What changed in this filing

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Item 1. Business

2022-02-18 compared with 2021-02-19 · 359 added, 329 removed, 709 unchanged (49% of the section changed)

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Through our predecessors, we commenced operations in 1968.

The Company was incorporated in Delaware in October 2010.

HCA Healthcare, Inc.

was incorporated in Delaware in October 2010.

Our principal executive offices are located at One Park Plaza, Nashville, Tennessee 37203, and our telephone number is (615) 344-9551.

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Our website address is www.hcahealthcare.com.

Please note that our website address is provided as an inactive textual reference only.

Please note that our website address is provided throughout this report as an inactive textual reference only.

We make available free of charge, through our website, our annual report on Form 10-K,

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The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is specifically referenced elsewhere in this report.

Our Code of Conduct is available free of charge upon request to our Corporate Secretary, HCA Healthcare, Inc., One Park Plaza, Nashville, Tennessee 37203, and is also available on the Ethics and Compliance and Corporate Governance portion of our website at www.hcahealthcare.com.

Index to Financial Statements

Our Code of Conduct is available free of charge upon request to our Investor Relations Department, HCA Healthcare, Inc., One Park Plaza, Nashville, Tennessee 37203, and is also available on the Ethics and Compliance and Corporate Governance portion of our website at www.hcahealthcare.com.

Business Strategy

We are committed to providing the communities we serve with high quality, cost-effective health care while growing our business and creating long-term value for our stockholders.

We strive to be the provider system of choice in the communities we serve and to support our operations with unique enterprise capabilities and best in class economies of scale.

We strive to be the provider system of choice in the communities we serve and to support our operations with unique enterprise capabilities and best-in-class

economies of scale.

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

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We currently own, manage or operate hospitals, freestanding surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in

clinics, diagnostic and imaging centers, radiation and oncology therapy centers, comprehensive rehabilitation and physical therapy centers, physician practices and various other facilities.

clinics, diagnostic and imaging centers, radiation and oncology therapy centers, comprehensive rehabilitation and physical therapy centers, physician practices, home health, hospice, outpatient physical therapy home and community-based services providers, and various other facilities.

At December 31, 2021, we owned and operated 175 general, acute care hospitals with 48,030 licensed beds.

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

Pandemic and CARES Act Funding

On March 11, 2020, the World Health Organization designated COVID-19

as a global pandemic.

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

Index to Financial Statements

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

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

and most states have lifted moratoriums on non-emergent

procedures, restrictions remain in place or may be adopted or re-imposed,

and the possibility exists that the public, particularly segments with a high mortality risk, could remain wary of real or perceived opportunities for exposure to the virus.

We are unable to predict the future impact of the pandemic on our operations.

During 2020, we received approximately $4.4 billion of accelerated Medicare payments and approximately $1.8 billion in general and targeted distributions from the Provider Relief Fund, both as provided for and established under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

During October 2020,

we announced our decision to return, or repay early, all of our share of the Provider Relief Fund distributions and all of the Medicare accelerated payments.

During the fourth quarter of 2020, we returned, or repaid early, approximately $6.1 billion of these funds.

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

During the second quarter of 2021, our patient volumes improved as the effects of the pandemic moderated and certain pandemic-related restrictions and policies were eased.

For the remainder of 2021, our patient volumes exhibited consistent growth over the prior year, with the exception of inpatient surgeries, and included a resurgence of COVID-19

admissions and the re-imposition

of pandemic-related restrictions in certain markets.

We believe the extent of the COVID-19

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

Such factors include, but are not limited to:

the severity or duration of the pandemic, including whether there will be additional periods of increases in the number of COVID-19 cases in the areas in which we operate, the rollout and availability of effective medical treatments and vaccines, the efficacy of public health controls, including vaccines, and the impact of any mutations of the virus;

the scope and duration of stay-at-home

practices and business closures and restrictions;

recommended or required 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 (“PPE”);

and changes in professional and general liability exposure.

Because of these and other uncertainties, we cannot estimate how long or how severely the pandemic will impact our business.

If we experience 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.

Because of these uncertainties, we cannot estimate how long or to what extent the pandemic will impact our operations.

Summary Risk Factors

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pandemic and other potential pandemics:

The COVID-19 pandemic is significantly affecting our operations, business and financial condition.

Our liquidity could also be negatively impacted by the COVID-19 pandemic, particularly if the U.S.

pandemic is significantly affecting our operations and could affect our business and financial condition.

Our liquidity could also be negatively impacted by the COVID-19

pandemic, particularly if the U.S.

economy remains unstable for a significant amount of time.

There is a high degree of uncertainty regarding the implementation and impact of the CARES Act and other existing or future stimulus legislation, if any.

There can be no assurance as to the total amount of financial assistance or types of assistance we will receive, that we will be able to comply with the applicable terms and conditions to retain such assistance, that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for health care providers or that additional stimulus legislation will be enacted.

We are unable to predict the ultimate impact of the CARES Act (as defined below) and other existing or future stimulus and relief legislation, if any, or the effect that such legislation and other governmental responses intended to assist providers in responding to COVID-19

may have on our business, financial condition, results of operations or cash flows.

There can be no assurance as to the total amount of financial assistance or types of assistance we will receive, that we will be able to comply with the applicable terms and conditions to retain such assistance, or that we will be able to benefit from provisions intended to increase access to resources and ease regulatory burdens for health care providers.

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

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Risks related to our indebtedness:

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Our debt agreements contain restrictions that limit our flexibility in operating our business.

Discontinuation, reform or replacement of LIBOR may adversely affect our business.

Risks related to governmental regulation and other legal matters:

Our results of operations may be adversely affected by health care reform efforts, including court challenges to, and efforts to repeal, replace or otherwise significantly change the Affordable Care Act.

We are unable to predict what, if any, and when such changes will be made in the future.

Changes in government health care programs may adversely affect our revenues.

If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations.

State efforts to regulate the construction or expansion of health care facilities could impair our ability to operate and expand our operations.

We may incur additional tax liabilities.

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

We may be subject to liabilities from claims brought against our facilities.

Discontinuation, reform or replacement of LIBOR may adversely affect our borrowing costs.

Risks related to human capital:

Our labor costs may be adversely affected by competition for staffing, the shortage of experienced nurses and labor union activity.

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

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

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Risks related to technology, data privacy and cybersecurity:

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

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

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remediation and other expenses;

and exposure to liability under HIPAA, consumer protection laws, common law theories or other laws.

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

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

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

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

Risks related to governmental regulation and other legal matters:

Our results of operations may be adversely affected by health care reform efforts, including efforts to significantly change the Affordable Care Act (as defined below).

We are unable to predict what, if any, and when additional health reform measures will be adopted or implemented, and the effects and ultimate impact of any such measures are uncertain.

Changes in government health care programs may adversely affect our revenues.

If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations.

State efforts to regulate the construction or expansion of health care facilities could impair our ability to operate and expand our operations.

We may incur additional tax liabilities.

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

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

Risks related to operations, strategy, demand and competition:

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Our facilities are heavily concentrated in Florida and Texas, which makes us sensitive to regulatory, economic, public health, environmental and competitive conditions and changes in those states.

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

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

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

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

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renal disease and persons with Lou Gehrig’s Disease.

Medicaid is a federal-state program, administered by the states, that provides hospital and medical benefits to qualifying individuals who are unable to afford health care.

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

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

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

The amount of such exclusions, deductibles and coinsurance continues to increase.

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

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

Collection of amounts due from individuals is typically more difficult than from government health care programs or other

third-party payers.

We provide discounts to uninsured patients who do not qualify for Medicaid or for financial relief under our charity care policy.

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In 2013, the Centers for Medicare & Medicaid Services (“CMS”) began imposing a 2% reduction on Medicare payments.

The CARES Act temporarily suspended these reductions through December 31, 2020 and extended the reductions through 2030.

The Consolidated Appropriations Act, 2021 (“CAA”) further extended the suspension through March 31, 2021.

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

The full 2% reduction will resume on July 1, 2022.

The BCA sequestration has been extended through 2030, with the reductions for 2030 set to increase to 2.25% for the first six months and to 3% for the second six months.

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

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

However, Congress has delayed implementation of this payment reduction until 2023.

Inpatient Acute Care

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

Under the hospital inpatient PPS, fixed payment amounts per

Index to Financial Statements

inpatient discharge are established based on the patient’s assigned Medicare severity diagnosis-related group (“MS-DRG”).

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

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

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Each federal fiscal year, the annual market basket update is reduced by a productivity adjustment based on the Bureau of Labor Statistics (“BLS”) 10-year

moving average of changes in specified economy-wide productivity, as required by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”).

moving average of changes in specified economy-wide productivity.

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

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rate by approximately 2.9%.

This increase reflected a market basket update of 3.0%, adjusted by the following percentage points:

a negative 0.4 productivity adjustment and a positive 0.5 adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”).

This increase reflected a market basket update of 2.4%, increased by a positive 0.5 percentage point adjustment in accordance with the Medicare Access and CHIP Reauthorization Act of 2015 (“MACRA”).

For federal fiscal year 2022, CMS increased the MS-DRG

rate by approximately 2.5%.

This increase reflects a market basket update of 2.4%, adjusted by a positive 0.5 adjustment required by MACRA.

This increase reflects a market basket update of 2.7%, adjusted by a negative 0.7 percentage point productivity adjustment and a positive 0.5 percentage point adjustment required by MACRA.

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

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

For example, the two midnight rule limits payments to hospitals when services to Medicare

beneficiaries are payable as inpatient services.

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

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

Payments to hospitals may also be reduced based on readmission rates.

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

Each federal fiscal year, inpatient payments are reduced if a hospital experiences “excess” readmissions within the 30-day

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

Hospitals with what CMS defines as excess readmissions for these conditions or procedures receive reduced payments for

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all inpatient discharges, not just discharges relating to the conditions or procedures subject to the excess readmission standard.

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

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

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Each hospital’s performance is publicly reported by CMS.

In addition, CMS reduces the inpatient PPS payment amount for all discharges by 2.0%.

The total amount collected from these reductions is pooled and used to fund payments to reward hospitals that meet certain quality performance standards established by CMS.

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

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

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

Because the Affordable Care Act provides that the pool will be fully distributed, hospitals that meet or exceed the quality performance standards receive greater reimbursement under the value-based purchasing program than they would have otherwise.

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

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

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and person and community engagement.

CMS estimates that $1.9 billion will be available to hospitals as incentive payments in federal fiscal year 2021 under the Hospital Value-Based Purchasing Program.

For the duration of the national public health emergency (“PHE”) declared as a result of the COVID-19

pandemic, which is ongoing, CMS has implemented a measure suppression policy across various hospital quality measurement and value-based purchasing programs.

The policy is intended to ensure that these programs neither reward nor penalize hospitals based on circumstances caused by the PHE that the measures were not designed to accommodate.

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

diagnosed patients.

Under the HVBP Program in federal fiscal year 2022, as a result of the measure suppression policy, hospitals will receive a net neutral payment adjustment for each discharge that is equal to the 2% withheld under the program.

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

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

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

In addition, certain items and services furnished by off-campus

provider-based departments, subject to certain exceptions, are not covered as outpatient department services under the outpatient PPS, but are reimbursed under the Medicare Physician Fee Schedule (“Physician Fee Schedule”), subject to adjustments as specified by CMS.

In calendar year 2019, CMS began a two-year

of an expanded site-neutral policy under which clinic visit services provided at all off-campus

provider-based departments are reimbursed at the Physician Fee Schedule rate, which is generally lower than the PPS rate.

Previously, this rate did not apply to “excepted” provider-based departments.

In September 2019, a federal judge invalidated the expansion of the site-neutral payment policy for 2019.

CMS appealed this decision and won, but had begun reprocessing the 2019 claims paid at the lower rates.

For calendar year 2020, CMS issued a final rule implementing year two of the policy phase-in.

For calendar year 2021 and beyond, CMS is continuing the payment policy.

CMS is considering how to address reprocessed claims from this litigation.

In conjunction with these efforts aimed at increasing site neutrality, CMS also finalized a rule in December 2020 that will begin phasing out over three years the Inpatient Only List, which is a list of procedures eligible to be reimbursed by Medicare only if performed in an inpatient setting.

As a result, these procedures will also be eligible to be reimbursed by Medicare if performed in outpatient settings.

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

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Each calendar year, the annual market basket update is further reduced by a productivity adjustment based on the BLS 10-year

moving average of changes in specified economy-wide productivity as required by the Affordable Care Act.

For calendar year 2020, CMS increased APC payment rates by an estimated 2.6%.

This increase reflected a market basket increase of 3.0% with a negative 0.4 percentage point productivity adjustment.

moving average of changes in specified economy-wide productivity.

For calendar year 2021, CMS increased APC payment rates by an estimated 2.4%.

This increase reflects a market basket increase of 2.4%.

Together with other policy changes, CMS estimates that the calendar year 2021 rates will increase Medicare outpatient PPS payments by 2.4%.

This increase reflected a market basket increase of 2.4%.

For calendar year 2022, CMS increased payment rates under the outpatient PPS by an estimated 2.0%.

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

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

Index to Financial Statements

Certain items and services furnished by off-campus

In calendar year 2019, CMS began a two-year

of an expanded site-neutral policy under which clinic visit services provided at all off-campus

provider-based departments are reimbursed at the Physician Fee Schedule rate, which is generally lower than the PPS rate.

Previously, this rate did not apply to “excepted” provider-based departments.

In September 2019, a federal judge invalidated the expansion of the site-neutral payment policy for 2019.

CMS appealed this decision and won, but had begun reprocessing the 2019 claims paid at the lower rates.

As a result of its successful appeal, CMS has begun to reprocess the 2019 claims provided at excepted provider-based departments so that they are paid at the same rate as non-excepted

provider-based departments for those services under the Physician Fee Schedule.

For calendar year 2020, CMS issued a final rule implementing year two of the policy phase-in.

For calendar year 2021 and beyond, CMS is continuing the expanded site-neutral payment policy.

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

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In 2020, HHS prevailed at the circuit court level, with the court upholding its authority to implement this policy.

Depending upon the remedy and the outcome of any appeal, this case could result in a decrease to the Company’s outpatient Medicare reimbursement.

However, in 2021, the group of hospitals challenging the policy appealed to the U.S.

Supreme Court.

Depending upon the decision and any prescribed remedy, this case could result in a decrease to the Company’s outpatient Medicare reimbursement.

For calendar year 2022, HHS will continue to pay the reduced rates that took effect beginning in 2018.

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moving average of changes in specified economy-wide productivity.

For federal fiscal year 2020, CMS increased IRF payment rates by an estimated 2.5%, reflecting an IRF market basket update of 2.9% with a negative 0.4 percentage point productivity adjustment.

For federal fiscal year 2021, CMS increased IRF payment rates by an estimated 2.4%, reflecting an IRF market basket update of 2.4%.

For federal fiscal year 2021, CMS increased IRF payment rates by an estimated 2.4%.

For federal fiscal year 2022, CMS increased IRF payment rates by an estimated 1.9%, reflecting an IRF market basket update of 2.6% with a negative

0.7 percentage point productivity adjustment.

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

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moving average of changes in specified economy-wide productivity.

For federal fiscal year 2020, CMS increased IPF payment rates by an estimated 1.75%, which reflects a 2.9% IPF market basket update with a negative 0.4 percentage point productivity adjustment and a negative 0.75 percentage point adjustment required by law.

For federal fiscal year 2021, CMS increased IPF payment rates by an estimated 2.2%, which reflects a 2.2% IPF market basket increase.

For federal fiscal year 2021, CMS increased IPF payment rates by an estimated 2.2%.

For federal fiscal year 2022, CMS increased IPF payment rates by an estimated 2.0%, which reflects a 2.7% IPF market basket increase with a negative 0.7 percentage point productivity adjustment.

Together with other policy changes, total payments to IPFs are anticipated to increase by 2.1% in federal fiscal year 2022.

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

As of December 31, 2021, we had five psychiatric hospitals and 44 hospital psychiatric units.

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Ambulatory Surgery Centers

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moving average of changes in specified economy-wide productivity.

For calendar year 2020, CMS increased ASC payment rates by 2.6%, which reflected a market basket increase of 3.0% and a negative 0.4 percentage point productivity adjustment.

For calendar year 2021, CMS increased ASC payment rates by 2.4%, which reflects a market basket increase of 2.4%.

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

For calendar year 2021, CMS increased ASC payment rates by 2.4%, which reflected a market basket increase of 2.4%.

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

In addition, CMS has established a quality reporting program for

ASCs under which ASCs that fail to report on specified quality measures receive a 2.0 percentage point reduction to the market basket update.

CMS reimburses home health agencies under the Home Health PPS.

Home health agencies are paid a national, standardized 30-day

period payment rate if a period of care meets a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit

payment rate for the discipline providing care).

The daily home health payment rate is adjusted for case-mix

and area wage levels.

An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.

Each calendar year, home health payment rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year

moving average of changes in specified economy-wide productivity.

For calendar year 2022, CMS increased home health payment rates by an estimated 3.2%, which reflects a 3.1% market basket increase reduced by a negative 0.5 percentage point productivity adjustment, among other changes.

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

In addition, beginning January 1, 2022, home health agencies are required to submit a one-time

Notice of Admission (“NOA”) for each patient that establishes that the beneficiary is under a Medicare home health period of care.

Failure to submit the NOA within 5 calendar days from the start of care will result in a reduction to the 30-day

period payment amount for each day from the start of care date until the date the NOA is submitted.

Effective January 1, 2022, CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model.

Under the model, home health agencies will receive increases or reductions to their Medicare fee-for-service

payments of up to 5%, based on performance against specific quality measures relative to the performance of other home health providers.

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

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

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

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

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

review, post-payment review or a minimal post-payment review with a 25% payment reduction.

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

The Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission, to propose a unified post-acute care payment model by 2023.

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

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

Hospice services are paid under the Hospice PPS, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit.

The daily rate depends on the level of care provided to a patient (routine home care, continuous home care, inpatient respite care, or general inpatient care).

Daily rates are adjusted for factors such as area wage levels.

Each federal fiscal year, hospice payment rates are updated using a market basket index, which is reduced by a productivity adjustment based on the BLS 10-year

moving average of

changes in specified economy-wide productivity.

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

Hospices that fail to satisfy quality reporting requirements receive a 2 percentage point reduction to the market basket update.

Beginning in 2024, the payment reduction for failure to report quality data will increase to 4 percentage points.

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

The inpatient cap limits the number of days of inpatient care to no more than 20% of total patient care days.

The aggregate cap limits the amount of Medicare reimbursement a hospice may receive, based on the number of Medicare patients served.

The aggregate cap is updated annually.

In federal fiscal year 2022, the aggregate cap is $31,297.61.

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

Physician Services

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To determine the payment rate for a particular service, the sum of the geographically adjusted RVUs is multiplied by a conversion factor.

For 2021, CMS updated the conversion factor based on a budget neutrality adjustment of negative 10.20%.

However, the CAA provides for a 3.75% payment increase under the Physician Fee Schedule, which will partially offset this reduction.

For calendar year 2022, CMS reduced the conversion factor by approximately 3.71%.

However, Congress approved a 3.0% payment increase for calendar year 2022, which will partially offset this reduction.

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

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

The Advanced Alternative Payment Model (“APM”) track makes incentive payments available for participation in specific innovative payment models approved by CMS.

The Advanced Alternative Payment Model (“Advanced APM”) track makes incentive payments available for participation in specific innovative payment models approved by CMS.

Providers may earn a 5% Medicare incentive payment through 2024 and will be exempt from the reporting requirements and payment adjustments imposed under the Merit-Based Incentive Payment System (“MIPS”) if the provider has sufficient participation (based on percentage of payments or patients) in an Advanced APM.

Alternatively, providers may participate in the MIPS track.

Currently, providers electing this option may receive payment incentives or be subject to payment reductions based on their performance with respect to clinical quality,

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resource use, clinical improvement activities, and meeting Promoting Interoperability standards related to the meaningful use of EHRs.

Currently, providers electing this option may receive payment incentives or be subject to payment reductions based on their performance with respect to clinical quality, resource use, clinical improvement activities, and meeting Promoting Interoperability standards related to the meaningful use of EHRs.

Performance data collected in 2022 will result in payment adjustments of up to 9% in 2024.

CMS will continue to offer the Extreme and Uncontrollable Circumstances Policy for 2021 performance data.

This policy is an exception providers must apply for, which allows reweighting for any or all MIPS performance categories for providers impacted by the COVID-19

MIPS consolidates components of three previously established physician incentive programs:

the Physician Quality Reporting System, the Physician Value-Based Payment Modifier, and the Medicare EHR Incentive Program.

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

that is outside of their control.

For performance year 2022, providers will generally be required to submit an application in order to request an exception.

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

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

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

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

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

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

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

Medicare reimburses teaching hospitals for portions of the direct and indirect costs of graduate medical education (“GME”) through statutory formulas that are generally based on the number of medical residents and

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which take into account patient volume or the number of hospital beds.

Accrediting organizations review GME programs for compliance with educational standards.

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Managed Medicare plans can be structured as HMOs, PPOs or private fee-for-service

In addition to covering Part A and Part B benefits, the health insurers may choose to offer supplemental benefits and impose higher premiums and plan costs on beneficiaries.

addition to covering Part A and Part B benefits, the health insurers may choose to offer supplemental benefits and impose higher premiums and plan costs on beneficiaries.

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

According to CMS, over one-third

of all Medicare enrollees participate in managed Medicare plans.

According to CMS, over 40% of all Medicare enrollees participate in managed Medicare plans.

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

As a result of the COVID-19

pandemic, Medicaid enrollment has increased, and the federal government has made available enhanced federal Medicaid funding.

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

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

The Affordable Care Act requires states to expand Medicaid coverage to all individuals under age 65 with incomes effectively at or below 138% of the federal poverty level.

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

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

A number of states, including Texas and Florida, have opted out of the Medicaid expansion.

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

Previously, certain members of Congress and the prior presidential administration indicated their intent to increase state flexibility in the administration of Medicaid programs, including allowing states to condition enrollment on work or other community engagement.

However, President Biden has issued executive orders directing agencies to re-examine measures that reduce coverage or undermine Medicaid programs, including work requirements.

Because most states must operate with balanced budgets and because the Medicaid program is often the state’s largest program, states can be expected to adopt or consider adopting legislation designed to reduce their Medicaid expenditures.

Budgetary pressures have, in recent years, resulted and likely will continue to result in decreased spending, or decreased spending growth, for Medicaid programs in many states.

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

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

Outside of the government response to the COVID-19

pandemic, budgetary pressures have, in recent years, resulted and likely will continue to result in decreased spending, or decreased spending growth, for Medicaid programs in many states.

Certain states in which we operate have adopted broad-based provider taxes to fund the non-federal

share of Medicaid programs.

share of Medicaid programs or fund indigent care within the state.

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

Federal funds under the Medicaid program may not be used to reimburse providers for medical assistance provided to treat certain provider-preventable conditions.

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

The prior presidential administration increased state flexibility in the administration of Medicaid programs, including by allowing states to condition enrollment on work or other community engagement.

However, in January 2021, President Biden issued an executive order directing agencies to re-examine

measures that reduce health insurance coverage or undermine Medicaid programs, including work requirements, and throughout 2021 CMS rescinded approvals of waivers involving certain eligibility and enrollment restrictions, including those allowing for work and community engagement requirements.

The Texas Healthcare Transformation and Quality Improvement Program (“Texas Waiver Program”) is operated under a waiver granted by CMS under Section 1115 of the Social Security Act.

The program provides funding for uncompensated care and supports several delivery system reform initiatives.

However, there is currently uncertainty regarding the duration of the Texas Waiver Program.

Although the previous presidential administration approved a 10-year

extension of the program, through September 2030, CMS rescinded this extension in April 2021.

Without the extension, the waiver would expire September 30, 2022.

The Texas Attorney General filed a lawsuit challenging the rescission, and, in August 2021, a federal district judge granted a preliminary injunction temporarily reinstating the extension.

While the lawsuit is pending, the Texas Health and Human Services Commission (“Texas HHSC”) has re-submitted its application to extend the Texas Waiver Program.

Additionally, the Texas HHSC’s proposed directed payment program has not yet been renewed for the current program year that began September 1, 2021.

Our supplemental Medicaid revenues from the directed payment program have been, and will continue to be, negatively impacted until the Texas HHSC and CMS finalize certain components of the program.

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

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

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

CMS employs UPICs to perform post-payment audits of Medicaid claims, identify overpayments, and perform other program integrity activities, many of which were previously performed by Medicaid Integrity Contractors.

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

The UPICs collaborate with states and coordinate provider investigations across the Medicare and Medicaid programs.

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These programs vary by state in design and operation.

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Managed Medicaid

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

However, in an effort to more closely tie funds to delivery and outcomes, CMS began limiting these “pass-through payments” to managed Medicaid plans in 2016 and will ultimately prohibit such payments by 2027.

In an effort to more closely tie funds to delivery and outcomes, CMS is limiting these “pass-through payments” to managed Medicaid plans and will generally prohibit such payments by 2027.

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

system to a managed care system.

Accountable Care Organizations and Bundled Payment Initiatives

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

There are several types of ACO programs, including the Medicare Shared Savings Program, which was established pursuant to the Affordable Care Act, and the Next Generation ACO Model.

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

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

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

For example, providers participating in bundled payment initiatives agree to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care, accepting accountability for costs and quality of care.

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

The CMMI has implemented bundled payment models, including the Bundled Payment Care Improvement Advanced (“BPCI Advanced”) program, which is voluntary and expected to run through December 2023.

Participation in bundled payment programs is generally voluntary, but CMS has required providers in selected geographic areas to participate in a mandatory bundled program for specified orthopedic procedures, which is scheduled to run through September 30, 2021.

CMS will require hospitals in selected markets to participate in bundled payment initiatives for end-stage renal disease treatment, which began January 1, 2021, and radiation oncology, beginning as early as January 1, 2022.

HHS has indicated that it plans to implement additional bundled payment programs, some of which will be mandatory.

HHS continues to focus on shifting from traditional fee-for-service

reimbursement models to alternative payment models that tie reimbursement to quality and/or value, including bundled payment and pay-for-performance

Several private third-party payers are increasingly employing such reimbursement models, which may increasingly shift financial risk to providers.

The CMS Innovation Center has implemented bundled payment models, including the Bundled Payment Care Improvement Advanced (“BPCI Advanced”) program, which is voluntary and expected to run through December 2023.

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

renal disease treatment.

In addition, CMS will require certain hospitals to participate in a radiation oncology model beginning as early as January 1, 2023.

In October 2021, CMS published an outline of the CMS Innovation Center’s strategy for the next decade, noting the need to accelerate the movement to value-based care and drive broader system transformation.

2030, the CMS Innovation Center aims to have all fee-for-service

Medicare beneficiaries and most Medicaid beneficiaries in a care relationship with accountability for quality and total cost of care.

CMS also indicated it will streamline its payment model portfolio and consider how to ensure broad provider participation, including by implementing more mandatory models.

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

Disproportionate Share Hospital and Medicaid Supplemental Payments

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

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Pending litigation challenging the methodology for calculating DSH payment adjustments may affect how CMS calculates these payments and may increase or decrease our payments in the future.

Some states make additional payments to providers through the Medicaid program for certain specific claims.

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

The Affordable Care Act and subsequent legislation provide for reductions to the Medicaid DSH hospital program.

Under the budget bill signed into law in February 2018, Medicaid DSH payments would have been reduced by $4 billion in 2020 and by $8 billion per year from 2021 through 2025.

However, Congress has delayed the implementation of these reductions through 2023, but added additional reductions for 2026 and 2027.

The Affordable Care Act and subsequent legislation provide for reductions to the Medicaid DSH hospital program, but Congress has delayed the implementation of these reductions through 2023 (to begin in federal fiscal year 2024).

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

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

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Most of our hospitals offer discounts from established charges to certain large group purchasers of health care services, including managed care plans and private health insurers.

Admissions reimbursed by commercial managed care and other insurers were 29%, 28% and 28% of our total admissions for the years ended December 31, 2020, 2019 and 2018, respectively.

Admissions reimbursed by commercial

managed care and other insurers were 31%, 29% and 28% of our total admissions for the years ended December 31, 2021, 2020 and 2019, respectively.

Managed care contracts are typically negotiated for terms between one and three years.

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Price transparency initiatives may impact our ability to obtain or maintain favorable contract terms.

Effective January 1, 2022, the No Surprises Act (enacted as part of the CAA) will require providers to send to a patient’s health plan good faith estimates of the expected charges for furnishing scheduled items or services, including any item or service that is reasonably expected to be provided in conjunction with the scheduled item or service or that is reasonably expected to be delivered by another provider, before the services are delivered.

The No Surprises Act will also prohibit providers from charging patients an amount beyond the in-network

cost sharing amount for services rendered by out-of-network

providers, subject to limited exceptions.

Effective January 1, 2022, the No Surprises Act (enacted as part of the Consolidated Appropriations Act, 2021 (“CAA”)) requires providers to send to a patient’s health plan a good faith estimate of the expected charges for furnishing scheduled items or services, including billing and diagnostic codes, prior to the scheduled date of the items or services.

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

However, HHS is deferring enforcement of certain requirements of the No Surprises Act related to the good faith estimates for scheduled items or services for insured patients.

In addition, among other consumer protections, the No Surprises Act prohibits providers from charging patients an amount beyond the in-network

cost sharing amount for emergency services rendered by out-of-network

providers and non-emergency services rendered by out-of-network

providers at certain in-network

facilities, including hospitals.

HHS has established a dispute resolution process for out-of-network

providers and health plans to resolve payment disagreements when surprise billing protections apply.

It is not clear what impact, if any, these or future health reform efforts at the federal and state levels, consolidation within the third-party payer industry and vertical integration among third-party payers and health care providers will have on our ability to negotiate reimbursement rates.

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Uninsured and Self-Pay

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Any increases in uninsured individuals, changes to the payer mix or greater adoption of health plan structures that result in higher patient responsibility amounts could increase amounts due from individuals.

Effective January 1, 2022, the No Surprises Act will require providers to send uninsured patients a good faith estimate of the expected charges for furnishing scheduled items or services, including any item or service that is reasonably expected to be provided in conjunction with the scheduled item or service or that is reasonably expected to be delivered by another provider, before the services are delivered.

Effective January 1, 2022, the No Surprises Act requires providers to provide uninsured and self-pay

patients a good faith estimate of the expected charges for furnishing scheduled items or services, including billing and diagnostic codes, prior to the scheduled date of the items or services.

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

If the actual charges are substantially higher than the estimate, the patient can invoke a dispute resolution process to challenge the higher amount.

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

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Hospital Utilization

We believe the most important factors relating to the overall utilization of a hospital are the quality and market position of the hospital and the number and quality of physicians and other health care professionals providing patient care within the facility.

Generally, we believe the ability of a hospital to be a market leader is determined by its breadth of services, level of technology, quality and condition of the facilities, emphasis on quality of care and convenience for patients and physicians.

Generally, we believe the ability of a hospital to be a market leader is determined by its breadth of services, level of technology, quality and condition of the facilities, emphasis on

quality of care and convenience for patients and physicians.

Other factors that impact utilization include the growth in local population, local economic conditions and market penetration of managed care programs.

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Outpatient revenues as a % of patient revenues(m)

Excludes freestanding endoscopy centers (21 at December 31, 2020;

20 at December 31, 2019 and 19 at December 31, 2018).

Excludes freestanding endoscopy centers (21 at December 31, 2021 and 2020, and 20 at December 31, 2019).

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

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Generally, other hospitals in the communities we serve provide services similar to those offered by our hospitals.

Additionally, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers and diagnostic and imaging centers in the geographic areas in which we operate continues to increase.

Additionally, the number of freestanding specialty hospitals, surgery centers, emergency departments,

urgent care centers and diagnostic and imaging centers in the geographic areas in which we operate continues to increase.

As a result, most of our hospitals operate in a highly competitive environment.

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Trends toward clinical and pricing transparency may impact our competitive position in ways that are difficult to predict.

For example, hospitals are currently required to publish online a list of their standard charges for items and services.

In 2019, CMS issued a final rule that, beginning January 2021, requires hospitals to publish additional types of standard charges for all items and services, including discounted cash prices and payer-specific and de-identified

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

negotiated charges, in a publicly accessible online file.

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

Court challenges to the 2019 rule in both the District Court for the District of Columbia and the D.C.

Circuit Court of Appeals were unsuccessful.

It is not yet known whether the Biden administration will take any action regarding the rule or whether the matter will be appealed to the U.S.

Supreme Court.

CMS plans to begin auditing hospitals for compliance with transparency requirements and may impose civil monetary penalties for noncompliance.

In addition, the No Surprises Act creates additional price transparency requirements beginning on January 1, 2022, including the requirement that providers send patients and health plans a good faith estimate of the expected charges and diagnostic codes prior to a patient’s appointment.

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

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

Effective January 1, 2022, the No Surprises Act imposes additional price transparency requirements, including the requirement that providers send patients and health plans a good faith estimate of the expected charges and diagnostic codes prior to the scheduled date of the item or service.

HHS is deferring enforcement of certain requirements of the No Surprises Act regarding providing good faith estimates for scheduled items or services for insured individuals.

Our strategies are designed to ensure our hospitals are competitive.

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

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

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

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

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

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Managed care plans attempt to direct and control the use of hospital services and obtain discounts from hospitals’ established gross charges.

Similarly, employers and

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

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

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

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Other health care providers may impact our ability to enter into contracts with third-party payers or negotiate increases in our reimbursement and other favorable terms and conditions.

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

For example, some of our

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

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

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

In addition, health reform efforts, such as the Affordable Care Act’s limitations on rescissions of coverage and pre-existing

condition exclusions, may lead to private third-party payers increasingly demanding reduced fees or being unwilling to negotiate reimbursement increases.

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

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

These trends may continue regardless of potential repeal or replacement of, or changes to, the Affordable Care Act, or other health reform efforts.

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

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

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

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

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

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Health care facility construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting, building codes and environmental protection.

Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the

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various standards necessary for licensing and accreditation.

Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation.

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

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

Each of our acute care hospitals located in the United States is eligible to participate in Medicare and Medicaid programs and is accredited by The Joint Commission, with the exception of one hospital which is accredited by DNV.

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

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

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

If any facility were to lose

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

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

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

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

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

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

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Failure to provide required notifications or obtain necessary state approvals can result in the inability to expand facilities, complete an acquisition or expenditure or change ownership or other penalties.

State Rate Review

Some states have adopted legislation mandating rate or budget review for hospitals or have adopted taxes on hospital revenues, assessments or licensure fees to fund indigent health care within the state.

In the aggregate, indigent tax provisions have not materially, adversely affected our results of operations.

Although we do not currently operate facilities in states that mandate rate or budget reviews, we cannot predict whether we will operate in such states in the future, or whether the states in which we currently operate may adopt legislation mandating such reviews.

Federal Health Care Program Regulations

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

Civil monetary penalties are adjusted annually based on updates to the consumer price index and were increased under the Bipartisan Budget Act of 2018.

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

Anti-kickback Statute

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

Furthermore, the Affordable Care Act provides that knowledge of the law or the intent to violate the law is not required.

Violations of the Anti-

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

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

Violations of the Anti-kickback

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

including Medicare and Medicaid.

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

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Currently, there are statutory exceptions and safe harbors for various activities, including the following:

certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, group purchasing organizations, waiver of beneficiary coinsurance and deductible amounts, managed care arrangements, obstetrical malpractice insurance subsidies, investments in group practices, freestanding surgery centers, ambulance replenishing, referral agreements for specialty services, care coordination arrangements, arrangements for patient engagement and support,

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CMS-sponsored

model arrangements, cybersecurity technology and related services, and value-based arrangements.

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Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law.

While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how

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the government will interpret many of these exceptions for enforcement purposes.

Further, we do not always have the benefit of significant regulatory or judicial interpretation of the Stark Law and its implementing regulations.

While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for enforcement purposes.

Further, we do not always have the benefit of significant regulatory or judicial interpretation of the Stark Law and its implementing

We attempt to structure our relationships to meet an exception to the Stark Law, but the regulations implementing the exceptions are detailed and complex, and are subject to continuing legal and regulatory change.

We cannot assure that every relationship complies fully with the Stark Law.

Similar State Laws

Many states in which we operate also have laws similar to the Anti-kickback Statute that prohibit payments to physicians for patient referrals and laws similar to the Stark Law that prohibit certain self-referrals.

These state laws often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement.

These statutes typically provide for criminal and civil penalties, as well as loss of licensure.

Other Fraud and Abuse Provisions

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

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

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

There is limited guidance with respect to the application of EKRA.

State Fraud and Abuse Laws

Many states in which we operate also have laws intended to prevent fraud and abuse within the health care industry.

Some of these laws are similar to the Anti-kickback Statute, prohibiting payments to physicians for patient referrals, and to the Stark Law, prohibiting certain self-referrals.

These state laws often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement.

These statutes typically provide for criminal and civil penalties, as well as loss of licensure.

The Federal False Claims Act and Similar State Laws

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

One of the most prominent of these laws is the FCA, which may be enforced by the federal government directly or by a qui tam

One of the most prominent of these laws is the FCA, which

may be enforced by the federal government directly or by a qui tam

plaintiff, or whistleblower, on the government’s behalf.

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

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

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

When a private party brings a qui tam

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Notification must also be made to HHS and, in certain situations involving large breaches, to the media.

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

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

500 individuals.

All non-permitted

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

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Violations of the HIPAA privacy and security regulations may result in criminal penalties and in substantial civil penalties per violation.

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

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

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

These laws vary and could impose additional penalties.

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

The California Consumer Privacy Act of 2018 (the “CCPA”) affords consumers expanded privacy protections effective January 1, 2020.

Moreover, the California Privacy Rights Act (“CPRA”) takes effect January 1, 2022, and significantly modifies the CCPA.

The California Consumer Privacy Act of 2018 (the “CCPA”), which was significantly amended by the California Privacy Rights Act (“CPRA”) effective January 1, 2022, affords consumers expanded privacy protections.

Additionally, Virginia and Colorado passed comprehensive privacy legislation in 2021, and several privacy bills have been proposed both at the federal and state level that may result in additional legal requirements that impact our business.

The potential effects of these laws are far-reaching and

may require us to modify our data processing practices and policies and to incur substantial costs and expenses to comply.

For example, the CCPA and CPRA give California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing and receive detailed information about how their personal information is used.

may require us to modify our data processing practices and policies and to incur substantial costs and expenses in order to comply.

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

The CCPA and CPRA provide for civil penalties for violations, as well as a private right of action for data breaches.

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

In the case of non-compliance

with these regulations, regulators may impose administrative fines which are based on a multi-factored approach.

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

For example, beginning April 5, 2021, health care providers and certain other entities will be subject to information blocking restrictions pursuant to the 21 st

For example, beginning April 5, 2021, health care providers and certain other entities are subject to information blocking restrictions pursuant to the 21 st

Century Cures Act that prohibit practices that are likely to interfere with the access, exchange or use of electronic health information, except as required by law or specified by HHS as a reasonable and necessary activity.

Violations may result in penalties or other disincentives.

Many foreign data privacy regulations (including the European Union’s General Data Protection Regulation (the “GDPR”)) are more stringent than those in the United States.

In the case of non-compliance

with a material provision of the GDPR (such as non-adherence

to the core principles of processing personal data), regulators have the authority to levy a fine in an amount that is up to the greater of €20 million or 4% of global annual turnover in the prior year.

If it is determined that non-compliance

is related to a non-material

provision (such as failure to comply with technical measures), regulators may impose a fine in an amount that is up to the greater of €10 million or 2% of the global annual turnover from the prior year.

These administrative fines are discretionary and based, in each case, on a multi-factored approach.

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

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

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

There are severe penalties under EMTALA if a hospital

fails to screen or appropriately stabilize or transfer an individual or if the hospital delays appropriate treatment in order to first inquire about the individual’s ability to pay.

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

These civil monetary penalties are

Index to Financial Statements

adjusted annually based on updates to the consumer price index.

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

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

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owned ambulance.

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

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

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Both federal and state government agencies have increased their focus on and coordination of civil and criminal enforcement efforts in the health care area.

The OIG and the Department of Justice (“DOJ”) have, from time to time, established national enforcement initiatives, targeting all hospital providers that focus on specific billing practices or other suspected areas of abuse.

The Affordable Care Act included additional federal funding of $350 million over 10 years to fight health care fraud, waste and abuse, which expired in 2020.

Through the national Health Care Fraud and Abuse Control

Program, the OIG and the DOJ coordinate federal, state and local law enforcement activities with respect to health care fraud against both public and private health plans.

The OIG and DOJ have, from time to time, established national enforcement initiatives that target all hospital providers, focusing on specific billing practices or other suspected areas of abuse.

In addition, governmental agencies and their agents, such as MACs, fiscal intermediaries and carriers, may conduct audits of our health care operations.

Private third-party payers may conduct similar post-payment audits, and we also perform internal audits and monitoring.

Index to Financial Statements

In addition to national enforcement initiatives, federal and state investigations have addressed a wide variety of routine health care operations such as:

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Health Care Reform

The health care industry is subject to changing political, regulatory, and other influences, along with various scientific and technological initiatives.

In recent years, the U.S.

Congress and certain state legislatures have passed a large number of laws and regulations intended to effect major change within the U.S.

The health care industry is subject to changing political, regulatory, and other influences, along with various scientific and technological initiatives and innovations.

In recent years, Congress and certain state legislatures have passed a large number of laws and regulations intended to effect major change within the U.S.

health care system, including the Affordable Care Act.

The Affordable Care Act affects how health care services are covered, delivered and reimbursed through expanded health insurance coverage, reduced growth in Medicare program spending, reductions in Medicare and Medicaid DSH payments, and the establishment of programs that tie reimbursement to quality and integration.

However, there is uncertainty regarding the future of the Affordable Care Act.

The law has been subject to legislative and regulatory changes and court challenges.

For example, final rules issued in 2018 expand the availability of association health plans and allow the sale of short-term, limited-duration health plans, neither of which are required to cover all of the essential health benefits mandated by the Affordable Care Act.

A number of members of Congress have stated their desire to repeal or make additional significant changes to the Affordable Care Act, its implementation or interpretation.

Effective January 1, 2019, the penalty associated with the individual mandate to maintain health insurance was eliminated.

As a result of this change, in December 2018, the United States District Court for the North District of Texas found the individual mandate to be unconstitutional and determined that the rest of the Affordable Care Act was, therefore, invalid.

In December 2019, the Fifth Circuit Court of Appeals upheld this decision with respect to the individual mandate, but remanded for further consideration of how this affects the rest of the law.

On November 10, 2020, the U.S.

Supreme Court heard oral arguments regarding this case, and the law remains in place pending the appeals process.

The elimination of the individual mandate penalty and other changes may impact the number of individuals that elect to obtain public or private health insurance or the scope of such coverage, if purchased.

As currently structured, the Affordable Care Act expands coverage through a combination of private sector health insurance requirements, public program expansion and other reforms.

Expansion of coverage through the private sector has been driven by requirements applicable to health insurers, employers, and individuals.

For example, health insurers are prohibited from imposing annual coverage limits, dropping coverage, excluding persons based upon pre-existing

conditions or denying coverage for any individual who is willing to pay the premiums for such coverage.

Expansion in public program coverage has been driven primarily by expanding the categories of individuals eligible for Medicaid coverage and permitting individuals with relatively higher incomes to qualify.

A number of states, including Texas and Florida, have opted out of the Medicaid expansion provisions, which they may do without losing federal funding.

For states that have not participated in the Medicaid expansion, the maximum income level required for individuals and families to qualify for Medicaid varies widely from state to state.

Some states are using waivers granted by CMS to expand their Medicaid programs, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards.

In addition, some states are proposing or have implemented various health reform initiatives at the state level.

For example, some states have proposed public health insurance options, and some states have passed or are considering legislation to address out-of-network

The Affordable Care Act has had a net positive effect on the Company to date, before considering the impact of Medicare reductions that began in 2010, and it is expected that the law, as presently implemented, will

Index to Financial Statements

continue to have a positive contribution to the Company’s results of operations.

However, there is uncertainty regarding the ongoing net effect of the Affordable Care Act due to efforts to change, repeal or replace the Affordable Care Act, court challenges, and the development of agency guidance, among other factors.

The Affordable Care Act increased health insurance coverage through a combination of private sector health insurance requirements, public program expansion and other reforms.

For example, expansion in public program coverage has been driven primarily by expanding the categories of individuals eligible for Medicaid coverage and permitting individuals with relatively higher incomes to qualify.

However, a number of states, including Texas and Florida, have opted out of the Medicaid expansion provisions, which they may do without losing federal funding.

The Affordable Care Act has been subject to legislative and regulatory changes and court challenges.

For example, effective January 1, 2019, the penalty associated with the individual mandate to maintain health insurance was eliminated.

This change resulted in legal challenges to the constitutionality of the individual mandate and the validity of the Affordable Care Act as a whole.

However, in June 2021, the U.S.

Supreme Court determined that the plaintiffs lacked standing, allowing the law to remain in place.

The current presidential administration has indicated that it generally intends to protect and strengthen the Affordable Care Act and Medicaid programs.

For example, in January 2021, President Biden issued an executive order that instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to health insurance coverage.

In a final rule published in September 2021, HHS extended the annual open enrollment period for coverage through federal marketplaces and granted state exchanges flexibility to lengthen their open enrollment periods.

However, there is uncertainty regarding the ongoing net effect of the Affordable Care Act due to the potential for continued changes to the law’s implementation and its interpretation by government agencies and courts, among other factors.

There is also uncertainty regarding the potential impact of other reform efforts at the federal and state levels.

For example, some members of Congress have proposed measures that would expand government-sponsored coverage, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and some states are considering similar measures.

Further, the impact of the 2020 federal election on health reform efforts is unknown, although President Biden has indicated through executive orders that his administration intends to protect and strengthen the Affordable Care Act and Medicaid programs.

some members of Congress have proposed measures that would expand government-sponsored coverage, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”).

Some states have implemented or are considering measures such as individual health insurance mandates and public health insurance options.

Other initiatives and proposals, including those aimed at price transparency and out-of-network

charges, may impact prices and the relationships between health care providers and insurers.

charges, may impact prices and the relationships between health care providers, insurers and patients.

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

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

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

General Economic and Demographic Factors

The health care industry is impacted by the overall United States economy.

The COVID-19 pandemic has led, and may continue to lead, to a general worsening of economic conditions.

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

We anticipate that the federal deficit, the growing magnitude of Medicare and Medicaid expenditures and the aging of the United States population will continue to place pressure on government health care programs.

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

pandemic has adversely impacted, and may in the future adversely impact, economic conditions in the United States.

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

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

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

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

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Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties.

Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the DOJ.

We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.

Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the DOJ, including with respect to hospital and physician practice acquisitions.

We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations and growth strategy.

Environmental Matters

We are subject to various federal, state and local statutes and ordinances regulating the discharge of materials into the environment.

We do not believe that we will be required to expend any material amounts in order to comply with these laws and regulations.

Index to Financial Statements

We do not believe that we will be required to expend any material amounts in order to comply with these laws and regulations as presently in effect.

Regulations limiting greenhouse gas

emissions and energy inputs may increase in coming years, which may increase our costs associated with compliance, disrupt and adversely affect our operations and could materially adversely affect our financial performance.

Our environmental strategy is designed to complement our mission of the care and improvement of human life, which extends to the environment.

This strategy is centered on incorporating the following four pillars into our operations:

Managing energy and water responsibly,

Enhancing our climate resilience,

Sourcing and consuming efficiently, and

Greening our capital programs.

We are baselining our scope 1 and scope 2 greenhouse gas emissions and have engaged specialists to assist in identifying best practices and developing plans to reduce emissions while maximizing operational efficiencies.

These efforts are led by task forces that examine operations in four key areas:

construction and major renovation, energy and water, waste stream and environmentally preferable purchasing.

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

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

Subject, in most cases, to a $15 million per occurrence self-insured retention, our facilities are insured by our 100% owned insurance subsidiary for losses up to $50 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 $75 million per occurrence.

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

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

We recently launched a data-driven diversity, equity and inclusion strategy based on internal and external research to support the advancement of women and people of color into leadership roles.

In the beginning of 2020, we launched a data-driven diversity, equity and inclusion (“DEI”) strategy based on internal and external research to support the advancement of people of color and women into leadership roles.

We also partner with national organizations which promote diversity in leadership positions.

Our Chief Diversity Officer leads a 20-person team that is responsible for advancing diversity, inclusion, equity and cultural competence initiatives across the Company.

We encourage you to review the “Inclusion, Compassion and Respect” section of our website, as well as the “Excellent People Make Excellence Happen” section of our 2020 Impact Report (located on our website) for more detailed information regarding our diversity, equity, inclusion and pay equity programs and initiatives.

Our Chief Diversity Officer leads a team that is responsible for advancing DEI and cultural competence initiatives across the Company.

We have also established an Executive Diversity Council, sponsored by our Chief Executive Officer and comprised of executive leaders from the Company, to champion DEI across the Company and inform strategic decisions towards DEI goals and objectives.

In addition to the Executive Diversity Council, we recently implemented fifteen Division Diversity, Equity and Inclusion Councils, comprised of diversity leaders and facility representatives, to support deployment of key DEI strategies and programs across the enterprise.

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

We encourage you to review the “Diversity, Equity and Inclusion” section of our website, as well as the “Part of the Solution” section of our 2021 Impact Report (available at www.hcahealthcareimpact.com) for more detailed information regarding our DEI and pay equity programs and initiatives.

Nothing on our website, including our 2021 Impact Report or sections thereof, shall be deemed incorporated by reference into this annual report on Form 10-K.

Compensation and Benefits

We provide competitive compensation and benefits programs to help meet the needs of our employees.

In addition to salaries, these programs (which vary by location) include an Employee Stock Purchase Plan, a 401(k) Plan, health care and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, flexible work schedules, employee assistance programs, tuition and student loan assistance and on-site services, such as cafeterias and fitness centers, among many others.

To recruit and retain a highly qualified and diverse workforce, we design competitive compensation and benefits programs to support, recognize and reward the performance of our employees.

services, such as cafeterias and fitness centers, among many others.

Serving the Community

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By joining forces with other leading organizations, we maximize our ability to provide care for patients and populations.

Index to Financial Statements

Through research, partnerships, policies and investments, we are tackling problems in our communities, from disaster relief to environmental sustainability.

We also support the HCA Healthcare Foundation, whose mission is to promote health and well-being and strive to make a positive impact in all the communities HCA Healthcare serves by providing leadership, service and financial support to effective non-profit organizations.

organizations.

Culture and Talent Development

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We seek to nurture a collaborative culture built on inclusion, compassion and respect.

To assess and improve employee retention and engagement, we conduct colleague pulse surveys and take action to address areas of concern.

During 2020, we hosted routine surveys as well as an innovative pandemic survey to gauge the pulse of our teams as we pivoted to respond to the needs of our communities during the pandemic.

To assess and improve employee retention and engagement, we conduct colleague pulse surveys throughout the year and take action to address areas of concern.

During 2021, we directed our efforts to improve our colleagues’ sense of belonging and leveraged the findings from our innovative pandemic survey to better respond to the needs of our communities and colleagues.

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

We also support our colleagues’ development through programs such as tuition reimbursement, clinical training and certification, loan forgiveness and award-winning programs offered through the HCA Healthcare Leadership Institute.

We also support our colleagues’ development through programs such as tuition

reimbursement, clinical training and certification, loan forgiveness and award-winning programs offered through the HCA Healthcare Leadership Institute.

Health, Safety and Wellness

We provide our employees and their families with access to a variety of health and wellness programs.

In response to the COVID-19 pandemic, we implemented changes to address the interests of our patients, employees, medical staff members and contractors, as well as the communities in which we operate, such as providing PPE, COVID-19 screening for patients and certain hospital staff, and scrub laundering.

In response to the COVID-19

pandemic, we implemented changes to address the interests of our patients, employees, medical staff members and contractors, as well as the communities in which we operate, such as providing PPE, COVID-19

screening for patients and certain hospital staff, and scrub laundering.

Over 33,000 quarantined caregivers unable to work received 100% of base pay through our Quarantine Pay Program;

More than 127,000 full-time/part-time care or support facility colleagues with reduced hours due to COVID-19 received 70% of base pay through our Pandemic Pay Program;

3,500 caregivers were supported through company-paid hotel stays to protect their families from exposure;

More than 25,000 calls were placed to the HCA Nurse Care line, a free, confidential 24-hour phone counseling support program for nurses;

$10.6 million in assistance provided by the HCA Healthcare Hope Fund to HCA Healthcare colleagues, including more than $3 million provided to colleagues to help with the loss of household income, childcare costs or other unexpected financial challenges related to the COVID-19 pandemic.

Approximately 25,000 calls were placed to the HCA Nurse Care line, a free, confidential 24-hour

phone counseling support program for nurses;

$10.7 million in assistance was provided by the HCA Healthcare Hope Fund to HCA Healthcare colleagues, including more than $1 million provided to colleagues to help with the loss of household income, childcare costs or other unexpected financial challenges related to the COVID-19

Labor Matters

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At December 31, 2021, certain employees at 37 of our domestic hospitals are represented by various labor unions.

Two elections were held in January 2020 that resulted in the addition of a number of employees to existing bargaining units at one of our facilities in California and one facility in Missouri.

During September 2020, an election was held that resulted in the creation of a new bargaining unit at one of our facilities in North Carolina, and a decertification election was held that resulted in the elimination of a bargaining unit at a facility in Virginia.

While no other elections are scheduled in 2021, it is possible that employees at additional hospitals may unionize in the future.

During 2021, a decertification election was held that resulted in the elimination of a bargaining unit at a facility in Missouri.

While no other elections are scheduled in 2022, it is possible that employees at additional hospitals may unionize in the future, or employees currently represented by labor unions may choose to reject that representation.

We consider our employee relations to be good and have not experienced work stoppages that have materially, adversely affected our business or results of operations.

However, it is possible that a material work stoppage at one or more of our hospitals may occur in the

Index to Financial Statements

Our hospitals, like most hospitals, have experienced rising labor costs.

In some markets, nurse and medical support personnel availability has become a significant operating issue to health care providers.

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

However, it is possible that a material work stoppage at one or more of our hospitals may occur in the future.

Physicians are an integral part of the success of our hospitals in delivering quality care to our patients.

Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who are not employees of our hospitals.

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

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

In some markets, nurse and medical support personnel availability and retention have become significant operating issues to health care providers, which issues have been exacerbated by the effects that the COVID-19

pandemic has had on health care personnel.

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

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

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

As a result, our labor costs could increase.

As a result, our labor costs

could continue to increase.

We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate.

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

In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse-staffing ratios already in place.

State-mandated nurse-staffing ratios could significantly affect labor costs, and have an adverse impact on revenues if we are required to limit patient admissions in order to meet the required ratios.

In addition, we operate in several states that have adopted mandatory nurse-staffing ratios.

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

The inability to attract and retain quality clinical and non-clinical

personnel could impair our capacity, ability to grow and our results of operations.

Information about our Executive Officers

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Chief Executive Officer and Director

Senior Vice President and Chief Human Resource Officer

Senior Vice President and Chief Human Resources Officer

Senior Vice President — Internal Audit Services

Senior Vice President — Government Relations

President — Physician Services Group

Senior Vice President and Chief Nursing Officer

Executive Vice President and Chief Clinical Officer

President — American Group

President — National Group

Senior Vice President and Chief Legal Officer

Bruce Moore, Jr.

President — Service Line and Operations Integration

Senior Vice President — Provider Relations

Senior Vice President — Finance and Treasurer

Senior Vice President and Chief Nurse Executive

Martin Paslick

Senior Vice President and Chief Information Officer

President — Clinical Operations Group and Chief Medical Officer

Senior Vice President — Marketing and Communications

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Senior Vice President — Payer Contracting and Alignment

Senior Vice President and General Counsel

Senior Vice President and Chief Ethics and Compliance Officer

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Senior Vice President and Controller

was appointed Chief Executive Officer effective January 1, 2019 and was appointed as a director in September 2018.

has served as Chief Executive Officer since January 2019 and was appointed as a director in September 2018.

From November 2016 through December 2018, Mr.

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

Index to Financial Statements

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

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

Prior to that time, Mr.

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and Galen Health Care, Inc.

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

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

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

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Cohen spent 20 years with the Federation of American Hospitals, most recently as Executive Vice President of Public Affairs, where he managed all advocacy, public affairs and communications for the association.

has served as President — Physician Services Group since October 2011.

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

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

From October 2011 to January 2015, Dr.

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Cuffe served in various leadership roles with the Duke Clinical Research Institute, Duke University Medical Center and Duke University School of Medicine.

was appointed Senior Vice President and Chief Nursing Officer in January 2015.

Englebright previously served as Vice President and Chief Nursing Officer from 2007 to January 2015.

Englebright joined HCA in 1992 as a critical care nurse at Lewisville Medical Center in Texas and became Chief Nursing Officer of HCA’s San Antonio Community Hospital in 1996.

Englebright currently serves on The Joint Commission’s Board of Commissioners.

was appointed President — American Group in January 2013.

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Hall served as President — Eastern Group from October 2006 to February 2011.

Hall had previously served the Company as President — North Florida Division from April 2003 until October 2006, as President of the East Florida Division from January 1999 until April 2003, as a Market President in the East Florida Division from January 1998 until December 1998, as President of the South Florida Division from February 1996 until December 1997, and as President of the Southwest Florida Division from October 1994 until February 1996, and in various other capacities since 1987.

Hall had previously served the Company as President — North Florida Division from April 2003 until October 2006, as President of the East Florida Division from January 1999 until April 2003, as a Market President in the East Florida Division from January 1998 until December 1998, as President of the South Florida Division from February 1996 until December 1997, as President of the Southwest Florida Division from October 1994 until February 1996, and in various other capacities since 1987.

was appointed Senior Vice President and Chief Legal Officer in January 2022.

Prior to joining HCA, Mr.

McAlevey served in senior legal and executive roles at General Electric, most recently as Vice President, General Counsel and Business Development Leader for GE Healthcare since 2018.

Prior to that, he served as General Counsel and Business Development Leader for GE Aviation from 2011 to 2018 and Chief Corporate, Securities and Finance Counsel for GE from 2003 to 2011.

Before joining GE, Mr.

McAlevey served as Deputy Director of the United States Securities and Exchange Commission’s Division of Corporation Finance from 1998 to 2002.

Bruce Moore, Jr.

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Moore served as Senior Vice President and as Chief Operating Officer — Outpatient Services Group from July 2004 to January 2006 and as Senior Vice President — Operations Administration from July 1999 until July 2004.

Index to Financial Statements

Moore served as Vice President — Operations Administration of the Company from September 1997 to July 1999, as Vice President — Benefits from October 1996 to September 1997, and as Vice President — Compensation from March 1995 until October 1996.

was appointed Senior Vice President — Provider Relations in January 2015.

Prior to that time, she served as Vice President — National Sales from April 2008 to January 2015.

From 2000 to 2008, Ms.

Morgan served in various capacities with Pfizer Inc., including Vice President of Managed Care for the Customer Business Unit from 2005 to 2008.

was appointed Senior Vice President — Finance and Treasurer in February 2017.

Morrow served as Vice President — Finance and Treasurer from July 2016 through January 2017.

From 2011 to 2016, Mr.

Morrow served the Company as Vice President — Development/Special Assets.

Morrow served as a partner in the law firm of Waller Lansden Dortch & Davis from 2006 to October 2011.

Prior to becoming a partner, Mr.

Morrow was an associate at Waller Lansden Dortch & Davis and at Cleary Gottlieb Steen & Hamilton.

was appointed Senior Vice President and Chief Nurse Executive effective December 1, 2021.

Mosier joined HCA in 1992 as a medical-surgical bedside nurse at Frankfort Regional Medical Center and has held progressive leadership roles, including as Vice President and Assistant Chief Nursing Executive- Clinical Services Group from 2019 to 2021.

Martin Paslick

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Paslick joined the Company in 1985.

was appointed President — Clinical Operations Group (f/k/a Clinical Services Group) and Chief Medical Officer in November 2007.

Perlin had served as Chief Medical Officer and Senior Vice President — Quality of the Company from August 2006 to November 2007.

Prior to joining the Company, Dr.

Perlin served as Under Secretary for Health in the U.S.

Department of Veterans Affairs since April 2004.

Perlin joined the Veterans Health Administration in November 1999 where he served in various capacities, including as Deputy Under Secretary for Health from July 2002 to April 2004, and as Chief Quality and Performance Officer from November 1999 to September 2002.

He also served as Senior Advisor to the Acting Secretary of the U.S.

Department of Veterans Affairs from July 2014 to September 2014 and as Chairman for the American Hospital Association in 2015.

was appointed Senior Vice President — Marketing and Communications in October 2017.

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Sowell served as the head of development, and later as the Chief Operating Officer of Arcon Healthcare.

Index to Financial Statements

was appointed Senior Vice President — Payer Contracting and Alignment (formerly Senior Vice President — Employer and Payer Engagement) in July 2016.

Torres joined HCA in 1993 and served in various capacities, including as Vice President of Employer and Payer Engagement and Vice President — Strategy.

has served as Senior Vice President and General Counsel since November 1997.

Waterman served as a partner in the law firm of Latham & Watkins from September 1993 to October 1997;

he was Chair of the firm’s health care group during 1997.

was appointed Senior Vice President and Chief Ethics and Compliance Officer effective January 1, 2019.

13 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business