What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-10 compared with 2025-02-14 · 127 added, 109 removed, 379 unchanged (38% of the section changed)

9 unchanged sentences

Forward-looking statements include statements regarding expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments, expected inflationary pressures 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) changes in or related to 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);

changes in revenues due to declining patient volumes;

These factors include, but are not limited to, (1) changes in or related to general economic or business conditions nationally and regionally in our markets, including inflation and the impact of trade policies, including changes in, or the imposition of, tariffs and/or trade barriers;

changes in revenues resulting from declining patient volumes;

changes in payer mix (including increases in uninsured and underinsured patients);

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

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

workforce disruptions;

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

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

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

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

and the impact of federal government shutdowns, holds on or cancellations of congressionally authorized spending and interruptions in the distribution of governmental funds, (2) the impact of current and future health care public policy developments and the implementation of new, and possible changes to existing, federal, state or local laws and regulations affecting the health care industry, including the expiration at the end of 2025 of enhanced premium tax credits (“EPTCs”) for eligible individuals purchasing insurance coverage through federal and state-based health insurance marketplaces, changes in the structure and administration of, and funding for, federal and state agencies and programs, and effects of the 2025 Federal Budget Act (the “FBA”), (3) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and the potential for future deficit or other spending reduction legislation that may alter current spending reductions, which include cuts to Medicare payments, or impose additional spending reductions, (5) the ability to achieve operating and financial targets, develop and execute resiliency plans to offset to the extent possible impacts from the FBA, the expiration of EPTCs and tariffs, attain expected levels of patient volumes and revenues, and control the costs of providing services, (6) possible reductions or other changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs and state directed payment arrangements, any of which may negatively impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (7) the results of our efforts to use technology and resilience initiatives, including artificial intelligence and machine learning, to drive efficiencies, better outcomes and an enhanced patient experience, (8) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (9) personnel-related capacity constraints, increases in wages and the ability to attract, utilize and retain qualified management and other personnel, including affiliated physicians, nurses and medical and technical support personnel, (10) the highly competitive nature of the health care business, (11) changes in service mix, revenue mix and service 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, (12) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (13) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (14) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (15) changes in accounting practices, (16) the emergence of and effects related to pandemics, epidemics and outbreaks of infectious diseases or other public health crises, (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) the impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of actual and potential cybersecurity incidents or security breaches involving us or our vendors and other third parties, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, including Hurricanes Milton and Helene, physical risks from changing global weather patterns or similar events beyond our control on our assets and activities and the communities we serve, (25) changes in U.S.

federal, state, or foreign tax laws, interpretations of tax laws by taxing authorities, other standard setting bodies or judicial decisions, (26) changes to, and the timing and amount of future approvals (if any) of, state Medicaid directed and supplemental payments and (27) other risk factors described in this annual report on Form 10-K.

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

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totaled $6.784 billion, or $28.33 per diluted share, for 2025, compared to $5.760 billion, or $22.00 per diluted share, for 2024.

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

The 2025 and 2024 results include gains on sales of facilities of $37 million, or $0.12 per diluted share, and $14 million, or $0.04 per diluted share, respectively.

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

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

Our provisions for income taxes for 2025 and 2024 include tax benefits of $61 million, or $0.25 per diluted share, and $102 million, or $0.39 per diluted share, respectively, related to employee equity award settlements.

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During 2025, consolidated admissions increased 2.7% and same facility admissions increased 2.3%, compared to 2024.

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

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

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

Inpatient surgical volumes increased 0.9% on a consolidated basis and 0.4% on a same facility basis during 2025, compared to 2024.

Outpatient surgical volumes declined 0.2% on a consolidated basis and 0.5% on a same facility basis during 2025, compared to 2024.

Emergency room visits increased 1.6% on a consolidated basis and 1.8% on a same facility basis during 2025, compared to 2024.

The estimated cost of total uncompensated care increased $239 million for 2025, compared to 2024.

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

Consolidated and same facility uninsured admissions increased 1.9% and 1.2%, respectively, and consolidated and same facility uninsured emergency room visits each declined 0.6% for 2025, compared to 2024.

Interest expense totaled $2.248 billion for 2025, compared to $2.061 billion for 2024.

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Cash flows from operating activities increased $2.122 billion, from $10.514 billion for 2024 to $12.636 billion for 2025.

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

The increase in cash flows from operating activities was related primarily to the combined impact of a $1.319 billion increase in net income, excluding gains on sales of facilities and depreciation and amortization, positive changes in working capital of $524 million and a decline in income taxes paid of $104 million.

Business Strategy

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

Advance Our Digital and Artificial Intelligence Capabilities.

We are investing in digital, data, and artificial intelligence capabilities to improve clinical quality, enhance the experience of our patients and colleagues, and drive operational efficiency at scale.

We are focused on developing and deploying secure, enterprise-grade digital and AI-enabled solutions that support clinical decision-making, streamline workflows, reduce administrative burden, and improve the coordination of care.

Our strategy emphasizes the use of standardized data platforms, advanced analytics, and responsible AI practices to enable scalable innovation across clinical, operational, and administrative functions, while maintaining appropriate governance, privacy, and security controls.

We believe these investments will help us improve patient outcomes, address workforce challenges, enhance efficiencies, and strengthen our ability to deliver high-quality, cost-effective care over the long term.

However, our ability to realize these expected benefits is subject to known and unknown risks and uncertainties.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates

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

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

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.

Estimates of contractual adjustments 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.

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

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

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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (continued)

Revenues (continued)

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

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Estimated cost of total uncompensated care

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Revenues (continued)

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

1 unchanged sentence

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

Professional Liability Claims

Professional Liability Reserves

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

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

Our facilities are insured by one of our insurance subsidiaries for losses up to $110 million per occurrence ($120 million effective January 1, 2026), subject, in most cases, to a $15 million per occurrence self-insured retention.

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

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Provisions for losses related to professional liability risks were $651 million, $627 million and $619 million for the years ended December 31, 2025, 2024 and 2023, respectively.

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

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

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

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Professional Liability Reserves (continued)

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 $1.883 billion to $2.251 billion at December 31, 2025 and $1.855 billion to $2.221 billion at December 31, 2024.

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

Our estimated reserves for professional liability risks 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.

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A 2.5% change in the expected claim severity trend could be reasonably likely and would increase the reserve estimate by $126 million or reduce the reserve estimate by $117 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 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.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

Professional Liability Claims (continued)

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

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

however, due to the complexity of the claims, the extended period of time to resolve the claims and the wide range of potential outcomes, our ultimate liability for professional liability risks 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 2,360 and 2,120 individual claims at December 31, 2025 and 2024, 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.

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Reserves for professional liability risks (net of $47 million and $80 million receivable under reinsurance and excess insurance contracts at December 31, 2025 and 2024, respectively) were $1.997 billion and $2.051 billion at December 31, 2025 and 2024, respectively.

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

The estimated total net reserves for professional liability risks at December 31, 2025 and 2024 are comprised of $1.124 billion and $1.059 billion, respectively, of case reserves for known claims and $873 million and $992 million, respectively, of reserves for incurred but not reported claims.

The 2025 increase in case reserves for known claims and the corresponding decrease in reserves for incurred but not reported claims is the result of changes in case management processes at our insurance subsidiary that include establishing case reserve estimates earlier and resolving claims quicker.

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Provision for current year claims

Unfavorable (favorable) development related to prior years’ claims

Unfavorable development related to prior years’ claims

Total provision

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Net reserves for professional liability claims, December 31

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Critical Accounting Policies and Estimates (Continued)

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

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Final audit results may vary from our estimates.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations

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The 6.6% increase for 2025 can be primarily attributed to the combined impact of a 2.4% increase in equivalent admissions and a 4.1% increase in revenue per equivalent admission.

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

The 7.9% increase for 2024 can be primarily attributed to the combined impact of a 4.5% increase in equivalent admissions and a 3.2% increase in revenue per equivalent admission.

Consolidated admissions increased 2.7% during 2025 compared to 2024 and increased 5.0% during 2024 compared to 2023.

Consolidated inpatient surgical volumes increased 0.9% during 2025 compared to 2024 and increased 2.2% during 2024 compared to 2023.

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

Consolidated outpatient surgical volumes declined 0.2% during 2025 compared to 2024 and declined 1.9% during 2024 compared to 2023.

Consolidated emergency room visits increased 1.6% during 2025 compared to 2024 and increased 4.8% during 2024 compared to 2023.

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Same facility inpatient surgical volumes increased 0.4% during 2025 compared to 2024 and increased 2.2% during 2024 compared to 2023.

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

Same facility outpatient surgical volumes declined 0.5% during 2025 compared to 2024 and declined 1.6% during 2024 compared to 2023.

Same facility emergency room visits increased 1.8% during 2025 compared to 2024 and increased 4.9% during 2024 compared to 2023.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Same facility uninsured emergency room visits declined 0.6% and same facility uninsured admissions increased 1.2% during 2025 compared to 2024.

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

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

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, 2025, 2024 and 2023 are set forth below.

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Managed care and insurers

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, and managed care and insurers for the years ended December 31, 2025, 2024 and 2023 are set forth below.

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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.

Some state Medicaid programs 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.

We receive supplemental payments in several states.

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

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

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

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

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

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

Some states make additional payments to providers through the Medicaid program that are separate from base payments.

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

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

These payments are generally authorized by the Centers for Medicare & Medicaid Services (“CMS”) and subject to periodic extension or reapproval.

Most states in which we receive payment have adopted statewide or local provider taxes to fund the non-federal share of Medicaid programs.

SDP arrangements and other additional payments supplement Medicaid base rates, which combined are generally insufficient to cover the cost of care provided to Medicaid beneficiaries after accounting for the costs of financing the non-federal share of Medicaid payments, such as the state or local provider taxes levied.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

We are aware these payment programs are currently being reviewed by certain government agencies, and some states requested modifications of their existing supplemental payment programs during the annual renewal process with CMS.

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

Further, the FBA makes significant changes to Medicaid financing mechanisms, including limitations on provider taxes and SDP arrangements.

However, the FBA grandfathers certain SDP arrangements, including those for which an application form was submitted to CMS prior to July 4, 2025, for the rating period occurring within 180 days of July 4, 2025, and those that received approval or made a good faith effort to receive approval from CMS prior to May 1, 2025.

Certain states in which we operate have submitted application forms to CMS for approval where the grandfathered payments we receive could be impacted, and in some instances, increased.

Beginning with the rating period on or after January 1, 2028, grandfathered payments will be reduced by 10 percentage points annually until they reach the allowable payment limits.

Some states have received approval of grandfathered applications, but we are unable to predict the timing or extent of any additional approvals by CMS and the resulting recognition of the related revenues.

Excluding the expected impact of any additional approvals, we expect revenues from SDP arrangements to decline in 2026 compared to 2025.

We also expect certain administrative reforms relating to the Exchanges and the expiration of the enhanced premium tax credits at the end of 2025 to adversely affect our results of operations in 2026, offset in part by our ongoing resiliency efforts.

Key Performance Indicators

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Losses (gains) on sales of facilities

Losses on retirement of debt

Income before income taxes

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totaled $6.784 billion, or $28.33 per diluted share, for 2025, compared to $5.760 billion, or $22.00 per diluted share, for 2024.

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

The 2025 and 2024 results include gains on sales of facilities of $37 million, or $0.12 per diluted share, and $14 million, or $0.04 per diluted share, respectively.

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

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During 2025, consolidated admissions increased 2.7% and same facility admissions increased 2.3% compared to 2024.

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

Consolidated inpatient surgeries increased 0.9% and same facility inpatient surgeries increased 0.4% during 2025 compared to 2024.

Emergency room visits increased 1.6% on a consolidated basis and increased 1.8% on a same facility basis during 2025 compared to 2024.

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We continue to utilize certain contract, overtime and other premium rate labor costs to support our clinical staff and patients.

While these costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

While these labor costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

Share-based compensation expense was $401 million in 2025 and $360 million in 2024.

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

Supplies, as a percentage of revenues, were 15.0% in 2025 and 15.2% in 2024.

Supply costs per equivalent admission increased 2.7% in 2025 compared to 2024.

Supply costs per equivalent admission increased 7.0% for medical devices and 0.3% for general medical and surgical items, but declined 4.0% for pharmacy supplies in 2025 compared to 2024.

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

The increase in supply costs per equivalent admission for medical devices is primarily related to cardiovascular technologies.

The decline in supply costs per equivalent admission for pharmacy supplies is primarily related to a decrease in the costs of certain drugs.

Other operating expenses, as a percentage of revenues, were 21.0% in both 2025 and 2024.

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

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

We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in 2026.

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

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

Equity in earnings of affiliates was $78 million for 2025 and $23 million for 2024.

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

Depreciation and amortization, as a percentage of revenues, were 4.6% in 2025 and 4.7% in 2024.

Depreciation expense was $3.508 billion for 2025 and $3.294 billion for 2024.

The increase of $214 million in depreciation expense relates primarily to capital expenditures at our existing facilities.

Interest expense increased to $2.248 billion for 2025 from $2.061 billion for 2024.

The $187 million increase in interest expense was primarily due to an increase in the average debt balance.

The average effective interest rate for our long-term debt was 5.0% for both 2025 and 2024.

Our average debt balance was $44.731 billion for 2025 compared to $41.388 billion for 2024.

Gains on sales of facilities were $37 million for 2025 and $14 million for 2024.

HCA HEALTHCARE, INC.

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Years Ended December 31, 2025 and 2024 (continued)

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

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

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

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

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

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

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

The effective income tax rate was 23.2% for 2025 and 24.5% for 2024, excluding net income attributable to noncontrolling interests as it relates to consolidated partnerships.

The decline in the effective tax rate for 2025 is due to a net increase in our 2024 tax provision related to an internal restructuring of certain affiliates and adjustments to our liability for unrecognized tax benefits.

Our provisions for income taxes for 2025 and 2024 included tax benefits of $61 million and $102 million, respectively, related to employee equity award settlements.

Net income attributable to noncontrolling interests increased from $897 million for 2024 to $998 million for 2025.

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

The increase in net income attributable to noncontrolling interests related primarily to the operations of two of our Texas markets.

For results of operations comparisons relating to years ending December 31, 2024 and 2023, refer to our annual report on Form 10-K, Item 7.

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Cash provided by operating activities totaled $12.636 billion in 2025 compared to $10.514 billion in 2024 and $9.431 billion in 2023.

The $2.122 billion increase in cash provided by operating activities for 2025, compared to 2024, was related primarily to the combined impact of a $1.319 billion increase in net income, excluding gains on sales of facilities and depreciation and amortization, positive changes in working capital of $524 million and a decline in income taxes paid of $104 million.

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

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

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

Cash payments for interest and income taxes increased $165 million for 2025 compared to 2024.

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

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

We had negative working capital of $567 million at December 31, 2025 and positive working capital of $1.237 billion at December 31, 2024.

The decline in working capital is primarily due to the decline of $893 million in cash and cash equivalents and an increase in current liabilities of $1.173 billion, including $2.207 billion of outstanding commercial paper notes (short-term borrowings).

We have the ability to refinance our outstanding commercial paper notes with our senior unsecured credit facility on a long-term basis.

Excluding the impact of our outstanding commercial paper notes, our working capital at December 31, 2025 would have been $1.640 billion.

Cash used in investing activities was $4.988 billion, $4.933 billion and $5.317 billion in 2025, 2024 and 2023, respectively.

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We expended $397 million, $266 million and $635 million for acquisitions of hospitals and health care entities during 2025, 2024 and 2023, respectively.

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

Cash flows from sales of hospitals and health care entities were $269 million of net proceeds for 2025, $328 million of net proceeds for 2024 and $193 million of net proceeds for 2023.

HCA HEALTHCARE, INC.

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During 2023, we had a net increase of $1.295 billion in our indebtedness, paid dividends of $661 million and paid $3.811 billion for repurchases of common stock.

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

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

During 2025, 2024 and 2023, we made distributions to noncontrolling interests of $827 million, $711 million and $640 million, respectively.

We, or our affiliates, may in the future repurchase portions of our debt or equity securities, subject to certain limitations, from time to time in either the open market or through privately negotiated transactions, in accordance with applicable SEC and other legal requirements.

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

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

In addition to cash flows from operations, available sources of capital include amounts available under our senior unsecured credit facility ($5.779 billion and $5.664 billion available as of December 31, 2025 and January 31, 2026, respectively, after giving effect to all issued and outstanding letters of credit and our intention to maintain a minimum available borrowing capacity equal to the aggregate amount outstanding under the commercial paper program ($2.207 billion and $2.322 billion as of December 31, 2025 and January 31, 2026, respectively) and anticipated access to public and private debt markets.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $588 million and $657 million at December 31, 2025 and 2024, respectively.

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

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

An insurance subsidiary maintained net reserves for professional liability risks of $91 million and $127 million at December 31, 2025 and 2024, respectively.

Our facilities are insured by one of our insurance subsidiaries for losses up to $110 million per occurrence ($120 million effective January 1, 2026);

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

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Our interest expense was $2.248 billion for 2025 and $2.061 billion for 2024.

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

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

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

HCA HEALTHCARE, INC.

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Financing Activities (continued)

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

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

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

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

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

The senior secured credit facilities are fully and unconditionally guaranteed on a senior secured basis by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our senior secured asset-based revolving credit facility).

During 2022, the conditions in the senior secured indentures to permit the permanent release of the subsidiary guarantees and all collateral securing the senior secured notes were met.

The subsidiary guarantees and collateral securing our senior secured credit facilities were not affected.

Following this release of the subsidiary guarantees and collateral securing the senior secured notes, summarized financial information for HCA Healthcare, Inc., HCA Inc.

and the subsidiary guarantors, and information about the subsidiary guarantees and affiliates whose securities were pledged as collateral are no longer required to be presented.

During 2025, we entered into a new credit agreement that provides for $8.000 billion of senior unsecured revolving credit commitments with a term of five years (“senior unsecured credit facility”).

Borrowings under the senior unsecured credit facility bear interest at a rate equal to the Secured Overnight Financing Rate plus 1.125% (plus, until October 23, 2025, a 0.10% credit spread adjustment, as the unsecured credit facility was amended on that date to remove the credit spread adjustment).

We terminated our $4.500 billion senior secured asset-based revolving credit facility, our $3.500 billion senior secured revolving cash flow credit facility and our senior secured term loan facility of $1.238 billion.

Finance leases and other secured debt totaled $1.021 billion at December 31, 2025.

During 2025, we issued $5.250 billion aggregate principal amount of senior notes comprised of (i) $700 million aggregate principal amount of 5.000% senior notes due 2028, (ii) $300 million aggregate principal amount of floating rate senior notes due 2028, (iii) $750 million aggregate principal amount of 5.250% senior notes due 2030, (iv) $750 million aggregate principal amount of 5.500% senior notes due 2032, (v) $1.500 billion aggregate principal amount of 5.750% senior notes due 2035 and (vi) $1.250 billion aggregate principal amount of 6.200% senior notes due 2055.

We used the net proceeds to repay borrowings under the senior unsecured credit facility and for general corporate purposes.

During 2025, we also issued $3.250 billion aggregate principal amount of senior notes comprised of (i) $500 million aggregate principal amount of 4.300% senior notes due 2030, (ii) $1.000 billion aggregate principal amount of 4.600% senior notes due 2032, (iii) $1.000 billion aggregate principal amount of 4.900% senior notes due 2035 and (iv) $750 million aggregate principal amount of 5.700% senior notes due 2055.

We used the net proceeds to repay borrowings under the commercial paper program and for general corporate purposes.

During 2025, we established a commercial paper program under which we may issue unsecured commercial paper notes from time to time up to a maximum aggregate face or principal amount of $4.000 billion outstanding at any time.

Amounts available under the program may be borrowed, repaid and reborrowed from time to time.

The maturities of the commercial paper notes borrowings may vary, but will not exceed 397 days from the date of issue, and the proceeds from the program will be used for general corporate purposes.

In connection with the commercial paper program, we intend to maintain a minimum available borrowing capacity under our $8.000 billion senior unsecured credit facility equal to the aggregate amount outstanding under the commercial paper program.

At December 31, 2025, we had $2.207 billion of commercial paper outstanding, and there were no borrowings outstanding under our senior unsecured credit facility.

During 2025, we repaid at maturity all $2.600 billion aggregate principal amount of 5.375% senior notes, all $1.400 billion aggregate principal amount of 5.25% senior notes, $291 million aggregate principal amount of 7.69% senior notes and $125 million aggregate principal amount of 7.58% medium-term notes.

We also redeemed all $1.500 billion aggregate principal amount of 5.875% senior notes due 2026.

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

All of the senior notes issued by HCA Inc.

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At December 31, 2025, we had net unrealized losses of $14 million on the insurance subsidiaries’ investment securities.

HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Market Risk (continued)

We are exposed to market risk related to market illiquidity.

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Debt of $2.507 billion at December 31, 2025 was subject to variable rates of interest, while the remaining debt balance of $43.985 billion at December 31, 2025 was subject to fixed rates of interest.

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

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

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

Our variable debt is comprised of outstanding commercial paper notes and the floating rate senior notes due 2028.

The average effective interest rate for our long-term debt was 5.0% for both 2025 and 2024.

HCA HEALTHCARE, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

Market Risk (continued)

The estimated fair value of our total long-term debt was $45.911 billion at December 31, 2025.

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Tax Examinations

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

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

During 2025, the Internal Revenue Service (“IRS”) concluded its examination of the Company ’ s 2022 and 2023 income tax returns resolving all federal income tax matters for those years.

Completion of the examination had no material impact on our results of operations or financial position.

At December 31, 2025 , the IRS was examining the 2019 income tax returns of certain affiliates of the Company.

We are subject to examination by the IRS for tax years after 2023, as well as by state and foreign taxing authorities.

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

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

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis