HCA Healthcare - 10-Q quarterly report FY2021 Q2

false0.023750.035Q20000860730--12-31 0000860730 2021-01-01 2021-06-30 0000860730 2021-04-01 2021-06-30 0000860730 2020-04-01 2020-06-30 0000860730 2020-01-01 2020-06-30 0000860730 2020-01-01 2020-03-31 0000860730 2020-10-01 2020-12-31 0000860730 2021-01-01 2021-03-31 0000860730 2021-06-30 0000860730 2020-12-31 0000860730 2020-07-01 2020-09-30 0000860730 2021-07-26 0000860730 2019-12-31 0000860730 2020-03-31 0000860730 2020-06-30 0000860730 2020-09-30 0000860730 2021-03-31 0000860730 us-gaap:CorporateAndOtherMember 2021-01-01 2021-06-30 0000860730 hca:AmericanGroupMember 2021-01-01 2021-06-30 0000860730 hca:NationalGroupMember 2021-01-01 2021-06-30 0000860730 hca:HospitalAndOtherNonhospitalHealthCareEntitiesMember 2021-01-01 2021-06-30 0000860730 us-gaap:InterestRateSwapMember 2021-01-01 2021-06-30 0000860730 hca:RealEstateAndOtherInvestmentsMember 2021-01-01 2021-06-30 0000860730 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:InterestRateSwapMember 2021-01-01 2021-06-30 0000860730 us-gaap:FixedIncomeInterestRateMember hca:DerivativeInstrumentMaturityDateDecemberTwoThousandAndTwentyOneMember 2021-01-01 2021-06-30 0000860730 us-gaap:FixedIncomeInterestRateMember hca:DerivativeInstrumentMaturityDateDecemberTwoThousandAndTwentyTwoMember 2021-01-01 2021-06-30 0000860730 hca:MedicareMember 2021-01-01 2021-06-30 0000860730 hca:ManagedMedicareMember 2021-01-01 2021-06-30 0000860730 hca:MedicaidMember 2021-01-01 2021-06-30 0000860730 hca:ManagedMedicaidMember 2021-01-01 2021-06-30 0000860730 hca:ManagedCareAndOtherInsurersMember 2021-01-01 2021-06-30 0000860730 hca:InternationalMember 2021-01-01 2021-06-30 0000860730 us-gaap:ProductAndServiceOtherMember 2021-01-01 2021-06-30 0000860730 srt:MinimumMember 2021-01-01 2021-06-30 0000860730 hca:OutOfNetworkServicesMember 2021-01-01 2021-06-30 0000860730 us-gaap:CorporateAndOtherMember 2020-01-01 2020-06-30 0000860730 hca:AmericanGroupMember 2020-01-01 2020-06-30 0000860730 hca:NationalGroupMember 2020-01-01 2020-06-30 0000860730 hca:HospitalAndOtherNonhospitalHealthCareEntitiesMember 2020-01-01 2020-06-30 0000860730 hca:RealEstateAndOtherInvestmentsMember 2020-01-01 2020-06-30 0000860730 hca:MedicareMember 2020-01-01 2020-06-30 0000860730 hca:ManagedMedicareMember 2020-01-01 2020-06-30 0000860730 hca:MedicaidMember 2020-01-01 2020-06-30 0000860730 hca:ManagedMedicaidMember 2020-01-01 2020-06-30 0000860730 hca:ManagedCareAndOtherInsurersMember 2020-01-01 2020-06-30 0000860730 hca:InternationalMember 2020-01-01 2020-06-30 0000860730 us-gaap:ProductAndServiceOtherMember 2020-01-01 2020-06-30 0000860730 hca:OutOfNetworkServicesMember 2020-01-01 2020-06-30 0000860730 us-gaap:CorporateAndOtherMember 2021-04-01 2021-06-30 0000860730 hca:AmericanGroupMember 2021-04-01 2021-06-30 0000860730 hca:NationalGroupMember 2021-04-01 2021-06-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-04-01 2021-06-30 0000860730 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0000860730 us-gaap:NoncontrollingInterestMember 2021-04-01 2021-06-30 0000860730 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0000860730 us-gaap:CommonStockMember 2021-04-01 2021-06-30 0000860730 hca:MedicareMember 2021-04-01 2021-06-30 0000860730 hca:ManagedMedicareMember 2021-04-01 2021-06-30 0000860730 hca:MedicaidMember 2021-04-01 2021-06-30 0000860730 hca:ManagedMedicaidMember 2021-04-01 2021-06-30 0000860730 hca:ManagedCareAndOtherInsurersMember 2021-04-01 2021-06-30 0000860730 hca:InternationalMember 2021-04-01 2021-06-30 0000860730 us-gaap:ProductAndServiceOtherMember 2021-04-01 2021-06-30 0000860730 us-gaap:CorporateAndOtherMember 2020-04-01 2020-06-30 0000860730 hca:AmericanGroupMember 2020-04-01 2020-06-30 0000860730 hca:NationalGroupMember 2020-04-01 2020-06-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0000860730 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0000860730 us-gaap:NoncontrollingInterestMember 2020-04-01 2020-06-30 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0000860730 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0000860730 hca:MedicareMember 2020-04-01 2020-06-30 0000860730 hca:ManagedMedicareMember 2020-04-01 2020-06-30 0000860730 hca:MedicaidMember 2020-04-01 2020-06-30 0000860730 hca:ManagedMedicaidMember 2020-04-01 2020-06-30 0000860730 hca:ManagedCareAndOtherInsurersMember 2020-04-01 2020-06-30 0000860730 hca:InternationalMember 2020-04-01 2020-06-30 0000860730 us-gaap:ProductAndServiceOtherMember 2020-04-01 2020-06-30 0000860730 us-gaap:SeniorNotesMember 2021-06-30 0000860730 us-gaap:SeniorNotesMember hca:SeniorSecuredNotesDue2031Member 2021-06-30 0000860730 us-gaap:SeniorNotesMember hca:SeniorSecuredNotesDue2051Member 2021-06-30 0000860730 us-gaap:CorporateAndOtherMember hca:ReorganizationGroupUnitsMember 2021-06-30 0000860730 hca:ReorganizationGroupUnitsMember hca:AmericanGroupMember 2021-06-30 0000860730 hca:ReorganizationGroupUnitsMember hca:NationalGroupMember 2021-06-30 0000860730 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:DebtSecuritiesMember 2021-06-30 0000860730 hca:MoneyMarketFundsAndOtherMember 2021-06-30 0000860730 us-gaap:FixedIncomeInterestRateMember hca:DerivativeInstrumentMaturityDateDecemberTwoThousandAndTwentyOneMember 2021-06-30 0000860730 us-gaap:FixedIncomeInterestRateMember hca:DerivativeInstrumentMaturityDateDecemberTwoThousandAndTwentyTwoMember 2021-06-30 0000860730 us-gaap:DebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2021-06-30 0000860730 us-gaap:DebtSecuritiesMember 2021-06-30 0000860730 us-gaap:FairValueInputsLevel2Member 2021-06-30 0000860730 us-gaap:FairValueInputsLevel1Member 2021-06-30 0000860730 hca:MoneyMarketFundsAndOtherMember us-gaap:FairValueInputsLevel1Member 2021-06-30 0000860730 hca:MoneyMarketFundsAndOtherMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanASevenFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanBFourteenFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanASixFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanBTwelveFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanBThirteenFacilityMember 2021-06-30 0000860730 hca:AssetBasedRevolvingCreditFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredRevolvingCreditFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredAssetBasedRevolvingCreditFacilityMember 2021-06-30 0000860730 hca:SeniorSecuredTermLoanFacilitiesMember 2021-06-30 0000860730 hca:SeniorSecuredNotesMember 2021-06-30 0000860730 hca:OtherSeniorSecuredDebtMember 2021-06-30 0000860730 hca:SeniorUnsecuredNotesMember 2021-06-30 0000860730 srt:BoardOfDirectorsChairmanMember 2021-06-30 0000860730 us-gaap:InterestRateSwapMember 2021-06-30 0000860730 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member 2021-06-30 0000860730 us-gaap:USStatesAndPoliticalSubdivisionsMember us-gaap:DebtSecuritiesMember 2020-12-31 0000860730 hca:MoneyMarketFundsAndOtherMember 2020-12-31 0000860730 us-gaap:DebtSecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000860730 us-gaap:DebtSecuritiesMember 2020-12-31 0000860730 us-gaap:FairValueInputsLevel2Member 2020-12-31 0000860730 us-gaap:FairValueInputsLevel1Member 2020-12-31 0000860730 hca:MoneyMarketFundsAndOtherMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0000860730 hca:MoneyMarketFundsAndOtherMember 2020-12-31 0000860730 hca:SeniorSecuredAssetBasedRevolvingCreditFacilityMember 2020-12-31 0000860730 hca:SeniorSecuredRevolvingCreditFacilityMember 2020-12-31 0000860730 hca:SeniorSecuredNotesMember 2020-12-31 0000860730 hca:SeniorSecuredTermLoanFacilitiesMember 2020-12-31 0000860730 hca:OtherSeniorSecuredDebtMember 2020-12-31 0000860730 hca:SeniorUnsecuredNotesMember 2020-12-31 0000860730 us-gaap:InterestRateSwapMember 2020-12-31 0000860730 us-gaap:InterestRateSwapMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0000860730 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0000860730 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-03-31 0000860730 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-07-01 2020-09-30 0000860730 us-gaap:RetainedEarningsMember 2020-07-01 2020-09-30 0000860730 us-gaap:NoncontrollingInterestMember 2020-07-01 2020-09-30 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-07-01 2020-09-30 0000860730 us-gaap:CommonStockMember 2020-07-01 2020-09-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-10-01 2020-12-31 0000860730 us-gaap:RetainedEarningsMember 2020-10-01 2020-12-31 0000860730 us-gaap:NoncontrollingInterestMember 2020-10-01 2020-12-31 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-10-01 2020-12-31 0000860730 us-gaap:CommonStockMember 2020-10-01 2020-12-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0000860730 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0000860730 us-gaap:NoncontrollingInterestMember 2021-01-01 2021-03-31 0000860730 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0000860730 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0000860730 srt:BoardOfDirectorsChairmanMember 2019-01-31 0000860730 srt:BoardOfDirectorsChairmanMember 2020-01-31 0000860730 srt:BoardOfDirectorsChairmanMember 2021-02-28 0000860730 us-gaap:CommonStockMember 2021-06-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0000860730 us-gaap:RetainedEarningsMember 2021-06-30 0000860730 us-gaap:NoncontrollingInterestMember 2021-06-30 0000860730 us-gaap:CommonStockMember 2020-06-30 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0000860730 us-gaap:RetainedEarningsMember 2020-06-30 0000860730 us-gaap:NoncontrollingInterestMember 2020-06-30 0000860730 us-gaap:CommonStockMember 2019-12-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0000860730 us-gaap:RetainedEarningsMember 2019-12-31 0000860730 us-gaap:NoncontrollingInterestMember 2019-12-31 0000860730 us-gaap:CommonStockMember 2020-03-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0000860730 us-gaap:RetainedEarningsMember 2020-03-31 0000860730 us-gaap:NoncontrollingInterestMember 2020-03-31 0000860730 us-gaap:CommonStockMember 2020-09-30 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-09-30 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-09-30 0000860730 us-gaap:RetainedEarningsMember 2020-09-30 0000860730 us-gaap:NoncontrollingInterestMember 2020-09-30 0000860730 us-gaap:CommonStockMember 2020-12-31 0000860730 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0000860730 us-gaap:RetainedEarningsMember 2020-12-31 0000860730 us-gaap:NoncontrollingInterestMember 2020-12-31 0000860730 us-gaap:CommonStockMember 2021-03-31 0000860730 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0000860730 us-gaap:RetainedEarningsMember 2021-03-31 0000860730 us-gaap:NoncontrollingInterestMember 2021-03-31 iso4217:USD utr:Year xbrli:pure xbrli:shares iso4217:USD xbrli:shares hca:Hospital hca:Surgery_Center hca:Endoscopy_Center hca:State

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2021

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

For the transition period from to

Commission file number

1-11239

HCA Healthcare, Inc.

(Exact name of registrant as specified in its charter)


Delaware		27-3865930
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Park Plaza Nashville, Tennessee		37203
(Address of principal executive offices)		(Zip Code)

(615) 344-9551

(Registrant’s telephone number, including area code)

Not Applicable

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

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of

Regulation S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in

Rule 12b-2

of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

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

Indicate by check mark whether the registrant is a shell company (as defined in

Rule 12b-2

of the Exchange Act). Yes ☐ No ☒

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


Class of Common Stock		Outstanding at July 26, 2021
Voting common stock, $.01 par value		320,141,900 shares

Table of Contents

HCA HEALTHCARE, INC.

Form 10-Q

June 30, 2021


		Page of Form 10-Q
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited):

	Condensed Consolidated Income Statements — for the quarters and six months ended June 30, 2021 and 2020		2

	Condensed Consolidated Comprehensive Income Statements — for the quarters and six months ended June 30, 2021 and 2020		3

	Condensed Consolidated Balance Sheets — June 30, 2021 and December 31, 2020		4

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) — for the quarters and six months ended June 30, 2021 and 2020		5

	Condensed Consolidated Statements of Cash Flows — for the six months ended June 30, 2021 and 2020		6

	Notes to Condensed Consolidated Financial Statements		7

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

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		38

Item 4.	Controls and Procedures		38

Part II.	Other Information

Item 1.	Legal Proceedings		38

Item 1A.	Risk Factors		38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		38

Item 6.	Exhibits		40

Signatures			41

Table of Contents

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Unaudited

(Dollars in millions, except per share amounts)


	Quarter						Six Months
	2021			2020			2021			2020
Revenues	$	14,435		$	11,068		$	28,412		$	23,929

Salaries and benefits		6,385			5,330			12,686			11,448
Supplies		2,380			1,748			4,604			3,871
Other operating expenses		2,473			2,147			4,894			4,574
Government stimulus income		—			(822	)		—			(822	)
Equity in earnings of affiliates		(22	)		(1	)		(43	)		(8	)
Depreciation and amortization		712			691			1,409			1,365
Interest expense		386			388			770			816
Losses (gains) on sales of facilities		(8	)		27			(10	)		20
Losses on retirement of debt		12			—			12			295

		12,318			9,508			24,322			21,559

Income before income taxes		2,117			1,560			4,090			2,370
Provision for income taxes		453			344			846			456

Net income		1,664			1,216			3,244			1,914
Net income attributable to noncontrolling interests		214			137			371			254

Net income attributable to HCA Healthcare, Inc.	$	1,450		$	1,079		$	2,873		$	1,660

Per share data:
Basic earnings	$	4.42		$	3.20		$	8.62		$	4.91
Diluted earnings	$	4.36		$	3.16		$	8.50		$	4.84
Shares used in earnings per share calculations (in millions):
Basic		328.171			337.760			333.119			338.001
Diluted		332.613			341.599			337.940			342.848

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

Table of Contents

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Unaudited

(Dollars in millions)


	Quarter						Six Months
	2021			2020			2021			2020
Net income	$	1,664		$	1,216		$	3,244		$	1,914
Other comprehensive income (loss) before taxes:
Foreign currency translation		3			(8	)		11			(81	)

Unrealized gains (losses) on available-for-sale securities		2			17			(9	)		12

Defined benefit plans		—			—			—			—
Pension costs included in salaries and benefits		7			4			14			8

		7			4			14			8

Change in fair value of derivative financial instruments		(1	)		(6	)		—			(66	)
Interest costs included in interest expense		9			7			18			6

		8			1			18			(60	)

Other comprehensive income (loss) before taxes		20			14			34			(121	)
Income taxes (benefits) related to other comprehensive income items		4			5			7			(19	)

Other comprehensive income (loss)		16			9			27			(102	)

Comprehensive income		1,680			1,225			3,271			1,812
Comprehensive income attributable to noncontrolling interests		214			137			371			254

Comprehensive income attributable to HCA Healthcare, Inc.	$	1,466		$	1,088		$	2,900		$	1,558

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

Table of Contents

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)


	June 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,120		$	1,793
Accounts receivable		7,636			7,051
Inventories		2,027			2,025
Other		1,692			1,464

		12,475			12,333

Property and equipment, at cost		50,698			49,317
Accumulated depreciation		(27,227	)		(26,118	)

		23,471			23,199

Investments of insurance subsidiaries		410			388
Investments in and advances to affiliates		382			422
Goodwill and other intangible assets		8,680			8,578
Right-of-use operating lease assets		2,118			2,024
Other		628			546

	$	48,164		$	47,490

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,531		$	3,535
Accrued salaries		1,896			1,720
Other accrued expenses		2,935			3,240
Long-term debt due within one year		253			209

		8,615			8,704

Long-term debt, less debt issuance costs and discounts of $255 and $236		32,319			30,795
Professional liability risks		1,585			1,486
Right-of-use operating lease obligations		1,767			1,673
Income taxes and other liabilities		2,088			1,940

Stockholders’ equity:
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 322,824,800 shares — 2021 and 339,425,600 shares — 2020		3			3
Capital in excess of par value		—			294
Accumulated other comprehensive loss		(475	)		(502	)
Retained (deficit) earnings		( 121	)		777

Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.		(593	)		572
Noncontrolling interests		2,383			2,320

		1,790			2,892

	$	48,164		$	47,490

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

Table of Contents

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE QUARTERS AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Unaudited

(Dollars in millions)


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

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

Table of Contents

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

Unaudited

(Dollars in millions)


	2021			2020
Cash flows from operating activities:
Net income	$	3,244		$	1,914
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable		(567	)		1,215
Inventories and other assets		(213	)		(57	)
Accounts payable and accrued expenses		49			(336	)
Contract liabilities-deferred revenues		—			4,999
Depreciation and amortization		1,409			1,365
Income taxes		2			472
Losses (gains) on sales of facilities		(10	)		20
Losses on retirement of debt		12			295
Amortization of debt issuance costs and discounts		14			14
Share-based compensation		226			148
Other		73			49

Net cash provided by operating activities		4,239			10,098

Cash flows from investing activities:
Purchase of property and equipment		(1,496	)		(1,598	)
Acquisition of hospitals and health care entities		(98	)		(346	)
Sales of hospitals and health care entities		30			39
Change in investments		(12	)		(11	)
Other		7			(37	)

Net cash used in investing activities		(1,569	)		(1,953	)

Cash flows from financing activities:
Issuances of long-term debt		4,337			2,700
Net change in revolving credit facilities		800			(2,480	)
Repayment of long-term debt		(3,731	)		(3,364	)
Distributions to noncontrolling interests		(357	)		(199	)
Payment of debt issuance costs		(32	)		(35	)
Payment of dividends		(325	)		(153	)
Repurchase of common stock		(3,814	)		(441	)
Other		(224	)		(144	)

Net cash used in financing activities		(3,346	)		(4,116	)

Effect of exchange rate changes on cash and cash equivalents		3			(12	)

Change in cash and cash equivalents		(673	)		4,017
Cash and cash equivalents at beginning of period		1,793			621

Cash and cash equivalents at end of period	$	1,120		$	4,638

Interest payments	$	755		$	854
Income tax payments (refunds), net	$	844		$	(16	)

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

Table of Contents

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

HCA Healthcare, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term “affiliates” includes direct and indirect subsidiaries of HCA Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At June 30, 2021, these affiliates owned and operated 187 hospitals, 122 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 $127 million and $76 million for the quarters ended June 30, 2021 and 2020, respectively, and $214 million and $172 million for the six months ended June 30, 2021 and 2020, respectively. Operating results for the quarter and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on

Form 10-K

for the year ended December 31, 2020.

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 in 2021 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. We believe the extent of the

COVID-19

pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Because of these uncertainties, we cannot estimate how long or to what extent the pandemic 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)

(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 six months ended June 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.

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% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and six months ended June 30, 2021 and 2020 are summarized in the following table (dollars in millions):


	Quarter
	2021		Ratio			2020		Ratio
Medicare	$	2,612		18.1	%	$	2,272		20.5	%
Managed Medicare		2,104		14.6			1,488		13.4
Medicaid		503		3.5			564		5.1
Managed Medicaid		831		5.8			531		4.8
Managed care and insurers		7,417		51.3			5,631		50.9
International (managed care and insurers)		338		2.3			239		2.2
Other		630		4.4			343		3.1

Revenues	$	14,435		100.0	%	$	11,068		100.0	%

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)


	Six Months
	2021		Ratio			2020		Ratio
Medicare	$	5,171		18.2	%	$	5,015		21.0	%
Managed Medicare		4,157		14.6			3,314		13.8
Medicaid		1,030		3.6			978		4.1
Managed Medicaid		1,556		5.5			1,197		5.0
Managed care and insurers		14,302		50.4			12,276		51.4
International (managed care and insurers)		671		2.4			531		2.2
Other		1,525		5.3			618		2.5

Revenues	$	28,412		100.0	%	$	23,929		100.0	%

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 and six months ended June 30, 2021 and 2020 follows (dollars in millions):


	Quarter						Six Months
	2021			2020			2021			2020
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	11,950		$	9,916		$	23,593		$	21,258
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		11.1	%		12.6	%		11.2	%		12.2	%
Total uncompensated care	$	7,696		$	6,729		$	14,517		$	14,602
Multiply by the cost-to-charges ratio		11.1	%		12.6	%		11.2	%		12.2	%

Estimated cost of total uncompensated care	$	848		$	844		$	1,626		$	1,781

The total uncompensated care amounts include charity care of $3.684 billion and $3.077 billion, respectively, and the related estimated costs of charity care were $407 million and $387 million, respectively, for the quarters ended June 30, 2021 and 2020. The total uncompensated care amounts include charity care of $6.626 billion and $6.812 billion, respectively, and the related estimated costs of charity care were $742 million and $831 million, respectively, for the six months ended June 30, 2021 and 2020.

Reclassifications

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

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the six months ended June 30, 2021, we paid $98 million to acquire a hospital in Georgia and nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. During the six months ended June 30, 2020, we paid $346 million to acquire a hospital in New Hampshire and nonhospital health care entities. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.

Table of Contents

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — ACQUISITIONS AND DISPOSITIONS (continued)

During the six months ended June 30, 2021, we received proceeds of $30 million and recognized a pretax gain of $10 million related to sales of real estate and other investments. During the six months ended June 30, 2020, we received proceeds of $39 million and recognized a pretax loss of $20 million related to the sale of a hospital facility in Mississippi and sales of real estate and other investments.

NOTE 3 — INCOME TAXES

Our provisions for income taxes for the quarters ended June 30, 2021 and 2020 were $453 million and $344 million, respectively, and the effective tax rates were 23.8% and 24.2%, respectively. Our provisions for income taxes for the six months ended June 30, 2021 and 2020 were $846 million and $456 million, respectively, and the effective tax rates were 22.7% and 21.6%, respectively. Our provisions for income taxes included tax benefits related to settlements of employee equity awards of $85 million and $54 million for the six months ended June 30, 2021 and 2020, respectively.

Our liability for unrecognized tax benefits was $606 million, including accrued interest of $92 million, as of June 30, 2021 ($508 million and $73 million, respectively, as of December 31, 2020). Unrecognized tax benefits of $187 million ($157 million as of December 31, 2020) would affect the effective rate, if recognized.

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at June 30, 2021. We are also subject to examination by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.

NOTE 4 — EARNINGS PER SHARE

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

The following table sets forth the computation of basic and diluted earnings per share for the quarters and six months ended June 30, 2021 and 2020 (dollars and shares in millions, except per share amounts):


	Quarter				Six Months
	2021		2020		2021		2020
Net income attributable to HCA Healthcare, Inc.	$	1,450	$	1,079	$	2,873	$	1,660

Weighted average common shares outstanding		328.171		337.760		333.119		338.001
Effect of dilutive incremental shares		4.442		3.839		4.821		4.847

Shares used for diluted earnings per share		332.613		341.599		337.940		342.848

Earnings per share:
Basic earnings	$	4.42	$	3.20	$	8.62	$	4.91
Diluted earnings	$	4.36	$	3.16	$	8.50	$	4.84

Table of Contents

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

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


	June 30, 2021
	Amortized Cost		Unrealized Amounts					Fair Value
	Amortized Cost		Gains		Losses			Fair Value
Debt securities	$	377	$	24	$	(1	)	$	400
Money market funds and other		125		—		—			125

	$	502	$	24	$	(1	)		525

Amounts classified as current assets									(115	)

Investment carrying value								$	410


	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

At June 30, 2021 and December 31, 2020, the investments in debt securities of our insurance subsidiaries were classified as

“available-for-sale.”

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

Scheduled maturities of investments in debt securities at June 30, 2021 were as follows (dollars in millions):


	Amortized Cost		Fair Value
Due in one year or less	$	—	$	—
Due after one year through five years		98		104
Due after five years through ten years		194		208
Due after ten years		85		88

	$	377	$	400

The average expected maturity of the investments in debt securities at June 30, 2021 was 5.0 years, compared to the average scheduled maturity of 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.

Table of Contents

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 — FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between 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, which have been designated as cash flow hedges, at June 30, 2021 (dollars in millions):


	Notional Amount		Maturity Date		Fair Value
Pay-fixed interest rate swaps	$	2,000		December 2021	$	(14	)
Pay-fixed interest rate swaps		500		December 2022		(14	)

During the next 12 months, we estimate $23 million will be reclassified from other comprehensive income (“OCI”) and will be included in interest expense.

Derivatives — Results of Operations

The following table presents the effect of our interest rate swaps on our results of operations for the six months ended June 30, 2021 (dollars in millions):


Derivatives in Cash Flow Hedging Relationships	Amount 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	$	—		Interest expense	$	18

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 June 30, 2021, we have not been required to post any collateral related to these agreements. If we had breached these provisions at June 30, 2021, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $28 million.

NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 820,

Fair Value Measurements and Disclosures

(“ASC 820”), emphasizes fair value is a market-based measurement, and fair value measurements should be determined based on the assumptions market participants would use in pricing assets or liabilities. ASC 820 utilizes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources

Table of Contents

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

Cash Traded Investments

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

Derivative Financial Instruments

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

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 June 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):


	June 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	$	400		$	—		$	400		$	—
Money market funds and other		125			125			—			—

Investments of insurance subsidiaries		525			125			400			—
Less amounts classified as current assets		(115	)		(73	)		(42	)		—

	$	410		$	52		$	358		$	—

Liabilities:
Interest rate swaps (Income taxes and other liabilities)	$	28		$	—		$	28		$	—


	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 $37.022 billion and $35.814 billion at June 30, 2021 and December 31, 2020, respectively, compared to carrying amounts, excluding debt issuance costs and discounts, aggregating $32.827 billion and $31.240 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.

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 June 30, 2021 and December 31, 2020, including related interest rates at June 30, 2021, follows (dollars in millions):


	June 30, 2021			December 31, 2020
Senior secured asset-based revolving credit facility (effective interest rate of 2.2%)	$	800		$	—
Senior secured revolving credit facility		—			—
Senior secured term loan facilities (effective interest rate of 3.1%)		2,000			3,671
Senior secured notes (effective interest rate of 4.8%)		16,200			13,850
Other senior secured debt (effective interest rate of 4.3%)		875			767

Senior secured debt		19,875			18,288
Senior unsecured notes (effective interest rate of 5.5%)		12,952			12,952
Debt issuance costs and discounts		(255	)		(236	)

Total debt (average life of 9.7 years, rates averaging 4.9%)		32,572			31,004
Less amounts due within one year		253			209

	$	32,319		$	30,795

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 existing

$1.071

billion term loan A-6 facility, the existing

$1.455

billion term loan B-12 facility and the existing

$1.131

billion term loan B-13 facility. The pretax loss on retirement of debt was

$12 million

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 under Section 1115 of the Social Security Act (“Program”). The Program includes uncompensated-care pools; payments from these pools are intended to defray the uncompensated costs of services provided by our and other hospitals to Medicaid eligible or uninsured individuals. Separately, we and other hospitals provide charity care services in several communities in the state. In 2018, the Civil Division of the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas requested information about whether the Program, as operated in Harris County, complied with the laws and regulations applicable to provider related donations, and the Company cooperated with that request. On May 21, 2019, a

qui tam

lawsuit asserting violations of the FCA and the Texas Medicaid Fraud Prevention Act related to the Program, as operated in Harris County, was unsealed by the U.S. District Court for the Southern District of Texas. Both the federal and state governments declined to intervene in the

qui tam

lawsuit. The Company believes that our participation is and has been consistent with the requirements of the Program and is vigorously defending against the lawsuit being pursued by the relator. We cannot predict what effect, if any, the

qui tam

lawsuit could have on the Company.

NOTE 10 — SHARE REPURCHASE TRANSACTIONS AND OTHER COMPREHENSIVE LOSS

During January 2020 and 2019, our Board of Directors authorized share repurchase programs for up to $4 billion ($2 billion for each authorization) of our outstanding common stock. During February 2021, our Board of Directors authorized an additional $6 billion for repurchases of our outstanding common stock. During the six months ended June 30, 2021, we repurchased 19.738 million shares of our common stock at an average price of $193.21 per share through market purchases pursuant to the January 2019 authorization (which was completed during the first quarter of 2021), the January 2020 authorization (which was completed during the second quarter of 2021) and the February 2021 authorization. At June 30, 2021, we had $4.987 billion of repurchase authorization available under the February 2021 authorization.

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


	Unrealized Gains on Available- for-Sale Securities			Foreign Currency Translation Adjustments			Defined Benefit Plans			Change in Fair Value of Derivative Instruments			Total
Balances at December 31, 2020	$	25		$	(271	)	$	(220	)	$	(36	)	$	(502	)
Unrealized losses on available-for-sale securities, net of $2 income tax benefit		(7	)											(7	)
Foreign currency translation adjustments, net of $2 of income taxes					9									9
Expense reclassified into operations from other comprehensive income, net of $3 and $4 income tax benefits, respectively								11			14			25

Balances at June 30, 2021	$	18		$	(262	)	$	(209	)	$	(22	)	$	(475	)

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 two geographically organized groups: the National and American Groups. The National Group includes 98 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 82 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 seven hospitals in England, and these facilities are included in the Corporate and other group.

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses and gain

on sales of facilities, losses on retirement of debt, income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA and depreciation and amortization for the quarters and six months ended June 30, 2021 and 2020 are summarized in the following table (dollars in millions):


	Quarter						Six Months
	2021			2020			2021			2020
Revenues:
National Group	$	7,300		$	5,546		$	14,356		$	12,020
American Group		6,504			5,103			12,795			10,847
Corporate and other		631			419			1,261			1,062

	$	14,435		$	11,068		$	28,412		$	23,929

Equity in earnings of affiliates:
National Group	$	(9	)	$	(4	)	$	(16	)	$	(3	)
American Group		(12	)		(2	)		(24	)		(11	)
Corporate and other		(1	)		5			(3	)		6

	$	(22	)	$	(1	)	$	(43	)	$	(8	)

Adjusted segment EBITDA:
National Group	$	1,845		$	1,485		$	3,550		$	2,700
American Group		1,593			1,408			3,094			2,523
Corporate and other		(219	)		(227	)		(373	)		(357	)

	$	3,219		$	2,666		$	6,271		$	4,866

Depreciation and amortization:
National Group	$	339		$	312		$	662		$	618
American Group		296			295			589			582
Corporate and other		77			84			158			165

	$	712		$	691		$	1,409		$	1,365

Adjusted segment EBITDA	$	3,219		$	2,666		$	6,271		$	4,866
Depreciation and amortization		712			691			1,409			1,365
Interest expense		386			388			770			816
Losses (gains) on sales of facilities		(8	)		27			(10	)		20
Losses on retirement of debt		12			—			12			295

Income before income taxes	$	2,117		$	1,560		$	4,090		$	2,370

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report on

Form 10-Q

includes certain disclosures which contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected share-based compensation expense, expected capital expenditures and expected net claim payments and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) developments related to

COVID-19,

including, without limitation, the length and severity of the pandemic and the spread of virus strains with new epidemiological characteristics; the volume of canceled or rescheduled procedures and the volume of

COVID-19

patients cared for across our health systems; measures we are taking to respond to the

COVID-19

pandemic; the impact and terms of government and administrative regulation and stimulus (including the Families First Coronavirus Response Act, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021 and other enacted and potential future legislation); changes in revenues due to declining patient volumes, changes in payer mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions; and the timing, availability and adoption of effective medical treatments and vaccines, (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the

COVID-19

pandemic which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of 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 and possible changes to other federal, state or local laws or regulations affecting the health care industry, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the

COVID-19

pandemic, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and those required under the

Pay-As-You-Go

Act of 2010 (“PAYGO Act”) as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs or Medicaid waiver programs, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (8) the highly competitive nature of the health care business, (9) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Forward-Looking Statements (continued)

technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including economic and business conditions (and the impact thereof on the economy, financial markets and banking industry) resulting from the

COVID-19

pandemic, (16) the emergence of and effects related to other pandemics, epidemics and infectious diseases, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of potential cybersecurity incidents or security breaches, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record (“EHR”) technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (25) changes in the U.S. federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, and (26) other risk factors described in our annual report on

Form 10-K

for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

COVID-19

Pandemic

On March 11, 2020, the World Health Organization designated

COVID-19

Second Quarter 2021 Operations Summary

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Quarter 2021 Operations Summary (continued)

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). In the third quarter of 2020, we reversed the $822 million of government stimulus income that we recognized during the second quarter of 2020. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 332.613 million shares for the quarter ended June 30, 2021 and 341.599 million shares for the quarter ended June 30, 2020. During 2020 and the first six months of 2021, we repurchased 3.287 million shares and 19.738 million shares, respectively, of our common stock.

Revenues increased 30.4% on a consolidated basis and 30.1% on a same facility basis for the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020. The increase in consolidated revenues can be primarily attributed to the combined impact of a 2.9% increase in revenue per equivalent admission and a 26.7% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 2.6% increase in same facility revenue per equivalent admission and a 26.8% increase in same facility equivalent admissions.

During the quarter ended June 30, 2021, consolidated admissions and same facility admissions both increased 17.5% compared to the quarter ended June 30, 2020. Surgeries increased 37.7% on a consolidated basis and 37.1% on a same facility basis during the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020. Emergency department visits increased 40.4% and 40.5% on a consolidated basis and on a same facility basis, respectively, during the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020. Consolidated and same facility uninsured admissions both increased 6.6% for the quarter ended June 30, 2021, compared to the quarter ended June 30, 2020. 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.

Cash flows from operating activities declined $6.472 billion, from $8.723 billion for the second quarter of 2020 to $2.251 billion for the second quarter of 2021. The $8.723 billion of cash flows from operating activities in the second quarter of 2020 included the $822 million of government stimulus income and $4.999 billion of contract liabilities-deferred revenues (primarily related to the Medicare accelerated payments), which were reversed during the third and fourth quarters of 2020, respectively. The decline in cash provided by operating activities also included the net impact of negative changes in working capital items of $1.242 billion, primarily related to an increase in accounts receivable, and income taxes of $579 million, offset by an increase in net income, excluding the government stimulus income, of $1.094 billion.

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

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)

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.

Revenues increased 30.4% from $11.068 billion in the second quarter of 2020 to $14.435 billion in the second quarter of 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


	Quarter
	2021		Ratio			2020		Ratio
Medicare	$	2,612		18.1	%	$	2,272		20.5	%
Managed Medicare		2,104		14.6			1,488		13.4
Medicaid		503		3.5			564		5.1
Managed Medicaid		831		5.8			531		4.8
Managed care and insurers		7,417		51.3			5,631		50.9
International (managed care and insurers)		338		2.3			239		2.2
Other		630		4.4			343		3.1

Revenues	$	14,435		100.0	%	$	11,068		100.0	%


	Six Months
	2021		Ratio			2020		Ratio
Medicare	$	5,171		18.2	%	$	5,015		21.0	%
Managed Medicare		4,157		14.6			3,314		13.8
Medicaid		1,030		3.6			978		4.1
Managed Medicaid		1,556		5.5			1,197		5.0
Managed care and insurers		14,302		50.4			12,276		51.4
International (managed care and insurers)		671		2.4			531		2.2
Other		1,525		5.3			618		2.5

Revenues	$	28,412		100.0	%	$	23,929		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)

Consolidated and same facility revenue per equivalent admission increased 2.9% and 2.6%, respectively, in the second quarter of 2021, compared to the second quarter of 2020. Consolidated and same facility equivalent admissions increased 26.7% and 26.8%, respectively, in the second quarter of 2021, compared to the second quarter of 2020. Consolidated and same facility outpatient surgeries increased 53.4% and 52.5%, respectively, in the second quarter of 2021, compared to the second quarter of 2020. Consolidated and same facility inpatient surgeries increased 15.1% and 15.0%, respectively, in the second quarter of 2021, compared to the second quarter of 2020. Consolidated and same facility emergency department visits increased 40.4% and 40.5%, respectively, in the second quarter of 2021, compared to the second quarter of 2020. During the second quarter of 2021, our patient volumes experienced a strong recovery as the effects of the pandemic moderated and certain pandemic-related restrictions and policies were eased.


	Quarter						Six Months
	2021			2020			2021			2020
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	11,950		$	9,916		$	23,593		$	21,258
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		11.1	%		12.6	%		11.2	%		12.2	%
Total uncompensated care	$	7,696		$	6,729		$	14,517		$	14,602
Multiply by the cost-to-charges ratio		11.1	%		12.6	%		11.2	%		12.2	%

Estimated cost of total uncompensated care	$	848		$	844		$	1,626		$	1,781

Same facility uninsured admissions increased by 2,596 admissions, or 6.6%, in the second quarter of 2021 compared to the second quarter of 2020. Same facility uninsured admissions 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 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, were primarily due to the reimbursement 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, as well as general declines in patient volumes resulting from the pandemic’s impact on our operations.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and six months ended June 30, 2021 and 2020 are set forth in the following table.


	Quarter						Six Months
	2021			2020			2021			2020
Medicare		23	%		25	%		23	%		26	%
Managed Medicare		21			19			22			20
Medicaid		5			6			5			6
Managed Medicaid		13			12			13			12
Managed care and insurers		30			29			30			28
Uninsured		8			9			7			8

		100	%		100	%		100	%		100	%

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and six months ended June 30, 2021 and 2020 are set forth in the following table.


	Quarter						Six Months
	2021			2020			2021			2020
Medicare		24	%		26	%		24	%		28	%
Managed Medicare		17			15			17			15
Medicaid		5			7			5			6
Managed Medicaid		7			6			6			6
Managed care and insurers		47			46			48			45

		100	%		100	%		100	%		100	%

At June 30, 2021, we had 92 hospitals in the states of Texas and Florida. During the quarter ended June 30, 2021, 56% of our admissions and 49% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 72% of our uninsured admissions during the quarter ended June 30, 2021.

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. In December 2017, the Centers for Medicare & Medicaid Services (“CMS”) announced that it will phase out federal matching funds for Designated State Health Programs under waivers granted under Section 1115 of the Social Security Act. Texas currently operates its Healthcare Transformation and Quality Improvement Program pursuant to a Medicaid waiver. In December 2017, CMS approved an extension of this waiver through September 30, 2022, but indicated that it will phase out some of the federal funding. Our Texas Medicaid revenues included Medicaid supplemental payments of $148 million and $186 million during the second quarters of 2021 and 2020, respectively, and $286 million and $301 million during the first six months of 2021 and 2020, respectively.

In addition, we receive supplemental payments in several other states. We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made requests to CMS to replace their existing supplemental payment programs. It is possible these reviews and requests will

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.

Operating Results Summary

The following is a comparative summary of results of operations for the quarters and six months ended June 30, 2021 and 2020 (dollars in millions):


	Quarter
	2021						2020
	Amount			Ratio			Amount			Ratio
Revenues	$	14,435			100.0		$	11,068			100.0

Salaries and benefits		6,385			44.2			5,330			48.2
Supplies		2,380			16.5			1,748			15.8
Other operating expenses		2,473			17.2			2,147			19.3
Government stimulus income		—			—			(822	)		(7.4	)
Equity in earnings of affiliates		(22	)		(0.2	)		(1	)		—
Depreciation and amortization		712			4.9			691			6.3
Interest expense		386			2.7			388			3.5
Losses (gains) on sales of facilities		(8	)		(0.1	)		27			0.2
Losses on retirement of debt		12			0.1			—			—

		12,318			85.3			9,508			85.9

Income before income taxes		2,117			14.7			1,560			14.1
Provision for income taxes		453			3.2			344			3.1

Net income		1,664			11.5			1,216			11.0
Net income attributable to noncontrolling interests		214			1.5			137			1.2

Net income attributable to HCA Healthcare, Inc.	$	1,450			10.0		$	1,079			9.8

% changes from prior year:
Revenues		30.4	%					(12.2	)%
Income before income taxes		35.7						30.3
Net income attributable to HCA Healthcare, Inc.		34.3						37.9
Admissions(a)		17.5						(12.6	)
Equivalent admissions(b)		26.7						(20.0	)
Revenue per equivalent admission		2.9						9.7
Same facility % changes from prior year(c):
Revenues		30.1						(12.1	)
Admissions(a)		17.5						(12.8	)
Equivalent admissions(b)		26.8						(20.1	)
Revenue per equivalent admission		2.6						10.0

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary (continued)


	Six Months
	2021						2020
	Amount			Ratio			Amount			Ratio
Revenues	$	28,412			100.0		$	23,929			100.0

Salaries and benefits		12,686			44.6			11,448			47.8
Supplies		4,604			16.2			3,871			16.2
Other operating expenses		4,894			17.3			4,574			19.1
Government stimulus income		—			—			(822	)		(3.4	)
Equity in earnings of affiliates		(43	)		(0.2	)		(8	)		—
Depreciation and amortization		1,409			5.0			1,365			5.7
Interest expense		770			2.7			816			3.4
Losses (gains) on sales of facilities		(10	)		—			20			0.1
Losses on retirement of debt		12			—			295			1.2

		24,322			85.6			21,559			90.1

Income before income taxes		4,090			14.4			2,370			9.9
Provision for income taxes		846			3.0			456			1.9

Net income		3,244			11.4			1,914			8.0
Net income attributable to noncontrolling interests		371			1.3			254			1.1

Net income attributable to HCA Healthcare, Inc.	$	2,873			10.1		$	1,660			6.9

% changes from prior year:
Revenues		18.7	%					(4.7	)%
Income before income taxes		72.5						(10.8	)
Net income attributable to HCA Healthcare, Inc.		73.0						(8.9	)
Admissions(a)		5.8						(5.8	)
Equivalent admissions(b)		8.5						(10.1	)
Revenue per equivalent admission		9.5						6.0
Same facility % changes from prior year(c):
Revenues		18.8						(5.5	)
Admissions(a)		5.8						(6.0	)
Equivalent admissions(b)		8.5						(10.2	)
Revenue per equivalent admission		9.5						5.3

(a)	Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume.

(b)

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume.

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

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended June 30, 2021 and 2020

Revenues increased to $14.435 billion in the second quarter of 2021 from $11.068 billion in the second quarter of 2020. Net income attributable to HCA Healthcare, Inc. totaled $1.450 billion, or $4.36 per diluted share, for the quarter ended June 30, 2021, compared to $1.079 billion, or $3.16 per diluted share, for the quarter ended June 30, 2020. Revenues for the second quarter of 2021 include $33 million, or $0.07 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Second quarter results for 2021 and 2020 include gains on sales of facilities of $8 million, or $0.02 per diluted share, and losses on sales of facilities of $27 million, or $0.07 per diluted share, respectively. Second quarter results for 2021 include losses on retirement of debt of $12 million, or $0.03 per diluted share. Second quarter results for 2020 also include $822 million ($590 million net of tax), or $1.73 per diluted share, of government stimulus income related to general distribution PRFs and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, both as provided for by 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). In the third quarter of 2020, we reversed the $822 million of government stimulus income that we recognized during the second quarter of 2020. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 332.613 million shares for the quarter ended June 30, 2021 and 341.599 million shares for the quarter ended June 30, 2020. During 2020 and the first six months of 2021, we repurchased 3.287 million shares and 19.738 million shares, respectively, of our common stock.

Salaries and benefits, as a percentage of revenues, were 44.2% in the second quarter of 2021 and 48.2% in the second quarter of 2020. Salaries and benefits per equivalent admission declined 5.5% in the second quarter of 2021 compared to the second quarter of 2020. Same facility labor rate increases averaged 7.8% for the second quarter of 2021 compared to the second quarter of 2020 primarily due to certain cost reduction initiatives that impacted the second quarter of 2020.

Supplies, as a percentage of revenues, were 16.5% in the second quarter of 2021 and 15.8% in the second quarter of 2020. Supply costs per equivalent admission increased 7.4% in the second quarter of 2021 compared to the second quarter of 2020 primarily due to the rebound in our surgical procedures in the second quarter of 2021 compared to the second quarter of 2020. Supply costs per equivalent admission increased 9.9% for medical devices and 10.1% for general medical and surgical items and declined 1.4% for pharmacy supplies in the second quarter of 2021 compared to the second quarter of 2020.

Other operating expenses, as a percentage of revenues, were 17.2% in the second quarter of 2021 and 19.3% in the second quarter 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 $135 million and $139 million for the second quarters of 2021 and 2020, respectively.

During the second quarter of 2020, we recorded $822 million ($590 million net of tax) of government stimulus income 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 June 30, 2021 and 2020 (continued)

Equity in earnings of affiliates was $22 million and $1 million in the second quarters of 2021 and 2020, respectively.

Depreciation and amortization increased $21 million, from $691 million in the second quarter of 2020 to $712 million in the second quarter of 2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $386 million in the second quarter of 2021 and $388 million in the second quarter of 2020. Our average debt balance was $31.892 billion for the second quarter of 2021 compared to $31.921 billion for the second quarter of 2020. The average effective interest rate for our long-term debt was 4.9% for both of the quarters ended June 30, 2021 and 2020.

During the second quarters of 2021 and 2020, we recorded gains on sales of facilities of $8 million and losses on sales of facilities of $27 million, respectively.

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 existing $1.071 billion term loan A-6 facility, the existing $1.455 billion term loan B-12 facility and the existing $1.131 billion term loan B-13 facility. The pretax loss on retirement of debt was $12 million.

The effective tax rates were 23.8% and 24.2% for the second 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 $137 million for the second quarter of 2020 to $214 million for the second quarter of 2021. The increase in net income attributable to noncontrolling interests related primarily to the operations of two of our Texas markets and our surgery center partnerships. The

COVID-19

pandemic negatively impacted second quarter 2020 operations, and surgery center operations were some of the most negatively impacted.

Six Months Ended June 30, 2021 and 2020

Revenues increased to $28.412 billion in the first six months of 2021 from $23.929 billion in the first six months of 2020. Net income attributable to HCA Healthcare, Inc. totaled $2.873 billion, or $8.50 per diluted share, for the first six months ended June 30, 2021, compared to $1.660 billion, or $4.84 per diluted share, for the first six months ended June 30, 2020. Results for the first six months of 2021 included gains on sales of facilities of $10 million, or $0.02 per diluted share, and losses on retirement of debt of $12 million, or $0.03 per diluted share. Results for the first six months of 2020 also included losses on retirement of debt of $295 million, or $0.66 per diluted share, and losses on sales of facilities of $20 million, or $0.06 per diluted share. Revenues for the first six months of 2021 and 2020, respectively, include $33 million, or $0.07 per diluted share, and $55 million, or

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2021 and 2020 (continued)

$0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Results for the first six months of 2020 included $822 million ($590 million net of tax), or $1.72 per diluted share, of government stimulus income related to general distribution PRFs and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, both as provided for by 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). In the third quarter of 2020, we reversed the $822 million of government stimulus income that we recognized during the second quarter of 2020. Our provision for income taxes for the first six months of 2021 and 2020 included tax benefits of $85 million, or $0.25 per diluted share, and $54 million, or $0.16 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 337.940 million shares for the six months ended June 30, 2021 and 342.848 million shares for the six months ended June 30, 2020. During 2020 and the first six months of 2021, we repurchased 3.287 million shares and 19.738 million shares, respectively, of our common stock.

Revenues increased 18.7% on a consolidated basis and 18.8% on a same facility basis for the six months ended June 30, 2021, compared to the six months ended June 30, 2020. The increase in both consolidated and same facility revenues can be primarily attributed to the combined impact of 9.5% increases in revenue per equivalent admission and 8.5% increases in equivalent admissions.

Salaries and benefits, as a percentage of revenues, were 44.6% in the first six months of 2021 and 47.8% in the first six months of 2020. Salaries and benefits per equivalent admission increased 2.2% in the first six months of 2021 compared to the first six months of 2020. Same facility labor rate increases averaged 6.9% for the first six months of 2021 compared to the first six months of 2020.

Supplies, as a percentage of revenues, were 16.2% in both the first six months of 2021 and 2020. Supply costs per equivalent admission increased 9.7% in the first six months of 2021 compared to the first six months of 2020. Supply costs per equivalent admission increased 8.3% for medical devices, 9.5% for pharmacy supplies and 11.2% for general medical and surgical items in the first six months of 2021 compared to the first six months of 2020.

Other operating expenses, as a percentage of revenues, were 17.3% in the first six months of 2021 and 19.1% in the first six 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 $269 million and $279 million for the first six months of 2021 and 2020, respectively.

During the first six months of 2020, we recorded $822 million ($590 million net of tax) of government stimulus income related to general distribution funds received from the PRFs established by the CARES Act.

Equity in earnings of affiliates was $43 million and $8 million in the first six months of 2021 and 2020, respectively.

Depreciation and amortization increased $44 million, from $1.365 billion in the first six months of 2020 to $1.409 billion in the first six months of 2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2021 and 2020 (continued)

Interest expense was $770 million in the first six months of 2021 and $816 million in the first six months of 2020. Our average debt balance was $31.510 billion for the first six months of 2021 compared to $32.766 billion for the first six months of 2020. The average effective interest rate for our long-term debt declined to 4.9% for the six months ended June 30, 2021 from 5.0% for the six months ended June 30, 2020.

During the first six months of 2021 and 2020, we recorded net gains of $10 million and net losses on sales of facilities of $20 million, respectively.

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 existing $1.071 billion term

loan A-6

facility, the existing $1.455 billion term

loan B-12

facility and the existing $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 22.7% and 21.6% for the first six months of 2021 and 2020, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the first six months of 2021 and 2020 included tax benefits of $85 million and $54 million, respectively, related to employee equity award settlements. Excluding the effect of these adjustments, the effective tax rate for the first six months of 2021 and 2020 would have been 25.0% and 24.1%, respectively.

Net income attributable to noncontrolling interests increased from $254 million for the first six months of 2020 to $371 million for the first six months of 2021. The increase in net income attributable to noncontrolling interests related primarily to the operations of two of our Texas markets and our surgery center partnerships.

Liquidity and Capital Resources

Cash provided by operating activities declined $5.859 billion, from $10.098 billion for the first six months of 2020 to $4.239 billion for the first six months of 2021. The $10.098 billion of cash flows from operating activities in the first six months of 2020 included the $822 million of government stimulus income and $4.999 billion of contract liabilities-deferred revenues (primarily related to the Medicare accelerated payments), which were reversed during the third and fourth quarters of 2020, respectively. The decline in cash provided by operating activities also included the net impact of negative changes in working capital items of $1.553 billion, primarily related to an increase in accounts receivable, and income taxes of $363 million, offset by an increase in net income, excluding the government stimulus income, losses and gains on sales of facilities and losses on retirement of debt, of $1.732 billion. The combination of interest payments and net income tax payments in the

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

first six months of 2021 totaled $1.599 billion, compared to the net combination of interest payments and net income tax refunds in the first six months of 2020 of $838 million. Working capital totaled $3.860 billion at June 30, 2021 and $3.629 billion at December 31, 2020.

Cash used in investing activities was $1.569 billion in the first six months of 2021 compared to $1.953 billion in the first six months of 2020. Acquisitions of hospitals and health care entities declined from $346 million in the first six months of 2020 to $98 million in the first six months of 2021. Excluding acquisitions, capital expenditures were $1.496 billion in the first six months of 2021 and $1.598 billion in the first six months of 2020. Planned capital expenditures are expected to approximate $3.7 billion in 2021. At June 30, 2021, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.6 billion. We expect to finance capital expenditures with internally generated and borrowed funds.

Cash used in financing activities totaled $3.346 billion in the first six months of 2021 compared to $4.116 billion in the first six months of 2020. During the first six months of 2021, net cash flows used in financing activities included a net increase of $1.406 billion in our indebtedness, payment of dividends of $325 million, repurchase of common stock of $3.814 billion and distributions to noncontrolling interests of $357 million. During the first six months of 2020, net cash flows used in financing activities included a net decline of $3.144 billion in our indebtedness, payment of dividends of $153 million, repurchase of common stock of $441 million and distributions to noncontrolling interests of $199 million.

We are a highly leveraged company with significant debt service requirements. Our debt totaled $32.572 billion at June 30, 2021. Our interest expense was $770 million for the first six months of 2021 and $816 million for the first six months of 2020.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($5.620 billion and $5.550 billion available as of June 30, 2021 and July 31, 2021, 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 $525 million and $504 million at June 30, 2021 and December 31, 2020, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $154 million and $188 million at June 30, 2021 and December 31, 2020, respectively. Our facilities are insured by a 100% owned 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 $1.850 billion and $1.736 billion at June 30, 2021 and December 31, 2020, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $471 million. We estimate that approximately $431 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

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 existing $1.071 billion term loan A-6 facility, the existing $1.455 billion term loan B-12 facility and the existing $1.131 billion term loan B-13 facility.

Management believes that cash flows from operations, amounts available under our senior secured credit facilities and our anticipated access to public and private debt markets will be sufficient to meet expected liquidity needs during the next 12 months.

Summarized Financial Information

HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the primary obligor under a substantial portion of our indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes. The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed 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 our annual report on Form

10-K

for the year ended December 31, 2020.

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)

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

Six Months Ended June 30, 2021 and Year Ended December 31, 2020:


	Six Months June 30, 2021			Year December 31, 2020
Revenues	$	16,984		$	31,040
Income before income taxes		2,984			4,016
Net income		2,318			3,172
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		2,274			3,091

At June 30, 2021 and December 31, 2020:

	June 30, 2021			December 31, 2020
Current assets	$	7,248		$	7,442
Property and equipment, net		15,105			14,939
Goodwill and other intangible assets		5,760			5,763
Total noncurrent assets		22,007			21,771
Total assets		29,255			29,213
Current liabilities		5,065			5,316
Long-term debt, net		31,897			30,444
Intercompany balances		2,419			2,090
Income taxes and other liabilities		1,240			1,004
Total noncurrent liabilities		36,088			34,035
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors		(12,013	)		(10,247	)
Noncontrolling interests		115			109

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

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)

facilities and the senior secured notes, the collateral agent in respect of the cash flow credit facility and the senior secured notes could proceed against the collateral granted to it to secure such indebtedness, including the aforementioned pledged capital stock and pledged indebtedness, and require such collateral to be delivered to the collateral agent to the extent not already in its possession for purposes of perfecting the lien on such assets. For further information regarding the collateral, including events or circumstances that may require delivery of the collateral, refer to the applicable indentures, the first lien intercreditor agreement, the cash flow credit agreement and the pledge agreement that are filed as exhibits to our annual report on Form

10-K

for the year ended December 31, 2020.

There is no trading market for any of HCA Healthcare, Inc.’s affiliates whose securities are pledged as collateral for the senior secured notes.

Rule

13-02

of Regulation

S-X

requires the presentation of summarized financial information of the combined affiliates whose securities are pledged as collateral for the senior secured notes unless such information is not material. The rule provides that such information is not material if the assets, liabilities and results of operations of the combined affiliates whose securities are pledged as collateral are not materially different than the corresponding amounts presented in the consolidated financial statements of the Registrant. Healthtrust, Inc. — The Hospital Company (“Healthtrust”) is the first-tier subsidiary of HCA Inc., and the common stock of Healthtrust is pledged as collateral for the senior secured notes. Due to the corporate structure relationship of HCA Healthcare, Inc. and Healthtrust, all of HCA Healthcare, Inc.’s operating subsidiaries, including all other affiliates whose securities are pledged as collateral for the senior secured notes, are also subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrust’s consolidated financial statements related to HCA Healthcare Inc.’s debt and financial instruments, mean that the assets, liabilities and results of operations of Healthtrust (and, therefore, of the combined affiliates whose securities are pledged as collateral for the senior secured notes) are not materially different than the corresponding amounts presented in the financial statements of HCA Healthcare, Inc. As a result, summarized financial information of affiliates whose securities are pledged as collateral for the senior secured notes is not required to be presented under Rule

13-02.

Market Risk

We are exposed to market risk related to changes in market values of securities. The investment securities held by our insurance subsidiaries were recorded at $525 million at June 30, 2021. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At June 30, 2021, we had a net unrealized gain of $23 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.

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)

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

With respect to our interest-bearing liabilities, approximately $300 million of long-term debt at June 30, 2021 was subject to variable rates of interest, while the remaining balance in long-term debt of $32.272 billion at June 30, 2021 was subject to fixed rates of interest. Both the general level of interest rates and, for the senior secured credit facilities, our leverage affect our variable interest rates. Our variable debt is comprised primarily of amounts outstanding under the senior secured credit facilities. Borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% or (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period. The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio. The average effective interest rate for our long-term debt was 4.9% and 5.0% for the six months ended June 30, 2021 and 2020, respectively.

The estimated fair value of our total long-term debt was $37.022 billion at June 30, 2021. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in variable interest rates, the potential annualized reduction to future pretax earnings would be approximately $3 million. To mitigate the impact of fluctuations in interest rates, we generally target a portion of our debt portfolio to be maintained at fixed rates.

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

Tax Examinations

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at June 30, 2021. We are also subject to examination by state and foreign taxing authorities. Management believes HCA Healthcare, Inc. and its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with IRS, 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.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data


	2021		2020
Number of hospitals in operation at:
March 31		186		186
June 30		187		186
September 30				187
December 31				185
Number of freestanding outpatient surgical centers in operation at:
March 31		121		123
June 30		122		122
September 30				121
December 31				121
Licensed hospital beds at(a):
March 31		49,561		49,357
June 30		49,693		49,403
September 30				49,473
December 31				49,265
Weighted average beds in service(b):
Quarter:
First		42,363		42,177
Second		42,464		42,309
Third				42,426
Fourth				42,072
Year				42,246
Average daily census(c):
Quarter:
First		29,678		28,822
Second		28,901		24,844
Third				28,186
Fourth				29,065
Year				27,734
Admissions(d):
Quarter:
First		506,380		528,244
Second		532,041		452,992
Third				506,756
Fourth				521,917
Year				2,009,909
Equivalent admissions(e):
Quarter:
First		832,489		889,035
Second		916,212		723,136
Third				835,576
Fourth				864,583
Year				3,312,330

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)


	2021			2020
Average length of stay (days)(f):
Quarter:
First		5.3			5.0
Second		4.9			5.0
Third					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					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					232,493
Fourth					252,760
Year					882,483
Inpatient surgeries(i):
Quarter:
First		127,590			135,145
Second		136,460			118,591
Third					133,492
Fourth					135,157
Year					522,385
Days revenues in accounts receivable(j):
Quarter:
First		48			49
Second		48			50
Third					44
Fourth					45
Outpatient revenues as a % of patient revenues(k):
Quarter:
First		36	%		37	%
Second		38	%		32	%
Third					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)	Represents the average number of patients in our hospital beds each day.

Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

(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.

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

HCA’s management, with participation of HCA’s chief executive officer and chief financial officer, has evaluated the effectiveness of HCA’s disclosure controls and procedures as of June 30, 2021. Based on that evaluation, HCA’s chief executive officer and chief financial officer concluded that HCA’s disclosure controls and procedures were effective as of June 30, 2021.

Changes in Internal Control Over Financial Reporting

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

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information set forth in Note 9 – Contingencies in the notes to the condensed consolidated financial statements is incorporated herein by reference.

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, 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.

ITEM 2. UNREGISTERED

SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During January 2020, our Board of Directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During February 2021, our Board of Directors authorized an additional $6 billion for repurchases of our outstanding common stock. During the quarter ended June 30, 2021, we repurchased 11,261,507 shares of our common stock at an average price of $203.06 per share through market purchases pursuant to the January 2020 authorization (which was completed during the second quarter of 2021) and February 2021 authorization. At June 30, 2021, we had $4.987 billion of repurchase authorization available under the February 2021 authorization.

Table of Contents

The following table provides certain information with respect to our repurchases of common stock from April 1, 2021 through June 30, 2021 (dollars in millions, except per share amounts).


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under Publicly Announced Plans or Programs
April 1, 2021 through April 30, 2021		3,927,519	$	193.08		3,927,519	$	6,516
May 1, 2021 through May 31, 2021		3,662,154	$	207.10		3,662,154	$	5,757
June 1, 2021 through June 30, 2021		3,671,834	$	209.71		3,671,834	$	4,987

Total for second quarter 2021		11,261,507	$	203.06		11,261,507	$	4,987

On July 19, 2021, our Board of Directors declared a quarterly dividend of $0.48 per share on our common stock payable on September 30, 2021 to stockholders of record at the close of business on September 16, 2021. Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors. Our ability to declare future dividends may also from time to time be limited by the terms of our debt agreements.

Table of Contents

ITEM 6. EXHIBITS

(a) List of Exhibits:


4.1	—	Supplemental Indenture No. 27, dated as of June 30, 2021, 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 July 1, 2021 (File No. 001-11239), and incorporated herein by reference).

4.2	—	Supplemental Indenture No. 28, dated as of June 30, 2021, 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 July 1, 2021 (File No. 001-11239), and incorporated herein by reference).

4.3	—	Form of 2 3/8% Senior Secured Notes due 2031 (included in Exhibit 4.1).

4.4	—	Form of 3 1/2% Senior Secured Notes due 2051 (included in Exhibit 4.2).

4.5	—	Additional Receivables Intercreditor Agreement, dated as of June 30, 2021, 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 4.9 to the Company’s Current Report on Form 8-K filed July 1, 2021 (File No. 001-11239), and incorporated herein by reference).

4.6	—	Restatement Agreement dated as of June 30, 2021, by and among HCA Inc., as borrower, the guarantors party thereto, Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto (filed as Exhibit 4.10 to the Company’s Current Report on Form 8-K filed July 1, 2021 (File No. 001-11239), and incorporated herein by reference).

4.7	—	Restatement Agreement dated as of June 30, 2021, by and among HCA Inc., as borrower, the subsidiary borrowers party thereto, Bank of America, N.A., as administrative agent and collateral agent, and the lenders party thereto (filed as Exhibit 4.11 to the Company’s Current Report on Form 8-K filed July 1, 2021 (File No. 001-11239), 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 June 30, 2021 filed with the SEC on August 2, 2021, formatted in Inline Extensible Business Reporting Language: (i) the condensed consolidated balance sheets at June 30, 2021 and December 31, 2020, (ii) the condensed consolidated income statements for the quarters and six months ended June 30, 2021 and 2020, (iii) the condensed consolidated comprehensive income statements for the quarters and six months ended June 30, 2021 and 2020, (iv) the condensed consolidated statements of stockholders’ equity (deficit) for the quarters and six months ended June 30, 2021 and 2020, (v) the condensed consolidated statements of cash flows for the six months ended June 30, 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 June 30, 2021, formatted in Inline XBRL (included in Exhibit 101).

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
		William B. Rutherford
		Executive Vice President and Chief Financial Officer

Date: August 2, 2021

HCA Healthcare - 10-Q quarterly report FY2021 Q2

Table of Contents

What is the market capitalization of a company?

DISCLAIMER

Contact

Links