What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-29 compared with 2020-07-30 · 204 added, 188 removed, 286 unchanged (58% of the section changed)

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measures we are taking to respond to the COVID-19

the impact of government and administrative regulation and stimulus (including the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement (“PPPHCE”) Act and other enacted legislation);

the impact and terms of government and administrative regulation and stimulus (including the Families First Coronavirus Response Act (“FFCRA”), the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act and other enacted legislation);

changes in revenues due to declining patient volumes, changes in payor mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients);

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pandemic which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of court challenges to, any repeal of, or changes to, the Affordable Care Act or additional changes to its implementation, the possible enactment of additional federal or state health care reforms and possible changes to other federal, state or local laws or regulations affecting the health care industry, including single-payer proposals (often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the COVID-19

pandemic, (4) the effects related to the continued implementation of the sequestration spending reductions required under the Budget Control Act of 2011, and related legislation extending these reductions, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs or Medicaid waiver programs, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (8) the highly competitive nature of the health care business, (9) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including economic and business conditions (and the impact thereof on the financial markets and banking industry) resulting from the COVID-19

pandemic, (16) the emergence of and

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements (continued)

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

industry) resulting from the COVID-19

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

federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, and (26) other risk factors described in our annual report on Form 10-K

for the year ended December 31, 2019, our quarterly report on Form 10-Q

for the quarter ended March 31, 2020 and our other filings with the Securities and Exchange Commission.

for the quarter ended June 30, 2020 and our other filings with the Securities and Exchange Commission.

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

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as a global pandemic.

Patient volumes and the related revenues for most of our services were significantly impacted in the last two weeks of the first quarter of 2020 and continued to be impacted in the second quarter of 2020 as various policies were implemented by federal, state and local governments in response to the COVID-19

Patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the COVID-19

pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities.

While some of these restrictions have been eased across the U.S.

While many of these restrictions have been eased across the U.S.

and most states have lifted moratoriums on non-emergent

procedures, some restrictions remain in place, and some state and local governments are re-imposing

certain restrictions due to increasing rates of COVID-19

While consolidated patient volumes and revenues experienced gradual improvement beginning in the latter part of April and continuing through the end of the quarter, we are unable to predict the future impact of the pandemic on our operations.

Our pandemic response plan has multiple facets and continues to evolve as the pandemic unfolds.

We have taken precautionary steps to enhance our operational and financial flexibility, and react to the risks the COVID-19

pandemic presents to our business, including the following:

Implemented certain cost reduction initiatives;

Suspended our authorized share repurchase program;

Suspended our quarterly dividend program;

Reduced certain planned projects and capital expenditures;

During March 2020, executed a new $2 billion 364-day

term loan facility (which was undrawn at June 30, 2020) to supplement our existing credit facilities;

During the second quarter of 2020, we received approximately $4.4 billion of accelerated Medicare payments and approximately $1.4 billion in general and targeted Provider Relief Fund distributions, both as provided for under the CARES Act.

procedures, some restrictions remain in place, and we are unable to predict the future impact of the pandemic on our operations.

During the nine months ended September 30, 2020, we received $4.449 billion of accelerated Medicare payments and $1.674 billion in general and targeted distributions from the Provider Relief Fund (net of amounts returned), both as provided for and established under the CARES Act.

The Provider Relief Fund distributions were accounted for as government grants, and recognized on a systematic and rational basis as other income, once there is reasonable assurance that the applicable terms and conditions required to retain the funds will be met.

Based on our analysis of the compliance and reporting requirements of the Provider Relief Fund and the impact of the pandemic on our operating results from the beginning of the pandemic in March through June 30, 2020, we recognized $822 million related to the general distribution funds during the quarter ended June 30, 2020.

During the quarter ended September 30, 2020, we continued to evaluate our operating results and gave consideration to the updated reporting guidelines issued in September by the U.S.

Department of Health and Human Services that significantly changed the measurement of Provider Relief Fund distributions providers are able to retain.

Based on our assessment of the likelihood of meeting the applicable terms and conditions of the Provider Relief Fund, during the quarter ended September 30, 2020 we reversed the $822 million of government stimulus income recognized during the quarter ended June 30, 2020.

On October 8, 2020, we announced our

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Pandemic and CARES Act Funding (continued)

decision to return, or repay early, all of our share of the Provider Relief Fund distributions of approximately $1.6 billion and the approximately $4.4 billion of Medicare accelerated payments.

The total accelerated Medicare payments and Provider Relief Fund distributions received are recorded under the caption “government stimulus refund liability” in our condensed consolidated balance sheet at September 30, 2020.

We believe the extent of the COVID-19

pandemic’s adverse impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast.

pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast.

Such factors include, but are not limited to, the scope and duration of stay-at-home

practices and business closures and restrictions, government-imposed or recommended suspensions of elective procedures, continued declines in patient volumes for an indeterminable length of time, increases in the number of uninsured and underinsured patients as a result of higher sustained rates of unemployment, incremental expenses required for supplies and personal protective equipment, and changes in professional and general liability exposure.

practices and business closures and restrictions, recommended suspensions of elective procedures, continued declines in patient volumes for an indeterminable length of time, increases in the number of uninsured and underinsured patients as a result of higher sustained rates of unemployment, incremental expenses required for supplies and personal protective equipment, and changes in professional and general liability exposure.

Because of these and other uncertainties, we cannot estimate the length or severity of the impact of the pandemic on our business.

Decreases in cash flows and results of operations may have an impact on the inputs and assumptions used in significant accounting estimates, including estimated implicit price concessions related to uninsured patient accounts, professional and general liability reserves, and potential impairments of goodwill and long-lived assets.

Second Quarter 2020 Operations Summary

Revenues declined to $11.068 billion in the second quarter of 2020 from $12.602 billion in the second quarter of 2019.

If we incur declines in cash flows and results of operations, such declines could have an impact on the inputs and assumptions used in significant accounting estimates, including estimated implicit price concessions related to uninsured patient accounts, professional and general liability reserves, and potential impairments of goodwill and long-lived assets.

During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case.

However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations.

Third Quarter 2020 Operations Summary

Revenues increased to $13.311 billion in the third quarter of 2020 from $12.694 billion in the third quarter of 2019.

Net income attributable to HCA Healthcare, Inc.

totaled $1.079 billion, or $3.16 per diluted share, for the quarter ended June 30, 2020, compared to $783 million, or $2.25 per diluted share, for the quarter ended June 30, 2019.

Second quarter results for 2020 include $822 million ($590 million net of tax), or $1.73 per diluted share, of government stimulus income related to general distribution funds and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act.

Second quarter results for 2020 also include losses on sales of facilities of $27 million, or $0.07 per diluted share, and second quarter results for 2019 include gains on sales of facilities of $18 million, or $0.04 per diluted share.

totaled $668 million, or $1.95 per diluted share, for the quarter ended September 30, 2020, compared to $612 million, or $1.76 per diluted share, for the quarter ended September 30, 2019.

Third quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in the second quarter of 2020 related to general distribution funds from the Provider Relief Fund established by the CARES Act.

Third quarter results for 2020 also include gains on sales of facilities of $14 million, or $0.03 per diluted share.

Third quarter results for 2019 include losses on retirement of debt of $211 million, or $0.47 per diluted share.

All “per diluted share” disclosures are based upon amounts net of the applicable income taxes.

Shares used for diluted earnings per share were 341.599 million shares for the quarter ended June 30, 2020 and 348.373 million shares for the quarter ended June 30, 2019.

During 2019 and the first six months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

Shares used for diluted earnings per share were 343.346 million shares for the quarter ended September 30, 2020 and 347.487 million shares for the quarter ended September 30, 2019.

During 2019 and the first nine months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

Due to the COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in April as various COVID-19

and business closure policies were implemented by federal, state and local governments.

Patient volumes gradually improved in the latter part of April and continuing through the end of the quarter as the states began to re-open

and allow for non-emergent

Revenues declined 12.2% on a consolidated basis and declined 12.1% on a same facility basis for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019.

The decline in consolidated revenues can be primarily attributed to the net impact of a 20.0% decline in equivalent admissions offset by a 9.7% increase in revenue per equivalent admission.

The same facility revenues decline primarily resulted from the net impact of a 20.1% decline in same facility equivalent admissions offset by a 10.0% increase in same facility revenue per equivalent admission.

During the quarter ended June 30, 2020, consolidated admissions and same facility admissions declined 12.6% and 12.8%, respectively, compared to the quarter ended June 30, 2019.

Surgeries declined 26.5% on both a consolidated basis and on a same facility basis during the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019.

Emergency department visits declined 32.7% and 32.9% on a consolidated basis and on a same facility basis, respectively, during the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019.

Consolidated and same facility uninsured admissions declined 10.8% and 10.0%, respectively, for the quarter ended June 30, 2020, compared to the quarter ended June 30, 2019.

pandemic, patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter and have continued to be impacted into the third quarter of 2020 as various policies were implemented by federal, state and local governments in response to the COVID-19

pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities.

Revenues increased 4.9% on a consolidated basis and 4.5% on a same facility basis for the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019.

The increase in consolidated revenues can be primarily attributed to the net impact of a 15.3% increase in revenue per equivalent admission offset by a 9.1% decline in equivalent admissions.

The same facility revenues increase primarily resulted from the net impact of a 14.8% increase in same facility revenue per equivalent admission offset by a 9.0% decline in same facility equivalent admissions.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Quarter 2020 Operations Summary (continued)

Cash flows from operating activities increased $6.726 billion, from $1.997 billion for the second quarter of 2019 to $8.723 billion for the second quarter of 2020.

The increase in cash provided by operating activities was primarily related to the combined effect of the receipt of $4.999 billion related to unapplied accelerated Medicare payments and unrecognized general and targeted distributions as provided for in the CARES Act, positive changes in working capital of $787 million, primarily from the collection of patient accounts receivable, increases related to the deferral of income taxes of $593 million and an increase in net income, excluding losses (gains) on sales of facilities, of $327 million.

Third Quarter 2020 Operations Summary (continued)

During the quarter ended September 30, 2020, consolidated admissions and same facility admissions declined 3.9% and 3.8%, respectively, compared to the quarter ended September 30, 2019.

Surgeries declined 6.7% on a consolidated basis and declined 6.5% on a same facility basis during the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019.

Emergency department visits declined 20.1% and 20.3% on a consolidated basis and on a same facility basis, respectively, during the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019.

Consolidated and same facility uninsured admissions declined 12.7% and 14.2%, respectively, for the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019.

Cash flows from operating activities increased $591 million, from $2.126 billion for the third quarter of 2019 to $2.717 billion for the third quarter of 2020.

The increase in cash provided by operating activities was primarily related to the net effect of an increase in net income, excluding the government stimulus income reversal, gains on sales of facilities and losses on retirement of debt, of $488 million, receipt of an additional $302 million in Provider Relief Funds, and positive changes in working capital of $277 million, primarily from the increase in accounts payable and accrued expenses, offset by declines related to income taxes of $486 million.

Results of Operations

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Revenue/Volume Trends (continued)

Revenues declined 12.2% from $12.602 billion in the second quarter of 2019 to $11.068 billion in the second quarter of 2020.

Revenues increased 4.9% from $12.694 billion in the third quarter of 2019 to $13.311 billion in the third quarter of 2020.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers.

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Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues.

Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and six months ended June 30, 2020 and 2019 are summarized in the following table (dollars in millions):

Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and nine months ended September 30, 2020 and 2019 are summarized in the following table (dollars in millions):

Managed Medicare

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International (managed care and insurers)

Consolidated and same facility revenue per equivalent admission increased 9.7% and 10.0%, respectively, in the second quarter of 2020, compared to the second quarter of 2019.

Consolidated and same facility equivalent admissions declined 20.0% and 20.1%, respectively, in the second quarter of 2020, compared to the second quarter of 2019.

Consolidated and same facility outpatient surgeries both declined 32.6% in the second quarter of 2020, compared to the second quarter of 2019.

Consolidated and same facility inpatient surgeries declined 15.6% and 15.7%, respectively, in the second quarter of 2020, compared to the second quarter of 2019.

Consolidated and same facility emergency department visits declined 32.7% and 32.9%, respectively, in the second quarter of 2020, compared to the second quarter of 2019.

Consolidated and same facility revenue per equivalent admission increased 15.3% and 14.8%, respectively, in the third quarter of 2020, compared to the third quarter of 2019.

Consolidated and same facility equivalent admissions declined 9.1% and 9.0%, respectively, in the third quarter of 2020, compared to the third quarter of 2019.

Consolidated and same facility outpatient surgeries declined 6.7% and 6.3%, respectively, in the third quarter of 2020, compared to the third quarter of 2019.

Consolidated and same facility inpatient surgeries both declined 6.8% in the third quarter of 2020, compared to the third quarter of 2019.

Consolidated and same facility emergency department visits declined 20.1% and 20.3%, respectively, in the third quarter of 2020, compared to the third quarter of 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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

A summary of the estimated cost of total uncompensated care for the quarters and six months ended June 30, 2020 and 2019 follows (dollars in millions):

A summary of the estimated cost of total uncompensated care for the quarters and nine months ended September 30, 2020 and 2019 follows (dollars in millions):

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

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Estimated cost of total uncompensated care

Same facility uninsured admissions declined by 4,264 admissions, or 10.0%, in the second quarter of 2020 compared to the second quarter of 2019.

Same facility uninsured admissions declined by 6,492 admissions, or 14.2%, in the third quarter of 2020 compared to the third quarter of 2019, primarily due to the reimbursement received as provided for under the FFCRA and subsequent legislation for uninsured patients diagnosed with COVID-19, and the resulting classification of those patients as an insured admission.

Same facility uninsured admissions declined 10.0%, in the second quarter of 2020 compared to the second quarter of 2019.

Same facility uninsured admissions increased 7.1%, in the first quarter of 2020 compared to the first quarter of 2019.

Same facility uninsured admissions in 2019, compared to 2018, increased 6.8% in the fourth quarter, increased 2.1% in the third quarter, increased 5.1% in the second quarter, and were flat in the first quarter.

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and six months ended June 30, 2020 and 2019 are set forth in the following table.

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and nine months ended September 30, 2020 and 2019 are set forth in the following table.

Managed Medicare

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Revenue/Volume Trends (continued)

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and six months ended June 30, 2020 and 2019 are set forth in the following table.

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and nine months ended September 30, 2020 and 2019 are set forth in the following table.

Managed Medicare

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Managed care and insurers

At June 30, 2020, we had 91 hospitals in the states of Texas and Florida.

During the second quarter of 2020, 56% of our admissions and 49% of our revenues were generated by these hospitals.

Uninsured admissions in Texas and Florida represented 74% of our uninsured admissions during the second quarter of 2020.

At September 30, 2020, we had 91 hospitals in the states of Texas and Florida.

During the third quarter of 2020, 55% of our admissions and 49% of our revenues were generated by these hospitals.

Uninsured admissions in Texas and Florida represented 71% of our uninsured admissions during the third quarter of 2020.

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes.

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In December 2017, CMS approved an extension of this waiver through September 30, 2022, but indicated that it will phase out some of the federal funding.

Our Texas Medicaid revenues included Medicaid supplemental payments of $186 million and $106 million during the second quarters of 2020 and 2019, respectively, and $301 million and $214 million during the first six months of 2020 and 2019, respectively.

Our Texas Medicaid revenues included Medicaid supplemental payments of $154 million and $103 million during the third quarters of 2020 and 2019, respectively, and $455 million and $317 million during the first nine months of 2020 and 2019, respectively.

In addition, we receive supplemental payments in several other states.

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Operating Results Summary

The following is a comparative summary of results of operations for the quarters and six months ended June 30, 2020 and 2019 (dollars in millions):

The following is a comparative summary of results of operations for the quarters and nine months ended September 30, 2020 and 2019 (dollars in millions):

Salaries and benefits

Other operating expenses

Government stimulus income

Government stimulus income reversal

Equity in earnings of affiliates

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Interest expense

Losses (gains) on sales of facilities

Gains on sales of facilities

Losses on retirement of debt

Income before income taxes

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Other operating expenses

Government stimulus income

Equity in earnings of affiliates

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Results of Operations (continued)

Quarters Ended June 30, 2020 and 2019

Revenues declined to $11.068 billion in the second quarter of 2020 from $12.602 billion in the second quarter of 2019.

Quarters Ended September 30, 2020 and 2019

Revenues increased to $13.311 billion in the third quarter of 2020 from $12.694 billion in the third quarter of 2019.

Net income attributable to HCA Healthcare, Inc.

totaled $1.079 billion, or $3.16 per diluted share, for the quarter ended June 30, 2020, compared to $783 million, or $2.25 per diluted share, for the quarter ended June 30, 2019.

All “per diluted share” disclosures are based upon amounts net of the applicable income taxes.

Shares used for diluted earnings per share were 341.599 million shares for the quarter ended June 30, 2020 and 348.373 million shares for the quarter ended June 30, 2019.

During 2019 and the first six months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

totaled $668 million, or $1.95 per diluted share, for the quarter ended September 30, 2020, compared to $612 million, or $1.76 per diluted share, for the quarter ended September 30, 2019.

Third quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income previously recorded in the second quarter of 2020 related to general distribution funds from the Provider Relief Fund established by the CARES Act.

Third quarter results for 2020 also include gains on sales of facilities of $14 million, or $0.03 per diluted share.

Third quarter results for 2019 include losses on retirement of debt of $211 million, or $0.47 per diluted share.

Due to the COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in April as various COVID-19

and business closure policies and other restrictions were implemented by federal, state and local governments.

Patient volumes gradually improved beginning in the latter part of April and continuing through the end of the quarter as the states began to re-open

and allow for non-emergent

Revenues declined 12.2%, primarily due to the net impact of revenue per equivalent admission growth of 9.7% and a 20.0% decline in equivalent admissions for the second quarter of 2020 compared to the second quarter of 2019.

Salaries and benefits, as a percentage of revenues, were 48.2% in the second quarter of 2020 and 46.3% in the second quarter of 2019.

Salaries and benefits per equivalent admission increased 14.1% in the second quarter of 2020 compared to the second quarter of 2019.

Same facility labor rate increases averaged 0.3% for the second quarter of 2020 compared to the second quarter of 2019.

Supplies, as a percentage of revenues, were 15.8% in the second quarter of 2020 and 16.8% in the second quarter of 2019.

Supply costs per equivalent admission increased 3.2% in the second quarter of 2020 compared to the second quarter of 2019.

Supply costs per equivalent admission increased 2.3% for pharmacy supplies and 5.6% for general medical and surgical items and declined 0.2% for medical devices in the second quarter of 2020 compared to the second quarter of 2019.

Other operating expenses, as a percentage of revenues, were 19.3% in the second quarter of 2020 and 18.8% in the second quarter of 2019.

pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities.

During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case.

However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations.

Revenues increased 4.9% on a consolidated basis and 4.5% on a same facility basis for the quarter ended September 30, 2020, compared to the quarter ended September 30, 2019.

The increase in consolidated revenues can be primarily attributed to the net impact of a 15.3% increase in revenue per equivalent admission offset by a 9.1% decline in equivalent admissions.

Salaries and benefits, as a percentage of revenues, were 45.8% in the third quarter of 2020 and 47.0% in the third quarter of 2019.

Salaries and benefits per equivalent admission increased 12.3% in the third quarter of 2020 compared to the third quarter of 2019.

Same facility labor rate increases averaged 5.2% for the third quarter of 2020 compared to the third quarter of 2019.

Due to the COVID-19

pandemic, during the second quarter of 2020 we suspended annual merit increases and implemented temporary salary reductions.

During the third quarter of 2020, we revised these compensation decisions and recorded $102 million, or $0.23 per diluted share, of additional compensation expense.

Supplies, as a percentage of revenues, were 16.0% in the third quarter of 2020 and 16.5% in the third quarter of 2019.

Supply costs per equivalent admission increased 11.9% in the third quarter of 2020 compared to the third quarter of 2019.

Supply costs per equivalent admission increased 9.9% for medical devices, 14.0% for pharmacy supplies and 12.5% for general medical and surgical items in the third quarter of 2020 compared to the third quarter of 2019.

Other operating expenses, as a percentage of revenues, were 16.9% in the third quarter of 2020 and 18.5% in the third quarter of 2019.

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

Provisions for losses related to professional liability risks were $139 million and $133 million for the second quarters of 2020 and 2019, respectively.

During the second quarter of 2020, we recorded $822 million ($590 million net of tax) of government stimulus income related to general distribution funds received from the Provider Relief Fund established by the CARES Act.

Equity in earnings of affiliates was $1 million and $8 million in the second quarters of 2020 and 2019, respectively.

Provisions for losses related to professional liability risks were $26 million and $89 million for the third quarters of 2020 and 2019, respectively.

During the third quarters of 2020 and 2019, we recorded reductions of $112 million, or $0.25 per diluted share, and $50 million, or $0.11 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.

During the third quarter of 2020, we recorded the reversal of $822 million of government stimulus income previously recorded in the second quarter of 2020 related to general distribution funds received from the Provider Relief Fund established by the CARES Act.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Results of Operations (continued)

Quarters Ended June 30, 2020 and 2019 (continued)

Depreciation and amortization increased $55 million, from $636 million in the second quarter of 2019 to $691 million in the second quarter of 2020.

Quarters Ended September 30, 2020 and 2019 (continued)

Equity in earnings of affiliates was $40 million and $4 million in the third quarters of 2020 and 2019, respectively.

Depreciation and amortization increased $47 million, from $647 million in the third quarter of 2019 to $694 million in the third quarter of 2020.

The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $388 million in the second quarter of 2020 and $477 million in the second quarter of 2019.

Our average debt balance was $31.921 billion for the second quarter of 2020 compared to $35.079 billion for the second quarter of 2019.

The average effective interest rate for our long-term debt declined to 4.9% for the quarter ended June 30, 2020 from 5.5% for the quarter ended June 30, 2019.

During the second quarters of 2020 and 2019, we recorded losses on sales of facilities of $27 million and gains on sales of facilities of $18 million, respectively.

The effective tax rates were 24.2% and 25.7% for the second quarters of 2020 and 2019, respectively.

Interest expense was $385 million in the third quarter of 2020 and $448 million in the third quarter of 2019.

Our average debt balance was $30.952 billion for the third quarter of 2020 compared to $34.693 billion for the third quarter of 2019.

The average effective interest rate for our long-term debt declined to 4.9% for the quarter ended September 30, 2020 from 5.1% for the quarter ended September 30, 2019.

During the third quarter of 2020, we recorded gains on sales of facilities of $14 million.

During June 2019, we issued $5.000 billion aggregate principal amount of senior secured notes comprised of $2.000 billion aggregate principal amount of 4 1/8% notes due 2029, $1.000 billion aggregate principal amount of 5 1/8% notes due 2039 and $2.000 billion aggregate principal amount of 5 1/4% notes due 2049.

During July 2019, we redeemed all $600 million outstanding aggregate principal amount of 4.250% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.500% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022.

The pretax loss on retirement of debt for these redemptions was $211 million.

The effective tax rates were 23.8% and 26.0% for the third quarters of 2020 and 2019, respectively.

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

Net income attributable to noncontrolling interests declined from $144 million for the second quarter of 2019 to $137 million for the second quarter of 2020.

The decline in net income attributable to noncontrolling interests related primarily to the operations of our surgery center partnerships.

Six Months Ended June 30, 2020 and 2019

Revenues declined to $23.929 billion in the first six months of 2020 from $25.119 billion in the first six months of 2019.

Net income attributable to noncontrolling interests declined from $152 million for the third quarter of 2019 to $111 million for the third quarter of 2020.

The decline in net income attributable to noncontrolling interests related primarily to the government stimulus income reversal for certain joint ventures.

Nine Months Ended September 30, 2020 and 2019

Revenues declined to $37.240 billion in the first nine months of 2020 from $37.813 billion in the first nine months of 2019.

Net income attributable to HCA Healthcare, Inc.

totaled $1.660 billion, or $4.84 per diluted share, for the first six months ended June 30, 2020, compared to $1.822 billion, or $5.22 per diluted share, for the first six months ended June 30, 2019.

Results for the first six months of 2020 included $822 million ($590 million net of tax), or $1.72 per diluted share, of government stimulus income related to general distribution funds and $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act.

Results for the first six months of 2020 also included losses on retirement of debt of $295 million, or $0.66 per diluted share, and losses on sales of facilities of $20 million, or $0.06 per diluted share.

Results for the first six months of 2019 included gains on sales of facilities of $17 million, or $0.04 per diluted share, respectively.

Revenues for the first six months of 2020 and 2019, respectively, include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods and $86 million, or $0.19 per diluted share, related to the resolution of transaction price differences regarding certain out-of-network

totaled $2.328 billion, or $6.79 per diluted share, for the nine months ended September 30, 2020, compared to $2.434 billion, or $6.98 per diluted share, for the nine months ended September 30, 2019.

Results for the first nine months of 2020 included $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act.

Results for the first nine months of 2020 also included losses on sales of facilities of $6 million, or $0.03 per diluted share, and losses on retirement of debt of $295 million, or $0.66 per diluted share.

Results for the first nine months of 2019 included gains on sales of facilities of $17 million, or $0.04 per diluted share, and losses on retirement of debt of $211 million, or $0.47 per diluted share.

Revenues for the first nine months of 2020 and 2019, respectively, include $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods and $86 million, or $0.19 per diluted share, related to the resolution of transaction price differences regarding certain out-of-network

services performed in prior periods.

All “per diluted share” disclosures are based upon amounts net of the applicable income taxes.

Shares used for diluted earnings per share were 342.848 million shares for the six months ended June 30, 2020 and 349.334 million shares for the six months ended June 30, 2019.

During 2019 and the first six months of 2020, we repurchased 7.949 million shares and 3.287 million shares of our common stock, respectively.

Due to the COVID-19

pandemic, patient volumes and the related revenues for most of our services, particularly elective surgical procedures, were significantly impacted in the last two weeks of the first quarter and continued to be impacted through the second quarter as various COVID-19

and business closure policies and other restrictions were implemented by federal, state and local governments.

Patient volumes gradually improved beginning in the latter part of April and continuing through the end of the quarter as the states began to re-open

and allow for non-emergent

Revenues declined 4.7% due primarily to the net impact of revenue per equivalent admission growth of 6.0% and a 10.1% decline in equivalent admissions for the first six months of 2020 compared to the first six months of 2019.

Shares used for diluted earnings per share were 343.014 million shares for the nine months ended September 30, 2020 and 348.712 million shares for the nine months ended September 30, 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

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Results of Operations (continued)

Six Months Ended June 30, 2020 and 2019 (continued)

Salaries and benefits, as a percentage of revenues, were 47.8% in the first six months of 2020 and 45.7% in the first six months of 2019.

Salaries and benefits per equivalent admission increased 10.9% in the first six months of 2020 compared to the first six months of 2019.

Same facility labor rate increases averaged 1.5% for the first six months of 2020 compared to the first six months of 2019.

Supplies, as a percentage of revenues, were 16.2% in the first six months of 2020 and 16.6% in the first six months of 2019.

Supply costs per equivalent admission increased 3.5% in the first six months of 2020 compared to the first six months of 2019.

Supply costs per equivalent admission increased 1.6% for medical devices, 0.9% for pharmacy supplies and 5.9% for general medical and surgical items in the first six months of 2020 compared to the first six months of 2019.

Other operating expenses, as a percentage of revenues, were 19.1% in the first six months of 2020 and 18.6% in the first six months of 2019.

Nine Months Ended September 30, 2020 and 2019 (continued)

Due to the COVID-19

pandemic that have caused many people to remain at home and forced the closure of or limitations on certain businesses, as well as suspended elective surgical procedures by health care facilities.

During the third quarter of 2020, we believe COVID-19 cases at our hospitals contributed to an increase in patient acuity and had a positive impact on our average reimbursement per case.

However, the impact of COVID-19 in future periods may vary and could adversely impact our results of operations.

Revenues declined 1.5% on a consolidated basis and 2.1% on a same facility basis for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.

The decline in consolidated revenues can be primarily attributed to the net impact of a 9.8% decline in equivalent admissions offset by a 9.1% increase in revenue per equivalent admission.

The same facility revenues decline primarily resulted from the net impact of a 9.9% decline in same facility equivalent admissions offset by an 8.6% increase in same facility revenue per equivalent admission.

Salaries and benefits, as a percentage of revenues, were 47.1% in the first nine months of 2020 and 46.2% in the first nine months of 2019.

Salaries and benefits per equivalent admission increased 11.4% in the first nine months of 2020 compared to the first nine months of 2019.

Same facility labor rate increases averaged 2.8% for the first nine months of 2020 compared to the first nine months of 2019.

Supplies, as a percentage of revenues, were 16.1% in the first nine months of 2020 and 16.5% in the first nine months of 2019.

Supply costs per equivalent admission increased 6.4% in the first nine months of 2020 compared to the first nine months of 2019.

Supply costs per equivalent admission increased 4.5% for medical devices, 5.2% for pharmacy supplies and 8.1% for general medical and surgical items in the first nine months of 2020 compared to the first nine months of 2019.

Other operating expenses, as a percentage of revenues, were 18.3% in the first nine months of 2020 and 18.6% in the first nine months of 2019.

Provisions for losses related to professional liability risks were $279 million and $269 million for the first six months of 2020 and 2019, respectively.

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

Equity in earnings of affiliates was $8 million and $19 million in the first six months of 2020 and 2019, respectively.

Depreciation and amortization increased $110 million, from $1.255 billion in the first six months of 2019 to $1.365 billion in the first six months of 2020.

The increase in depreciation relates to both acquired facilities and increased capital expenditures at our existing facilities.

Interest expense was $816 million in the first six months of 2020 and $938 million in the first six months of 2019.

Our average debt balance was $32.766 billion for the first six months of 2020 compared to $34.520 billion for the first six months of 2019.

The average effective interest rate for our long-term debt declined to 5.0% for the six months ended June 30, 2020 from 5.5% for the six months ended June 30, 2019.

During the first six months of 2020 and 2019, we recorded net losses on sales of facilities of $20 million and gains on sales of facilities of $17 million, respectively.

Provisions for losses related to professional liability risks were $305 million and $358 million for the first nine months of 2020 and 2019, respectively.

During the first nine months of 2020 and 2019, we recorded reductions of $112 million, or $0.25 per diluted share, and $50 million, or $0.11 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.

Equity in earnings of affiliates was $48 million and $23 million in the first nine months of 2020 and 2019, respectively.

Depreciation and amortization increased $157 million, from $1.902 billion in the first nine months of 2019 to $2.059 billion in the first nine months of 2020.

The increase in depreciation relates primarily capital expenditures at our existing facilities.

Interest expense was $1.201 billion in the first nine months of 2020 and $1.386 billion in the first nine months of 2019.

Our average debt balance was $32.223 billion for the first nine months of 2020 compared to $34.422 billion for the first nine months of 2019.

The average effective interest rate for our long-term debt declined to 5.0% for the nine months ended September 30, 2020 from 5.4% for the nine months ended September 30, 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Nine Months Ended September 30, 2020 and 2019 (continued)

During the first nine months of 2020 and 2019, we recorded losses on sales of facilities of $6 million and gains on sales of facilities of $17 million, respectively.

During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior unsecured notes due 2030.

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The pretax loss on retirement of debt was $295 million.

The effective tax rates were 21.6% and 23.2% for the first six months of 2020 and 2019, respectively.

The pretax loss on retirement of debt for these redemptions was $211 million.

The effective tax rates were 22.2% and 23.9% for the first nine months of 2020 and 2019, respectively.

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

Our provisions for income taxes for the first six months of 2020 and 2019 included tax benefits of $54 million and $53 million, respectively, related to employee equity award settlements.

Excluding the effect of these adjustments, the effective tax rate for the first six months of 2020 and 2019 would have been 24.1% and 25.4%, respectively.

Our provisions for income taxes for the first nine months of 2020 and 2019 included tax benefits of $59 million and $56 million, respectively, related to employee equity award settlements.

Excluding the effect of these adjustments, the effective tax rate for the first nine months of 2020 and 2019 would have been 24.2% and 25.7%, respectively.

Net income attributable to noncontrolling interests declined from $438 million for the first nine months of 2019 to $365 million for the first nine months of 2020.

The decline in net income attributable to noncontrolling interests related primarily to the operations of joint ventures in two of our Texas markets and our surgery center partnerships.

Liquidity and Capital Resources

Cash provided by operating activities totaled $12.815 billion in the first nine months of 2020 compared to $5.097 billion in the first nine months of 2019.

The $7.718 billion increase in cash provided by operating activities in the first nine months of 2020 compared to the first nine months of 2019, related primarily to the combined effect of the receipt of $6.123 billion related to unapplied accelerated Medicare payments and Provider Relief Funds as provided for in the CARES Act, and positive changes in working capital of $1.742 billion, primarily from the collection of patient accounts receivable.

On October 8, 2020, we announced our decision to return, or repay early, all of our share of the Provider Relief Fund distributions of approximately $1.6 billion and the approximately $4.4 billion of Medicare accelerated payments that have been received under the CARES Act.

The repayment of these funds will be recorded as a reduction to our cash flows from operating activities.

Our cash flows from operating activities of $12.815 billion for the nine months ended September 30, 2020 includes this approximately $6 billion of funds that we have announced we will repay, and the exclusion of the impact of these cash flows would reduce our cash flows provided by operating activities for the first nine months of 2020 to $6.815 billion.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Six Months Ended June 30, 2020 and 2019 (continued)

Net income attributable to noncontrolling interests declined from $286 million for the first six months of 2019 to $254 million for the first six months of 2020.

The decline in net income attributable to noncontrolling interests related primarily to the operations of our surgery center partnerships.

Liquidity and Capital Resources

Cash provided by operating activities totaled $10.098 billion in the first six months of 2020 compared to $2.971 billion in the first six months of 2019.

The $7.127 billion increase in cash provided by operating activities in the first six months of 2020 compared to the first six months of 2019, related primarily to the combined effect of the receipt of $4.999 billion related to the unapplied accelerated Medicare payments and unrecognized general and targeted distributions as provided for in the CARES Act, positive changes in working capital of $1.465 billion, primarily from the collection of patient accounts receivable, and an increase related to the deferral of income taxes of $445 million.

The net combination of interest payments and net tax refunds in the first six months of 2020 was $838 million, and the combined interest payments and net tax payments in the first six months of 2019 was $1.433 billion.

Interest payments decreased in 2020 due to lower average debt balances, and net tax payments decreased as quarterly estimated income tax payments were deferred until July 2020 by the IRS in response to the COVID-19

Working capital totaled $1.175 billion at June 30, 2020 and $3.439 billion at December 31, 2019.

The $2.264 billion decline in working capital is primarily related to the net effect of an increase in cash and cash equivalents of $4.017 billion, offset by a decline in accounts receivable of $1.241 billion and an increase in contract liabilities-deferred revenues of $4.999 billion.

Cash used in investing activities was $1.953 billion in the first six months of 2020 compared to $3.113 billion in the first six months of 2019.

Acquisitions of hospitals and health care entities declined from $1.504 billion in the first six months of 2019 (which included the acquisition of a seven-hospital health system in North Carolina) to $346 million in the first six months of 2020.

Excluding acquisitions, capital expenditures were $1.598 billion in the first six months of 2020 and $1.745 billion in the first six months of 2019.

Planned capital expenditures are expected to approximate $2.8 billion to $3.0 billion in 2020.

At June 30, 2020, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.0 billion.

Liquidity and Capital Resources (continued)

Interest payments and net income tax payments in the first nine months of 2020 and 2019 totaled $2.009 billion and $2.206 billion, respectively.

Working capital totaled $1.887 billion at September 30, 2020 and $3.439 billion at December 31, 2019.

The $1.552 billion decline in working capital is primarily related to a decline in accounts receivable of $947 million and a $365 million increase in accounts payable.

Cash used in investing activities was $2.483 billion in the first nine months of 2020 compared to $4.375 billion in the first nine months of 2019.

Acquisitions of hospitals and health care entities declined from $1.592 billion in the first nine months of 2019 (which included the acquisition of a seven-hospital health system in North Carolina) to $380 million in the first nine months of 2020.

Excluding acquisitions, capital expenditures were $2.087 billion in the first nine months of 2020 and $2.884 billion in the first nine months of 2019.

Planned capital expenditures are expected to approximate $3.0 billion in 2020.

At September 30, 2020, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.1 billion.

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

Cash used in financing activities totaled $4.116 billion in the first six months of 2020 compared to cash provided by financing activities of $2.070 billion in the first six months of 2019.

During the first six months of 2020, net cash flows used in financing activities included a net decline of $3.144 billion in our indebtedness, payments of dividends of $153 million, repurchases of common stock of $441 million, distributions to noncontrolling interests of $199 million and payments of debt issuance costs of $35 million.

During the first six months of 2019, net cash flows provided by financing activities included a net increase of $3.313 billion in our indebtedness, payment of dividends of $278 million, repurchases of common stock of $520 million, distributions to noncontrolling interests of $247 million and payments of debt issuance costs of $63 million.

Cash used in financing activities totaled $4.361 billion in the first nine months of 2020 compared to $661 million in the first nine months of 2019.

During the first nine months of 2020, net cash flows used in financing activities included a net decline of $3.183 billion in our indebtedness, payments of dividends of $153 million, repurchases of common stock of $441 million, distributions to noncontrolling interests of $393 million and payments of debt issuance costs of $35 million.

During the first nine months of 2019, net cash flows used in financing activities included a net increase of $1.132 billion in our indebtedness, payment of dividends of $414 million, repurchases of common stock of $759 million, distributions to noncontrolling interests of $404 million and payments of debt issuance costs of $71 million.

In response to the risks the COVID-19

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We expect to evaluate resumption of these programs at a future date.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

We are a highly leveraged company with significant debt service requirements.

Our debt totaled $30.942 billion at June 30, 2020.

Our interest expense was $816 million for the first six months of 2020 and $938 million for the first six months of 2019.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.718 billion available as of both June 30, 2020 and July 28, 2020, respectively) and anticipated access to public and private debt markets.

Our debt totaled $30.964 billion at September 30, 2020.

Our interest expense was $1.201 billion for the first nine months of 2020 and $1.386 billion for the first nine months of 2019.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.710 billion available as of both September 30, 2020 and October 26, 2020) and anticipated access to public and private debt markets.

During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior notes due 2030.

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If drawn, amounts outstanding under the credit agreement will bear interest at either (i) the LIBOR rate plus 2.50% or (ii) an alternate base rate as defined in the credit agreement.

As of June 30, 2020 and July 28, 2020, there were no amounts outstanding nor draw notices pending under the facility.

During the second quarter of 2020, we requested accelerated Medicare payments as provided for in the CARES Act, which allows for eligible health care facilities to request up to six months of advance Medicare payments for acute care hospitals or up to three months of advance Medicare payments for other health care providers.

After 120 days past receipt of the advance payments (beginning in August 2020), claims for services provided to Medicare beneficiaries will be applied against the advance payment balance.

Any unapplied advance payment amounts must be paid in full within one year from receipt of the advance payments for acute care hospitals and within 210 days for other health care providers.

During the second quarter of 2020, we also received approximately $1.4 billion in general and targeted distributions from the CARES Act Provider Relief Fund, and in July 2020 we received approximately $300 million in targeted distributions.

These distributions from the Provider Relief Fund will not be subject to repayment, provided we are able to attest to and comply with the terms and conditions of the funding.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $469 million and $462 million at June 30, 2020 and December 31, 2019, respectively.

An insurance subsidiary maintained net reserves for professional liability risks of $181 million and $175 million at June 30, 2020 and December 31, 2019, respectively.

As of September 30, 2020 and October 29, 2020, there were no amounts outstanding nor draw notices pending under the facility.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

We expect to repay the entire amount using available cash and future cash flows from operations.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $486 million and $462 million at September 30, 2020 and December 31, 2019, respectively.

An insurance subsidiary maintained net reserves for professional liability risks of $187 million and $175 million at September 30, 2020 and December 31, 2019, respectively.

Our facilities are insured by a 100% owned insurance subsidiary for losses up to $50 million per occurrence;

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

Net reserves for the self-insured professional liability risks retained were $1.744 billion and $1.606 billion at June 30, 2020 and December 31, 2019, respectively.

Net reserves for the self-insured professional liability risks retained were $1.702 billion and $1.606 billion at September 30, 2020 and December 31, 2019, respectively.

Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $487 million.

We estimate that approximately $440 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

Considering the actions discussed above to respond to the uncertainty arising from the COVID-19

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

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

Summarized Financial Information

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for the year ended December 31, 2019.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information (continued)

Summarized financial information is presented on a combined basis and transactions between the combining entities have been eliminated.

Financial information for nonguarantor entities has been excluded.

The summarized operating results information for the six months ended June 30, 2020 and year ended December 31, 2019 and the summarized balance sheet information at June 30, 2020 and December 31, 2019, for HCA Healthcare, Inc., HCA Inc.

The summarized operating results information for the nine months ended September 30, 2020 and year ended December 31, 2019 and the summarized balance sheet information at September 30, 2020 and December 31, 2019, for HCA Healthcare, Inc., HCA Inc.

and the subsidiary guarantors (the Parent, Subsidiary Issuer and Subsidiary Guarantors) follow (dollars in millions):

Six Months Ended June 30, 2020 and Year Ended December 31, 2019:

June 30, 2020

Nine Months Ended September 30, 2020 and Year Ended December 31, 2019:

September 30, 2020

December 31, 2019

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Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors

At June 30, 2020 and December 31, 2019:

At September 30, 2020 and December 31, 2019:

September 30,

Current assets

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Noncontrolling interests

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

We are exposed to market risk related to changes in market values of securities.

The investments in our 100% owned insurance subsidiaries were $469 million at June 30, 2020.

The investments in our 100% owned insurance subsidiaries were $486 million at September 30, 2020.

These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income.

At June 30, 2020, we had a net unrealized gain of $30 million on the insurance subsidiaries’ investments.

At September 30, 2020, we had a net unrealized gain of $31 million on the insurance subsidiaries’ investments.

We are exposed to market risk related to market illiquidity.

Investments in debt and equity securities of our 100% owned insurance subsidiaries could be impaired by the inability to access the capital markets.

Should the 100% owned insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Market Risk (continued)

manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment.

We may be required to recognize credit-related impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.

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Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income.

With respect to our interest-bearing liabilities, approximately $1.198 billion of long-term debt at June 30, 2020 was subject to variable rates of interest, while the remaining balance in long-term debt of $29.744 billion at June 30, 2020 was subject to fixed rates of interest.

With respect to our interest-bearing liabilities, approximately $1.185 billion of long-term debt at September 30, 2020 was subject to variable rates of interest, while the remaining balance in long-term debt of $29.779 billion at September 30, 2020 was subject to fixed rates of interest.

Both the general level of interest rates and, for the senior secured credit facilities, our leverage affect our variable interest rates.

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The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio.

The average effective interest rate for our long-term debt was 5.0% and 5.5% for the six months ended June 30, 2020 and 2019, respectively.

The estimated fair value of our total long-term debt was $34.000 billion at June 30, 2020.

The average effective interest rate for our long-term debt was 5.0% and 5.4% for the nine months ended September 30, 2020 and 2019, respectively.

The estimated fair value of our total long-term debt was $34.739 billion at September 30, 2020.

The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities.

3 unchanged sentences

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Tax Examinations

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at June 30, 2020.

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at September 30, 2020.

We are also subject to examination by state and foreign taxing authorities.

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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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data

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Admissions(d):

Equivalent admissions(e):

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Operating Data (continued)

Equivalent admissions(e):

Average length of stay (days)(f):

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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-Q

Item 2. Management’s Discussion and Analysis