying value

$
418

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, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, the investments in debt securities of our insurance subsidiaries were classified as

~~“available-for-sale.~~ “available-for-sale.”

Changes in unrealized gains and losses that are not credit-related are recorded as adjustments to other comprehensive income (loss).

~~Table of Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)~~

Scheduled maturities of investments in debt securities at ~~September 30, 2021~~March 31, 2022 were as follows (dollars in millions):


	Amortized Cost		Fair Value
Due in one year or less	$	8	$	8
Due after one year through five years		139		140
Due after five years through ten years		173		166
Due after ten years		91		87
	$	411	$	401

Amortized
Cost

Fair
Value

Due in one year or less
   $ 0    $ 0
Due after one year through five years
   134    141
Due after five years through ten years
   177    187
Due after ten years
   80    83




   $ 391    $ 411

The average expected maturity of the investments in debt securities at ~~September 30, 2021~~March 31, 2022 was ~~5.5~~6.0 years, compared to the average scheduled maturity of ~~9.3~~9.0 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.

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.

The following table sets forth our interest rate swap ~~agreements,~~agreement, which ~~have~~has been designated as a cash flow ~~hedges,~~hedge, at ~~September 30, 2021~~March 31, 2022 (dollars in millions):


	Notional Amount		Maturity Date	Fair Value
Pay-fixed interest rate swap	$	500	December 2022	$	(2	)

Notional
Amount

Maturity Date

Fair
Value

Pay-fixed
interest rate swaps
   $ 2,000    December 2021    $ (7 )
Pay-fixed
interest rate swaps
   500    December 2022    (12 )

~~During the next 12 months, we estimate $17 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~~swap on our results of operations for the ~~nine months~~quarter ended ~~September 30, 2021~~March 31, 2022 (dollars in millions):


Derivatives in Cash Flow Hedging Relationships	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 swap	$3	Interest expense	$2

Derivatives in Cash Flow Hedging Relationships

Amount of Loss
Recognized in OCI on
Derivatives, Net of Tax

Location of Loss
Reclassified from
Accumulated OCI
into Operations

Amount of Loss
Reclassified from
Accumulated OCI
into Operations

Interest rate swaps
   $ 1    Interest expense    $ 28

~~Table of Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE 6 — FINANCIAL INSTRUMENTS (continued)~~

~~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, 2021, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2021, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $19 million.

NOTE 7 — ASSETS AND LIABILITIES MEASURED

AT FAIR VALUE

~~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 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.

Investment Securities

The investments of our insurance subsidiaries 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~~

Instrument

We have entered into an interest rate swap ~~agreements~~agreement to manage our exposure to fluctuations in interest rates. The valuation of ~~these instruments~~this instrument is determined using widely accepted valuation techniques, including a discounted expected 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.analysis.

~~Table of Contents~~

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, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):


	March 31, 2022
				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	$	401		$	—		$	401	$	—
Money market funds and other		112			112			—		—
Investments of insurance subsidiaries		513			112			401		—
Less amounts classified as current assets		(105	)		(105	)		—		—
	$	408		$	7		$	401	$	—
Liabilities:
Interest rate swap (Other accrued expenses)	$	2		$	—		$	2	$	—


	December 31, 2021
				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		125			125			—		—
Investments of insurance subsidiaries		541			125			416		—
Less amounts classified as current assets		(103	)		(103	)		—		—
	$	438		$	22		$	416	$	—
Liabilities:
Interest rate swap (Other accrued expenses)	$	8		$	—		$	8	$	—

September 30, 2021


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

$
411

$
—

$
411

$
—

Money market funds and other


119

119

—

—



Investments of insurance subsidiaries


530

119

411

—

Less amounts classified as current assets


(112
)

(105
)

(7
)

—




$
418

$
14

$
404

$
—



Liabilities:

Interest rate swaps (Other accrued expenses)

$
17

$
—

$
17

$
—

Interest rate swaps (Income taxes and other liabilities)


2

—

2

—

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 ~~$36.567~~$39.038 billion and ~~$35.814~~$38.541 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively, compared to carrying amounts, excluding debt issuance costs and discounts, aggregating ~~$32.552~~$38.019 billion and ~~$31.240~~$34.827 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.

~~Table of Contents~~

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — LONG-TERM DEBT

A summary of long-term debt at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, including related interest rates at ~~September 30, 2021,~~March 31, 2022 follows (dollars in millions):


	March 31, 2022			December 31, 2021
Senior secured asset-based revolving credit facility	$	0		$	2,780
Senior secured revolving credit facility		0			0
Senior secured term loan facilities (effective interest rate of 2.3%)		1,940			1,960
Senior secured notes (effective interest rate of 4.6%)		22,200			16,200
Other senior secured debt (effective interest rate of 4.0%)		927			935
Senior secured debt		25,067			21,875
Senior unsecured notes (effective interest rate of 5.5%)		12,952			12,952
Debt issuance costs and discounts		(323	)		(248	)
Total debt (average life of 10.2 years, rates averaging 4.8%)		37,696			34,579
Less amounts due within one year		1,486			237
	$	36,210		$	34,342

September 30,
2021

December 31,
2020

Senior secured asset-based revolving credit facility (effective interest rate of 2.7%)

$
500

$ 0
Senior secured revolving credit facility


0

0
Senior secured term loan facilities (effective interest rate of 3.1%)


1,980

3,671
Senior secured notes (effective interest rate of 4.8%)


16,200

13,850
Other senior secured debt (effective interest rate of 4.2%)


920

767


Senior secured debt


19,600

18,288
Senior unsecured notes (effective interest rate of 5.5%)


12,952

12,952
Debt issuance costs and discounts


(253
)
(236 )


Total debt (average life of 9.5 years, rates averaging 4.9%)


32,299

31,004
Less amounts due within one year


250

209



$
32,049

$ 30,795

During ~~June 2021,~~March 2022, we issued ~~$2.350~~$6.000 billion aggregate principal amount of senior secured notes comprised of ~~$850~~(i) $1.000 billion aggregate principal amount of 3 1/8% senior secured notes due 2027, (ii) $500 million aggregate principal amount of 23 3/8% senior secured notes due ~~2031 and $1.500~~2029, (iii) $2.000 billion aggregate principal amount of 3 ~~1/2~~5/8% senior secured notes due ~~2051 (the “June 2021 Notes”). We also amended and restated our~~2032, (iv) $500 million aggregate principal amount of 4 3/8% senior secured ~~revolving credit facility~~notes due 2042 and ~~our~~(v) $2.000 billion aggregate principal amount of 4 5/8% senior secured asset-based revolving credit facility, including increasing availability under the asset-based revolving credit facility to $4.500 billion, extending the maturity date on both facilities to June 30, 2026 and entering intonotes due 2052. During March 2022, we used a ~~new $1.500 billion term~~

~~loan A-7~~

~~facility and a new $500 million term~~

~~loan B-14~~

~~facility (the “Credit Agreement Transactions”). We used~~portion of the net proceeds ~~from the June 2021 Notes~~ to pay down our revolving credit facilities. During April 2022, we redeemed all $1.250 billion outstanding aggregate principal amount of our 4.75% senior secured notes due 2023 and ~~the Credit Agreement Transactions~~provided a notice of our election to ~~retire the $1.071~~redeem all $1.250 billion ~~term~~

~~loan A-6~~

~~facility, the $1.455 billion term~~

~~loan B-12~~

~~facility and the $1.131 billion term~~

~~loan B-13~~

~~facility. The~~outstanding aggregate principal amount of our 5.875% senior notes due 2023. We expect to record aggregate pretax ~~loss~~losses on retirement of debt ~~was $12 million.~~

for these two redemptions of approximately $80 million during the second quarter of 2022.

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.

Health care companies are routinely subject to 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.

~~Table of Contents~~

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — CONTINGENCIES (continued)

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~~2022 and ~~2019,~~February 2021, our Board of Directors authorized share repurchase programs for up to $4$8 billion ~~($2~~and $6 billion, ~~for each authorization) of our outstanding common stock. During February 2021, our Board of Directors authorized an additional $6 billion for repurchases~~respectively, of our outstanding common stock. During the ~~nine months~~quarter ended ~~September 30, 2021,~~March 31, 2022, we repurchased ~~29.343~~8.375 million shares of our common stock at an average price of ~~$209.35~~$250.89 per share through market purchases pursuant to the ~~January 2019~~February 2021 authorization (which was completed during the first quarter of ~~2021),~~2022) and the January ~~2020 authorization (which was completed during the second quarter of 2021) and the February 2021~~2022 authorization. At ~~September 30, 2021,~~March 31, 2022, we had ~~$2.658~~$6.485 billion of repurchase authorization available under the ~~February 2021~~January 2022 authorization.

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


	Unrealized Gains (Losses) on Available- for-Sale Securities			Foreign Currency Translation Adjustments			Defined Benefit Plans			Change in Fair Value of Derivative Instruments			Total
Balances at December 31, 2021	$	12		$	(278	)	$	(132	)	$	(6	)	$	(404	)
Unrealized losses on available-for-sale securities, net of $6 income tax benefit		(20	)											(20	)
Foreign currency translation adjustments, net of $4 income tax benefit					(30	)								(30	)
Change in fair value of derivative instruments, net of $1 of income taxes											3			3
Expense reclassified into operations from other comprehensive income								2			2			4
Balances at March 31, 2022	$	(8	)	$	(308	)	$	(130	)	$	(1	)	$	(447	)

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 $3 income tax benefit
(9 ) (9 )
Foreign currency translation adjustments, net of $2 income tax benefit
(18 ) (18 )
Change in fair value of derivative instruments
(1 ) (1 )
Expense reclassified into operations from other comprehensive income, net of $5 and $6 income tax benefits, respectively
16 22 38

Balances at September 30, 2021
$ 16 $ (289 ) $ (204 ) $ (15 ) $ (492 )

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 96 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 8079 hospitals located in Colorado, ~~northern Georgia,~~ Kansas, southern Kentucky, Louisiana, Missouri, Tennessee and

~~Table of Contents~~

~~HCA HEALTHCARE, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~NOTE 11 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)~~

Texas. We also operate 7 hospitals in England, and these facilities are included in the Corporate and other group.

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 and~~ 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, 2022and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ are summarized in the following table (dollars in millions):


	2022			2021
Revenues:
National Group	$	7,506		$	7,056
American Group		6,616			6,291
Corporate and other		823			630
	$	14,945		$	13,977
Equity in earnings of affiliates:
National Group	$	(1	)	$	(7	)
American Group		(9	)		(12	)
Corporate and other		(1	)		(2	)
	$	(11	)	$	(21	)
Adjusted segment EBITDA:
National Group	$	1,566		$	1,705
American Group		1,486			1,501
Corporate and other		(108	)		(154	)
	$	2,944		$	3,052
Depreciation and amortization:
National Group	$	355		$	323
American Group		301			293
Corporate and other		76			81
	$	732		$	697

Adjusted segment EBITDA	$	2,944		$	3,052
Depreciation and amortization		732			697
Interest expense		408			384
Gains on sales of facilities		(10	)		(2	)
Income before income taxes	$	1,814		$	1,973

Quarter

Nine Months


2021

2020

2021

2020

Revenues:

National Group

$
7,787

   $ 6,633
$
22,143

   $ 18,653
American Group


6,767

   6,073

19,562

   16,920
Corporate and other


722

   605

1,983

   1,667









$
15,276

   $ 13,311
$
43,688

   $ 37,240








Equity in earnings of affiliates:

National Group

$
(14
)
   $ (23 )
$
(30
)
   $ (26 )
American Group


(14
)
   (15 )

(38
)
   (26 )
Corporate and other


(7
)
   (2 )

(10
)
   4









$
(35
)
   $ (40 )
$
(78
)
   $ (48 )








Adjusted segment EBITDA:

National Group

$
1,780

   $ 1,128
$
5,330

   $ 3,828
American Group


1,604

   1,130

4,698

   3,653
Corporate and other


(160
)
   (205 )

(533
)
   (562 )









$
3,224

   $ 2,053
$
9,495

   $ 6,919








Depreciation and amortization:

National Group

$
343

   $ 312
$
1,005

   $ 930
American Group


295

   286

884

   868
Corporate and other


78

   96

236

   261









$
716

   $ 694
$
2,125

   $ 2,059








Adjusted segment EBITDA

$
3,224

   $ 2,053
$
9,495

   $ 6,919
Depreciation and amortization


716

   694

2,125

   2,059
Interest expense


398

   385

1,168

   1,201
Losses (gains) on sales of facilities


(1,047
)
   (14 )

(1,057
)
   6
Losses on retirement of debt


0

   0

12

   295








Income before income taxes

$
3,157

   $ 988
$
7,247

   $ 3,358

~~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~~its impact 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;~~COVID-19; the impact and terms of government and administrative regulation and stimulus and relief measures (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 (“ARPA”) and other enacted and potential future legislation) and whether ~~such~~various stimulus and relief programs continue or new similar programs are enacted in the future; 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, including the impact of any current or future vaccine mandates; supply shortages and disruptions; and the timing, availability and adoption of effective medical treatments and vaccines (including boosters), (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 current and future federal and state health reform initiatives and possible changes to other federal, state or local laws and regulations affecting the health care industry, including but not limited to, 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~~and the effects of additional changes ~~or court challenges~~ to the Affordable Care Act, ~~or additional changes to~~ its implementation, ~~the possible enactment of additional federal~~ or ~~state health care reforms~~interpretation (including through executive orders and ~~possible changes to other federal, state or local laws or regulations affecting the health care industry, including~~court challenges), and 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,~~ARPA, 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) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (9) the highly competitive nature of the health care business, ~~(9)~~(10) 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)~~(11) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, ~~(11)~~(12) 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~~

~~Table of Contents~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF (Continued)~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

~~Forward-Looking Statements (continued)~~

~~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 inflation and 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, physical risks from climate change 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, ~~2020~~2021 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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

COVID-19

~~Pandemic~~

On March 11, 2020, the World Health Organization designated

COVID-19

~~COVID-19~~

~~admissions. Inpatient surgery volumes were constrained during the quarter as capacity was used to treat the surge of COVID-19 patients.~~ We believe the extent of ~~the~~

~~COVID-19~~

~~Third~~

First Quarter ~~2021~~2022 Operations Summary

Revenues increased to ~~$15.276~~$14.945 billion in the ~~third~~first quarter of ~~2021~~2022 from ~~$13.311~~$13.977 billion in the ~~third~~first quarter of ~~2020.~~2021. Net income attributable to HCA Healthcare, Inc. totaled ~~$2.269~~$1.273 billion, or ~~$7.00~~$4.14 per diluted share, for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$668 million,~~$1.423 billion, or ~~$1.95~~$4.14 per diluted share, for the quarter ended ~~September 30, 2020. Third~~March 31, 2021. First quarter results for ~~2021 and 2020~~2022 include gains on sales of facilities of ~~$1.047 billion,~~$10 million, or ~~$2.43~~$0.02 per diluted ~~share, and $14 million, or $0.03 per diluted share, respectively. Third quarter results~~share. In March 2022, the state of Texas received approval from the Centers for ~~2020 include~~Medicare & Medicaid Services ("CMS") to implement a proposed directed payment program effective for the ~~reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in~~current program year that began September 1, 2021. During the ~~second~~first quarter of ~~2020~~2022, revenues include $244 million and other operating expenses include $90 million from provider tax assessments related to ~~general distribution Provider Relief Funds (“PRFs”) established by~~this program for the CARES Act. During October 2020, we announced we would return, or repay early, our share of the PRFs of approximately $1.6 billion and approximately $4.4 billion in Medicare accelerated payments (repaid during

~~Table of Contents~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~

~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)~~

~~Third Quarter 2021 Operations Summary (continued)~~

~~the fourth quarter of 2020).~~period September through December 2021. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were ~~324.029~~307.374 million shares for the quarter ended ~~September 30, 2021~~March 31, 2022 and ~~343.346~~343.321 million shares for the quarter ended ~~September 30, 2020.~~March 31, 2021. During 2021 and the first ~~nine months~~quarter of ~~2021,~~2022, we repurchased ~~29.343~~37.812 million shares and 8.375 million shares, respectively, of our common stock.

Revenues increased ~~14.8%~~6.9% on a consolidated basis and ~~15.0%~~7.8% on a same facility basis for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to the quarter ended ~~September 30, 2020.~~March 31, 2021. The increase in consolidated revenues can be primarily attributed to the combined impact of a ~~5.9%~~3.6% increase in revenue per equivalent admission and a ~~8.4%~~3.2% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a ~~5.2%~~2.7% increase in same facility revenue per equivalent admission and a ~~9.3%~~5.0% increase in same facility equivalent admissions.

The consolidated and same facility increases in revenue per equivalent admission were negatively impacted by declines in acuity of COVID-19 patients.

During the quarter ended ~~September 30, 2021,~~March 31, 2022, consolidated admissions increased ~~5.9%~~0.1% and same facility admissions increased ~~6.8%~~2.1% compared to the quarter ended ~~September 30, 2020.~~March 31, 2021. Surgeries increased ~~2.6%~~4.3% on a consolidated basis and ~~2.3%~~4.6% on a same facility basis during the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to the quarter ended ~~September 30, 2020.~~March 31, 2021. Emergency department visits increased ~~28.9%~~11.7% on a consolidated basis and ~~31.2%~~14.6% on a same facility basis during the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to the quarter ended ~~September 30, 2020.~~March 31, 2021. Consolidated and same facility uninsured admissions ~~increased 0.7%~~declined 4.9% and ~~1.2%~~3.0%, respectively, for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to the quarter ended ~~September 30, 2020.~~

March 31, 2021.

Cash flows from operating activities declined ~~$440~~$643 million, from ~~$2.717~~$1.988 billion for the ~~third~~first quarter of ~~2020~~2021 to ~~$2.277~~$1.345 billion for the ~~third~~first quarter of ~~2021.~~2022. The decline in cash provided by operating activities was primarily related to the ~~net~~combined impact of negative changes in working capital items of ~~$797~~$492 million, primarily related to ~~an increase in accounts receivable, offset by~~ a ~~$269~~payment of $344 million ~~increase~~for deferred payroll taxes from 2020, and a $121 million decline in net income, excluding ~~the government stimulus income reversal and~~ gains on sales of facilities.

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.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF ~~(Continued)~~

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Revenues increased ~~14.8%~~6.9% from ~~$13.311~~$13.977 billion in the ~~third~~first quarter of ~~2020~~2021 to ~~$15.276~~$14.945 billion in the ~~third~~first quarter of 2022. Managed Medicaid revenues for the quarter ended March 31, 2022 include $244 million, for the period from September through December 2021, related to the March 2022 CMS approval of a Texas directed payment program for the current program year that began September 1, 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 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

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 ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ are summarized in the following table (dollars in millions):

Quarter


2021

    Ratio

2020

    Ratio

Medicare

$
2,645



17.3
%
$ 2,603    19.6 %
Managed Medicare


2,124



13.9

1,760    13.2
Medicaid


692



4.5

445    3.3
Managed Medicaid


813



5.3

707    5.3
Managed care and insurers


7,998



52.4

6,752    50.7
International (managed care and insurers)


324



2.1

307    2.3
Other


680



4.5

737    5.6






Revenues

$
15,276



100.0
%
$ 13,311    100.0 %







Nine Months


2021

    Ratio

2020

    Ratio

Medicare

$
7,816



17.9
%
$ 7,618    20.5 %
Managed Medicare


6,281



14.4

5,074    13.6
Medicaid


1,722



3.9

1,423    3.8
Managed Medicaid


2,369



5.4

1,904    5.1
Managed care and insurers


22,300



51.0

19,028    51.0
International (managed care and insurers)


995



2.3

838    2.3
Other


2,205



5.1

1,355    3.7






Revenues

$
43,688



100.0
%
$ 37,240    100.0 %

~~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)~~


	2022		Ratio			2021		Ratio
Medicare	$	2,726		18.2	%	$	2,559		18.3	%
Managed Medicare		2,324		15.6			2,053		14.7
Medicaid		579		3.9			527		3.8
Managed Medicaid		1,110		7.4			725		5.2
Managed care and insurers		7,152		47.9			6,885		49.1
International (managed care and insurers)		356		2.4			333		2.4
Other		698		4.6			895		6.5
Revenues	$	14,945		100.0	%	$	13,977		100.0	%

Consolidated and same facility revenue per equivalent admission increased ~~5.9%~~3.6% and ~~5.2%~~2.7%, respectively, in the ~~third~~first quarter of ~~2021,~~2022, compared to the ~~third~~first quarter of ~~2020.~~2021. Consolidated and same facility equivalent admissions increased ~~8.4%~~3.2% and ~~9.3%~~5.0%, respectively, in the ~~third~~first quarter of ~~2021,~~2022, compared to the ~~third~~first quarter of ~~2020.~~2021. Consolidated and same facility outpatient surgeries increased ~~7.2%~~7.0% and ~~6.4%~~6.8%, respectively, in the ~~third~~first quarter of ~~2021,~~2022, compared to the ~~third~~first quarter of ~~2020.~~2021. Consolidated and same facility inpatient surgeries declined ~~5.3%~~0.6% and ~~4.9%~~increased 0.8%, respectively, in the ~~third~~first quarter of ~~2021,~~2022, compared to the ~~third~~first quarter of ~~2020.~~2021. Consolidated and same facility emergency department visits increased ~~28.9%~~11.7% and ~~31.2%~~14.6%, respectively, in the ~~third~~first quarter of ~~2021,~~2022, compared to the ~~third~~first quarter of ~~2020.~~

2021.

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, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ follows (dollars in millions):


	2022			2021
Patient care costs (salaries and benefits, supplies, other operating expense and depreciation and amortization)	$	12,744		$	11,643
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		11.3	%		11.4	%
Total uncompensated care	$	7,005		$	6,821
Multiply by the cost-to-charges ratio		11.3	%		11.4	%
Estimated cost of total uncompensated care	$	792		$	778

Same facility uninsured admissions ~~increased~~declined by ~~463~~1,030 admissions, or 3.0%, in the first quarter of 2022 compared to the first quarter of 2021. Same facility uninsured admissions in 2021, compared to 2020, declined 6.3% in the fourth quarter, increased 1.2%, in the third quarter, ~~of 2021 compared to the third quarter of 2020. Same facility uninsured admissions~~ increased 6.6% in the second quarter of 2021, ~~compared to the second quarter of 2020. Same facility uninsured admissions~~and declined 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~~fluctuations in ~~the first quarter of 2021, compared to the first quarter of 2020, and the last three quarters of 2020, compared to the last three quarters of 2019,~~quarterly same facility admissions were primarily due to ~~the reimbursement~~reimbursements received, as 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,~~admissions, as well as general ~~declines~~fluctuations in patient volumes resulting from ~~the pandemic’s~~COVID-19's impact on our operations.

~~Table~~ The government program to reimburse for testing and treatment of ~~Contents~~

uninsured COVID-19 patients stopped accepting claims in March 2022.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ are set forth in the following table.

Quarter

Nine Months


2021

2020

2021

2020

Medicare


21
%
25 %

23
%
26 %
Managed Medicare


21

19

21

19
Medicaid


4

5

5

6
Managed Medicaid


14

13

13

12
Managed care and insurers


32

30

31

29
Uninsured


8

8

7

8




100
%
100 %

100
%
100 %


	2022			2021
Medicare		23	%		24	%
Managed Medicare		23			22
Medicaid		5			5
Managed Medicaid		13			12
Managed care and insurers		30			30
Uninsured		6			7
		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, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ are set forth in the following table.

Quarter

Nine Months


2021

2020

2021

2020

Medicare


22
%
25 %

24
%
27 %
Managed Medicare


16

15

16

15
Medicaid


7

5

6

5
Managed Medicaid


5

6

6

6
Managed care and insurers


50

49

48

47




100
%
100 %

100
%
100 %


	2022			2021
Medicare		24	%		24	%
Managed Medicare		18			17
Medicaid		6			5
Managed Medicaid		9			6
Managed care and insurers		43			48
		100	%		100	%

At ~~September 30, 2021,~~March 31, 2022, we had 91 hospitals in the states of Texas and Florida. During the quarter ended ~~September 30, 2021, 57%~~March 31, 2022, 58% of our admissions and 50% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented ~~71%~~75% of our uninsured admissions during the quarter ended ~~September 30, 2021.~~

March 31, 2022.

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.The Texas ~~currently operates its~~ Healthcare Transformation and Quality Improvement Program (“Texas Waiver Program”) currently operates pursuant to a Medicaid waiver. ~~In December 2017,~~During April 2022, CMS ~~approved an~~withdrew its previous letter that challenged the approval and extension of ~~this waiver~~the Texas Waiver Program, and the program is now approved and extended through September ~~30, 2022, but indicated that it will phase out some of the federal funding.~~2030. Our Texas Medicaid revenues included ~~Medicaid~~Texas Waiver Program supplemental ~~payments~~revenues of ~~$151~~$103 million and ~~$154 million during the third quarters of 2021 and 2020, respectively, and $437 million and $455~~$138 million during the first ~~nine months~~quarters of 2022 and 2021, ~~and 2020,~~ respectively.

In ~~addition, we~~March 2022, the state of Texas received approval from CMS to implement a proposed directed payment program effective for the current program year that began September 1, 2021. During the first quarter of 2022, revenues include $385 million related to this program for the period September 2021 through March 2022. 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

~~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)~~

result in the restructuring of such supplemental payment programs and could result in the payment programs being reduced or eliminated. Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications, if any, may have on our results of operations.

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 operating data.

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, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~ (dollars in millions):


	2022						2021
	Amount			Ratio			Amount			Ratio
Revenues	$	14,945			100.0		$	13,977			100.0

Salaries and benefits		6,939			46.4			6,301			45.1
Supplies		2,321			15.5			2,224			15.9
Other operating expenses		2,752			18.5			2,421			17.4
Equity in earnings of affiliates		(11	)		(0.1	)		(21	)		(0.2	)
Depreciation and amortization		732			5.0			697			5.0
Interest expense		408			2.7			384			2.7
Gains on sales of facilities		(10	)		(0.1	)		(2	)		—
		13,131			87.9			12,004			85.9
Income before income taxes		1,814			12.1			1,973			14.1
Provision for income taxes		349			2.3			393			2.8
Net income		1,465			9.8			1,580			11.3
Net income attributable to noncontrolling interests		192			1.3			157			1.1
Net income attributable to HCA Healthcare, Inc.	$	1,273			8.5		$	1,423			10.2
% changes from prior year:
Revenues		6.9	%					8.7	%
Income before income taxes		(8.1	)					143.6
Net income attributable to HCA Healthcare, Inc.		(10.6	)					145.0
Admissions(a)		0.1						(4.1	)
Equivalent admissions(b)		3.2						(6.4	)
Revenue per equivalent admission		3.6						16.1
Same facility % changes from prior year(c):
Revenues		7.8						9.0
Admissions(a)		2.1						(4.2	)
Equivalent admissions(b)		5.0						(6.5	)
Revenue per equivalent admission		2.7						16.6

(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)

Quarter


2021

2020


Amount

Ratio

Amount

Ratio

Revenues

$
15,276

100.0

$ 13,311 100.0
Salaries and benefits


7,094

46.4

6,097 45.8
Supplies


2,463

16.1

2,128 16.0
Other operating expenses


2,530

16.6

2,251 16.9
Government stimulus income reversal


—

—

822 6.2
Equity in earnings of affiliates


(35
)

(0.2
)
(40 ) (0.3 )
Depreciation and amortization


716

4.7

694 5.2
Interest expense


398

2.6

385 2.9
Gains on sales of facilities


(1,047
)

(6.9
)
(14 ) (0.1 )




12,119

79.3

12,323 92.6


Income before income taxes


3,157

20.7

988 7.4
Provision for income taxes


685

4.5

209 1.5


Net income


2,472

16.2

779 5.9
Net income attributable to noncontrolling interests


203

1.3

111 0.9


Net income attributable to HCA Healthcare, Inc.

$
2,269

14.9

$ 668 5.0


% changes from prior year:

Revenues


14.8
%
4.9 %
Income before income taxes


219.6

0.9
Net income attributable to HCA Healthcare, Inc.


239.7

9.0
Admissions(a)


5.9

(3.9 )
Equivalent admissions(b)


8.4

(9.1 )
Revenue per equivalent admission


5.9

15.3
Same facility % changes from prior year(c):

Revenues


15.0

4.5
Admissions(a)


6.8

(3.8 )
Equivalent admissions(b)


9.3

(9.0 )
Revenue per equivalent admission


5.2

14.8

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)

24Same facility information excludes the operations of hospitals and their related facilities which were either acquired or divested during the current and prior period.

~~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


2021

2020


Amount

Ratio

Amount

Ratio

Revenues

$
43,688

100.0

$ 37,240 100.0
Salaries and benefits


19,780

45.3

17,545 47.1
Supplies


7,067

16.2

5,999 16.1
Other operating expenses


7,424

17.0

6,825 18.3
Equity in earnings of affiliates


(78
)

(0.2
)
(48 ) (0.1 )
Depreciation and amortization


2,125

4.8

2,059 5.6
Interest expense


1,168

2.7

1,201 3.2
Losses (gains) on sales of facilities


(1,057
)

(2.4
)
6 —
Losses on retirement of debt


12

—

295 0.8




36,441

83.4

33,882 91.0


Income before income taxes


7,247

16.6

3,358 9.0
Provision for income taxes


1,531

3.5

665 1.8


Net income


5,716

13.1

2,693 7.2
Net income attributable to noncontrolling interests


574

1.3

365 0.9


Net income attributable to HCA Healthcare, Inc.

$
5,142

11.8

$ 2,328 6.3


% changes from prior year:

Revenues


17.3
%
(1.5 )%
Income before income taxes


115.8

(7.7 )
Net income attributable to HCA Healthcare, Inc.


120.8

(4.4 )
Admissions(a)


5.9

(5.1 )
Equivalent admissions(b)


8.4

(9.8 )
Revenue per equivalent admission


8.2

9.1
Same facility % changes from prior year(c):

Revenues


17.5

(2.1 )
Admissions(a)


6.2

(5.3 )
Equivalent admissions(b)


8.8

(9.9 )
Revenue per equivalent admission


7.9

8.6

~~(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)~~

~~(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.~~

~~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, 2022 and 2021 ~~and 2020~~

Revenues increased to ~~$15.276~~$14.945 billion in the ~~third~~first quarter of ~~2021~~2022 from ~~$13.311~~$13.977 billion in the ~~third~~first quarter of ~~2020.~~2021. Net income attributable to HCA Healthcare, Inc. totaled ~~$2.269~~$1.273 billion, or ~~$7.00~~$4.14 per diluted share, for the quarter ended ~~September 30, 2021,~~March 31, 2022, compared to ~~$668 million,~~$1.423 billion, or ~~$1.95~~$4.14 per diluted share, for the quarter ended ~~September 30, 2020. Third~~March 31, 2021. First quarter results for ~~2021 and 2020~~2022 include gains on sales of facilities of ~~$1.047 billion,~~$10 million, or ~~$2.43~~$0.02 per diluted ~~share, and $14 million, or $0.03 per diluted share, respectively. Third quarter results~~share. In March 2022, the state of Texas received approval from CMS to implement a proposed directed payment program effective for ~~2020 include~~ the ~~reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in~~current program year that began September 1, 2021. During the ~~second~~first quarter of ~~2020~~2022, revenues include $244 million and other operating expenses include $90 million from provider tax assessments related to ~~general distribution PRFs established by~~this program for the CARES Act. During October 2020, we announced we would return, or repay early, our share of the PRFs of approximately $1.6 billion and approximately $4.4 billion in Medicare accelerated payments (repaid during the fourth quarter of 2020).period September through December 2021. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were ~~324.029~~307.374 million shares for the quarter ended ~~September 30, 2021~~March 31, 2022 and ~~343.346~~343.321 million shares for the quarter ended ~~September 30, 2020.~~March 31, 2021. During 2021 and the first ~~nine months~~quarter of ~~2021,~~2022, we repurchased ~~29.343~~37.812 million shares and 8.375 million shares, respectively, of our common stock.

The consolidated and same facility increases in revenue per equivalent admission were negatively impacted by declines in acuity of COVID-19 patients.

Salaries and benefits, as a percentage of revenues, were 46.4% in the ~~third~~first quarter of ~~2021~~2022 and ~~45.8%~~45.1% in the ~~third~~first quarter of ~~2020.~~2021. Salaries and benefits per equivalent admission increased ~~7.4%~~6.7% in the ~~third~~first quarter of 2022 compared to the first quarter of 2021. Same facility salaries and benefits per full time equivalent increased 7.7% for the first quarter of 2022 compared to the first quarter of 2021 ~~compared~~as we continue to ~~the third quarter of 2020. Same facility labor rate increases averaged 8.0% for the third quarter of 2021 compared to the third quarter of 2020 primarily due to~~utilize certain contract, overtime and other premium rate labor costs ~~being incurred during the third quarter of 2021~~ to support our clinical staff and ~~address~~patients. We intend to reduce our utilization of and rates paid for premium rate labor, but the ~~surge~~pace and amount of

~~COVID-19~~

~~patients.~~

any expected future declines may be affected by labor market conditions and other factors.

Supplies, as a percentage of revenues, were ~~16.1%~~15.5% in the ~~third~~first quarter of ~~2021~~2022 and ~~16.0%~~15.9% in the ~~third~~first quarter of ~~2020.~~2021. Supply costs per equivalent admission increased ~~6.8%~~1.1% in the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020.~~2021. Supply costs per equivalent admission increased ~~24.0%~~5.9% for ~~pharmacy supplies~~medical devices and ~~9.4%~~2.5% for general medical and surgical items and declined ~~4.9%~~10.7% for ~~medical devices~~pharmacy supplies in the ~~third~~first quarter of ~~2021~~2022 compared to the ~~third~~first quarter of ~~2020.~~2021. The ~~increase~~decline in pharmacy supplies is primarily related to certain

COVID-19

therapies used in the surge of

COVID-19

cases during the ~~third~~first quarter of ~~2021, and the increase in general medical and surgical items is primarily related to an increased utilization of personal protective equipment (“PPE”).~~

2021.

Other operating expenses, as a percentage of revenues, were ~~16.6%~~18.5% in the ~~third~~first quarter of ~~2021~~2022 and ~~16.9%~~17.4% in the ~~third~~first quarter of ~~2020.~~2021. 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. We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in the future. Provisions for losses related to professional liability risks were ~~$49~~$143 million and ~~$26~~$134 million for the ~~third~~first quarters of 2022 and 2021, ~~and 2020,~~ respectively. ~~During~~For the ~~third quarters~~quarter ended March 31, 2022, other operating expenses included $90 million of ~~2021 and 2020, we recorded reductions of $87 million, or $0.21 per diluted share, and $112 million, or $0.25 per diluted share, respectively, to our provision~~Texas provider tax assessments for ~~professional liability risks~~September through December 2021 related to CMS' March 2022 approval of a Texas directed payment program (effective for 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 PRFs established by the CARES Act.

~~Table of Contents~~

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

~~Results of Operations (continued)~~

~~Quarters Ended~~current program year that began September ~~30, 2021 and 2020 (continued)~~

1, 2021).

Equity in earnings of affiliates was ~~$35~~$11 million and ~~$40~~$21 million in the ~~third~~first quarters of 2022 and 2021, ~~and 2020,~~ respectively.

Depreciation and amortization increased ~~$22~~$35 million, from ~~$694~~$697 million in the ~~third~~first quarter of ~~2020~~2021 to ~~$716~~$732 million in the ~~third~~first quarter of ~~2021.~~2022. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was ~~$398~~$408 million in the ~~third~~first quarter of ~~2021~~2022 and ~~$385~~$384 million in the ~~third~~first quarter of ~~2020.~~2021. Our average debt balance was ~~$32.450~~$35.798 billion for the ~~third~~first quarter of ~~2021~~2022 compared to ~~$30.952~~$31.019 billion for the ~~third~~first quarter of ~~2020.~~2021. The average effective interest rate for our long-term debt was ~~4.9%~~4.6% and 5.0%, respectively, for ~~both of~~ the quarters ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~

2021.

During the ~~third~~first quarters of ~~2021~~2022 and ~~2020,~~2021, we recorded gains on sales of facilities of ~~$1.047 billion~~$10 million and ~~$14~~$2 million, respectively. The gains on sales of facilities for the third quarter of 2021 include a $655 million gain related to the sale of four hospital facilities in Georgia and gains of $392 million related to the sales of other health care entity investments and minor real estate assets.

The effective tax rates were 23.2% and 23.8% for the third quarters of 2021 and 2020, 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 increased from $111 million for the third quarter of 2020 to $203 million for the third quarter of 2021. The increase in net income attributable to noncontrolling interests related primarily to an increase in partnership operating income as well as the impact of the government stimulus income reversal for certain hospital and surgery center partnerships in the third quarter of 2020.

~~Nine Months Ended September 30, 2021 and 2020~~

Revenues increased to $43.688 billion in the first nine months of 2021 from $37.240 billion in the first nine months of 2020. Net income attributable to HCA Healthcare, Inc. totaled $5.142 billion, or $15.43 per diluted share, for the first nine months ended September 30, 2021, compared to $2.328 billion, or $6.79 per diluted share, for the first nine months ended September 30, 2020. Results for the first nine months of 2021 included gains on sales of facilities of $1.057 billion, or $2.39 per diluted share, and losses on retirement of debt of $12 million, or $0.03 per diluted share. Results for the first nine months of 2020 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. Revenues for the first nine months of 2021 and 2020, respectively, include $33 million, or $0.07 per diluted share, and $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Results for the first nine months of 2020 also included $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, established by the CARES Act. Our provision for income taxes for the first nine months of 2021 and 2020 included tax benefits of $96 million, or $0.29 per diluted share, and $59 million, or $0.17 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 333.248 million shares for the nine months ended September 30, 2021 and 343.014 million shares for the nine months ended September 30, 2020. During the first nine months of 2021, we repurchased 29.343 million shares of our common stock.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

~~Nine Months~~

Quarters Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ (continued)

Revenues increased 17.3% on a consolidated basis and 17.5% on a same facility basis for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The increase in consolidated revenues can be primarily attributed to the combined impact of an 8.2% increase in revenue per equivalent admission and an 8.4% increase in equivalent admissions. The increase in same facility revenues can be primarily attributed to the combined impact of a 7.9% increase in revenue per equivalent admission and an 8.8% increase in equivalent admissions.

Salaries and benefits, as a percentage of revenues, were 45.3% in the first nine months of 2021 and 47.1% in the first nine months of 2020. Salaries and benefits per equivalent admission increased 4.0% in the first nine months of 2021 compared to the first nine months of 2020. Same facility labor rate increases averaged 7.3% for the first nine months of 2021 compared to the first nine months of 2020 primarily due to an increased utilization of contract, overtime and other premium rate labor costs during the 2021 period to support our clinical staff and address the surges of COVID-19 cases during the first and third quarters of 2021.

Supplies, as a percentage of revenues, were 16.2% in the first nine months of 2021 and 16.1% in the first nine months of 2020. Supply costs per equivalent admission increased 8.6% in the first nine months of 2021 compared to the first nine months of 2020. Supply costs per equivalent admission increased 3.6% for medical devices, 14.8% for pharmacy supplies and 10.7% for general medical and surgical items in the first nine months of 2021 compared to the first nine months of 2020. The increase in pharmacy supplies is primarily related to certain

~~COVID-19~~

~~therapies used in the surges of~~

~~COVID-19~~

~~cases during the first and third quarters of 2021, and the increase in general medical and surgical items is primarily related to increased utilization of PPE.~~

Other operating expenses, as a percentage of revenues, were 17.0% in the first nine months of 2021 and 18.3% in the first nine months of 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 $318 million and $305 million for the first nine months of 2021 and 2020, respectively. During the first nine months of 2021 and 2020, we recorded reductions of $87 million, or $0.20 per diluted share, and $112 million, or $0.25 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 $78 million and $48 million in the first nine months of 2021 and 2020, respectively.~~

Depreciation and amortization increased $66 million, from $2.059 billion in the first nine months of 2020 to $2.125 billion in the first nine months of 2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $1.168 billion in the first nine months of 2021 and $1.201 billion in the first nine months of 2020. Our average debt balance was $31.780 billion for the first nine months of 2021 compared to $32.223 billion for the first nine months of 2020. The average effective interest rate for our long-term debt declined to 4.9% for the nine months ended September 30, 2021 from 5.0% for the nine months ended September 30, 2020.

During the first nine months of 2021 and 2020, we recorded net gains of $1.057 billion and net losses on sales of facilities of $6 million, respectively. The gains on sales of facilities for the first nine months of 2021 are primarily related to the sale of four hospital facilities in Georgia and other health care entity investments.

~~Table of Contents~~

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

~~Results of Operations (continued)~~

~~Nine Months Ended September 30, 2021 and 2020 (continued)~~

During June 2021, we issued $2.350 billion aggregate principal amount of senior secured notes comprised of $850 million aggregate principal amount of 2 3/8% notes due 2031 and $1.500 billion aggregate principal amount of 3 1/2% notes due 2051 (the “June 2021 Notes”). We also amended and restated our senior secured revolving credit facility and our senior secured asset-based revolving credit facility, including increasing availability under the asset-based revolving credit facility to $4.500 billion, extending the maturity date on both facilities to June 30, 2026 and entering into a new $1.500 billion term loan

~~A-7~~

~~facility and a new $500 million term~~

~~loan B-14~~

~~facility (the “Credit Agreement Transactions”). We used the net proceeds from the June 2021 Notes and the Credit Agreement Transactions to retire the $1.071 billion term~~

~~loan A-6~~

~~facility, the $1.455 billion term~~

~~loan B-12~~

~~facility and the $1.131 billion term~~

~~loan B-13~~

facility. The pretax loss on retirement of debt was $12 million. 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.

The effective tax rates were ~~22.9%~~21.5% and ~~22.2%~~21.7% for the first ~~nine months~~quarters of ~~2021~~2022 and ~~2020,~~2021, 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 months~~quarters of ~~2021~~2022 and ~~2020~~2021 included tax benefits of ~~$96~~$64 million and ~~$59~~$74 million, respectively, related to employee equity award settlements. Excluding the effect of these adjustments, the effective tax rate for the first ~~nine months~~quarters of ~~2021~~2022 and ~~2020~~2021 would have been ~~24.4%~~25.5% and ~~24.2%~~25.7%, respectively.

Net income attributable to noncontrolling interests increased from ~~$365~~$157 million for the first ~~nine months~~quarter of ~~2020~~2021 to ~~$574~~$192 million for the first ~~nine months~~quarter of ~~2021.~~2022. The increase in net income attributable to noncontrolling interests related primarily to the ~~partnership~~ operations of two of our Texas markets and our surgery ~~center partnerships.~~

centers.

Liquidity and Capital Resources

Cash provided by operating activities ~~declined $6.299~~totaled $1.345 billion ~~from $12.815 billion for~~in the first ~~nine months~~quarter of ~~2020~~2022 compared to ~~$6.516~~$1.988 billion ~~for~~in the first ~~nine months~~quarter of 2021. The $12.815 billion of cash flows from operating activities in the first nine months of 2020 included $6.123 billion of government stimulus refund liability related to unapplied accelerated Medicare payments and PRFs established by the CARES Act (approximately $6 billion was returned or repaid early and reversed out of cash flow from operations in the fourth quarter of 2020). The$643 million decline in cash provided by operating activities, ~~also included~~in the ~~net~~first quarter of 2022 compared to the first quarter of 2021, related primarily to the combined impact of negative changes in working capital items of ~~$2.350 billion,~~$492 million, primarily related to ~~an increase in accounts receivable, offset by an increase~~a payment of $344 million for deferred payroll taxes from 2020, and a $121 million decline in net income, excluding ~~losses and~~ gains on sales of ~~facilities and losses on retirement of debt, of $2.001 billion.~~facilities. The combination of interest payments and net income tax payments in the first ~~nine months~~quarter of 2022 totaled $411 million, compared to the net combination of interest payments and income tax refunds in the first quarter of 2021 ~~and 2020 totaled $2.473 billion and $2.009 billion, respectively.~~of $362 million. Working capital totaled ~~$3.624~~$4.488 billion at ~~September 30, 2021~~March 31, 2022 and ~~$3.629~~$3.960 billion at December 31, ~~2020.~~

2021.

Cash used in investing activities was ~~$929~~$845 million in the first ~~nine months~~quarter of ~~2021~~2022 compared to ~~$2.483 billion in the first nine months of 2020. Acquisitions of hospitals and health care entities increased from $380~~$649 million in the first ~~nine months of 2020 to $488 million in the first nine months~~quarter of 2021. Excluding acquisitions, capital expenditures were ~~$2.385 billion~~$861 million in the first ~~nine months~~quarter of ~~2021~~2022 and ~~$2.087 billion~~$654 million in the first ~~nine months~~quarter of ~~2020.~~2021. Planned capital expenditures are expected to approximate ~~$3.7~~$4.2 billion in ~~2021.~~2022. At

~~Table of Contents~~

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

~~Liquidity and Capital Resources (continued)~~

~~September 30, 2021,~~ March 31, 2022, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately ~~$3.6~~$4.5 billion. We expect to finance capital expenditures with internally generated and borrowed funds. ~~Sales~~

Cash provided by financing activities totaled $425 million in the first quarter of ~~hospitals and health care entities increased $1.912 billion primarily related~~2022, compared to ~~the proceeds from our sales of five hospitals in Georgia (the sale of one hospital was effective October 1, 2021) and other health care entity investments.~~

~~Cash~~cash used in financing activities ~~totaled $6.349~~of $2.104 billion in the first ~~nine months~~quarter of ~~2021 compared to $4.361 billion in the first nine months of 2020.~~2021. During the first ~~nine months~~quarter of 2022, net cash flows provided by financing activities included a net increase of $3.120 billion in our indebtedness, payment of dividends of $177 million, repurchase of common stock of $2.101 billion and distributions to noncontrolling interests of $171 million. During the first quarter of 2021, net cash flows used in financing activities included a net increase of ~~$1.050 billion~~$33 million in our indebtedness, payment of dividends of ~~$476~~$169 million, repurchase of common stock of ~~$6.143~~$1.527 billion and distributions to noncontrolling interests of ~~$501~~$234 million. During the first nine months of 2020, net cash flows used in financing activities included a net decline of $3.183 billion in our indebtedness, payment of dividends of $153 million, repurchase of common stock of $441 million and distributions to noncontrolling interests of $393 million.

We are a highly leveraged company with significant debt service requirements. Our debt totaled ~~$32.299~~$37.696 billion at ~~September 30, 2021.~~March 31, 2022. Our interest expense was ~~$1.168 billion~~$408 million for the first ~~nine months~~quarter of ~~2021~~2022 and ~~$1.201 billion~~$384 million for the first ~~nine months~~quarter of ~~2020.~~

2021.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($~~5.920~~6.435 billion and ~~$5.590~~$5.075 billion available as of ~~September~~March 31, 2022 and April 30, ~~2021 and October 31, 2021,~~2022, respectively) and anticipated access to public and private debt markets.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled ~~$530~~$513 million and ~~$504~~$541 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. An insurance subsidiary maintained net reserves for professional liability risks of ~~$159~~$134 million and ~~$188~~$154 million at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Our facilities are insured by ~~a 100% owned~~our insurance subsidiary for losses up to $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 ~~$1.795~~$1.809 billion and ~~$1.736~~$1.813 billion at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate ~~$476~~$482 million. We estimate that approximately ~~$434~~$439 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

During ~~June 2021,~~March 2022, we issued ~~$2.350~~$6.000 billion aggregate principal amount of senior secured notes comprised of ~~$850 million aggregate principal amount of 2 3/8% notes due 2031 and $1.500~~(i) $1.000 billion aggregate principal amount of 3 1/2%8% senior secured notes due ~~2051 (the “June 2021 Notes”). We also amended and restated our~~2027, (ii) $500 million aggregate principal amount of 3 3/8% senior secured ~~revolving credit facility and our~~notes due 2029, (iii) $2.000 billion aggregate principal amount of 3 5/8% senior secured asset-based revolving credit facility, including increasing availability under the asset-based revolving credit facility to $4.500 billion, extending the maturity date on both facilities to June 30, 2026 and entering into a new $1.500 billion term loan

~~A-7~~

~~facility and a new~~notes due 2032, (iv) $500 million ~~term loan~~

~~B-14~~

~~facility (the “Credit Agreement Transactions”)~~aggregate principal amount of 4 3/8% senior secured notes due 2042 and (v) $2.000 billion aggregate principal amount of 4 5/8% senior secured notes due 2052. WeDuring March 2022, we used a portion of the net proceeds ~~from the June 2021 Notes~~ to pay down our revolving credit facilities. During April 2022, we redeemed all $1.250 billion outstanding aggregate principal amount of our 4.75% senior secured notes due 2023 and ~~the Credit Agreement Transactions~~provided a notice of our election to ~~retire the $1.071~~redeem all $1.250 billion ~~term loan~~

~~A-6~~

~~facility, the $1.455 billion term loan~~

~~B-12~~

~~facility and the $1.131 billion term loan~~

~~B-13~~

~~facility.~~

outstanding aggregate principal amount of our 5.875% senior notes due 2023.

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.

~~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

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 on an unsecured basis by HCA Healthcare, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed 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 a list of subsidiary guarantors, see Exhibit 22 to this quarterly report on Form

10-Q.

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 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, 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 this quarterly report on Form 10-Q and our annual report on Form

10-K

for the year ended December 31, ~~2020.~~

2021.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information (continued)

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 months~~quarter ended ~~September 30, 2021~~March 31, 2022 and year ended December 31, ~~2020~~2021 and the summarized balance sheet information at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, for HCA Healthcare, Inc., HCA Inc. and the subsidiary guarantors (the Parent, Subsidiary Issuer and Subsidiary Guarantors) follow (dollars in millions):

~~Nine Months Ended September 30, 2021 and Year Ended December 31, 2020:~~

Nine Months
September 30, 2021

Year
December 31, 2020

Revenues

$
26,140

   $ 31,040
Income before income taxes


4,578

   4,016
Net income


3,546

   3,172
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors


3,474

   3,091

~~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)~~

At September 30, 2021 and December 31, 2020:


September 30, 2021

December 31, 2020

Current assets

$
7,821

$ 7,442
Property and equipment, net


15,285

14,939
Goodwill and other intangible assets


5,707

5,763
Total noncurrent assets


22,277

21,771
Total assets


30,098

29,213
Current liabilities


5,859

5,316
Long-term debt, net


31,597
��
30,444
Intercompany balances


3,229

2,090
Income taxes and other liabilities


1,841

1,004
Total noncurrent liabilities


37,179

34,035
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors


(13,155
)
(10,247 )
Noncontrolling interests


215

109


Quarter Ended March 31, 2022 and Year Ended December 31, 2021:
	Quarter			Year
	March 31, 2022			December 31, 2021
Revenues	$	8,728		$	34,889
Income before income taxes		1,155			6,061
Net income		920			4,666
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		896			4,564

At March 31, 2022 and December 31, 2021:
	March 31, 2022			December 31, 2021
Current assets	$	9,415		$	8,268
Property and equipment, net		16,040			15,559
Goodwill and other intangible assets		5,695			5,694
Total noncurrent assets		22,719			22,370
Total assets		32,134			30,638
Current liabilities		6,807			5,697
Long-term debt, net		35,769			33,904
Intercompany balances		3,668			3,423
Income taxes and other liabilities		744			1,053
Total noncurrent liabilities		40,722			38,912
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		(15,551	)		(14,124	)
Noncontrolling interests		156			153

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 this quarterly report on Form 10-Q and our annual report on Form

10-K

for the year ended December 31, ~~2020.~~

2021.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information (continued)

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.

~~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)~~

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 investment securities held by our insurance subsidiaries were recorded at ~~$530~~$513 million at ~~September 30, 2021.~~March 31, 2022. 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, 2021,~~March 31, 2022, we had a net unrealized ~~gain~~losses of ~~$20~~$10 million on the insurance subsidiaries’ investments.

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. ~~At September 30, 2021,~~

With respect to our interest-bearing liabilities, approximately $1.440 billion of long-term debt at March 31, 2022 was subject to variable rates of interest, while the remaining balance of long-term debt of $36.256 billion at March 31, 2022 was subject to fixed rates of interest. Both the general level of interest rates and our leverage affect our variable ~~rate debt was fully covered by our~~ interest ~~rate swap agreements.~~

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 ~~4.9%~~4.6% and 5.0% for the ~~nine months~~quarters ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Market Risk (continued)

The estimated fair value of our total long-term debt was ~~$36.567~~$39.038 billion at ~~September 30, 2021.~~March 31, 2022. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in interest rates, the potential annualized reduction to future pretax earnings would be approximately $14 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~~

At March 31, 2022, the Internal Revenue Service was conducting ~~an examination~~examinations of the Company’s 2016, 2017 and 2018 federal income tax returns ~~at September 30, 2021.~~and the 2019 return for one affiliated partnership. We are also subject to examination by state and foreign taxing authorities. Management believes HCA Healthcare, Inc. and its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with IRS, state and foreign taxing authorities and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.

~~Operating Data~~

2021

2020

Number of hospitals in operation at:

March 31


186

   186
June 30


187

   186
September 30


183

   187
December 31
      185
Number of freestanding outpatient surgical centers in operation at:

March 31


121

   123
June 30


122

   122
September 30


123

   121
December 31
      121
Licensed hospital beds at(a):

March 31


49,561

   49,357
June 30


49,693

   49,403
September 30


48,950

   49,473
December 31
      49,265
Weighted average beds in service(b):

Quarter:

First


42,363

   42,177
Second


42,464

   42,309
Third


42,088

   42,426
Fourth
      42,072
Year
      42,246

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data ~~(continued)~~

2021

2020

Average daily census(c):

Quarter:

First


29,678

   28,822
Second


28,901

   24,844
Third


31,144

   28,186
Fourth
      29,065
Year
      27,734
Admissions(d):

Quarter:

First


506,380

   528,244
Second


532,041

   452,992
Third


536,848

   506,756
Fourth
      521,917
Year
      2,009,909
Equivalent admissions(e):

Quarter:

First


832,489

   889,035
Second


916,212

   723,136
Third


905,627

   835,576
Fourth
      864,583
Year
      3,312,330
Average length of stay (days)(f):

Quarter:

First


5.3

   5.0
Second


4.9

   5.0
Third


5.3

   5.1
Fourth
      5.1
Year
      5.1
Emergency room visits(g):

Quarter:

First


1,841,778

   2,264,707
Second


2,128,428

   1,516,116
Third


2,338,180

   1,813,661
Fourth
      1,855,823
Year
      7,450,307
Outpatient surgeries(h):

Quarter:

First


231,228

   226,319
Second


262,107

   170,911
Third


249,192

   232,493
Fourth
      252,760
Year
      882,483


	2022		2021
Number of hospitals in operation at:
March 31		182		186
June 30				187
September 30				183
December 31				182
Number of freestanding outpatient surgical centers in operation at:
March 31		124		121
June 30				122
September 30				123
December 31				125
Licensed hospital beds at(a):
March 31		48,892		49,561
June 30				49,693
September 30				48,950
December 31				48,803
Weighted average beds in service(b):
Quarter:
First		41,818		42,363
Second				42,464
Third				42,088
Fourth				41,685
Year				42,148
Average daily census(c):
Quarter:
First		29,797		29,678
Second				28,901
Third				31,144
Fourth				29,273
Year				29,752
Admissions(d):
Quarter:
First		506,956		506,380
Second				532,041
Third				536,848
Fourth				514,706
Year				2,089,975
Equivalent admissions(e):
Quarter:
First		859,290		832,489
Second				916,212
Third				905,627
Fourth				881,910
Year				3,536,238
Average length of stay (days)(f):
Quarter:
First		5.3		5.3
Second				4.9
Third				5.3
Fourth				5.2
Year				5.2

~~Table of Contents~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)



	2022			2021
Emergency room visits(g):
Quarter:
First		2,056,389			1,841,778
Second					2,128,428
Third					2,338,180
Fourth					2,166,959
Year					8,475,345
Outpatient surgeries(h):
Quarter:
First		247,421			231,228
Second					262,107
Third					249,192
Fourth					265,709
Year					1,008,236
Inpatient surgeries(i):
Quarter:
First		126,880			127,590
Second					136,460
Third					126,436
Fourth					131,583
Year					522,069
Days revenues in accounts receivable(j):
Quarter:
First		51			48
Second					48
Third					51
Fourth					49
Outpatient revenues as a % of patient revenues(k):
Quarter:
First		37	%		36	%
Second					38	%
Third					34	%
Fourth					38	%
Year					37	%

(a)

Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency.

(b)

~~Operating Data (continued)~~

Represents the average number of beds in service, weighted based on periods owned.

2021

2020

Inpatient surgeries(i):

Quarter:

First


127,590

135,145
Second


136,460

118,591
Third


126,436

133,492
Fourth
   135,157
Year
   522,385
Days revenues in accounts receivable(j):

Quarter:

First


48

49
Second


48

50
Third


51

44
Fourth
   45
Outpatient revenues as a % of patient revenues(k):

Quarter:

First


36
%
37 %
Second


38
%
32 %
Third


34
%
36 %
Fourth
   35 %
Year
   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 beds in service, weighted based on periods owned.~~

~~(c)~~

(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.~~

(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)

~~Table~~Equivalent admissions are used by management and certain investors as a general measure of ~~Contents~~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)

(k)

Represents the percentage of patient revenues related to patients who are not admitted to our hospitals.

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 the 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, 2021.~~March 31, 2022. 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, 2021.~~

March 31, 2022.

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.

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, ~~2020,~~2021, which are incorporated herein by reference. There have not been any material changes to the risk factors previously disclosed in our annual report on

Form 10-K

for the year ended December 31, ~~2020.~~

2021.

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

During January 2022 and February 2021, our Board of Directors authorized share repurchase programs for up to $8 billion and $6 billion, ~~for repurchases~~respectively, of our outstanding common stock. During the quarter ended ~~September 30, 2021,~~March 31, 2022, we repurchased ~~9,604,350~~8,374,934 shares of our common stock at an average price of ~~$242.53~~$250.89 per share through market purchases pursuant to the February 2021 authorization (which was completed during the first quarter of 2022) and the January 2022 authorization. At ~~September 30, 2021,~~March 31, 2022, we had ~~$2.658~~$6.485 billion of repurchase authorization available under the ~~February 2021~~January 2022 authorization.

~~Table of Contents~~

The following table provides certain information with respect to our repurchases of common stock from ~~July~~January 1, ~~2021~~2022 through ~~September 30, 2021~~March 31, 2022 (dollars in millions, except per share amounts).

Period

Total Number
of Shares
Purchased

Average Price
Paid per Share

Total Number
of Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs

Approximate
Dollar Value of
Shares That
May Yet Be
Purchased
Under Publicly
Announced
Plans or
Programs

July 1, 2021 through July 31, 2021
   3,306,380    $ 225.33    3,306,380    $ 4,242
August 1, 2021 through August 31, 2021
   3,407,927    $ 247.73    3,407,927    $ 3,398
September 1, 2021 through September 30, 2021
   2,890,043    $ 256.08    2,890,043    $ 2,658





Total for third quarter 2021
   9,604,350    $ 242.53    9,604,350    $ 2,658


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, 2022 through January 31, 2022		2,347,430	$	249.68		2,347,430	$	8,000
February 1, 2022 through February 28, 2022		2,948,912	$	240.77		2,948,912	$	7,290
March 1, 2022 through March 31, 2022		3,078,592	$	261.49		3,078,592	$	6,485
Total for first quarter 2022		8,374,934	$	250.89		8,374,934	$	6,485

On ~~October~~April 21, ~~2021,~~2022, our Board of Directors declared a quarterly dividend of ~~$0.48~~$0.56 per share on our common stock payable on ~~December 29, 2021~~June 30, 2022 to stockholders of record at the close of business on ~~December 14, 2021.~~June 16, 2022. 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.

~~Table of Contents~~

~~ITEM 6.~~

~~EXHIBITS~~

ITEM 6. EXHIBITS

(a) List of Exhibits:


4.1	—	Supplemental Indenture No. 29, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.2	—	Supplemental Indenture No. 30, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.3	—	Supplemental Indenture No. 31, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.4 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.4	—	Supplemental Indenture No. 32, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.5 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.5	—	Supplemental Indenture No. 33, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein, Delaware Trust Company, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.6 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.6	—	Form of Global Notes representing the 2027 Notes (included in Exhibit 4.1)

4.7	—	Form of Global Notes representing the 2029 Notes (included in Exhibit 4.2)

4.8	—	Form of Global Notes representing the 2032 Notes (included in Exhibit 4.3)

4.9	—	Form of Global Notes representing the 2042 Notes (included in Exhibit 4.4)

4.10	—	Form of Global Notes representing the 2052 Notes (included in Exhibit 4.5)

4.11	—	Additional Receivables Intercreditor Agreement, dated as of March 9, 2022, by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as First Lien Collateral Agent (filed as Exhibit 4.15 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

4.12	—	Registration Rights Agreement, dated as of March 9, 2022, among HCA Inc., HCA Healthcare, Inc., the subsidiary guarantors named therein and Citigroup Global Markets Inc., BofA Securities, Inc., J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC as representatives of the other several initial purchasers named therein (filed as Exhibit 4.16 to the Company’s Current Report on Form 8-K filed on March 10, 2022, and incorporated herein by reference).

10.1	—	HCA Healthcare, Inc. 2022 Senior Officer Performance Excellence Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 11, 2022, and incorporated herein by reference).*

22	—	—	List of Subsidiary Guarantors and 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 quarter ended ~~September 30, 2021~~March 31, 2022 filed with the SEC on ~~November 1, 2021,~~May 3, 2022, formatted in Inline Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, (ii) the condensed consolidated income statements for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~and 2020,~~ (iii) the condensed consolidated comprehensive income statements for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~and 2020,~~ (iv) the condensed consolidated statements of stockholders’ equity ~~(deficit)~~ for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021, ~~and 2020,~~ (v) the condensed consolidated statements of cash flows for the ~~nine months~~quarters ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ 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, 2021,~~March 31, 2022, formatted in Inline XBRL (included in Exhibit 101).

*Management compensatory plan or arrangement.

~~Table of Contents~~

SIGNATURES

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


~~HCA Healthcare, Inc.~~

~~By:~~		/ S ~~/ W~~ ~~ILLIAM~~ ~~B. R~~ ~~UTHERFORD~~
HCA Healthcare, Inc.

By:	/S/ WILLIAM B. RUTHERFORD
	William B. Rutherford
		Executive Vice President and Chief Financial Officer

Date: ~~November 1, 2021~~

May 3, 2022


~~Delaware~~		~~27-3865930~~
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)



Title of each class		Trading Symbol(s)	Name of each exchange on which registered
Voting common stock, $.01 par value	HCA	~~HCA~~	New York Stock Exchange



Large accelerated filer	☒	☒	Accelerated filer	☐

Non-accelerated filer	☐	☐	Smaller reporting company	☐

Emerging growth company	☐	☐


Class of Common Stock	Outstanding at April 29, 2022
Voting common stock, $.01 par value	295,484,400 shares


~~Class of Common Stock~~		~~Outstanding at October 25, 2021~~
~~Voting common stock, $.01 par value~~		~~311,022,800 shares~~

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

Item 1.		Financial Statements (Unaudited):

		Condensed Consolidated Income Statements — for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~		2	3

		Condensed Consolidated Comprehensive Income Statements — for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~		3	4

		Condensed Consolidated Balance Sheets — ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021		4	5

		Condensed Consolidated Statements of Stockholders’ Equity ~~(Deficit)~~ — for the quarters ended March 31, 2022 and ~~nine months ended September 30,~~ 2021 ~~and 2020~~		5	6

		Condensed Consolidated Statements of Cash Flows — for the ~~nine months~~quarters ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~		6	7

		Notes to Condensed Consolidated Financial Statements		7	8

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		18	17

Item 3.		Quantitative and Qualitative Disclosures About Market Risk		37	30

Item 4.		Controls and Procedures		37	30

Part II.		Other Information

Item 1.		Legal Proceedings		37	30

Item 1A.		Risk Factors		37	30

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		37	31

Item 6.	Exhibits	~~Exhibits~~		39	32

Signatures			40	34


	Quarter						Nine Months
	2021			2020			2021			2020
Revenues	$	15,276		$	13,311		$	43,688		$	37,240

Salaries and benefits		7,094			6,097			19,780			17,545
Supplies		2,463			2,128			7,067			5,999
Other operating expenses		2,530			2,251			7,424			6,825
Government stimulus income reversal		0			822			0			0
Equity in earnings of affiliates		(35	)		(40	)		(78	)		(48	)
Depreciation and amortization		716			694			2,125			2,059
Interest expense		398			385			1,168			1,201
Losses (gains) on sales of facilities		(1,047	)		(14	)		(1,057	)		6
Losses on retirement of debt		0			0			12			295

		12,119			12,323			36,441			33,882

Income before income taxes		3,157			988			7,247			3,358
Provision for income taxes		685			209			1,531			665

Net income		2,472			779			5,716			2,693
Net income attributable to noncontrolling interests		203			111			574			365

Net income attributable to HCA Healthcare, Inc.	$	2,269		$	668		$	5,142		$	2,328

Per share data:
Basic earnings	$	7.13		$	1.97		$	15.67		$	6.89
Diluted earnings	$	7.00		$	1.95		$	15.43		$	6.79
Shares used in earnings per share calculations (in millions):
Basic		318.072			338.168			328.048			338.057
Diluted		324.029			343.346			333.248			343.014


	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,027		$	1,793
Accounts receivable		8,433			7,051
Inventories		2,019			2,025
Other		1,769			1,464

		13,248			12,333

Property and equipment, at cost		50,695			49,317
Accumulated depreciation		(27,148	)		(26,118	)

		23,547			23,199

Investments of insurance subsidiaries		418			388
Investments in and advances to affiliates		412			422
Goodwill and other intangible assets		9,153			8,578
Right-of-use operating lease assets		2,099			2,024
Other		685			546

	$	49,562		$	47,490

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,759		$	3,535
Accrued salaries		2,134			1,720
Other accrued expenses		3,481			3,240
Long-term debt due within one year		250			209

		9,624			8,704

Long-term debt, less debt issuance costs and discounts of $253 and $236		32,049			30,795
Professional liability risks		1,522			1,486
Right-of-use operating lease obligations		1,742			1,673
Income taxes and other liabilities		2,800			1,940

Stockholders’ equity:
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 313,502,400 shares — 2021 and 339,425,600 shares — 2020		3			3
Capital in excess of par value		0			294
Accumulated other comprehensive loss		(492	)		(502	)
Retained (deficit) earnings		(206	)		777

Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.		(695	)		572
Noncontrolling interests		2,520			2,320

		1,825			2,892

	$	49,562		$	47,490


	Equity (Deficit) Attributable to HCA Healthcare, Inc.														Equity Attributable to Noncontrolling Interests			Total
	Common Stock					Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)
	Shares (in millions)			Par Value		Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)
Balances, December 31, 2019		338.446		$	3	$	—		$	(460	)	$	(2,351	)	$	2,243		$	(565	)
Comprehensive income										(111	)		581			117			587
Repurchase of common stock		(3.287	)										(441	)					(441	)
Share-based benefit plans		2.449					2						(35	)					(33	)
Cash dividends declared ($0.43 per share)													(148	)					(148	)
Distributions																(154	)		(154	)
Other							(2	)								53			51

Balances, March 31, 2020		337.608			3		—			(571	)		(2,394	)		2,259			(703	)
Comprehensive income										9			1,079			137			1,225
Share-based benefit plans		0.352					93												93
Distributions																(45	)		(45	)
Other							(5	)								3			(2	)

Balances, June 30, 2020		337.960			3		88			(562	)		(1,315	)		2,354			568
Comprehensive income										47			668			111			826
Share-based benefit plans		0.410					97												97
Distributions																(194	)		(194	)
Other																2			2

Balances, September 30, 2020		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
Comprehensive income										16			1,450			214			1,680
Repurchase of common stock		(11.261	)				(142	)					(2,145	)					(2,287	)
Share-based benefit plans		0.372					140												140
Cash dividends declared ($0.48 per share)													(161	)					(161	)
Distributions																(123	)		(123	)
Other							2									57			59

Balances, June 30, 2021		322.825			3		—			(475	)		(121	)		2,383			1,790
Comprehensive income										(17	)		2,269			203			2,455
Repurchase of common stock		(9.605	)				(130	)					(2,199	)					(2,329	)
Share-based benefit plans		0.282					127												127
Cash dividends declared ($0.48 per share)													(155	)					(155	)
Distributions																(144	)		(144	)
Other							3									78			81

Balances, September 30, 2021		313.502		$	3	$	—		$	(492	)	$	(206	)	$	2,520		$	1,825


	Equity (Deficit) Attributable to HCA Healthcare, Inc.
						Capital			Accumulated						Equity
	Common Stock					in Excess			Other			Retained			Attributable to
	Shares			Par		of Par			Comprehensive			Earnings			Noncontrolling
	(in millions)			Value		Value			Loss			(Deficit)			Interests			Total
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
Comprehensive income										16			1,450			214			1,680
Repurchase of common stock		(11.261	)				(142	)					(2,145	)					(2,287	)
Share-based benefit plans		0.372					140												140
Cash dividends declared ($0.48 per share)													(161	)					(161	)
Distributions																(123	)		(123	)
Other							2									57			59
Balances, June 30, 2021		322.825			3		—			(475	)		(121	)		2,383			1,790
Comprehensive income										(17	)		2,269			203			2,455
Repurchase of common stock		(9.605	)				(130	)					(2,199	)					(2,329	)
Share-based benefit plans		0.282					127												127
Cash dividends declared ($0.48 per share)													(155	)					(155	)
Distributions																(144	)		(144	)
Other							3									78			81
Balances, September 30, 2021		313.502			3		—			(492	)		(206	)		2,520			1,825
Comprehensive income										88			1,814			191			2,093
Repurchase of common stock		(8.469	)				(81	)					(1,991	)					(2,072	)
Share-based benefit plans		0.444					88												88
Cash dividends declared ($0.48 per share)													(149	)					(149	)
Distributions																(248	)		(248	)
Other							(7	)								(41	)		(48	)
Balances, December 31, 2021		305.477			3		—			(404	)		(532	)		2,422			1,489
Comprehensive income										(43	)		1,273			192			1,422
Repurchase of common stock		(8.375	)										(2,101	)					(2,101	)
Share-based benefit plans		1.879											(57	)					(57	)
Cash dividends declared ($0.56 per share)													(171	)					(171	)
Distributions																(171	)		(171	)
Other													(1	)		4			3
Balances, March 31, 2022		298.981		$	3	$	—		$	(447	)	$	(1,589	)	$	2,447		$	414


	2021			2020
Cash flows from operating activities:
Net income	$	5,716		$	2,693
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable		(1,312	)		930
Inventories and other assets		(333	)		(36	)
Accounts payable and accrued expenses		731			542
Contract liabilities-deferred revenues		0			6,123
Depreciation and amortization		2,125			2,059
Income taxes		185			(114	)
Losses (gains) on sales of facilities		(1,057	)		6
Losses on retirement of debt		12			295
Amortization of debt issuance costs and discounts		21			22
Share-based compensation		341			229
Other		87			66

Net cash provided by operating activities		6,516			12,815

Cash flows from investing activities:
Purchase of property and equipment		(2,385	)		(2,087	)
Acquisition of hospitals and health care entities		(488	)		(380	)
Sales of hospitals and health care entities		1,980			68
Change in investments		(38	)		(40	)
Other		2			(44	)

Net cash used in investing activities		(929	)		(2,483	)

Cash flows from financing activities:
Issuances of long-term debt		4,337			2,700
Net change in revolving credit facilities		500			(2,480	)
Repayment of long-term debt		(3,787	)		(3,403	)
Distributions to noncontrolling interests		(501	)		(393	)
Payment of debt issuance costs		(38	)		(35	)
Payment of dividends		(476	)		(153	)
Repurchase of common stock		(6,143	)		(441	)
Other		(241	)		(156	)

Net cash used in financing activities		(6,349	)		(4,361	)

Effect of exchange rate changes on cash and cash equivalents		(4	)		(4	)

Change in cash and cash equivalents		(766	)		5,967
Cash and cash equivalents at beginning of period		1,793			621

Cash and cash equivalents at end of period	$	1,027		$	6,588

Interest payments	$	1,127		$	1,230
Income tax payments, net	$	1,346		$	779


	September 30, 2021
	Amortized Cost		Unrealized Amounts					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
Debt securities	$	391	$	21	$	(1	)	$	411
Money market funds and other		119		—		—			119

	$	510	$	21	$	(1	)		530

Amounts classified as current assets									(112	)

Investment carrying value								$	418


	December 31, 2020
	Amortized Cost		Unrealized Amounts				Fair Value
	Amortized Cost		Gains		Losses		Fair Value
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


Derivatives in Cash Flow Hedging Relationships	Amount of Loss Recognized in OCI on Derivatives, Net of Tax		Location of Loss Reclassified from Accumulated OCI into Operations		Amount of Loss Reclassified from Accumulated OCI into Operations
Interest rate swaps	$	1		Interest expense	$	28


	Nine Months September 30, 2021		Year December 31, 2020
Revenues	$	26,140	$	31,040
Income before income taxes		4,578		4,016
Net income		3,546		3,172
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		3,474		3,091