What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-14 compared with 2024-02-16 · 103 added, 92 removed, 385 unchanged (34% of the section changed)

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supply shortages and disruptions (including as a result of geopolitical disruptions);

and the impact of potential federal government shutdowns, (2) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (3) the impact of current and future federal and state health reform initiatives and possible changes to other federal, state or local laws and regulations affecting the health care industry, including, but not limited to, 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”), (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions and those required under the Pay-As-You-Go Act of 2010 as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, attain expected levels of patient volumes and revenues, and control the costs of providing services, (7) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs or SDPs that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (8) personnel-related capacity constraints, increases in wages and the ability to attract, utilize and retain qualified management and other personnel, including affiliated physicians, nurses and medical and technical support personnel, (9) the highly competitive nature of the health care business, (10) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (11) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (12) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) the emergence of and effects related to pandemics, epidemics and outbreaks of infectious diseases or other public health crises, including but not limited to developments related to COVID-19, (16) future divestitures which may result in charges and possible impairments of long-lived assets, (17) changes in business strategy or development plans, (18) delays in receiving payments for services provided, (19) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (20) the impact of known and unknown government investigations, litigation and other claims that may be made against us, (21) the impact of actual and potential cybersecurity incidents or security breaches, including the data security incident disclosed in July 2023, (22) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and the impact of interoperability requirements, (23) the impact of natural

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Forward-Looking Statements (continued)

disasters, such as hurricanes and floods, physical risks from climate change or similar events beyond our control, (24) changes in U.S.

federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, (25) the results of our efforts to use technology and resilience initiatives, including artificial intelligence and machine learning, to drive efficiencies, better outcomes and an enhanced patient experience, and (26) other risk factors described in this annual report on Form 10-K.

and the impact of potential federal government shutdowns or interruptions in appropriation or distribution of governmental funds, (2) the impact of current and future health care public policy developments and possible changes to other federal, state or local laws and regulations affecting the health care industry, including, but not limited to, the expiration of enhanced premium tax credits for individuals eligible to purchase insurance coverage through federal and state-based health insurance marketplaces, (3) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) the ability to achieve operating and financial targets, attain expected levels of patient volumes and revenues, and control the costs of providing services, (6) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs or state directed payments, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (7) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (8) personnel-related capacity constraints, increases in wages and the ability to attract, utilize and retain qualified management and other personnel, including affiliated physicians, nurses and medical and technical support personnel, (9) the highly competitive nature of the health care business, (10) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (11) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (12) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) the emergence of and effects related to pandemics, epidemics and outbreaks of infectious diseases or other public health crises, (16) future divestitures which may result in charges and possible impairments of long-lived assets, (17) changes in business strategy or development plans, (18) delays in receiving payments for services provided, (19) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (20) the impact of known and unknown government investigations, litigation and other claims that may be made against us, (21) the impact of actual and potential cybersecurity incidents or security breaches involving us or our vendors and other third parties, (22) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and the impact of interoperability requirements, (23) the impact of natural disasters, such as hurricanes and floods, including Hurricanes Milton and Helene, physical risks from changing global weather patterns or similar events beyond our control on our assets and activities and the communities we serve, (24) changes in U.S.

federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities, other standard setting bodies or judicial decisions, (25) the results of our efforts to use technology and resilience initiatives, including AI and machine learning, to drive efficiencies, better outcomes and an enhanced patient experience, and (26) other risk factors described in this annual report on Form 10-K.

As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA.

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We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

2024 Operations Summary

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totaled $5.760 billion, or $22.00 per diluted share, for 2024, compared to $5.242 billion, or $18.97 per diluted share, for 2023.

The 2024 results include gains on sales of facilities of $14 million, or $0.04 per diluted share.

The 2024 results also include additional expenses and losses of revenues estimated at approximately $250 million, or $0.73 per diluted share, related to Hurricanes Helene and Milton, which impacted our facilities in North Carolina and certain facilities in Florida.

The 2023 results include losses on sales of facilities of $5 million, or $0.04 per diluted share.

The 2022 results include gains on sales of facilities of $1.301 billion, or $2.46 per diluted share, and losses on retirement of debt of $78 million, or $0.20 per diluted share.

Our provisions for income taxes for 2024 and 2023 include tax benefits of $102 million, or $0.39 per diluted share, and $93 million, or $0.34 per diluted share, respectively, related to employee equity award settlements.

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The same facility revenues increase resulted primarily from the combined impact of a 4.5% increase in equivalent admissions and a 3.2% increase in revenue per equivalent admission.

Our revenues from Medicaid state directed and supplemental payment programs totaled approximately $4.9 billion and $3.9 billion in 2024 and 2023, respectively.

During 2024, consolidated admissions increased 5.0% and same facility admissions increased 4.9%, compared to 2023.

Inpatient surgical volumes increased 1.3% on a consolidated basis and increased 2.0% on a same facility basis during 2023, compared to 2022.

Outpatient surgical volumes increased 2.1% on a consolidated basis and increased 2.5% on a same facility basis during 2023, compared to 2022.

Inpatient surgical volumes increased 2.2% on both a consolidated basis and a same facility basis during 2024, compared to 2023.

Outpatient surgical volumes declined 1.9% on a consolidated basis and declined 1.6% on a same facility basis during 2024, compared to 2023.

Emergency room visits increased 4.8% on a consolidated basis and increased 4.9% on a same facility basis during 2024, compared to 2023.

The estimated cost of total uncompensated care increased $646 million for 2024, compared to 2023.

Consolidated and same facility uninsured admissions each declined 0.4%, and consolidated and same facility uninsured emergency room visits increased 4.0% and 4.4%, respectively, for 2023, compared to 2022.

Consolidated and same facility uninsured admissions increased 1.3% and 1.0%, respectively, and consolidated and same facility uninsured emergency room visits increased 13.8% and 13.5%, respectively, for 2024, compared to 2023.

Interest expense totaled $2.061 billion for 2024, compared to $1.938 billion for 2023.

The $197 million increase in interest expense for 2023 was primarily due to an increase in the average effective interest rate.

Cash flows from operating activities increased $909 million, from $8.522 billion for 2022 to $9.431 billion for 2023.

The increase in cash flows from operating activities was related primarily to a positive change in working capital items of $695 million, mainly from an increase in accounts payable and accrued expenses, and an increase in net income of $275 million, excluding losses and gains on sales of facilities and losses on retirement of debt.

The $123 million increase in interest expense for 2024 was primarily due to an increase in the average debt balance.

Cash flows from operating activities increased $1.083 billion, from $9.431 billion for 2023 to $10.514 billion for 2024.

The increase in cash flows from operating activities was related primarily to an increase in net income of $542 million, excluding losses and gains on sales of facilities, and a positive change in working capital items of $351 million, mainly from a decline in inventories and other assets.

Business Strategy

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To achieve these objectives, we align our efforts around the following growth agenda:

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Business Strategy (continued)

Grow Our Presence in Existing Markets.

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Additional components of our growth strategy include providing access and convenience through developing various outpatient facilities, including, but not limited to surgery centers, urgent care clinics, freestanding emergency care facilities, imaging centers and home health and hospice services, as well as seeking to improve coordination of care and patient retention across our markets.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Business Strategy (continued)

Achieve Industry-Leading Performance in Clinical, Operational and Satisfaction Measures.

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Actual results may differ from these estimates.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

HCA HEALTHCARE, INC.

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Critical Accounting Policies and Estimates (continued)

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from payers.

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We provide discounts to uninsured patients who do not qualify for Medicaid or charity care.

We may attempt to provide assistance to uninsured patients to help determine whether they may qualify for Medicaid, other federal or state assistance, or charity care.

We may provide assistance to uninsured patients to help determine whether they may qualify for Medicaid, other federal or state assistance, or charity care.

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

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These routine, quarterly changes in estimates have not resulted in material adjustments to the valuations of our accounts receivable or period-to-period comparisons of our revenues.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Revenues (continued)

To quantify the total impact of and trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions.

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Estimated cost of total uncompensated care

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Revenues (continued)

Management expects a continuation of the challenges related to collection of patient due accounts.

Adverse changes in the percentage of our patients having adequate health care coverage, increases in patient responsibility amounts under certain health care coverages, general economic conditions, patient accounting service center operations, payer mix, or trends in federal, state, and private employer health care coverage could affect the collection of accounts receivable, cash flows and results of operations.

See Item 1, “Business — Developments in Health Care Public Policy.”

Professional Liability Claims

We, along with virtually all health care providers, operate in an environment with professional liability risks.

Our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence, 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 ($110 million effective January 1, 2025), subject, in most cases, to a $15 million per occurrence self-insured retention.

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.

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Provisions for losses related to professional liability risks were $627 million, $619 million and $517 million for the years ended December 31, 2024, 2023 and 2022, respectively.

We recorded an increase to the provision for professional liability risks of $40 million during 2023 and reductions to the provision for professional liability risks of $55 million and $87 million for 2022 and 2021, respectively, due to the receipt of updated actuarial information.

We recorded an increase to the provision for professional liability risks of $40 million during 2023 and a reduction to the provision for professional liability risks of $55 million for 2022, due to the receipt of updated actuarial information.

Reserves for professional liability risks represent the estimated ultimate cost of all reported and unreported losses incurred through the respective consolidated balance sheet dates.

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This company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, professional liability retentions for each policy year, geographic information and other data.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Professional Liability Claims (continued)

Reserves and provisions for professional liability risks are based upon actuarially determined estimates.

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however, due to the complexity of the claims, the extended period of time to resolve the claims and the wide range of potential outcomes, our ultimate liability for professional liability claims could change by more than the estimated sensitivity amounts and could change materially from our current estimates.

The reserves for professional liability risks cover approximately 2,100 and 2,000 individual claims at December 31, 2023 and 2022, respectively, and estimates for unreported potential claims.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Professional Liability Claims (continued)

The reserves for professional liability risks cover approximately 2,100 individual claims at both December 31, 2024 and 2023 and estimates for unreported potential claims.

The time period required to resolve these claims can vary depending upon the jurisdiction and whether the claim is settled or litigated.

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Reserves for professional liability risks (net of $80 million and $42 million receivable under reinsurance and excess insurance contracts at December 31, 2024 and 2023, respectively) were $2.051 billion and $2.047 billion at December 31, 2024 and 2023, respectively.

The estimated total net reserves for professional liability risks at December 31, 2023 and 2022 are comprised of $947 million and $793 million, respectively, of case reserves for known claims and $1.100 billion and $1.190 billion, respectively, of reserves for incurred but not reported claims.

The estimated total net reserves for professional liability risks at December 31, 2024 and 2023 are comprised of $1.059 billion and $947 million, respectively, of case reserves for known claims and $992 million and $1.100 billion, respectively, of reserves for incurred but not reported claims.

The 2024 increase in case reserves for known claims and the corresponding decrease in reserves for incurred but not reported claims is the result of changes in case management processes at our insurance subsidiary that include establishing case reserve estimates earlier and resolving claims quicker.

Changes in our professional liability reserves, net of reinsurance recoverable, for the years ended December 31, are summarized in the following table (dollars in millions):

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Net reserves for professional liability claims, December 31

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

We calculate our provision for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized by identifying the temporary differences that arise from the recognition of items in different periods for tax and accounting purposes.

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Final audit results may vary from our estimates.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations

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The 7.6% increase for 2023 can be primarily attributed to the net impact of a 4.8% increase in equivalent admissions and a 2.7% decline in revenue per equivalent admission.

Consolidated admissions increased 2.7% during 2023 compared to 2022 and declined 0.7% during 2022 compared to 2021.

Consolidated surgeries increased 1.8% during 2023 compared to 2022 and increased 1.0% during 2022 compared to 2021.

Consolidated admissions increased 5.0% during 2024 compared to 2023 and increased 2.7% during 2023 compared to 2022.

Consolidated inpatient surgical volumes increased 2.2% during 2024 compared to 2023 and increased 1.3% during 2023 compared to 2022.

Consolidated outpatient surgical volumes declined 1.9% during 2024 compared to 2023 and increased 2.1% during 2023 compared to 2022.

Consolidated emergency room visits increased 4.8% during 2024 compared to 2023 and increased 4.1% during 2023 compared to 2022.

Same facility admissions increased 4.9% during 2024 compared to 2023 and increased 3.3% during 2023 compared to 2022.

Same facility surgeries increased 2.3% during 2023 compared to 2022 and increased 1.5% during 2022 compared to 2021.

Same facility inpatient surgical volumes increased 2.2% during 2024 compared to 2023 and increased 2.0% during 2023 compared to 2022.

Same facility outpatient surgical volumes declined 1.6% during 2024 compared to 2023 and increased 2.5% during 2023 compared to 2022.

Same facility emergency room visits increased 4.9% during 2024 compared to 2023 and increased 4.7% during 2023 compared to 2022.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Same facility uninsured emergency room visits increased 4.4% and same facility uninsured admissions declined 0.4% during 2023 compared to 2022.

Same facility uninsured emergency room visits increased 13.5% and same facility uninsured admissions increased 1.0% during 2024 compared to 2023.

Same facility uninsured emergency room visits increased 4.4% and same facility uninsured admissions declined 0.4% during 2023 compared to 2022.

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Managed care and insurers

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, and managed care and insurers for the years ended December 31, 2024, 2023 and 2022 are set forth below.

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We receive supplemental payments in several states.

We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made requests to CMS to replace their existing supplemental payment programs.

It is possible these reviews and requests will result in the restructuring of such supplemental payment programs and could result in the payment programs being reduced or eliminated.

Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications, if any, may have on our results of operations.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

These supplemental payment programs are regularly reviewed by certain government agencies and some states have made requests to CMS to replace their existing supplemental payment programs.

In May 2024, CMS issued a final rule related to Medicaid managed care programs that addresses access, financing and quality within these programs.

This final rule addresses aspects of state directed program arrangements with new and updated requirements to ensure a more consistent and transparent approach for participating states.

The various elements of the rule take effect between issuance and early 2028.

It is possible that these developments, reviews and requests will result in the restructuring of or other significant changes to supplemental payment programs and could result in the payment programs being reduced or eliminated.

Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications and other program changes, if any, may have on our results of operations.

Key Performance Indicators

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Information on how these metrics and statistical information are defined is provided in the following tables summarizing operating results and operating data.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary

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Number of hospitals at end of period

Number of freestanding outpatient surgical centers at end of period(a)

Number of freestanding outpatient surgery centers at end of period(a)

Number of licensed beds at end of period(b)

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Average daily census(g)

Occupancy rate(h)

Emergency room visits(i)

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Outpatient revenues as a % of patient revenues(m)

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

(a) Excludes freestanding endoscopy centers (26 at December 31, 2024, 24 at December 31, 2023 and 21 at December 31, 2022).

(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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totaled $5.760 billion, or $22.00 per diluted share, for 2024, compared to $5.242 billion, or $18.97 per diluted share, for 2023.

The 2024 results include gains on sales of facilities of $14 million, or $0.04 per diluted share.

The 2023 results include losses on sales of facilities of $5 million, or $0.04 per diluted share.

The 2022 results include gains on sales of facilities of $1.301 billion, or $2.46 per diluted share, and losses on retirement of debt of $78 million, or $0.20 per diluted share.

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During 2024, consolidated admissions increased 5.0% and same facility admissions increased 4.9% compared to 2023.

Consolidated inpatient surgeries increased 1.3% and same facility inpatient surgeries increased 2.0% during 2023 compared to 2022.

Consolidated and same facility inpatient surgeries each increased 2.2% during 2024 compared to 2023.

Emergency room visits increased 4.8% on a consolidated basis and increased 4.9% on a same facility basis during 2024 compared to 2023.

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Same facility revenues increased 7.9% due primarily to the combined impact of a 4.5% increase in equivalent admissions and a 3.2% increase in revenue per equivalent admission compared to 2023.

Our revenues from Medicaid state directed and supplemental payment programs totaled approximately $4.9 billion and $3.9 billion in 2024 and 2023, respectively.

Salaries and benefits, as a percentage of revenues, were 44.1% in 2024 and 45.4% in 2023.

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Share-based compensation expense was $360 million in 2024 and $262 million in 2023.

Supplies, as a percentage of revenues, were 15.2% in 2023 and 15.6% in 2022.

Supplies, as a percentage of revenues, were 15.2% in both 2024 and 2023.

Supply costs per equivalent admission increased 3.1% in 2024 compared to 2023.

Supply costs per equivalent admission increased 5.6% for medical devices and 3.2% for general medical and surgical items, but declined 2.4% for pharmacy supplies in 2024 compared to 2023.

The decline in pharmacy supplies is primarily related to lower application of certain COVID-19 therapies, combined with increased utilization of generic drugs during 2023 compared to 2022.

Other operating expenses, as a percentage of revenues, were 21.0% in 2024 and 19.8% in 2023.

Other operating expenses are primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes.

The 1.3% increase in other operating expenses, as a percentage of revenues for 2023 compared to 2022, was primarily related to increased costs for state provider fees in certain states, professional fees and insurance.

The 1.2% increase in other operating expenses, as a percentage of revenues for 2024 compared to 2023, was primarily related to increased costs for state provider fees in certain states, professional fees and repairs and maintenance, primarily related to remediation activities in certain hospitals in the state of Florida in response to Hurricane Milton.

We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in 2025.

Provisions for losses related to professional liability risks were $627 million and $619 million for 2024 and 2023, respectively.

We recorded an increase of $40 million, or $0.11 per diluted share, during 2023 and a reduction of $55 million, or $0.14 per diluted share, during 2022 to our provision for professional liability risks related to the receipt of updated actuarial information.

We recorded an increase of $40 million, or $0.11 per diluted share, during 2023 to our provision for professional liability risks related to the receipt of updated actuarial information.

Equity in earnings of affiliates was $23 million for 2024 and $22 million for 2023.

The decline of $23 million is primarily related to the operations of a hospital-based physician staffing joint venture.

Depreciation and amortization, as a percentage of revenues, were 4.7% in 2023 and 5.0% in 2022.

Depreciation and amortization, as a percentage of revenues, were 4.7% in both 2024 and 2023.

Depreciation expense was $3.294 billion for 2024 and $3.052 billion for 2023.

The increase of $242 million in depreciation expense relates primarily to capital expenditures at our existing facilities.

Interest expense increased to $1.938 billion for 2023 from $1.741 billion for 2022.

The $197 million increase in interest expense was primarily due to an increase in the average effective interest rate.

The average effective interest rate for our long-term debt was 5.0% for 2023 and 4.7% for 2022.

Our average debt balance was $38.790 billion for 2023 compared to $37.363 billion for 2022.

HCA HEALTHCARE, INC.

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Years Ended December 31, 2024 and 2023 (continued)

Losses on sales of facilities were $5 million for 2023 and gains on sales of facilities were $1.301 billion for 2022.

The gains on sales of facilities for 2022 were primarily related to the sales of controlling interests in a subsidiary of our group purchasing organization and subsidiaries of our research entities.

During 2022, we issued $6.000 billion aggregate principal amount of senior notes and used a portion of the net proceeds to pay down our revolving credit facilities, and we redeemed all $1.250 billion outstanding aggregate principal amount of our 4.75% senior notes due 2023 and all $1.250 billion outstanding aggregate principal amount of our 5.875% senior notes due 2023.

The aggregate pretax loss on retirement of debt for these two redemptions was $78 million.

The effective income tax rate was 23.6% for both 2023 and 2022.

Interest expense increased to $2.061 billion for 2024 from $1.938 billion for 2023.

The $123 million increase in interest expense was primarily due to an increase in the average debt balance.

The average effective interest rate for our long-term debt was 5.0% for both 2024 and 2023.

Our average debt balance was $41.388 billion for 2024 compared to $38.790 billion for 2023.

Gains on sales of facilities were $14 million for 2024 and losses on sales of facilities were $5 million for 2023.

The effective income tax rate was 24.5% for 2024 and 23.6% for 2023.

The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.

Net income attributable to noncontrolling interests declined from $1.191 billion for 2022 to $849 million for 2023.

The decline in net income attributable to noncontrolling interests related primarily to the gain on the sale of a controlling interest in a subsidiary of our group purchasing organization in 2022.

Net income attributable to noncontrolling interests increased from $849 million for 2023 to $897 million for 2024.

The increase in net income attributable to noncontrolling interests related primarily to the operations of one of our Texas markets and our surgery center partnerships.

For results of operations comparisons relating to years ending December 31, 2023 and 2022, refer to our annual report on Form 10-K, Item 7.

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Cash provided by operating activities totaled $10.514 billion in 2024 compared to $9.431 billion in 2023 and $8.522 billion in 2022.

The $1.083 billion increase in cash provided by operating activities for 2024, compared to 2023, was related primarily to an increase in net income of $542 million, excluding losses and gains on sales of facilities, and a positive change in working capital items of $351 million, mainly from a decline in inventories and other assets.

The decrease in inventories during 2024 was the result of a targeted effort by our supply chain management to manage and reduce the inventory levels carried in our facilities.

The $909 million increase in cash provided by operating activities for 2023, compared to 2022, was related primarily to a positive change in working capital items of $695 million, mainly from an increase in accounts payable and accrued expenses, and an increase in net income of $275 million, excluding losses and gains on sales of facilities and losses on retirement of debt.

The $437 million decline in cash provided by operating activities for 2022, compared to 2021, was related primarily to a negative change in working capital items of $649 million, mainly from a decline in accounts payable and accrued expenses, and a decline in net income of $687 million, excluding gains on sales of facilities and losses on retirement of debt, offset by a decline in cash payments for interest and income taxes of $847 million for 2022 compared to 2021.

Cash payments for interest and income taxes increased $504 million for 2024 compared to 2023.

Working capital totaled $1.237 billion at December 31, 2024 and $2.272 billion at December 31, 2023.

The decline in working capital in the current period is primarily due to the $2.054 billion increase in long-term debt due within one year in the current period.

The decline in working capital is primarily due to the $2.274 billion increase in long-term debt due within one year, offset by an increase of $998 million in cash and cash equivalents and an increase of $793 million in accounts receivable.

Cash used in investing activities was $4.933 billion, $5.317 billion and $3.389 billion in 2024, 2023 and 2022, respectively.

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We expect to fund capital expenditures with internally generated and borrowed funds.

We expended $635 million, $224 million and $1.105 billion for acquisitions of hospitals and health care entities during 2023, 2022 and 2021, respectively.

Cash flows from sales of hospitals and health care entities declined from $2.160 billion for 2021 (primarily related to the proceeds from our sales of five hospitals in Georgia and other health care entity investments) to $1.237 billion of net proceeds for 2022 (primarily related to proceeds from our sales of other health care entities) and were $193 million for 2023.

We expended $266 million, $635 million and $224 million for acquisitions of hospitals and health care entities during 2024, 2023 and 2022, respectively.

Cash flows from sales of hospitals and health care entities increased to $328 million of net proceeds for 2024 from $193 million of net proceeds for 2023, and was $1.237 billion in 2022 primarily related to proceeds from our sales of other health care entities.

HCA HEALTHCARE, INC.

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During 2022, we had a net increase of $3.287 billion in our indebtedness, paid dividends of $653 million and paid $7.000 billion for repurchases of common stock.

During 2023, 2022 and 2021, we made distributions to noncontrolling interests of $640 million, $1.025 billion and $749 million, respectively.

During 2024, 2023 and 2022, we made distributions to noncontrolling interests of $711 million, $640 million and $1.025 billion, respectively.

The increase in distributions in 2022 was related to the sale of a controlling interest in a subsidiary of our group purchasing organization.

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The timing and amount of future cash dividends will vary based on a number of factors, including future capital requirements for strategic transactions, share repurchases and investing in our existing markets, the availability of financing on acceptable terms, debt service requirements, changes to applicable tax laws or corporate laws, changes to our business model and periodic determinations by our Board of Directors that cash dividends are in the best interest of stockholders and are in compliance with all applicable laws and agreements of the Company.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($6.107 billion as of December 31, 2023 and $6.228 billion as of January 31, 2024) and anticipated access to public and private debt and equity markets.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.986 billion as of both December 31, 2024 and January 31, 2025) and anticipated access to public and private debt and equity markets.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $657 million and $564 million at December 31, 2024 and 2023, respectively.

The insurance subsidiary maintained net reserves for professional liability risks of $127 million and $121 million at December 31, 2024 and 2023, respectively.

Our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence;

Our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence ($110 million effective January 1, 2025);

however, this coverage is subject, in most cases, to a $15 million per occurrence self-insured retention.

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Our interest expense was $2.061 billion for 2024 and $1.938 billion for 2023.

During 2023, we issued $3.250 billion aggregate principal amount of senior notes comprised of (i) $1.000 billion aggregate principal amount of 5.200% senior notes due 2028, (ii) $1.250 billion aggregate principal amount of 5.500% senior notes due 2033 and (iii) $1.000 billion aggregate principal amount of 5.900% senior notes due 2053.

We used the net proceeds to repay borrowings under our asset-based revolving credit facility.

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

During 2024, we issued $4.500 billion aggregate principal amount of senior notes comprised of (i) $1.000 billion aggregate principal amount of 5.450% senior notes due 2031 (the “Existing 2031 Notes”), (ii) $1.300 billion aggregate principal amount of 5.600% senior notes due 2034, (iii) $1.500 billion aggregate principal amount of 6.000% senior notes due 2054 and (iv) $700 million aggregate principal amount of 6.100% senior notes due 2064.

We used the net proceeds to repay borrowings under our asset-based revolving credit facility and for general corporate purposes.

During 2024, we repaid all of the $2.000 billion aggregate principal amount of 5.000% senior notes due 2024 at maturity.

HCA HEALTHCARE, INC.

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Financing Activities (continued)

During 2024, we also issued $3.000 billion aggregate principal amount of senior notes comprised of (i) $750 million aggregate principal amount of 5.450% senior notes due 2031 (the “New 2031 Notes”), (ii) $1.250 billion aggregate principal amount of 5.450% senior notes due 2034 and (iii) $1.000 billion aggregate principal amount of 5.950% senior notes due 2054.

The New 2031 Notes represent a further issuance of our Existing 2031 Notes, issued during February 2024, and together with the New 2031 Notes, the aggregate principal amount of these notes is $1.750 billion.

We used the net proceeds to repay borrowings under our asset-based revolving credit facility and for general corporate purposes.

HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the primary obligor under a substantial portion of our indebtedness, including our senior secured credit facilities and senior notes.

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Our variable debt is comprised primarily of amounts outstanding under the senior secured credit facilities.

The average effective interest rate for our long-term debt was 5.0% for 2023 and 4.7% for 2022.

The average effective interest rate for our long-term debt was 5.0% for both 2024 and 2023.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Market Risk (continued)

The estimated fair value of our total long-term debt was $40.845 billion at December 31, 2024.

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

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Tax Examinations

At December 31, 2023, the Internal Revenue Service (“IRS”) was conducting examinations of the Company’s 2016, 2017 and 2018 federal income tax returns and the 2019 returns of certain affiliates.

We are also subject to examination by the IRS for tax years after 2019 as well as by state and foreign taxing authorities.

During 2024, the Internal Revenue Service (“IRS”) completed its examination of our 2016, 2017 and 2018 income tax returns, resolving all federal income tax matters for those years, and the 2020 federal statute of limitations expired.

At December 31, 2024, the IRS was examining the Company’s 2022 and 2023 income tax returns and the 2019 income tax returns of certain affiliates.

We are subject to examination by the IRS for tax years after 2020, as well as by state and foreign taxing authorities.

Management believes HCA Healthcare, Inc., its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS, state and foreign taxing authorities, and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position.

However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.

Howe v er , if payments due upon final resolution of any issues exceed our recorded estimates , such resolutions could have a material , adverse effect on our results of operations or financial position .

Quantitative and Qualitative Disclosures about Market Risk

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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 7. Management’s Discussion and Analysis