What changed in this filing

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Item 1. Business

2024-02-16 compared with 2023-02-17 · 365 added, 451 removed, 647 unchanged (56% of the section changed)

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At December 31, 2023, we operated 186 hospitals, comprised of 178 general, acute care hospitals;

five psychiatric hospitals;

six behavioral hospitals;

and two rehabilitation hospitals.

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Our facilities are located in 20 states and England.

The terms “Company,”

“HCA,”

“HCA Healthcare,”

“we,”

“our”

or “us,”

as used herein and unless otherwise stated or indicated by context, refer to HCA Healthcare, Inc.

The terms “Company,” “HCA,” “HCA Healthcare,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA Healthcare, Inc.

and its affiliates.

The term “affiliates”

means direct and indirect subsidiaries of HCA Healthcare, Inc.

The term “affiliates” means direct and indirect subsidiaries of HCA Healthcare, Inc.

and partnerships and joint ventures in which such subsidiaries are partners.

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.

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.

Our primary objective is to provide a comprehensive array of quality health care services in the most cost-effective manner possible.

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Outpatient and ancillary health care services are provided by our general, acute care hospitals, freestanding surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic centers and rehabilitation facilities.

Our psychiatric hospitals provide a full range of mental health care services through inpatient, partial hospitalization and outpatient settings.

Our common stock is traded on the New York Stock Exchange (symbol “HCA”).

Our behavioral hospitals provide a full range of mental health care services through inpatient, partial hospitalization and outpatient settings.

Our common stock is traded on the New York Stock Exchange (symbol “HCA”).

Through our predecessors, we commenced operations in 1968.

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Available Information

We file certain reports with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

The SEC maintains an Internet site at http://www.sec.gov that contains the reports, proxy and information statements and other information we file.

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• pursue a disciplined development strategy.

Our strategy also emphasizes investments that advance our clinical systems and digital capabilities, transform care models with innovative care solutions, expand our workforce development programs and enhance our health care networks and partnerships.

Our strategy also emphasizes investments that seek to advance our clinical systems and digital capabilities, transform care models with innovative care solutions, expand our workforce development programs and enhance our health care networks and partnerships.

Health Care Facilities

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Each hospital has an organized medical staff and a local board of trustees or governing board comprised of members of the local community.

At December 31, 2022, we operated five psychiatric hospitals with 593 licensed beds.

Our psychiatric hospitals provide therapeutic programs, including child, adolescent and adult psychiatric care and adolescent and adult alcohol and drug abuse treatment and counseling.

We also operate outpatient health care facilities, which include freestanding ambulatory surgery centers (“ASCs”), freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, comprehensive rehabilitation and physical therapy centers, radiation and oncology therapy centers, physician practices and various other facilities.

At December 31, 2023, we operated six behavioral hospitals with 653 licensed beds.

Our behavioral hospitals provide therapeutic programs, including child, adolescent and adult psychiatric care and adolescent and adult alcohol and drug abuse treatment and counseling.

These outpatient services are an integral component of our strategy to develop comprehensive health care networks in select communities.

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Certain of our affiliates provide a variety of management services to our health care facilities, including patient safety programs, ethics and compliance programs, national supply contracts, equipment purchasing and leasing contracts, accounting, financial and clinical systems, governmental reimbursement assistance, construction planning and coordination, information technology systems and solutions, legal counsel, human resources services and internal audit services.

We believe the extent of COVID-19’s impact on our operating results and financial condition has been and could 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 COVID-19 will impact our operations.

Summary Risk Factors

You should carefully read and consider the risk factors set forth under Item 1A, “Risk Factors,”

as well as all other information contained in this annual report on Form 10-K.

You should carefully read and consider the risk factors set forth under Item 1A, “Risk Factors,” as well as all other information contained in this annual report on Form 10-K.

Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect us.

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Our business is subject to the following principal risks and uncertainties:

Risks related to COVID-19 and other potential pandemics:

COVID-19 has affected, and may continue to affect, our operations.

Further, COVID-19 could negatively impact our business, financial condition, and cash flows, particularly if it causes public health conditions and/or economic conditions to deteriorate.

We are unable to predict the ultimate impact of the CARES Act (as defined below) and other stimulus and relief legislation or the effect that such legislation and other governmental responses intended to assist providers in responding to COVID-19 may have on our business, financial condition, results of operations or cash flows.

The emergence and effects related to a potential future pandemic, epidemic or outbreak of an infectious disease could adversely affect our operations.

Risks related to our indebtedness:

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations.

• We have significant indebtedness and may incur further indebtedness in the future.

Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations.

• We may not be able to generate sufficient cash to service all of our indebtedness and may not be able to refinance our indebtedness on favorable terms.

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• Our results of operations may be adversely affected by competition for staffing, the shortage of experienced nurses and other health care professionals and labor union activity.

We may be unable to attract, hire and retain a highly qualified and diverse workforce, including key management.

• Our performance depends on our ability to recruit and retain quality physicians.

• We may be unable to attract, hire and retain a highly qualified and diverse workforce, including key management.

Risks related to technology, data privacy and cybersecurity:

A cybersecurity incident or other form of data breach could result in the compromise of our facilities, confidential data or critical data systems.

• Cybersecurity incidents or other forms of data breaches could result in the compromise of our facilities, confidential data or critical data systems.

A cybersecurity incident or other form of data breach could also give rise to potential harm to patients;

remediation and other expenses;

and exposure to liability under HIPAA (as defined below), consumer protection laws, common law theories or other laws.

and exposure to liability under Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), consumer protection laws, common law theories or other laws.

Such incidents could subject us to litigation and foreign, federal and state governmental inquiries, damage our reputation, and otherwise be disruptive to our business.

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• Health care technology initiatives, particularly those related to sharing patient data and interoperability, may adversely affect our operations.

We may not be reimbursed for the cost of expensive, new technology.

• We may not be adequately reimbursed by third-party payers for services involving new technology.

Risks related to public health crises:

• COVID-19 has affected, and may continue to affect, our operations.

In addition, the emergence and effects related to a potential future pandemic, epidemic or outbreak of an infectious disease could adversely affect our business and operations.

Risks related to governmental regulation and other legal matters:

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• We may incur additional tax liabilities.

We have been and could become the subject of government investigations, claims and litigation.

• We have been and could become the subject of government investigations, claims and litigation, as well as governmental and commercial payer audits.

• We may be subject to liabilities from claims brought against our facilities, which are costly to defend and may require us to pay significant damages if not covered by insurance.

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• If our volume of patients with private health insurance coverage declines or we are unable to retain and negotiate favorable contracts with private third-party payers, including managed care plans, our revenues may be adversely affected.

Changes to physician utilization practices and treatment methodologies, third-party payer controls designed to reduce inpatient services or surgical procedures and other factors outside our control that impact demand for medical services may reduce our revenues.

• Changes to physician utilization practices and treatment methodologies and other factors outside our control that impact demand for medical services may reduce our revenues.

• Third-party payer controls designed to reduce costs and other payer practices intended to decrease inpatient services, surgical procedure volumes or reimbursement for services rendered may reduce our revenues.

• We may encounter difficulty acquiring hospitals and other health care businesses, encounter challenges integrating the operations of acquired hospitals and other health care businesses and/or become liable for unknown or contingent liabilities as a result of acquisitions.

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• Our business and operations are subject to risks related to climate change.

We may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) goals or otherwise meet the expectations of our stakeholders with respect to ESG matters.

• We may be adversely affected if we are not able to achieve our environmental, social and governance (“ESG”) objectives or otherwise meet the expectations of our stakeholders with respect to ESG matters.

• The industry trend toward value-based purchasing may negatively impact our revenues.

Risks related to macroeconomic conditions:

Our overall business results may suffer during periods of general economic weakness.

• Our overall business results may suffer during periods of general economic weakness or recessions.

• We are exposed to market risk related to changes in the market values of securities and interest rates.

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Inpatient occupancy levels fluctuate for various reasons, many of which are beyond our control.

We receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans (including plans offered through the American Health Benefit Exchanges (“Exchanges”)), private insurers and directly from patients.

We receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans (including plans offered through federal and state-based health insurance marketplaces (“Exchanges”)), private insurers and directly from patients.

Our revenues by primary third-party payer classification and other (including uninsured patients) for the years ended December 31, 2023, 2022 and 2021 are summarized in the following table (dollars in millions):

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International (managed care and other insurers)

Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, persons with end-stage renal disease and persons with Lou Gehrig’s Disease.

Medicaid is a federal-state program, administered by the states, that provides hospital and medical benefits to qualifying low-income individuals.

All of our general, acute care hospitals located in the United States are eligible to participate in Medicare and Medicaid programs.

Payment under the Medicare and Medicaid programs is conditioned on satisfaction of extensive provider enrollment requirements.

All of our general, acute care hospitals located in the United States are eligible and enrolled to participate in Medicare and Medicaid programs.

Amounts received under Medicare and Medicaid programs are generally significantly less than established hospital gross charges for the services provided.

Our hospitals generally offer discounts from established charges to certain group purchasers of health care services, including private health insurers, employers, health maintenance organizations (“HMOs”), preferred provider organizations (“PPOs”) and other managed care plans, including health plans offered through the Exchanges.

These discount programs generally limit our ability to increase revenues in response to increasing costs.

See Item 1, “Business —

Competition.”

For services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, patients are generally responsible for any exclusions, deductibles or coinsurance features of their coverage.

See Item 1, “Business — Competition.” For services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, patients are generally responsible for any exclusions, deductibles or coinsurance features of their coverage.

The amounts of such exclusions, deductibles and coinsurance continue to increase.

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If an uninsured patient does not qualify for these programs, the uninsured discount is applied.

In addition to the reimbursement reductions and adjustments discussed below, the Budget Control Act of 2011 (the “BCA”) requires automatic spending reductions to reduce the federal deficit, resulting in a uniform percentage reduction across all Medicare programs of 2% per fiscal year.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and related legislation temporarily suspended these reductions through March 31, 2022 and reduced the sequestration adjustment from 2% to 1% from April 1 through June 30, 2022.

The full 2% reduction resumed on July 1, 2022.

The BCA sequestration has been extended through the first six months of 2032.

In addition, the American Rescue Plan Act of 2021 (“ARPA”) increased the federal budget deficit in a manner that triggers an additional sequestration mandated under the Pay As You Go Act of 2010 (“PAYGO Act”).

In addition, the American Rescue Plan Act of 2021 (“ARPA”) increased the federal budget deficit in a manner that triggers an additional sequestration mandated under the Pay-As-You-Go Act of 2010.

As a result, a further payment reduction of up to 4% was required to take effect in January 2022.

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Inpatient Acute Care

Under the Medicare program, we receive reimbursement under a prospective payment system (“PPS”) for general, acute care hospital inpatient services.

Under the hospital inpatient PPS, fixed payment amounts per inpatient discharge are established based on the patient’s assigned Medicare severity diagnosis-related group (“MS-DRG”).

Under the Medicare program, we receive reimbursement under a prospective payment system (“PPS”) for general, acute care hospital inpatient services.

Under the hospital inpatient PPS, fixed payment amounts per inpatient discharge are established based on the patient’s assigned Medicare severity diagnosis-related group (“MS-DRG”).

MS-DRGs classify treatments for illnesses according to the estimated intensity of hospital resources necessary to furnish care for each principal diagnosis.

MS-DRG weights represent the average resources for a given MS-DRG relative to the average

resources for all MS-DRGs.

MS-DRG weights represent the average resources for a given MS-DRG relative to the average resources for all MS-DRGs.

MS-DRG payments are adjusted for area wage differentials.

Hospitals, other than those defined as “new,”

receive PPS reimbursement for inpatient capital costs based on MS-DRG weights multiplied by a geographically adjusted federal rate.

When the cost to treat certain patients falls well outside the normal distribution, providers typically receive additional “outlier”

These payments are financed by offsetting reductions in the inpatient PPS rates.

A high-cost outlier threshold is set annually at a level that targets estimated outlier payments equaling 5.1% of total inpatient PPS payments for the fiscal year.

MS-DRG rates are updated, and MS-DRG weights are recalibrated, using cost-relative weights each federal fiscal year (which begins October 1).

The index used to update the MS-DRG rates (the “market basket”) gives consideration to the inflation experienced by hospitals and entities outside the health care industry in purchasing goods and services.

Each federal fiscal year, the annual market basket update is reduced by a productivity adjustment based on the Bureau of Labor Statistics (“BLS”) 10-year moving average of changes in specified economy-wide productivity.

Hospitals, other than those defined as “new,” receive PPS reimbursement for inpatient capital costs based on MS-DRG weights multiplied by a geographically adjusted federal rate.

When the cost to treat certain patients falls well outside the normal distribution, providers typically receive additional “outlier” payments.

These payments are financed by offsetting reductions in the

inpatient PPS rates.

A high-cost outlier threshold is set annually at a level that targets estimated outlier payments equaling 5.1% of total inpatient PPS payments for the federal fiscal year.

MS-DRG payment rates are updated, and MS-DRG weights are recalibrated, using cost-relative weights each federal fiscal year (which begins October 1).

The index used to update the MS-DRG payment rates (the “market basket”) gives consideration to the inflation experienced by hospitals and entities outside the health care industry in purchasing goods and services.

A decrease in payment rates or an increase in rates that is below the increase in our costs may adversely affect our results of operations.

For federal fiscal year 2022, the Centers for Medicare & Medicaid Services (“CMS”) increased the MS-DRG rate by approximately 2.5%.

This increase reflected a market basket update of 2.7%, reduced by a negative 0.7 percentage point productivity adjustment and increased by 0.5 percentage points in accordance with the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”).

For federal fiscal year 2023, CMS increased the MS-DRG rate by approximately 4.3%.

This increase reflects a market basket update of 4.1%, reduced by a negative 0.3 percentage point productivity adjustment and increased by 0.5 percentage points as required by MACRA.

For federal fiscal year 2023, the Centers for Medicare & Medicaid Services (“CMS”) increased the MS-DRG payment rates by approximately 4.3%.

This increase reflected a market basket update of 4.1%, reduced by a 0.3 percentage point productivity adjustment and increased by 0.5 percentage points as required by the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”).

For federal fiscal year 2024, CMS increased the MS-DRG payment rates by approximately 3.1%.

This increase reflects a market basket update of 3.3%, reduced by a 0.2 percentage point productivity adjustment.

Additional adjustments may apply, depending on patient-specific or hospital-specific factors.

For example, the two-midnight rule limits payments to hospitals when services to Medicare beneficiaries are payable as inpatient services.

In addition, under the post-acute care transfer policy, Medicare reimbursement rates may be reduced when an inpatient hospital discharges a patient in a specified MS-DRG to certain post-acute care settings.

In addition, under transfer policies, Medicare reimbursement rates may be reduced when an inpatient hospital discharges a patient to another hospital or, for specified MS-DRGs, to certain post-acute care settings.

CMS has implemented and is implementing a number of programs and requirements intended to transform Medicare from a passive payer to an active purchaser of quality goods and services.

For example, hospitals that do not successfully participate in the Hospital Inpatient Quality Reporting Program are subject to a 25% reduction of the market basket update.

Hospitals that do not demonstrate meaningful use of electronic health records (“EHRs”) are subject to a 75% reduction of the market basket update.

Further, Medicare does not allow an inpatient hospital discharge to be assigned to a higher paying MS-DRG if certain designated hospital acquired conditions (“HACs”) were not present on admission and the identified HAC is the only condition resulting in the assignment of the higher paying MS-DRG.

Hospitals that do not demonstrate meaningful use of electronic health records (“EHRs”) are subject to a 75% reduction of the market basket update.

In this situation, the case is paid as though the secondary diagnosis was not present.

There are currently 14 categories of conditions on the list of HACs.

In addition, the 25% of hospitals with the worst risk-adjusted HAC scores in the designated performance period receive a 1% reduction in their inpatient PPS Medicare payments.

In addition, the 25% of hospitals with the worst risk-adjusted HAC scores in the designated performance period receive a 1.0% reduction in their inpatient PPS Medicare payments in the applicable federal fiscal year.

CMS has also established three National Coverage Determinations that prohibit Medicare reimbursement for erroneous surgical procedures performed on an inpatient or outpatient basis.

Under the Hospital Readmission Reduction Program (“HRRP”), payments to hospitals may also be reduced based on readmission rates.

Each federal fiscal year, inpatient payments are reduced if a hospital experiences “excess”

readmissions within the 30-day time period from the date of discharge for conditions designated by CMS.

For federal fiscal year 2017 and subsequent years, CMS has designated six conditions or procedures, including heart attack, pneumonia and total hip arthroplasty.

Hospitals with what CMS defines as excess readmissions for these conditions or procedures receive reduced payments for all inpatient discharges, not just discharges relating to the conditions or procedures subject to the excess readmission standard.

The amount by which payments are reduced is determined by assessing a hospital’s performance relative to hospitals with similar proportions of dual eligible patients, subject to a cap established by CMS.

The reduction in payments to hospitals with excess readmissions can be up to 3% of a hospital’s base payments.

Each hospital’s performance is publicly reported by CMS.

In addition, under the Hospital Value-Based Purchasing (“HVBP”) Program, CMS reduces the inpatient PPS payment amount for all discharges by 2.0%.

Under the Hospital Readmission Reduction Program, payments to hospitals may also be reduced based on readmission rates.

Each federal fiscal year, inpatient payments are reduced if a hospital experiences “excess” readmissions within the 30-day time period from the date of discharge for conditions or procedures designated by CMS during the prior performance review period.

CMS has designated six conditions or procedures under the program, including heart attack, pneumonia and total hip arthroplasty.

Hospitals with what CMS defines as excess readmissions for these conditions or procedures receive reduced payments for all inpatient discharges in the federal fiscal year, not just discharges relating to the conditions or procedures subject to the excess readmission standard.

The reduction in payments to hospitals with excess readmissions can be up to 3% of a hospital’s base payments.

Each hospital’s performance is publicly reported by CMS.

In addition, under the Hospital Value-Based Purchasing Program, CMS reduces the inpatient PPS payment amount for all discharges by 2.0% in each federal fiscal year.

The total amount collected from these reductions is pooled, and the entire amount collected is redistributed as incentive payments to reward hospitals that meet certain quality performance standards established by CMS.

CMS scores each hospital based on achievement (relative to other hospitals) and improvement ranges (relative to the hospital’s own past performance) for each applicable performance standard.

Hospitals that meet or exceed the quality performance standards receive greater reimbursement under the value-based purchasing program than they would have otherwise.

Hospitals that do not achieve the necessary quality performance receive reduced Medicare inpatient hospital payments.

Hospitals that do not achieve the necessary level of quality performance receive reduced Medicare inpatient hospital payments.

Hospitals are scored on a number of individual measures that are categorized into four domains:

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and person and community engagement.

As a result of the national public health emergency (“PHE”) declared in response to COVID-19, CMS has paused or refined several measures across various hospital quality measurement and value-based purchasing programs.

These policies are intended to ensure that the programs neither reward nor penalize hospitals based on circumstances caused by the PHE that the measures were not designed to accommodate.

For example, CMS is modifying certain readmissions measures within the HRRP to exclude COVID-19 diagnosed patients.

Under the HVBP Program in federal fiscal year 2023, as a result of the measure suppression policy, hospitals will receive a net neutral payment adjustment for each discharge that is equal to the 2% withheld under the program.

In addition, facilities that experience extraordinary circumstances beyond their control, that prevent satisfaction of program reporting requirements, may request an exception from CMS.

As a result of the national public health emergency declared in response to COVID-19, CMS paused or refined several measures across various hospital quality measurement and value-based purchasing programs.

However, as of federal fiscal year 2024, these programs have resumed in their standard form.

CMS reimburses hospital outpatient services (and certain Medicare Part B services furnished to hospital inpatients who have no Part A coverage) on a PPS basis.

Hospital outpatient services paid under PPS are classified into groups called ambulatory payment classifications (“APCs”).

Services for each APC are similar clinically and in terms of the resources they require.

A payment rate is established for each APC.

Depending on the services provided, a hospital may be paid for more than one APC for a patient visit.

The APC payment rates are updated for each calendar year.

A payment rate is established for each APC and updated for each calendar year.

Each calendar year, the annual market basket update is further reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For calendar year 2022, CMS increased APC payment rates by 2.0%.

This increase reflected a market basket increase of 2.7% with a negative 0.7 percentage point productivity adjustment.

For calendar year 2023, CMS increased payment rates under the outpatient PPS by an estimated 3.8%.

This increase reflects a market basket increase of 4.1% with a negative 0.3 percentage point productivity adjustment.

This increase reflects a market basket increase of 4.1%, reduced by a 0.3 percentage point productivity adjustment.

For calendar year 2024, CMS increased payment rates by an estimated 3.1%.

This increase reflects a market basket increase of 3.3%, reduced by a 0.2 percentage point productivity adjustment.

CMS requires hospitals to submit quality data relating to outpatient care to avoid receiving a 2.0 percentage point reduction in the annual payment update under the outpatient PPS.

The Medicare reimbursement we receive may also be affected by broad shifts in payment policy.

For example, in June 2022, the U.S.

Supreme Court invalidated past payment cuts for hospitals participating in the 340B Drug Pricing Program.

Although our hospitals do not participate in the 340B program, the decision has implications for all hospitals reimbursed under the outpatient PPS and could affect our Medicare reimbursement for both past and future periods.

The 340B program allows participating hospitals to purchase certain outpatient drugs from manufacturers at discounted rates.

These hospitals are reimbursed for the discounted drugs under the same Medicare payment methodology and rates that are applied to non-340B hospitals.

The past payment cuts, which CMS implemented in 2018, resulted in increased payments for non-340B hospitals, and it has not yet been determined whether the increased payments to non-340B hospitals may be recouped due to budget neutrality principles.

Further, depending on future Medicare payment policies, non-340B hospitals may receive decreased reimbursement going forward for outpatient drugs and services.

For calendar year 2023, CMS finalized the payment rate for drugs acquired through the 340B program in light of the Supreme Court decision and, as a result of the payment rate change, is implementing a 3.09% reduction to payment rates for non-drug services under the outpatient PPS for calendar year 2023 to achieve budget neutrality.

In addition, CMS has, in recent years, phased in an expanded site-neutral payment policy for clinic visit services provided at all off-campus provider-based departments.

Under the policy, clinic visit services provided at all off-campus provider-based departments are generally not covered as outpatient department services under the outpatient PPS, but rather are reimbursed at the Medicare Physician Fee Schedule (“Physician Fee Schedule”) rate, which is generally lower than the outpatient PPS rate.

Before the expanded policy, the Physician Fee Schedule equivalent rate did not apply to “excepted”

provider-based departments.

The Physician Fee Schedule equivalent rate for calendar year 2023 is substantially less than the outpatient PPS rate.

Medicare reimbursement for outpatient services may also be affected by broad shifts in payment policy.

For example, the 340B Drug Pricing Program allows participating hospitals to purchase certain outpatient drugs from manufacturers at discounted rates.

These hospitals are reimbursed for the discounted drugs under the same Medicare payment methodology and rates that apply to non-340B hospitals.

In 2018, CMS implemented a payment policy that reduced Medicare payments for 340B hospitals for most drugs obtained at 340B-discounted rates and that resulted in increased payments for non-340B hospitals.

Most of our facilities are non-340B hospitals.

In June 2022, the U.S.

Supreme Court invalidated this 340B program payment policy.

In light of this U.S.

Supreme Court decision and to achieve budget neutrality, CMS implemented a reduction of approximately 3.1% to payment rates for non-drug services under the outpatient PPS for calendar year 2023.

HHS also directed that $9 billion be paid to affected 340B hospitals in one-time lump sum payments as the remedy for calendar years 2018 through 2022.

In order to comply with budget neutrality requirements, HHS finalized a corresponding offset in future non-drug item and service payments for all outpatient PPS providers (except new providers) that will reduce the outpatient PPS conversion factor by 0.5% annually.

This adjustment will start in calendar year 2026 and continue for approximately 16 years.

In addition, CMS has implemented an expanded site-neutral payment policy for clinic visit services provided at all off-campus provider-based departments.

Rehabilitation

CMS reimburses inpatient rehabilitation facilities (“IRFs”) on a PPS basis.

Under the IRF PPS, patients are classified into case mix groups that reflect the relative resource intensity typically associated with the patient’s clinical condition.

CMS reimburses inpatient rehabilitation facilities (“IRFs”) on a PPS basis.

Under the IRF PPS, patients are classified into case mix groups that reflect the relative resource intensity typically associated with the patient’s clinical condition.

The case mix groups are based upon impairment, age, functional motor and cognitive scores, and comorbidities (additional diseases or disorders from which the patient suffers).

IRFs are paid a predetermined amount per discharge that reflects the patient’s case mix group that is adjusted for facility-specific factors, such as area wage levels, proportion of low-income patients, and location in a rural area.

IRFs are paid a predetermined amount per discharge that reflects the patient’s case mix group and is adjusted for facility-specific factors, such as area wage levels, proportion of low-income patients, and location in a rural area.

Each federal fiscal year, the IRF rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For federal fiscal year 2022, CMS increased IRF payment rates by an estimated 1.9%, reflecting an IRF market basket update of 2.6% reduced by a negative 0.7 percentage point productivity adjustment.

For federal fiscal year 2023, CMS increased IRF payment rates by an estimated 3.9%, reflecting an IRF market basket update of 4.2% with a negative 0.3 percentage point productivity adjustment.

For federal fiscal year 2023, CMS increased IRF payment rates by an estimated 3.9%, reflecting an IRF market basket update of 4.2%, reduced by a 0.3 percentage point productivity adjustment.

For federal fiscal year 2024, CMS increased IRF payment rates by an estimated 3.4%, reflecting an IRF market basket update of 3.6%, reduced by a 0.2 percentage point productivity adjustment.

In addition, CMS requires IRFs to report quality measures to avoid receiving a reduction of 2.0 percentage points to the market basket update.

In order to qualify for classification as an IRF, at least 60% of a facility’s inpatients during the most recent 12-month CMS-defined review period must have required intensive rehabilitation services for one or more of 13 specified conditions.

IRFs must also meet additional coverage criteria, including patient selection and care requirements relating to pre-admission screenings, post-admission evaluations, ongoing coordination of care and involvement of rehabilitation physicians.

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As of December 31, 2023, we had two rehabilitation hospitals and 73 hospital rehabilitation units.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires the U.S.

Department of Health and Human Services (“HHS”), together with the Medicare Payment Advisory Commission, to work toward a unified payment system for post-acute care services provided by IRFs, home health agencies, skilled nursing facilities, and long-term care hospitals.

A unified post-acute care payment system would pay post-acute care providers under a single framework according to a patient’s characteristics, rather than based on the post-acute care setting where the patient receives treatment.

As required under the statute, CMS issued a report presenting a prototype for a unified post-acute care payment model in July 2022.

CMS noted in its report the need for additional analyses and acknowledged that the universal implementation of a unified post-acute care payment system would require congressional action.

The Medicare Payment Advisory Commission is required to submit a report to Congress by June 2023.

Inpatient hospital services furnished in psychiatric hospitals and psychiatric units of general, acute care hospitals and critical access hospitals are reimbursed on a PPS basis.

The inpatient psychiatric facility (“IPF”) PPS is based upon a per diem payment, with adjustments to account for certain patient and facility characteristics.

The IPF PPS contains an “outlier”

policy for extraordinarily costly cases and an adjustment to a facility’s base payment if it maintains a full-service emergency department.

The Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) required the U.S.

Department of Health and Human Services (“HHS”), together with the Medicare Payment Advisory Commission (“MedPAC)”, to consider and propose a unified payment system for post-acute care services provided by IRFs, home health agencies, skilled nursing facilities, and long-term care hospitals.

As required under the statute, CMS issued a report in July 2022 presenting a prototype for a unified post-acute care payment model, and MedPAC issued a report in June 2023 evaluating a prototype design.

Although both CMS and MedPAC determined that designing a post-acute care PPS is feasible, MedPAC noted that implementation would require significant policy changes and considerable agency resources and that CMS may consider smaller-scale site-neutral policies to address some of the overlap in patients treated in different settings.

Inpatient hospital services furnished in behavioral hospitals and behavioral units of general, acute care hospitals and critical access hospitals are reimbursed on a PPS basis.

The inpatient psychiatric facility (“IPF”) PPS is based upon a per diem payment, with adjustments to account for certain patient and facility characteristics.

The IPF PPS contains an “outlier” policy for extraordinarily costly cases and an adjustment to a facility’s base payment if it maintains a full-service emergency department.

CMS has established the IPF PPS payment rate in a manner intended to be budget neutral.

Each federal fiscal year, IPF payment rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For federal fiscal year 2022, CMS increased IPF payment rates by an estimated 2.0%, reflecting a 2.7% IPF market basket update reduced by a negative 0.7 percentage point productivity adjustment.

For federal fiscal year 2023, CMS increased IPF payment rates by an estimated 3.8%, reflecting a 4.1% IPF market basket update, reduced by a 0.3 percentage point productivity adjustment.

For federal fiscal year 2024, CMS increased IPF payment rates by an estimated 3.3%, which reflects a 3.5% IPF market basket increase with a negative 0.2 percentage point productivity adjustment.

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Inpatient psychiatric facilities are required to report quality measures to CMS to avoid receiving a 2.0 percentage point reduction to the market basket update.

As of December 31, 2022, we had five psychiatric hospitals and 45 hospital psychiatric units.

As of December 31, 2023, we had six behavioral hospitals and 44 hospital behavioral units.

Ambulatory Surgery Centers

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Reimbursements for ASC overhead costs are limited to no more than the overhead costs paid to hospital outpatient departments under the Medicare hospital outpatient PPS for the same procedure.

If CMS determines that a procedure is commonly performed in a physician’s office, the ASC reimbursement for that procedure is limited to the reimbursement allowable under the Physician Fee Schedule, with limited exceptions.

All surgical procedures, other than those that pose a significant safety risk or generally require an overnight stay, are payable as ASC procedures.

From time to time, CMS expands the services that may be performed in ASCs, which may result in more Medicare procedures that historically have been performed in hospitals being moved to ASCs, reducing surgical volume in our hospitals.

Also, more Medicare procedures that historically have been performed in ASCs may be moved to physicians’

Also, more Medicare procedures that historically have been performed in ASCs may be moved to physicians’ offices.

Some commercial third-party payers have adopted similar policies.

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For each federal fiscal year, the ASC payment system update is reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For calendar year 2022, CMS increased ASC payment rates by 2.0%, which reflected a market basket increase of 2.7% and a negative 0.7 percentage point productivity adjustment.

For calendar year 2023, CMS increased ASC payment rates by 3.8%, which reflects a market basket increase of 4.1% and a negative 0.3 percentage point productivity adjustment.

For calendar year 2023, CMS increased ASC payment rates by 3.8%, which reflected a market basket increase of 4.1%, reduced by a 0.3 percentage point productivity adjustment.

For calendar year 2024, CMS increased ASC payment rates by 3.1%, which reflects a market basket increase of 3.3%, reduced by a 0.2 percentage point productivity adjustment.

In addition, CMS has established a quality reporting program for ASCs under which ASCs that fail to report on specified quality measures receive a 2.0 percentage point reduction to the market basket update.

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Each calendar year, home health payment rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For calendar year 2022, CMS increased home health payment rates by 3.2%, based on a home health payment update percentage of 2.6%, which reflected a 3.1% market basket increase reduced by a 0.5 percentage point productivity adjustment, among other changes.

For calendar year 2023, CMS increased home health payment rates by 0.7%, based on a home health payment update percentage of 4.0%, which reflected a 4.1% market basket increase, reduced

by a 0.1 percentage point productivity adjustment, among other changes.

For calendar year 2024, CMS increased home health payment rates by 0.8%, based on a home health payment update percentage of 3.0%, which reflects a 3.3% market basket increase, reduced by a 0.3 percentage point productivity adjustment, among other changes.

Home health agencies that do not submit required quality data are subject to a 2.0 percentage point reduction to the market basket update.

In addition, home health agencies are required to submit a one-time Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care.

Failure to submit the NOA within five calendar days from the start of care results in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model in January 2022.

Under the model, home health agencies will receive increases or reductions to their Medicare fee-for-service payments of up to 5%, based on performance against specific quality measures relative to the performance of other home health providers.

Under the nationwide Home Health Value-Based Purchasing (“HHVBP”) Model, home health agencies receive increases or reductions to their Medicare fee-for-service payments of up to 5%, based on performance against specific quality measures relative to the performance of other home health providers.

Data collected in each performance year will impact Medicare payments two years later.

Calendar year 2023 is the first performance year under the expanded HHVBP Model, which will affect payments in calendar year 2025.

Payment of claims for home health services may be impacted by the Review Choice Demonstration, a program intended to identify and prevent home health services fraud, reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements.

The program applies only to home health agencies in certain states, including North Carolina, Florida and Texas.

The program currently applies only to home health agencies in certain states, including North Carolina, Florida and Texas.

Providers in these states may initially select from the following claims review and approval processes:

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Home health agencies that maintain high levels of compliance are eligible for additional, less burdensome options.

As noted above, the IMPACT Act requires HHS, in conjunction with the Medicare Payment Advisory Commission, to propose a unified post-acute care payment model by 2023.

The unified post-acute care payment system would include home health agencies.

As noted above, the IMPACT Act required HHS and MedPAC to propose a unified post-acute care payment model by 2023.

After evaluating the proposed model, which included home health agencies, MedPAC recommended that CMS instead focus on smaller-scale site-neutral policies to address some of the overlap in patients treated in different settings.

Medicare beneficiaries who have a terminal illness and a life expectancy of six months or less may elect to receive hospice benefits (palliative care) instead of standard coverage of treatment for the terminal illness and related conditions.

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Each federal fiscal year, hospice payment rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity.

For federal fiscal year 2022, CMS increased hospice payment rates by 2.0%, which reflected a 2.7% market basket update and a negative 0.7 percentage point productivity adjustment.

For federal fiscal year 2023, CMS increased hospice payment rates by 3.8%, which reflects a 4.1% market basket update and a negative 0.3 percentage point productivity adjustment.

For federal fiscal year 2023, CMS increased hospice payment rates by 3.8%, which reflected a 4.1% market basket update, reduced by a 0.3 percentage point productivity adjustment.

For federal fiscal year 2024, CMS increased hospice payment rates by 3.1%, which reflects a 3.3% market basket update, reduced by a 0.2 percentage point productivity adjustment.

Hospices that fail to satisfy quality reporting requirements receive a 4.0 percentage point reduction to the market basket update.

Beginning in 2024, the payment reduction for failure to report quality data will increase to 4.0 percentage points.

Overall payments made by Medicare to each hospice are subject to an inpatient cap and an aggregate cap.

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In federal fiscal year 2024, the aggregate cap is $33,494.01.

If a hospice’s Medicare payments exceed its inpatient or aggregate caps, it must repay Medicare for the excess amount.

Physician Services

Physician services are reimbursed under the Physician Fee Schedule system, under which CMS has assigned a national relative value unit (“RVU”) to most medical procedures and services that reflects the various resources required by a physician to provide the services, relative to all other services.

Each RVU is calculated based on a combination of work required in terms of time and intensity of effort for the service, practice expense (overhead) attributable to the service and malpractice insurance expense attributable to the service.

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For calendar year 2024, CMS reduced the conversion factor by approximately 3.4%.

However, Congress approved a partial offset to this reduction, increasing payment amounts by 2.5%, which will result in a payment reduction of approximately 2% for calendar year 2023.

Medicare payments are adjusted based on participation in the Quality Payment Program (“QPP”), a payment methodology intended to reward high-quality patient care.

Physicians and certain other health care clinicians are required to participate in one of two QPP tracks.

Under both tracks, performance data collected in each performance year will affect Medicare payments two years later.

Under both tracks, performance data collected in each performance year will

affect Medicare payments two years later.

CMS expects to transition increasing financial risk to providers as the QPP evolves.

The Advanced Alternative Payment Model (“Advanced APM”) track makes incentive payments available for participation in specific innovative payment models approved by CMS, which are paid two years after the relevant performance period, if a provider has sufficient participation (based on percentage of payments or patients) in an Advanced APM.

Providers were able to earn a 5.0% Medicare incentive payment for performance year 2022 (to be paid in 2024), may earn a 3.5% incentive payment for performance year 2023 (to be paid in 2025), and may receive higher Medicare Physician Fee Schedule payment rate updates based on performance in 2025 and beyond.

In addition, providers are exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System (“MIPS”).

The Advanced Alternative Payment Model (“Advanced APM”) track encourages participation in specific innovative payment models approved by CMS through financial incentives, which are paid two years after the relevant performance period, if a provider has sufficient participation (based on percentage of payments or patients) in an Advanced APM.

Providers were able to earn a 3.5% incentive payment for performance year 2023 (to be paid in 2025), the final year for the incentive payments.

Beginning in the 2024 performance year, qualifying providers will instead receive a higher Medicare Physician Fee Schedule payment rate (payment year 2026 for performance year 2024).

In addition, providers are exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System (“MIPS”).

Alternatively, providers may participate in the MIPS track.

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positive adjustments are subject to a scaling factor to meet budget neutrality requirements.

CMS makes available an exception that permits clinicians to request reweighting of any or all performance categories if they encounter an extreme and uncontrollable circumstance or public health emergency, such as COVID-19, that is outside of their control.

CMS uses fee schedules to pay for physical, occupational and speech therapies, durable medical equipment, clinical diagnostic laboratory services, nonimplantable orthotics and prosthetics and services provided by independent diagnostic testing facilities.

Under the various PPS structures, the payment rates are adjusted for area differences in wage levels by a factor (“wage index”) reflecting the relative wage level in the geographic area compared to the national average wage level and taking into account occupational mix.

CMS uses fee schedules to pay for physical, occupational and speech therapies, durable medical equipment, clinical diagnostic laboratory services, nonimplantable orthotics and prosthetics, services provided by independent diagnostic testing facilities and ambulance services.

Under the various PPS structures, the payment rates are adjusted for area differences in wage levels by a factor reflecting the relative wage level in the geographic area compared to the national average wage level and taking into account occupational mix (“wage index”).

The redistributive impact of wage index changes is not anticipated to have a material financial impact for 2024.

CMS recently finalized a permanent, budget-neutral cap on year-to-year wage index changes to smooth variations and decrease volatility.

To smooth variations and decrease volatility, CMS has implemented permanent, budget-neutral caps on year-to-year decreases in the wage indexes under certain PPS structures, including the hospital inpatient PPS and home health PPS.

Medicare reimburses hospitals for a portion (65%) of deductible and coinsurance amounts that are uncollectable from Medicare beneficiaries.

CMS has implemented contractor reform whereby CMS competitively bids the Medicare fiscal intermediary and Medicare carrier functions to Medicare Administrative Contractors (“MACs”), which are geographically assigned across 12 jurisdictions to service both Part A and Part B providers.

CMS competitively bids the Medicare fiscal intermediary and Medicare carrier functions to Medicare Administrative Contractors (“MACs”), which are geographically assigned across 12 jurisdictions to service both Part A and Part B providers.

Home health and hospice providers are serviced across four MAC jurisdictions.

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CMS contracts with third parties to promote the integrity of the Medicare program through reviews of quality concerns and detections, and corrections of improper payments.

Quality Improvement Organizations (“QIOs”), for example, are groups of physicians and other health care quality experts that work on behalf of CMS to ensure that Medicare pays only for goods and services that are reasonable and necessary, and that are provided in the most appropriate setting.

Under the Recovery Audit Contractor (“RAC”) program, CMS contracts with RACs on a contingency basis to

conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program.

Quality Improvement Organizations, for example, are groups of physicians and other health care quality experts that work on behalf of CMS to ensure that Medicare pays only for goods and services that are reasonable and necessary, and that are provided in the most appropriate setting.

Under the Recovery Audit Contractor (“RAC”) program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program.

The compensation for RACs is based on their review of claims submitted to Medicare for billing compliance, including correct coding and medical necessity, and the amount of overpayments and underpayments they identify.

CMS limits the number of claims that RACs may audit by limiting the number of records that RACs may request from hospitals based on each provider’s claim denial rate for the previous year.

CMS has implemented the RAC program on a permanent, nationwide basis and expanded the RAC program to the Managed Medicare program and Medicare Part D.

CMS has transitioned some of its other integrity programs to a consolidated model by engaging Unified Program Integrity Contractors (“UPICs”) to perform audits, investigations and other integrity activities.

We have established policies and procedures to respond to requests from and payment denials by RACs and other Medicare contractors.

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In recent years, there have been significant delays in the Medicare appeals process.

Depending upon changes to and the growth of the RAC program and other Medicare integrity programs and our success in appealing claims in future periods, our cash flows and results of operations could be negatively impacted.

Medicare reimburses teaching hospitals for portions of the direct and indirect costs of graduate medical education (“GME”) through statutory formulas that are generally based on the number of medical residents and which take into account patient volume or the number of hospital beds.

However, HHS has taken steps to streamline the appeals process and has significantly reduced the appeals backlog.

Depending upon changes to and the growth of the RAC program and other Medicare integrity programs, our success in appealing claims in future periods, and potential future delays in the appeals process, our cash flows and results of operations could be negatively impacted.

Accrediting organizations review GME programs for compliance with educational standards.

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CMS makes fee payment adjustments based on service benchmarks and quality ratings and publishes star ratings to assist beneficiaries with plan selection.

According to CMS, nearly half of all Medicare enrollees participate in managed Medicare plans.

According to CMS data, approximately half of all Medicare enrollees participate in managed Medicare plans.

Medicaid programs are funded jointly by the federal government and the states and are administered by states under approved plans.

Most state Medicaid program payments are made under a PPS or are based on negotiated payment levels with individual hospitals.

Medicaid reimbursement is often less than a hospital’s cost of services.

The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”) requires states to expand Medicaid coverage to all individuals under age 65 with incomes effectively at or below 138% of the federal poverty level.

Medicaid reimbursement is often less than a hospital’s cost of services.

However, states may opt out of the expansion without losing existing federal Medicaid funding.

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Among these states, the maximum income level required for individuals and families to qualify for Medicaid varies widely.

Medicaid enrollment has increased as a result of COVID-19.

Through COVID-19 relief legislation, Congress authorized a temporary increase in federal funds for certain Medicaid expenditures.

The enhanced funding is available to states that maintain continuous Medicaid enrollment and meet certain other conditions.

The continuous coverage requirement will expire as of April 1, 2023, and the increase in federal funding will be phased out through calendar year 2023.

The resumption of redeterminations for Medicaid enrollees and end of the other conditions of funding may lead to coverage disruptions and dis-enrollments of current Medicaid enrollees.

Because most states must operate with balanced budgets and because the Medicaid program is often a state’s largest program, many states have adopted or may consider adopting various strategies to reduce their Medicaid expenditures.

Medicaid enrollment increased as a result of COVID-19 relief legislation that authorized a temporary increase in federal funds for certain Medicaid expenditures in states that maintained continuous Medicaid enrollment, among other requirements.

The end of the continuous enrollment requirement in 2023, including the resumption of redeterminations for Medicaid enrollees, has resulted in significant coverage disruptions and dis-enrollments of enrollees.

Medicaid enrollment is generally expected to continue to decline through fiscal year 2024 (which ends June 30, 2024, in most states).

To increase state compliance with redetermination and reporting requirements and guidelines, CMS published an interim final rule in December 2023 that provides an enforcement framework, including potential monetary penalties for states.

Outside of the government response to COVID-19, budgetary pressures have, in recent years, resulted and likely will continue to result in decreased spending, or decreased spending growth, for Medicaid programs in many states.

Most states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaid programs or fund indigent care within the state.

Many states have also adopted, or are considering, legislation designed to reduce coverage, enroll Medicaid recipients in managed care programs and/or impose additional taxes on hospitals to help finance or expand the states’

Medicaid systems.

Some states use, or have applied to use, waivers granted by CMS to implement Medicaid expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary

from federal standards.

For example, the Texas Healthcare Transformation and Quality Improvement Program, which is operated under a Medicaid waiver, expands Medicaid managed care programs in the state, provides funding for uncompensated care and supports several delivery system reform initiatives.

Although this Texas waiver has been extended through 2030, certain delivery system reform initiatives operate under different approval periods.

For example, a directed payment program for hospitals in Texas expires August 31, 2023.

If Texas is unable to obtain future extensions of this program or similar programs, our revenues could be negatively impacted.

In recent years, aspects of existing or proposed Medicaid waiver programs have been subject to legal challenge, resulting in uncertainty.

Most states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaid programs within the state.

Some states use, or have applied to use, waivers granted by CMS to implement Medicaid expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.

For example, the Texas Healthcare Transformation and Quality Improvement Program, which is operated under a Medicaid waiver, enables the expansion of Medicaid managed care programs in the state, and provides funding for uncompensated care.

The funding amount to each hospital for uncompensated care is recalculated annually by the state and subject to changes in state policies.

The total uncompensated care funding for the state is also recalculated every five years by CMS and subject to rebasing again effective federal fiscal year 2028.

In recent years, aspects of existing or proposed Medicaid programs have been subject to legal challenge, resulting in uncertainty.

Additionally, federal policies that shape administration of the Medicaid programs at the state level are subject to change, including as a result of changes in the presidential administration.

Where states had previously been permitted to condition Medicaid enrollment on work or other community engagement, the approvals of waivers permitting these conditions have been rescinded, and the federal government is also reexamining block grant funding structures.

However, a federal court is permitting Georgia to impose work and community engagement requirements under a Medicaid demonstration program that is expected to launch in mid-2023.

However, a federal court is permitting Georgia to impose work and community engagement requirements under a Medicaid demonstration program that launched in mid-2023.

Many state Medicaid programs incorporate value-based purchasing models and related payment and delivery system reform initiatives that incentivize improvements in quality of care and cost-effectiveness.

For example, federal funds under the Medicaid program may not be used to reimburse providers for treatment of certain provider-preventable conditions.

For example, federal funds under the Medicaid program may not be used to reimburse providers for treatment of certain provider-preventable

Each state Medicaid program must deny payments to providers for the treatment of health care-acquired conditions designated by CMS as well as other provider-preventable conditions that may be designated by the state.

Congress has expanded the federal government’s involvement in fighting fraud, waste and abuse in the Medicaid program through the Medicaid Integrity Program.

CMS employs UPICs to perform post-payment audits of Medicaid claims, identify overpayments and perform other program integrity activities.

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The provisions of these programs are state-specific.

Many states direct managed care plans to pass through supplemental payments to designated providers, independent of services rendered, to ensure consistent funding of providers that serve large numbers of low-income patients.

In an effort to more closely tie funds to delivery and outcomes, CMS is limiting these “pass-through payments”

that are paid by states under managed Medicaid plan contracts and will generally prohibit such payments by 2027.

Certain states may direct managed care plans to pass through supplemental payments to designated providers, independent of services rendered, to ensure consistent funding of providers that serve large numbers of low-income patients.

In an effort to more closely tie funds to delivery and outcomes, CMS is limiting these “pass-through payments” that are paid by states under managed Medicaid plan contracts and will generally prohibit such payments by 2027.

However, CMS permits new pass-throughs of supplemental provider payments for up to a three-year period when states are transitioning Medicaid populations or services from a fee-for-service system to a managed care system.

Disproportionate Share Hospital and Medicaid State Directed and Supplemental Payments

In addition to making payments for services provided directly to beneficiaries, Medicare makes additional payments to hospitals that treat a disproportionately large number of low-income patients (Medicaid and Medicare patients eligible to receive Supplemental Security Income).

Disproportionate Share Hospital (“DSH”) payment adjustments are determined annually based on certain statistical information required by HHS and are paid as a percentage addition to MS-DRG payments.

The methodology for calculating DSH payment adjustments is affected by shifts in payment policy.

For example, in August 2023, CMS finalized changes to the treatment of patient days paid under demonstrations authorized under Section 1115 of the Social Security Act (“Section 1115”) (including through demonstration-authorized uncompensated and undercompensated care pools) in the Medicaid fraction of the DSH payment formula in a manner that will effectively lower DSH payments for many hospitals.

These changes could adversely impact our results of operations.

CMS also distributes a payment to each DSH hospital that is allocated according to the hospital’s proportion of uncompensated care costs relative to the uncompensated care amount of other DSH hospitals.

Some states make additional payments to providers through the Medicaid program that are separate from base payments and not specifically tied to an individual’s care.

These supplemental payments may be in the form of Medicaid DSH payments, which are intended to offset hospital uncompensated care costs.

The federal government distributes federal Medicaid DSH funds to each state based on a statutory formula.

The states then distribute the DSH funding among qualifying hospitals.

States have broad discretion to define which hospitals qualify for Medicaid DSH payments and the amount of such payments.

The Affordable Care Act and subsequent legislation provided for reductions to the Medicaid DSH hospital program, but Congress has delayed the implementation of these reductions.

Under current law, Medicaid DSH payments will be reduced by $8 billion for the period from March 9, 2024, through September 30, 2024, and in each of federal fiscal years 2025 through 2027.

Many states have implemented state directed payment (“SDP”) arrangements to direct certain Medicaid managed care plan expenditures.

These arrangements, which are subject to approval by CMS, allow states to implement delivery system and provider payment initiatives by requiring Medicaid managed care organizations to pay providers according to specific rates or methods.

For example, SDP arrangements may require managed care plans to implement value-based purchasing models or performance improvement initiatives, or may direct managed care plans to adopt specific payment parameters, such as minimum or maximum fee schedules for specific types of providers.

States are increasingly using SDP arrangements, and some states have converted supplemental payment programs to SDP arrangements, diverting previously-available funding.

SDP arrangements can be limited to a specific subset of providers, and providers that do not satisfy applicable criteria may be ineligible for payments.

All state directed payment programs are subject to annual approval by CMS.

If a state is unable to obtain future CMS approvals of these programs, our revenues could be negatively impacted.

Supplemental payments may also be in the form of payments, such as upper payment limit payments, which are intended to address the difference between Medicaid fee-for-service payments and Medicare reimbursement rates, or

payments under other programs that vary by state under Section 1115 waivers.

These supplemental reimbursement programs are generally authorized by CMS for a specified period of time and require CMS’s approval to be extended.

Over the last three years, states in which the majority of our hospitals operate have implemented or enhanced their Medicaid state directed and supplemental payment programs.

Revenues from these programs totaled approximately $3.9 billion in 2023.

Accountable Care Organizations and Bundled Payment Initiatives

An Accountable Care Organization (“ACO”) is a network of providers and suppliers that work together to invest in infrastructure and redesign delivery processes to attempt to achieve high quality and efficient delivery of services.

Promoting accountability and coordination of care, ACOs are intended to produce savings as a result of improved quality and operational efficiency.

ACOs are intended to promote accountability, coordinate care and produce savings as a result of improved quality and operational efficiency.

ACOs that achieve quality performance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program.

There are several types of ACO programs, including the Medicare Shared Savings Program.

CMS continues to explore strategies to accelerate the growth of and access to ACOs.

The CMS Innovation Center is responsible for establishing demonstration projects and other initiatives in order to identify, develop, test and encourage the adoption of new methods of delivering and paying for health care that create savings under the Medicare and Medicaid programs, while improving quality of care.

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Hospitals may receive supplemental Medicare payments or owe repayments to CMS depending on whether overall CMS spending per episode exceeds or falls below a target specified by CMS and whether quality standards are met.

The CMS Innovation Center has implemented bundled payment models, including the Bundled Payment Care Improvement Advanced (“BPCI Advanced”) program, which is voluntary and expected to run through December 2025.

Participation in bundled payment programs is generally

voluntary, but CMS currently requires providers in selected geographic areas to participate in a mandatory bundled program for specified orthopedic procedures and a model for end-stage renal disease treatment.

The CMS Innovation Center has implemented bundled payment models, including the Bundled Payment Care Improvement Advanced program, which is voluntary and expected to run through December 2025.

Participation in bundled payment programs is generally voluntary, but CMS currently requires providers in selected geographic areas to participate in a mandatory bundled program for specified orthopedic procedures and a model for end-stage renal disease treatment.

In addition, a mandatory radiation oncology model was expected to begin on January 1, 2023, but CMS has indefinitely delayed its implementation.

CMS has indicated that it will provide six months’

notice before starting the model.

CMS has indicated that it will provide six months’ notice before starting the model.

In a strategic report issued in 2021 and updated in 2022, the CMS Innovation Center highlighted the need to accelerate the movement to value-based care and drive broader system transformation.

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Moreover, several private third-party payers are increasingly employing alternative payment models, which may increasingly shift financial risk to providers.

Disproportionate Share Hospital and Medicaid Supplemental Payments

Pending litigation challenging the payment formula for prior years and any future policies implemented by CMS may affect how CMS calculates DSH payments and may increase or decrease our payments in the future.

CMS has previously proposed making changes to the calculation of Section 1115 Demonstrations in the Medicaid fraction of the DSH formula in a manner that would effectively lower DSH payments for many hospitals, and has indicated that the agency will return to the issue in future rulemaking.

These changes could adversely impact our results of operations.

Some states make additional payments to providers through the Medicaid program that are separate from base payments and not specifically tied to an individual’s care.

These supplemental payments may be in the form of Medicaid DSH payments, which are intended to offset hospital uncompensated care costs.

The federal government distributes federal Medicaid DSH funds to each state based on a statutory formula.

The states then distribute the DSH funding among qualifying hospitals.

States have broad discretion to define which hospitals qualify for Medicaid DSH payments and the amount of such payments.

The Affordable Care Act and subsequent legislation provide for reductions to the Medicaid DSH hospital program, but Congress has delayed the implementation of these reductions until federal fiscal year 2024.

Under current law, Medicaid DSH payments will be reduced by $8 billion in each of federal fiscal years 2024 through 2027.

Supplemental payments may also be in the form of non-DSH payments, such as upper payment limit payments, which are intended to address the difference between Medicaid fee-for-service payments and Medicare reimbursement rates, or payments under other programs that vary by state under Section 1115 waivers.

These supplemental reimbursement programs are designed with input from CMS.

The programs are generally authorized for a specified period of time and require CMS’s approval to be extended.

CMS is considering changes to both DSH and non-DSH types of programs.

TRICARE is the Department of Defense’s health care program for members of the armed forces.

For inpatient services, TRICARE reimburses hospitals based on a DRG system modeled on the Medicare inpatient PPS.

For outpatient services, TRICARE reimburses hospitals based on a PPS that is similar to that utilized for services furnished to Medicare beneficiaries.

For outpatient services, TRICARE reimburses hospitals based on a PPS that is similar to that utilized for outpatient services furnished to Medicare beneficiaries.

Annual Cost Reports

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Price transparency initiatives may impact our relationships with payers and ability to obtain or maintain favorable contract terms.

For example, hospitals are required to publish a list of their standard charges for all items and services, including gross charges, discounted cash prices and payer-specific and de-identified negotiated charges, in a publicly accessible online file.

Further, CMS requires health insurers to publish online charges negotiated with providers for health care services.

In addition , the No Surprises Act requires providers to send to a patient’s health plan a good faith estimate of the expected charges for furnishing scheduled items or services, including billing and diagnostic codes, prior to the scheduled date of the items or services.

Further, CMS requires most health insurers to publish online charges negotiated with providers for health care services.

The estimate must cover any item or service that is reasonably expected to be provided in conjunction with the primary items or services, including those that may be delivered by another provider.

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Uninsured and Self-Pay Patients

Self-pay revenues are derived from providing health care services to patients without health insurance coverage and from the patient responsibility portion of payments for our health care services that are not covered by an individual’s health plan.

Collection of amounts due from individuals is typically more difficult than collection of amounts due from government health care programs or private third-party payers.

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The estimate must cover any item or service that is reasonably expected to be provided in conjunction with the scheduled item or service or that is reasonably expected to be delivered by another provider.

HHS is delaying enforcement with regard to good faith estimates that do not include expected charges for co-providers or co-facilities until the agency issues additional regulations.

If the actual charges to the uninsured or self-pay patient are substantially higher than the estimate or the provider furnishes an item or service that was not included in the good faith estimate, the patient can invoke a patient-provider dispute resolution process to challenge the higher amount.

HHS is delaying enforcement with regard to good faith estimates to uninsured individuals that do not include expected charges for co-providers or co-facilities until the agency issues additional regulations.

If the actual charges to the uninsured or self-pay patient exceed the good faith estimate by an amount deemed to be substantial by regulation (which is currently $400) or the provider furnishes an item or service that was not included in the estimate, the patient can invoke a patient-provider dispute resolution process to challenge the higher amount.

A high percentage of our uninsured patients are initially admitted through our emergency rooms.

For the year ended December 31, 2023, approximately 85% of our admissions of uninsured patients occurred through our emergency rooms.

The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital that participates in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize that condition or make an appropriate transfer of the individual to a facility that can handle the condition.

The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment.

In addition, health insurers are required to reimburse hospitals for emergency services provided to enrollees without prior authorization and without regard to whether a participating provider contract is in place.

The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment.

In addition, various federal and state laws require health insurers to reimburse hospitals for emergency services provided to enrollees without prior authorization and without regard to whether a participating provider contract is in place.

Hospital Utilization

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Outpatient revenues as a % of patient revenues(m)

(a) Excludes freestanding endoscopy centers (21 at December 31, 2022, 2021 and 2020).

(a) Excludes freestanding endoscopy centers (24 at December 31, 2023 and 21 at December 31, 2022 and 2021).

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

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Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenue and gross outpatient revenue and then dividing the resulting amount by gross inpatient revenue.

The equivalent admissions computation “equates”

outpatient revenue to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume.

The equivalent admissions computation “equates” outpatient revenue 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.

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In some cases, competing facilities are more established than we are.

Some competing facilities are physician-owned or are owned by

tax-supported government agencies and many others are owned by not-for-profit entities that may be supported by endowments, charitable contributions and/or tax revenues and are exempt from sales, property and income taxes.

Some competing facilities are physician-owned or are owned by tax-supported government agencies and many others are owned by not-for-profit entities that may be supported by endowments, charitable contributions and/or tax revenues and are exempt from sales, property and income taxes.

Such exemptions and support are not available to our facilities and may provide the tax-supported or not-for-profit entities an advantage in funding capital expenditures.

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We also face competition from specialty hospitals and from both our own and unaffiliated freestanding ASCs for market share in certain high margin services.

Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, our psychiatric hospitals and units compete with both local and regional hospitals, including the psychiatric units of general, acute care hospitals.

Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, our behavioral hospitals and units compete with both local and regional hospitals, including the behavioral units of general, acute care hospitals.

Trends toward clinical and pricing transparency may impact our competitive position, ability to obtain or maintain favorable contract terms and patient volumes in ways that may be difficult to predict.

For example, hospitals are currently required to publish a list of their standard charges for all items and services, including discounted cash prices and payer-specific and de-identified negotiated charges, in a publicly accessible online file.

Hospitals are also required to publish a consumer-friendly list of standard charges for certain “shoppable”

services (i.e., services that can be scheduled by a patient in advance) and associated ancillary services or, alternatively, maintain an online price estimator tool.

For example, hospitals are required to publish a list of their standard charges for all items and services, including discounted cash prices and payer-specific and de-identified negotiated charges, in a machine-readable, publicly accessible online file.

Hospitals are also required to publish a consumer-friendly list of standard charges for certain “shoppable” services (i.e., services that can be scheduled by a patient in advance) and associated ancillary services or, alternatively, maintain an online price estimator tool.

CMS may impose civil monetary penalties for noncompliance with these price transparency requirements.

Further, CMS requires health insurers to publish online charges negotiated with providers for health care services.

Starting January 1, 2023, health insurers must also provide online price comparison tools to help individuals get personalized cost estimates for covered items and services .

In addition, the No Surprises Act imposes additional price transparency requirements, including the requirement that providers send uninsured and self-pay patients (in advance of the scheduled date for the item or service or upon request) and health plans of insured patients a good faith estimate of the expected charges and diagnostic codes.

Further, CMS requires most health insurers to publish online charges negotiated with providers for health care services.

Starting January 1, 2024, most health insurers must also provide online price comparison tools to help individuals get personalized cost estimates for all covered items and services .

In addition, the No Surprises Act requires providers to send uninsured and self-pay patients (in advance of the scheduled date for the item or service or upon request) and health plans of commercially insured patients a good faith estimate of the expected charges and diagnostic codes.

Until HHS issues additional regulations, the agency is deferring enforcement of certain requirements regarding providing good faith estimates for insured patients and for good faith estimates sent to uninsured or self-pay patients that do not include expected charges for co-providers or co-facilities.

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Two of the most significant factors that impact the competitive position of a hospital are the number and quality of physicians affiliated with or employed by the hospital.

Although physicians may at any time terminate their relationship with a hospital we operate, our hospitals seek to retain physicians with varied specialties on the hospitals’

medical staffs and to attract other qualified physicians.

We believe physicians refer patients to a hospital on the basis of the quality and scope of services it renders to patients and physicians, the quality of physicians on the medical staff, the location of the hospital and the quality of the hospital’s facilities, technology, equipment and employees.

Although physicians may at any time terminate their relationship with a hospital we operate, our hospitals seek to retain physicians with varied specialties on the hospitals’ medical staffs and to attract other qualified physicians.

Accordingly, we strive to maintain and provide quality facilities, technology, equipment, employees and services for physicians and patients.

Our hospitals face competition from competitors that are implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models.

Our hospitals face competitors that are implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models.

Another major factor in the competitive position of our hospitals and other facilities is our ability to negotiate service contracts with group purchasers of health care services.

Managed care plans attempt to direct and control the use of health care services and obtain discounts from providers’

established gross charges.

Managed care plans attempt to direct and control members’ use of health care services and obtain discounts from providers’ established gross charges.

Similarly, employers and traditional health insurers continue to attempt to contain costs through negotiations with providers for managed care programs and discounts from established gross charges.

Generally, hospitals compete for service contracts with group purchasers of health care services on the basis of price, market reputation, geographic location, quality and range of services, quality of the medical staff and convenience.

Legislative and regulatory initiatives may impact our contract terms or ability to contract with payers, such as laws that permit payers to guide patients to particular providers and eliminate restrictions on placing providers into preferred tiers.

Our future success will depend, in part, on our ability to retain and renew our contracts with third-party payers and enter into new contracts on favorable terms.

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For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us.

Price transparency initiatives and increasing vertical integration efforts involving third-party payers and health care providers, among other factors, may increase these challenges.

Moreover, the trend toward consolidation among private third-party payers tends to increase payer bargaining power over fee structures.

In addition, health reform efforts may lead to private third-party payers increasingly demanding reduced fees or being unwilling to negotiate reimbursement increases.

Health plans increasingly utilize narrow networks that restrict the number of participating providers or tiered networks that impose significantly higher cost sharing obligations on patients that obtain services from providers in a disfavored tier.

The importance of obtaining contracts with group purchasers of health care services varies from community to community, depending on the market strength of such organizations.

State certificate of need (“CON”) laws, which place limitations on a health care facility’s ability to expand services and facilities, make capital expenditures and otherwise make changes in operations, may also have the effect of restricting competition.

Price transparency

initiatives and increasing vertical integration efforts involving third-party payers and health care providers, among other factors, may increase these challenges.

Moreover, the trend toward consolidation among private third-party payers tends to increase payer bargaining power over fee structures, and private third-party payers may increasingly demand reduced fees or be unwilling to negotiate reimbursement increases.

Health plans increasingly utilize narrow networks that restrict the number of participating providers or tiered networks that impose significantly higher cost sharing obligations on patients who obtain services from providers in a disfavored tier.

The importance of obtaining contracts with group purchasers of health care services varies by purchaser and by community, depending on the market position of such organizations.

We currently operate health care facilities in a number of states with CON laws or that require other types of approvals for the establishment or expansion of certain facility types or services.

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In those states that do not require state approval or that set relatively high levels of expenditures before they become reviewable by state authorities, competition in the form of new services, facilities and capital spending is more prevalent.

Other federal and state laws and regulations may also adversely impact our ability to expand, such as a regulation commonly known as the “36 Month Rule,”

which restricts the assumption of Medicare billing privileges for certain home health agencies.

Other federal and state laws and regulations may also adversely impact our ability to expand, such as a regulation commonly known as the “36 Month Rule,” which restricts the assumption of Medicare billing privileges for certain home health agencies and, effective January 1, 2024, hospices.

In addition, changes in licensure or other laws or regulations and recognition of new provider types or payment models could impact our competitive position.

See Item 1, “Business —

Regulation and Other Factors.”

See Item 1, “Business — Regulation and Other Factors.”

We and the health care industry as a whole face the challenge of continuing to provide quality patient care while dealing with rising costs and strong competition for patients.

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We believe our health care facilities are properly licensed under applicable state laws.

Each of our acute care hospitals located in the United States is eligible to participate in Medicare and Medicaid programs and is accredited by The Joint Commission.

If any facility were to lose its Medicare or Medicaid certification, the facility would be unable to receive reimbursement from federal health care programs.

Each of our acute care hospitals located in the United States is eligible to participate in Medicare and Medicaid programs.

To receive reimbursement under the Medicare and Medicaid programs, organizational providers and suppliers and individuals must satisfy extensive enrollment and revalidation requirements.

CMS has the authority to deny or revoke Medicare enrollment and deactivate billing privileges for a variety of reasons.

An adverse action relating to Medicare enrollment may impact a provider’s Medicaid eligibility, and adverse actions relating to Medicaid enrollment may impact Medicare enrollment.

If any facility were to lose its Medicare or Medicaid certification, the facility would be unable to receive reimbursement from applicable federal health care programs.

Each of our acute care hospitals located in the United States is accredited by The Joint Commission.

From time to time, we may acquire a facility that is not accredited but for which we will seek accreditation.

If any facility were to lose accreditation, the facility would be subject to state surveys, potentially be subject to increased scrutiny by CMS and likely lose payment from private third-party payers.

The Controlled Substances Act and Drug Enforcement Administration (“DEA”) regulations require every person who dispenses controlled substances to be registered with the DEA at each principal place of business or professional practice where the person dispenses controlled substances, subject to limited exceptions.

practice where the person dispenses controlled substances, subject to limited exceptions.

Each hospital or clinic must hold a DEA registration at each location and may be subject to similar state registration requirements.

In addition, we are subject to a variety of federal and state statutes and regulations that govern operational issues related to pharmaceuticals and controlled substances, such as those related to packaging, storing, and dispensing of pharmaceutical drugs, inventory control and recordkeeping requirements for controlled substances, and other standards intended to prevent diversion of controlled substances.

The DEA, the Department of Justice (“DOJ”), HHS, and state boards of pharmacy have broad enforcement powers, may conduct audits and investigations and can impose substantial fines and other penalties, including revocation of registration.

Management believes our facilities are in substantial compliance with current applicable federal, state, local and independent review body regulations and standards.

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Participation in any federal health care program, including the Medicare and Medicaid programs, is heavily regulated by statute and regulation.

If a hospital or other provider fails to substantially comply with the numerous conditions of participation in the Medicare and Medicaid programs or performs certain prohibited acts, the provider’s participation in the federal health care programs may be terminated, or civil and/or criminal penalties may be imposed.

Civil monetary penalties are adjusted annually based on updates to the consumer price index.

Anti-kickback Statute

A section of the Social Security Act known as the “Anti-kickback Statute”

prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a federal health care program.

A section of the Social Security Act known as the “Anti-kickback Statute” prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a federal health care program.

Courts have interpreted this statute broadly and held that there is a violation of the Anti-kickback Statute if just one purpose of the remuneration is to generate referrals, even if there are other lawful purposes.

Furthermore, knowledge of the law or the intent to violate the law is not required.

Violations of the Anti-kickback Statute may be punished by criminal fines of up to $100,000 per violation, imprisonment, substantial civil monetary penalties per violation that are subject to annual adjustment based on updates to the consumer price index and damages of up to three times the total amount of the remuneration and/or exclusion from participation in federal health care programs, including Medicare and Medicaid.

In addition, submission of a claim for services or items generated in violation of the Anti-kickback Statute may be subject to additional penalties under the federal False Claims Act (“FCA”) as a false or fraudulent claim.

The HHS Office of Inspector General (the “OIG”), among other regulatory agencies, is responsible for identifying and eliminating fraud, abuse and waste.

Violations of the Anti-kickback Statute may be punished by criminal fines per violation, imprisonment, substantial civil monetary penalties per violation that are subject to annual adjustment based on updates to the consumer price index and damages of up to three times the total amount of the remuneration and/or exclusion from participation in federal health care programs, including Medicare and Medicaid.

The HHS Office of Inspector General (the “OIG”), among other regulatory agencies, is responsible for identifying and eliminating fraud, abuse and waste.

The OIG carries out this mission through a nationwide program of audits, investigations and inspections.

The OIG provides guidance to the industry through various methods, including advisory opinions and “Special Fraud Alerts.”

These Special Fraud Alerts do not have the force of law, but identify features of arrangements or transactions that the government believes may cause the arrangements or transactions to violate the Anti-kickback Statute or other federal health care laws.

The OIG provides guidance to the industry through various methods, including advisory opinions and “Special Fraud Alerts.” These Special Fraud Alerts do not have the force of law, but identify features of arrangements or transactions that the government believes may cause the arrangements or transactions to violate the Anti-kickback Statute or other federal health care laws.

The OIG has identified several incentive arrangements that constitute suspect practices, including:

(a) payment of any incentive by a hospital each time a physician refers a patient to the hospital, (b) the use of free or significantly discounted office space or equipment in facilities usually located close to the hospital, (c) provision of free or significantly discounted billing, nursing or other staff services, (d) free training for a physician’s office staff in areas such as management techniques and laboratory techniques, (e) guarantees which provide, if the physician’s income fails to reach a predetermined level, the hospital will pay any portion of the remainder, (f) low-interest or interest-free loans, or loans which may be forgiven if a physician refers patients to the hospital, (g) payment of the costs of a physician’s travel and expenses for conferences or payments to a physician for speaking engagements, (h) coverage on the hospital’s group health insurance plans at an inappropriately low cost to the physician, (i) payment for services (which may include consultations at the hospital) which require few, if any, substantive duties by the physician, (j) purchasing goods or services from physicians at prices in excess of their fair market value, (k) rental of space in physician offices, at other than fair market value terms, by persons or entities to which physicians refer, and (l) physician-owned entities (frequently referred to as physician-owned distributorships or PODs) that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs.

coverage on the hospital’s group health insurance plans at an inappropriately low cost to the physician, (i) payment for services (which may include consultations at the hospital) which require few, if any, substantive duties by the physician, (j) purchasing goods or services from physicians at prices in excess of their fair market value, (k) rental of space in physician offices, at other than fair market value terms, by persons or entities to which physicians refer, and (l) physician-owned entities (frequently referred to as physician-owned distributorships or PODs) that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs.

The OIG has encouraged persons having information about hospitals who offer the above types of incentives to physicians to report such information to the OIG.

The OIG also issues “Special Advisory Bulletins”

as a means of providing guidance to health care providers.

The OIG also issues “Special Advisory Bulletins” as a means of providing guidance to health care providers.

These bulletins, along with the Special Fraud Alerts, have focused on certain arrangements that could be subject to heightened scrutiny by government enforcement authorities, including:

arrangements, i.e., the practice of giving physicians a share of any reduction in a hospital’s costs for patient care attributable in part to the physician’s efforts.

(a) contractual joint venture arrangements and other joint venture arrangements between those in a position to refer business, such as physicians, and those providing items or services for which Medicare or Medicaid pays, and (b) certain “gainsharing” arrangements, i.e., the practice of giving physicians a share of any reduction in a hospital’s costs for patient care attributable in part to the physician’s efforts.

In addition to issuing Special Fraud Alerts and Special Advisory Bulletins, the OIG issues compliance program guidance for certain types of health care providers.

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An adverse determination could subject us to liabilities under the Social Security Act and other laws, including criminal penalties, civil monetary penalties and exclusion from participation in Medicare, Medicaid or other federal health care programs.

The Social Security Act also includes a provision commonly known as the “Stark Law.”

The Stark Law prohibits physicians from referring Medicare and Medicaid patients to entities with which they or any of their immediate family members have a financial relationship, if these entities provide certain “designated health services”

reimbursable by Medicare or Medicaid unless an exception applies.

The Social Security Act also includes a provision commonly known as the “Stark Law.” The Stark Law prohibits physicians from referring Medicare and Medicaid patients to entities with which they or any of their immediate family members have a financial relationship, if these entities provide certain “designated health services” reimbursable by Medicare or Medicaid unless an exception applies.

The Stark Law also prohibits entities that provide designated health services reimbursable by Medicare and Medicaid from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral on a timely basis.

“Designated health services”

include inpatient and outpatient hospital services, clinical laboratory services, radiology and certain other imaging services, radiation therapy services and home health services.

Sanctions for violating the Stark Law include denial of payment, substantial civil monetary penalties per claim submitted and exclusion from the federal health care programs.

“Designated health services” include inpatient and outpatient hospital services, clinical laboratory services, radiology and certain other imaging services, radiation therapy services and home health services.

Sanctions for violating the Stark Law include denial of payment, substantial civil monetary penalties

per claim submitted and exclusion from the federal health care programs.

Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the FCA.

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Unlike safe harbors under the Anti-kickback Statute with which compliance is voluntary, a financial relationship must comply with every requirement of a Stark Law exception or the arrangement is in violation of the Stark Law.

Although there is an exception for a physician’s ownership interest in an entire hospital, the Affordable Care Act prohibits physician-owned hospitals established after December 31, 2010 from billing for Medicare or Medicaid patients referred by their physician owners.

As a result, the law effectively prevents the formation of new physician-owned hospitals that participate in Medicare or Medicaid.

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Federal enforcement officials have the ability to exclude from Medicare and Medicaid any business entities and any investors, officers and managing employees associated with business entities that have committed health care fraud, even if the officer or managing employee had no knowledge of the fraud.

Criminal and civil penalties may be imposed for a number of other prohibited activities, including failure to return known overpayments, certain gainsharing arrangements, billing Medicare amounts that are substantially in excess of a provider’s usual charges, offering remuneration to influence a Medicare or Medicaid beneficiary’s selection of a health care provider, contracting with an individual or entity known to be excluded from a federal health care program, making or accepting a payment to induce a physician to reduce or limit services, and soliciting or receiving any remuneration in return for referring an individual for an item or service payable by a federal health care program.

Like the Anti-kickback Statute, these provisions are very broad.

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Further, individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds under the Medicare Integrity Program.

In addition, the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”) establishes criminal penalties for paying, receiving, soliciting or offering any remuneration in return for referring a patient to a laboratory, clinical treatment facility or recovery home, or in exchange for an individual using the services of one of these entities.

The EKRA prohibitions apply to services covered by government health care programs and by private health plans.

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We are subject to state and federal laws that govern the submission of claims for reimbursement and prohibit the making of false claims or statements.

One of the most prominent of these laws is the FCA, which may be enforced by the federal government directly or by a qui tam plaintiff, or whistleblower, on the government’s behalf.

The government may use the FCA to prosecute Medicare and other government program fraud in areas such as coding errors, billing for services not provided and submitting false cost reports.

In addition, the FCA covers payments made in connection with the Exchanges created under the Affordable Care Act, if those payments include any federal funds.

In addition, the FCA covers payments made in connection with the Exchanges if those payments include any federal funds.

When a private party brings a qui tam action under the FCA, the defendant is not made aware of the lawsuit until the government commences its own investigation or makes a determination whether it will intervene.

If a defendant is determined by a court of law to

be liable under the FCA, the defendant may be required to pay three times the actual damages sustained by the government, plus substantial mandatory civil penalties for each separate false claim.

If a defendant is determined by a court of law to be liable under the FCA, the defendant may be required to pay three times the actual damages sustained by the government, plus substantial mandatory civil penalties for each separate false claim.

These penalties are updated annually based on changes to the consumer price index.

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Liability often arises when an entity knowingly submits a false claim for reimbursement to the federal government.

The FCA defines the term “knowingly”

Though simple negligence will not give rise to liability under the FCA, submitting a claim with reckless disregard to its truth or falsity constitutes a “knowing”

submission under the FCA and, therefore, may create liability.

The FCA defines the term “knowingly” broadly.

Though simple negligence will not give rise to liability under the FCA, submitting a claim with reckless disregard to its truth or falsity constitutes a “knowing” submission under the FCA and, therefore, may create liability.

Submission of claims for services or items generated in violation of the Anti-kickback Statute constitutes a false or fraudulent claim under the FCA.

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HIPAA Administrative Simplification and Privacy, Security and Interoperability Requirements

The Administrative Simplification Provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and implementing regulations require the use of uniform electronic data transmission standards and code sets for certain health care claims and payment transactions submitted or received electronically.

The Administrative Simplification Provisions of HIPAA and implementing regulations require the use of uniform electronic data transaction standards and code sets for certain health care claims and payment transactions submitted or received electronically.

In addition, HIPAA requires each provider to use a National Provider Identifier.

These provisions are intended to encourage electronic commerce in the health care industry.

and require covered entities, including health plans and most health care providers, to implement administrative, physical and technical safeguards to protect the security of such information.

The privacy and security regulations promulgated pursuant to HIPAA extensively regulate the use and disclosure of individually identifiable health information, known as “protected health information,” and require covered entities, including health plans and most health care providers, to implement administrative, physical and technical safeguards to protect the security of such information.

Certain provisions of the security and privacy regulations apply to business associates (entities that handle protected health information on behalf of covered entities), and business associates are subject to direct liability for violation of these provisions.

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HHS is required to publish on its website a list of all covered entities that report a breach involving more than 500 individuals.

All non-permitted uses or disclosures of unsecured protected health information are presumed to be breaches unless the covered entity or business associate establishes that there is a low probability the information has been compromised.

All non-permitted uses or disclosures of unsecured protected health information are presumed to be breaches unless the covered entity or

business associate establishes that there is a low probability the information has been compromised.

Various state laws and regulations may also require us to notify affected individuals in the event of a data breach involving individually identifiable information.

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The HIPAA privacy regulations and security regulations have and will continue to impose significant costs on our facilities in order to comply with these standards.

There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns.

Our facilities remain subject to federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA.

These laws vary and could impose additional penalties.

For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches.

The California Consumer Privacy Act of 2018 (the “CCPA”), which was significantly amended by the California Privacy Rights Act (“CPRA”), the Colorado Privacy Act, the Utah Privacy Act and the Virginia Consumer Data Protection Act each afford consumers expanded privacy protections.

These provide for civil penalties for violations, and the CCPA and CPRA provide for a private right of action for data breaches.

Additionally, several privacy bills have been proposed both at the federal and state level that may result in additional legal requirements that impact our business.

The potential effects of these laws are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in order to comply.

For example, residents in states with comprehensive privacy laws have expanded rights to access and require deletion and portability of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.

Many foreign data privacy regulations (including the UK Data Protection Legislation) are more stringent than those in the United States.

In the case of non-compliance with these regulations, regulators may impose administrative fines which are based on a multi-factored approach.

Health care providers and industry participants are also subject to a growing number of requirements intended to promote the interoperability and exchange of patient health information.

For example, health care providers and certain other entities are subject to information blocking restrictions pursuant to the 21 st Century Cures Act that prohibit practices that are likely to interfere with the access, exchange or use of electronic health information, except as required by law or specified by HHS as a reasonable and necessary activity.

Violations may result in penalties or other disincentives.

Violations may result in penalties or other significant disincentives.

In November 2023, HHS issued a proposed rule to establish disincentives for certain types of providers.

If finalized, hospitals found to have committed information blocking would not qualify as “meaningful electronic health record users” under the Medicare Promoting Interoperability Program and as a result would lose 75% of the annual market basket increase they would otherwise receive.

All of our hospitals in the United States are subject to EMTALA.

This federal law requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every individual who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition.

The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment.

There are severe penalties under EMTALA if a hospital fails to screen or appropriately stabilize or transfer an individual or if the hospital delays appropriate treatment in order to first inquire about the individual’s ability to pay.

The obligation to screen and stabilize emergency medical conditions exists regardless of an individual’s ability to pay for treatment.

Penalties for violations of EMTALA include exclusion from participation in the Medicare program and civil monetary penalties.

These civil monetary penalties are adjusted annually based on updates to the consumer price index.

In addition, an injured individual, the individual’s family or a medical facility that suffers a financial loss as a direct result of a hospital’s violation of the law can bring a civil suit against the hospital.

The government broadly interprets EMTALA to cover situations in which individuals do not actually present to a hospital’s emergency room, but present for emergency examination or treatment to the hospital’s campus, generally, or to a hospital-based clinic that treats emergency medical conditions or are transported in a hospital-owned ambulance, subject to certain exceptions.

At least one court has interpreted the law also to apply to a hospital that has been notified of a patient’s pending arrival in a non-hospital owned ambulance.

In recent years, the government has undertaken enforcement actions in which it has broadly interpreted a hospital’s obligations with respect to screening and stabilizing patients who present with a psychiatric emergency.

At least one court has interpreted the law also to apply to a hospital that has been notified of a patient’s pending arrival in a non-hospital owned ambulance.

EMTALA does not generally apply to individuals admitted for inpatient services.

The government has expressed its intent to investigate and enforce EMTALA violations actively.

Hospitals may face conflicting interpretations of EMTALA’s requirements with respect to state laws that limit access to abortion or other reproductive health services.

For example, HHS has provided guidance regarding EMTALA obligations specific to patients who are pregnant or are experiencing pregnancy loss and the preemption of state law.

This guidance is the subject of legal challenges, and a federal district court issued a preliminary injunction prohibiting enforcement of the guidance in Texas and against members of certain professional groups involved in the litigation.

This guidance is the subject of legal challenges, including pending cases in Texas and Idaho that currently have allowed state restrictions to remain in effect or stayed or limited application of HHS guidance as the cases continue.

Corporate Practice of Medicine/Fee Splitting

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However, some states have imposed individual health insurance mandates, and other states have explored or offer public health insurance options.

To increase access to health insurance during COVID-19, the ARPA enhanced subsidies for individuals eligible to purchase coverage through Affordable Care Act marketplaces.

The Inflation Reduction Act, enacted in August 2022, extends these enhanced subsidies through 2025.

In addition, in a final rule published in September 2021,

HHS extended the annual open enrollment period for coverage through federal marketplaces and granted state exchanges flexibility to lengthen their open enrollment periods.

These changes and initiatives may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

The expansion in public program coverage under the Affordable Care Act has been driven primarily by expanding the categories of individuals eligible for Medicaid coverage and permitting individuals with relatively higher incomes to qualify.

To increase access to health insurance during the COVID-19 pandemic, the ARPA enhanced subsidies for individuals eligible to purchase coverage through the Exchanges.

Subsequent legislation extended these enhanced subsidies through 2025.

These and other changes and initiatives have impacted the number of individuals that

elect to obtain public or private health insurance or the scope of such coverage, if purchased, in the states that we operate.

For example, the ARPA enhanced subsidies, among other factors, have resulted in increased Exchange enrollment in the states in which we operate.

If these subsidies are not extended beyond 2025, Exchange enrollment may be adversely impacted.

Health care providers may be significantly impacted by changes specific to the Medicaid program, including changes resulting from the Affordable Care Act and subsequent legislation or agency initiatives.

The Affordable Care Act expanded the categories of individuals eligible for Medicaid coverage and permits individuals with relatively higher incomes to qualify.

However, a number of states, including Texas and Florida, have opted out of the Medicaid expansion provisions.

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In addition, there is uncertainty regarding the potential impact of other reform efforts at the federal and state levels.

For example, some members of Congress have proposed measures that would expand government-sponsored coverage, 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”).

Other recent initiatives and proposals include those aimed at price transparency and out-of-network charges, which may impact prices and the relationships between health care providers, insurers and patients.

For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise”

medical bills, and several states have implemented similar laws intended to protect consumers.

For example, the No Surprises Act imposes various requirements on providers and health plans intended to prevent “surprise” medical bills, and several states have implemented similar laws intended to protect consumers.

The No Surprises Act prohibits providers from charging patients an amount beyond the in-network cost sharing amount for items and services rendered by out-of-network providers (i.e., prohibits balance billing), subject to limited exceptions.

The No Surprises Act also impacts the payment received by an out-of-network provider from a health plan for items and services to which the prohibitions on balance billing apply.

For items and services for which balance billing is prohibited (even when no balance billing occurs), the No Surprises Act establishes an independent dispute resolution (“IDR”) process for providers and payers to handle payment disputes that cannot be resolved through direct negotiations.

Regulations implementing the IDR provisions of the No Surprises Act provide that, when making a payment determination, the IDR must consider the qualifying payment amount, or QPA (which is generally the payer’s median contracted rate for the same or similar service in an area), and all additional permissible information submitted by each party.

The IDR entity must select the offer that best represents the value of the item or service under dispute.

However, the final rule establishing the IDR process is currently the subject of legal challenges.

On February 6, 2023, a federal judge vacated parts of the rule, including provisions related to consideration of the QPA.

The No Surprises Act also requires providers to send an insured patient’s health plan a good faith estimate of expected charges, including billing and diagnostic codes, prior to when the patient is scheduled to receive the item or service.

HHS is deferring enforcement of this requirement until it issues additional regulations.

The final rule establishing the IDR process is currently the subject of legal challenges, and government agencies have proposed various changes, creating uncertainty and resulting in delays in claims resolution.

The No Surprises Act also requires providers to provide a good faith estimate of expected charges to uninsured or self-pay individuals in connection with scheduled items or services, in advance of the date of the scheduled item or service, or upon request of the individual.

HHS is delaying enforcement with regard to good faith estimates that do not include expected charges for co-providers or co-facilities until the agency issues additional regulations.

If the actual charges to an uninsured or self-pay patient are substantially higher than the estimate or the provider furnishes an item or service that was not included in the good faith estimate, the patient may invoke a patient-provider dispute resolution process established by regulation to challenge the higher amount.

If the actual charges to an uninsured or self-pay patient exceed the good faith estimate by an amount deemed to be substantial by regulation (which is currently $400) or the provider furnishes an item or service that was not included in the good faith estimate, the patient may invoke a patient-provider dispute resolution process established by regulation to challenge the higher amount.

Other trends toward transparency and value-based purchasing may impact the competitive position and patient volumes of providers.

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Some price transparency obligations apply only to payers.

For example, CMS requires health insurers to publish online charges negotiated with providers for health care services.

Starting January 1, 2023, health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

For example, CMS requires health insurers to publish online charges negotiated with providers for health care services, and health insurers must provide online price comparison tools to help individuals get personalized cost estimates for covered items and services.

Other industry participants, such as private payers and large employer groups and their affiliates, may also introduce financial or delivery system reforms.

For example, in recent years, there have been trends influenced by private and/or public payers toward enrollment in managed care programs, favoring outpatient care over inpatient care, and provider consolidation.

These issues are further discussed in Item 1A, “Risk Factors.”

General Economic and Demographic Factors

The health care industry is impacted by changes in or uncertainty regarding the overall U.S.

COVID-19 has adversely impacted, and may in the future adversely impact, economic conditions in the United States.

In addition, outside of COVID-19-related stimulus and relief measures, budget deficits at the federal level and within some state and local government entities have had a negative impact on spending for many health and human service programs, including

Medicare, Medicaid and similar programs, which represent significant payer sources for our hospitals and other providers.

The health care industry is impacted by the overall U.S.

Budget deficits at the federal level and within some state and local government entities have had a negative impact on spending for many health and human service programs, including Medicare, Medicaid and similar programs, which represent significant payer sources for our hospitals and other providers.

We anticipate that the federal deficit, the growing magnitude of Medicare and Medicaid expenditures and the aging of the U.S.

population will continue to place pressure on government health care programs.

Other risks we face during periods of economic weakness and high unemployment include potential declines in the population covered under managed care agreements, increased patient decisions to postpone or cancel elective and nonemergency health care procedures (including delaying surgical procedures), potential increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients and increased difficulties in collecting patient receivables for copayment and deductible amounts.

population, among other factors, will continue to place pressure on government health care programs.

nonemergency health care procedures (including delaying surgical procedures), potential increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients and increased difficulties in collecting patient receivables for copayment and deductible amounts.

Compliance Program

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The program is intended to monitor and raise awareness of various regulatory issues among employees and to emphasize the importance of complying with governmental laws and regulations.

As part of the ethics and compliance program, we provide annual ethics and compliance training to our employees and encourage all employees to report any violations to their supervisor, an ethics and compliance officer or to the Company’s ethics line available 24 hours a day by phone and internet portal.

Antitrust Laws

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• Managing the environmental impact of our capital programs.

We are pursuing a plan to reduce our scope 1 and scope 2 greenhouse gas emissions by 2030 in line with the Paris Agreement 1.5℃

emissions reduction goal.

We are pursuing a plan to reduce our scope 1 and scope 2 greenhouse gas emissions by 2030 in line with the Paris Agreement 1.5℃ emissions reduction goal.

Our initiatives contemplate operational changes intended to reduce energy consumption, including by accelerating related capital investments, new technology pilots, renewable energy contracting and investments, and medical gas initiatives.

We have baselined our scope 1 and scope 2 greenhouse gas emissions for 2021, and we are updating those calculations for 2022 activity to measure trends in our greenhouse gas emissions.

We are exploring a process to measure scope 3 greenhouse gas emissions in the future.

In 2022, we released our inaugural Task Force on Climate-related Financial Disclosure (“TCFD”) report to provide additional insight into our commitment to improving our environmental impact and strengthening our climate resilience to support the communities we serve.

The report follows TCFD guidance and outlines the ways we are integrating climate-related risks and opportunities into our governance structure, our risk management and strategy development processes, and how we establish and track climate-related metrics and targets.

In 2021, we baselined our scope 1 and scope 2 greenhouse gas emissions for 2020, and we are updating those calculations annually to measure trends in our greenhouse gas emissions.

In 2023, we measured our 2021 scope 3 greenhouse gas emissions for the first time for the purchased goods and services category and the capital goods category.

These two categories comprise the majority of our scope 3 emissions.

In 2022, we released our inaugural Task Force on Climate-related Financial Disclosures (“TCFD”) report to provide additional insight into our commitment to improving our environmental impact and strengthening our climate resilience to support the communities we serve.

We plan to continue following established guidelines to assess and better understand the physical and transition risks from climate change that we believe most significantly impact our operations.

We have also integrated climate-related risk assessment into our established enterprise risk management function.

While we currently believe that compliance with existing environmental laws and regulations does not have a material impact on our operations, changes in consumer preferences and additional legislation or regulatory requirements, including those associated with the transition to a low-carbon economy, may increase costs associated with compliance, the operation of our facilities and supplies.

While we currently believe that compliance with existing environmental laws and regulations does not have a material impact on our operations, changes in consumer preferences and additional legislation or regulatory requirements, including those associated with efforts to transition to a low-carbon economy, may increase costs associated with compliance, the operation of our facilities and supplies.

As is typical in the health care industry, we are subject to claims and legal actions by patients in the ordinary course of business.

Subject, in most cases, to a $15 million per occurrence self-insured retention, our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence (effective January 1, 2023).

Subject, in most cases, to a $15 million per occurrence self-insured retention, our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence.

The insurance subsidiary has obtained reinsurance for professional liability risks generally above a retention level of either $25 million or $35 million per occurrence, depending on the jurisdiction for the related claim.

We also maintain professional liability insurance with unrelated commercial carriers for losses in excess of amounts insured by our insurance subsidiary.

We purchase, from unrelated insurance companies, coverage for cyber security incidents, directors and officers liability and property loss in amounts we believe are reasonable and subject to terms of coverage we believe to be reasonable.

We purchase, from unrelated insurance companies, coverage for cybersecurity incidents, directors and officers liability and property loss in amounts we believe are reasonable and subject to terms of coverage we believe to be reasonable.

Human Capital Resources

Our workforce is comprised of approximately 294,000 employees (as of December 31, 2022), including approximately 87,000 part-time and PRN employees (references herein to “employees”

refer to employees of our affiliates).

Our workforce is comprised of approximately 310,000 employees (as of December 31, 2023), including approximately 90,000 part-time and PRN employees (references herein to “employees” refer to employees of our affiliates).

Our Board of Directors and its committees oversee human capital matters through regular reporting from management and advisors.

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We are committed to fostering a culture of inclusion that embraces and supports our patients, colleagues, partners, physicians and communities.

Our workforce is comprised of approximately 78% women and 44% people of color.

Our domestic workforce is comprised of approximately 78% women and 45% people of color.

Our policies prohibit discrimination on the basis of age, gender, disability, race, color, ancestry, citizenship, religion, pregnancy, sexual orientation, gender identity or expression, national origin, medical condition, marital status, veteran status, payment source or ability, or any other basis prohibited by federal, state or local law.

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We seek to recruit diverse candidates at all stages of their careers and through a variety of venues and programs.

Our Chief Diversity Officer leads a team that is responsible for advancing diversity, equity and inclusion (“DEI”) and cultural competence initiatives across the Company.

Our Executive Diversity Council, sponsored by our Chief Executive Officer and comprised of executive leaders from the Company, champions DEI across the Company and informs strategic decisions towards DEI goals and objectives.

In addition to the Executive Diversity Council, we have implemented DEI Councils comprised of diversity leaders and facility representatives and added division-based DEI leaders to support local deployment of DEI strategies and programs across the enterprise.

In the beginning of 2020, we launched a DEI strategy based on internal and external research to support the advancement of people of color and women into leadership roles.

We have since established nine employee resource groups to provide colleagues opportunities to convene around shared experiences, including groups for Black colleagues, women, young professionals, LGBTQ+, Hispanic/Latinx, and Asian colleagues, veterans, colleagues with disabilities, and a group focused on mental health and wellness –

each with a senior leader serving as executive sponsor.

In addition, the Company launched a sponsorship program in 2022 for a cohort of Black colleagues to support leadership and advancement, which has since expanded to include a broader focus on Black, Asian, and Hispanic leaders.

The Company’s Corporate Governance Guidelines reinforce its commitment to diversity by requiring the initial pool of candidates from which the Nominating and Corporate Governance Committee may recommend director nominees to include qualified female and racially/ethnically diverse candidates and the Nominating and Corporate Governance Committee to request that any third-party search firm that it engages to identify such candidates to include qualified female and racially/ethnically diverse candidates in such initial pool.

We encourage you to review the “Diversity, Equity and Inclusion”

section of our website, which includes our EEO-1 data, as well as our 2022 Impact Report (available at www.hcahealthcareimpact.com) for more detailed

information regarding our DEI and pay equity programs and initiatives.

Our Chief Diversity Officer leads a team that is responsible for advancing diversity, equity and inclusion (“DEI”) initiatives across the Company.

Our Executive DEI Council, sponsored by our Chief Executive Officer and comprised of executive leaders from the Company, champions DEI across the Company and informs strategic decisions towards DEI objectives.

In addition to the Executive DEI Council, we have implemented division DEI Councils comprised of diversity leaders and facility representatives and added division-based DEI leaders to support local deployment of DEI strategies and programs across the enterprise.

We have established nine employee resource groups to provide colleagues opportunities to convene around shared experiences, including groups for Black colleagues, women, young professionals, LGBTQ+, Hispanic and Asian colleagues, veterans, colleagues with disabilities and a group focused on mental health and wellness – each with a senior leader serving as executive sponsor.

The Company remains focused on supporting leadership development and advancement opportunities for all of its employees, and as part of that overarching commitment, has established programs which develop leadership skills and provide mentorship opportunities for Black, Asian, and Hispanic leaders at the manager level and above.

Committee to request that any third-party search firm that it engages to identify such candidates to include qualified female and racially/ethnically diverse candidates in such initial pool.

We encourage you to review the “Diversity, Equity and Inclusion” section of our website, which includes our EEO-1 data, as well as our 2023 Impact Report (available at www.hcahealthcareimpact.com) for more detailed information regarding our DEI and pay equity programs and initiatives.

Nothing on our website, including our 2023 Impact Report or sections thereof, shall be deemed incorporated by reference into this annual report on Form 10-K.

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Culture and Talent Development

HCA Healthcare’s culture is critical to our success.

We seek to instill a culture across our system that includes making a positive impact on our patients, communities and each other, and nurture that culture through inclusion, compassion and respect.

To assess and improve employee retention and engagement, we connect with our colleagues in several ways to listen to and respond to their concerns, including employee rounding, employee advisory groups and governance councils, and colleague surveys throughout the year.

During 2022, we expanded our efforts to improve our colleagues’

engagement by focusing on the vital behavior of personal connection through care, support and growth to better respond to the needs of our colleagues.

We have expanded our efforts to improve our colleagues’ engagement by focusing on the vital behavior of personal connection through care, support and growth to better respond to the needs of our colleagues.

By providing education, training and opportunities to grow as clinicians and leaders, we seek to support our colleagues throughout their career journey.

We also support our colleagues’

development through programs such as tuition assistance, student loan payment assistance, clinical training and certification.

We also support our colleagues’ development through programs such as tuition assistance, student loan payment assistance, clinical training and certification.

We are highly committed to developing leaders who support our culture, grow our business and lead the industry.

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No union elections occurred at any of our domestic facilities in 2023.

While no elections are scheduled in 2023, it is possible that employees at additional hospitals may unionize in the future, or employees currently represented by labor unions may choose to reject that representation.

One election was held in January 2024 that resulted in the addition of a number of employees to an existing bargaining unit at one of our facilities in Nevada.

There are no other elections scheduled to be held in 2024.

It is possible that employees at additional hospitals may unionize in the future, or employees currently represented by labor unions may choose to reject that representation.

We have not experienced work stoppages that have materially, adversely affected our business or results of operations.

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Some physicians provide services in our hospitals under contracts, which generally describe a term of service, provide and establish the duties and obligations of such physicians, require the maintenance of certain performance criteria and set compensation for such services.

Any licensed physician may apply to be accepted to the medical staff of any of our hospitals, but the hospital’s medical staff and the appropriate governing board of the hospital, in accordance with established credentialing criteria, must approve acceptance to the staff.

Members of the medical staffs of our hospitals often also serve on the medical staffs of other hospitals and may terminate their affiliation with one of our hospitals at any time.

Our facilities, like most health care facilities, have experienced rising labor costs and turnover.

In some markets, nurse and medical support personnel availability and retention have become significant operating issues for health care providers, including the Company.

These challenges have been exacerbated by the effects that COVID-19 has had on health care personnel.

Nurse and medical support shortages have resulted in a number of adverse impacts to our business, including capacity and growth constraints, reduced patient satisfaction, reduced physician satisfaction, impact on services offered and increased costs, among others.

To address this challenge, we have implemented several initiatives to improve retention, recruiting, compensation programs and productivity.

We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel and to utilize more expensive temporary or contract personnel.

As a result, our labor costs could continue to increase at rates in excess of historical levels.

We continue to experience increasing competition to recruit and retain quality physicians, as well as increasing costs to contract with hospital-based physicians.

Our facilities, like most health care facilities, have experienced challenges related to labor costs and turnover.

Nurse and medical support personnel availability and retention can present significant operating issues for health care providers such as the Company, including capacity and growth constraints, reduced patient satisfaction, reduced physician satisfaction, impact on services offered and increased costs, among others.

To address these challenges, we implemented several initiatives to improve retention, recruiting, compensation programs and productivity.

While these efforts moderated the impact of these challenges to the Company in 2023, there can be no assurance we will not experience operating issues due to the costs and availability of nurse and medical support personnel in the future.

We may be required to enhance wages and benefits to recruit and retain nurses and other medical support personnel and to utilize more expensive temporary or contract personnel.

As a result, our labor costs could increase at rates in excess of historical levels.

We also depend on the available labor pool of employees in each of the markets in which we operate to fill other necessary positions.

If there is additional union organizing activity or a significant portion of our employee base unionizes, our costs could increase.

In addition, we operate in several states that have adopted mandatory nurse-staffing ratios, mandate staffing committees to develop staffing plans or require public reporting of nurse staffing levels.

If these states reduce mandatory nurse to patient ratios or additional states in which we operate adopt mandatory nurse to patient ratios, such changes could significantly affect labor costs and have an adverse impact on revenues if we are required to limit patient admissions in order to meet the required ratios.

The inability to attract, retain and utilize sufficient, quality clinical and non-clinical personnel could impair our capacity, ability to grow and our results of operations.

In addition, we operate in states that have adopted mandatory nurse-staffing ratios or mandate staffing committees to develop staffing plans.

If these states reduce mandatory nurse to patient ratios or additional states in which we operate adopt mandatory nurse to patient ratios or other measures to regulate staffing, such changes could significantly affect labor costs and have an adverse impact on revenues if we are required to limit patient admissions in order to comply.

The inability to attract, retain and utilize sufficient, quality clinical and non-clinical personnel could impair our capacity, ability to grow and results of operations.

Information about our Executive Officers

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Chief Executive Officer and Director

President —

American Group

President — American Group

Senior Vice President and Chief Human Resources Officer

Senior Vice President —

Internal Audit Services

Senior Vice President —

Government Relations

Senior Vice President — Internal Audit Services

Senior Vice President — Government Relations

Executive Vice President and Chief Clinical Officer

Executive Vice President and Chief Operating Officer

President —

Atlantic Group

Senior Vice President —

President — Atlantic Group

Senior Vice President — Finance

Senior Vice President and Chief Legal Officer

President —

National Group

President — National Group

Senior Vice President and Chief Nurse Executive

Martin Paslick

Senior Vice President and Chief Information Officer

Senior Vice President —

Marketing and Communications

Senior Vice President — Marketing and Communications

Executive Vice President and Chief Financial Officer

Senior Vice President and Chief Development Officer

Senior Vice President —

Payer Contracting and Alignment

Senior Vice President — Payer Contracting and Alignment

Senior Vice President and Chief Information Officer

Senior Vice President and Chief Ethics and Compliance Officer

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From November 2016 through December 2018, Mr.

Hazen served as the Company’s President and Chief Operating Officer.

Prior to that, he served as Chief Operating Officer of the Company from January 2015 to November 2016 and as President —

Operations of the Company from 2011 to 2015.

He also served as President —

Western Group from 2001 to 2011 and as Chief Financial Officer —

Western Group of the Company from 1995 to 2001.

Hazen served as the Company’s President and Chief Operating Officer.

Prior to that, he served as Chief Operating Officer of the Company from January 2015 to November 2016 and as President — Operations of the Company from 2011 to 2015.

He also served as President — Western Group from 2001 to 2011 and as Chief Financial Officer — Western Group of the Company from 1995 to 2001.

Prior to that time, Mr.

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and Galen Health Care, Inc.

Akdamar was appointed President –

American Group effective January 1, 2023.

Akdamar was appointed President – American Group effective January 1, 2023.

Akdamar previously served as President of the North Texas Division from October 2013 to December 2022.

Prior to that, he served as CEO of Medical City Dallas Hospital in Dallas, Texas from 2010 to 2013 and CEO of St.

David’s South Austin Medical Center in Austin, Texas from 2004 to 2010.

Akdamar began his career with HCA in 1993 with Rapides Regional Medical Center.

Berres was appointed Senior Vice President and Chief Human Resources Officer effective November 1, 2019.

Berres joined HCA in 1993 and served in various capacities, including as Vice President —

Human Resources from April 2013 through October 2019.

Billington was appointed Senior Vice President —

Internal Audit Services effective January 1, 2019.

Billington previously served as Vice President —

Corporate Internal Audit from June 2005 to December 2018.

Berres joined HCA in 1993 and served in various capacities, including as Vice President — Human Resources from April 2013 through October 2019.

Billington was appointed Senior Vice President — Internal Audit Services effective January 1, 2019.

Billington previously served as Vice President — Corporate Internal Audit from June 2005 to December 2018.

Prior to joining HCA, Mr.

Billington worked as a managing director for FTI Consulting, Inc., a director for KPMG LLP and was a senior manager at Arthur Andersen LLP.

Cohen was appointed Senior Vice President —

Government Relations effective October 1, 2019.

Cohen was appointed Senior Vice President — Government Relations effective October 1, 2019.

Prior to joining HCA, Mr.

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was appointed Executive Vice President and Chief Clinical Officer effective January 1, 2022.

He previously served as President —

Physician Services Group from October 2011 through December 2021.

He previously served as President — Physician Services Group from October 2011 through December 2021.

From October 2011 to January 2015, Dr.

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Foster was appointed Executive Vice President and Chief Operating Officer effective January 1, 2023.

Prior to that time, he served as President —

American Group from January 2013 to December 2022, President —

Southwest Group from February 2011 to January 2013 and Division President for the Central and West Texas Division from January 2006 to February 2011.

Prior to that time, he served as President — American Group from January 2013 to December 2022, President — Southwest Group from February 2011 to January 2013 and Division President for the Central and West Texas Division from January 2006 to February 2011.

Foster joined HCA in March 2001 as President and CEO of St.

David’s HealthCare in Austin, Texas and served in that position until February 2011.

Prior to joining the Company, Mr.

Foster served in various executive capacities within the Baptist Health System in Knoxville, Tennessee and The Methodist Hospital System in Houston, Texas.

Hammett was appointed President —

Atlantic Group effective January 1, 2023.

Hammett was appointed President — Atlantic Group effective January 1, 2023.

Hammett previously served as President of the North Florida Division from June 2020 to December 2022.

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David’s Medical Center in Austin, Texas.

Marks was appointed Senior Vice President —

Finance effective January 1, 2023.

Marks previously served as Vice President —

Financial Operations Support from March 2021 to December 2022.

Marks was appointed Senior Vice President — Finance effective January 1, 2023.

Marks previously served as Vice President — Financial Operations Support from March 2021 to December 2022.

Prior to that time, he served as CFO of the National Group from December 2008 to February 2021 and CFO of the West Florida Division from January 2006 to November 2008.

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Before joining GE, Mr.

McAlevey served as Deputy Director of the United States Securities and Exchange Commission’s Division of Corporation Finance from 1998 to 2002.

McManus was appointed President —

National Group effective January 1, 2023.

McAlevey served as Deputy Director of the United States Securities and Exchange Commission’s Division of Corporation Finance from 1998 to 2002.

McManus was appointed President — National Group effective January 1, 2023.

McManus previously served as President of the Capital Division from August 2016 to December 2022.

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Mosier was appointed Senior Vice President and Chief Nurse Executive effective December 1, 2021.

Mosier joined HCA in 1992 as a medical-surgical bedside nurse at Frankfort Regional Medical Center and has held progressive leadership roles, including as Vice President and Assistant Chief Nursing Executive —

Clinical Services Group from 2019 to 2021.

Martin Paslick was appointed Senior Vice President and Chief Information Officer in June 2012.

Prior to that time, he served as Vice President and Chief Operating Officer of Information Technology & Services from March 2010 to May 2012 and Vice President —

Information Technology & Services Field Operations from September 2006 to February 2010.

From January 1998 to September 2006, he served in various Vice President roles in the Company’s Information Technology & Services department.

Paslick joined the Company in 1985.

Reiner was appointed Senior Vice President —

Marketing and Communications in October 2017.

Mosier joined HCA in 1996 as a medical-surgical bedside nurse at Frankfort Regional Medical Center and has held progressive leadership roles, including as Vice President and Assistant Chief Nursing Executive — Clinical Services Group from 2019 to 2021.

Reiner was appointed Senior Vice President — Marketing and Communications in October 2017.

Prior to that time, she served as Vice President of Marketing and Customer Relationship Management from August 2017 to October 2017 and Vice President of Customer Relationship Management from January 2012 to August 2017.

Reiner joined the Company in 2000 and served in various roles with the Company’s Mountain Division from 2000 to 2012.

Rutherford has served as Executive Vice President and Chief Financial Officer since January 2014.

Rutherford previously served as Chief Operating Officer of the Company’s Clinical and Physician Services Group from January 2011 to January 2014 and Chief Financial Officer of the Company’s Outpatient Services Group from November 2008 to January 2011.

Prior to that time, Mr.

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from March 2006 to June 2007.

Rutherford also previously served in various positions with the Company from 1986 to 2005, including Chief Financial Officer of what was then the Company’s Eastern Group, Director of Internal Audit and Director of Operations Support.

Sowell, III was appointed as Senior Vice President and Chief Development Officer in December 2009.

From 1987 to 1996 and again from 1999 to 2009, Mr.

Sowell was a partner at the law firm of Waller Lansden Dortch & Davis where he specialized in the areas of health care law, mergers and acquisitions, joint ventures, private equity

financing, tax law and general corporate law.

He also co-managed the firm’s corporate and commercial transactions practice.

Sowell was a partner at the law firm of Waller Lansden Dortch & Davis where he specialized in the areas of health care law, mergers and acquisitions, joint ventures, private equity financing, tax law and general corporate law.

He also co-managed the firm’s corporate and commercial transactions practice.

From 1996 to 1999, Mr.

Sowell served as the head of development, and later as the Chief Operating Officer of Arcon Healthcare.

Torres was appointed Senior Vice President —

Payer Contracting and Alignment (formerly Senior Vice President —

Employer and Payer Engagement) in July 2016.

Torres joined HCA in 1993 and served in various capacities, including as Vice President of Employer and Payer Engagement and Vice President —

Torres was appointed Senior Vice President — Payer Contracting and Alignment (formerly Senior Vice President — Employer and Payer Engagement) in July 2016.

Torres joined HCA in 1993 and served in various capacities, including as Vice President of Employer and Payer Engagement and Vice President — Strategy.

Wasserman was appointed Senior Vice President and Chief Information Officer effective February 1, 2024.

Prior to that time, he served as Senior Vice President and Chief Operating Officer – Information Technology Group since July 2023.

Wasserman joined HCA Healthcare in 1996 and has served in a variety of other leadership positions, including Vice President – IT&S Service Lines & Corporate Solutions from 2022 to 2023, Vice President of Digital Patient Experience from 2020 to 2022, Vice President – IT&S Infrastructure Services & Operations from 2017 to 2020 and Chief Information Officer of Parallon Business Performance Group from 2013 to 2017.

Whalen was appointed Senior Vice President and Chief Ethics and Compliance Officer effective January 1, 2019.

Prior to that time, Ms.

Whalen served as Vice President —

Ethics and Compliance from August 2013 through December 2018 and Assistant Vice President —

Ethics and Compliance Program Development from March 2000 through July 2013.

Whalen served as Vice President — Ethics and Compliance from August 2013 through December 2018 and Assistant Vice President — Ethics and Compliance Program Development from March 2000 through July 2013.

Prior to joining HCA in January 1998, Ms.

Whalen served as Associate Counsel to President Clinton with responsibility for the White House’s ethics program.

She began her government service in the ethics division of the General Counsel’s Office at the U.S.

Whalen served as Associate Counsel to President Clinton with responsibility for the White House’s ethics program.

She began her government service in the ethics division of the General Counsel’s Office at the U.S.

Commerce Department.

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Prior to that time, Mr.

Wyatt served the Company as Vice President and Chief Financial Officer —

IT&S from January 2013 to April 2016 and Chief Financial Officer —

Clinical Services Group from October 2010 until January 2013.

Wyatt served the Company as Vice President and Chief Financial Officer — IT&S from January 2013 to April 2016 and Chief Financial Officer — Clinical Services Group from October 2010 until January 2013.

From 2000 to 2010, Mr.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business