What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-02-18 compared with 2021-02-19 · 468 added, 13 removed, 17 unchanged (97% of the section changed)

2 unchanged sentences

During January 2020 and 2019, our Board of Directors authorized share repurchase programs for up to $4 billion ($2 billion for each authorization) of our outstanding common stock.

During March 2020 in response to the risks the COVID-19

pandemic presents to our business, we announced the suspension of our share repurchase programs.

There were no share repurchases of our outstanding common stock during the second through fourth quarters of 2020.

At December 31, 2020, we had $2.800 billion of repurchase authorization available under the January 2019 and 2020 authorizations.

During February 2021, our Board of Directors authorized the resumption of the share repurchase program, and an additional $6 billion was authorized for repurchases of the Company’s outstanding common stock ($8.8 billion of total repurchase authorization including the February 2021 authorization).

During February 2021, our Board of Directors authorized an additional $6 billion for share repurchases of the Company’s outstanding common stock.

The January 2020 and 2019 authorizations were completed during 2021, and at December 31, 2021, there was $586 million of share repurchase authorization that remained available under the February 2021 authorization.

During January 2022, our Board of Directors authorized an additional $8 billion for share repurchases of the Company’s outstanding common stock.

All repurchases made during the fourth quarter of 2021, as detailed below, were made pursuant to the February 2021 share repurchase authorization and were made in the open market.

The following table provides certain information with respect to our repurchases of common stock from October 1, 2021 through December 31, 2021 (dollars in millions, except per share amounts).

Average Price

Paid per Share

Dollar Value of

Under Publicly

October 1, 2021 through October 31, 2021

November 1, 2021 through November 30, 2021

December 1, 2021 through December 31, 2021

Total for Fourth Quarter 2021

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

During January 2020, our Board of Directors declared one quarterly dividend of $0.43 per share on our common stock.

In response to the COVID-19

pandemic concerns, the Company suspended its quarterly dividend program for the second, third and fourth quarters of 2020.

On February 1, 2021, our Board of Directors reinstated the quarterly dividend program and declared a quarterly dividend of $0.48 per share on our common stock payable on March 31, 2021 to stockholders of record at the close of business on March 17, 2021.

During 2021, our Board of Directors declared four quarterly dividends of $0.48 per share, or $1.92 per share in the aggregate, on our common stock.

On January 26, 2022, our Board of Directors declared a quarterly dividend of $0.56 per share on our common stock payable on March 31, 2022 to stockholders of record at the close of business on March 17, 2022.

Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to the final determination of our Board of Directors.

1 unchanged sentence

At the close of business on February 7, 2022, there were approximately 400 holders of record of our common stock.

Index to Financial Statements

STOCK PERFORMANCE GRAPH

3 unchanged sentences

S&P Health Care

The graph shows the cumulative total return to our stockholders beginning as of December 31, 2015 through December 31, 2020, in comparison to the cumulative returns of the S&P 500 Index and the S&P Health Care Index.

The graph shows the cumulative total return to our stockholders for the five-year period ended December 31, 2021, in comparison to the cumulative returns of the S&P 500 Index and the S&P Health Care Index.

The graph assumes $100 invested on December 31, 2016 in our common stock and in each index with the subsequent reinvestment of dividends.

The stock performance shown on the graph represents historical stock performance and is not necessarily indicative of future stock price performance.

Selected Financial Data

Index to Financial Statements

HCA HEALTHCARE, INC.

1 unchanged sentence

AND RESULTS OF OPERATIONS

s Discussion and Analysis of Financial Condition and Results of Operations

The accompanying consolidated financial statements present certain information with respect to the financial position, results of operations and cash flows of HCA Healthcare, Inc.

which should be read in conjunction with the following discussion and analysis.

The terms “HCA,” “Company,” “we,” “our,” or “us,” as used herein, refer to HCA Healthcare, Inc.

and its affiliates.

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

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

Forward-Looking Statements

This annual report on Form 10-K

includes certain disclosures that contain “forward-looking statements,” within the meaning of the federal securities laws, which involve risks and uncertainties.

Forward-looking statements include statements regarding expected share-based compensation expense, expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations.

These factors include, but are not limited to, (1) developments related to COVID-19,

including, without limitation, the length and severity of the pandemic and the spread of virus strains with new epidemiological characteristics;

the volume of canceled or rescheduled procedures and the volume of COVID-19

patients cared for across our health systems;

measures we are taking to respond to the COVID-19

the impact and terms of government and administrative regulation and stimulus and relief measures (including the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021 (“ARPA”) and other enacted and potential future legislation) and whether various stimulus and relief programs continue or new similar programs are enacted in the future;

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

potential increased expenses related to labor, supply chain or other expenditures;

workforce disruptions, including the impact of any current or future vaccine mandates;

supply shortages and disruptions;

and the timing, availability and adoption of effective medical treatments and vaccines (including boosters), (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the COVID-19

pandemic, which could impact us from a financial perspective, (3) the impact of current and future federal and state health reform initiatives and possible changes to other federal, state or local laws and regulations affecting the health care industry, including, but not limited to, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), and the effects of additional changes to the Affordable Care Act, its implementation, or interpretation (including through executive orders and court challenges), and proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the COVID-19

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

Act of 2010 (“PAYGO Act”) as a result of the federal budget deficit impact of the ARPA, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Forward-Looking Statements (continued)

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

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

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

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

You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report.

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

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 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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Pandemic (continued)

been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast.

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

2021 Operations Summary

Net income attributable to HCA Healthcare, Inc.

totaled $6.956 billion, or $21.16 per diluted share, for 2021, compared to $3.754 billion, or $10.93 per diluted share, for 2020.

The 2021 results include gains on sales of facilities of $1.620 billion, or $3.69 per diluted share, and losses on retirement of debt of $12 million, or $0.03 per diluted share.

The 2020 results include losses on sales of facilities of $7 million, or $0.02 per diluted share, and losses on retirement of debt of $295 million, or $0.66 per diluted share.

The 2020 results also include $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, as provided for by the CARES Act.

Revenues for 2021 and 2020, respectively, include $33 million, or $0.07 per diluted share, and $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods.

Revenues for 2020 also include $69 million, or $0.15 per diluted share, related to the resolution of transaction price differences regarding certain services performed in prior periods.

During 2021 and 2020, we recorded reductions to the provision for professional liability risks of $87 million, or $0.20 per diluted share, and $112 million, or $0.25 per diluted share, respectively.

Our provisions for income taxes for 2021 and 2020 include tax benefits of $119 million, or $0.36 per diluted share, and $92 million, or $0.27 per diluted share, respectively, related to employee equity award settlements.

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

Shares used for diluted earnings per share were 328.752 million shares and 343.605 million shares for the years ended December 31, 2021 and 2020, respectively.

During 2021, we repurchased 37.812 million shares of our common stock.

Revenues increased to $58.752 billion for 2021 from $51.533 billion for 2020.

Revenues increased 14.0% and 14.4%, respectively, on a consolidated basis and on a same facility basis for 2021, compared to 2020.

The consolidated revenues increase can be primarily attributed to the combined impact of a 6.8% increase in revenue per equivalent admission and a 6.8% increase in equivalent admissions.

The same facility revenues increase resulted primarily from the combined impact of a 6.3% increase in revenue per equivalent admission and a 7.6% increase in equivalent admissions.

During 2021, consolidated admissions increased 4.0% and same facility admissions increased 4.8%, compared to 2020.

Inpatient surgical volumes declined 0.1% on a consolidated basis and increased 0.4% on a same facility basis during 2021, compared to 2020.

Outpatient surgical volumes increased 14.2% on a consolidated basis and increased 14.1% on a same facility basis during 2021, compared to 2020.

Emergency room visits increased 13.8% on a consolidated basis and increased 15.1% on a same facility basis during 2021, compared to 2020.

The estimated cost of total uncompensated care declined $133 million for 2021, compared to 2020.

Consolidated and same facility uninsured admissions declined 4.4% and 3.5%, respectively, and consolidated and same facility uninsured emergency room visits declined 7.8% and 6.3%, respectively, for 2021, compared to 2020.

Interest expense totaled $1.566 billion for 2021, compared to $1.584 billion for 2020.

The $18 million decline in interest expense for 2021 was due to a decline in the average effective interest rate.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

2021 Operations Summary (continued)

Cash flows from operating activities declined $273 million, from $9.232 billion for 2020 to $8.959 billion for 2021.

The decline in cash flows from operating activities was related to a negative change in working capital items of $1.781 billion, primarily from an increase in accounts receivable, offset by the increase in net income, excluding the non-cash impact of losses and gains on sales of facilities, losses on retirement of debt and depreciation and amortization.

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.

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

Grow Our Presence in Existing Markets.

We believe we are well positioned in a number of large and growing markets that will allow us the opportunity to generate long-term, attractive growth through the expansion of our presence in these markets.

We plan to continue recruiting and strategically collaborating with the physician community and developing comprehensive service lines such as cardiology, neurology, oncology, orthopedics and women’s services.

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

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

Achieving high levels of patient safety, patient satisfaction and clinical quality are central goals of our business.

To achieve these goals, we have implemented a number of initiatives including infection reduction initiatives, hospitalist programs, advanced health information technology and evidence-based medicine programs.

We routinely analyze operational practices from our best-performing hospitals to identify ways to implement organization-wide performance improvements and reduce clinical variation.

We believe these initiatives will continue to improve patient care, help us achieve cost efficiencies and favorably position us in an environment where our constituents are increasingly focused on quality, efficacy and efficiency.

Recruit and Employ Physicians to Meet the Need for High Quality Health Services.

We depend on the quality and dedication of the health care providers and other team members who serve at our facilities.

We believe a critical component of our growth strategy is our ability to successfully recruit and strategically collaborate with physicians and other professionals to provide high quality care.

We attract and retain physicians by providing high quality, convenient facilities with advanced technology, by expanding our specialty services and by building our outpatient operations.

We believe our continued investment in the employment, recruitment and retention of physicians will improve the quality of care at our facilities.

Continue to Leverage Our Scale and Market Positions to Grow the Company.

We believe there is significant opportunity to continue to grow our company by fully leveraging the scale and scope of our organization.

We continue to invest in initiatives such as care navigators, clinical data exchange and centralized patient transfer operations, which will enable us to improve coordination of care and patient retention across our markets.

We believe our centrally managed business processes and ability to leverage cost-saving practices

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Business Strategy (continued)

across our extensive network will enable us to continue to manage costs effectively.

We continue to invest in our Parallon subsidiary group to leverage key components of our support infrastructure, including revenue cycle management, health care group purchasing, supply chain management and staffing functions.

Pursue a Disciplined Development Strategy.

We continue to believe there are significant growth opportunities in our markets.

We will continue to provide financial and operational resources to analyze and develop our in-market

opportunities.

To complement our in-market

growth agenda, we intend to focus on selectively developing and acquiring new hospitals, outpatient facilities and other health care service providers.

We believe the challenges faced by the hospital industry may continue to spur consolidation, and we believe our size, scale, national presence and access to capital will position us well to participate in any such consolidation.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses.

Our estimates are based on historical experience and various other assumptions we believe are reasonable under the circumstances.

We evaluate our estimates on an ongoing basis and make changes to the estimates and related disclosures as experience develops or new information becomes known.

Actual results may differ from these estimates.

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

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

Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements.

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation.

The estimated reimbursement amounts are made on a payer-specific basis and are recorded based on the best information available regarding management’s interpretation of the applicable laws, regulations and contract terms.

Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

We have invested significant resources to refine and improve our billing systems and the information system data used to make contractual allowance estimates.

We have developed standardized calculation processes and related employee training programs to improve the utility of our patient accounting systems.

Patients treated at hospitals for non-elective

care, who have income at or below 400% of the federal poverty level, are eligible for charity care, and we limit the patient responsibility amounts for these patients to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable percentage of the federal poverty level.

Patients treated at hospitals for non-elective

care, who have income above 400% of the federal poverty level, are eligible for certain other discounts which limit the patient responsibility amounts for these patients to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable percentage of the federal poverty level.

We apply additional discounts to limit patient responsibility for certain emergency services.

The federal poverty level is

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

Revenues (continued)

established by the federal government and is based on income and family size.

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

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

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

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

Implicit price concessions relate primarily to amounts due directly from patients.

Estimated implicit price concessions are recorded for all uninsured accounts, regardless of the age of those accounts.

Accounts are written off when all reasonable collection efforts have been performed.

The estimates for implicit price concessions are based upon management’s assessment of historical writeoffs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators.

Management relies on the results of detailed reviews of historical writeoffs and collections at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information in estimating the collectability of our accounts receivable.

We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data.

We believe our quarterly updates to the estimated implicit price concession amounts at each of our hospital facilities provide reasonable estimates of our revenues and valuations of our accounts receivable.

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

comparisons of our revenues.

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

A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):

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

Cost-to-charges

ratio (patient care costs as percentage of gross patient charges)

Total uncompensated care

Multiply by the cost-to-charges

Estimated cost of total uncompensated care

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

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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

Professional Liability Claims

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

Our facilities are insured by our insurance subsidiary for losses up to $75 million per occurrence, subject, in most cases, to a $15 million per occurrence self-insured retention.

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

We purchase excess insurance on an occurrence reported basis for losses in excess of amounts insured by our insurance subsidiary.

Provisions for losses related to professional liability risks were $453 million, $435 million and $497 million for the years ended December 31, 2021, 2020 and 2019, respectively.

During 2021, 2020 and 2019, we recorded reductions to the provision for professional liability risks of $87 million, $112 million and $50 million, respectively, due to the receipt of updated actuarial information.

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

The estimated ultimate cost includes estimates of direct expenses and fees paid to outside counsel and experts, but does not include the general overhead costs of our insurance subsidiary or corporate office.

Individual case reserves are established based upon the particular circumstances of each reported claim and represent our estimates of the future costs that will be paid on reported claims.

Case reserves are reduced as claim payments are made and are adjusted upward or downward as our estimates regarding the amounts of future losses are revised.

Once the case reserves for known claims are determined, information is stratified by loss layers and retentions, accident years, reported years, and geographic location of our hospitals.

Several actuarial methods are employed to utilize this data to produce estimates of ultimate losses and reserves for incurred but not reported claims, including:

paid and incurred extrapolation methods utilizing paid and incurred loss development to estimate ultimate losses;

frequency and severity methods utilizing paid and incurred claims development to estimate ultimate average frequency (number of claims) and ultimate average severity (cost per claim);

and Bornhuetter-Ferguson methods which add expected development to actual paid or incurred experience to estimate ultimate losses.

These methods use our company-specific historical claims data and other information.

Company-specific claim reporting and payment data collected over an approximate 20-year

period is used in our reserve estimation process.

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

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

The estimated reserve ranges, net of amounts receivable under reinsurance contracts, were $1.752 billion to $2.098 billion at December 31, 2021 and $1.710 billion to $2.050 billion at December 31, 2020.

Our estimated reserves for professional liability claims may change significantly if future claims differ from expected trends.

We perform sensitivity analyses which model the volatility of key actuarial assumptions and monitor our reserves for adequacy relative to all our assumptions in the aggregate.

Based on our analysis, we believe the estimated professional liability reserve ranges represent the reasonably likely outcomes for ultimate losses.

We consider the number and severity of claims to be the most significant assumptions in estimating reserves for professional liabilities.

A 2.5% change in the expected frequency trend could be reasonably likely and would increase the reserve estimate by $22 million or reduce the reserve estimate by $21 million.

A 2.5% change in the expected claim severity trend could be reasonably likely and would increase the reserve estimate by $107 million or reduce the reserve estimate by $98 million.

We believe adequate reserves have been recorded for our professional liability claims;

however, due to the complexity of the claims, the extended period of time to resolve

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

Professional Liability Claims (continued)

the claims and the wide range of potential outcomes, our ultimate liability for professional liability claims could change by more than the estimated sensitivity amounts and could change materially from our current estimates.

The reserves for professional liability risks cover approximately 2,100 and 2,300 individual claims at December 31, 2021 and 2020, respectively, and estimates for unreported potential claims.

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

The average time period between the occurrence and final resolution for our professional liability claims is approximately four years, although the facts and circumstances of each individual claim can result in an occurrence-to-resolution

timeframe that varies from this average.

The estimation of the timing of payments beyond a year can vary significantly.

Reserves for professional liability risks were $2.022 billion and $1.963 billion at December 31, 2021 and 2020, respectively.

The current portion of these reserves, $508 million and $477 million at December 31, 2021 and 2020, respectively, is included in “other accrued expenses.” Obligations covered by reinsurance and excess insurance contracts are included in the reserves for professional liability risks, as we remain liable to the extent reinsurers and excess insurance carriers do not meet their obligations.

Reserves for professional liability risks (net of $55 million and $39 million receivable under reinsurance and excess insurance contracts at December 31, 2021 and 2020, respectively) were $1.967 billion and $1.924 billion at December 31, 2021 and 2020, respectively.

The estimated total net reserves for professional liability risks at December 31, 2021 and 2020 are comprised of $874 million and $833 million, respectively, of case reserves for known claims and $1.093 billion and $1.091 billion, respectively, of reserves for incurred but not reported claims.

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

Net reserves for professional liability claims, January 1

Provision for current year claims

Favorable development related to prior years’ claims

Total provision

Payments for current year claims

Payments for prior years’ claims

Total claim payments

Effect of new retroactive reinsurance contracts

Net reserves for professional liability claims, December 31

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

Deferred tax assets generally represent the tax effects of amounts expensed in our income statement for which tax deductions will be claimed in future periods.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

Income Taxes (continued)

and penalties payable to taxing authorities are included as a component of our provision for income taxes.

We have elected to treat taxes incurred on global intangible low-taxed

income as a period expense.

Although we believe we have properly reported taxable income and paid taxes in accordance with applicable laws, federal, state or foreign taxing authorities may challenge our tax positions upon audit.

Significant judgment is required in determining and assessing the impact of uncertain tax positions.

We report a liability for unrecognized tax benefits from uncertain tax positions taken or expected to be taken in our income tax returns.

During each reporting period, we assess the facts and circumstances related to uncertain tax positions.

If the realization of unrecognized tax benefits is deemed probable based upon new facts and circumstances, the estimated liability and the provision for income taxes are reduced in the current period.

Final audit results may vary from our estimates.

Results of Operations

Revenue/Volume Trends

Our revenues depend upon inpatient occupancy levels, the ancillary services and therapy programs ordered by physicians and provided to patients, the volume of outpatient procedures and the charge and negotiated payment rates for such services.

Gross charges typically do not reflect what our facilities are actually paid.

Our facilities have entered into agreements with third-party payers, including government programs and managed care health plans, under which the facilities are paid based upon the cost of providing services, predetermined rates per diagnosis, fixed per diem rates or discounts from gross charges.

We do not pursue collection of amounts related to patients who meet our guidelines to qualify for charity care;

therefore, they are not reported in revenues.

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

Revenues increased 14.0% to $58.752 billion for 2021 from $51.533 billion for 2020 and increased 0.4% for 2020 from $51.336 billion for 2019.

The increase in revenues in 2021 can be primarily attributed to the combined impact of a 6.8% increase in revenue per equivalent admission and a 6.8% increase in equivalent admissions compared to the prior year.

The increase in revenues in 2020 can be primarily attributed to the net impact of a 10.5% increase in revenue per equivalent admission offset by a 9.2% decline in equivalent admissions compared to the prior year.

Same facility revenues increased 14.4% for the year ended December 31, 2021 compared to the year ended December 31, 2020 and declined 0.1% for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The 14.4% increase for 2021 can be primarily attributed to the combined impact of a 6.3% increase in revenue per equivalent admission and a 7.6% increase in equivalent admissions.

The 0.1% decline for 2020 can be primarily attributed to the net impact of a 9.3% decline in same facility equivalent admissions offset by a 10.1% increase in same facility revenue per equivalent admission.

Consolidated admissions increased 4.0% during 2021 compared to 2020 and declined 4.7% during 2020 compared to 2019.

Consolidated surgeries increased 8.9% during 2021 compared to 2020 and declined 10.9% during 2020 compared to 2019.

Consolidated emergency room visits increased 13.8% during 2021 compared to 2020 and declined 18.7% during 2020 compared to 2019.

Same facility admissions increased 4.8% during 2021 compared to 2020 and declined 4.8% during 2020 compared to 2019.

Same facility surgeries increased 9.0% during 2021 compared to 2020 and declined 10.7%

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

during 2020 compared to 2019, primarily driven by the pandemic-related impact on outpatient surgeries.

Same facility emergency room visits increased 15.1% during 2021 compared to 2020 and declined 18.8% during 2020 compared to 2019.

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

Same facility uninsured emergency room visits declined 6.3% and same facility uninsured admissions declined 3.5% during 2021 compared to 2020.

Same facility uninsured emergency room visits declined 21.0% and same facility uninsured admissions declined 7.0% during 2020 compared to 2019.

The decline in uninsured admissions in 2021, compared to 2020, was primarily due to the reimbursement received, as provided for under the Families First Coronavirus Response Act and subsequent legislation, for uninsured patients diagnosed with COVID-19

and the resulting classification of those patients as an insured admission, as well as general declines in patient volumes resulting from the pandemic’s impact on our operations.

The decline in uninsured admissions in 2020, compared to 2019, was primarily due to general declines in patient volumes resulting from the pandemic’s impact on our operations.

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the years ended December 31, 2021, 2020 and 2019 are set forth below.

Years Ended December 31,

Managed Medicare

Managed Medicaid

Managed care and insurers

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, and managed care and insurers for the years ended December 31, 2021, 2020 and 2019 are set forth below.

Years Ended December 31,

Managed Medicare

Managed Medicaid

Managed care and insurers

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

At December 31, 2021, we owned and operated 46 hospitals and 30 surgery centers in the state of Florida.

Our Florida facilities’ revenues totaled $13.670 billion, $11.442 billion and $11.494 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

At December 31, 2021, we owned and operated 45 hospitals and 35 surgery centers in the state of Texas.

Our Texas facilities’ revenues totaled $15.344 billion, $13.528 billion and $13.101 billion for the years ended December 31, 2021, 2020 and 2019, respectively.

During 2021, 2020 and 2019, 56% of our admissions for each year and 49%, 49% and 48%, respectively, of our revenues were generated by our Florida and Texas facilities.

Uninsured admissions in Florida and Texas represented 72% of our uninsured admissions each year during 2021, 2020 and 2019.

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

In December 2017, the Centers for Medicare & Medicaid Services (“CMS”) announced that it would phase out federal matching funds for Designated State Health Programs under waivers granted under Section 1115 of the Social Security Act.

The Texas Healthcare Transformation and Quality Improvement Program (“Texas Waiver Program”) currently operates pursuant to a Medicaid waiver.

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

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.

Our Texas Medicaid revenues included Medicaid supplemental waiver payments of $534 million, $599 million and $416 million during 2021, 2020 and 2019, respectively.

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.

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

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

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

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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary

The following are comparative summaries of operating results and certain operating data for the years ended December 31, 2021, 2020 and 2019 (dollars in millions):

Salaries and benefits

Other operating expenses

Equity in earnings of affiliates

Depreciation and amortization

Interest expense

Losses (gains) on sales of facilities

Losses on retirement of debt

Income before income taxes

Provision for income taxes

Net income attributable to noncontrolling interests

Net income attributable to HCA Healthcare, Inc.

% changes from prior year:

Income before income taxes

Net income attributable to HCA Healthcare, Inc.

Admissions(a)

Equivalent admissions(b)

Revenue per equivalent admission

Same facility % changes from prior year(c):

Admissions(a)

Equivalent admissions(b)

Revenue per equivalent admission

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

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume.

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

The equivalent admissions computation “equates” outpatient revenue to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume.

Same facility information excludes the operations of hospitals and their related facilities that were either acquired, divested or removed from service during the current and prior year.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary (continued)

Operating Data:

Number of hospitals at end of period

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

Number of licensed beds at end of period(b)

Weighted average beds in service(c)

Admissions(d)

Equivalent admissions(e)

Average length of stay (days)(f)

Average daily census(g)

Emergency room visits(i)

Outpatient surgeries(j)

Inpatient surgeries(k)

Days revenues in accounts receivable(l)

Outpatient revenues as a % of patient revenues(m)

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.

Represents the average number of beds in service, weighted based on periods owned.

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

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume.

Represents the average number of days admitted patients stay in our hospitals.

Represents the average number of patients in our hospital beds each day.

Represents the percentage of hospital beds in service that are occupied by patients.

Both average daily census and occupancy rate provide measures of the utilization of inpatient rooms.

Represents the number of patients treated in our emergency rooms.

Represents the number of surgeries performed on patients who were not admitted to our hospitals.

Pain management and endoscopy procedures are not included in outpatient surgeries.

Represents the number of surgeries performed on patients who have been admitted to our hospitals.

Pain management and endoscopy procedures are not included in inpatient surgeries.

Revenues per day is calculated by dividing the revenues for the fourth quarter of each year by the days in the quarter.

Days revenues in accounts receivable is then calculated as accounts receivable at the end of the period divided by revenues per day.

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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Key Performance Indicators

We present certain metrics and statistical information that management uses when assessing our results of operations.

We believe this information is useful to investors as it provides insight to how management evaluates operational performance and trends between reporting periods.

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

Years Ended December 31, 2021 and 2020