UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2013
Or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-11239
HCA Holdings, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 27-3865930 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) |
|
One Park Plaza Nashville, Tennessee |
37203 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (615) 344-9551
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class |
Name of Each Exchange on Which Registered |
|
Common Stock, $0.01 Par Value | New York Stock Exchange |
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||||
Non-accelerated filer | ¨ | (Do not check if a smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of January 31, 2014, there were 440,512,800 outstanding shares of the Registrants common stock. As of June 30, 2013, the aggregate market value of the common stock held by nonaffiliates was approximately $9.867 billion. For purposes of the foregoing calculation only, Hercules Holding II, LLC and the Registrants directors and executive officers have been deemed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrants definitive proxy materials for its 2014 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.
2
PART I
General
HCA Holdings, Inc. is one of the leading health care services companies in the United States. At December 31, 2013, we operated 165 hospitals, comprised of 159 general, acute care hospitals; five psychiatric hospitals; and one rehabilitation hospital. In addition, we operated 115 freestanding surgery centers. Our facilities are located in 20 states and England.
The terms Company, HCA, we, our or us, as used herein and unless otherwise stated or indicated by context, refer to HCA Inc. and its affiliates prior to the Corporate Reorganization (as defined below) and to HCA Holdings, Inc. and its affiliates after the Corporate Reorganization. The term affiliates means direct and indirect subsidiaries of HCA Holdings, Inc. and partnerships and joint ventures in which such subsidiaries are partners. The terms facilities or hospitals refer to entities owned and operated by affiliates of HCA, and the term employees refers to employees of affiliates of HCA.
Our primary objective is to provide a comprehensive array of quality health care services in the most cost-effective manner possible. Our general, acute care hospitals typically provide a full range of services to accommodate such medical specialties as internal medicine, general surgery, cardiology, oncology, neurosurgery, orthopedics and obstetrics, as well as diagnostic and emergency services. Outpatient and ancillary health care services are provided by our general, acute care hospitals, freestanding surgery centers, diagnostic centers and rehabilitation facilities. Our psychiatric hospitals provide a full range of mental health care services through inpatient, partial hospitalization and outpatient settings.
On November 17, 2006, HCA Inc. was acquired by a private investor group, including affiliates of or funds sponsored by Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co., BAML Capital Partners and HCA founder, Dr. Thomas F. Frist, Jr. (collectively, the Investors) and by members of management and certain other investors. The transaction was accounted for as a recapitalization in our financial statements, with no adjustments to the historical basis of our assets and liabilities.
During March 2011, we completed the initial public offering of 87,719,300 shares of our common stock. Certain of our stockholders also sold 57,410,700 shares of our common stock in this offering. During December 2012, February 2013 and November 2013, certain Investors sold 32,000,000 shares, 50,000,000 shares and 30,000,000 shares, respectively, of our common stock. We did not receive any proceeds from the shares sold by the selling stockholders in any of these offerings. Our common stock is traded on the New York Stock Exchange (symbol HCA).
The Company was incorporated in Nevada in January 1990 and reincorporated in Delaware in September 1993. Our principal executive offices are located at One Park Plaza, Nashville, Tennessee 37203, and our telephone number is (615) 344-9551.
Corporate Reorganization
On November 22, 2010, HCA Inc. reorganized by creating a new holding company structure (the Corporate Reorganization). We are the parent company, and HCA Inc. is our 100% owned direct subsidiary. As part of the Corporate Reorganization, HCA Inc.s outstanding shares of capital stock were automatically converted, on a share for share basis, into identical shares of our common stock. As a result of the Corporate Reorganization, we are deemed the successor registrant to HCA Inc. under the Exchange Act. As part of the Corporate Reorganization, we became a guarantor but did not assume the debt of HCA Inc.s outstanding secured notes.
3
Following the Corporate Reorganization, the right to receive HCA Inc.s common stock under its various compensation plans and agreements automatically converted into rights for the same number of shares of our common stock, with the same rights and conditions as the corresponding HCA Inc. rights prior to the Corporate Reorganization.
Available Information
We file certain reports with the Securities and Exchange Commission (the SEC), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The public may read and copy any materials we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer, and the SEC maintains an Internet site at http://www.sec.gov that contains the reports, proxy and information statements and other information we file electronically. Our website address is www.hcahealthcare.com. Please note that our website address is provided as an inactive textual reference only. We make available free of charge, through our website, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Exchange Act, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. The information provided on our website is not part of this report, and is therefore not incorporated by reference unless such information is specifically referenced elsewhere in this report.
Our Code of Conduct is available free of charge upon request to our Corporate Secretary, HCA Holdings, Inc., One Park Plaza, Nashville, Tennessee 37203.
Business Strategy
We are committed to providing the communities we serve with high quality, cost-effective health care while growing our business, increasing our profitability and creating long-term value for our stockholders. To achieve these objectives, we align our efforts around the following growth agenda:
|
grow our presence in existing markets; |
|
achieve industry-leading performance in clinical and satisfaction measures; |
|
recruit and employ physicians to meet the need for high quality health services; |
|
continue to leverage our scale and market positions to enhance profitability; and |
|
selectively pursue a disciplined development strategy. |
Health Care Facilities
We currently own, manage or operate hospitals; freestanding surgery centers; diagnostic and imaging centers; radiation and oncology therapy centers; comprehensive rehabilitation and physical therapy centers; and various other facilities.
At December 31, 2013, we owned and operated 159 general, acute care hospitals with 42,240 licensed beds. Most of our general, acute care hospitals provide medical and surgical services, including inpatient care, intensive care, cardiac care, diagnostic services and emergency services. The general, acute care hospitals also provide outpatient services such as outpatient surgery, laboratory, radiology, respiratory therapy, cardiology and physical therapy. Each hospital has an organized medical staff and a local board of trustees or governing board, made up of members of the local community.
Our hospitals do not typically engage in extensive medical research and education programs. However, some of our hospitals are affiliated with medical schools and may participate in the clinical rotation of medical interns and residents and other education programs.
4
At December 31, 2013, we operated five psychiatric hospitals with 556 licensed beds. Our psychiatric hospitals provide therapeutic programs including child, adolescent and adult psychiatric care, adult and adolescent alcohol and drug abuse treatment and counseling.
We also operate outpatient health care facilities, which include freestanding ambulatory surgery centers (ASCs), freestanding emergency care facilities, diagnostic and imaging centers, comprehensive outpatient rehabilitation and physical therapy centers, outpatient radiation and oncology therapy centers and various other facilities. These outpatient services are an integral component of our strategy to develop comprehensive health care networks in select communities. Most of our ASCs are operated through partnerships or limited liability companies, with majority ownership of each partnership or limited liability company typically held by a general partner or member that is an affiliate of HCA.
Certain of our affiliates provide a variety of management services to our health care facilities, including patient safety programs; ethics and compliance programs; national supply contracts; equipment purchasing and leasing contracts; accounting, financial and clinical systems; governmental reimbursement assistance; construction planning and coordination; information technology systems and solutions; legal counsel; human resources services; and internal audit services.
Sources of Revenue
Hospital revenues depend upon inpatient occupancy levels, the medical and ancillary services ordered by physicians and provided to patients, the volume of outpatient procedures and the charges or payment rates for such services. Charges and reimbursement rates for inpatient services vary significantly depending on the type of payer, the type of service (e.g., medical/surgical, intensive care or psychiatric) and the geographic location of the hospital. Inpatient occupancy levels fluctuate for various reasons, many of which are beyond our control.
We receive payments for patient services from the federal government under the Medicare program, state governments under their respective Medicaid or similar programs, managed care plans, private insurers and directly from patients. Our revenues from third-party payers and the uninsured for the years ended December 31, 2013, 2012 and 2011 are summarized in the following table (dollars in millions):
Years Ended December 31, | ||||||||||||||||||||||||
2013 | Ratio | 2012 | Ratio | 2011 | Ratio | |||||||||||||||||||
Medicare |
$ | 7,951 | 23.3 | % | $ | 8,292 | 25.1 | % | $ | 7,653 | 25.8 | % | ||||||||||||
Managed Medicare |
3,279 | 9.6 | 2,954 | 8.9 | 2,442 | 8.2 | ||||||||||||||||||
Medicaid |
1,480 | 4.3 | 1,464 | 4.4 | 1,845 | 6.2 | ||||||||||||||||||
Managed Medicaid |
1,570 | 4.6 | 1,504 | 4.6 | 1,265 | 4.3 | ||||||||||||||||||
Managed care and other insurers |
18,654 | 54.6 | 17,998 | 54.5 | 15,703 | 52.9 | ||||||||||||||||||
International (managed care and other insurers) |
1,175 | 3.4 | 1,060 | 3.2 | 938 | 3.2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
34,109 | 99.8 | 33,272 | 100.7 | 29,846 | 100.6 | |||||||||||||||||||
Uninsured |
2,677 | 7.8 | 2,580 | 7.8 | 1,846 | 6.2 | ||||||||||||||||||
Other |
1,254 | 3.7 | 931 | 2.8 | 814 | 2.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues before provision for doubtful accounts |
38,040 | 111.3 | 36,783 | 111.3 | 32,506 | 109.5 | ||||||||||||||||||
Provision for doubtful accounts |
(3,858 | ) | (11.3 | ) | (3,770 | ) | (11.3 | ) | (2,824 | ) | (9.5 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
$ | 34,182 | 100.0 | % | $ | 33,013 | 100.0 | % | $ | 29,682 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Medicare is a federal program that provides certain hospital and medical insurance benefits to persons age 65 and over, some disabled persons, persons with end-stage renal disease and persons with Lou Gehrigs Disease. Medicaid is a federal-state program, administered by the states, which provides hospital and medical benefits to qualifying individuals who are unable to afford health care. All of our general, acute care hospitals
5
located in the United States are eligible to participate in Medicare and Medicaid programs. Amounts received under Medicare and Medicaid programs are generally significantly less than established hospital gross charges for the services provided.
Our hospitals generally offer discounts from established charges to certain group purchasers of health care services, including private insurance companies, employers, health maintenance organizations (HMOs), preferred provider organizations (PPOs) and other managed care plans, including plans offered through the American Health Benefit Exchanges (Exchanges). These discount programs generally limit our ability to increase revenues in response to increasing costs. See Item 1, Business Competition. Patients are generally not responsible for the total difference between established hospital gross charges and amounts reimbursed for such services under Medicare, Medicaid, HMOs, PPOs and other managed care plans, but are responsible to the extent of any exclusions, deductibles or coinsurance features of their coverage. The amount of such exclusions, deductibles and coinsurance continues to increase. Collection of amounts due from individuals is typically more difficult than from governmental or third-party payers. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care under our charity care policy. These discounts are similar to those provided to many local managed care plans. In implementing the uninsured discount policy, we attempt to qualify uninsured patients for Medicaid, other federal or state assistance or charity care under our charity care policy. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.
Medicare
In addition to the reimbursement reductions and adjustments discussed below, the Budget Control Act of 2011 (the BCA) requires automatic spending reductions to reduce the federal deficit, including Medicare spending reductions of up to 2% per fiscal year, with a uniform percentage reduction across all Medicare programs. These automatic spending reductions began on March 1, 2013, with CMS imposing a 2% reduction on Medicare claims beginning on April 1, 2013. These reductions have been extended through 2024.
Inpatient Acute Care
Under the Medicare program, we receive reimbursement under a prospective payment system (PPS) for general, acute care hospital inpatient services. Under the hospital inpatient PPS, fixed payment amounts per inpatient discharge are established based on the patients assigned Medicare severity diagnosis-related group (MS-DRG). MS-DRGs classify treatments for illnesses according to the estimated intensity of hospital resources necessary to furnish care for each principal diagnosis. MS-DRG weights represent the average resources for a given MS-DRG relative to the average resources for all MS-DRGs. MS-DRG payments are adjusted for area wage differentials. Hospitals, other than those defined as new, receive PPS reimbursement for inpatient capital costs based on MS-DRG weights multiplied by a geographically adjusted federal rate. When the cost to treat certain patients falls well outside the normal distribution, providers typically receive additional outlier payments.
MS-DRG rates are updated, and MS-DRG weights are recalibrated, using cost-relative weights each federal fiscal year (which begins October 1). The index used to update the MS-DRG rates (the market basket) gives consideration to the inflation experienced by hospitals and entities outside the health care industry in purchasing goods and services. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Health Reform Law), provides for annual decreases to the market basket, including the following reductions for each of the following federal fiscal years: 0.3% in 2014; 0.2% in 2015 and 2016 and 0.75% in 2017, 2018 and 2019. For each federal fiscal year, the Health Reform Law provides for the annual market basket update to be further reduced by a productivity adjustment based on the Bureau of Labor Statistics (BLS) 10-year moving average of changes in specified economy-wide productivity. At the time of enactment, the Centers for Medicare & Medicaid Services (CMS) estimated that the combined market basket and productivity adjustments would reduce Medicare payments under the inpatient PPS by $112.6 billion from 2010 to 2019. The American Taxpayer Relief Act of 2012 requires a negative
6
documentation and coding adjustment for four years beginning in federal fiscal year 2014. It is estimated that this documentation and coding adjustment will reduce Medicare inpatient PPS payments by $10.5 billion. A decrease in payment rates or an increase in rates that is below the increase in our costs may adversely affect our results of operations.
For federal fiscal year 2013, CMS increased the MS-DRG rate by 2.8%. This increase reflected a 2.6% market basket increase, the 0.1% reduction required by the Health Reform Law, a negative 0.7% productivity adjustment, a negative 1.9% prospective documentation and coding adjustment and a positive 2.9% retrospective documentation and coding adjustment. For federal fiscal year 2014, CMS issued a final rule that results in a net increase of 0.7%. This increase reflects a 2.5% market basket increase, the 0.3% reduction required by the Health Reform Law, a negative 0.5% productivity adjustment, a negative 0.8% prospective documentation and coding adjustment and a negative 0.2% adjustment to offset projected spending increases associated with new admission and medical review criteria for inpatient services commonly known as the two midnight rule. Under the rule, Medicare beneficiaries are only to be admitted as inpatients when there is a reasonable expectation that the hospital care is medically necessary and will be required across two midnights, absent unusual circumstances. Compliance with the two midnight rule was required beginning October 1, 2013 and will become subject to Recovery Audit Contractor (RAC) audits beginning October 1, 2014.
CMS has implemented or is implementing a number of programs and requirements intended to transform Medicare from a passive payer to an active purchaser of quality goods and services. For example, hospitals receive a 2% reduction to their market basket updates if they fail to submit data for patient care quality indicators to the Secretary of the Department of Health and Human Services (HHS). Beginning in federal fiscal year 2015, hospitals that do not participate will lose an additional one-quarter of the percentage increase in their payment updates. All of our hospitals paid under the Medicare inpatient PPS are participating in the quality initiative by submitting the requested quality data. While we will endeavor to comply with all data submission requirements as additional requirements continue to be added, our submissions may not be deemed timely or sufficient to entitle all of our hospitals to the full market basket adjustment.
Further, Medicare does not allow an inpatient hospital discharge to be assigned to a higher paying MS-DRG if a selected hospital acquired condition (HAC) was not present on admission. In this situation, the case is paid as though the secondary diagnosis was not present. There are currently 11 categories of conditions on the list of HACs. In addition, CMS has established three National Coverage Determinations that prohibit Medicare reimbursement for erroneous surgical procedures performed on an inpatient or outpatient basis. The Health Reform Law provides for reduced payments based on a hospitals HAC rates. Beginning in federal fiscal year 2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous year will receive a 1% reduction in their total inpatient operating Medicare payments.
The Health Reform Law also provides for reduced payments to hospitals based on readmission rates. Beginning in federal fiscal year 2013 and continuing in each federal fiscal year, inpatient payments are reduced if a hospital experiences excess readmissions within the 30-day time period from the date of discharge for heart attack, heart failure, pneumonia or other conditions that may be designated by CMS. Hospitals with what CMS defines as excess readmissions for these conditions receive reduced payments for all inpatient discharges, not just discharges relating to the conditions subject to the excess readmission standard. The amount by which payments are reduced is determined by comparing the hospitals performance for each condition using three years of discharge data to a risk-adjusted national average, subject to a cap established by CMS. The reduction in payments to hospitals with excess readmissions was capped at 1% for federal fiscal year 2013, but this reduction increased to 2% for federal fiscal year 2014, and will increase to 3% for federal fiscal year 2015 and thereafter. Each hospitals performance is publicly reported by CMS.
The Health Reform Law additionally establishes a hospital value-based purchasing program to further link payments to quality and efficiency. For each federal fiscal year, CMS will reduce the inpatient PPS payment amount for all discharges by the following: 1.25% for 2014; 1.5% for 2015; 1.75% for 2016; and 2% for 2017 and subsequent years. The total amount collected from these reductions is pooled and used to fund payments to
7
reward hospitals that meet certain quality performance standards established by CMS. CMS scores each hospital based on achievement (relative to other hospitals) and improvement ranges (relative to the hospitals own past performance) for each applicable performance standard. Because the Health Reform Law provides that the pool will be fully distributed, hospitals that meet or exceed the quality performance standards receive greater reimbursement under the value-based purchasing program than they would have otherwise. Hospitals that do not achieve the necessary quality performance receive reduced Medicare inpatient hospital payments. Hospitals are scored based on a weighted average of patient experience scores using the Hospital Consumer Assessment of Healthcare Providers and Systems survey and certain clinical measures. In federal fiscal year 2014, there are 17 measures by which hospitals will be scored. CMS estimates that it will distribute $1.1 billion in federal fiscal year 2014 to hospitals under the value-based purchasing program.
Historically, the Medicare program has set aside 5.10% of Medicare inpatient payments to pay for outlier cases. For federal fiscal year 2013, CMS established an outlier threshold of $21,821, and for federal fiscal year 2014, CMS reduced the outlier threshold to $21,748. We do not anticipate that the decrease to the outlier threshold for federal fiscal year 2014 will have a material impact on our results of operations.
Outpatient
CMS reimburses hospital outpatient services (and certain Medicare Part B services furnished to hospital inpatients who have no Part A coverage) on a PPS basis. CMS uses fee schedules to pay for physical, occupational and speech therapies, durable medical equipment, clinical diagnostic laboratory services, nonimplantable orthotics and prosthetics, freestanding surgery center services and services provided by independent diagnostic testing facilities.
Hospital outpatient services paid under PPS are classified into groups called ambulatory payment classifications (APCs). Services for each APC are similar clinically and in terms of the resources they require. A payment rate is established for each APC. Depending on the services provided, a hospital may be paid for more than one APC for a patient visit. The APC payment rates are updated for each calendar year. The Health Reform Law provides for reductions to the market basket update, including the following reductions for each of the following calendar years: 0.3% in 2014; 0.2% in 2015 and 2016 and 0.75% in 2017, 2018 and 2019. For each calendar year, the Health Reform Law provides for the annual market basket update to be further reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity. At the time of enactment, CMS estimated that the combined market basket and productivity adjustments would reduce Medicare payments under the outpatient PPS by $26.3 billion from 2010 to 2019. For calendar year 2013, CMS increased APC payment rates by 1.8%, which represented the full market basket update of 2.6%, a negative 0.7% productivity adjustment and the negative 0.1% adjustment required by the Health Reform Law. For calendar year 2014, CMS has issued a final rule that increases the APC payment rate by 1.7%, which includes the full market basket update of 2.5%, a negative 0.5% productivity adjustment and the negative 0.3% adjustment required by the Health Reform Law. CMS requires hospitals to submit quality data relating to outpatient care to avoid receiving a 2% reduction to the market basket update under the outpatient PPS.
Rehabilitation
CMS reimburses inpatient rehabilitation facilities (IRFs) on a PPS basis. Under the IRF PPS, patients are classified into case mix groups based upon impairment, age, comorbidities (additional diseases or disorders from which the patient suffers) and functional capability. IRFs are paid a predetermined amount per discharge that reflects the patients case mix group and is adjusted for area wage levels, low-income patients, rural areas and high-cost outliers. The Health Reform Law also provides for reductions to the market basket update, including the following reductions for each of the following federal fiscal years: 0.3% in 2014; 0.2% in 2015 and 2016 and 0.75% in 2017, 2018 and 2019. For each federal fiscal year, the Health Reform Law provides for the annual market basket update to be further reduced by a productivity adjustment based on the BLS 10-year moving
8
average of changes in specified economy-wide productivity. At the time of enactment, CMS estimated that the combined market basket and productivity adjustments would reduce Medicare payments under the IRF PPS by $5.7 billion from 2010 to 2019. For federal fiscal year 2013, CMS updated inpatient rehabilitation rates by 1.9%, which reflected a 2.7% market basket increase, a negative 0.7% productivity adjustment and a 0.1% reduction required by the Health Reform Law. For federal fiscal year 2014, CMS has issued a final rule updating inpatient rehabilitation rates by 1.8%, which reflects a 2.6% market basket increase, a negative 0.5% productivity adjustment and a 0.3% reduction required by the Health Reform Law. In addition, beginning in federal fiscal year 2014, IRFs are required to report quality measures to CMS or they will receive a 2% reduction to the market basket update.
In order to qualify for classification as an IRF, at least 60% of a facilitys inpatients during the most recent 12-month CMS-defined review period must have required intensive rehabilitation services for one or more of 13 specified conditions. IRFs must also meet additional coverage criteria, including patient selection and care requirements relating to pre-admission screenings, post-admission evaluations, ongoing coordination of care and involvement of rehabilitation physicians. A facility that fails to meet the 60% threshold, or other criteria to be classified as an IRF, will be paid under the acute care hospital inpatient or outpatient PPS, which generally provide for lower payment amounts. As of December 31, 2013, we had one rehabilitation hospital and 48 hospital rehabilitation units.
Psychiatric
Inpatient hospital services furnished in psychiatric hospitals and psychiatric units of general, acute care hospitals and critical access hospitals are reimbursed under a prospective payment system (the IPF PPS), a per diem payment, with adjustments to account for certain patient and facility characteristics. The IPF PPS contains an outlier policy for extraordinarily costly cases and an adjustment to a facilitys base payment if it maintains a full-service emergency department. CMS has established the IPF PPS payment rate in a manner intended to be budget neutral. The rehabilitation, psychiatric and long-term care market basket update is used to update the IPF PPS. The Health Reform Law also provides for reductions to the market basket update, including the following reductions for the following federal fiscal years: 0.1% in 2014; 0.3% in 2015, 0.2% in 2016 and 2017 and 0.75% in 2018, 2019 and 2020. For each payment year, the Health Reform Law provides for the annual market basket update to be further reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity. At the time of enactment, CMS estimated that the combined market basket and productivity adjustments would reduce Medicare payments under the IPF PPS by $4.3 billion from 2010 to 2019. For federal fiscal year 2013, CMS increased inpatient psychiatric payment rates by 1.9%, including a market basket increase of 2.7%, reduced by a 0.7% productivity adjustment and a reduction of 0.1% as required by the Health Reform Law. For federal fiscal year 2014, CMS has increased inpatient psychiatric payment rates by 2%, including a market basket increase of 2.6%, reduced by a 0.5% productivity adjustment and 0.1% as required by the Health Reform Law. Beginning in federal fiscal year 2014, inpatient psychiatric facilities will be required to report quality measures to CMS or will receive a 2% reduction to the market basket update. As of December 31, 2013, we had five psychiatric hospitals and 45 hospital psychiatric units.
Ambulatory Surgery Centers
CMS reimburses ASCs using a predetermined fee schedule. Reimbursements for ASC overhead costs are limited to no more than the overhead costs paid to hospital outpatient departments under the Medicare hospital outpatient PPS for the same procedure. If CMS determines that a procedure is commonly performed in a physicians office, the ASC reimbursement for that procedure is limited to the reimbursement allowable under the Medicare Part B Physician Fee Schedule, with limited exceptions. All surgical procedures, other than those that pose a significant safety risk or generally require an overnight stay, are payable as ASC procedures. From time to time, CMS considers expanding the services that may be performed in ASCs, which may result in more Medicare procedures that historically have been performed in hospitals being moved to ASCs, reducing surgical volume in our hospitals. Also, more Medicare procedures that historically have been performed in ASCs may be
9
moved to physicians offices. Commercial third-party payers may adopt similar policies. For each federal fiscal year, the Health Reform Law provides for the annual market basket update to be reduced by a productivity adjustment based on the BLS 10-year moving average of changes in specified economy-wide productivity. For calendar year 2014, CMS has issued a final rule that provides for a 1.2% annual update to ASC payments, which includes the market basket update of 1.7% and a negative 0.5% productivity adjustment. In addition, CMS has also established a quality reporting program for ASCs under which ASCs that fail to report on specified quality measures will receive a 2% reduction in reimbursement.
Physician Services
Physician services are reimbursed under the physician fee schedule (PFS) system, under which CMS has assigned a national relative value unit (RVU) to most medical procedures and services that reflects the various resources required by a physician to provide the services relative to all other services. Each RVU is calculated based on a combination of work required in terms of time and intensity of effort for the service, practice expense (overhead) attributable to the service and malpractice insurance expense attributable to the service. These three elements are each modified by a geographic adjustment factor to account for local practice costs and are then aggregated. The aggregated amount is multiplied by a conversion factor that accounts for inflation and targeted growth in Medicare expenditures (as calculated by the sustainable growth rate (SGR)) to arrive at the payment amount for each service. While RVUs for various services may change in a given year, any alterations are required by statute to be virtually budget neutral, such that total payments made under the PFS may not differ by more than $20 million from what payments would have been if adjustments were not made.
The PFS rates are adjusted each year, and reductions in both current and future payments are anticipated. The SGR formula, if implemented as mandated by statute, would result in significant reductions to payments under the PFS. These reductions are scheduled to be effective April 1, 2014. Since 2003, the U.S. Congress has passed multiple legislative acts delaying application of the SGR to the PFS. The most recent legislative delay provided a 0.5% increase in payment rates through March 31, 2014. The Senate Finance Committee, the House Ways and Means Committee, and the House Energy and Commerce Committee recently agreed upon legislation that, if enacted, will discontinue use of the SGR formula, thereby eliminating the scheduled payment reductions. The legislation would also provide an annual payment increase of 0.5% beginning in 2014 and extending through 2018 and would maintain 2018 rates through 2023. In addition, the legislation would require CMS to transition physician payments to a more value-based model beginning in 2018.
Other
Under PPS, the payment rates are adjusted for the area differences in wage levels by a factor (wage index) reflecting the relative wage level in the geographic area compared to the national average wage level and taking into account occupational mix. The redistributive impact of wage index changes, while slightly negative in the aggregate, is not anticipated to have a material financial impact for 2014. Based on the Health Reform Laws mandate, HHS submitted recommendations on reform to the Medicare wage index system, but Congress has not yet acted on the proposed reforms.
Medicare reimburses hospitals for a portion of bad debts resulting from deductible and coinsurance amounts that are uncollectable from Medicare beneficiaries. The Middle Class Tax Relief and Jobs Creation Act of 2012 (the Jobs Creation Act) reduced the percentage of bad debt amounts that Medicare reimburses from 70% to 65%. These reductions were intended to offset, in part, the impact of the legislative delay of the SGR reductions in physician compensation under the PFS. The U.S. Congress is considering legislation to address the SGR reductions, but has not yet enacted it into law.
As required by the MMA, CMS has implemented contractor reform whereby CMS competitively bids the Medicare fiscal intermediary and Medicare carrier functions to 15 Medicare Administrative Contractors (MACs), which are geographically assigned and service both Part A and Part B providers within a given
10
jurisdiction. CMS awarded initial contracts to all 15 MAC jurisdictions, but CMS is currently engaged in a consolidation strategy to move from 15 MAC jurisdictions to 10. While chain providers had the option of having all hospitals use one home office MAC, we chose to use the MACs assigned to the geographic areas in which our hospitals are located. CMS periodically re-solicits bids, and the MAC servicing a geographic area can change as a result of the bid competition. MAC transition periods can impact claims processing functions and the resulting cash flow.
Under the RAC program, CMS contracts with RACs on a contingency basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program. CMS has implemented the RAC program on a permanent, nationwide basis as required by statute. The compensation for the RACs is based on their review of claims submitted to Medicare for billing compliance, including correct coding and medical necessity, and the amount of overpayments and underpayments they identify.
Historically, RACs have conducted their reviews on a post-payment basis. However, CMS has also established the Recovery Audit Prepayment Review (RAPR) demonstration, that allows RACs to perform prepayment reviews. Under the RAPR demonstration, RACs conduct prepayment reviews on certain types of claims that historically result in high rates of improper payments, beginning with claims for short stay inpatient hospital services. These reviews focus on seven states (Florida, California, Michigan, Texas, New York, Louisiana and Illinois) with high populations of fraud and error-prone providers and four states (Pennsylvania, Ohio, North Carolina, and Missouri) with high claims volumes of short inpatient hospital stays. The RAPR demonstration began in 2012 and runs for a three year period.
We have established policies and procedures to respond to the RAC requests and payment denials. Payment recoveries resulting from RAC reviews and denials are appealable through administrative and judicial processes, and we pursue reversal of adverse determinations at appropriate appeal levels. We are incurring additional costs related to responding to RAC requests and denials, including costs associated with responding to requests for records and pursuing the reversal of payment denials and losses associated with overpayments that are not reversed upon appeal. Amounts that have not been reversed upon appeal have not been significant, but the number and amount of claims subject to RAC review has been steadily increasing, and we expect this trend to continue. Further, HHS has suspended the assignment of new Medicare appeals to Administrative Law Judges for at least two years beginning July 16, 2013, so that HHS may work through a backlog of appeals. Thus, we will experience a significant delay in appealing any RAC payment denials that occur during the suspension period. Depending upon the growth of RAC programs and our success in appealing claims in future periods, our cash flows and results of operations could be negatively impacted.
Managed Medicare
Under the Managed Medicare program, the federal government contracts with private health plans to provide members with Medicare Part A, Part B and Part D benefits. Managed Medicare plans can be structured as HMOs, PPOs or private fee-for-service plans. The Medicare program allows beneficiaries to choose enrollment in certain managed Medicare plans. MMA increased reimbursement to managed Medicare plans and expanded Medicare beneficiaries health care options. The Health Reform Law reduces, over a three year period starting in 2012, premium payments to managed Medicare plans such that CMS managed care per capita premium payments are, on average, equal to traditional Medicare. In addition, the Health Reform Law requires managed Medicare plans to keep annual administrative costs lower than 15% of annual premium revenue. The Health Reform Law also implements fee payment adjustments based on service benchmarks and quality ratings. The Congressional Budget Office (CBO) has estimated that, as a result of these changes, payments to plans will be reduced by $138 billion between 2010 and 2019, while CMS has estimated the reduction to be $145 billion. In addition, the Health Reform Law expands the RAC program to include managed Medicare plans. In light of the current economic environment and the Health Reform Law, managed Medicare plans may experience reduced premium payments from CMS, which may lead to increased beneficiary premiums or limits on benefits which, in turn, may cause decreased enrollment in such plans.
11
Medicaid
Medicaid programs are funded jointly by the federal government and the states and are administered by states under approved plans. Most state Medicaid program payments are made under a PPS or are based on negotiated payment levels with individual hospitals. Medicaid reimbursement is often less than a hospitals cost of services. Although the Health Reform Law requires states to expand Medicaid coverage to all individuals under age 65 with incomes up to 133% of the federal poverty level (FPL) by 2014, states may opt out of the expansion without losing existing federal Medicaid funding. For those states that expand Medicaid coverage, the Health Reform Law requires states to apply a 5% income disregard to the Medicaid eligibility standard, so that Medicaid eligibility will effectively be extended to those with incomes up to 138% of the FPL. A number of states, including Texas and Florida, have opted out of the Medicaid expansion, but these states could choose to implement the expansion at a later date. It is unclear how many states will ultimately decline to implement the Medicaid expansion provisions of the law.
Because most states must operate with balanced budgets and because the Medicaid program is often the states largest program, states can be expected to adopt or consider adopting legislation designed to reduce their Medicaid expenditures. The current economic environment has increased the budgetary pressures on most states, and these budgetary pressures have resulted and likely will continue to result in decreased spending, or decreased spending growth, for Medicaid programs in many states.
Certain states in which we operate have adopted broad-based provider taxes to fund the non-federal share of Medicaid programs. Many states have also adopted, or are considering, legislation designed to reduce coverage, enroll Medicaid recipients in managed care programs and/or impose additional taxes on hospitals to help finance or expand the states Medicaid systems. However, the Health Reform Law requires states to at least maintain Medicaid eligibility standards established prior to the enactment of the law for children until October 1, 2019.
Federal funds under the Medicaid program may not be used to reimburse providers for medical assistance provided to treat certain provider-preventable conditions. Each state Medicaid program must deny payments to providers for the treatment of health care-acquired conditions designated by CMS as well as other provider-preventable conditions that may be designated by the state.
Congress has expanded the federal governments involvement in fighting fraud, waste and abuse in the Medicaid program through the Medicaid Integrity Program. CMS employs private contractors, referred to as Medicaid Integrity Contractors (MICs), to perform post-payment audits of Medicaid claims and identify overpayments. In addition to MICs, several other contractors and state Medicaid agencies have increased their review activities. The Health Reform Law increases federal funding for the MIC program and expands the RAC programs scope to include Medicaid claims by requiring all states to enter into contracts with RACs to audit payments to Medicaid providers.
Managed Medicaid
Managed Medicaid programs enable states to contract with one or more entities for patient enrollment, care management and claims adjudication. The states usually do not relinquish program responsibilities for financing, eligibility criteria and core benefit plan design. We generally contract directly with one of the designated entities, usually a managed care organization. The provisions of these programs are state-specific.
Enrollment in managed Medicaid plans has increased in recent years, as state governments seek to control the cost of Medicaid programs. However, general economic conditions in the states in which we operate may require reductions in premium payments to these plans and may reduce enrollment in these plans.
Accountable Care Organizations and Bundled Payment Initiatives
Pursuant to the Health Reform Law, HHS established a Medicare Shared Savings Program (MSSP) that seeks to promote accountability and coordination of care through the creation of Accountable Care Organizations
12
(ACOs). The program allows certain providers and suppliers (including hospitals, physicians and other designated professionals) to voluntarily form ACOs and work together along with other ACO participants to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services. The program is intended to produce savings as a result of improved quality and operational efficiency. ACOs that achieve quality performance standards established by HHS are eligible to share in a portion of the amounts saved by the Medicare program. HHS has significant discretion to determine key elements of the program. Participants may choose between two different ACO tracks, the first of which allows ACOs to share only in the savings under the MSSP. The second track requires ACOs to share in any savings and losses under the MSSP but offers ACOs a greater share of any savings realized under the MSSP. As authorized by the Health Reform Law, certain waivers are available from fraud and abuse laws for ACOs. CMS has approved over 300 ACOs to participate in the MSSP.
The Health Reform Law created the Center for Medicare & Medicaid Innovation with responsibility for establishing demonstration projects and other initiatives in order to identify, develop, test and encourage the adoption of new methods of delivering and paying for health care that create savings under the Medicare and Medicaid programs while improving quality of care. One initiative announced by the Center for Medicare & Medicaid Innovation is a voluntary bundled payment initiative involving over 400 participants that links payments to participating providers for services provided during an episode of care. As required by the Health Reform Law, HHS established a separate five-year, voluntary, national pilot program on payment bundling for Medicare services. Under the program, organizations enter into payment arrangements that include financial and performance accountability for episodes of care, and these models are intended to lead to higher quality, more coordinated care at a lower cost to the Medicare program. Participating providers agree to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care. The Health Reform Law also provides for a bundled payment demonstration project for Medicaid services, but CMS has not yet implemented this project. HHS may select up to eight states to participate, and these state programs may target particular categories of beneficiaries, selected diagnoses or geographic regions of the state. The selected state programs will provide one payment for both hospital and physician services provided to Medicaid patients for certain episodes of inpatient care.
Disproportionate Share Hospital Payments
In addition to making payments for services provided directly to beneficiaries, Medicare makes additional payments to hospitals that treat a disproportionately large number of low-income patients (Medicaid and Medicare patients eligible to receive Supplemental Security Income). DSH payments are determined annually based on certain statistical information required by HHS and are calculated as a percentage addition to MS-DRG payments.
Under the Health Reform Law, beginning in federal fiscal year 2014, Medicare DSH payments are reduced to 25% of the amount they otherwise would have been absent the law. The remaining 75% of the amount that would otherwise be paid under Medicare DSH is effectively pooled, and this pool will be reduced further each year by a formula that reflects reductions in the national level of uninsured who are under 65 years of age. Thus, the greater the level of coverage for the uninsured nationally, the more the Medicare DSH payment pool will be reduced. Each DSH hospital is then to be paid, out of the reduced DSH payment pool, an amount allocated based upon its estimated cost of providing uncompensated care. In 2013, CMS issued final rules to implement these reductions.
Hospitals that provide care to a disproportionately high number of low-income patients may receive Medicaid DSH payments. The federal government distributes federal Medicaid DSH funds to each state based on a statutory formula. The states then distribute the DSH funding among qualifying hospitals. States have broad discretion to define which hospitals qualify for Medicaid DSH payments and the amount of such payments. The Health Reform Law, as modified by the Bipartisan Budget Act of 2013, provides for reductions to the Medicaid DSH hospital program in federal fiscal years 2016 through 2020 by the following amounts: 2016 ($1.2 billion); 2017 ($1.8 billion); 2018 ($5 billion); 2019 ($5.6 billion); and 2020 ($4 billion). The Jobs Creation Act, the
13
American Taxpayer Relief Act of 2012 and the Bipartisan Budget Act of 2013 provide for additional Medicaid DSH reductions in federal fiscal years 2021, 2022 and 2023 estimated at $4.1 billion, $4.2 billion and $4.3 billion, respectively. CMS has issued a final rule establishing the methodology for allocating the cuts among the states based on the volume of Medicaid inpatients and levels of uncompensated care in each state. States largely retain the ability to manage the reduced allotments and to allocate these cuts among providers within the state.
TRICARE
TRICARE is the Department of Defenses health care program for members of the armed forces. For inpatient services, TRICARE reimburses hospitals based on a DRG system modeled on the Medicare inpatient PPS. For outpatient services, TRICARE reimburses hospitals based on a PPS that is similar to that utilized for services furnished to Medicare beneficiaries.
Annual Cost Reports
All hospitals participating in the Medicare, Medicaid and TRICARE programs, whether paid on a reasonable cost basis or under a PPS, are required to meet certain financial reporting requirements. Federal and, where applicable, state regulations require the submission of annual cost reports covering the revenues, costs and expenses associated with the services provided by each hospital to Medicare beneficiaries and Medicaid recipients.
Annual cost reports required under the Medicare and Medicaid programs are subject to routine audits, which may result in adjustments to the amounts ultimately determined to be due to us under these reimbursement programs. These audits often require several years to reach the final determination of amounts due to or from us under these programs. Providers also have rights of appeal, and it is common to contest issues raised in audits of cost reports.
Managed Care and Other Discounted Plans
Most of our hospitals offer discounts from established charges to certain large group purchasers of health care services, including managed care plans and private insurance companies. Admissions reimbursed by commercial managed care and other insurers were 30%, 30%, and 31% of our total admissions for the years ended December 31, 2013, 2012 and 2011, respectively. Managed care contracts are typically negotiated for terms between one and three years. While we generally received contracted annual average increases that were expected to yield 4% to 6% from managed care payers during 2013, there can be no assurance that we will continue to receive increases in the future. It is not clear what impact, if any, the increased obligations on managed care payers and other health plans imposed by the Health Reform Law will have on our ability to negotiate reimbursement increases or the impact of plans offered through the Exchanges on us.
Uninsured and Self-Pay Patients
A high percentage of our uninsured patients are initially admitted through our emergency rooms. For the year ended December 31, 2013, approximately 83% of our admissions of uninsured patients occurred through our emergency rooms. The Emergency Medical Treatment and Labor Act (EMTALA) requires any hospital that participates in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospitals emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize that condition or make an appropriate transfer of the individual to a facility that can handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individuals ability to pay for treatment. The Health Reform Law requires health plans to reimburse hospitals for emergency services provided to enrollees without prior authorization and without regard to whether a participating provider contract is in place. Further, the Health Reform Law contains provisions that seek to decrease the number of uninsured individuals, including requirements and incentives, most of which
14
became effective on January 1, 2014, for individuals to obtain, and large employers to provide, insurance coverage. These mandates may reduce the financial impact of screening for and stabilizing emergency medical conditions. However, many factors are unknown regarding the impact of the Health Reform Law, including how many previously uninsured individuals will obtain coverage as a result of the law, the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsured individuals, any changes to the payer mix and any increases in plan structures that result in higher patient responsibility amounts.
Electronic Health Record Incentives
The American Recovery and Reinvestment Act of 2009 (ARRA) provides for Medicare and Medicaid incentive payments for eligible hospitals and for eligible professionals that adopt and meaningfully use certified electronic health record (EHR) technology and provides for penalties for eligible hospitals and eligible professionals that do not adopt and meaningfully use EHR technology. Through December 2013, approximately $19 billion in incentive payments have been made through the Medicare and Medicaid EHR incentive programs to eligible hospitals and eligible professionals.
Under the Medicare incentive program, eligible hospitals that demonstrate meaningful use will receive incentive payments for up to four fiscal years. The Medicare incentive payment amount is the product of three factors: (1) an initial amount comprised of a base amount of $2,000,000, plus $200 for each acute care inpatient discharge, beginning with a hospitals 1,150th discharge of the applicable year and ending with a hospitals 23,000th discharge of the applicable year; (2) the Medicare share, which is the sum of Medicare Part A and Part C acute care inpatient-bed-days divided by the product of the total acute care inpatient-bed-days and a charity care factor; and (3) a transition factor applicable to the payment year. In order to maximize their incentive payments, acute care hospitals must have begun participating in the incentive program by federal fiscal year 2013. Beginning in federal fiscal year 2015, acute care hospitals that have failed to demonstrate meaningful use of certified EHR technology in an applicable prior reporting period will receive reduced market basket updates under inpatient PPS.
Eligible professionals who demonstrate meaningful use are entitled to incentive payments for up to five payment years in an amount equal to 75% of their estimated Medicare allowed charges for covered professional services furnished during the relevant calendar year, subject to an annual limit. Eligible professionals must have begun participating in the incentive payment program by calendar year 2012 in order to maximize their incentive payments and must participate by calendar year 2014 in order to receive any incentive payments. Beginning in calendar year 2015, eligible professionals who have failed to demonstrate meaningful use of certified EHR technology in an applicable prior reporting period will face Medicare payment reductions.
The Medicaid EHR incentive program is voluntary for states to implement. For participating states, the Medicaid EHR incentive program provides incentive payments for acute care hospitals and eligible professionals that meet certain volume percentages of Medicaid patients, as well as childrens hospitals. Providers may only participate in a single states Medicaid EHR incentive program. Eligible professionals can only participate in either the Medicaid incentive program or the Medicare incentive program and can change this election only one time. Eligible hospitals may participate in both the Medicare and Medicaid incentive programs.
To qualify for incentive payments under the Medicaid program, providers must either adopt, implement, upgrade or demonstrate meaningful use of certified EHR technology during their first participation year or successfully demonstrate meaningful use of certified EHR technology in subsequent participation years. Payments may be received for up to six participation years. For hospitals, the aggregate Medicaid EHR incentive amount is the product of two factors: (1) the overall EHR amount, which is comprised of a base amount of $2,000,000 plus a discharge-related amount, multiplied by the Medicare share (which is set at one by statute) multiplied by a transition factor, and (2) the Medicaid share, which is the estimated Medicaid inpatient-bed days plus estimated Medicaid managed care inpatient bed-days, divided by the product of the estimated total inpatient bed-days and a charity care factor. Under the Medicaid incentive program, eligible professionals may
15
receive payments based on their EHR costs, up to a total amount of $63,750, or for pediatricians, $42,500. There is no penalty for hospitals or professionals under Medicaid for failing to meet EHR meaningful use requirements.
Hospital Utilization
We believe the most important factors relating to the overall utilization of a hospital are the quality and market position of the hospital and the number and quality of physicians and other health care professionals providing patient care within the facility. Generally, we believe the ability of a hospital to be a market leader is determined by its breadth of services, level of technology, quality and condition of the facilities, emphasis on quality of care and convenience for patients and physicians. Other factors that impact utilization include the growth in local population, local economic conditions and market penetration of managed care programs.
The following table sets forth certain operating statistics for our health care facilities. Health care facility operations are subject to certain seasonal fluctuations, including decreases in patient utilization during holiday periods and increases in the cold weather months. The data set forth in this table includes only those facilities that are consolidated for financial reporting purposes.
Years Ended December 31, | ||||||||||||||||||||
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Number of hospitals at end of period(a) |
165 | 162 | 163 | 156 | 155 | |||||||||||||||
Number of freestanding outpatient surgery centers at end of period(b) |
115 | 112 | 108 | 97 | 97 | |||||||||||||||
Number of licensed beds at end of period(c) |
42,896 | 41,804 | 41,594 | 38,827 | 38,839 | |||||||||||||||
Weighted average licensed beds(d) |
42,133 | 41,795 | 39,735 | 38,655 | 38,825 | |||||||||||||||
Admissions(e) |
1,744,100 | 1,740,700 | 1,620,400 | 1,554,400 | 1,556,500 | |||||||||||||||
Equivalent admissions(f) |
2,844,700 | 2,832,100 | 2,595,900 | 2,468,400 | 2,439,000 | |||||||||||||||
Average length of stay (days)(g) |
4.8 | 4.7 | 4.8 | 4.8 | 4.8 | |||||||||||||||
Average daily census(h) |
22,853 | 22,521 | 21,123 | 20,523 | 20,650 | |||||||||||||||
Occupancy rate(i) |
54 | % | 54 | % | 53 | % | 53 | % | 53 | % | ||||||||||
Emergency room visits(j) |
6,968,100 | 6,912,000 | 6,143,500 | 5,706,200 | 5,593,500 | |||||||||||||||
Outpatient surgeries(k) |
881,900 | 873,600 | 799,200 | 783,600 | 794,600 | |||||||||||||||
Inpatient surgeries(l) |
508,800 | 506,500 | 484,500 | 487,100 | 494,500 |
(a) |
Excludes eight facilities in 2010 and 2009 that were not consolidated (accounted for using the equity method) for financial reporting purposes. |
(b) |
Excludes one facility in 2012 and 2011, nine facilities in 2010 and eight facilities in 2009 that were not consolidated (accounted for using the equity method) for financial reporting purposes. |
(c) |
Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency. |
(d) |
Represents the average number of licensed beds, weighted based on periods owned. |
(e) |
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. |
(f) |
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. |
(g) |
Represents the average number of days admitted patients stay in our hospitals. |
(h) |
Represents the average number of patients in our hospital beds each day. |
(i) |
Represents the percentage of hospital licensed beds occupied by patients. Both average daily census and occupancy rate provide measures of the utilization of inpatient rooms. |
16
(j) |
Represents the number of patients treated in our emergency rooms. |
(k) |
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. |
(l) |
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. |
Competition
Generally, other hospitals in the local communities served by most of our hospitals provide services similar to those offered by our hospitals. Additionally, in recent years the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers and diagnostic and imaging centers in the geographic areas in which we operate has increased significantly. As a result, most of our hospitals operate in a highly competitive environment. In some cases, competing hospitals are more established than our hospitals. Some competing facilities are physician-owned or are owned by tax-supported government agencies and many others are owned by not-for-profit entities that may be supported by endowments, charitable contributions and/or tax revenues and are exempt from sales, property and income taxes. Such exemptions and support are not available to our hospitals and may provide the tax-supported or not-for-profit entities an advantage in funding capital expenditures. In certain localities there are large teaching hospitals that provide highly specialized facilities, equipment and services that may not be available at most of our hospitals. We also face competition from specialty hospitals and from both our own and unaffiliated freestanding ASCs for market share in certain high margin services.
Psychiatric hospitals frequently attract patients from areas outside their immediate locale and, therefore, our psychiatric hospitals compete with both local and regional hospitals, including the psychiatric units of general, acute care hospitals.
Our strategies are designed to ensure our hospitals are competitive. We believe our hospitals compete within local communities on the basis of many factors, including the quality of care, ability to attract and retain quality physicians, skilled clinical personnel and other health care professionals, location, breadth of services, technology offered, quality and condition of the facilities and prices charged. The Health Reform Law requires hospitals to publish annually a list of their standard charges for items and services. We have increased our focus on operating outpatient services with improved accessibility and more convenient service for patients, and increased predictability and efficiency for physicians.
Two of the most significant factors to the competitive position of a hospital are the number and quality of physicians affiliated with or employed by the hospital. Although physicians may at any time terminate their relationship with a hospital we operate, our hospitals seek to retain physicians with varied specialties on the hospitals medical staffs and to attract other qualified physicians. We believe physicians refer patients to a hospital on the basis of the quality and scope of services it renders to patients and physicians, the quality of physicians on the medical staff, the location of the hospital and the quality of the hospitals facilities, equipment and employees. Accordingly, we strive to maintain and provide quality facilities, equipment, employees and services for physicians and patients. Our hospitals face competition from competitors that are implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models.
Another major factor in the competitive position of our hospitals is our ability to negotiate service contracts with purchasers of group health care services. Managed care plans attempt to direct and control the use of hospital services and obtain discounts from hospitals established gross charges. In addition, employers and traditional health insurers continue to attempt to contain costs through negotiations with hospitals for managed care programs and discounts from established gross charges. Generally, hospitals compete for service contracts with group health care services purchasers on the basis of price, market reputation, geographic location, quality and range of services, quality of the medical staff and convenience. Our future success will depend, in part, on
17
our ability to retain and renew our managed care contracts and enter into new managed care contracts on favorable terms. Other health care providers may impact our ability to enter into managed care contracts or negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us. The trend toward consolidation among non-government payers tends to increase their bargaining power over fee structures. In addition, as various provisions of the Health Reform Law are implemented, including the Exchanges and limitations on rescissions of coverage and pre-existing condition exclusions, non-government payers may increasingly demand reduced fees or be unwilling to negotiate reimbursement increases. Most of the plans offered through the Exchanges provide for narrow networks that restrict the number of participating providers or tiered networks that impose significantly higher cost sharing obligations on patients that obtain services from providers in a disfavored tier. The importance of obtaining contracts with managed care organizations varies from community to community, depending on the market strength of such organizations.
State certificate of need (CON) laws, which place limitations on a health care facilitys ability to expand services and facilities, make capital expenditures and otherwise make changes in operations, may also have the effect of restricting competition. We currently operate health care facilities in a number of states with CON laws or that require other types of approvals for the establishment or expansion of certain facility types or services. Before issuing a CON or other approval, these states consider the need for additional or expanded health care facilities or services. In those states that do not require state approval or that set relatively high levels of expenditures before they become reviewable by state authorities, competition in the form of new services, facilities and capital spending is more prevalent. See Item 1, Business Regulation and Other Factors.
We and the health care industry as a whole face the challenge of continuing to provide quality patient care while dealing with rising costs and strong competition for patients. Changes in medical technology, existing and future legislation, regulations and interpretations and managed care contracting for provider services by private and government payers remain ongoing challenges.
Admissions, average lengths of stay and reimbursement amounts continue to be negatively affected by payer-required pre-admission authorization, utilization review and payer pressure to maximize outpatient and alternative health care delivery services for less acutely ill patients. The Health Reform Law expanded the use of prepayment review by Medicare contractors by eliminating statutory restrictions on their use. Increased competition, admission constraints and payer pressures are expected to continue. To meet these challenges, we intend to expand and update our facilities or acquire or construct new facilities where appropriate, to enhance the provision of a comprehensive array of outpatient services, offer market competitive pricing to private payer groups, upgrade facilities and equipment and offer new or expanded programs and services.
Regulation and Other Factors
Licensure, Certification and Accreditation
Health care facility construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting and compliance with building codes and environmental protection laws. Facilities are subject to periodic inspection by governmental and other authorities to assure continued compliance with the various standards necessary for licensing and accreditation. We believe our health care facilities are properly licensed under applicable state laws. Each of our acute care hospitals located in the United States is eligible to participate in Medicare and Medicaid programs and is accredited by The Joint Commission with the exception of three hospitals acquired in the third quarter of 2013 which are accredited by Det Norske Veritas. If any facility were to lose its Medicare or Medicaid certification, the facility would be unable to receive reimbursement from federal health care programs. If any facility were to lose accreditation, the facility would be subject to state surveys, potentially be subject to increased scrutiny by CMS and likely lose payment from non-government payers. Management believes our facilities are in substantial compliance with current applicable federal, state, local and independent review body regulations and standards.
18
The requirements for licensure, certification and accreditation are subject to change and, in order to remain qualified, it may become necessary for us to make changes in our facilities, equipment, personnel and services. The requirements for licensure, certification and accreditation also include notification or approval in the event of the transfer or change of ownership or certain other changes. Failure to provide required notifications or obtain necessary approvals in these circumstances can result in the inability to complete an acquisition or change of ownership, loss of licensure, lapses in reimbursement or other penalties.
Certificates of Need
In some states where we operate hospitals and other health care facilities, the construction or expansion of health care facilities, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory agencies under a CON program. Such laws generally require the reviewing state agency to determine the public need for additional or expanded health care facilities and services. Failure to provide required notifications or obtain necessary state approvals can result in the inability to expand facilities, complete an acquisition or change ownership or other penalties.
State Rate Review
Some states have adopted legislation mandating rate or budget review for hospitals or have adopted taxes on hospital revenues, assessments or licensure fees to fund indigent health care within the state. In the aggregate, indigent tax provisions have not materially, adversely affected our results of operations. Although we do not currently operate facilities in states that mandate rate or budget reviews, we cannot predict whether we will operate in such states in the future, or whether the states in which we currently operate may adopt legislation mandating such reviews.
Federal Health Care Program Regulations
Participation in any federal health care program, including the Medicare and Medicaid programs, is heavily regulated by statute and regulation. If a hospital fails to substantially comply with the numerous conditions of participation in the Medicare and Medicaid programs or performs certain prohibited acts, the hospitals participation in the federal health care programs may be terminated, or civil and/or criminal penalties may be imposed.
Anti-kickback Statute
A section of the Social Security Act known as the Anti-kickback Statute prohibits providers and others from directly or indirectly soliciting, receiving, offering or paying any remuneration with the intent of generating referrals or orders for services or items covered by a federal health care program. Courts have interpreted this statute broadly and held that there is a violation of the Anti-kickback Statute if just one purpose of the remuneration is to generate referrals, even if there are other lawful purposes. Furthermore, the Health Reform Law provides that knowledge of the law or the intent to violate the law is not required. Violations of the Anti-kickback Statute may be punished by a criminal fine of up to $25,000 for each violation or imprisonment, civil money penalties of up to $50,000 per violation and damages of up to three times the total amount of the remuneration and/or exclusion from participation in federal health care programs, including Medicare and Medicaid. The Health Reform Law provides that submission of a claim for services or items generated in violation of the Anti-kickback Statute constitutes a false or fraudulent claim and may be subject to additional penalties under the federal False Claims Act (FCA).
The HHS Office of Inspector General (OIG), among other regulatory agencies, is responsible for identifying and eliminating fraud, abuse and waste. The OIG carries out this mission through a nationwide program of audits, investigations and inspections. The OIG provides guidance to the industry through various methods including advisory opinions and Special Fraud Alerts. These Special Fraud Alerts do not have the
19
force of law, but identify features of arrangements or transactions that the government believes may cause the arrangements or transactions to violate the Anti-kickback Statute or other federal health care laws. The OIG has identified several incentive arrangements that constitute suspect practices, including: (a) payment of any incentive by a hospital each time a physician refers a patient to the hospital, (b) the use of free or significantly discounted office space or equipment in facilities usually located close to the hospital, (c) provision of free or significantly discounted billing, nursing or other staff services, (d) free training for a physicians office staff in areas such as management techniques and laboratory techniques, (e) guarantees which provide, if the physicians income fails to reach a predetermined level, the hospital will pay any portion of the remainder, (f) low-interest or interest-free loans, or loans which may be forgiven if a physician refers patients to the hospital, (g) payment of the costs of a physicians travel and expenses for conferences, (h) coverage on the hospitals group health insurance plans at an inappropriately low cost to the physician, (i) payment for services (which may include consultations at the hospital) which require few, if any, substantive duties by the physician, (j) purchasing goods or services from physicians at prices in excess of their fair market value, (k) rental of space in physician offices, at other than fair market value terms, by persons or entities to which physicians refer, and (l) physician-owned entities (frequently referred to as physician-owned distributorships or PODs) that derive revenue from selling, or arranging for the sale of, implantable medical devices ordered by their physician-owners for use on procedures that physician-owners perform on their own patients at hospitals or ASCs. The OIG has encouraged persons having information about hospitals who offer the above types of incentives to physicians to report such information to the OIG.
The OIG also issues Special Advisory Bulletins as a means of providing guidance to health care providers. These bulletins, along with the Special Fraud Alerts, have focused on certain arrangements that could be subject to heightened scrutiny by government enforcement authorities, including: (a) contractual joint venture arrangements and other joint venture arrangements between those in a position to refer business, such as physicians, and those providing items or services for which Medicare or Medicaid pays, and (b) certain gainsharing arrangements, i.e., the practice of giving physicians a share of any reduction in a hospitals costs for patient care attributable in part to the physicians efforts.
In addition to issuing Special Fraud Alerts and Special Advisory Bulletins, the OIG issues compliance program guidance for certain types of health care providers. The OIG guidance identifies a number of risk areas under federal fraud and abuse statutes and regulations. These areas of risk include compensation arrangements with physicians, recruitment arrangements with physicians and joint venture relationships with physicians.
As authorized by Congress, the OIG has published safe harbor regulations that outline categories of activities deemed protected from prosecution under the Anti-kickback Statute. Currently, there are statutory exceptions and safe harbors for various activities, including the following: certain investment interests, space rental, equipment rental, practitioner recruitment, personnel services and management contracts, sale of practice, referral services, warranties, discounts, employees, group purchasing organizations, waiver of beneficiary coinsurance and deductible amounts, managed care arrangements, obstetrical malpractice insurance subsidies, investments in group practices, freestanding surgery centers, ambulance replenishing, and referral agreements for specialty services.
The fact that conduct or a business arrangement does not fall within a safe harbor or is identified in a Special Fraud Alert, Special Advisory Bulletin or other guidance does not necessarily render the conduct or business arrangement illegal under the Anti-kickback Statute. However, such conduct and business arrangements may lead to increased scrutiny by government enforcement authorities.
We have a variety of financial relationships with physicians and others who either refer or influence the referral of patients to our hospitals, other health care facilities and employed physicians, including employment contracts, leases, medical director agreements and professional service agreements. We also have similar relationships with physicians and facilities to which patients are referred from our facilities and other providers. In addition, we provide financial incentives, including minimum revenue guarantees, to recruit physicians into
20
the communities served by our hospitals. While we endeavor to comply with the applicable safe harbors, certain of our current arrangements, including joint ventures and financial relationships with physicians and other referral sources and persons and entities to which we refer patients, do not qualify for safe harbor protection.
Although we believe our arrangements with physicians and other referral sources and referral recipients have been structured to comply with current law and available interpretations, there can be no assurance regulatory authorities enforcing these laws will determine these financial arrangements comply with the Anti-kickback Statute or other applicable laws. An adverse determination could subject us to liabilities under the Social Security Act and other laws, including criminal penalties, civil monetary penalties and exclusion from participation in Medicare, Medicaid or other federal health care programs.
Stark Law
The Social Security Act also includes a provision commonly known as the Stark Law. The Stark Law prohibits physicians from referring Medicare and Medicaid patients to entities with which they or any of their immediate family members have a financial relationship, if these entities provide certain designated health services reimbursable by Medicare or Medicaid unless an exception applies. The Stark Law also prohibits entities that provide designated health services reimbursable by Medicare and Medicaid from billing the Medicare and Medicaid programs for any items or services that result from a prohibited referral and requires the entities to refund amounts received for items or services provided pursuant to the prohibited referral on a timely basis. Designated health services include inpatient and outpatient hospital services, clinical laboratory services and radiology services. Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to $15,000 per claim submitted and exclusion from the federal health care programs. Failure to refund amounts received as a result of a prohibited referral on a timely basis may constitute a false or fraudulent claim and may result in civil penalties and additional penalties under the FCA. The statute also provides for a penalty of up to $100,000 for a circumvention scheme. There are exceptions to the self-referral prohibition for many of the customary financial arrangements between physicians and providers, including employment contracts, leases and recruitment agreements. Unlike safe harbors under the Anti-kickback Statute with which compliance is voluntary, a financial relationship must comply with every requirement of a Stark Law exception or the arrangement is in violation of the Stark Law. Although there is an exception for a physicians ownership interest in an entire hospital, the Health Reform Law prohibits physician-owned hospitals established after December 31, 2010 from billing for Medicare or Medicaid patients referred by their physician owners. As a result, the law effectively prevents the formation of new physician-owned hospitals that participate in Medicare or Medicaid. While the Health Reform Law grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to expand services.
Through a series of rulemakings, CMS has issued final regulations implementing the Stark Law. While these regulations were intended to clarify the requirements of the exceptions to the Stark Law, it is unclear how the government will interpret many of these exceptions for enforcement purposes. Further, we do not always have the benefit of significant regulatory or judicial interpretation of the Stark Law and its implementing regulations. We attempt to structure our relationships to meet an exception to the Stark Law, but the regulations implementing the exceptions are detailed and complex, and we cannot assure that every relationship complies fully with the Stark Law.
Similar State Laws
Many states in which we operate also have laws similar to the Anti-kickback Statute that prohibit payments to physicians for patient referrals and laws similar to the Stark Law that prohibit certain self-referrals. The scope of these state laws is broad because they can often apply regardless of the source of payment for care, and little precedent exists for their interpretation or enforcement. These statutes typically provide for criminal and civil penalties, as well as loss of facility licensure.
21
Other Fraud and Abuse Provisions
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) broadened the scope of certain fraud and abuse laws by adding several criminal provisions for health care fraud offenses that apply to all health benefit programs. The Social Security Act also imposes criminal and civil penalties for making false claims and statements to Medicare and Medicaid. False claims include, but are not limited to, billing for services not rendered or for misrepresenting actual services rendered in order to obtain higher reimbursement, billing for unnecessary goods and services and cost report fraud. Federal enforcement officials have the ability to exclude from Medicare and Medicaid any investors, officers and managing employees associated with business entities that have committed health care fraud, even if the officer or managing employee had no knowledge of the fraud. Criminal and civil penalties may be imposed for a number of other prohibited activities, including failure to return known overpayments, certain gainsharing arrangements, billing Medicare amounts that are substantially in excess of a providers usual charges, offering remuneration to influence a Medicare or Medicaid beneficiarys selection of a health care provider, contracting with an individual or entity known to be excluded from a federal health care program, making or accepting a payment to induce a physician to reduce or limit services, and soliciting or receiving any remuneration in return for referring an individual for an item or service payable by a federal health care program. Like the Anti-kickback Statute, these provisions are very broad. Under the Health Reform Law, civil penalties may be imposed for the failure to report and return an overpayment within 60 days of identifying the overpayment or by the date a corresponding cost report is due, whichever is later. To avoid liability, providers must, among other things, carefully and accurately code claims for reimbursement, promptly return overpayments and accurately prepare cost reports.
Some of these provisions, including the federal Civil Monetary Penalty Law, require a lower burden of proof than other fraud and abuse laws, including the Anti-kickback Statute. Civil monetary penalties that may be imposed under the federal Civil Monetary Penalty Law range from $10,000 to $50,000 per act, and in some cases may result in penalties of up to three times the remuneration offered, paid, solicited or received. In addition, a violator may be subject to exclusion from federal and state health care programs. Federal and state governments increasingly use the federal Civil Monetary Penalty Law, especially where they believe they cannot meet the higher burden of proof requirements under the Anti-kickback Statute. Further, individuals can receive up to $1,000 for providing information on Medicare fraud and abuse that leads to the recovery of at least $100 of Medicare funds under the Medicare Integrity Program.
The Federal False Claims Act and Similar State Laws
The qui tam , or whistleblower, provisions of the FCA allow private individuals to bring actions on behalf of the government alleging that the defendant has defrauded the federal government. Further, the government may use the FCA to prosecute Medicare and other government program fraud in areas such as coding errors, billing for services not provided and submitting false cost reports. The Health Reform Law expanded the scope of the FCA to cover payments in connection with the Exchanges created under the Health Reform Law, if those payments include any federal funds. When a private party brings a qui tam action under the FCA, the defendant is not made aware of the lawsuit until the government commences its own investigation or makes a determination whether it will intervene. If a defendant is determined by a court of law to be liable under the FCA, the defendant may be required to pay three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. There are many potential bases for liability under the FCA, including knowingly and improperly avoiding repayment of an overpayment received from the government and the knowing failure to report and return an overpayment in a timely manner. Liability often arises when an entity knowingly submits a false claim for reimbursement to the federal government. The FCA defines the term knowingly broadly. Though simple negligence will not give rise to liability under the FCA, submitting a claim with reckless disregard to its truth or falsity constitutes a knowing submission under the FCA and, therefore, may create liability.
The Health Reform Law provides that submission of claims for services or items generated in violation of the Anti-kickback Statute constitutes a false or fraudulent claim under the FCA. In some cases, whistleblowers
22
and the federal government have taken the position, and some courts have held, that providers who allegedly have violated other statutes, such as the Stark Law, have thereby submitted false claims under the FCA. Every entity that receives at least $5 million annually in Medicaid payments must have written policies for all employees, contractors or agents, providing detailed information about false claims, false statements and whistleblower protections under certain federal laws, including the FCA, and similar state laws. In addition, federal law provides an incentive to states to enact false claims laws comparable to the FCA. A number of states in which we operate have adopted their own false claims provisions as well as their own whistleblower provisions under which a private party may file a civil lawsuit in state court. We have adopted and distributed policies pertaining to the FCA and relevant state laws.
HIPAA Administrative Simplification and Privacy and Security Requirements
The Administrative Simplification Provisions of HIPAA and implementing regulations require the use of uniform electronic data transmission standards for certain health care claims and payment transactions submitted or received electronically. These provisions are intended to encourage electronic commerce in the health care industry. As required by the Health Reform Law, HHS is in the process of adopting standards for additional electronic transactions and establishing operating rules to promote uniformity in the implementation of each standardized electronic transaction. In addition, HIPAA requires that each provider use a National Provider Identifier. CMS has also published a final rule requiring the use of updated standard code sets for certain diagnoses and procedures known as ICD-10 code sets. Implementing the ICD-10 code sets will require significant administrative changes. Use of the ICD-10 code sets is required beginning October 1, 2014.
The privacy and security regulations promulgated pursuant to HIPAA extensively regulate the use and disclosure of individually identifiable health information, known as protected health information, and require covered entities, including health plans and most health care providers, to implement administrative, physical and technical safeguards to protect the security of such information. ARRA broadened the scope of the HIPAA privacy and security regulations. In addition, ARRA extends the application of certain provisions of the security and privacy regulations to business associates (entities that handle protected health information on behalf of covered entities) and subjects business associates to civil and criminal penalties for violation of the regulations. HHS has implemented many of these ARRA provisions through a final rule that became effective March 26, 2013. The final rule subjects business associates and their subcontractors to direct liability under the HIPAA privacy and security regulations and revises the requirements for agreements with business associates. In addition, a covered entity may be subject to penalties as a result of a business associate violating HIPAA, if the business associate is found to be an agent of the covered entity. Compliance with the final rule was required beginning September 23, 2013, except that existing business associate agreements may qualify for an extended compliance date of September 23, 2014.
Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay but not to exceed 60 days of discovery of the breach by a covered entity or its agents. Notification must also be made to HHS and, in certain situations involving large breaches, to the media. HHS is required to publish on its website a list of all covered entities that report a breach involving more than 500 individuals. In its 2013 final rule, HHS modified this breach notification requirement by creating a presumption that all non-permitted uses or disclosures of unsecured protected health information are breaches unless the covered entity or business associate establishes that there is a low probability the information has been compromised. Various state laws and regulations may also require us to notify affected individuals in the event of a data breach involving individually identifiable information.
Violations of the HIPAA privacy and security regulations may result in civil and criminal penalties, and ARRA has strengthened the enforcement provisions of HIPAA, including requiring HHS to perform compliance audits, which may result in increased enforcement activity. For example, ARRA broadens the applicability of the criminal penalty provisions to employees of covered entities and requires HHS to impose penalties for violations resulting from willful neglect. In addition, ARRA authorizes state attorneys general to bring civil actions seeking
23
either injunction or damages in response to violations of HIPAA privacy and security regulations that threaten the privacy of state residents. ARRA also significantly increases the amount of the civil penalties, with penalties of up to $50,000 per violation for a maximum civil penalty of $1,500,000 in a calendar year for violations of the same requirement. The 2013 final rule implemented many of the ARRA enforcement requirements. In the rule, HHS removed the requirement that HHS attempt to resolve HIPAA violations through informal means, such as allowing a covered entity to implement a corrective action plan, prior to imposing penalties. Instead, HHS has the discretion to resolve violations by moving directly to impose monetary penalties. We enforce a HIPAA compliance plan, which we believe complies with the HIPAA privacy and security regulations and under which a HIPAA compliance group monitors our compliance. The HIPAA privacy regulations and security regulations have and will continue to impose significant costs on our facilities in order to comply with these standards.
There are numerous other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns. Our facilities remain subject to any federal or state privacy-related laws that are more restrictive than the privacy regulations issued under HIPAA. These laws vary and could impose additional penalties. For example, the Federal Trade Commission uses its consumer protection authority to initiate enforcement actions in response to data breaches.
EMTALA
All of our hospitals in the United States are subject to EMTALA. This federal law requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every individual who presents to the hospitals emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individuals ability to pay for treatment. There are severe penalties under EMTALA if a hospital fails to screen or appropriately stabilize or transfer an individual or if the hospital delays appropriate treatment in order to first inquire about the individuals ability to pay. Penalties for violations of EMTALA include civil monetary penalties and exclusion from participation in the Medicare program. In addition, an injured individual, the individuals family or a medical facility that suffers a financial loss as a direct result of a hospitals violation of the law can bring a civil suit against the hospital.
The government broadly interprets EMTALA to cover situations in which individuals do not actually present to a hospitals emergency room, but present for emergency examination or treatment to the hospitals campus, generally, or to a hospital-based clinic that treats emergency medical conditions or are transported in a hospital-owned ambulance, subject to certain exceptions. At least one court has interpreted the law also to apply to a hospital that has been notified of a patients pending arrival in a non-hospital owned ambulance. EMTALA does not generally apply to individuals admitted for inpatient services. The government has expressed its intent to investigate and enforce EMTALA violations actively in the future. We believe our hospitals operate in substantial compliance with EMTALA.
Corporate Practice of Medicine/Fee Splitting
Some of the states in which we operate have laws prohibiting corporations and other entities from employing physicians, practicing medicine for a profit and making certain direct and indirect payments or fee-splitting arrangements between health care providers designed to induce or encourage the referral of patients to, or the recommendation of, particular providers for medical products and services. Possible sanctions for violation of these restrictions include loss of license and civil and criminal penalties. In addition, agreements between the corporation and the physician may be considered void and unenforceable. These statutes vary from state to state, are often vague and have seldom been interpreted by the courts or regulatory agencies.
Health Care Industry Investigations
Significant media and public attention has focused in recent years on the hospital industry. This media and public attention, changes in government personnel and other factors have led to increased scrutiny of the health care industry. Except as may be disclosed in our SEC filings, we are not aware of any material investigations of
24
the Company under federal or state health care laws or regulations. It is possible that governmental entities could initiate investigations or litigation in the future at facilities we operate and that such matters could result in significant penalties, as well as adverse publicity. It is also possible that our executives and managers could be included in governmental investigations or litigation or named as defendants in private litigation.
Our substantial Medicare, Medicaid and other governmental billings result in heightened scrutiny of our operations. We continue to monitor all aspects of our business and have developed a comprehensive ethics and compliance program that is designed to meet or exceed applicable federal guidelines and industry standards. Because the law in this area is complex and constantly evolving, governmental investigations or litigation may result in interpretations that are inconsistent with our or industry practices.
In public statements surrounding current investigations, governmental authorities have taken positions on a number of issues, including some for which little official interpretation previously has been available, that appear to be inconsistent with practices that have been common within the industry and that previously have not been challenged in this manner. In some instances, government investigations that have in the past been conducted under the civil provisions of federal law may now be conducted as criminal investigations.
Both federal and state government agencies have increased their focus on and coordination of civil and criminal enforcement efforts in the health care area. The OIG and the Department of Justice (DOJ) have, from time to time, established national enforcement initiatives, targeting all hospital providers that focus on specific billing practices or other suspected areas of abuse. The Health Reform Law includes additional federal funding of $350 million over 10 years to fight health care fraud, waste and abuse, including $40 million in federal fiscal year 2014. In addition, governmental agencies and their agents, such as MACs, fiscal intermediaries and carriers, may conduct audits of our health care operations. Private payers may conduct similar post-payment audits, and we also perform internal audits and monitoring.
In addition to national enforcement initiatives, federal and state investigations have addressed a wide variety of routine health care operations such as: cost reporting and billing practices, including for Medicare outliers; financial arrangements with referral sources; physician recruitment activities; physician joint ventures; and hospital charges and collection practices for self-pay patients. We engage in many of these routine health care operations and other activities that could be the subject of governmental investigations or inquiries. For example, we have significant Medicare and Medicaid billings, numerous financial arrangements with physicians who are referral sources to our hospitals, and joint venture arrangements involving physician investors. Certain of our individual facilities have received, and other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Any additional investigations of the Company, our executives or managers could result in significant liabilities or penalties to us, as well as adverse publicity.
Health Care Reform
The Health Reform Law changes how health care services are covered, delivered and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid DSH payments, and the establishment of programs that tie reimbursement to quality and integration. In addition, the law reforms certain aspects of health insurance, expands existing efforts to tie Medicare and Medicaid payments to performance and quality, and contains provisions intended to strengthen fraud and abuse enforcement. Most of the provisions of the Health Reform Law that seek to decrease the number of uninsured became effective January 1, 2014.
Expanded Coverage
Based on the CBOs February 2014 projection, by 2022, the Health Reform Law will expand coverage to 25 million additional individuals. This increased coverage will occur through a combination of public program expansion and private sector health insurance and other reforms.
25
Medicaid Expansion
The primary public program coverage expansion is occurring through changes in Medicaid, and to a lesser extent, expansion of the Childrens Health Insurance Program (CHIP). The most significant changes expand the categories of individuals eligible for Medicaid coverage and permit individuals with relatively higher incomes to qualify. Although the Health Reform Law requires, as of January 1, 2014, all state Medicaid programs to provide, and the federal government to subsidize, Medicaid coverage to virtually all adults under 65 years old with incomes at or under 133% of the federal poverty level (FPL), states may opt out of the expansion without losing existing federal Medicaid funding. For states that expand Medicaid coverage, the Health Reform Law also requires those states to apply a 5% income disregard to the Medicaid eligibility standard, so that Medicaid eligibility will effectively be extended to those with incomes up to 138% of the FPL. States that choose not to implement the Medicaid expansion will forego funding established by the Health Reform Law to cover most of the expansion costs. A number of states, including Texas and Florida, have chosen not to participate in the expanded Medicaid program, but these states could choose to implement the expansion at a later date. For states that do not participate, the maximum income level required for individuals and families to qualify for Medicaid varies widely from state to state. According to the CBOs February 2014 projection, the new eligibility requirements will expand Medicaid and CHIP coverage by an estimated 13 million persons nationwide by 2022.
As Medicaid is a joint federal and state program, the federal government provides states with matching funds in a defined percentage, known as the federal medical assistance percentage (FMAP). Beginning in 2014, states will receive an enhanced FMAP for the individuals enrolled in Medicaid pursuant to the Health Reform Law. The FMAP percentage is as follows: 100% for calendar years 2014 through 2016; 95% for 2017; 94% in 2018; 93% in 2019; and 90% in 2020 and thereafter. CMS has indicated that states that only partially expand their Medicaid programs will not receive an enhanced FMAP.
The Health Reform Law also provides that the federal government will subsidize states that create non-Medicaid plans for residents whose incomes are greater than 133% of the FPL but do not exceed 200% of the FPL. Approved state plans will be eligible to receive federal funding. The amount of that funding per individual will be equal to 95% of subsidies that would have been provided for that individual had he or she enrolled in a health plan offered through one of the Exchanges, as discussed below.
Historically, states often have attempted to reduce Medicaid spending by limiting benefits and tightening Medicaid eligibility requirements. However, the Health Reform Law requires states to at least maintain Medicaid eligibility standards established prior to the enactment of the law for children until October 1, 2019.
Private Sector Expansion
The expansion of health coverage through the private sector as a result of the Health Reform Law occurs through new requirements applicable to health insurers, employers and individuals. Health insurers must keep their annual nonmedical costs lower than 15% of premium revenue for the group market and lower than 20% in the small group and individual markets or rebate to enrollees the amount spent in excess of the percentage. In addition, health insurers are not permitted to deny coverage to children based upon a pre-existing condition and must allow dependent care coverage for children up to 26 years old. As of January 1, 2014, health insurers are prohibited from imposing annual coverage limits, dropping coverage, excluding persons based upon pre-existing conditions or denying coverage for any individual who is willing to pay the premiums for such coverage.
Larger employers will be subject to new requirements and incentives to provide health insurance benefits to their full time employees. Employers with 50 or more employees that do not offer health insurance will be held subject to a penalty if an employee obtains government-subsidized coverage through an Exchange. The employer penalties will range from $2,000 to $3,000 per employee, subject to certain thresholds and conditions. This requirement was originally effective January 1, 2014, but has been delayed until January 1, 2015. For employers with 50 to 99 employees, this requirement has been further delayed until January 1, 2016.
26
The Health Reform Law uses various means to induce individuals who do not have health insurance to obtain coverage. Effective January 1, 2014, individuals are required to maintain health insurance for a minimum defined set of benefits or pay a tax penalty. The penalty in most cases is the greater of $95 or 1% of income in 2014, $325 or 2% of income in 2015, $695 or 2.5% of income in 2016, and indexed to a cost of living adjustment in subsequent years. The Internal Revenue Service (IRS), in consultation with HHS, is responsible for enforcing the tax penalty, although the Health Reform Law limits the availability of certain IRS enforcement mechanisms. In addition, for individuals and families below 400% of the FPL, the cost of obtaining health insurance through the Exchanges will be subsidized by the federal government. Those with lower incomes will be eligible to receive greater subsidies. It is anticipated that those at the lowest income levels will have the majority of their premiums subsidized by the federal government, in some cases in excess of 95% of the premium amount.
To facilitate the purchase of health insurance by individuals and small employers, the Health Reform Law mandated that each state establish or participate in an Exchange or default to a federally-operated Exchange by January 1, 2014. Based on CBO estimates issued in May 2013, approximately 24 million individuals will obtain their health insurance coverage through an Exchange by 2022. This amount will include individuals who were previously uninsured and individuals who have switched from their prior insurance coverage to a plan obtained through an Exchange. The Health Reform Law requires that the Exchanges be designed to make the process of evaluating, comparing and acquiring coverage simple for consumers. For example, each states Exchange must maintain an internet website through which consumers may access health plan ratings that are assigned by the state based on quality and price, view governmental health program eligibility requirements and calculate the actual cost of health coverage. Health insurers participating in an Exchange must offer a set of minimum benefits, as defined by HHS, and may offer more benefits. Health insurers must offer at least two, and up to five, levels of plans that vary by the percentage of medical expenses that must be paid by the enrollee. These levels are referred to as platinum, gold, silver, bronze and catastrophic plans, with gold and silver being the two mandatory levels of plans. Each level of plan must require the enrollee to share the following percentages of medical expenses up to the deductible/copayment limit: platinum, 10%; gold, 20%; silver, 30%; bronze, 40%; and catastrophic, 100%. Health insurers may establish varying deductible/copayment levels, up to the statutory maximum ($6,250 for 2013 and $6,350 in 2014 for an individual, subject to increases in future years). The health insurers must cover 100% of the amount of medical expenses in excess of the deductible/copayment limit. For example, an individual making 100% to 200% of the FPL will have copayments and deductibles reduced to about one-third of the amount payable by those with the same plan with incomes at or above 400% of the FPL.
Public Program Spending
The Health Reform Law provides for Medicare, Medicaid and other federal health care program spending reductions between 2010 and 2019. In March 2010, CMS estimated Medicare fee-for-service reductions from 2010 to 2019 would be $233 billion and the Medicare and Medicaid DSH reductions would be an additional $64 billion. In July 2012, the CBO estimated that from 2013 to 2022, the Health Reform Law reductions would include $415 billion in Medicare fee-for-service market basket and productivity reimbursement reductions, the majority of which will come from hospitals. The CBO estimate included an additional $56 billion in reductions in Medicare and Medicaid DSH funding.
Payments for Hospitals and Ambulatory Surgery Centers
Inpatient Market Basket and Productivity Adjustment . Under the Medicare program, hospitals receive reimbursement under a PPS for general, acute care hospital inpatient services. CMS establishes fixed PPS payment amounts per inpatient discharge based on the patients assigned MS-DRG. These MS-DRG rates are updated each federal fiscal year, which begins October 1, using a market basket index that takes into account inflation experienced by hospitals and other entities outside the health care industry in purchasing goods and services.
27
The Health Reform Law provides for three types of annual reductions in the market basket. The first is a general reduction of a specified percentage each federal fiscal year that began in 2010 and extends through 2019. The remaining reductions are as follows: 2014 (0.3%); 2015 (0.2%); 2016 (0.2%); 2017 (0.75%); 2018 (0.75%); and 2019 (0.75%).
The second type of reduction to the market basket is a productivity adjustment that was implemented by HHS beginning in federal fiscal year 2012. The amount of that reduction is the projected nationwide productivity gains over the preceding 10 years. To determine the projection, HHS uses the BLS 10-year moving average of changes in specified economy-wide productivity. For federal fiscal year 2014, CMS has announced a negative 0.5% productivity adjustment to the market basket. In 2010, CMS estimated that the combined market basket and productivity adjustments would reduce Medicare payments under the inpatient PPS by $112.6 billion from 2010 to 2019.
The third type of reduction is in connection with the value-based purchasing program discussed in more detail below. For each federal fiscal year, CMS will reduce the inpatient PPS payment amount for all discharges by the following: 1.25% for 2014; 1.5% for 2015; 1.75% for 2016; and 2% for 2017 and subsequent years. For each federal fiscal year, the total amount collected from these reductions will be pooled and used to fund payments to hospitals that satisfy certain quality metrics. While some or all of these reductions may be recovered if a hospital satisfies these quality metrics, the recovery amounts may be delayed.
If the aggregate of the three market basket reductions described above is more than the annual market basket adjustments made to account for inflation, there will be a reduction in the MS-DRG rates paid to hospitals.
Quality-Based Payment Adjustments and Reductions for Inpatient Services . The Health Reform Law establishes or expands three provisions to promote value-based purchasing and to link payments to quality and efficiency. First, in federal fiscal year 2013, HHS was directed to implement a value-based purchasing program for inpatient hospital services. This program rewards hospitals that meet certain quality performance standards established by HHS. The Health Reform Law provides HHS considerable discretion over the value-based purchasing program. Under the value-based purchasing program for hospital inpatient services, CMS will distribute an estimated $1.1 billion in federal fiscal year 2014 to hospitals based on their overall performance on a set of quality measures that have been linked to improved clinical processes of care and patient satisfaction. Hospitals are scored based on a weighted average of patient experience scores using the Hospital Consumer Assessment of Healthcare Providers and Systems survey and certain clinical measures. In federal fiscal year 2014, there are 17 measures by which hospitals will be scored. CMS scores each hospital based on achievement (relative to other hospitals) and improvement ranges (relative to the hospitals own past performance) for each applicable measure. Because the Health Reform Law provides that the pool will be fully distributed, hospitals that meet or exceed the quality performance standards set by HHS will receive greater reimbursement under the value-based purchasing program than they would have otherwise. Hospitals that do not achieve the necessary quality performance will receive reduced Medicare inpatient hospital payments. CMS published the value-based incentive payment adjustment factor for each hospital for federal fiscal year 2014 discharges on November 14, 2013.
Second, beginning in federal fiscal year 2013 and continuing in each federal fiscal year, inpatient payments are reduced if a hospital experiences excess readmissions within the 30-day period from the date of discharge for heart attack, heart failure, pneumonia or other conditions that may be designated by CMS. Hospitals with what CMS defines as excess readmissions for these conditions will receive reduced payments for all inpatient discharges, not just discharges relating to the conditions subject to the excess readmission standard. The amount by which payments will be reduced if a hospital experiences excess readmissions is determined by comparison of the hospitals readmission performance to a risk-adjusted national average and is subject to a cap established by CMS. Each hospitals performance is publicly reported by CMS.
Third, reimbursement will be reduced based on a facilitys HAC rates. A HAC is a condition that is acquired by a patient while admitted as an inpatient in a hospital, such as a surgical site infection. Beginning in federal
28
fiscal year 2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous year will receive a 1% reduction in their total inpatient operating Medicare payments. In addition, the Health Reform Law prohibits the use of federal funds under the Medicaid program to reimburse providers for medical services provided to treat HACs. CMS implemented this prohibition for services with dates beginning July 1, 2012. States may add additional provider-preventable conditions to the list of HACs for which Medicaid reimbursement will not be allowed.
Outpatient Market Basket and Productivity Adjustment . Hospital outpatient services paid under PPS are classified into APCs. The APC payment rates are updated each calendar year based on the market basket. The first two market basket changes outlined above the general reduction and the productivity adjustment apply to outpatient services as well as inpatient services, although these are applied on a calendar year basis. The percentage changes specified in the Health Reform Law summarized above as the general reduction for inpatients e.g., 0.2% in 2015 are the same for outpatients.
Medicare and Medicaid DSH Payments . The Medicare DSH program provides for additional payments to hospitals that treat a disproportionate share of low-income patients. Under the Health Reform Law, beginning in federal fiscal year 2014, Medicare DSH payments are reduced to 25% of the amount they otherwise would have been absent the law. The remaining 75% of the amount that would otherwise be paid under Medicare DSH is effectively pooled, and this pool will be reduced further each year by a formula that reflects reductions in the national level of uninsured who are under 65 years of age. In other words, the greater the level of coverage for the uninsured nationally, the more the Medicare DSH payment pool will be reduced. Each hospital is then paid, out of the reduced DSH payment pool, an amount allocated based upon its level of uncompensated care, which was not the basis for DSH payments prior to implementation of the Health Reform Law. In 2013, CMS issued final rules to implement these reductions.
Hospitals that provide care to a disproportionately high number of low-income patients may receive Medicaid DSH payments. The federal government distributes federal Medicaid DSH funds to each state based on a statutory formula. The states then distribute the DSH funding among qualifying hospitals. Although federal Medicaid law defines some level of hospitals that must receive Medicaid DSH funding, states have broad discretion to define additional hospitals that also may qualify for Medicaid DSH payments and the amount of such payments. The Health Reform Law, as modified by the Bipartisan Budget Act of 2013, provides for reductions to the Medicaid DSH hospital program in federal fiscal years 2016 through 2020 by the following amounts: 2016 ($1.2 billion); 2017 ($1.8 billion); 2018 ($5 billion); 2019 ($5.6 billion); and 2020 ($4 billion). The Jobs Creation Act and the American Taxpayer Relief Act of 2012 and the Bipartisan Budget Act of 2013 provide for additional Medicaid DSH reductions in federal fiscal years 2021, 2022 and 2023 estimated at $4.1 billion, $4.2 billion and $4.3 billion, respectively. CMS has issued a final rule establishing the methodology for allocating the cuts among the states based on the volume of Medicaid inpatients and levels of uncompensated care in each state. States largely retain the ability to manage the reduced allotments and to allocate these cuts among providers within the state.
ACOs . Pursuant to the Health Reform Law, HHS established the MSSP, which seeks to promote accountability and coordination of care through the creation of ACOs. The MSSP allows certain providers and suppliers (including hospitals, physicians and other designated professionals) to voluntarily form ACOs and work together along with other ACO participants to invest in infrastructure and redesign delivery processes to achieve high quality and efficient delivery of services. The program is intended to produce savings as a result of improved quality and operational efficiency. ACOs that achieve quality performance standards established by HHS will be eligible to share in a portion of the amounts saved by the Medicare program. Participants may choose between two different ACO tracks, the first of which allows ACOs to share only in the savings under the MSSP. The second track requires ACOs to share in any savings and losses under the MSSP but offers ACOs a greater share of any savings realized under the MSSP. As authorized by the Health Reform Law, certain waivers are available from fraud and abuse laws for ACOs. CMS has approved over 300 ACOs to participate in the MSSP.
29
Bundled Payment Pilot Programs . The Health Reform Law created the Center for Medicare & Medicaid Innovation with responsibility for establishing demonstration projects and other initiatives in order to identify, develop, test and encourage the adoption of new methods of delivering and paying for health care that create savings under the Medicare and Medicaid programs while improving quality of care. One initiative announced by the Center for Medicare & Medicaid Innovation is a voluntary bundled payment initiative involving over 400 participants that will link payments to participating providers for services provided during an episode of care. In addition, as required by the Health Reform Law, HHS established a five-year, voluntary, national pilot program on payment bundling for Medicare services. Under the program, organizations may enter into payment arrangements that include financial and performance accountability for episodes of care, and these models are intended to lead to higher quality, more coordinated care at a lower cost to the Medicare program. Participating providers agree to receive one payment for services provided to Medicare patients for certain medical conditions or episodes of care. HHS has discretion to determine how the program will function, including what medical conditions will be included in the program and the amount of the payment for each condition. The Health Reform Law also provides for a five-year bundled payment pilot program for Medicaid services, but CMS has not yet implemented this program. HHS may select up to eight states to participate based on the potential to lower costs under the Medicaid program while improving care. State programs may target particular categories of beneficiaries, selected diagnoses or geographic regions of the state. The selected state programs will provide one payment for both hospital and physician services provided to Medicaid patients for certain episodes of inpatient care. For both pilot programs, HHS will determine the relationship between the programs and restrictions in certain existing laws, including the Civil Monetary Penalty Law, the Anti-kickback Statute, the Stark Law and the HIPAA privacy, security and transaction standard requirements. However, the Health Reform Law does not authorize HHS to waive other laws that may impact the ability of hospitals and other eligible participants to participate in the pilot programs, such as antitrust laws.
Ambulatory Surgery Centers . The Health Reform Law reduces reimbursement for ASCs through a productivity adjustment to the market basket similar to the productivity adjustment for inpatient and outpatient hospital services. In addition, CMS has established a quality reporting program for ASCs under which ASCs that fail to report on required quality measures will receive a 2% reduction in reimbursement beginning with the calendar year 2014 payment determination.
Medicare Managed Care (Medicare Advantage or MA) . Under the MA program, the federal government contracts with private health plans to provide inpatient and outpatient benefits to beneficiaries who enroll in such plans. In 2013, approximately 14.4 million Medicare beneficiaries elected to enroll in MA plans. Effective in 2014, the Health Reform Law requires MA plans to keep annual administrative costs lower than 15% of annual premium revenue. The Health Reform Law reduces, over a three year period starting in 2012, premium payments to the MA plans such that CMS managed care per capita premium payments are, on average, equal to traditional Medicare. In addition, the Health Reform Law implements fee payment adjustments based on service benchmarks and quality ratings. As a result of these changes, payments to MA plans are estimated to be reduced by $138 to $145 billion between 2010 and 2019. These reductions to MA plan premium payments paid by the federal government may cause some plans to raise beneficiary premiums or limit benefits, which in turn might cause some Medicare beneficiaries to terminate their MA coverage and enroll in traditional Medicare.
Physician-Owned Hospital Limitations
Over the last decade, we have faced competition from hospitals that have physician ownership. The Health Reform Law prohibits newly created physician-owned hospitals from billing for Medicare patients referred by their physician owners. As a result, the law effectively prevents the formation of new physician-owned hospitals that participate in Medicare and Medicaid after December 31, 2010. While the law grandfathers existing physician-owned hospitals, it does not allow these hospitals to increase the percentage of physician ownership and significantly restricts their ability to expand services.
30
Program Integrity and Fraud and Abuse
The Health Reform Law makes several significant changes to health care fraud and abuse laws, provides additional enforcement tools to the government, increases cooperation between agencies by establishing mechanisms for the sharing of information and enhances criminal and administrative penalties for non-compliance. For example, the Health Reform Law: (1) provides $350 million in increased federal funding over 10 years to fight health care fraud, waste and abuse; (2) expands the scope of the RAC program to include MA plans and Medicaid; (3) authorizes HHS, in consultation with the OIG, to suspend Medicare and Medicaid payments to a provider of services or a supplier pending an investigation of a credible allegation of fraud; (4) provides Medicare contractors with additional flexibility to conduct random prepayment reviews; and (5) tightens up the rules for returning overpayments made by governmental health programs and expands FCA liability to include failure to timely repay identified overpayments.
Impact of Health Reform Law on the Company
The expansion of health insurance coverage under the Health Reform Law may result in an increase in the number of patients using our facilities who have either private or public program coverage. In addition, the Health Reform Law provides for initiatives that create possible sources of additional revenue, such as ACOs. However, any positive effects of the Health Reform Law could be offset, and the Company could be significantly impacted, by reductions to the Medicare and Medicaid programs. Substantial uncertainty remains regarding the net effect of the Health Reform Law on the Company because the resolution of a number of material factors remains unclear, including the following:
|
how many states will ultimately implement the Medicaid expansion provisions and under what terms; |
|
the potential for and impact of further delays in or complications related to implementation of the Health Reform Law (for example, there were significant problems during the initial implementation of the Exchanges that negatively impacted the ability of individuals to enroll in Medicaid and to purchase health insurance); |
|
the possibility of enactment of additional federal or state health care reforms and possible changes to the Health Reform Law; |
|
our ability to participate in health insurance plans offered through the Exchanges and the terms of our participation as well as treatment of out of network claims; |
|
how many previously uninsured individuals will obtain coverage as a result of the Health Reform Law (based on the CBOs February 2014 estimates, by 2022, the Health Reform Law will expand coverage to 25 million additional individuals); |
|
what percentage of the newly insured patients will be covered under the Medicaid program and what percentage will be covered by private health insurers; |
|
the extent to which states will enroll new Medicaid participants in managed care programs; |
|
the pace at which insurance coverage expands, including the pace of different types of coverage expansion; |
|
the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsured individuals; |
|
the rate paid to hospitals by private payers for newly covered individuals and individuals with existing coverage, including those covered through the Exchanges and those who might be covered under the Medicaid program; |
|
the rate paid by state governments under the Medicaid program for newly covered individuals; |
|
the effect of the value-based purchasing provisions of the Health Reform Law on our hospitals revenues and the effects of other quality programs; |
31
|
the percentage of individuals in the Exchanges who select the high deductible plans, since health insurers offering those kinds of products have traditionally sought to pay lower rates to hospitals; |
|
the amount of overall revenues the Company will generate from Medicare and Medicaid business when the reductions are implemented (42% of our revenues in 2013 were from Medicare and Medicaid); |
|
the size of the Health Reform Laws annual productivity adjustment to the market basket; |
|
the amount of the Medicare DSH reductions and the allocation of the Medicaid DSH reductions to our hospitals; |
|
how successful ACOs will be at coordinating care and reducing costs or whether they will decrease reimbursement; |
|
the scope and nature of potential changes to Medicare reimbursement methods, such as an emphasis on bundling payments or coordination of care programs; |
|
whether the Companys revenues from Medicaid supplemental programs developed through a federally approved waiver program (Waiver Program), will be adversely affected because there may be reductions in available state and local government funding for the programs; and |
|
the impact of efforts to repeal or revise the Health Reform Law and remaining or new federal lawsuits challenging its constitutionality. |
General Economic and Demographic Factors
The health care industry is impacted by the overall United States economy. Budget deficits at federal, state and local government entities have had a negative impact on spending for many health and human service programs, including Medicare, Medicaid and similar programs, which represent significant payer sources for our hospitals. The federal deficit, the growing magnitude of Medicare expenditures and the aging of the United States population will continue to place pressure on federal health care programs. Other risks we face during periods of economic weakness and high unemployment include potential declines in the population covered under managed care agreements, increased patient decisions to postpone or cancel elective and nonemergency health care procedures, increases in the uninsured and underinsured populations, increased adoption of health plan structures that shift financial responsibility to patients and further difficulties in our collecting patient receivables for copayment and deductible amounts. The Health Reform Law seeks to decrease over time the number of uninsured individuals, but it is difficult to predict the full impact of the Health Reform Law.
Compliance Program
We maintain a comprehensive ethics and compliance program that is designed to meet or exceed applicable federal guidelines and industry standards. The program is intended to monitor and raise awareness of various regulatory issues among employees and to emphasize the importance of complying with governmental laws and regulations. As part of the ethics and compliance program, we provide annual ethics and compliance training to our employees and encourage all employees to report any violations to their supervisor, an ethics and compliance officer or a toll-free telephone ethics line. The Health Reform Law requires providers to implement core elements of compliance program criteria to be established by HHS, on a timeline to be established by HHS, as a condition of enrollment in the Medicare or Medicaid programs, and we may have to modify our compliance programs to comply with these new criteria.
Antitrust Laws
The federal government and most states have enacted antitrust laws that prohibit certain types of conduct deemed to be anti-competitive. These laws prohibit price fixing, market allocation, bid-rigging, concerted refusal to deal, market monopolization, price discrimination, tying arrangements, acquisitions of competitors and other
32
practices that have, or may have, an adverse effect on competition. Violations of federal or state antitrust laws can result in various sanctions, including criminal and civil penalties. Antitrust enforcement in the health care industry is currently a priority of the Federal Trade Commission and the DOJ. We believe we are in compliance with such federal and state laws, but courts or regulatory authorities may reach a determination in the future that could adversely affect our operations.
Environmental Matters
We are subject to various federal, state and local statutes and ordinances regulating the discharge of materials into the environment. We do not believe that we will be required to expend any material amounts in order to comply with these laws and regulations.
Insurance
As is typical in the health care industry, we are subject to claims and legal actions by patients in the ordinary course of business. Subject to a $5 million per occurrence self-insured retention, our facilities are insured by our 100% owned insurance subsidiary for losses up to $50 million per occurrence. The insurance subsidiary has obtained reinsurance for professional liability risks generally above a retention level of $15 million per occurrence. We also maintain professional liability insurance with unrelated commercial carriers for losses in excess of amounts insured by our insurance subsidiary.
We purchase, from unrelated insurance companies, coverage for directors and officers liability and property loss in amounts we believe are adequate. The directors and officers liability coverage includes a $5 million corporate deductible. In addition, we will continue to purchase coverage for our directors and officers on an ongoing basis. The property coverage includes varying deductibles depending on the cause of the property damage. These deductibles range from $500,000 per claim up to 5% of the affected property values for certain flood and wind and earthquake related incidents.
Employees and Medical Staffs
At December 31, 2013, we had approximately 215,000 employees, including approximately 53,000 part-time employees. References herein to employees refer to employees of our affiliates. We are subject to various state and federal laws that regulate wages, hours, benefits and other terms and conditions relating to employment. At December 31, 2013, certain employees at 38 of our domestic hospitals are represented by various labor unions. While no elections are expected in 2014, it is possible additional hospitals may unionize in the future. We consider our employee relations to be good and have not experienced work stoppages that have materially, adversely affected our business or results of operations. Our hospitals, like most hospitals, have experienced rising labor costs. In some markets, nurse and medical support personnel availability has become a significant operating issue to health care providers. To address this challenge, we have implemented several initiatives to improve retention, recruiting, compensation programs and productivity.
Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who are not employees of our hospitals. Some physicians provide services in our hospitals under contracts, which generally describe a term of service, provide and establish the duties and obligations of such physicians, require the maintenance of certain performance criteria and fix compensation for such services. Any licensed physician may apply to be accepted to the medical staff of any of our hospitals, but the hospitals medical staff and the appropriate governing board of the hospital, in accordance with established credentialing criteria, must approve acceptance to the staff. Members of the medical staffs of our hospitals often also serve on the medical staffs of other hospitals and may terminate their affiliation with one of our hospitals at any time.
We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensive temporary or contract personnel. As a result, our labor costs
33
could increase. We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. Certain proposed changes in federal labor laws and the National Labor Relations Boards (the NLRB) modification of its election procedures could increase the likelihood of employee unionization attempts. To the extent a significant portion of our employee base unionizes, our costs could increase materially. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse-staffing ratios already in place. State-mandated nurse-staffing ratios could significantly affect labor costs, and have an adverse impact on revenues if we are required to limit patient admissions in order to meet the required ratios.
Executive Officers of the Registrant
As of January 31, 2014, our executive officers were as follows:
Name |
Age |
Position(s) |
||||
Richard M. Bracken |
61 |
Chairman of the Board |
||||
R. Milton Johnson |
57 |
Chief Executive Officer, President and Director |
||||
David G. Anderson |
66 |
Senior Vice President Finance and Treasurer |
||||
Victor L. Campbell |
67 |
Senior Vice President |
||||
Jana J. Davis |
55 |
Senior Vice President Corporate Affairs |
||||
Jon M. Foster |
52 |
President American Group |
||||
Charles J. Hall |
60 |
President National Group |
||||
Samuel N. Hazen |
53 |
President Operations |
||||
A. Bruce Moore, Jr. |
53 |
President Service Line and Operations Integration |
||||
P. Martin Paslick |
54 |
Senior Vice President and Chief Information Officer |
||||
Jonathan B. Perlin, M.D. |
52 |
President Clinical Services Group and Chief Medical Officer |
||||
William B. Rutherford |
50 |
Chief Financial Officer and Executive Vice President |
||||
Joseph A. Sowell, III |
57 |
Senior Vice President and Chief Development Officer |
||||
Joseph N. Steakley |
59 |
Senior Vice President Internal Audit Services |
||||
John M. Steele |
58 |
Senior Vice President Human Resources |
||||
Donald W. Stinnett |
57 |
Senior Vice President and Controller |
||||
Juan Vallarino |
53 |
Senior Vice President Employer and Payer Engagement |
||||
Robert A. Waterman |
60 |
Senior Vice President, General Counsel and Chief Labor Relations Officer |
||||
Alan R. Yuspeh |
64 |
Senior Vice President and Chief Ethics and Compliance Officer |
Richard M. Bracken has served as Chairman of the Board since December 2009. Mr. Bracken served as Chief Executive Officer from January 2009 through December 2013. Mr. Bracken served as President and Chief Executive Officer from January 2009 to December 2009. Mr. Bracken was appointed Chief Operating Officer in July 2001 and served as President and Chief Operating Officer from January 2002 to January 2009. Mr. Bracken served as President Western Group of the Company from August 1997 until July 2001. From January 1995 to August 1997, Mr. Bracken served as President of the Pacific Division of the Company. Prior to 1995, Mr. Bracken served in various hospital Chief Executive Officer and Administrator positions with HCA-Hospital Corporation of America.
R. Milton Johnson has served as Chief Executive Officer and President since January 1, 2014. Prior to that time, Mr. Johnson had served as President and Chief Financial Officer of the Company since February 2011 and was appointed as a director in December 2009. Mr. Johnson served as Executive Vice President and Chief Financial Officer from July 2004 to February 2011 and as Senior Vice President and Controller of the Company from July 1999 until July 2004. Mr. Johnson served as Vice President and Controller of the Company from November 1998 to July 1999. Prior to that time, Mr. Johnson served as Vice President Tax of the Company from April 1995 to October 1998. Prior to that time, Mr. Johnson served as Director of Tax for Healthtrust, Inc. The Hospital Company from September 1987 to April 1995.
34
David G. Anderson has served as Senior Vice President Finance and Treasurer of the Company since July 1999. Mr. Anderson served as Vice President Finance of the Company from September 1993 to July 1999 and was appointed to the additional position of Treasurer in November 1996. From March 1993 until September 1993, Mr. Anderson served as Vice President Finance and Treasurer of Galen Health Care, Inc. From July 1988 to March 1993, Mr. Anderson served as Vice President Finance and Treasurer of Humana Inc.
Victor L. Campbell has served as Senior Vice President of the Company since February 1994. Prior to that time, Mr. Campbell served as HCA-Hospital Corporation of Americas Vice President for Investor, Corporate and Government Relations. Mr. Campbell joined HCA-Hospital Corporation of America in 1972. Mr. Campbell serves on the board of the Nashville Health Care Council, as a member of the American Hospital Associations Presidents Forum, and serving as Chairman of the Federation of American Hospitals from March 2013 to March 2014.
Jana J. Davis was appointed Senior Vice President Corporate Affairs of the Company in December 2012. Prior to that time, she served as the Companys Senior Vice President Communications from February 2011 to December 2012 and Vice President of Communications from November 1997 to February 2011. Ms. Davis joined HCA in 1997 from Burson-Marsteller, where she was a Managing Director and served as Corporate Practice Chair for Latin American operations. Ms. Davis also held a number of Public Affairs positions in the George H.W. Bush and Reagan Administrations. Ms. Davis is an attorney and serves as chair of the Public Relations Committee for the Federation of American Hospitals.
Jon M. Foster was appointed President American Group in January 2013. Prior to that, Mr. Foster served as President Southwest Group from February 2011 to January 2013 and as Division President for the Central and West Texas Division from January 2006 to February 2011. Mr. Foster joined HCA in March 2001 as President and CEO of St. Davids HealthCare in Austin, Texas and served in that position until February 2011. Prior to joining the Company, Mr. Foster served in various executive capacities within the Baptist Health System, Knoxville, Tennessee and The Methodist Hospital System in Houston, Texas.
Charles J. Hall was appointed President National Group in February 2011. Prior to that, Mr. Hall served as President Eastern Group from October 2006 to February 2011. Mr. Hall had previously served the Company as President North Florida Division from April 2003 until October 2006, as President of the East Florida Division from January 1999 until April 2003, as a Market President in the East Florida Division from January 1998 until December 1998, as President of the South Florida Division from February 1996 until December 1997, and as President of the Southwest Florida Division from October 1994 until February 1996, and in various other capacities since 1987.
Samuel N. Hazen was appointed President Operations of the Company in February 2011. Mr. Hazen served as President Western Group from July 2001 to February 2011 and as Chief Financial Officer Western Group of the Company from August 1995 to July 2001. Mr. Hazen served as Chief Financial Officer North Texas Division of the Company from February 1994 to July 1995. Prior to that time, Mr. Hazen served in various hospital and regional Chief Financial Officer positions with Humana Inc. and Galen Health Care, Inc.
A. Bruce Moore, Jr. was appointed President Service Line and Operations Integration in February 2011. Prior to that, Mr. Moore had served as President Outpatient Services Group since January 2006. Mr. Moore served as Senior Vice President and as Chief Operating Officer Outpatient Services Group from July 2004 to January 2006 and as Senior Vice President Operations Administration from July 1999 until July 2004. Mr. Moore served as Vice President Operations Administration of the Company from September 1997 to July 1999, as Vice President Benefits from October 1996 to September 1997, and as Vice President Compensation from March 1995 until October 1996.
P. Martin Paslick was appointed Senior Vice President and Chief Information Officer of the Company in June 2012. Prior to that time, he served as Vice President and Chief Operating Officer of Information
35
Technology & Services from March 2010 to May 2012 and Vice President Information Technology & Services Field Operations from September 2006 to February 2010. From January 1998 to September 2006, he served in various Vice President roles in the Companys Information Technology & Services department. Mr. Paslick joined the Company in 1985.
Dr. Jonathan B. Perlin was appointed President Clinical Services Group and Chief Medical Officer in November 2007. Dr. Perlin had served as Chief Medical Officer and Senior Vice President Quality of the Company from August 2006 to November 2007. Prior to joining the Company, Dr. Perlin served as Under Secretary for Health in the U.S. Department of Veterans Affairs since April 2004. Dr. Perlin joined the Veterans Health Administration in November 1999 where he served in various capacities, including as Deputy Under Secretary for Health from July 2002 to April 2004, and as Chief Quality and Performance Officer from November 1999 to September 2002. He also is Chairman-elect for the American Hospital Association.
William B. Rutherford has served as the Companys Chief Financial Officer and Executive Vice President since January 2014. Mr. Rutherford previously served as Chief Operating Officer of the Companys Clinical and Physician Services Group since January 2011 and Chief Financial Officer of the Companys Outpatient Services Group from November 2008 to January 2011. Prior to that time, Mr. Rutherford was employed by Summit Consulting Group of Tennessee from July 2007 to November 2008 and was Chief Operating Officer of Psychiatric Solutions, Inc. from March 2006 to June 2007. Mr. Rutherford also previously served in various positions with the Company from 1986 to 2005, including Chief Financial Officer of what was then the Companys Eastern Group, Director of Internal Audit and Director of Operations Support.
Joseph A. Sowell, III was appointed as Senior Vice President and Chief Development Officer of the Company in December 2009. From 1987 to 1996 and again from 1999 to 2009, Mr. Sowell was a partner at the law firm of Waller Lansden Dortch & Davis where he specialized in the areas of health care law, mergers and acquisitions, joint ventures, private equity financing, tax law and general corporate law. He also co-managed the firms corporate and commercial transactions practice. From 1996 to 1999, Mr. Sowell served as the head of development, and later as the Chief Operating Officer of Arcon Healthcare.
Joseph N. Steakley has served as Senior Vice President Internal Audit Services of the Company since July 1999. Mr. Steakley served as Vice President Internal Audit Services from November 1997 to July 1999. From October 1989 until October 1997, Mr. Steakley was a partner with Ernst & Young LLP.
John M. Steele has served as Senior Vice President Human Resources of the Company since November 2003. Mr. Steele served as Vice President Compensation and Recruitment of the Company from November 1997 to October 2003. From March 1995 to November 1997, Mr. Steele served as Assistant Vice President Recruitment.
Donald W. Stinnett has served as Senior Vice President and Controller since December 2008. Mr. Stinnett served as Chief Financial Officer Eastern Group from October 2005 to December 2008 and Chief Financial Officer of the Far West Division from July 1999 to October 2005. Mr. Stinnett served as Chief Financial Officer and Vice President of Finance of Franciscan Health System of the Ohio Valley from 1995 until 1999, and served in various capacities with Franciscan Health System of Cincinnati and Providence Hospital in Cincinnati prior to that time.
Juan Vallarino was appointed Senior Vice President Employer and Payer Engagement (former Senior Vice President Strategic Pricing and Analytics) in February 2011. Prior to that time, Mr. Vallarino served as Vice President Strategic Pricing and Analytics since October 2006. Prior to that, Mr. Vallarino served as Vice President of Managed Care for the Western Group of the Company from January 1998 to October 2006.
Robert A. Waterman has served as Senior Vice President and General Counsel of the Company since November 1997 and Chief Labor Relations Officer since March 2009. Mr. Waterman served as a partner in the law firm of Latham & Watkins from September 1993 to October 1997; he was Chair of the firms health care group during 1997.
36
Alan R. Yuspeh has served as Senior Vice President and Chief Ethics and Compliance Officer of the Company since May 2007. From October 1997 to May 2007, Mr. Yuspeh served as Senior Vice President Ethics, Compliance and Corporate Responsibility of the Company. From September 1991 until October 1997, Mr. Yuspeh was a partner with the law firm of Howrey & Simon. As a part of his law practice, Mr. Yuspeh served from 1987 to 1997 as Coordinator of the Defense Industry Initiative on Business Ethics and Conduct.
If any of the events discussed in the following risk factors were to occur, our business, financial position, results of operations, cash flows or prospects could be materially, adversely affected. Additional risks and uncertainties not presently known, or currently deemed immaterial, may also constrain our business and operations.
Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations.
We are highly leveraged. As of December 31, 2013, our total indebtedness was $28.376 billion. As of December 31, 2013, we had availability of $1.942 billion under our senior secured revolving credit facility and $60 million under our asset-based revolving credit facility, after giving effect to letters of credit and borrowing base limitations. Our high degree of leverage could have important consequences, including:
|
increasing our vulnerability to downturns or adverse changes in general economic, industry or competitive conditions and adverse changes in government regulations; |
|
requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities; |
|
exposing us to the risk of increased interest rates as certain of our unhedged borrowings are at variable rates of interest; |
|
limiting our ability to make strategic acquisitions or causing us to make nonstrategic divestitures; |
|
limiting our ability to obtain additional financing for working capital, capital expenditures, product or service line development, debt service requirements, acquisitions and general corporate or other purposes; and |
|
limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged. |
We and our subsidiaries have the ability to incur additional indebtedness in the future, subject to the restrictions contained in our senior secured credit facilities and the indentures governing our outstanding notes. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.
We may not be able to generate sufficient cash to service all of our indebtedness and may not be able to refinance our indebtedness on favorable terms. If we are unable to do so, we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
37
In addition, we conduct our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us by dividend, debt repayment or otherwise. Our subsidiaries may not be able to, or may not be permitted to, make distributions to enable us to make payments in respect of our indebtedness. Each subsidiary is a distinct legal entity, and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. We may find it necessary or prudent to refinance our outstanding indebtedness with longer-maturity debt at a higher interest rate. Our ability to refinance our indebtedness on favorable terms, or at all, is directly affected by the current global economic and financial conditions. In addition, our ability to incur secured indebtedness (which would generally enable us to achieve better pricing than the incurrence of unsecured indebtedness) depends in part on the value of our assets, which depends, in turn, on the strength of our cash flows and results of operations, and on economic and market conditions and other factors.
If our cash flows and capital resources are insufficient to fund our debt service obligations or we are unable to refinance our indebtedness, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. If our operating results and available cash are insufficient to meet our debt service obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions, or the proceeds from the dispositions may not be adequate to meet any debt service obligations then due.
Our debt agreements contain restrictions that limit our flexibility in operating our business.
Our senior secured credit facilities and the indentures governing our outstanding notes contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our and certain of our subsidiaries ability to, among other things:
|
incur additional indebtedness or issue certain preferred shares; |
|
pay dividends on, repurchase or make distributions in respect of our capital stock or make other restricted payments; |
|
make certain investments; |
|
sell or transfer assets; |
|
create liens; |
|
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and |
|
enter into certain transactions with our affiliates. |
Under our asset-based revolving credit facility, when (and for as long as) the combined availability under our asset-based revolving credit facility and our senior secured revolving credit facility is less than a specified amount for a certain period of time or, if a payment or bankruptcy event of default has occurred and is continuing, funds deposited into any of our depository accounts will be transferred on a daily basis into a blocked account with the administrative agent and applied to prepay loans under the asset-based revolving credit facility and to cash collateralize letters of credit issued thereunder.
Under our senior secured credit facilities, we are required to satisfy and maintain specified financial ratios. Our ability to meet those financial ratios can be affected by events beyond our control, and there can be no assurance we will continue to meet those ratios. A breach of any of these covenants could result in a default under both the cash flow credit facility and the asset-based revolving credit facility. Upon the occurrence of an event of default under the senior secured credit facilities, the lenders thereunder could elect to declare all amounts outstanding under the senior secured credit facilities to be immediately due and payable and terminate
38
all commitments to extend further credit. If we were unable to repay those amounts, the lenders under the senior secured credit facilities could proceed against the collateral granted to them to secure such indebtedness. We have pledged a significant portion of our assets under our senior secured credit facilities and that collateral is also pledged as collateral under our first lien notes. If any of the lenders under the senior secured credit facilities accelerate the repayment of borrowings, there can be no assurance there will be sufficient assets to repay the senior secured credit facilities, the first lien notes and our other indebtedness.
Our hospitals face competition for patients from other hospitals and health care providers.
The health care business is highly competitive, and competition among hospitals and other health care providers for patients has intensified in recent years. Generally, other hospitals in the local communities we serve provide services similar to those offered by our hospitals. In addition, CMS publicizes on its Hospital Compare website performance data related to quality measures and data on patient satisfaction surveys hospitals submit in connection with their Medicare reimbursement. Federal law provides for the future expansion of the number of quality measures that must be reported. Additional quality measures and future trends toward clinical transparency may have an unanticipated impact on our competitive position and patient volumes. Further, the Health Reform Law requires every hospital to establish and update annually a public listing of the hospitals standard charges for items and services. If any of our hospitals achieve poor results (or results that are lower than our competitors) on these quality measures or on patient satisfaction surveys or if our standard charges are higher than our competitors, our patient volumes could decline.
In addition, the number of freestanding specialty hospitals, surgery centers, emergency departments, urgent care centers and diagnostic and imaging centers in the geographic areas in which we operate has increased significantly. As a result, most of our hospitals operate in a highly competitive environment. Some of the facilities that compete with our hospitals are physician-owned or are owned by governmental agencies or not-for-profit corporations supported by endowments, charitable contributions and/or tax revenues and can finance capital expenditures and operations on a tax-exempt basis. Our hospitals face competition from competitors that are implementing physician alignment strategies, such as employing physicians, acquiring physician practice groups and participating in ACOs or other clinical integration models. Our hospitals compete with specialty hospitals and with both our own and unaffiliated freestanding surgery centers for market share in certain high margin services and for quality physicians and personnel. If ambulatory surgery centers are better able to compete in this environment than our hospitals, our hospitals may experience a decline in patient volume, and we may experience a decrease in margin, even if those patients use our ambulatory surgery centers. In states that do not require a CON or other type of approval for the purchase, construction or expansion of health care facilities or services, competition in the form of new services, facilities and capital spending is more prevalent. Further, if our competitors are better able to attract patients, make capital expenditures and maintain modern and technologically upgraded facilities and equipment, recruit physicians, expand services or obtain favorable managed care contracts at their facilities than our hospitals and ambulatory surgery centers, we may experience an overall decline in patient volume. See Item 1, Business Competition.
The growth of uninsured and patient due accounts and a deterioration in the collectability of these accounts could adversely affect our results of operations.
The primary collection risks of our accounts receivable relate to the uninsured patient accounts and patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (exclusions, deductibles and copayments) remain outstanding. The provision for doubtful accounts relates primarily to amounts due directly from patients. Although Medicare reimburses hospitals for a portion of Medicare bad debts, the Jobs Creation Act reduced the reimbursement level from 70% of eligible bad debts to 65% beginning in federal fiscal year 2013.
The amount of the provision for doubtful accounts is based upon managements assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal and state
39
governmental and private employer health care coverage, the rate of growth in uninsured patient admissions and other collection indicators. At December 31, 2013, our allowance for doubtful accounts represented approximately 93% of the $5.927 billion patient due accounts receivable balance. The sum of the provision for doubtful accounts, uninsured discounts and charity care increased from $11.214 billion for 2011 to $13.841 billion for 2012 and to $15.565 billion for 2013.
Any increase in the amount or deterioration in the collectability of uninsured accounts receivable will adversely affect our cash flows and results of operations. Our facilities may experience growth in bad debts, uninsured discounts and charity care as a result of a number of factors, including conditions impacting the overall economy and continued high unemployment. The Health Reform Law seeks to decrease, over time, the number of uninsured individuals through reforms, most of which became effective January 1, 2014, but it is difficult to predict the full impact of the Health Reform Law. For example, a number of states have opted out of the Medicaid expansion. These states could choose to implement the expansion at a later date, and it is unclear how many states will ultimately decline to implement the Medicaid expansion provisions of the law. Further, the President has delayed until January 1, 2015, implementation of the employer mandate, which requires firms with 50 or more full-time employees to offer health insurance or pay fines. For employers with 50 to 99 employees, this mandate has been further delayed until January 1, 2016. Even after full implementation of the Health Reform Law, we may continue to experience bad debts and have to provide uninsured discounts and charity care for individuals residing in states that choose not to implement the Medicaid expansion, for undocumented aliens who are not permitted to enroll in an Exchange or government health care programs and for certain others who may not have insurance coverage. Further, implementation of the Health Reform Law could result in some patients terminating their current insurance plans in favor of lower cost Medicaid plans or other insurance coverage with lower reimbursement levels. We may also be adversely affected by the growth in patient responsibility accounts as a result of increases in the adoption of plan structures, including health savings accounts, narrow networks and tiered networks, which shift greater responsibility for care to individuals through greater exclusions and copayment and deductible amounts.
Changes in government health care programs may adversely affect our revenues.
A significant portion of our patient volume is derived from government health care programs, principally Medicare and Medicaid. Specifically, we derived 42% of our revenues from the Medicare and Medicaid programs in 2013. Changes in government health care programs may reduce the reimbursement we receive and could adversely affect our business and results of operations.
In recent years, legislative and regulatory changes have resulted in limitations on and, in some cases, reductions in levels of payments to health care providers for certain services under the Medicare program. The Budget Control Act of 2011 (the BCA) provides for new spending on program integrity initiatives intended to reduce fraud and abuse under the Medicare program. The BCA requires automatic spending reductions of $1.2 trillion for federal fiscal years 2013 through 2021, minus any deficit reductions enacted by Congress and debt service costs. However, the percentage reduction for Medicare may not be more than 2% for a fiscal year, with a uniform percentage reduction across all Medicare programs. The BCA spending reductions began on March 1, 2013, with CMS imposing a 2% reduction on Medicare claims beginning on April 1, 2013. These reductions have been extended by Congress through 2024. We are unable to predict what other deficit reduction initiatives may be proposed by Congress or whether Congress will attempt to suspend or restructure the automatic budget cuts. These reductions are in addition to reductions mandated by the Health Reform Law, which provides for material reductions in the growth of Medicare program spending, including reductions in Medicare market basket updates and Medicare DSH funding. Further, from time to time, CMS revises the reimbursement systems used to reimburse health care providers, including changes to the MS-DRG system and other payment systems, which may result in reduced Medicare payments. For example, CMS has established what is referred to as the two midnight rule, which provides that Medicare beneficiaries are only to be admitted as inpatients when there is a reasonable expectation that the hospital care is medically necessary and will be required across two midnights
40
absent unusual circumstances. Compliance with the rule became required for admissions beginning October 1, 2013 and will become subject to RAC audits beginning October 1, 2014.
Because most states must operate with balanced budgets and because the Medicaid program is often a states largest program, some states have enacted or may consider enacting legislation designed to reduce their Medicaid expenditures. Further, many states have also adopted, or are considering, legislation designed to reduce coverage, enroll Medicaid recipients in managed care programs and/or impose additional taxes on hospitals to help finance or expand the states Medicaid systems. The economic downturn increased the budgetary pressures on many states, and these budgetary pressures have resulted, and likely may continue to result, in decreased spending, or decreased spending growth, for Medicaid programs and the Childrens Health Insurance Program in many states. Some states that provide Medicaid supplemental payments are reviewing these programs or have filed waiver requests with CMS to replace these programs, which could result in Medicaid supplemental payments being reduced or eliminated. CMS approved a five-year Medicaid waiver in December 2011 that allows Texas to continue receiving supplemental Medicaid reimbursement while expanding its Medicaid managed care program. However, we cannot predict whether the Texas private supplemental Medicaid Waiver Program will continue or guarantee that revenues recognized from the program will not decrease.
The Health Reform Law made changes to the Medicaid program and will likely cause additional changes in the future. For example, the Health Reform Law provides for material reductions to Medicaid DSH funding. The Health Reform Law will result in increased state legislative and regulatory changes in order for states to comply with new federal mandates, such as the requirement to establish or participate in Exchanges and to participate in grants and other incentive opportunities. A number of states have opted out of the Medicaid expansion provisions of the Health Reform Law, but these states could choose to implement the expansion at a later date. It is unclear how many states will ultimately decline to implement the Medicaid expansion provisions of the law.
In some cases, commercial third-party payers rely on all or portions of Medicare payment systems to determine payment rates. Changes to government health care programs that reduce payments under these programs may negatively impact payments from commercial third-party payers.
Current or future health care reform and deficit reduction efforts, changes in laws or regulations regarding government health care programs, other changes in the administration of government health care programs and changes to commercial third-party payers in response to health care reform and other changes to government health care programs could have a material, adverse effect on our financial position and results of operations.
We are unable to predict the impact of the Health Reform Law, which represents a significant change to the health care industry.
The Health Reform Law changes how health care services are covered, delivered, and reimbursed through expanded coverage of uninsured individuals, reduced growth in Medicare program spending, reductions in Medicare and Medicaid DSH payments and the establishment and expansion of programs that tie reimbursement to quality and integration. In addition, the law reforms certain aspects of health insurance, contains provisions intended to strengthen fraud and abuse enforcement and establishes ACOs and bundled payment pilot programs. The expansion of health insurance coverage under the Health Reform Law may result in an increase in the number of patients using our facilities who have either private or public program coverage, and our facilities may benefit from Health Reform Law initiatives that create possible sources of additional revenue. However, any positive effects of the Health Reform Law could be offset and the Company could be significantly impacted by reductions to the Medicare and Medicaid programs. Substantial uncertainty remains regarding the net effect of the Health Reform Law on the Company because the resolution of a number of material factors remains unclear, including the following:
|
how many states will ultimately implement the Medicaid expansion provisions and under what terms; |
|
the potential for and impact of further delays in or complications related to implementation of the Health Reform Law (for example, there were significant problems during the initial implementation of |
41
the Exchanges that negatively impacted the ability of individuals to enroll in Medicaid and to purchase health insurance); |
|
the possibility of enactment of additional federal or state health care reforms and possible changes to the Health Reform Law; |
|
our ability to participate in health insurance plans offered through the Exchanges and the terms of our participation as well as treatment of out of network claims; |
|
how many previously uninsured individuals will obtain coverage as a result of the Health Reform Law (based on the CBOs February 2014 estimates, by 2022, the Health Reform Law will expand coverage to 25 million additional individuals); |
|
what percentage of the newly insured patients will be covered under the Medicaid program and what percentage will be covered by private health insurers; |
|
the extent to which states will enroll new Medicaid participants in managed care programs; |
|
the pace at which insurance coverage expands, including the pace of different types of coverage expansion; |
|
the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsured individuals; |
|
the rate paid to hospitals by private payers for newly covered individuals and individuals with existing coverage including those covered through the Exchanges, and those who might be covered under the Medicaid program; |
|
the rate paid by state governments under the Medicaid program for newly covered individuals; |
|
the effect of the value-based purchasing provisions of the Health Reform Law on our hospitals revenues and the effects of other quality programs; |
|
the percentage of individuals in the Exchanges who select the high deductible plans, since health insurers offering those kinds of products have traditionally sought to pay lower rates to hospitals; |
|
the amount of overall revenues the Company will generate from Medicare and Medicaid business when the reductions are implemented (42% of our revenues in 2013 were from Medicare and Medicaid); |
|
the size of the Health Reform Laws annual productivity adjustment to the market basket; |
|
the amount of the Medicare DSH reductions and the allocation of the Medicaid DSH reductions to our hospitals; |
|
how successful ACOs will be at coordinating care and reducing costs or whether they will decrease reimbursement; |
|
the scope and nature of potential changes to Medicare reimbursement methods, such as an emphasis on bundling payments or coordination of care programs; |
|
whether the Companys revenues from Medicaid supplemental programs developed through a federally approved waiver program (Waiver Program), will be adversely affected because there may be reductions in available state and local government funding for the programs; and |
|
the impact of efforts to repeal or revise the Health Reform Law and remaining or new federal lawsuits challenging its constitutionality. |
If we are unable to retain and negotiate favorable contracts with nongovernment payers, including managed care plans, our revenues may be reduced.
Our ability to obtain favorable contracts with nongovernment payers, including HMOs, PPOs and other managed care plans significantly affects the revenues and operating results of our facilities. Revenues derived
42
from these entities and other insurers (domestic only) accounted for 54.6%, 54.5% and 52.9% of our revenues for 2013, 2012 and 2011, respectively. Nongovernment payers, including managed care payers, continue to demand discounted fee structures, and the trend toward consolidation among nongovernment payers tends to increase their bargaining power over fee structures. As various provisions of the Health Reform Law are implemented, including the Exchanges, nongovernment payers increasingly may demand reduced fees and utilize plan structures such as narrow networks and tiered networks that limit beneficiary provider choices or impose significantly higher cost sharing obligations when care is obtained from providers in a disfavored tier. Other health care providers may impact our ability to enter into managed care contracts or negotiate increases in our reimbursement and other favorable terms and conditions. For example, some of our competitors may negotiate exclusivity provisions with managed care plans or otherwise restrict the ability of managed care companies to contract with us. Our future success will depend, in part, on our ability to retain and renew our managed care contracts and enter into new managed care contracts on terms favorable to us. It is not clear what impact, if any, the increased obligations on managed care payers and other payers imposed by the Health Reform Law will have on our ability to negotiate reimbursement increases and participate in plan networks on favorable terms. If we are unable to retain and negotiate favorable contracts with managed care plans or experience reductions in payment increases or amounts received from nongovernment payers, our revenues may be reduced.
Our performance depends on our ability to recruit and retain quality physicians.
The success of our hospitals depends in part on the number and quality of the physicians on the medical staffs of our hospitals, the admitting and utilization practices of those physicians, maintaining good relations with those physicians and controlling costs related to the employment of physicians. Although we employ some physicians, physicians are often not employees of the hospitals at which they practice and, in many of the markets we serve, most physicians have admitting privileges at other hospitals in addition to our hospitals. Such physicians may terminate their affiliation with our hospitals at any time. If we are unable to provide adequate support personnel or technologically advanced equipment and hospital facilities that meet the needs of those physicians and their patients, they may be discouraged from referring patients to our facilities, admissions may decrease and our operating performance may decline.
Our hospitals face competition for staffing, which may increase labor costs and reduce profitability.
Our operations are dependent on the efforts, abilities and experience of our management and medical support personnel, such as nurses, pharmacists and lab technicians, as well as our physicians. We compete with other health care providers in recruiting and retaining qualified management and support personnel responsible for the daily operations of each of our hospitals, including nurses and other nonphysician health care professionals. In some markets, the availability of nurses and other medical support personnel has been a significant operating issue to health care providers. We may be required to continue to enhance wages and benefits to recruit and retain nurses and other medical support personnel or to hire more expensive temporary or contract personnel. As a result, our labor costs could increase. We also depend on the available labor pool of semi-skilled and unskilled employees in each of the markets in which we operate. Certain proposed changes in federal labor laws and the NLRBs modification of its election procedures could increase the likelihood of employee unionization attempts. To the extent a significant portion of our employee base unionizes, it is possible our labor costs could increase materially. When negotiating collective bargaining agreements with unions, whether such agreements are renewals or first contracts, there is the possibility that strikes could occur during the negotiation process, and our continued operation during any strikes could increase our labor costs. In addition, the states in which we operate could adopt mandatory nurse-staffing ratios or could reduce mandatory nurse staffing ratios already in place. State-mandated nurse-staffing ratios could significantly affect labor costs and have an adverse impact on revenues if we are required to limit admissions in order to meet the required ratios. If our labor costs increase, we may not be able to raise rates to offset these increased costs. Because a significant percentage of our revenues consists of fixed, prospective payments, our ability to pass along increased labor costs is constrained. Our failure to recruit and retain qualified management, nurses and other medical support personnel, or to control labor costs, could have a material, adverse effect on our results of operations.
43
If we fail to comply with extensive laws and government regulations, we could suffer penalties or be required to make significant changes to our operations.
The health care industry is required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things:
|
billing and coding for services and properly handling overpayments; |
|
classification of level of care provided, including proper classification of inpatient admissions, observation services and outpatient care; |
|
relationships with physicians and other referral sources and referral recipients; |
|
necessity and adequacy of medical care; |
|
quality of medical equipment and services; |
|
qualifications of medical and support personnel; |
|
confidentiality, maintenance, data breach, identity theft and security issues associated with health-related and personal information and medical records; |
|
screening, stabilization and transfer of individuals who have emergency medical conditions; |
|
licensure and certification; |
|
hospital rate or budget review; |
|
preparing and filing of cost reports; |
|
operating policies and procedures; |
|
activities regarding competitors; and |
|
addition of facilities and services. |
Among these laws are the federal Anti-kickback Statute, the federal Stark Law, the federal FCA and similar state laws. We have a variety of financial relationships with physicians and others who either refer or influence the referral of patients to our hospitals, other health care facilities and employed physicians or who are the recipients of referrals, and these laws govern those relationships. The OIG has enacted safe harbor regulations that outline practices deemed protected from prosecution under the Anti-kickback Statute. While we endeavor to comply with the applicable safe harbors, certain of our current arrangements, including joint ventures and financial relationships with physicians and other referral sources and persons and entities to which we refer patients, do not qualify for safe harbor protection. Failure to qualify for a safe harbor does not mean the arrangement necessarily violates the Anti-kickback Statute but may subject the arrangement to greater scrutiny. However, we cannot offer assurance that practices outside of a safe harbor will not be found to violate the Anti-kickback Statute. Allegations of violations of the Anti-kickback Statute may be brought under the federal Civil Monetary Penalty Law, which requires a lower burden of proof than other fraud and abuse laws, including the Anti-kickback Statute.
Our financial relationships with referring physicians and their immediate family members must comply with the Stark Law by meeting an exception. We attempt to structure our relationships to meet an exception to the Stark Law, but the regulations implementing the exceptions are detailed and complex, and we cannot provide assurance that every relationship complies fully with the Stark Law. Unlike the Anti-kickback Statute, failure to meet an exception under the Stark Law results in a violation of the Stark Law, even if such violation is technical in nature.
Additionally, if we violate the Anti-kickback Statute or Stark Law, or if we improperly bill for our services, we may be found to violate the FCA, either under a suit brought by the government or by a private person under a qui tam , or whistleblower, suit. See Item 1, Business Regulation and Other Factors.
44
We also operate health care facilities in the United Kingdom and have operations and commercial relationships with companies in other foreign jurisdictions and, as a result, are subject to certain U.S. and foreign laws applicable to businesses generally, including anti-corruption laws. The Foreign Corrupt Practices Act regulates U.S. companies in their dealings with foreign officials, prohibiting bribes and similar practices, and requires that they maintain records that fairly and accurately reflect transactions and appropriate internal accounting controls. In addition, the United Kingdom Bribery Act has wide jurisdiction over certain activities that affect the United Kingdom.
If we fail to comply with the Anti-kickback Statute, the Stark Law, the FCA or other applicable laws and regulations, we could be subjected to liabilities, including civil penalties (including the loss of our licenses to operate one or more facilities), exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state health care programs and, for violations of certain laws and regulations, criminal penalties.
We do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. In the future, different interpretations or enforcement of, or amendment to, these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our facilities, equipment, personnel, services, capital expenditure programs and operating expenses. A determination that we have violated these laws, or the public announcement that we are being investigated for possible violations of these laws, could have a material, adverse effect on our business, financial condition, results of operations or prospects, and our business reputation could suffer significantly. In addition, other legislation or regulations at the federal or state level may be adopted that adversely affect our business.
We have been and could become the subject of governmental investigations, claims and litigation.
Health care companies are subject to numerous investigations by various governmental agencies. Further, under the FCA, private parties have the right to bring qui tam , or whistleblower, suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our financial position, results of operations and liquidity.
Governmental agencies and their agents, such as the Medicare Administrative Contractors, fiscal intermediaries and carriers, as well as the OIG, CMS and state Medicaid programs, conduct audits of our health care operations. Private payers may conduct similar post-payment audits, and we also perform internal audits and monitoring. Depending on the nature of the conduct found in such audits and whether the underlying conduct could be considered systemic, the resolution of these audits could have a material, adverse effect on our financial position, results of operations and liquidity.
CMS contracts with RACs on a contingency fee basis to conduct post-payment reviews to detect and correct improper payments in the fee-for-service Medicare program. In February 2012, CMS initiated a RAC prepayment demonstration program in 11 states. The Health Reform Law expands the RAC programs scope to include managed Medicare plans and Medicaid claims. RAC denials are appealable; however, HHS has imposed a suspension of assignment of new Medicare appeals to Administrative Law Judges for at least two years beginning July 16, 2013. This suspension will delay our ability to appeal RAC payment denials during this period. In addition, CMS employs MICs to perform post-payment audits of Medicaid claims and identify overpayments. The Health Reform Law increases federal funding for the MIC program. In addition to RACs and MICs, the state Medicaid agencies and other contractors have increased their review activities.
Should we be found out of compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be negatively impacted.
45
Physician utilization practices and treatment methodologies or governmental or managed care controls designed to reduce inpatient services or surgical procedures may reduce our revenues.
Controls imposed by Medicare, managed Medicare, Medicaid, managed Medicaid and commercial third-party payers designed to reduce admissions, intensity of services, surgical volumes and lengths of stay, in some instances referred to as utilization review, have affected and are expected to continue to affect our facilities. Utilization review entails the review of the admission and course of treatment of a patient by health plans. Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payer-required preadmission authorization and utilization review and by payer pressure to maximize outpatient and alternative health care delivery services for less acutely ill patients. Efforts to impose more stringent cost controls are expected to continue. For example, the Health Reform Law expanded the use of prepayment review by Medicare contractors by eliminating statutory restrictions on their use. Although we are unable to predict the effect these changes will have on our operations, significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material, adverse effect on our business, financial position and results of operations. Additionally, trends in physician treatment protocols and managed care health plan design, such as plans that shift increased costs and accountability for care to patients, could reduce our surgical volumes and admissions in favor of lower intensity and lower cost treatment methodologies.
Our overall business results may suffer during periods of general economic weakness.
Budget deficits at federal, state and local government entities have had a negative impact on spending, and may continue to negatively impact spending, for health and human service programs, including Medicare, Medicaid and similar programs, which represent significant payer sources for our hospitals. Other risks we face during periods of economic weakness and high unemployment include potential declines in the population covered under managed care agreements, patient decisions to postpone or cancel elective and nonemergency health care procedures (including delaying surgical procedures), potential increases in the uninsured and underinsured populations and further difficulties in our collecting patient copayment and deductible receivables.
The industry trend toward value-based purchasing may negatively impact our revenues.
There is a trend in the health care industry toward value-based purchasing of health care services. These value-based purchasing programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare currently require hospitals to report certain quality data to receive full reimbursement updates. In addition, Medicare does not reimburse for care related to certain preventable adverse events (also called never events). The Health Reform Law also prohibits the use of federal funds under the Medicaid program to reimburse providers for medical assistance provided to treat HACs. Beginning in federal fiscal year 2015, the 25% of hospitals with the worst national risk-adjusted HAC rates in the previous year will receive a 1% reduction in their total inpatient operating Medicare payments.
Hospitals with excess readmission rates for conditions designated by HHS will receive a reduction in operating payments for all Medicare inpatient discharges, not just discharges relating to the conditions subject to the excess readmission standard. The reduction in payments to hospitals with excess readmissions is capped at 2% for federal fiscal year 2014 and 3% for federal fiscal year 2015 and thereafter.
As required by the Health Reform Law, HHS has implemented a value-based purchasing program for inpatient hospital services that reduces inpatient hospital payments for all discharges by 1.25% in federal fiscal year 2014. This percentage will increase by 0.25% each fiscal year up to 2% in federal fiscal year 2017 and subsequent years. HHS pools the amount collected from these reductions to fund payments to reward hospitals that meet or exceed certain quality performance standards established by HHS. HHS estimates that it will distribute $1.1 billion to hospitals in federal fiscal year 2014 based on their achievement (relative to other
46
hospitals) and improvement ranges (relative to the hospitals own past performance). Hospitals that meet or exceed the quality performance standards will receive greater reimbursement under the value-based purchasing program than they would have otherwise.
Many large commercial payers currently require hospitals to report quality data, and several commercial payers do not reimburse hospitals for certain preventable adverse events. Further, we have implemented a policy pursuant to which we do not bill patients or third-party payers for fees or expenses incurred due to certain preventable adverse events.
We expect value-based purchasing programs, including programs that condition reimbursement on patient outcome measures, to become more common and to involve a higher percentage of reimbursement amounts. We are unable at this time to predict our future reductions and payments under these programs or how this trend will affect our results of operations, but it could negatively impact our revenues.
Our operations could be impaired by a failure of our information systems.
Any system failure that causes an interruption in service or availability of our systems could adversely affect operations or delay the collection of revenues. We have implemented multiple layers of security measures through technology, processes, and our people; utilize current security technologies; and our defenses are monitored and routinely tested internally and by external parties. Despite these efforts, threats from malicious persons and groups, new vulnerabilities, and advanced new attacks against information technology systems create risk of cyber security incidents that could impact availability of systems. The occurrence of any of these events could result in interruptions, delays, the loss or corruption of data, cessations in the availability of systems or liability under privacy and security laws, all of which could have a material adverse effect on our financial position and results of operations and harm our business reputation.
The performance of our information technology and systems is critical to our business operations. In addition to our shared services initiatives, our information systems are essential to a number of critical areas of our operations, including:
|
accounting and financial reporting; |
|
billing and collecting accounts; |
|
coding and compliance; |
|
clinical systems; |
|
medical records and document storage; |
|
inventory management; |
|
negotiating, pricing and administering managed care contracts and supply contracts; and |
|
monitoring quality of care and collecting data on quality measures necessary for full Medicare payment updates. |
If we fail to effectively and timely implement electronic health record systems and transition to the ICD-10 coding system, our operations could be adversely affected.
As required by ARRA, the Secretary of HHS has developed and implemented an incentive payment program for eligible hospitals and health care professionals that adopt and meaningfully use certified EHR technology. HHS uses the Provider Enrollment, Chain and Ownership System (PECOS) to verify Medicare enrollment prior to making EHR incentive program payments. During 2013, we received Medicare and Medicaid incentive payments for being a meaningful user of certified EHR technology and recorded incentive income of $216 million for the year.
We have incurred and will continue to incur both capital costs and operating expenses in order to implement our certified EHR technology and meet meaningful use requirements. These expenses are ongoing and are projected to continue over all stages of implementation of meaningful use. The timing of expenses will not
47
correlate with the receipt of the incentive payments and the recognition of incentive income. During 2013, we incurred $113 million of operating expenses to implement our certified EHR technology and to meet meaningful use. If our eligible hospitals and employed professionals are unable to meet the requirements for participation in the incentive payment program, including having an enrollment record in PECOS, we will not be eligible to receive incentive payments that could offset some of the costs of implementing certified EHR technology. Further, eligible providers that have failed to demonstrate meaningful use of certified EHR technology in an applicable prior reporting period will be subject to reduced payments from Medicare, beginning in federal fiscal year 2015 for eligible hospitals and calendar year 2015 for eligible professionals. Failure to implement and continue to demonstrate meaningful use of certified EHR technology could have a material, adverse effect on our financial position and results of operations.
Health plans and providers, including our hospitals, are required to transition to the new ICD-10 coding system, which greatly expands the number and detail of billing codes used for inpatient claims. Use of the ICD-10 system is required beginning October 1, 2014. Transition to the new ICD-10 system requires significant investment in training of staff and physicians involved in the coding and billing process as well as investment in coding technology and software. In addition to these upfront costs of transition to ICD-10, it is possible that our hospitals could experience disruption or delays in payment due to technical or coding errors or other implementation issues involving our systems or the systems and implementation efforts of health plans and their business partners. Further, the transition to the more detailed ICD-10 coding system could result in decreased reimbursement if the use of ICD-10 codes results in conditions being reclassified to MS-DRGs or commercial payer payment groupings with lower levels of reimbursement than assigned under the previous system.
State efforts to regulate the construction or expansion of health care facilities could impair our ability to operate and expand our operations.
Some states, particularly in the eastern part of the country, require health care providers to obtain prior approval, often known as a CON, for the purchase, construction or expansion of health care facilities, to make certain capital expenditures or to make changes in services or bed capacity. In giving approval, these states consider the need for additional or expanded health care facilities or services. We currently operate health care facilities in a number of states with CON laws or that require other types of approvals for the establishment or expansion of certain facility types or services. The failure to obtain any requested CON or other required approval could impair our ability to operate or expand operations. Any such failure could, in turn, adversely affect our ability to attract patients and physicians to our facilities and grow our revenues, which would have an adverse effect on our results of operations.
We may encounter difficulty acquiring hospitals and other health care businesses, encounter challenges integrating the operations of acquired hospitals and other health care businesses and become liable for unknown or contingent liabilities as a result of acquisitions.
A component of our business strategy is acquiring hospitals and other health care businesses. We may encounter difficulty acquiring new facilities as a result of competition from other purchasers that may be willing to pay purchase prices that are higher than we believe are reasonable. Some states require CONs in order to acquire a hospital or other facility or to expand facilities or services. In addition, the acquisition of health care facilities often involves licensure approvals or reviews and complex change of ownership processes for Medicare and other payers. Further, many states have laws that restrict the conversion or sale of not-for-profit hospitals to for-profit entities. These laws may require prior approval from the state attorney general, advance notification of the attorney general or other regulators and community involvement. Attorneys general in states without specific requirements may exercise broad discretionary authority over transactions involving the sale of not-for-profits under their general obligations to protect the use of charitable assets. These conversion legislative and administrative efforts often focus on the appropriate valuation of the assets divested and the use of the proceeds of the sale by the non-profit seller and may include consideration of commitments for capital improvements and charity care by the purchaser. Also, the increasingly challenging regulatory and enforcement environment may
48
negatively impact our ability to acquire health care businesses if they are found to have material unresolved compliance issues, such as repayment obligations. Resolving compliance issues as well as completion of oversight, review or approval processes could seriously delay or even prevent our ability to acquire hospitals or other businesses and increase our acquisition costs.
We may be unable to timely and effectively integrate hospitals and other businesses that we acquire with our ongoing operations, or we may experience delays implementing operating procedures and systems. Hospitals and other health care businesses that we acquire may have unknown or contingent liabilities, including liabilities for failure to comply with health care and other laws and regulations, medical and general professional liabilities, workers compensation liabilities and tax liabilities. Although we typically exclude significant liabilities from our acquisition transactions and seek indemnification from the sellers for these matters, we could experience difficulty enforcing those obligations, experience liability in excess of any indemnification obtained or otherwise incur material liabilities for the pre-acquisition conduct of acquired businesses. Such liabilities and related legal or other costs could harm our business and results of operations.
Our facilities are heavily concentrated in Florida and Texas, which makes us sensitive to regulatory, economic, environmental and competitive conditions and changes in those states.
We operated 165 hospitals at December 31, 2013, and 78 of those hospitals are located in Florida and Texas. Our Florida and Texas facilities combined revenues represented approximately 46% of our consolidated revenues for the year ended December 31, 2013. This concentration makes us particularly sensitive to regulatory, economic, environmental and competitive conditions and changes in those states. Any material change in the current payment programs or regulatory, economic, environmental or competitive conditions in those states could have a disproportionate effect on our overall business results.
In addition, our hospitals in Florida, Texas and other areas across the Gulf Coast are located in hurricane-prone areas. In the past, hurricanes have had a disruptive effect on the operations of our hospitals in Florida, Texas and other coastal states and the patient populations in those states. Our business activities could be harmed by a particularly active hurricane season or even a single storm, and the property insurance we obtain may not be adequate to cover losses from future hurricanes or other natural disasters.
We may be subject to liabilities from claims by the Internal Revenue Service.
We expect the IRS Examination Division will begin an audit of HCA Holdings, Inc.s 2011 federal income tax return in 2014.
Management believes HCA Holdings, Inc., its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.
We may be subject to liabilities from claims brought against our facilities.
We are subject to litigation relating to our business practices, including claims and legal actions by patients and others in the ordinary course of business alleging malpractice, product liability or other legal theories. Many of these actions seek large sums of money as damages and involve significant defense costs. We insure a portion of our professional liability risks through a 100% owned subsidiary. Management believes our reserves for self-insured retentions and insurance coverage are sufficient to cover insured claims arising out of the operation of our facilities. Our 100% owned liability insurance subsidiary has entered into certain reinsurance contracts, and the obligations covered by the reinsurance contracts are included in its reserves for professional liability risks, as the subsidiary remains liable to the extent that the reinsurers do not meet their obligations under the reinsurance
49
contracts. If payments for claims exceed actuarially determined estimates, are not covered by insurance, or reinsurers, if any, fail to meet their obligations, our results of operations and financial position could be adversely affected.
We are exposed to market risks related to changes in the market values of securities and interest rate changes.
We are exposed to market risk related to changes in market values of securities. The investments in debt and equity securities of our 100% owned insurance subsidiaries were $506 million and $4 million, respectively, at December 31, 2013. These investments are carried at fair value, with changes in unrealized gains and losses being recorded as adjustments to other comprehensive income. At December 31, 2013, we had a net unrealized gain of $10 million on the insurance subsidiaries investment securities.
We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our 100% owned insurance subsidiaries could be impaired by the inability to access the capital markets. Should the 100% owned insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize other-than-temporary impairments on long-term investments in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue specific factors.
We are also exposed to market risk related to changes in interest rates, and we periodically enter into interest rate swap agreements to manage our exposure to these fluctuations. Our interest rate swap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the swap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities.
The Investors continue to have influence over us and may have conflicts of interest with us in the future.
Through their investment in Hercules Holdings II, LLC, the Investors continue to hold a significant interest in our outstanding common stock (approximately 29% as of January 31, 2014). In addition, pursuant to a shareholders agreement we entered into with Hercules Holdings II, LLC, representatives of the Investors have the continued right to designate certain of the members of our Board of Directors. As a result, the Investors potentially have the ability to influence our decisions to enter into corporate transactions (and the terms thereof) and to potentially prevent changes in the composition of our Board of Directors and any transaction that requires stockholder approval.
Additionally, the Investors are in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. One or more of the Investors may also pursue acquisition opportunities that may be complementary to our business and, as a result, those acquisition opportunities may not be available to us.
Item 1B. Unresolved Staff Comments
None.
50
The following table lists, by state, the number of hospitals (general, acute care, psychiatric and rehabilitation) directly or indirectly owned and operated by us as of December 31, 2013:
State |
Hospitals | Beds | ||||||
Alaska |
1 | 250 | ||||||
California |
5 | 1,749 | ||||||
Colorado |
7 | 2,259 | ||||||
Florida |
42 | 11,240 | ||||||
Georgia |
8 | 1,609 | ||||||
Idaho |
2 | 480 | ||||||
Indiana |
1 | 278 | ||||||
Kansas |
4 | 1,360 | ||||||
Kentucky |
2 | 384 | ||||||
Louisiana |
5 | 1,161 | ||||||
Mississippi |
1 | 130 | ||||||
Missouri |
6 | 1,031 | ||||||
Nevada |
3 | 1,164 | ||||||
New Hampshire |
2 | 295 | ||||||
Oklahoma |
2 | 772 | ||||||
South Carolina |
3 | 794 | ||||||
Tennessee |
12 | 2,367 | ||||||
Texas |
36 | 10,664 | ||||||
Utah |
7 | 928 | ||||||
Virginia |
10 | 3,132 | ||||||
International |
||||||||
England |
6 | 849 | ||||||
|
|
|
|
|||||
165 | 42,896 | |||||||
|
|
|
|
In addition to the hospitals listed in the above table, we directly or indirectly operate 115 freestanding surgery centers. We also operate medical office buildings in conjunction with some of our hospitals. These office buildings are primarily occupied by physicians who practice at our hospitals. Fourteen of our general, acute care hospitals and three of our other properties have been mortgaged to support our obligations under our senior secured cash flow credit facility and first lien secured notes.
We maintain our headquarters in approximately 1,400,000 square feet of space in the Nashville, Tennessee area. In addition to the headquarters in Nashville, we maintain regional service centers related to our shared services initiatives. These service centers are located in markets in which we operate hospitals.
We believe our headquarters, hospitals and other facilities are suitable for their respective uses and are, in general, adequate for our present needs. Our properties are subject to various federal, state and local statutes and ordinances regulating their operation. Management does not believe that compliance with such statutes and ordinances will materially affect our financial position or results of operations.
We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. The resolution of any such lawsuits, claims or legal and regulatory proceedings could materially and adversely affect our results of operations and financial position in a given period.
51
Government Investigations, Claims and Litigation
Health care companies are subject to numerous investigations by various governmental agencies. Further, under the federal False Claims Act (FCA), private parties have the right to bring qui tam , or whistleblower, suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our financial position, results of operations and liquidity.
As initially disclosed in 2010, the DOJ has contacted the Company in connection with its nationwide review of whether, in certain cases, hospital charges to the federal government relating to implantable cardio-defibrillators (ICDs) met the CMS criteria. In connection with this nationwide review, the DOJ has indicated that it will be reviewing certain ICD billing and medical records at 95 HCA hospitals; the review covers the period from October 2003 to the present. In August 2012, HCA, along with non-HCA hospitals across the country subject to the DOJs review, received from the DOJ a proposed framework for resolving the DOJs review of ICDs. The Company is cooperating in the review. The review could potentially give rise to claims against the Company under the federal FCA or other statutes, regulations or laws. At this time, we cannot predict what effect, if any, this review or any resulting claims could have on the Company.
In July 2012, the Civil Division of the U.S. Attorneys Office in Miami requested information on reviews assessing the medical necessity of interventional cardiology services provided at any Company facility (other than peer reviews). The Company is cooperating with the governments request and has produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. At this time, we cannot predict what effect, if any, the request or any resulting claims, including any potential claims under the federal FCA, other statutes, regulations or laws, could have on the Company.
Securities Class Action Litigation
On October 28, 2011, a shareholder action, Schuh v. HCA Holdings, Inc. et al., was filed in the United States District Court for the Middle District of Tennessee seeking monetary relief. The case sought to include as a class all persons who acquired the Companys stock pursuant or traceable to the Companys Registration Statement issued in connection with the March 9, 2011 initial public offering. The lawsuit asserted a claim under Section 11 of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserted a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors. The action alleged various deficiencies in the Companys disclosures in the Registration Statement. Subsequently, two additional class action complaints, Kishtah v. HCA Holdings, Inc. et al. and Daniels v. HCA Holdings, Inc. et al., setting forth substantially similar claims against substantially the same defendants were filed in the same federal court on November 16, 2011 and December 12, 2011, respectively. All three of the cases were consolidated. On May 3, 2012, the court appointed New England Teamsters & Trucking Industry Pension Fund as Lead Plaintiff for the consolidated action. On July 13, 2012, the lead plaintiff filed an amended complaint asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserts a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors and Hercules Holdings II, LLC, a majority shareholder of the Company at the time of the initial public offering. The consolidated complaint alleges deficiencies in the Companys disclosures in the Registration Statement and Prospectus relating to: (1) the accounting for the Companys 2006 recapitalization and 2010 reorganization; (2) the Companys failure to maintain effective internal controls relating to its accounting for such transactions; and (3) the Companys Medicare and Medicaid revenue growth rates. The Company and other defendants moved to dismiss the amended complaint on September 11, 2012. The Court granted the motion in part on May 28, 2013. The action is proceeding to discovery on the remaining claims.
52
In addition to the above described shareholder class actions, on December 8, 2011, a federal shareholder derivative action, Sutton v. Bracken, et al., putatively initiated in the name of the Company, was filed in the United States District Court for the Middle District of Tennessee against certain officers and present and former directors of the Company seeking monetary relief. The action alleges breaches of fiduciary duties by the named officers and directors in connection with the accounting and earnings claims set forth in the shareholder class actions. Setting forth substantially similar claims against substantially the same defendants, an additional federal derivative action, Schroeder v. Bracken, et al., was filed in the United States District Court for the Middle District of Tennessee on December 16, 2011, and a state derivative action, Bagot v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court on December 20, 2011. The federal derivative actions were consolidated in the Middle District of Tennessee and stayed pending developments in the shareholder class actions. The state derivative action had also been stayed pending developments in the shareholder class actions, but that stay has expired. The plaintiff in the state derivative action subsequently filed an amended complaint on September 9, 2013 that added additional allegations made in the shareholder class actions. On September 24, 2013, an additional state derivative action, Steinberg v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court. This action against our board of directors has been consolidated with the earlier filed state derivative action. The plaintiffs in the consolidated action filed a consolidated complaint on December 4, 2013. The Company has filed a motion to again stay the state derivative action pending developments in the class action, but the Court has not yet acted on that motion.
Health Midwest Litigation
In October 2009, the Health Care Foundation of Greater Kansas City, a nonprofit health foundation, filed suit against HCA Inc. in the Circuit Court of Jackson County, Missouri and alleged that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCAs purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCAs construction of new hospitals counted towards its $450 million five-year capital commitments. In addition, the plaintiff alleged that HCA did not make its required capital expenditures in a timely fashion. On January 24, 2013, the Court ruled in favor of the plaintiff and awarded at least $162 million. The Court also ordered a court-supervised accounting of HCAs capital expenditures, as well as of expenditures on charity and uncompensated care during the ten years following the purchase. Should the accounting fail to satisfy the Court concerning HCAs compliance with its capital and charity care commitments, the amount of the judgment award could substantially increase. The Court also indicated it would award plaintiff attorneys fees, which the parties have stipulated are about $12 million. HCA recorded $175 million of legal claim costs in the fourth quarter of 2012 related to this ruling. The accounting for HCAs capital expenditures and charity and uncompensated care is ongoing and will likely not be concluded before the fourth quarter of 2014. HCA plans to appeal the trial courts ruling on the breach of contract claim and order for the accounting once the trial court rules on the accounting and enters final judgment.
General Liability and Other Claims
We are subject to claims for additional income taxes and related interest.
We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or for wrongful restriction of, or interference with, physicians staff privileges. In certain of these actions the claimants have asked for punitive damages against us, which may not be covered by insurance. In the opinion of management, the ultimate resolution of these pending claims and legal proceedings will not have a material, adverse effect on our results of operations or financial position.
Item 4. Mine Safety Disclosures
None.
53
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
See Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Financing Activities for a description of the restrictions on our ability to pay dividends.
During March 2011, we completed the initial public offering of 87,719,300 shares of our common stock. Our first day of trading was March 10, 2011. During September 2011, we repurchased 80,771,143 shares of our common stock, beneficially owned by affiliates of Bank of America Corporation, at a purchase price of $18.61 per share. The shares repurchased represented approximately 15.6% of our total shares outstanding at the time of the repurchase. During November 2013, we repurchased 10,656,436 shares of our common stock at a price of $46.92 per share. Our common stock is traded on the New York Stock Exchange (the NYSE) (symbol HCA).
During 2012, our Board of Directors declared three distributions to the Companys stockholders and holders of certain vested share-based awards. The distributions totaled $6.50 per share and vested share-based award (subject to limitations for certain awards), or $3.142 billion in the aggregate. Pursuant to the terms of our share-based award plans, the holders of nonvested stock options and SARs received $6.50 per share reductions to the exercise price of the applicable share-based awards (subject to certain limitations for certain share-based awards that resulted in deferred distributions for a portion of the declared distribution, which will be paid upon the vesting of the applicable share-based award). The holders of nonvested RSUs will be paid the applicable distribution amounts upon the vesting of the applicable RSUs. There were no distributions declared during 2013.
The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the NYSE for our common stock.
Sales Price | ||||||||
High | Low | |||||||
2013 |
||||||||
First Quarter |
$ | 40.92 | $ | 30.65 | ||||
Second Quarter |
41.83 | 35.40 | ||||||
Third Quarter |
43.11 | 35.20 | ||||||
Fourth Quarter |
49.52 | 42.60 | ||||||
2012 |
||||||||
First Quarter |
$ | 29.30 | $ | 20.33 | ||||
Second Quarter |
31.39 | 24.09 | ||||||
Third Quarter |
33.55 | 23.91 | ||||||
Fourth Quarter |
34.32 | 27.92 |
At the close of business on January 31, 2014, there were approximately 270 holders of record of our common stock.
54
3/10/11 | 3/31/11 | 6/30/11 | 9/30/11 | 12/30/11 | 3/31/12 | 6/30/12 | 9/30/12 | 12/31/12 | 3/31/13 | 6/30/13 | 9/30/13 | 12/31/13 | ||||||||||||||||||||||||||||||||||||||||
HCA Holdings, Inc. |
100.00 | 109.19 | 106.38 | 64.99 | 71.02 | 86.11 | 105.92 | 115.73 | 121.66 | 163.84 | 145.41 | 172.39 | 192.39 | |||||||||||||||||||||||||||||||||||||||
S&P 500 |
100.00 | 100.04 | 100.14 | 86.25 | 96.44 | 108.58 | 105.60 | 112.30 | 111.88 | 123.74 | 127.35 | 134.02 | 148.11 | |||||||||||||||||||||||||||||||||||||||
S&P Health Care |
100.00 | 101.90 | 109.91 | 98.90 | 108.76 | 118.61 | 120.68 | 128.12 | 128.21 | 148.48 | 154.18 | 164.69 | 181.37 |
The graph shows the cumulative total return to our stockholders beginning as of March 10, 2011, the day our stock began trading on the NYSE, and through December 31, 2013, 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 March 10, 2011 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.
55
Item 6. Selected Financial Data
HCA HOLDINGS, INC.
SELECTED FINANCIAL DATA
AS OF AND FOR THE YEARS ENDED DECEMBER 31
(Dollars in millions, except per share amounts)
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Summary of Operations: |
||||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | 38,040 | $ | 36,783 | $ | 32,506 | $ | 30,683 | $ | 30,052 | ||||||||||
Provision for doubtful accounts |
3,858 | 3,770 | 2,824 | 2,648 | 3,276 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Revenues |
34,182 | 33,013 | 29,682 | 28,035 | 26,776 | |||||||||||||||
Salaries and benefits |
15,646 | 15,089 | 13,440 | 12,484 | 11,958 | |||||||||||||||
Supplies |
5,970 | 5,717 | 5,179 | 4,961 | 4,868 | |||||||||||||||
Other operating expenses |
6,237 | 6,048 | 5,470 | 5,004 | 4,724 | |||||||||||||||
Electronic health record incentive income |
(216 | ) | (336 | ) | (210 | ) | | | ||||||||||||
Equity in earnings of affiliates |
(29 | ) | (36 | ) | (258 | ) | (282 | ) | (246 | ) | ||||||||||
Depreciation and amortization |
1,753 | 1,679 | 1,465 | 1,421 | 1,425 | |||||||||||||||
Interest expense |
1,848 | 1,798 | 2,037 | 2,097 | 1,987 | |||||||||||||||
Losses (gains) on sales of facilities |
10 | (15 | ) | (142 | ) | (4 | ) | 15 | ||||||||||||
Losses on retirement of debt |
17 | | 481 | | | |||||||||||||||
Legal claim costs |
| 175 | | | | |||||||||||||||
Gain on acquisition of controlling interest in equity investment |
| | (1,522 | ) | | | ||||||||||||||
Impairments of long-lived assets |
| | | 123 | 43 | |||||||||||||||
Termination of management agreement |
| | 181 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
31,236 | 30,119 | 26,121 | 25,804 | 24,774 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income before income taxes |
2,946 | 2,894 | 3,561 | 2,231 | 2,002 | |||||||||||||||
Provision for income taxes |
950 | 888 | 719 | 658 | 627 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income |
1,996 | 2,006 | 2,842 | 1,573 | 1,375 | |||||||||||||||
Net income attributable to noncontrolling interests |
440 | 401 | 377 | 366 | 321 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net income attributable to HCA Holdings, Inc. |
$ | 1,556 | $ | 1,605 | $ | 2,465 | $ | 1,207 | $ | 1,054 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Per common share data: |
||||||||||||||||||||
Basic earnings per share |
$ | 3.50 | $ | 3.65 | $ | 5.17 | $ | 2.83 | $ | 2.48 | ||||||||||
Diluted earnings per share |
$ | 3.37 | $ | 3.49 | $ | 4.97 | $ | 2.76 | $ | 2.44 | ||||||||||
Cash dividends declared per share |
$ | | $ | 6.50 | $ | | $ | 9.43 | $ | | ||||||||||
Financial Position: |
||||||||||||||||||||
Assets |
$ | 28,831 | $ | 28,075 | $ | 26,898 | $ | 23,852 | $ | 24,131 | ||||||||||
Working capital |
2,342 | 1,591 | 1,679 | 2,650 | 2,264 | |||||||||||||||
Long-term debt, including amounts due within one year |
28,376 | 28,930 | 27,052 | 28,225 | 25,670 | |||||||||||||||
Equity securities with contingent redemption rights |
| | | 141 | 147 | |||||||||||||||
Noncontrolling interests |
1,342 | 1,319 | 1,244 | 1,132 | 1,008 | |||||||||||||||
Stockholders deficit |
(6,928 | ) | (8,341 | ) | (7,014 | ) | (10,794 | ) | (7,978 | ) | ||||||||||
Cash Flow Data: |
||||||||||||||||||||
Cash provided by operating activities |
$ | 3,680 | $ | 4,175 | $ | 3,933 | $ | 3,085 | $ | 2,747 | ||||||||||
Cash used in investing activities |
(2,346 | ) | (2,063 | ) | (2,995 | ) | (1,039 | ) | (1,035 | ) | ||||||||||
Capital expenditures |
(1,943 | ) | (1,862 | ) | (1,679 | ) | (1,325 | ) | (1,317 | ) | ||||||||||
Cash used in financing activities |
(1,625 | ) | (1,780 | ) | (976 | ) | (1,947 | ) | (1,865 | ) |
56
2013 | 2012 | 2011 | 2010 | 2009 | ||||||||||||||||
Operating Data: |
||||||||||||||||||||
Number of hospitals at end of period(a) |
165 | 162 | 163 | 156 | 155 | |||||||||||||||
Number of freestanding outpatient surgical centers at end of period(b) |
115 | 112 | 108 | 97 | 97 | |||||||||||||||
Number of licensed beds at end of period(c) |
42,896 | 41,804 | 41,594 | 38,827 | 38,839 | |||||||||||||||
Weighted average licensed beds(d) |
42,133 | 41,795 | 39,735 | 38,655 | 38,825 | |||||||||||||||
Admissions(e) |
1,744,100 | 1,740,700 | 1,620,400 | 1,554,400 | 1,556,500 | |||||||||||||||
Equivalent admissions(f) |
2,844,700 | 2,832,100 | 2,595,900 | 2,468,400 | 2,439,000 | |||||||||||||||
Average length of stay (days)(g) |
4.8 | 4.7 | 4.8 | 4.8 | 4.8 | |||||||||||||||
Average daily census(h) |
22,853 | 22,521 | 21,123 | 20,523 | 20,650 | |||||||||||||||
Occupancy(i) |
54 | % | 54 | % | 53 | % | 53 | % | 53 | % | ||||||||||
Emergency room visits(j) |
6,968,100 | 6,912,000 | 6,143,500 | 5,706,200 | 5,593,500 | |||||||||||||||
Outpatient surgeries(k) |
881,900 | 873,600 | 799,200 | 783,600 | 794,600 | |||||||||||||||
Inpatient surgeries(l) |
508,800 | 506,500 | 484,500 | 487,100 | 494,500 | |||||||||||||||
Days revenues in accounts receivable(m) |
54 | 51 | 52 | 49 | 49 | |||||||||||||||
Gross patient revenues(n) |
$ | 181,141 | $ | 165,614 | $ | 141,516 | $ | 125,640 | $ | 115,682 | ||||||||||
Outpatient revenues as a % of patient revenues(o) |
38 | % | 38 | % | 37 | % | 36 | % | 39 | % |
(a) |
Excludes eight facilities in 2010 and 2009 that were not consolidated (accounted for using the equity method) for financial reporting purposes. |
(b) |
Excludes one facility in 2012 and 2011, nine facilities in 2010 and eight facilities in 2009 that were not consolidated (accounted for using the equity method) for financial reporting purposes. |
(c) |
Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency. |
(d) |
Represents the average number of licensed beds, weighted based on periods owned. |
(e) |
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. |
(f) |
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. |
(g) |
Represents the average number of days admitted patients stay in our hospitals. |
(h) |
Represents the average number of patients in our hospital beds each day. |
(i) |
Represents the percentage of hospital licensed beds occupied by patients. Both average daily census and occupancy rate provide measures of the utilization of inpatient rooms. |
(j) |
Represents the number of patients treated in our emergency rooms. |
(k) |
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. |
(l) |
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. |
(m) |
Revenues per day is calculated by dividing the revenues for the fourth quarter of each year by the days in the period. Days revenues in accounts receivable is then calculated as accounts receivable, net of the allowance for doubtful accounts, at the end of the period divided by revenues per day. Revenues used in this computation are net of the provision for doubtful accounts. |
(n) |
Gross patient revenues are based upon our standard charge listing. Gross charges/revenues typically do not reflect what our hospital facilities are paid. Gross charges/revenues are reduced by the provision for doubtful accounts, contractual adjustments, discounts and charity care to determine reported revenues. |
(o) |
Represents the percentage of patient revenues related to patients who are not admitted to our hospitals. |
57
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
The selected financial data and the accompanying consolidated financial statements present certain information with respect to the financial position, results of operations and cash flows of HCA Holdings, 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 HCA Inc. and our affiliates prior to the Corporate Reorganization and to HCA Holdings, Inc. and our affiliates after the Corporate Reorganization unless otherwise stated or indicated by context. The term affiliates means direct and indirect subsidiaries of HCA Holdings, 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 which contain forward-looking statements. Forward-looking statements include statements regarding estimated EHR incentive income and related EHR operating expenses, expected capital expenditures and 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) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, (2) the effects related to the implementation of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the Health Reform Law), possible delays in or complications related to implementation of the Health Reform Law, the possible enactment of additional federal or state health care reforms and possible changes to the Health Reform Law and other federal, state or local laws or regulations affecting the health care industry, (3) the effects related to the continued implementation of the sequestration spending reductions required under the Budget Control Act of 2011 (the BCA) and the potential for future deficit reduction legislation that may alter BCA-mandated spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (4) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (5) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (6) possible changes in the Medicare, Medicaid and other state programs, including Medicaid upper payment limit (UPL) programs or Waiver Programs, that may impact reimbursements to health care providers and insurers, (7) the highly competitive nature of the health care business, (8) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under managed care agreements, the ability to enter into and renew managed care provider agreements on acceptable terms and the impact of consumer driven health plans and physician utilization trends and practices, (9) the efforts of insurers, health care providers and others to contain health care costs, (10) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (11) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical and technical support personnel, (12) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (13) changes in accounting practices, (14) changes in general economic conditions nationally and regionally in our markets, (15) future divestitures which may result in charges and possible impairments of long-lived assets, (16) changes in business strategy or development plans, (17) delays in receiving payments for services provided, (18) the outcome of pending and any future tax audits, appeals and litigation associated with our tax positions, (19) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (20) our ongoing ability to demonstrate meaningful use of certified EHR technology and
58
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Forward-Looking Statements (continued)
recognize income for the related Medicare or Medicaid incentive payments, and (21) 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.
2013 Operations Summary
Net income attributable to HCA Holdings, Inc. totaled $1.556 billion, or $3.37 per diluted share, for 2013, compared to $1.605 billion, or $3.49 per diluted share, for 2012. The 2013 results include net losses on sales of facilities of $10 million (pretax), or $0.02 per diluted share, and a loss on retirement of debt of $17 million (pretax), or $0.02 per diluted share. The 2012 results include legal claim costs of $175 million (pretax), or $0.24 per diluted share, and net gains on sales of facilities of $15 million (pretax), or $0.02 per diluted share. All per diluted share disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 461.913 million shares and 459.403 million shares for the years ended December 31, 2013 and 2012, respectively.
Revenues increased to $34.182 billion for 2013 from $33.013 billion for 2012. Revenues increased 3.5% and 3.1%, respectively, on a consolidated basis and on a same facility basis for 2013, compared to 2012. The consolidated revenues increase can be primarily attributed to the combined impact of a 3.1% increase in revenue per equivalent admission and a 0.4% increase in equivalent admissions. The same facility revenues increase resulted primarily from a 3.0% increase in same facility revenue per equivalent admission and a 0.1% increase in same facility equivalent admissions.
During 2013, consolidated admissions increased 0.2% and same facility admissions increased 0.1%, compared to 2012. Inpatient surgical volumes increased 0.5% on a consolidated basis and increased 0.3% on a same facility basis during 2013, compared to 2012. Outpatient surgical volumes increased 0.9% on a consolidated basis and declined 0.5% on a same facility basis during 2013, compared to 2012. Emergency room visits increased 0.8% on a consolidated basis and increased 0.7% on a same facility basis during 2013, compared to 2012.
For 2013, the provision for doubtful accounts increased $88 million, compared to 2012. The self-pay revenue deductions for charity care and uninsured discounts increased $404 million and $1.232 billion, respectively, for 2013, compared to 2012. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care, was 31.3% for 2013, compared to 29.5% for 2012. Same facility uninsured admissions increased 7.6% and same facility uninsured emergency room visits increased 2.2% for 2013, compared to 2012.
Interest expense totaled $1.848 billion for 2013, compared to $1.798 billion for 2012. The $50 million increase in interest expense for 2013 was due primarily to an increase in the average debt balance.
Cash flows from operating activities declined $495 million, from $4.175 billion for 2012 to $3.680 billion for 2013. The decline in cash flows from operating activities was primarily related to net negative changes in working capital items of $521 million.
59
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Business Strategy
We are committed to providing the communities we serve with high quality, cost-effective health care while growing our business, increasing our profitability and creating long-term value for our stockholders. 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 adding attractive service lines such as cardiology, emergency services, oncology and womens services. Additional components of our growth strategy include expanding our footprint through developing various outpatient access points, including surgery centers, rural outreach, freestanding emergency departments and walk-in clinics.
Achieve Industry-Leading Performance in Clinical and Satisfaction Measures. Achieving high levels of patient safety, patient satisfaction and clinical quality are central goals of our business model. 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, grow our revenues and favorably position us in an environment where our constituents are increasingly focused on quality, efficacy and efficiency.
Recruit and Employ Physicians to Meet 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 Enhance Profitability. We believe there is significant opportunity to continue to grow the profitability of our company by fully leveraging the scale and scope of our franchise. We are currently pursuing next generation performance improvement initiatives such as contracting for services on a multistate basis and expanding our support infrastructure for additional clinical and support functions, such as physician credentialing, medical transcription and electronic medical recordkeeping. We believe our centrally managed business processes and ability to leverage cost-saving practices 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 and are offering these services to other hospital companies.
Selectively 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 spur consolidation and we believe our size, scale, national presence and access to capital will position us well to participate in any such consolidation. We have a
60
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Business Strategy (continued)
strong record of successfully acquiring and integrating hospitals and entering into joint ventures and intend to continue leveraging this experience.
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
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 managements 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 computerized billing systems and the information system data used to make contractual allowance estimates. We have developed standardized calculation processes and related training programs to improve the utility of our patient accounting systems.
The Emergency Medical Treatment and Labor Act (EMTALA) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospitals emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individuals ability to pay for treatment. Federal and state laws and regulations, including but not limited to EMTALA, require, and our commitment to providing quality patient care encourages, the provision of services to patients who are financially unable to pay for the health care services they receive. The Health Reform Law requires health plans to reimburse hospitals for emergency services provided to enrollees without prior authorization and without regard to whether a participating provider contract is in place. Further, the Health Reform Law contains provisions that seek to decrease the number of uninsured individuals, including requirements or incentives, which become effective during 2014, for individuals to obtain, and large employers to provide, insurance coverage. These mandates may reduce the financial impact of screening for and stabilizing emergency medical conditions. However, many factors are unknown regarding the impact of the Health Reform Law, including how many previously uninsured individuals will obtain coverage as a result of the law, the change, if any, in the volume of inpatient and outpatient hospital services that are sought by and provided to previously uninsured individuals and overall changes in the payer mix.
61
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Revenues (continued)
We do not pursue collection of amounts related to patients who meet our guidelines to qualify as charity care; therefore, they are not reported in revenues. Patients treated at our hospitals for nonelective care, who have income at or below 200% of the federal poverty level, are eligible for charity care. The federal poverty level is established by the federal government and is based on income and family size. We provide discounts from our gross charges to uninsured patients who do not qualify for Medicaid or charity care. These discounts are similar to those provided to many local managed care plans. After the discounts are applied, we are still unable to collect a significant portion of uninsured patients accounts, and we record significant provisions for doubtful accounts (based upon our historical collection experience) related to uninsured patients in the period the services are provided.
Due to the complexities involved in the classification and documentation of health care services authorized and provided, the estimation of revenues earned and the related reimbursement are often subject to interpretations that could result in payments that are different from our estimates. Adjustments to estimated Medicare and Medicaid reimbursement amounts and disproportionate-share funds, which resulted in net increases to revenues, related primarily to cost reports filed during the respective year were $41 million, $50 million and $40 million in 2013, 2012 and 2011, respectively. The adjustments to estimated reimbursement amounts, which resulted in net increases to revenues, related primarily to cost reports filed during previous years were $68 million, $242 million and $30 million in 2013, 2012 and 2011, respectively. The 2012 amount related to cost reports filed during previous years includes two adjustments to Medicare revenues that affected multiple annual cost report periods for the majority of our hospitals (the Rural Floor Provision Settlement which increased revenues by approximately $271 million and the implementation of revised Supplemental Security Income (SSI) ratios which reduced revenues by approximately $75 million). Excluding the effect of these Medicare adjustments, the 2012 amount related to previous years would have been $46 million. We expect adjustments during the next 12 months related to Medicare and Medicaid cost report filings and settlements and disproportionate-share funds will result in increases to revenues within generally similar ranges.
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts
The collection of outstanding receivables from Medicare, managed care payers, other third-party payers and patients is our primary source of cash and is critical to our operating performance. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to amounts due directly from patients. An estimated allowance for doubtful accounts is recorded for all uninsured accounts, regardless of the aging of those accounts. Accounts are written off when all reasonable internal and external collection efforts have been performed. Our collection policies include a review of all accounts against certain standard collection criteria, upon completion of our primary internal collection efforts. Accounts determined to possess positive collectibility attributes are forwarded to a secondary internal or external collection agency and the other accounts are written off. The accounts that are not collected by the secondary collection agency are written off when secondary collection efforts are completed (usually within 12 months). Writeoffs are based upon specific identification and the writeoff process requires a writeoff adjustment entry to the patient accounting system. We do not pursue collection of amounts related to patients that meet our guidelines to qualify as charity care.
The amount of the provision for doubtful accounts is based upon managements assessment of historical writeoffs and expected net collections, business and economic conditions, trends in federal, state, and private
62
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts (continued)
employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical writeoffs and recoveries at facilities that represent a majority of our revenues and accounts receivable (the hindsight analysis) as a primary source of information in estimating the collectibility 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 allowance for doubtful accounts at each of our hospital facilities provide reasonable valuations of our accounts receivable. These routine, quarterly changes in estimates have not resulted in material adjustments to our allowance for doubtful accounts, provision for doubtful accounts or period-to-period comparisons of our results of operations. At both December 31, 2013 and 2012, the allowance for doubtful accounts represented approximately 93%, of the $5.927 billion and $5.228 billion, respectively, patient due accounts receivable balance. The patient due accounts receivable balance represents the estimated uninsured portion of our accounts receivable. The estimated uninsured portion of Medicaid pending and uninsured discount pending accounts is included in our patient due accounts receivable balance.
To quantify the total impact of and trends related to uninsured accounts, we believe it is beneficial to view the revenue deductions related to uninsured accounts (charity care and uninsured discounts) and provision for doubtful accounts in combination, rather than each separately. A summary of these amounts for the years ended December 31, follows (dollars in millions):
2013 | 2012 | 2011 | ||||||||||
Charity care |
$ | 3,497 | $ | 3,093 | $ | 2,683 | ||||||
Uninsured discounts |
8,210 | 6,978 | 5,707 | |||||||||
Provision for doubtful accounts |
3,858 | 3,770 | 2,824 | |||||||||
|
|
|
|
|
|
|||||||
Totals |
$ | 15,565 | $ | 13,841 | $ | 11,214 | ||||||
|
|
|
|
|
|
The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care increased from 27.4% for 2011, to 29.5% for 2012 and to 31.3% for 2013.
Days revenues in accounts receivable were 54 days, 51 days and 52 days at December 31, 2013, 2012 and 2011, respectively. 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, 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.
63
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Provision for Doubtful Accounts and the Allowance for Doubtful Accounts (continued)
The approximate breakdown of accounts receivable by payer classification as of December 31, 2013 and 2012 is set forth in the following table:
% of Accounts Receivable | ||||||||||||
Under 91 Days | 91 180 Days | Over 180 Days | ||||||||||
Accounts receivable aging at December 31, 2013: |
||||||||||||
Medicare and Medicaid |
12 | % | 2 | % | 1 | % | ||||||
Managed care and other insurers |
21 | 4 | 5 | |||||||||
Uninsured |
20 | 8 | 27 | |||||||||
|
|
|
|
|
|
|||||||
Total |
53 | % | 14 | % | 33 | % | ||||||
|
|
|
|
|
|
|||||||
Accounts receivable aging at December 31, 2012: |
||||||||||||
Medicare and Medicaid |
13 | % | 1 | % | 1 | % | ||||||
Managed care and other insurers |
22 | 4 | 4 | |||||||||
Uninsured |
18 | 9 | 28 | |||||||||
|
|
|
|
|
|
|||||||
Total |
53 | % | 14 | % | 33 | % | ||||||
|
|
|
|
|
|
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 100% owned insurance subsidiary for losses up to $50 million per occurrence, subject to a $5 million per occurrence self-insured retention. We purchase excess insurance on a claims-made basis for losses in excess of $50 million per occurrence. Provisions for losses related to professional liability risks were $314 million, $331 million and $244 million for the years ended December 31, 2013, 2012 and 2011, respectively.
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 settlement 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.
64
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Professional Liability Claims (continued)
Reserves and provisions for professional liability risks are based upon actuarially determined estimates. The estimated reserve ranges, net of amounts receivable under reinsurance contracts, were $1.137 billion to $1.359 billion at December 31, 2013 and $1.130 billion to $1.346 billion at December 31, 2012. 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% change in the expected frequency trend could be reasonably likely and would increase the reserve estimate by $18 million or reduce the reserve estimate by $17 million. A 2% change in the expected claim severity trend could be reasonably likely and would increase the reserve estimate by $73 million or reduce the reserve estimate by $67 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 settle 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 2,600 individual claims and 2,700 individual claims at December 31, 2013 and 2012, 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 payment of final settlement for our professional liability claims is approximately five years, although the facts and circumstances of each individual claim can result in an occurrence-to-settlement 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 $1.279 billion and $1.297 billion at December 31, 2013 and 2012, respectively. The current portion of these reserves, $331 million and $324 million at December 31, 2013 and 2012, 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 $24 million and $49 million receivable under reinsurance and excess insurance contracts at December 31, 2013 and 2012, respectively) were $1.255 billion and $1.248 billion at December 31, 2013 and 2012, respectively. The estimated total net reserves for professional liability risks at December 31, 2013 and 2012 are comprised of $710 million and $789 million, respectively, of case reserves for known claims and $545 million and $459 million, respectively, of reserves for incurred but not reported claims.
65
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Critical Accounting Policies and Estimates (continued)
Professional Liability Claims (continued)
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):
2013 | 2012 | 2011 | ||||||||||
Net reserves for professional liability claims, January 1 |
$ | 1,248 | $ | 1,252 | $ | 1,248 | ||||||
Provision for current year claims |
343 | 324 | 298 | |||||||||
Unfavorable (favorable) development related to prior years claims |
(29 | ) | 7 | (54 | ) | |||||||
|
|
|
|
|
|
|||||||
Total provision |
314 | 331 | 244 | |||||||||
|
|
|
|
|
|
|||||||
Payments for current year claims |
7 | 6 | 7 | |||||||||
Payments for prior years claims |
300 | 329 | 233 | |||||||||
|
|
|
|
|
|
|||||||
Total claim payments |
307 | 335 | 240 | |||||||||
|
|
|
|
|
|
|||||||
Net reserves for professional liability claims, December 31 |
$ | 1,255 | $ | 1,248 | $ | 1,252 | ||||||
|
|
|
|
|
|
Income Taxes
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.
Although we believe we have properly reported taxable income and paid taxes in accordance with applicable laws, federal, state or international 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 return. 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 that are similar to the discounts provided to many local managed care plans.
66
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
Revenues increased 3.5% to $34.182 billion for 2013 from $33.013 billion for 2012 and increased 11.2% for 2012 from $29.682 billion for 2011. The increase in revenues in 2013 can be primarily attributed to the combined impact of a 3.1% increase in revenue per equivalent admission and a 0.4% increase in equivalent admissions compared to the prior year. The increase in revenues in 2012 can be primarily attributed to the combined impact of a 2.0% increase in revenue per equivalent admission and a 9.1% increase in equivalent admissions compared to 2011. The increase in revenues (and volume metrics) for 2012 compared to 2011 related primarily to the impact of the financial consolidation of the HCA-HealthONE LLC venture for periods subsequent to our acquisition of controlling interests during October 2011 (HealthONE revenues and related volume metrics are not included in our same facility amounts). HealthONE revenues included in our consolidated revenues increased from $347 million for 2011 to $2.203 billion in 2012.
Same facility revenues increased 3.1% for the year ended December 31, 2013 compared to the year ended December 31, 2012 and increased 4.5% for the year ended December 31, 2012 compared to the year ended December 31, 2011. The 3.1% increase for 2013 can be primarily attributed to the combined impact of a 3.0% increase in same facility revenue per equivalent admission and a 0.1% increase in same facility equivalent admissions. The 4.5% increase for 2012 can be primarily attributed to the combined impact of a 0.3% increase in same facility revenue per equivalent admission and a 4.1% increase in same facility equivalent admissions.
Consolidated admissions increased 0.2% in 2013 compared to 2012 and increased 7.4% in 2012 compared to 2011. Consolidated inpatient surgeries increased 0.5% and consolidated outpatient surgeries increased 0.9% during 2013 compared to 2012. Consolidated inpatient surgeries increased 4.5% and consolidated outpatient surgeries increased 9.3% during 2012 compared to 2011. Consolidated emergency room visits increased 0.8% during 2013 compared to 2012 and increased 12.5% during 2012 compared to 2011.
Same facility admissions increased 0.1% in 2013 compared to 2012 and increased 3.0% in 2012 compared to 2011. Same facility inpatient surgeries increased 0.3% and same facility outpatient surgeries declined 0.5% during 2013 compared to 2012. Same facility inpatient surgeries declined 0.1% and same facility outpatient surgeries increased 0.9% during 2012 compared to 2011. Same facility emergency room visits increased 0.7% during 2013 compared to 2012 and increased 8.6% during 2012 compared to 2011.
Same facility uninsured emergency room visits increased 2.2% and same facility uninsured admissions increased 7.6% during 2013 compared to 2012. Same facility uninsured emergency room visits increased 8.9% and same facility uninsured admissions increased 9.7% during 2012 compared to 2011.
67
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and other insurers and the uninsured for the years ended December 31, 2013, 2012 and 2011 are set forth below.
Years Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Medicare |
32 | % | 33 | % | 34 | % | ||||||
Managed Medicare |
13 | 12 | 11 | |||||||||
Medicaid |
8 | 8 | 9 | |||||||||
Managed Medicaid |
9 | 9 | 8 | |||||||||
Managed care and other insurers |
30 | 30 | 31 | |||||||||
Uninsured |
8 | 8 | 7 | |||||||||
|
|
|
|
|
|
|||||||
100 | % | 100 | % | 100 | % | |||||||
|
|
|
|
|
|
The approximate percentages of our inpatient revenues, before provision for doubtful accounts, related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care plans and other insurers and the uninsured for the years ended December 31, 2013, 2012 and 2011 are set forth below.
Years Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Medicare |
29 | % | 30 | % | 31 | % | ||||||
Managed Medicare |
10 | 10 | 9 | |||||||||
Medicaid |
6 | 6 | 8 | |||||||||
Managed Medicaid |
4 | 4 | 4 | |||||||||
Managed care and other insurers |
46 | 45 | 45 | |||||||||
Uninsured |
5 | 5 | 3 | |||||||||
|
|
|
|
|
|
|||||||
100 | % | 100 | % | 100 | % | |||||||
|
|
|
|
|
|
At December 31, 2013, we owned and operated 42 hospitals and 32 surgery centers in the state of Florida. Our Florida facilities revenues totaled $7.545 billion, $7.336 billion and $6.989 billion for the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, we owned and operated 36 hospitals and 24 surgery centers in the state of Texas. Our Texas facilities revenues totaled $8.192 billion, $8.012 billion and $7.829 billion for the years ended December 31, 2013, 2012 and 2011, respectively. During 2013, 2012 and 2011, respectively, 55%, 55% and 57% of our admissions and 46%, 47% and 50% of our revenues were generated by our Florida and Texas facilities. Uninsured admissions in Florida and Texas represented 62%, 61% and 63% of our uninsured admissions during 2013, 2012 and 2011, respectively.
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 2011, the Centers for Medicare and Medicaid Services (CMS) approved a Medicaid waiver that allows Texas to continue receiving supplemental Medicaid reimbursement while expanding its Medicaid managed care program. Thus, Texas is operating pursuant to a Waiver Program. The Texas Waiver Program includes two primary components: the continuation of an indigent care component and the establishment of a Delivery System Reform Incentive
68
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Revenue/Volume Trends (continued)
Payment (DSRIP) component. Initiatives under the DSRIP program are designed to provide incentive payments to hospitals and other providers for their investments in delivery system reforms that increase access to health care, improve the quality of care and enhance the health of patients and families they serve. We provide indigent care services in several communities in the state of Texas, in affiliation with other hospitals. The state of Texas has been involved in efforts to increase the indigent care provided by private hospitals. As a result of additional indigent care being provided by private hospitals, public hospital districts or counties in Texas have available funds that were previously devoted to indigent care. The public hospital districts or counties are under no contractual or legal obligation to provide such indigent care. The public hospital districts or counties have elected to transfer some portion of these available funds to the states Medicaid program. Such action is at the sole discretion of the public hospital districts or counties. It is anticipated that these contributions to the state will be matched with federal Medicaid funds. The state then may make supplemental payments to hospitals in the state for Medicaid services rendered. Hospitals receiving Medicaid supplemental payments may include those that are providing additional indigent care services. Our Texas Medicaid revenues included $393 million ($76 million DSRIP related and $317 million indigent care related), $387 million (all indigent care related) and $540 million (all indigent care related) during 2013, 2012 and 2011, respectively, of Medicaid supplemental payments. In addition, we receive supplemental payments in several other states. We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made waiver requests to the 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.
Electronic Health Record Incentive Payments
The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive payments, beginning in 2011, for eligible hospitals and professionals that adopt and meaningfully use certified electronic health record (EHR) technology. We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.
During 2013, 2012 and 2011, respectively, we recognized $216 million, $336 million and $210 million of electronic health record incentive income related to Medicare ($183 million, $252 million and $123 million) and Medicaid ($33 million, $84 million and $87 million) incentive programs. At December 31, 2013, we have $78 million of deferred EHR incentive income, which represents initial incentive payments received for which EHR incentive income has not been recognized.
We have incurred and will continue to incur both capital costs and operating expenses in order to implement our certified EHR technology and meet meaningful use requirements. These expenses are ongoing and are projected to continue over all stages of implementation of meaningful use. The timing of recognizing the expenses may not correlate with the receipt of the incentive payments and the recognition of incentive income. During 2013, 2012 and 2011, respectively, we incurred $113 million, $80 million and $77 million of operating expenses to implement our certified EHR technology and meet meaningful use.
69
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Electronic Health Record Incentive Payments (continued)
For 2014, we estimate EHR incentive income will be recognized in the range of $110 million to $130 million and that related EHR operating expenses will be in the range of $110 million to $130 million. Actual incentive payments and EHR operating expenses could vary from these estimates due to certain factors such as availability of federal funding for both Medicare and Medicaid incentive payments and our ability to continue to demonstrate meaningful use of certified EHR technology. The failure of our ability to continue to demonstrate meaningful use of EHR technology could have a material, adverse effect on our results of operations.
70
HCA HOLDINGS, INC.
MANAGEMENTS 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 for the years ended December 31, 2013, 2012 and 2011 (dollars in millions):
2013 | 2012 | 2011 | ||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | 38,040 | $ | 36,783 | $ | 32,506 | ||||||||||||||||||
Provision for doubtful accounts |
3,858 | 3,770 | 2,824 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Revenues |
34,182 | 100.0 | 33,013 | 100.0 | 29,682 | 100.0 | ||||||||||||||||||
Salaries and benefits |
15,646 | 45.8 | 15,089 | 45.7 | 13,440 | 45.3 | ||||||||||||||||||
Supplies |
5,970 | 17.5 | 5,717 | 17.3 | 5,179 | 17.4 | ||||||||||||||||||
Other operating expenses |
6,237 | 18.2 | 6,048 | 18.3 | 5,470 | 18.5 | ||||||||||||||||||
Electronic health record incentive income |
(216 | ) | (0.6 | ) | (336 | ) | (1.0 | ) | (210 | ) | (0.7 | ) | ||||||||||||
Equity in earnings of affiliates |
(29 | ) | (0.1 | ) | (36 | ) | (0.1 | ) | (258 | ) | (0.9 | ) | ||||||||||||
Depreciation and amortization |
1,753 | 5.1 | 1,679 | 5.1 | 1,465 | 4.9 | ||||||||||||||||||
Interest expense |
1,848 | 5.4 | 1,798 | 5.4 | 2,037 | 6.9 | ||||||||||||||||||
Losses (gains) on sales of facilities |
10 | | (15 | ) | | (142 | ) | (0.5 | ) | |||||||||||||||
Losses on retirement of debt |
17 | 0.1 | | | 481 | 1.6 | ||||||||||||||||||
Legal claim costs |
| | 175 | 0.5 | | | ||||||||||||||||||
Gain on acquisition of controlling interest in equity investment |
| | | | (1,522 | ) | (5.1 | ) | ||||||||||||||||
Termination of management agreement |
| | | | 181 | 0.6 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
31,236 | 91.4 | 30,119 | 91.2 | 26,121 | 88.0 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income before income taxes |
2,946 | 8.6 | 2,894 | 8.8 | 3,561 | 12.0 | ||||||||||||||||||
Provision for income taxes |
950 | 2.8 | 888 | 2.7 | 719 | 2.4 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income |
1,996 | 5.8 | 2,006 | 6.1 | 2,842 | 9.6 | ||||||||||||||||||
Net income attributable to noncontrolling interests |
440 | 1.2 | 401 | 1.2 | 377 | 1.3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income attributable to HCA Holdings, Inc. |
$ | 1,556 | 4.6 | $ | 1,605 | 4.9 | $ | 2,465 | 8.3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
% changes from prior year: |
||||||||||||||||||||||||
Revenues |
3.5 | % | 11.2 | % | 5.9 | % | ||||||||||||||||||
Income before income taxes |
1.8 | (18.7 | ) | 59.6 | ||||||||||||||||||||
Net income attributable to HCA Holdings, Inc. |
(3.1 | ) | (34.9 | ) | 104.3 | |||||||||||||||||||
Admissions(a) |
0.2 | 7.4 | 4.2 | |||||||||||||||||||||
Equivalent admissions(b) |
0.4 | 9.1 | 5.2 | |||||||||||||||||||||
Revenue per equivalent admission |
3.1 | 2.0 | 0.7 | |||||||||||||||||||||
Same facility % changes from prior year(c): |
||||||||||||||||||||||||
Revenues |
3.1 | 4.5 | 3.3 | |||||||||||||||||||||
Admissions(a) |
0.1 | 3.0 | 2.3 | |||||||||||||||||||||
Equivalent admissions(b) |
0.1 | 4.1 | 3.0 | |||||||||||||||||||||
Revenue per equivalent admission |
3.0 | 0.3 | 0.3 |
(a) |
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. |
(b) |
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. |
(c) |
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. |
71
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2013 and 2012
Net income attributable to HCA Holdings, Inc. totaled $1.556 billion, or $3.37 per diluted share, for the year ended December 31, 2013 compared to $1.605 billion, or $3.49 per diluted share, for the year ended December 31, 2012. Financial results for 2013 include net losses on sales of facilities of $10 million (pretax), or $0.02 per diluted share, and a loss on retirement of debt of $17 million (pretax), or $0.02 per diluted share. Financial results for 2012 include legal claim costs of $175 million (pretax), or $0.24 per diluted share, and net gains on sales of facilities of $15 million (pretax), or $0.02 per diluted share. All per diluted share disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 461.913 million shares and 459.403 million shares for the years ended December 31, 2013 and 2012, respectively.
During 2013, consolidated admissions increased 0.2% and same facility admissions increased 0.1% for 2013 compared to 2012. Consolidated inpatient surgical volumes increased 0.5%, and same facility inpatient surgeries increased 0.3% during 2013 compared to 2012. Consolidated outpatient surgical volumes increased 0.9%, and same facility outpatient surgeries declined 0.5% during 2013 compared to 2012. Emergency room visits increased 0.8% on a consolidated basis and increased 0.7% on a same facility basis during 2013 compared to 2012.
Revenues before provision for doubtful accounts increased 3.4% to $38.040 billion for 2013 from $36.783 billion for 2012. Provision for doubtful accounts increased $88 million from $3.770 billion in 2012 to $3.858 billion in 2013. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to uninsured amounts due directly from patients, including copayment and deductible amounts for patients who have health care coverage. The self-pay revenue deductions for charity care and uninsured discounts increased $404 million and $1.232 billion, respectively, during 2013 compared to 2012. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care, was 31.3% for 2013 compared to 29.5% for 2012. At December 31, 2013, our allowance for doubtful accounts represented approximately 93% of the $5.927 billion total patient due accounts receivable balance, including accounts, net of estimated contractual discounts, related to patients for which eligibility for Medicaid coverage or uninsured discounts was being evaluated.
Revenues increased 3.5% to $34.182 billion for 2013 from $33.013 billion for 2012. The increase in revenues was due primarily to the combined impact of a 3.1% increase in revenue per equivalent admission and a 0.4% increase in equivalent admissions compared to 2012. Same facility revenues increased 3.1% due primarily to the combined impact of a 3.0% increase in same facility revenue per equivalent admission and a 0.1% increase in same facility equivalent admissions compared to 2012.
Salaries and benefits, as a percentage of revenues, were 45.8% in 2013 and 45.7% in 2012. Salaries and benefits per equivalent admission increased 3.2% in 2013 compared to 2012. Same facility labor rate increases averaged 1.8% for 2013 compared to 2012. Share-based compensation expense increased from $56 million in 2012 to $113 million in 2013, and we expect the 2014 expense will increase by approximately $50 million to $60 million.
Supplies, as a percentage of revenues, were 17.5% in 2013 and 17.3% in 2012. Supply costs per equivalent admission increased 4.0% in 2013 compared to 2012. Supply costs per equivalent admission increased 5.7% for medical devices, increased 0.3% for pharmacy supplies and 5.1% for general medical and surgical items in 2013 compared to 2012.
72
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2013 and 2012 (continued)
Other operating expenses, as a percentage of revenues, declined to 18.2% in 2013 from 18.3% in 2012. 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. Provisions for losses related to professional liability risks were $314 million and $331 million for 2013 and 2012, respectively.
During 2013 and 2012, respectively, we recognized $216 million and $336 million of electronic health record incentive income related to Medicare ($183 million and $252 million) and Medicaid ($33 million and $84 million) incentive programs. We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.
Equity in earnings of affiliates declined from $36 million for 2012 to $29 million for 2013.
Depreciation and amortization, as a percentage of revenues, was 5.1% in 2013 and 2012. Depreciation expense was $1.733 billion for 2013 and $1.673 billion for 2012.
Interest expense increased to $1.848 billion for 2013 from $1.798 billion for 2012. The increase in interest expense was due to an increase in the average debt balance. Our average debt balance was $28.377 billion for 2013 compared to $27.397 billion for 2012. The average interest rate for our long-term debt declined from 6.6% for 2012 to 6.5% for 2013.
Net losses on sales of facilities were $10 million for 2013 and related to the sale of a hospital facility and other real estate investments. Net gains on sales of facilities were $15 million for 2012 and related to the sales of health care entity investments.
During 2013, we redeemed all $201 million aggregate principal amount of our 9 7 / 8 % senior secured second lien notes due 2017, at a redemption price of 104.938% of the principal amount. The pretax loss on retirement of debt related to this redemption was $17 million.
During January 2013, a Missouri judge ruled in favor of a nonprofit health foundation in a lawsuit against HCA. In the case, the plaintiff alleged HCA did not make the full level of capital expenditures and uncompensated care agreed to in connection with its purchase of hospitals from Health Midwest in 2003. We recorded $175 million of legal claim costs during the fourth quarter of 2012 related to this ruling.
The effective tax rate was 37.9% and 35.6% for 2013 and 2012, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provision for income taxes for 2012 was reduced by $33 million related to a reduction in interest expense related to taxing authority examinations. Excluding the effect of this adjustment, the effective tax rate for 2012 would have been 36.9%.
Net income attributable to noncontrolling interests increased from $401 million for 2012 to $440 million for 2013. The increase in net income attributable to noncontrolling interests related primarily to growth in operating results of a hospital joint venture in one of our Texas markets.
73
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2012 and 2011
Net income attributable to HCA Holdings, Inc. totaled $1.605 billion, or $3.49 per diluted share, for the year ended December 31, 2012 compared to $2.465 billion, or $4.97 per diluted share, for the year ended December 31, 2011. Financial results for 2012 include legal claim costs of $175 million (pretax), or $0.24 per diluted share, and net gains on sales of facilities of $15 million (pretax), or $0.02 per diluted share. Financial results for 2011 include net gains on sales of facilities of $142 million (pretax), or $0.16 per diluted share, a gain on the acquisition of controlling interest in an equity investment of $1.522 billion (pretax), or $2.87 per diluted share, losses on retirement of debt of $481 million (pretax), or $0.61 per diluted share, and termination of management agreement fees of $181 million (pretax), or $0.30 per diluted share. All per diluted share disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 459.403 million shares and 495.943 million shares for the years ended December 31, 2012 and 2011, respectively. During March 2011, we completed the initial public offering of 87.719 million shares of our common stock, and during September 2011, we repurchased 80.771 million shares of our common stock.
During 2012, consolidated admissions increased 7.4% and same facility admissions increased 3.0% for 2012, compared to 2011. Consolidated inpatient surgical volumes increased 4.5%, and same facility inpatient surgeries declined 0.1% during 2012 compared to 2011. Consolidated outpatient surgical volumes increased 9.3%, and same facility outpatient surgeries increased 0.9% during 2012 compared to 2011. Emergency room visits increased 12.5% on a consolidated basis and increased 8.6% on a same facility basis during 2012 compared to 2011.
Revenues before provision for doubtful accounts increased 13.2% to $36.783 billion for 2012 from $32.506 billion for 2011. Provision for doubtful accounts increased $946 million from $2.824 billion in 2011 to $3.770 billion in 2012. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to uninsured amounts due directly from patients, including copayment and deductible amounts for patients who have health care coverage. The self-pay revenue deductions for charity care and uninsured discounts increased $410 million and $1.271 billion, respectively, during 2012 compared to 2011. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as a percentage of the sum of revenues, the provision for doubtful accounts, uninsured discounts and charity care, was 29.5% for 2012 compared to 27.4% for 2011. At December 31, 2012, our allowance for doubtful accounts represented approximately 93% of the $5.228 billion total patient due accounts receivable balance, including accounts, net of estimated contractual discounts, related to patients for which eligibility for Medicaid coverage or uninsured discounts was being evaluated.
Revenues increased 11.2% to $33.013 billion for 2012 from $29.682 billion for 2011. The increase in revenues was due primarily to the combined impact of a 2.0% increase in revenue per equivalent admission and a 9.1% increase in equivalent admissions compared to 2011. Same facility revenues increased 4.5% due primarily to the combined impact of a 0.3% increase in same facility revenue per equivalent admission and a 4.1% increase in same facility equivalent admissions compared to 2011. The increase in revenues (and volume metrics) for 2012 compared to 2011 related primarily to the impact of the financial consolidation of the HCA-HealthONE LLC venture for periods subsequent to our acquisition of controlling interests during October 2011 (HealthONE revenues and volume metrics are not included in our same facility amounts). HealthONE revenues included in our consolidated revenues increased from $347 million in 2011 to $2.203 billion in 2012. Two adjustments (Rural Floor Provision Settlement and SSI ratios) related to Medicare revenues for prior period cost reports and the current period resulted in a net increase of $188 million to 2012 revenues.
Salaries and benefits, as a percentage of revenues, were 45.7% in 2012 and 45.3% in 2011. Salaries and benefits per equivalent admission increased 2.9% in 2012 compared to 2011. Same facility labor rate increases
74
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2012 and 2011 (continued)
averaged 1.7% for 2012 compared to 2011. Share-based compensation expense increased from $26 million in 2011 to $56 million in 2012.
Supplies, as a percentage of revenues, were 17.3% in 2012 and 17.4% in 2011. Supply costs per equivalent admission increased 1.2% in 2012 compared to 2011. Supply costs per equivalent admission declined 2.0% for pharmacy supplies, and increased 1.6% for medical devices and 0.1% for general medical and surgical items in 2012 compared to 2011.
Other operating expenses, as a percentage of revenues, declined to 18.3% in 2012 from 18.5% in 2011. 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. Other operating expenses include $234 million and $317 million of indigent care costs in certain Texas markets during 2012 and 2011, respectively. Provisions for losses related to professional liability risks were $331 million and $244 million for 2012 and 2011, respectively.
During 2012 and 2011, respectively, we recognized $336 million and $210 million of electronic health record incentive income related to Medicare ($252 million and $123 million) and Medicaid ($84 million and $87 million) incentive programs. We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.
Equity in earnings of affiliates declined from $258 million for 2011 to $36 million for 2012. Equity in earnings of affiliates during 2011 related primarily to our Denver, Colorado market joint venture, which effective November 1, 2011, we began consolidating due to our acquisition of the approximate 40% remaining ownership interest.
Depreciation and amortization increased, as a percentage of revenues, to 5.1% in 2012 from 4.9% in 2011. The consolidation of HealthONE for periods subsequent to November 1, 2011 represents $113 million of the increase in depreciation and amortization. Depreciation expense was $1.673 billion for 2012 and $1.461 billion for 2011.
Interest expense declined to $1.798 billion for 2012 from $2.037 billion for 2011. The decline in interest expense was due to a decline in the average interest rate. Our average debt balance was $27.397 billion for 2012 compared to $26.588 billion for 2011. The average interest rate for our long-term debt declined from 7.7% for 2011 to 6.6% for 2012.
Net gains on sales of facilities were $15 million for 2012 and related to the sales of health care entity investments. Net gains on sales of facilities were $142 million for 2011 and related to the sale of a hospital facility and other health care entity investments.
During January 2013, a Missouri judge ruled in favor of a nonprofit health foundation in a lawsuit against HCA. In the case, the plaintiff alleged HCA did not make the full level of capital expenditures and uncompensated care agreed to in connection with its purchase of hospitals from Health Midwest in 2003. We recorded $175 million of legal claim costs during the fourth quarter of 2012 related to this ruling.
75
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Results of Operations (continued)
Years Ended December 31, 2012 and 2011 (continued)
During October 2011, we completed our acquisition of the Colorado Health Foundations (Foundation) approximate 40% remaining ownership interest in the HealthONE joint venture for $1.450 billion. We recorded a gain on the acquisition of a controlling interest in an equity investment of $1.522 billion related to the remeasurement of our previous equity investment in HealthONE based upon our acquisition of the Foundations ownership interest and the resulting consolidation of the entire enterprise at estimated fair value.
During 2011, we recorded losses on retirement of debt of $481 million related to the redemptions of all $1.000 billion aggregate principal amount of our 9 1 / 8 % Senior Secured Notes due 2014, at a redemption price of 104.563% of the principal amount; $108 million aggregate principal amount of our 9 7 / 8 % Senior Secured Notes due 2017, at a redemption price of 109.875% of the principal amount; all of our outstanding $1.578 billion 9 5 / 8 %/10 3 / 8 % second lien toggle notes due 2016, at a redemption price of 106.783% of the principal amount and all of our outstanding $3.200 billion 9 1 / 4 % second lien notes due 2016, at a redemption price of 106.513% of the principal amount. There were no losses on retirement of debt during 2012.
Our Investors provided management and advisory services to the Company, pursuant to a management agreement among HCA and the Investors executed in connection with the Investors acquisition of HCA in November 2006. In March 2011, the management agreement was terminated pursuant to its terms upon completion of the initial public offering of our common stock, and the Investors were paid a final fee of $181 million.
The effective tax rate was 35.6% and 22.6% for 2012 and 2011, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provision for income taxes for 2012 was reduced by $33 million related to a reduction in interest expense related to taxing authority examinations. Our income before income taxes for 2011 included $1.255 billion of nontaxable gain related to the reported gain on the acquisition of a controlling interest in an equity investment. Excluding the effect of these adjustments, the effective tax rate for 2012 and 2011 would have been 36.9% and 37.3%, respectively.
Net income attributable to noncontrolling interests increased from $377 million for 2011 to $401 million for 2012. The increase in net income attributable to noncontrolling interests related primarily to growth in operating results of certain surgery center joint ventures.
Liquidity and Capital Resources
Our primary cash requirements are paying our operating expenses, servicing our debt, capital expenditures on our existing properties, acquisitions of hospitals and other health care entities, repurchases of our common stock, distributions to stockholders and distributions to noncontrolling interests. Our primary cash sources are cash flows from operating activities, issuances of debt and equity securities and dispositions of hospitals and other health care entities.
Cash provided by operating activities totaled $3.680 billion in 2013 compared to $4.175 billion in 2012 and $3.933 billion in 2011. Working capital totaled $2.342 billion at December 31, 2013 and $1.591 billion at December 31, 2012. The $495 million decline in cash provided by operating activities for 2013, compared to 2012, was primarily related to net negative changes in working capital items of $521 million. The $242 million increase in cash provided by operating activities for 2012, compared to 2011, was primarily related to a positive
76
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
impact from changes in working capital items of $236 million, as cash benefits from income items were offset by increased tax payments. Cash payments for interest and income taxes increased $185 million for 2013 compared to 2012 and increased $610 million for 2012 compared to 2011.
Cash used in investing activities was $2.346 billion, $2.063 billion and $2.995 billion in 2013, 2012 and 2011, respectively. Excluding acquisitions, capital expenditures were $1.943 billion in 2013, $1.862 billion in 2012 and $1.679 billion in 2011. We expended $481 million, $258 million and $1.682 billion for acquisitions of hospitals and health care entities during 2013, 2012 and 2011, respectively. Expenditures for acquisitions in 2013 included three hospitals, expenditures for acquisitions in 2012 included one hospital and expenditures for acquisitions in 2011 included eight hospital facilities, seven of which were related to the acquisition of the remaining interests in HealthONE. Planned capital expenditures are expected to approximate $2.2 billion in 2014. At December 31, 2013, there were projects under construction which had an estimated additional cost to complete and equip over the next five years of approximately $1.8 billion. We expect to finance capital expenditures with internally generated and borrowed funds.
During 2013, we received cash of $33 million from sales of a hospital, real estate investments and other health care entities. We also received net cash proceeds of $36 million related to net changes in our investments. During 2012, we received cash of $30 million from sales of real estate investments and other health care entities. We also received net cash proceeds of $16 million related to net changes in our investments. During 2011, we received cash of $281 million from sales of one hospital, other health care entities and real estate investments. We also received net cash proceeds of $80 million related to net changes in our investments.
Cash used in financing activities totaled $1.625 billion in 2013, $1.780 billion in 2012 and $976 million in 2011. During 2013, we had a decline of $692 million in our indebtedness and used cash of $500 million for repurchases of common stock. During 2012, we had a net increase of $1.724 billion in our indebtedness. During 2011, we received cash of $2.506 billion related to the issuance of common stock in conjunction with our initial public offering; we used cash of $1.503 billion for repurchases of common stock; and we used cash proceeds from issuance of common stock and available cash provided by operations to make net debt repayments of $1.589 billion. During 2013, 2012 and 2011, we paid $16 million, $3.148 billion and $31 million, respectively, in distributions to our stockholders. During 2013, 2012 and 2011, we made distributions to noncontrolling interests of $435 million, $401 million and $378 million, respectively. We paid debt issuance costs of $5 million, $62 million and $92 million for 2013, 2012 and 2011, respectively. During 2013, 2012 and 2011, we received income tax benefits of $113 million, $174 million and $63 million, respectively, for certain items (primarily the cash distributions to holders of our stock options and exercises of stock options) that were deductible expenses for tax purposes, but were recognized as adjustments to stockholders deficit for financial reporting purposes. We or our affiliates, including affiliates of the Investors, 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. The timing, prices, and sizes of purchases depend upon prevailing trading prices, general economic and market conditions, and other factors, including applicable securities laws. Funds for the repurchase of debt or equity securities have, and are expected to, come primarily from cash generated from operations and borrowed funds.
In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($2.002 billion as of December 31, 2013 and $1.972 billion as of January 31, 2014) and anticipated access to public and private debt and equity markets.
77
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Liquidity and Capital Resources (continued)
During 2012, our Board of Directors declared three distributions to our stockholders and holders of certain vested share-based awards. The distributions totaled $6.50 per share and vested share-based award, or $3.142 billion in the aggregate. The distributions were funded using funds available under our existing senior secured credit facilities and proceeds from the December 2012 issuance of $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. There were no distributions declared during 2013 or 2011.
Investments of our professional liability insurance subsidiaries, to maintain statutory equity and pay claims, totaled $510 million and $570 million at December 31, 2013 and 2012, respectively. The insurance subsidiary maintained net reserves for professional liability risks of $315 million and $352 million at December 31, 2013 and 2012, respectively. Our facilities are insured by our 100% owned insurance subsidiary for losses up to $50 million per occurrence; however, this coverage is subject to a $5 million per occurrence self-insured retention. Net reserves for the self-insured professional liability risks retained were $940 million and $896 million at December 31, 2013 and 2012, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $326 million. We estimate that approximately $264 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.
Financing Activities
We are a highly leveraged company with significant debt service requirements. Our debt totaled $28.376 billion and $28.930 billion at December 31, 2013 and 2012, respectively. Our interest expense was $1.848 billion for 2013 and $1.798 billion for 2012.
During February 2012, we issued $1.350 billion aggregate principal amount of 5.875% senior secured first lien notes due 2022. After the payment of related fees and expenses, we used the net proceeds for general corporate purposes.
During October 2012, we issued $2.500 billion aggregate principal amount of notes, comprised of $1.250 billion of 4.75% senior secured first lien notes due 2023 and $1.250 billion of 5.875% senior unsecured notes due 2023. After the payment of related fees and expenses, we used the net proceeds for general corporate purposes, which included the repayment of an existing term loan due November 2013.
During December 2012, we issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. After the payment of related fees and expenses, we used the net proceeds to pay a distribution to our stockholders and holders of certain vested stock awards.
During March 2013, we redeemed all $201 million aggregate principal amount of our 9 7 / 8 % senior secured second lien notes due 2017, at a redemption price of 104.938% of the principal amount. The pretax loss on retirement of debt related to this redemption was $17 million.
During November 2013, our $329 million senior secured European term loan facility matured.
Management believes that cash flows from operations, amounts available under our senior secured credit facilities and our anticipated access to public and private debt markets will be sufficient to meet expected liquidity needs during the next twelve months.
78
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Contractual Obligations and Off-Balance Sheet Arrangements
As of December 31, 2013, maturities of contractual obligations and other commercial commitments are presented in the table below (dollars in millions):
Payments Due by Period | ||||||||||||||||||||
Contractual Obligations(a) |
Total | Current | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||||
Long-term debt including interest, excluding the senior secured credit facilities(b) |
$ | 31,302 | $ | 2,122 | $ | 4,674 | $ | 3,108 | $ | 21,398 | ||||||||||
Loans outstanding under the senior secured credit facilities, including interest(b) |
9,184 | 435 | 4,382 | 4,367 | | |||||||||||||||
Operating leases(c) |
1,822 | 293 | 482 | 307 | 740 | |||||||||||||||
Purchase and other obligations(c) |
25 | 18 | 7 | | | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total contractual obligations |
$ | 42,333 | $ | 2,868 | $ | 9,545 | $ | 7,782 | $ | 22,138 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Commitment Expiration by Period | ||||||||||||||||||||
Other Commercial Commitments Not Recorded on the Consolidated Balance Sheet |
Total | Current | 2-3 Years | 4-5 Years | After 5 Years | |||||||||||||||
Surety bonds(d) |
$ | 45 | $ | 43 | $ | 2 | $ | | $ | | ||||||||||
Letters of credit(e) |
58 | 20 | 38 | | | |||||||||||||||
Physician commitments(f) |
24 | 20 | 4 | | | |||||||||||||||
Guarantees(g) |
2 | | | | 2 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total commercial commitments |
$ | 129 | $ | 83 | $ | 44 | $ | | $ | 2 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) |
We have not included obligations to pay net estimated professional liability claims ($1.255 billion at December 31, 2013, including net reserves of $315 million relating to the 100% owned insurance subsidiary) in this table. The estimated professional liability claims, which occurred prior to 2007, are expected to be funded by the designated investment securities that are restricted for this purpose ($510 million at December 31, 2013). We also have not included obligations related to unrecognized tax benefits of $462 million at December 31, 2013, as we cannot reasonably estimate the timing or amounts of cash payments, if any, at this time. |
(b) |
Estimates of interest payments assume that interest rates and borrowing spreads at December 31, 2013, remain constant during the period presented. |
(c) |
Amounts relate to future operating lease obligations, purchase obligations and other obligations and are not recorded in our consolidated balance sheet. Amounts also include physician commitments that are recorded in our consolidated balance sheet. |
(d) |
Amounts relate primarily to instances in which we have agreed to indemnify various commercial insurers who have provided surety bonds to cover self-insured workers compensation claims, utility deposits and damages for malpractice cases which were awarded to plaintiffs by the courts. These cases are currently under appeal and the bonds will not be released by the courts until the cases are closed. |
(e) |
Amounts relate primarily to various insurance programs and employee benefit plan obligations for which we have letters of credit outstanding. |
(f) |
In consideration for physicians relocating to the communities in which our hospitals are located and agreeing to engage in private practice for the benefit of the respective communities, we make advances to physicians, normally over a period of one year, to assist in establishing the physicians practices. The actual amount of these commitments to be advanced often depends upon the financial results of the physicians private practice during the recruitment agreement payment period. The physician commitments reflected were based on our maximum exposure on effective agreements at December 31, 2013. |
(g) |
We have entered into guarantee agreements related to certain leases. |
79
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Market Risk
We are exposed to market risk related to changes in market values of securities. The investments in debt and equity securities of our 100% owned insurance subsidiaries were $506 million and $4 million, respectively, at December 31, 2013. These investments are carried at fair value, with changes in unrealized gains and losses being recorded as adjustments to other comprehensive income. At December 31, 2013, we had a net unrealized gain of $10 million on the insurance subsidiaries investment securities.
We are exposed to market risk related to market illiquidity. Investments in debt and equity securities of our 100% owned insurance subsidiaries could be impaired by the inability to access the capital markets. Should the 100% owned insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize other-than-temporary impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.
We are also exposed to market risk related to changes in interest rates, and we periodically enter into interest rate swap agreements to manage our exposure to these fluctuations. Our interest rate swap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the swap agreements represent balances used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions. The interest payments under these agreements are settled on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income, and changes in the fair value of derivatives which have not been designated as hedges are recorded in operations.
With respect to our interest-bearing liabilities, approximately $3.540 billion of long-term debt at December 31, 2013 was subject to variable rates of interest, while the remaining balance in long-term debt of $24.836 billion at December 31, 2013 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. Borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% and (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period. The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio. The average effective interest rate for our long-term debt declined from 6.6% for 2012 to 6.5% for 2013.
The estimated fair value of our total long-term debt was $29.603 billion at December 31, 2013. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. Based on a hypothetical 1% increase in interest rates, the potential annualized reduction to future pretax earnings would be approximately $35 million. To mitigate the impact of fluctuations in interest rates, we generally target a portion of our debt portfolio to be maintained at fixed rates.
Our international operations and the related market risks associated with foreign currencies are currently insignificant to our results of operations and financial position.
80
HCA HOLDINGS, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Market Risk (continued)
Financial Instruments
Derivative financial instruments are employed to manage risks, including foreign currency and interest rate exposures, and are not used for trading or speculative purposes. We recognize derivative instruments, such as interest rate swap agreements and foreign exchange contracts, in the consolidated balance sheets at fair value. Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders equity, as a component of other comprehensive income, depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or a cash flow hedge. Gains and losses on derivatives designated as cash flow hedges, to the extent they are effective, are recorded in other comprehensive income, and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. Changes in the fair value of derivatives not qualifying as hedges, and for any portion of a hedge that is ineffective, are reported in earnings.
The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments to expense over the remaining period of the debt originally covered by the terminated swap.
Effects of Inflation and Changing Prices
Various federal, state and local laws have been enacted that, in certain cases, limit our ability to increase prices. Revenues for general, acute care hospital services rendered to Medicare patients are established under the federal governments prospective payment system. Total fee-for-service Medicare revenues were 23.3%, 25.1% and 25.8% of our revenues for 2013, 2012 and 2011, respectively.
Management believes hospital industry operating margins have been, and may continue to be, under significant pressure because of changes in payer and service mix and growth in operating expenses in excess of the increase in prospective payments under the Medicare program. In addition, as a result of increasing regulatory and competitive pressures, our ability to maintain operating margins through price increases to non-Medicare patients is limited.
IRS Examinations
We expect the IRS Examination Division will begin an audit of HCA Holdings, Inc.s 2011 federal income tax return in 2014.
Management believes HCA Holdings, Inc., its predecessors and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with the IRS and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.
81
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Information with respect to this Item is provided under the caption Market Risk under Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.
Item 8. Financial Statements and Supplementary Data
Information with respect to this Item is contained in our consolidated financial statements indicated in the Index to Consolidated Financial Statements on Page F-1 of this annual report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
1. Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this annual report.
2. Internal Control Over Financial Reporting
(a) Managements Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective, can provide only reasonable assurance with respect to financial statement preparation and presentation.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework). Based on our assessment under the framework in Internal Control Integrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2013.
Ernst & Young, LLP, the independent registered public accounting firm that audited our consolidated financial statements included in this Form 10-K, has issued a report on our internal control over financial reporting, which is included herein.
(b) Attestation Report of the Independent Registered Public Accounting Firm
82
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
HCA Holdings, Inc.
We have audited HCA Holdings, Inc.s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). HCA Holdings, Inc.s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the companys internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, HCA Holdings, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of HCA Holdings, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders deficit, and cash flows for each of the three years in the period ended December 31, 2013 and our report dated February 26, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Nashville, Tennessee
February 26, 2014
83
(c) Changes in Internal Control Over Financial Reporting
During the fourth quarter of 2013, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item regarding the identity and business experience of our directors and executive officers is set forth under the heading Election of Directors in the definitive proxy materials of HCA to be filed in connection with our 2014 Annual Meeting of Stockholders with respect to our directors and is set forth in Item 1 of Part I of this annual report on Form 10-K with respect to our executive officers. The information required by this Item contained in such definitive proxy materials is incorporated herein by reference.
Information on the beneficial ownership reporting for our directors and executive officers required by this Item is contained under the caption Section 16(a) Beneficial Ownership Reporting Compliance in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders and is incorporated herein by reference.
Information on our Audit and Compliance Committee and Audit Committee Financial Experts required by this Item is contained under the caption Corporate Governance in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders and is incorporated herein by reference.
We have a Code of Conduct which is applicable to all our directors, officers and employees (the Code of Conduct). The Code of Conduct is available on the Ethics and Compliance and Corporate Governance pages of our website at www.hcahealthcare.com. To the extent required pursuant to applicable SEC regulations, we intend to post amendments to or waivers from our Code of Conduct (to the extent applicable to our chief executive officer, principal financial officer or principal accounting officer) at this location on our website or report the same on a Current Report on Form 8-K. Our Code of Conduct is available free of charge upon request to our Corporate Secretary, HCA Holdings, Inc., One Park Plaza, Nashville, TN 37203.
Item 11. Executive Compensation
The information required by this Item is set forth under the headings Executive Compensation and Compensation Committee Interlocks and Insider Participation in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information about security ownership of certain beneficial owners required by this Item is set forth under the heading Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders, which information is incorporated herein by reference.
84
This table provides certain information as of December 31, 2013 with respect to our equity compensation plans:
EQUITY COMPENSATION PLAN INFORMATION
(a) | (b) | (c) | ||||||||||
Number of securities
to be issued upon exercise of outstanding options, warrants and rights |
Weighted-average
exercise price of outstanding options, warrants and rights |
Number of securities remaining
available for future issuance under equity compensation plans (excluding securities reflected in column(a) ) |
||||||||||
Equity compensation plans approved by security holders |
42,683,900 | (1) | $ | 15.82 | (1) | 32,269,100 | ||||||
Equity compensation plans not approved by security holders |
| | | |||||||||
|
|
|
|
|
|
|||||||
Total |
42,683,900 | $ | 15.82 | 32,269,100 | ||||||||
|
|
|
|
|
|
(1) |
Includes 7,497,800 restricted share units, a portion of which vests solely based upon continued employment over a specific period of time and a portion vests based upon continued employment over a specific period of time and the achievement of predetermined financial targets over time. The weighted average exercise price does not take these restricted share units into account. |
* |
For additional information concerning our equity compensation plans, see the discussion in Note 2 Share-Based Compensation in the notes to the consolidated financial statements. |
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is set forth under the headings Certain Relationships and Related Party Transactions and Corporate Governance in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders, which information is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by this Item is set forth under the heading Principal Accountant Fees and Services in the definitive proxy materials to be filed in connection with our 2014 Annual Meeting of Stockholders, which information is incorporated herein by reference.
85
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of the report:
1. Financial Statements. The accompanying Index to Consolidated Financial Statements on page F-1 of this annual report on Form 10-K is provided in response to this item.
2. List of Financial Statement Schedules. All schedules are omitted because the required information is either not present, not present in material amounts or presented within the consolidated financial statements.
3. List of Exhibits
2.1 | |
Agreement and Plan of Merger, dated July 24, 2006, by and among HCA Inc., Hercules Holding II, LLC and Hercules Acquisition Corporation (filed as Exhibit 2.1 to the Companys Current Report on Form 8-K filed July 25, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
2.2 | |
Merger Agreement, dated November 22, 2010, by and among HCA Inc., HCA Holdings, Inc., and HCA Merger Sub LLC (filed as Exhibit 2.1 to the Companys Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference). |
||
2.3 | |
Membership Interest Purchase Agreement by and between HealthONE, D/B/A The Colorado Health Foundation, and HealthONE of Denver, Inc., dated August 2, 2011 (Registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request) (filed as Exhibit 2.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference). |
||
3.1 | |
Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference). |
||
3.2 | |
Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference). |
||
4.1 | |
Specimen Certificate for shares of Common Stock, par value $0.01 per share, of the Company. (filed as Exhibit 4.1 to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference). |
||
4.2 | |
Security Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary grantors party thereto and The Bank of New York, as collateral agent (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed November 24, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.3 | |
Pledge Agreement, dated as of November 17, 2006, among HCA Inc., the subsidiary pledgors party thereto and The Bank of New York, as collateral agent (filed as Exhibit 4.3 to the Companys Current Report of Form 8-K filed November 24, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.4(a) | |
$13,550,000,000 1,000,000,000 Credit Agreement, dated as of November 17, 2006, among HCA Inc., HCA UK Capital Limited, the lending institutions from time to time parties thereto, Banc of America Securities LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A. and Citicorp North America, Inc., as co-syndication agents and Merrill Lynch Capital Corporation, as documentation agent (filed as Exhibit 4.8 to the Companys Current Report on Form 8-K filed November 24, 2006 (File No. 001-11239), and incorporated herein by reference). |
86
4.4(b) | |
Amendment No. 1 to the Credit Agreement, dated as of February 16, 2007, among HCA Inc., HCA UK Capital Limited, the lending institutions from time to time parties thereto, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., and Citicorp North America, Inc., as Co-Syndication Agents, Banc of America Securities, LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and bookrunners, Deutsche Bank Securities and Wachovia Capital Markets LLC, as joint bookrunners and Merrill Lynch Capital Corporation, as documentation agent (filed as Exhibit 4.7(b) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.4(c) | |
Amendment No. 2 to the Credit Agreement, dated as of March 2, 2009, among HCA Inc., HCA UK Capital Limited, the lending institutions from time to time parties thereto, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., and Citicorp North America, Inc., as Co-Syndication Agents, Banc of America Securities, LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and bookrunners, Deutsche Bank Securities and Wachovia Capital Markets LLC, as joint bookrunners and Merrill Lynch Capital Corporation, as documentation agent (filed as exhibit 4.8(c) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-11239), and incorporated herein by reference). |
||
4.4(d) | |
Amendment No. 3 to the Credit Agreement, dated as of June 18, 2009, among HCA Inc., HCA UK Capital Limited, the lending institutions from time to time parties thereto, Bank of America, N.A., as administrative agent, JPMorgan Chase Bank, N.A., and Citicorp North America, Inc., as Co-Syndication Agents, Banc of America Securities, LLC, J.P. Morgan Securities Inc., Citigroup Global Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and bookrunners, Deutsche Bank Securities and Wachovia Capital Markets LLC, as joint bookrunners and Merrill Lynch Capital Corporation, as documentation agent (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed June 22, 2009, and incorporated herein by reference). |
||
4.4(e) | |
Extension Amendment No. 1 to the Credit Agreement, dated as of April 6, 2010, among HCA Inc., HCA UK Capital Limited, the lending institutions from time to time parties thereto, Bank of America, N.A., as administrative agent and collateral agent (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 8, 2010, and incorporated herein by reference). |
||
4.4(f) | |
Amended and Restated Joinder Agreement No. 1, dated as of November 8, 2010, by and among each of the financial institutions listed as a Replacement-1 Revolving Credit Lender on Schedule A thereto, HCA Inc., Bank of America, N.A., as Administrative Agent and as Collateral Agent, and the other parties listed on the signature pages thereto (filed as Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q filed November 9, 2010, and incorporated herein by reference). |
||
4.4(g) | |
Restatement Agreement, dated as of May 4, 2011, by and among HCA Inc., HCA UK Capital Limited, the lenders party thereto and Bank of America, N.A., as administrative agent and collateral agent to the Credit Agreement, dated as of November 17, 2006, as amended on February 16, 2007, March 2, 2009, June 18, 2009, April 6, 2010 and November 8, 2010 (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed May 9, 2011, and incorporated herein by reference). |
||
4.4(h) | |
Extension Amendment No. 1, dated as of April 25, 2012, by and among HCA Inc., HCA UK Capital Limited, each of the U.S. Guarantors, each of the European Guarantors, the lenders party thereto and Bank of America, N.A., as administrative agent, swingline lender and letter of credit issuer (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 25, 2012, and incorporated herein by reference). |
87
4.4(i) | |
Joinder Agreement No. 1, dated as of October 22, 2012, by and among each of the financial institutions listed as a Replacement-2012 Revolving Credit Lender on Schedule A thereto, HCA Inc., Bank of America, N.A., as Administrative Agent and as Collateral Agent, and the other parties listed on the signature pages thereto (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed October 23, 2012, and incorporated herein by reference). |
||
4.4(j) | |
Joinder Agreement, dated as of April 25, 2013, by and among HCA Inc., as borrower, Bank of America, N.A., as administrative agent and collateral agent and the lenders party thereto (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed May 1, 2013, and incorporated herein by reference). |
||
4.4(k) | |
Joinder Agreement No. 2, dated as of May 3, 2013, by and among HCA Inc., as borrower, Bank of America, N. A., as administrative agent and collateral agent and the lenders party thereto (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed May 9, 2013, and incorporated herein by reference). |
||
4.4(l) | |
Joinder Agreement No. 3, dated as of May 22, 2013, by and among HCA Inc., as borrower, Bank of America, N. A., as administrative agent and collateral agent and the lenders party thereto (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed May 28, 2013, and incorporated herein by reference). |
||
4.5 | |
Indenture, dated as of April 22, 2009, among HCA Inc., the guarantors party thereto, Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York, as trustee (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed April 28, 2009, and incorporated herein by reference). |
||
4.6 | |
Security Agreement, dated as November 17, 2006, and amended and restated as of March 2, 2009, among the Company, the Subsidiary Grantors named therein and Bank of America, N.A., as Collateral Agent (filed as exhibit 4.10 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-11239), and incorporated herein by reference). |
||
4.7 | |
Pledge Agreement, dated as of November 17, 2006, and amended and restated as of March 2, 2009, among the Company, the Subsidiary Pledgors named therein and Bank of America, N.A., as Collateral Agent (filed as exhibit 4.11 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-11239), and incorporated herein by reference). |
||
4.8 | |
Form of 8 1 / 2 % Senior Secured Notes due 2019 (included in Exhibit 4.5). |
||
4.9 | |
Indenture, dated as of August 11, 2009, among HCA Inc., the guarantors party thereto, Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York, as trustee (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed August 17, 2009, and incorporated herein by reference). |
||
4.10 | |
Form of 7 7 / 8 % Senior Secured Notes due 2020 (included in Exhibit 4.9). |
||
4.11 | |
Indenture, dated as of March 10, 2010, among HCA Inc., the guarantors party thereto, Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York, as trustee (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed March 12, 2010, and incorporated herein by reference). |
||
4.12 | |
Form of 7 1 / 4 % Senior Secured Notes due 2020 (included in Exhibit 4.11). |
||
4.13 | |
$2,500,000,000 Credit Agreement, dated as of September 30, 2011, by and among HCA Inc., the subsidiary borrowers party thereto, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent (filed as Exhibit 4.4 to the Companys Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). |
88
4.14 | |
Security Agreement, dated as of September 30, 2011, by and among HCA Inc., the subsidiary borrowers party thereto and Bank of America, N.A., as collateral agent (filed as Exhibit 4.5 to the Companys Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). |
||
4.15(a) | |
General Intercreditor Agreement, dated as of November 17, 2006, between Bank of America, N.A., as First Lien Collateral Agent, and The Bank of New York, as Junior Lien Collateral Agent (filed as Exhibit 4.13(a) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.15(b) | |
Additional General Intercreditor Agreement, dated as of April 22, 2009, by and among Bank of America, N.A., in its capacity as First Lien Collateral Agent, The Bank of New York Mellon, in its capacity as Junior Lien Collateral Agent and in its capacity as 2006 Second Lien Trustee and The Bank of New York Mellon Trust Company, N.A., in its capacity as 2009 Second Lien Trustee (filed as Exhibit 4.6 to the Companys Current Report on Form 8-K filed April 28, 2009, and incorporated herein by reference). |
||
4.15(c) | |
Additional General Intercreditor Agreement, dated as of August 11, 2009, by and among Bank of America, N.A., in its capacity as First Lien Collateral Agent, The Bank of New York Mellon, in its capacity as Junior Lien Collateral Agent and in its capacity as trustee for the Second Lien Notes issued on November 17, 2006, and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the Second Lien Notes issued on February 19, 2009 (filed as Exhibit 4.6 to the Companys Current Report on Form 8-K filed August 17, 2009, and incorporated herein by reference). |
||
4.15(d) | |
Receivables Intercreditor Agreement, dated as of November 17, 2006, among Bank of America, N.A., as ABL Collateral Agent, Bank of America, N.A., as CF Collateral Agent and The Bank of New York, as Bonds Collateral Agent (filed as Exhibit 4.13(b) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.15(e) | |
Additional Receivables Intercreditor Agreement, dated as of April 22, 2009, by and between Bank of America, N.A. as ABL Collateral Agent, and Bank of America, N.A. as New First Lien Collateral Agent (filed as Exhibit 4.7 to the Companys Current Report on Form 8-K filed April 28, 2009, and incorporated herein by reference). |
||
4.15(f) | |
Additional Receivables Intercreditor Agreement, dated as of August 11, 2009, by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as New First Lien Collateral Agent (filed as Exhibit 4.7 to the Companys Current Report on Form 8-K filed August 17, 2009, and incorporated herein by reference). |
||
4.15(g) | |
First Lien Intercreditor Agreement, dated as of April 22, 2009, among Bank of America, N.A. as Collateral Agent, Bank of America, N.A. as Authorized Representative under the Credit Agreement and Law Debenture Trust Company of New York as the Initial Additional Authorized Representative (filed as Exhibit 4.5 to the Companys Current Report on Form 8-K filed April 28, 2009, and incorporated herein by reference). |
||
4.15(h) | |
Additional General Intercreditor Agreement, dated as of August 1, 2011, by and among Bank of America, N.A., in its capacity as First Lien Collateral Agent, The Bank of New York Mellon, in its capacity as Junior Lien Collateral Agent and in its capacity as trustee for the Second Lien Notes issued on November 17, 2006, and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the Second Lien Notes issued on February 19, 2009 (filed as Exhibit 4.9 to the Companys Current Report on Form 8-K filed August 1, 2011, and incorporated herein by reference). |
||
4.15(i) | |
Additional Receivables Intercreditor Agreement, dated as of August 1, 2011 by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as New First Lien Collateral Agent (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). |
89
4.15(j) | |
Additional General Intercreditor Agreement, dated as of February 16, 2012, by and among Bank of America, N.A., in its capacity as First Lien Collateral Agent, The Bank of New York Mellon, in its capacity as Junior Lien Collateral Agent and in its capacity as trustee for the Second Lien Notes issued on November 17, 2006, and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the Second Lien Notes issued on February 19, 2009 (filed as Exhibit 4.9 to the Companys Current Report on Form 8-K filed February 16, 2012, and incorporated herein by reference). |
||
4.15(k) | |
Additional Receivables Intercreditor Agreement, dated as of February 16, 2012, by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as New First Lien Collateral Agent (filed as Exhibit 4.10 to the Companys Current Report on Form 8-K filed February 16, 2012, and incorporated herein by reference). |
||
4.15(l) | |
Additional General Intercreditor Agreement, dated as of October 23, 2012, by and among Bank of America, N.A., in its capacity as First Lien Collateral Agent, The Bank of New York Mellon, in its capacity as Junior Lien Collateral Agent and in its capacity as trustee for the Second Lien Notes issued on November 17, 2006, and The Bank of New York Mellon Trust Company, N.A., in its capacity as trustee for the Second Lien Notes issued on February 19, 2009 (filed as Exhibit 4.10 to the Companys Current Report on Form 8-K filed October 23, 2012, and incorporated herein by reference). |
||
4.15(m) | |
Additional Receivables Intercreditor Agreement, dated as of October 23, 2012, by and between Bank of America, N.A., as ABL Collateral Agent, and Bank of America, N.A., as New First Lien Collateral Agent (filed as Exhibit 4.11 to the Companys Current Report on Form 8-K filed October 23, 2012, and incorporated herein by reference). |
||
4.16 | |
Registration Rights Agreement, dated as of November 22, 2010, among HCA Holdings, Inc., Hercules Holding II, LLC and certain other parties thereto (filed as Exhibit 4.4 to the Companys Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference). |
||
4.17 | |
Registration Rights Agreement, dated as of March 16, 1989, by and among HCA-Hospital Corporation of America and the persons listed on the signature pages thereto (filed as Exhibit 4.14 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.18 | |
Assignment and Assumption Agreement, dated as of February 10, 1994, between HCA-Hospital Corporation of America and the Company relating to the Registration Rights Agreement, as amended (filed as Exhibit 4.15 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.19(a) | |
Indenture, dated as of December 16, 1993 between the Company and The First National Bank of Chicago, as Trustee (filed as Exhibit 4.16(a) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.19(b) | |
First Supplemental Indenture, dated as of May 25, 2000 between the Company and Bank One Trust Company, N.A., as Trustee (filed as Exhibit 4.16(b) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.19(c) | |
Second Supplemental Indenture, dated as of July 1, 2001 between the Company and Bank One Trust Company, N.A., as Trustee (filed as Exhibit 4.16(c) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.19(d) | |
Third Supplemental Indenture, dated as of December 5, 2001 between the Company and The Bank of New York, as Trustee (filed as Exhibit 4.16(d) to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
90
4.19(e) | |
Fourth Supplemental Indenture, dated as of November 14, 2006, between the Company and The Bank of New York, as Trustee (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed November 16, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.20 | |
Form of 7.5% Debentures due 2023 (filed as Exhibit 4.17 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.21 | |
Form of 8.36% Debenture due 2024 (filed as Exhibit 4.18 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.22 | |
Form of Fixed Rate Global Medium-Term Note (filed as Exhibit 4.19 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.23 | |
Form of Floating Rate Global Medium-Term Note (filed as Exhibit 4.20 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.24 | |
Form of 7.69% Note due 2025 (filed as Exhibit 4.10 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2004 (File No. 001-11239), and incorporated herein by reference). |
||
4.25 | |
Form of 7.19% Debenture due 2015 (filed as Exhibit 4.22 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.26 | |
Form of 7.50% Debenture due 2095 (filed as Exhibit 4.23 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.27 | |
Form of 7.05% Debenture due 2027 (filed as Exhibit 4.24 to the Companys Registration Statement on Form S-4 (File No. 333-145054), and incorporated herein by reference). |
||
4.28 | |
7.50% Note due 2033 in the principal amount of $250,000,000 (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K dated November 6, 2003 (File No. 001-11239), and incorporated herein by reference). |
||
4.29 | |
5.75% Note due 2014 in the principal amount of $500,000,000 (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K dated March 8, 2004 (File No. 001-11239), and incorporated herein by reference). |
||
4.30(a) | |
6.375% Note due 2015 in the principal amount of $500,000,000 (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K dated November 16, 2004 (File No. 001-11239), and incorporated herein by reference). |
||
4.30(b) | |
6.375% Note due 2015 in the principal amount of $250,000,000 (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K dated November 16, 2004 (File No. 001-11239), and incorporated herein by reference). |
||
4.31(a) | |
6.500% Note due 2016 in the principal amount of $500,000,000 (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed on February 8, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.31(b) | |
6.500% Note due 2016 in the principal amount of $500,000,000 (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed on February 8, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
4.32 | |
Indenture, dated as of November 23, 2010, among HCA Holdings, Inc., Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York, as trustee (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference). |
91
4.33 | |
Form of 7 3 / 4 % Senior Notes due 2021 (included in Exhibit 4.32). |
||
4.34 | |
Form of Indenture of HCA Inc. (filed as Exhibit 4.2 to the Registrants Registration Statement on Form S-3 (File No. 333-175791), and incorporated herein by reference). |
||
4.35 | |
Supplemental Indenture No. 1, dated as of August 1, 2011, among HCA Inc., HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed August 1, 2011, and incorporated herein by reference). |
||
4.36 | |
Supplemental Indenture No. 2, dated as of August 1, 2011, among HCA Inc., HCA Holdings, Inc., the subsidiary guarantors named therein, Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K filed August 1, 2011, and incorporated herein by reference). |
||
4.37 | |
Form of 7.50% Senior Notes Due 2022 (included in Exhibit 4.35). |
||
4.38 | |
Form of 6.50% Senior Secured Notes Due 2020 (included in Exhibit 4.36). |
||
4.39 | |
Supplemental Indenture No. 3, dated as of October 3, 2011, among HCA Inc., HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). |
||
4.40 | |
Form of 8.00% Senior Notes Due 2018 (included in Exhibit 4.39). |
||
4.41 | |
Supplemental Indenture No. 4, dated as of February 16, 2012, among HCA Inc., HCA Holdings, Inc., the subsidiary guarantors named therein, Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed February 16, 2012, and incorporated herein by reference). |
||
4.42 | |
Form of 5.875% Senior Secured Notes due 2022 (included in Exhibit 4.41). |
||
4.43 | |
Supplemental Indenture No. 5, dated as of October 23, 2012, among HCA Inc., HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (Unsecured Notes) (filed as Exhibit 4.3 to the Companys Current Report on Form 8-K filed October 23, 2012, and incorporated herein by reference). |
||
4.44 | |
Supplemental Indenture No. 6, dated as of October 23, 2012, among HCA Inc., HCA Holdings, Inc., the subsidiary guarantors named therein, Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent (Secured Notes) (filed as Exhibit 4.4 to the Companys Current Report on Form 8-K filed October 23, 2012, and incorporated herein by reference). |
||
4.45 | |
Form of 5.875% Senior Notes due 2023 (included in Exhibit 4.43). |
||
4.46 | |
Form of 4.75% Senior Secured Notes due 2023 (included in Exhibit 4.44). |
||
4.47 | |
Indenture, dated as of December 6, 2012, among HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as registrar, paying agent and transfer agent (filed as Exhibit 4.1 to the Companys Current Report on Form 8-K filed December 6, 2012, and incorporated herein by reference). |
||
4.48 | |
Supplemental Indenture No. 1, dated as of December 6, 2012, among HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as registrar, paying agent and transfer agent (filed as Exhibit 4.2 to the Companys Current Report on Form 8-K filed December 6, 2012, and incorporated herein by reference). |
92
4.49 | |
Form of 6.25% Senior Notes due 2021 (included in Exhibit 4.48) |
||
10.1 | |
HCA-Hospital Corporation of America Nonqualified Initial Option Plan (filed as Exhibit 4.6 to the Companys Registration Statement on Form S-3 (File No. 33-52379), and incorporated herein by reference).* |
||
10.2 | |
Form of Indemnity Agreement with certain officers and directors (filed as Exhibit 10.3 to the Companys Registration Statement on Form S-4 (File No. 333-145054) and incorporated herein by reference). |
||
10.3 | |
Columbia/HCA Healthcare Corporation 2000 Equity Incentive Plan (filed as Exhibit A to the Companys Proxy Statement for the Annual Meeting of Stockholders on May 25, 2000 (File No. 001-11239), and incorporated herein by reference).* |
||
10.4 | |
Form of Non-Qualified Stock Option Award Agreement (Officers) (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K dated February 2, 2005 (File No. 001-11239), and incorporated herein by reference).* |
||
10.5 | |
HCA 2005 Equity Incentive Plan (filed as Exhibit B to the Companys Proxy Statement for the Annual Meeting of Shareholders on May 26, 2005 (File No. 001-11239), and incorporated herein by reference).* |
||
10.6 | |
Form of 2005 Non-Qualified Stock Option Agreement (Officers) (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K dated October 6, 2005 (File No. 001-11239), and incorporated herein by reference).* |
||
10.7 | |
Form of 2006 Non-Qualified Stock Option Award Agreement (Officers) (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K dated February 1, 2006 (File No. 001-11239), and incorporated herein by reference).* |
||
10.8(a) | |
2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates as Amended and Restated (filed as Exhibit 10.11(b) to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference).* |
||
10.8(b) | |
First Amendment to 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as amended and restated (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, and incorporated herein by reference).* |
||
10.8(c) | |
Second Amendment to the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as amended and restated (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference).* |
||
10.9(a) | |
Management Stockholders Agreement dated November 17, 2006 (filed as Exhibit 10.12 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
10.9(b) | |
Form of Omnibus Amendment to HCA Holdings, Incs Management Stockholders Agreements (filed as Exhibit 10.39 to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference). |
||
10.10 | |
Form of Option Rollover Agreement (filed as Exhibit 10.14 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference).* |
||
10.11 | |
Form of Stock Option Agreement (2007) (filed as Exhibit 10.15 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference).* |
93
10.12 | |
Form of Stock Option Agreement (2008) (filed as Exhibit 10.16 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2007 (File No. 001-11239), and incorporated herein by reference).* |
||
10.13 | |
Form of Stock Option Agreement (2009) (filed as Exhibit 10.17 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-11239), and incorporated herein by reference).* |
||
10.14 | |
Form of Stock Option Agreement (2010) (filed as Exhibit 10.20 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference).* |
||
10.15 | |
Form of 2x Time Stock Option Agreement (filed as Exhibit 10.2 to the Companys Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009, and incorporated herein by reference).* |
||
10.16 | |
Form Stock Option Agreement (2011) (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and incorporated herein by reference).* |
||
10.17(a) | |
Form of Stock Appreciation Right Award Agreement Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed February 14, 2012, and incorporated herein by reference).* |
||
10.17(b) | |
Form of 2014 Stock Appreciation Right Award Agreement Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated.* |
||
10.18 | |
Form of Director Restricted Share Unit Agreement (Initial Award) Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed February 14, 2012, and incorporated herein by reference).* |
||
10.19 | |
Form of Director Restricted Share Unit Agreement (Annual Award) Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.3 to the Companys Current Report on Form 8-K filed February 14, 2012, and incorporated herein by reference).* |
||
10.20 | |
Exchange and Purchase Agreement (filed as Exhibit 10.16 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference). |
||
10.21 | |
Civil and Administrative Settlement Agreement, dated December 14, 2000 between the Company, the United States Department of Justice and others (filed as Exhibit 99.2 to the Companys Current Report on Form 8-K dated December 20, 2000 (File No. 001-11239), and incorporated herein by reference). |
||
10.22 | |
Plea Agreement, dated December 14, 2000 between the Company, Columbia Homecare Group, Inc., Columbia Management Companies, Inc. and the United States Department of Justice (filed as Exhibit 99.3 to the Companys Current Report on Form 8-K dated December 20, 2000 (File No. 001-11239), and incorporated herein by reference). |
||
10.23 | |
Corporate Integrity Agreement, dated December 14, 2000 between the Company and the Office of Inspector General of the United States Department of Health and Human Services (filed as Exhibit 99.4 to the Companys Current Report on Form 8-K dated December 20, 2000 (File No. 001-11239), and incorporated herein by reference). |
||
10.24 | |
Management Agreement, dated November 17, 2006, among HCA Inc., Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co. L.P., Dr. Thomas F. Frist, Jr., Patricia F. Elcan, William R. Frist and Thomas F. Frist III, and Merrill Lynch Global Partners, Inc. (filed as Exhibit 10.20 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference). |
94
10.25 | |
Retirement Agreement between the Company and Thomas F. Frist, Jr., M.D. dated as of January 1, 2002 (filed as Exhibit 10.30 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (File No. 001-11239), and incorporated herein by reference).* |
||
10.26 | |
Amended and Restated HCA Supplemental Executive Retirement Plan, effective December 22, 2010, except as provided therein (filed as Exhibit 10.26 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference).* |
||
10.27 | |
Amended and Restated HCA Restoration Plan, effective December 22, 2010 (filed as Exhibit 10.27 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference).* |
||
10.28(a) | |
Amended and Restated Employment Agreement dated August 2, 2013 (Richard M. Bracken) (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference).* |
||
10.28(b) | |
Employment Agreement dated November 16, 2006 (R. Milton Johnson) (filed as Exhibit 10.27(c) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference).* |
||
10.28(c) | |
Employment Agreement dated November 16, 2006 (Samuel N. Hazen) (filed as Exhibit 10.27(d) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001-11239), and incorporated herein by reference).* |
||
10.28(d) | |
Employment Agreement dated November 16, 2006 (Charles J. Hall) (filed as Exhibit 10.28(d) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2012, and incorporated herein by reference).* |
||
10.28(e) | |
Amendment to Employment Agreement effective February 9, 2011 (R. Milton Johnson) (filed as Exhibit 10.29(i) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference).* |
||
10.28(f) | |
Amendment to Employment Agreement effective February 9, 2011 (Samuel N. Hazen) (filed as Exhibit 10.29(j) to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference).* |
||
10.28(g) | |
Second Amendment to Employment Agreement effective January 1, 2014 (R. Milton Johnson).* |
||
10.29 | |
Administrative Settlement Agreement dated June 25, 2003 by and between the United States Department of Health and Human Services, acting through the Centers for Medicare and Medicaid Services, and the Company (filed as Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2003 (File No. 001-11239), and incorporated herein by reference). |
||
10.30 | |
Civil Settlement Agreement by and among the United States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, the TRICARE Management Activity (filed as Exhibit 10.2 to the Companys Quarterly Report of Form 10-Q for the quarter ended June 30, 2003 (File No. 001-11239), and incorporated herein by reference). |
||
10.31(a) | |
Form of Amended and Restated Limited Liability Company Agreement of Hercules Holding II, LLC dated as of November 17, 2006, among Hercules Holding II, LLC and certain other parties thereto (filed as Exhibit 10.3 to the Companys Registration Statement on Form 8-A, filed April 29, 2008 (File No. 000-18406) and incorporated herein by reference). |
95
10.31(b) | |
Form of Amendment to the Amended and Restated Limited Liability Company Agreement of Hercules Holding II, LLC (filed as Exhibit 10.32(a) to the Companys Registration Statement on Form S-1 (File No. 333-171369), and incorporated herein by reference). |
||
10.32 | |
Indemnification Priority and Information Sharing Agreement, dated as of November 1, 2009, between HCA Inc. and certain other parties thereto (filed as Exhibit 10.35 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 001-11239), and incorporated herein by reference). |
||
10.33 | |
Assignment and Assumption Agreement, dated November 22, 2010, by and among HCA Inc., HCA Holdings, Inc. and HCA Merger Sub LLC (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference). |
||
10.34 | |
Omnibus Amendment to Various Stock and Option Plans and the Management Stockholders Agreement, dated November 22, 2010 (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference).* |
||
10.35 | |
Omnibus Amendment to Stock Option Agreements Issued Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as amended, effective February 16, 2011 (filed as Exhibit 10.38 to the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference).* |
||
10.36 | |
Stockholders Agreement, dated as of March 9, 2011, by and among the Company, Hercules Holding II, LLC and the other signatories thereto (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed March 16, 2011, and incorporated herein by reference). |
||
10.37 | |
Amendment, dated as of September 21, 2011, to the Stockholders Agreement, dated as of March 9, 2011 (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed September 21, 2011, and incorporated herein by reference). |
||
10.38 | |
HCA Holdings, Inc. 2011 Senior Officer Performance Excellence Program (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 5, 2011, and incorporated herein by reference).* |
||
10.39 | |
Form of 2011 PEP Restricted Share Unit Agreement (Officers) (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed April 5, 2011, and incorporated herein by reference).* |
||
10.40 | |
Form of Director Restricted Share Unit Agreement Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.5 to the Companys Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference).* |
||
10.41 | |
HCA Holdings, Inc. 2012 Senior Officer Performance Excellence Program (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed April 4, 2012, and incorporated herein by reference).* |
||
10.42 | |
Form of 2012 PEP Restricted Share Unit Agreement (Officers) (filed as Exhibit 10.2 to the Companys Current Report on Form 8-K filed April 4, 2012, and incorporated herein by reference).* |
||
10.43 | |
Share Repurchase Agreement, dated as of October 28, 2013, by and between HCA Holdings, Inc. and Hercules Holdings II, LLC (filed as Exhibit 10.1 to the Companys Current Report on Form 8-K filed November 1, 2013, and incorporated herein by reference). |
||
10.44 | |
HCA Holdings, Inc. 2013 Senior Officer Performance Excellence Program.* |
||
10.45 | |
Form of 2013 PEP Restricted Share Unit Agreement (Officers).* |
||
10.46 | |
Executive Severance Policy.* |
||
10.47 | |
Form of Restricted Share Unit Agreement (Richard M. Bracken).* |
96
10.48 | |
Form of Director Restricted Share Unit Agreement (Initial Award) under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated.* |
||
10.49 | |
Form of Director Restricted Share Unit Agreement (Annual Award) under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated.* |
||
21 | |
List of Subsidiaries. |
||
23 | |
Consent of Ernst & Young LLP. |
||
31.1 | |
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
||
31.2 | |
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
||
32 | |
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
||
101 | |
The following financial information from our annual report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 26, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the consolidated balance sheets at December 31, 2013 and 2012, (ii) the consolidated income statements for the years ended December 31, 2013, 2012 and 2011, (iii) the consolidated comprehensive income statements for the years ended December 31, 2013, 2012 and 2011, (iv) the consolidated statements of stockholders deficit for the years ended December 31, 2013, 2012 and 2011, (v) the consolidated statements of cash flows for the years ended December 31, 2013, 2012 and 2011, and (vi) the notes to consolidated financial statements. |
* | Management compensatory plan or arrangement. |
97
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
HCA HOLDINGS, INC. | ||
By: |
/s/ R. M ILTON J OHNSON |
|
R. Milton Johnson | ||
President and Chief Executive Officer |
Dated: February 26, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
Title |
Date |
||
/s/ R ICHARD M. B RACKEN Richard M. Bracken |
Chairman of the Board | February 26, 2014 | ||
/s/ R. M ILTON J OHNSON R. Milton Johnson |
President, Chief Executive Officer and Director (Principal Executive Officer) |
February 26, 2014 | ||
/s/ W ILLIAM B. R UTHERFORD William B. Rutherford |
Chief Financial Officer and Executive Vice President (Principal Financial Officer and Principal Accounting Officer) |
February 26, 2014 | ||
/s/ R OBERT J. D ENNIS Robert J. Dennis |
Director |
February 26, 2014 |
||
/s/ N ANCY -A NN D E P ARLE Nancy-Ann DeParle |
Director |
February 26, 2014 |
||
/s/ T HOMAS F. F RIST III Thomas F. Frist III |
Director | February 26, 2014 | ||
/s/ W ILLIAM R. F RIST William R. Frist |
Director | February 26, 2014 | ||
/s/ A NN H. L AMONT Ann H. Lamont |
Director | February 26, 2014 | ||
/s/ J AY O. L IGHT Jay O. Light |
Director | February 26, 2014 | ||
/s/ M ICHAEL W. M ICHELSON Michael W. Michelson |
Director | February 26, 2014 | ||
/s/ G EOFFREY G. M EYERS Geoffrey G. Meyers |
Director | February 26, 2014 | ||
/s/ S TEPHEN G. P AGLIUCA Stephen G. Pagliuca |
Director | February 26, 2014 | ||
/s/ W AYNE J. R ILEY Wayne J. Riley |
Director | February 26, 2014 | ||
/s/ J OHN W. R OWE John W. Rowe |
Director | February 26, 2014 |
98
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
F-2 | ||||
Consolidated Financial Statements: |
||||
Consolidated Income Statements for the years ended December 31, 2013, 2012 and 2011 |
F-3 | |||
Consolidated Comprehensive Income Statements for the years ended December 31, 2013, 2012 and 2011 |
F-4 | |||
F-5 | ||||
F-6 | ||||
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011 |
F-7 | |||
F-8 | ||||
F-49 |
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
HCA Holdings, Inc.
We have audited the accompanying consolidated balance sheets of HCA Holdings, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, stockholders deficit, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of HCA Holdings, Inc. at December 31, 2013 and 2012, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), HCA Holdings, Inc.s internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework), and our report dated February 26, 2014 expressed an unqualified opinion thereon.
/s/ Ernst & Young LLP
Nashville, Tennessee
February 26, 2014
F-2
CONSOLIDATED INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Dollars in millions, except per share amounts)
2013 | 2012 | 2011 | ||||||||||
Revenues before the provision for doubtful accounts |
$ | 38,040 | $ | 36,783 | $ | 32,506 | ||||||
Provision for doubtful accounts |
3,858 | 3,770 | 2,824 | |||||||||
|
|
|
|
|
|
|||||||
Revenues |
34,182 | 33,013 | 29,682 | |||||||||
Salaries and benefits |
15,646 | 15,089 | 13,440 | |||||||||
Supplies |
5,970 | 5,717 | 5,179 | |||||||||
Other operating expenses |
6,237 | 6,048 | 5,470 | |||||||||
Electronic health record incentive income |
(216 | ) | (336 | ) | (210 | ) | ||||||
Equity in earnings of affiliates |
(29 | ) | (36 | ) | (258 | ) | ||||||
Depreciation and amortization |
1,753 | 1,679 | 1,465 | |||||||||
Interest expense |
1,848 | 1,798 | 2,037 | |||||||||
Losses (gains) on sales of facilities |
10 | (15 | ) | (142 | ) | |||||||
Losses on retirement of debt |
17 | | 481 | |||||||||
Legal claim costs |
| 175 | | |||||||||
Gain on acquisition of controlling interest in equity investment |
| | (1,522 | ) | ||||||||
Termination of management agreement |
| | 181 | |||||||||
|
|
|
|
|
|
|||||||
31,236 | 30,119 | 26,121 | ||||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
2,946 | 2,894 | 3,561 | |||||||||
Provision for income taxes |
950 | 888 | 719 | |||||||||
|
|
|
|
|
|
|||||||
Net income |
1,996 | 2,006 | 2,842 | |||||||||
Net income attributable to noncontrolling interests |
440 | 401 | 377 | |||||||||
|
|
|
|
|
|
|||||||
Net income attributable to HCA Holdings, Inc. |
$ | 1,556 | $ | 1,605 | $ | 2,465 | ||||||
|
|
|
|
|
|
|||||||
Per share data: |
||||||||||||
Basic earnings per share |
$ | 3.50 | $ | 3.65 | $ | 5.17 | ||||||
Diluted earnings per share |
$ | 3.37 | $ | 3.49 | $ | 4.97 | ||||||
Shares used in earnings per share calculations (in thousands): |
||||||||||||
Basic |
445,066 | 440,178 | 476,609 | |||||||||
Diluted |
461,913 | 459,403 | 495,943 |
The accompanying notes are an integral part of the consolidated financial statements.
F-3
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Dollars in millions)
2013 | 2012 | 2011 | ||||||||||
Net income |
$ | 1,996 | $ | 2,006 | $ | 2,842 | ||||||
Other comprehensive income (loss) before taxes: |
||||||||||||
Foreign currency translation |
18 | 37 | (9 | ) | ||||||||
Unrealized (losses) gains on available-for-sale securities |
(7 | ) | 6 | 2 | ||||||||
Defined benefit plans |
134 | (89 | ) | (67 | ) | |||||||
Pension costs included in salaries and benefits |
38 | 46 | 25 | |||||||||
|
|
|
|
|
|
|||||||
172 | (43 | ) | (42 | ) | ||||||||
Change in fair value of derivative financial instruments |
3 | (151 | ) | (311 | ) | |||||||
Interest costs included in interest expense |
131 | 122 | 341 | |||||||||
|
|
|
|
|
|
|||||||
134 | (29 | ) | 30 | |||||||||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss) before taxes |
317 | (29 | ) | (19 | ) | |||||||
Income taxes (benefits) related to other comprehensive income items |
117 | (12 | ) | (7 | ) | |||||||
|
|
|
|
|
|
|||||||
Other comprehensive income (loss) |
200 | (17 | ) | (12 | ) | |||||||
|
|
|
|
|
|
|||||||
Comprehensive income |
2,196 | 1,989 | 2,830 | |||||||||
Comprehensive income attributable to noncontrolling interests |
440 | 401 | 377 | |||||||||
|
|
|
|
|
|
|||||||
Comprehensive income attributable to HCA Holdings, Inc. |
$ | 1,756 | $ | 1,588 | $ | 2,453 | ||||||
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-4
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2013 AND 2012
(Dollars in millions)
2013 | 2012 | |||||||
ASSETS | ||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 414 | $ | 705 | ||||
Accounts receivable, less allowance for doubtful accounts of $5,488 and $4,846 |
5,208 | 4,672 | ||||||
Inventories |
1,179 | 1,086 | ||||||
Deferred income taxes |
489 | 385 | ||||||
Other |
747 | 915 | ||||||
|
|
|
|
|||||
8,037 | 7,763 | |||||||
Property and equipment, at cost: |
||||||||
Land |
1,487 | 1,429 | ||||||
Buildings |
11,211 | 10,720 | ||||||
Equipment |
17,519 | 16,430 | ||||||
Construction in progress |
856 | 948 | ||||||
|
|
|
|
|||||
31,073 | 29,527 | |||||||
Accumulated depreciation |
(17,454 | ) | (16,342 | ) | ||||
|
|
|
|
|||||
13,619 | 13,185 | |||||||
Investments of insurance subsidiaries |
448 | 515 | ||||||
Investments in and advances to affiliates |
121 | 104 | ||||||
Goodwill and other intangible assets |
5,903 | 5,539 | ||||||
Deferred loan costs |
237 | 290 | ||||||
Other |
466 | 679 | ||||||
|
|
|
|
|||||
$ | 28,831 | $ | 28,075 | |||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 1,803 | $ | 1,768 | ||||
Accrued salaries |
1,193 | 1,120 | ||||||
Other accrued expenses |
1,913 | 1,849 | ||||||
Long-term debt due within one year |
786 | 1,435 | ||||||
|
|
|
|
|||||
5,695 | 6,172 | |||||||
Long-term debt |
27,590 | 27,495 | ||||||
Professional liability risks |
949 | 973 | ||||||
Income taxes and other liabilities |
1,525 | 1,776 | ||||||
Stockholders deficit: |
||||||||
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 439,604,000 shares 2013 and 443,200,200 shares 2012 |
4 | 4 | ||||||
Capital in excess of par value |
1,386 | 1,753 | ||||||
Accumulated other comprehensive loss |
(257 | ) | (457 | ) | ||||
Retained deficit |
(9,403 | ) | (10,960 | ) | ||||
|
|
|
|
|||||
Stockholders deficit attributable to HCA Holdings, Inc. |
(8,270 | ) | (9,660 | ) | ||||
Noncontrolling interests |
1,342 | 1,319 | ||||||
|
|
|
|
|||||
(6,928 | ) | (8,341 | ) | |||||
|
|
|
|
|||||
$ | 28,831 | $ | 28,075 | |||||
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Dollars in millions)
Equity (Deficit) Attributable to HCA Holdings, Inc. |
Equity
Attributable to Noncontrolling Interests |
Total | ||||||||||||||||||||||||||
Common Stock |
Capital in
Excess of Par Value |
Accumulated
Other Comprehensive Loss |
Retained
Deficit |
|||||||||||||||||||||||||
Shares
(000) |
Par
Value |
|||||||||||||||||||||||||||
Balances, December 31, 2010 |
427,459 | $ | 4 | $ | 386 | $ | (428 | ) | $ | (11,888 | ) | $ | 1,132 | $ | (10,794 | ) | ||||||||||||
Comprehensive income |
(12 | ) | 2,465 | 377 | 2,830 | |||||||||||||||||||||||
Issuance of common stock |
87,719 | 1 | 2,505 | 2,506 | ||||||||||||||||||||||||
Repurchase of common stock |
(80,771 | ) | (1 | ) | (1,502 | ) | (1,503 | ) | ||||||||||||||||||||
Share-based benefit plans |
3,071 | 35 | 35 | |||||||||||||||||||||||||
Distributions |
(378 | ) | (378 | ) | ||||||||||||||||||||||||
Consolidation of acquired controlling interest in equity investment |
93 | 93 | ||||||||||||||||||||||||||
Reclassification of equity securities with contingent redemption rights |
141 | 141 | ||||||||||||||||||||||||||
Other |
36 | 20 | 56 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances, December 31, 2011 |
437,478 | 4 | 1,601 | (440 | ) | (9,423 | ) | 1,244 | (7,014 | ) | ||||||||||||||||||
Comprehensive income |
(17 | ) | 1,605 | 401 | 1,989 | |||||||||||||||||||||||
Share-based benefit plans |
5,722 | 169 | 169 | |||||||||||||||||||||||||
Distributions |
(3,142 | ) | (401 | ) | (3,543 | ) | ||||||||||||||||||||||
Adjustment to the acquired controlling interest in equity investment |
30 | 30 | ||||||||||||||||||||||||||
Other |
(17 | ) | 45 | 28 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances, December 31, 2012 |
443,200 | 4 | 1,753 | (457 | ) | (10,960 | ) | 1,319 | (8,341 | ) | ||||||||||||||||||
Comprehensive income |
200 | 1,556 | 440 | 2,196 | ||||||||||||||||||||||||
Repurchase of common stock |
(10,656 | ) | (500 | ) | (500 | ) | ||||||||||||||||||||||
Share-based benefit plans |
7,060 | 139 | 139 | |||||||||||||||||||||||||
Distributions |
(435 | ) | (435 | ) | ||||||||||||||||||||||||
Other |
(6 | ) | 1 | 18 | 13 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balances, December 31, 2013 |
439,604 | $ | 4 | $ | 1,386 | $ | (257 | ) | $ | (9,403 | ) | $ | 1,342 | $ | (6,928 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated financial statements.
F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011
(Dollars in millions)
2013 | 2012 | 2011 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net income |
$ | 1,996 | $ | 2,006 | $ | 2,842 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||||
Increase (decrease) in cash from operating assets and liabilities: |
||||||||||||
Accounts receivable |
(4,395 | ) | (3,896 | ) | (3,248 | ) | ||||||
Inventories and other assets |
(19 | ) | (122 | ) | (18 | ) | ||||||
Accounts payable and accrued expenses |
142 | 355 | 313 | |||||||||
Provision for doubtful accounts |
3,858 | 3,770 | 2,824 | |||||||||
Depreciation and amortization |
1,753 | 1,679 | 1,465 | |||||||||
Income taxes |
143 | 96 | 912 | |||||||||
Losses (gains) on sales of facilities |
10 | (15 | ) | (142 | ) | |||||||
Losses on retirement of debt |
17 | | 481 | |||||||||
Legal claim costs |
| 175 | | |||||||||
Gain on acquisition of controlling interest in equity investment |
| | (1,522 | ) | ||||||||
Amortization of deferred loan costs |
55 | 62 | 70 | |||||||||
Share-based compensation |
113 | 56 | 26 | |||||||||
Pay-in-kind interest |
| | (78 | ) | ||||||||
Other |
7 | 9 | 8 | |||||||||
|
|
|
|
|
|
|||||||
Net cash provided by operating activities |
3,680 | 4,175 | 3,933 | |||||||||
|
|
|
|
|
|
|||||||
Cash flows from investing activities: |
||||||||||||
Purchase of property and equipment |
(1,943 | ) | (1,862 | ) | (1,679 | ) | ||||||
Acquisition of hospitals and health care entities |
(481 | ) | (258 | ) | (1,682 | ) | ||||||
Disposal of hospitals and health care entities |
33 | 30 | 281 | |||||||||
Change in investments |
36 | 16 | 80 | |||||||||
Other |
9 | 11 | 5 | |||||||||
|
|
|
|
|
|
|||||||
Net cash used in investing activities |
(2,346 | ) | (2,063 | ) | (2,995 | ) | ||||||
|
|
|
|
|
|
|||||||
Cash flows from financing activities: |
||||||||||||
Issuances of long-term debt |
| 4,850 | 5,500 | |||||||||
Net change in revolving bank credit facilities |
970 | (685 | ) | (449 | ) | |||||||
Repayment of long-term debt |
(1,662 | ) | (2,441 | ) | (6,640 | ) | ||||||
Distributions to noncontrolling interests |
(435 | ) | (401 | ) | (378 | ) | ||||||
Payment of debt issuance costs |
(5 | ) | (62 | ) | (92 | ) | ||||||
Issuance of common stock |
| | 2,506 | |||||||||
Repurchase of common stock |
(500 | ) | | (1,503 | ) | |||||||
Distributions to stockholders |
(16 | ) | (3,148 | ) | (31 | ) | ||||||
Income tax benefits |
113 | 174 | 63 | |||||||||
Other |
(90 | ) | (67 | ) | 48 | |||||||
|
|
|
|
|
|
|||||||
Net cash used in financing activities |
(1,625 | ) | (1,780 | ) | (976 | ) | ||||||
|
|
|
|
|
|
|||||||
Change in cash and cash equivalents |
(291 | ) | 332 | (38 | ) | |||||||
Cash and cash equivalents at beginning of period |
705 | 373 | 411 | |||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents at end of period |
$ | 414 | $ | 705 | $ | 373 | ||||||
|
|
|
|
|
|
|||||||
Interest payments |
$ | 1,832 | $ | 1,723 | $ | 1,987 | ||||||
Income tax payments (refunds), net |
$ | 694 | $ | 618 | $ | (256 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 ACCOUNTING POLICIES
Reporting Entity and Corporate Reorganization
On November 17, 2006, HCA Inc. was acquired by a private investor group, including affiliates of or funds sponsored by Bain Capital Partners, LLC, Kohlberg Kravis Roberts & Co., BAML Capital Partners and HCA founder, Dr. Thomas F. Frist Jr. (collectively, the Investors) and by members of management and certain other investors. The transaction was accounted for as a recapitalization in our financial statements, with no adjustments to the historical basis of our assets and liabilities.
On November 22, 2010, HCA Inc. reorganized by creating a new holding company structure (the Corporate Reorganization). HCA Holdings, Inc. became the parent company, and HCA Inc. became HCA Holdings, Inc.s 100% owned direct subsidiary. As part of the Corporate Reorganization, HCA Inc.s outstanding shares of common stock were automatically converted, on a share for share basis, into identical shares of HCA Holdings, Inc.s common stock. As a result of the Corporate Reorganization, HCA Holdings, Inc. was deemed the successor registrant to HCA Inc. under the Securities Exchange Act of 1934.
During March 2011, we completed the initial public offering of 87,719,300 shares of our common stock. Upon the completion of a secondary offering in February 2013, we no longer qualify as a controlled company under the applicable New York Stock Exchange (NYSE) listing standards and were required to appoint a board of directors comprised of a majority of independent members within one year of such date. Our common stock is traded on the NYSE (symbol HCA).
HCA Holdings, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term affiliates includes direct and indirect subsidiaries of HCA Holdings, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At December 31, 2013, these affiliates owned and operated 165 hospitals, 115 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Holdings, Inc.s facilities are located in 20 states and England. The terms Company, HCA, we, our or us, as used herein and unless otherwise stated or indicated by context, refer to HCA Inc. and its affiliates prior to the Corporate Reorganization and to HCA Holdings, Inc. and its affiliates after the Corporate Reorganization. The term facilities or hospitals refer to entities owned and operated by affiliates of HCA and the term employees refers to employees of affiliates of HCA.
Basis of Presentation
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
The consolidated financial statements include all subsidiaries and entities controlled by HCA. We generally define control as ownership of a majority of the voting interest of an entity. The consolidated financial statements include entities in which we absorb a majority of the entitys expected losses, receive a majority of the entitys expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Significant intercompany transactions have been eliminated. Investments in entities we do not control, but in which we have a substantial ownership interest and can exercise significant influence, are accounted for using the equity method.
We have completed various acquisitions and joint venture transactions. The accounts of these entities have been included in our consolidated financial statements for periods subsequent to our acquisition of controlling interests. The majority of our expenses are cost of revenue items. Costs that could be classified as general and
F-8
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Basis of Presentation (continued)
administrative include our corporate office costs, which were $287 million, $248 million and $228 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Revenues
Revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments. Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Revenues related to uninsured patients and copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts (based primarily on historical collection experience) related to these uninsured accounts to record net self pay revenues at the estimated amounts we expect to collect. Our revenues from third party payers and the uninsured for the years ended December 31, are summarized in the following table (dollars in millions):
2013 | Ratio | 2012 | Ratio | 2011 | Ratio | |||||||||||||||||||
Medicare |
$ | 7,951 | 23.3 | % | $ | 8,292 | 25.1 | % | $ | 7,653 | 25.8 | % | ||||||||||||
Managed Medicare |
3,279 | 9.6 | 2,954 | 8.9 | 2,442 | 8.2 | ||||||||||||||||||
Medicaid |
1,480 | 4.3 | 1,464 | 4.4 | 1,845 | 6.2 | ||||||||||||||||||
Managed Medicaid |
1,570 | 4.6 | 1,504 | 4.6 | 1,265 | 4.3 | ||||||||||||||||||
Managed care and other insurers |
18,654 | 54.6 | 17,998 | 54.5 | 15,703 | 52.9 | ||||||||||||||||||
International (managed care and other insurers) |
1,175 | 3.4 | 1,060 | 3.2 | 938 | 3.2 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
34,109 | 99.8 | 33,272 | 100.7 | 29,846 | 100.6 | |||||||||||||||||||
Uninsured |
2,677 | 7.8 | 2,580 | 7.8 | 1,846 | 6.2 | ||||||||||||||||||
Other |
1,254 | 3.7 | 931 | 2.8 | 814 | 2.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues before provision for doubtful accounts |
38,040 | 111.3 | 36,783 | 111.3 | 32,506 | 109.5 | ||||||||||||||||||
Provision for doubtful accounts |
(3,858 | ) | (11.3 | ) | (3,770 | ) | (11.3 | ) | (2,824 | ) | (9.5 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
$ | 34,182 | 100.0 | % | $ | 33,013 | 100.0 | % | $ | 29,682 | 100.0 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility recorded estimates will change by a material amount. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the cost report filing and settlement process). The adjustments to estimated Medicare and Medicaid reimbursement amounts and disproportionate-share funds, which resulted in net increases to revenues, related primarily to cost reports filed during the respective year were $41 million, $50 million and $40 million in 2013, 2012 and 2011, respectively. The adjustments to estimated reimbursement amounts, which resulted in net increases to revenues, related primarily to cost reports filed during previous years were $68 million, $242 million and $30 million in 2013, 2012 and 2011, respectively. The 2012 amount related to cost reports filed during previous years includes two adjustments to Medicare revenues that affected multiple
F-9
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Revenues (continued)
annual cost report periods for the majority of our hospitals (the Rural Floor Provision Settlement increased revenues by approximately $271 million and the implementation of revised Supplemental Security Income ratios reduced revenues by approximately $75 million). Excluding the effect of these Medicare adjustments, the 2012 amount related to previous years would have been $46 million.
The Emergency Medical Treatment and Labor Act (EMTALA) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospitals emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an individuals ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Patients treated at hospitals for nonelective care, who have income at or below 200% of the federal poverty level, are eligible for charity care. The federal poverty level is established by the federal government and is based on income and family size. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. These discounts are similar to those provided to many local managed care plans. In implementing the uninsured discount policy, we first attempt to qualify uninsured patients 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.
To quantify the total impact of and trends related to uninsured accounts, we believe it is beneficial to view charity care, uninsured discounts and the provision for doubtful accounts in combination, rather than each separately. A summary of these amounts for the years ended December 31, follows (dollars in millions):
2013 | Ratio | 2012 | Ratio | 2011 | Ratio | |||||||||||||||||||
Charity care |
$ | 3,497 | 22 | % | $ | 3,093 | 22 | % | $ | 2,683 | 24 | % | ||||||||||||
Uninsured discounts |
8,210 | 53 | 6,978 | 51 | 5,707 | 51 | ||||||||||||||||||
Provision for doubtful accounts |
3,858 | 25 | 3,770 | 27 | 2,824 | 25 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total uncompensated care |
$ | 15,565 | 100 | % | $ | 13,841 | 100 | % | $ | 11,214 | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):
2013 | 2012 | 2011 | ||||||||||
Gross patient charges |
$ | 181,141 | $ | 165,614 | $ | 141,516 | ||||||
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization) |
29,606 | 28,533 | 25,554 | |||||||||
|
|
|
|
|
|
|||||||
Cost-to-charges ratio |
16.3 | % | 17.2 | % | 18.1 | % | ||||||
|
|
|
|
|
|
|||||||
Total uncompensated care |
$ | 15,565 | $ | 13,841 | $ | 11,214 | ||||||
Multiply by the cost-to-charges ratio |
16.3 | % | 17.2 | % | 18.1 | % | ||||||
|
|
|
|
|
|
|||||||
Estimated cost of total uncompensated care |
$ | 2,537 | $ | 2,381 | $ | 2,030 | ||||||
|
|
|
|
|
|
F-10
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Revenues (continued)
The sum of charity care, uninsured discounts and the provision for doubtful accounts, as a percentage of the sum of revenues, charity care, uninsured discounts and the provision for doubtful accounts increased from 27.4% for 2011, to 29.5% for 2012 and to 31.3% for 2013.
Cash and Cash Equivalents
Cash and cash equivalents include highly liquid investments with a maturity of three months or less when purchased. Our insurance subsidiaries cash equivalent investments in excess of the amounts required to pay estimated professional liability claims during the next twelve months are not included in cash and cash equivalents as these funds are not available for general corporate purposes. Carrying values of cash and cash equivalents approximate fair value due to the short-term nature of these instruments.
Our cash management system provides for daily investment of available balances and the funding of outstanding checks when presented for payment. Outstanding, but unpresented, checks totaling $461 million and $437 million at December 31, 2013 and 2012, respectively, have been included in accounts payable in the consolidated balance sheets. Upon presentation for payment, these checks are funded through available cash balances or our credit facility.
Accounts Receivable
We receive payments for services rendered from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. We recognize that revenues and receivables from government agencies are significant to our operations, but do not believe there are significant credit risks associated with these government agencies. We do not believe there are any other significant concentrations of revenues from any particular payer that would subject us to any significant credit risks in the collection of our accounts receivable.
Additions to the allowance for doubtful accounts are made by means of the provision for doubtful accounts. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts and subsequent recoveries are added. The amount of the provision for doubtful accounts is based upon managements assessment of historical and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. The provision for doubtful accounts and the allowance for doubtful accounts relate to uninsured amounts due directly from patients (including copayment and deductible amounts from patients who have health care coverage). Accounts are written off when all reasonable internal and external collection efforts have been performed. We consider the return of an account from the secondary collection agency to be the culmination of our reasonable collection efforts and the timing basis for writing off the account balance. Writeoffs are based upon specific identification and the writeoff process requires a writeoff adjustment entry to the patient accounting system. Management relies on the results of detailed reviews of historical writeoffs and recoveries at facilities that represent a majority of our revenues and accounts receivable (the hindsight analysis) as a primary source of information to utilize in estimating the collectibility of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data. At both December 31, 2013 and 2012, the allowance for doubtful accounts represented approximately 93% of the $5.927 billion and $5.228 billion, respectively, patient due accounts receivable balance. The patient due accounts receivable balance represents the estimated uninsured portion of our accounts receivable. The estimated uninsured portion of Medicaid pending and uninsured discount pending accounts is included in our patient due accounts receivable balance. Days revenues in accounts
F-11
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Accounts Receivable (continued)
receivable were 54 days, 51 days and 52 days at December 31, 2013, 2012 and 2011, respectively. Adverse changes in general economic conditions, patient accounting service center operations, payer mix or trends in federal or state governmental health care coverage could affect our collection of accounts receivable, cash flows and results of operations.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
Depreciation expense, computed using the straight-line method, was $1.733 billion in 2013, $1.673 billion in 2012 and $1.461 billion in 2011. Buildings and improvements are depreciated over estimated useful lives ranging generally from 10 to 40 years. Estimated useful lives of equipment vary generally from four to 10 years.
When events, circumstances or operating results indicate the carrying values of certain long-lived assets expected to be held and used, might be impaired, we prepare projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value may be estimated based upon internal evaluations that include quantitative analyses of revenues and cash flows, reviews of recent sales of similar facilities and independent appraisals.
Long-lived assets to be disposed of are reported at the lower of their carrying amounts or fair value less costs to sell or close. The estimates of fair value are usually based upon recent sales of similar assets and market responses based upon discussions with and offers received from potential buyers.
Investments of Insurance Subsidiaries
At December 31, 2013 and 2012, the investments of our 100% owned insurance subsidiaries were classified as available-for-sale as defined in Accounting Standards Codification (ASC) No. 320, Investments Debt and Equity Securities and are recorded at fair value. The investment securities are held for the purpose of providing a funding source to pay liability claims covered by the insurance subsidiaries. We perform a quarterly assessment of individual investment securities to determine whether declines in market value are temporary or other-than-temporary. Our investment securities evaluation process involves multiple subjective judgments, often involves estimating the outcome of future events, and requires a significant level of professional judgment in determining whether an impairment has occurred. We evaluate, among other things, the financial position and near term prospects of the issuer, conditions in the issuers industry, liquidity of the investment, changes in the amount or timing of expected future cash flows from the investment, and recent downgrades of the issuer by a rating agency, to determine if, and when, a decline in the fair value of an investment below amortized cost is considered other-than-temporary. The length of time and extent to which the fair value of the investment is less than amortized cost and our ability and intent to retain the investment, to allow for any anticipated recovery of the investments fair value, are important components of our investment securities evaluation process.
Goodwill and Intangible Assets
Goodwill is not amortized but is subject to annual impairment tests. In addition to the annual impairment review, impairment reviews are performed whenever circumstances indicate a possible impairment may exist.
F-12
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Goodwill and Intangible Assets (continued)
Impairment testing for goodwill is done at the reporting unit level. Reporting units are one level below the business segment level, and our impairment testing is performed at the operating division or market level. We compare the fair value of the reporting unit assets to the carrying amount, on at least an annual basis, to determine if there is potential impairment. If the fair value of the reporting unit assets is less than their carrying value, we compare the fair value of the goodwill to its carrying value. If the fair value of the goodwill is less than its carrying value, an impairment loss is recognized. Fair value of goodwill is estimated based upon internal evaluations of the related long-lived assets for each reporting unit that include quantitative analyses of market multiples, revenues and cash flows and reviews of recent sales of similar facilities. No goodwill impairments were recognized during 2013, 2012 and 2011. Since January 1, 2000, we have recognized total goodwill impairments of $102 million in the aggregate. None of the goodwill impairments related to evaluations of goodwill at the reporting unit level, as all recognized goodwill impairments during this period related to goodwill allocated to asset disposal groups.
During 2013, goodwill increased by $265 million related to acquisitions, declined by $1 million related to facility sales and declined by $13 million related to foreign currency translation and other adjustments. During 2012, goodwill increased by $288 million related to acquisitions, declined by $3 million related to facility sales and increased by $3 million related to foreign currency translation and other adjustments.
During 2013, identifiable intangible assets increased by $113 million and are being amortized over estimated lives ranging generally from three to 15 years. During 2012, there were no changes in identifiable intangible assets. During 2011, indefinite-lived identifiable intangible assets increased by $269 million. Indefinite-lived identifiable intangible assets are not amortized, but all identifiable intangible assets are subject to annual impairment tests, and impairment reviews are performed whenever circumstances indicate a possible impairment may exist.
Deferred Loan Costs
Debt issuance costs are amortized based upon the terms of the respective debt obligations. The gross carrying amount of deferred loan costs at December 31, 2013 and 2012 was $542 million and $571 million, respectively, and accumulated amortization was $305 million and $281 million, respectively. Amortization of deferred loan costs is included in interest expense and was $55 million, $62 million and $70 million for 2013, 2012 and 2011, respectively.
Physician Recruiting Agreements
In order to recruit physicians to meet the needs of our hospitals and the communities they serve, we enter into minimum revenue guarantee arrangements to assist the recruited physicians during the period they are relocating and establishing their practices. A guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the stand-ready obligation undertaken in issuing the guarantee. We expense the total estimated guarantee liability amount at the time the physician recruiting agreement becomes effective as we are not able to justify recording a contract-based asset based upon our analysis of the related control, regulatory and legal considerations.
The physician recruiting liability amount of $15 million at both December 31, 2013 and 2012 represents the amount of expense recognized in excess of payments made through December 31, 2013 and 2012. At December 31, 2013 the maximum amount we could have to pay under all effective minimum revenue guarantees was $39 million.
F-13
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Professional Liability Claims
Reserves for professional liability risks were $1.279 billion and $1.297 billion at December 31, 2013 and 2012, respectively. The current portion of the reserves, $331 million and $324 million at December 31, 2013 and 2012, respectively, is included in other accrued expenses in the consolidated balance sheets. Provisions for losses related to professional liability risks were $314 million, $331 million and $244 million for 2013, 2012 and 2011, respectively, and are included in other operating expenses in our consolidated income statements. Provisions for losses related to professional liability risks are based upon actuarially determined estimates. Loss and loss expense reserves represent the estimated ultimate net cost of all reported and unreported losses incurred through the respective consolidated balance sheet dates. The reserves for unpaid losses and loss expenses are estimated using individual case-basis valuations and actuarial analyses. Those estimates are subject to the effects of trends in loss severity and frequency. The estimates are continually reviewed and adjustments are recorded as experience develops or new information becomes known. Adjustments to the estimated reserve amounts are included in current operating results. The reserves for professional liability risks cover approximately 2,600 individual claims and 2,700 individual claims at December 31, 2013 and 2012, 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. During 2013 and 2012, $307 million and $335 million, respectively, of net payments were made for professional and general liability claims. The estimation of the timing of payments beyond a year can vary significantly. Although considerable variability is inherent in professional liability reserve estimates, we believe the reserves for losses and loss expenses are adequate; however, there can be no assurance the ultimate liability will not exceed our estimates.
A portion of our professional liability risks is insured through a 100% owned insurance subsidiary. Subject to a $5 million per occurrence self-insured retention, our facilities are insured by our 100% owned insurance subsidiary for losses up to $50 million per occurrence. The insurance subsidiary has obtained reinsurance for professional liability risks generally above a retention level of $15 million per occurrence. We also maintain professional liability insurance with unrelated commercial carriers for losses in excess of amounts insured by our insurance subsidiary.
The obligations covered by reinsurance and excess insurance contracts are included in the reserves for professional liability risks, as we remain liable to the extent the reinsurers and excess insurance carriers do not meet their obligations under the reinsurance and excess insurance contracts. The amounts receivable under the reinsurance contracts include $19 million and $17 million at December 31, 2013 and 2012, respectively, recorded in other assets, and $5 million and $32 million at December 31, 2013 and 2012, respectively, recorded in other current assets.
Financial Instruments
Derivative financial instruments are employed to manage risks, including interest rate and foreign currency exposures, and are not used for trading or speculative purposes. We recognize derivative instruments, such as interest rate swap agreements and foreign exchange contracts, in the consolidated balance sheets at fair value. Changes in the fair value of derivatives are recognized periodically either in earnings or in stockholders equity, as a component of other comprehensive income (loss), depending on whether the derivative financial instrument qualifies for hedge accounting, and if so, whether it qualifies as a fair value hedge or a cash flow hedge. Generally, changes in fair values of derivatives accounted for as fair value hedges are recorded in earnings, along with the changes in the fair value of the hedged items related to the hedged risk. Gains and losses on derivatives designated as cash flow hedges, to the extent they are effective, are recorded in other comprehensive income (loss), and subsequently reclassified to earnings to offset the impact of the forecasted transactions when they
F-14
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Financial Instruments (continued)
occur. In the event the forecasted transaction to which a cash flow hedge relates is no longer likely, the amount in other comprehensive income (loss) is recognized in earnings and generally the derivative is terminated. Changes in the fair value of derivatives not qualifying as hedges, and for any portion of a hedge that is ineffective, are reported in earnings.
The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments to interest expense over the remaining term of the debt originally associated with the terminated swap.
Electronic Health Record Incentive Payments
The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive payments for eligible hospitals and professionals that adopt and meaningfully use certified electronic health record (EHR) technology. We recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.
Medicaid EHR incentive calculations and related payment amounts are based upon prior period cost report information available at the time our eligible hospitals adopt, implement or demonstrate meaningful use of certified EHR technology for the applicable period, and are not subject to revision for cost report data filed for a subsequent period. Thus, incentive income recognition occurs at the point our eligible hospitals adopt, implement or demonstrate meaningful use of certified EHR technology for the applicable period, as the cost report information for the full cost report year that will determine the final calculation of the incentive payment is known at that time.
Medicare EHR incentive calculations and related initial payment amounts are based upon the most current filed cost report information available at the time our eligible hospitals demonstrate meaningful use of certified EHR technology for the applicable period. However, unlike Medicaid, this initial payment amount will be adjusted based upon an updated calculation using the annual cost report information for the cost report period that began during the applicable payment year. Thus, incentive income recognition occurs at the point our eligible hospitals demonstrate meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that will determine the final calculation of the incentive payment is available.
We recognized $216 million ($183 million Medicare and $33 million Medicaid), $336 million ($252 million Medicare and $84 million Medicaid) and $210 million ($123 million Medicare and $87 million Medicaid) of electronic health record incentive income during the years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013 and 2012, we had $78 million and $113 million, respectively, of deferred EHR incentive income, which represent initial incentive payments received for which EHR incentive income has not been recognized.
Noncontrolling Interests in Consolidated Entities
The consolidated financial statements include all assets, liabilities, revenues and expenses of less than 100% owned entities that we control. Accordingly, we have recorded noncontrolling interests in the earnings and equity of such entities.
F-15
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 ACCOUNTING POLICIES (continued)
Related Party Transactions Management Agreement
The Investors provided management and advisory services to the Company pursuant to a management agreement among HCA Inc. and the Investors executed in connection with the Investors acquisition of HCA Inc. in November 2006. The management agreement was terminated pursuant to its terms upon completion of the initial public offering of our common stock during March 2011, and the Company paid the Investors a final fee of $181 million. The management agreement also provided that the Company pay a 1% fee in connection with certain financing, acquisition, divestiture and change of control transactions. The Company paid the Investors a fee of $26 million related to the initial public offering of our common stock, and this fee was recorded as a cost of the stock offering.
Reclassifications
Certain prior year amounts have been reclassified to conform to the 2013 presentation.
NOTE 2 SHARE-BASED COMPENSATION
Stock Incentive Plan
The 2006 Stock Incentive Plan for Key Employees of HCA Holdings Inc. and its Affiliates, as Amended and Restated (the Stock Incentive Plan) is designed to promote the long term financial interests and growth of the Company by attracting and retaining management and other personnel and to motivate them to achieve long range goals and further the alignment of interests of participants with those of our stockholders through opportunities for increased stock, or stock-based, ownership in the Company. Portions of the options, stock appreciation rights (SARs) and restricted share units (RSUs) granted under the Stock Incentive Plan vest solely based upon continued employment over a specific period of time, and portions of the options, SARs and RSUs vest based both upon continued employment over a specific period of time and upon the achievement of predetermined financial targets over time. We granted 4,864,000 and 6,348,000 SARs and 4,858,800 and 4,647,400 RSUs under the Stock Incentive Plan during 2013 and 2012, respectively. At December 31, 2013, there were 25,088,200 stock options and SARs outstanding and exercisable, and there were 32,269,100 shares available for future grants under the Stock Incentive Plan.
Stock Option, SAR and RSU Activity
The fair value of each stock option and SAR award is estimated on the grant date, using valuation models and the weighted average assumptions indicated in the following table. Awards under the Stock Incentive Plan generally vest based on continued employment (Time Stock Options and SARs and Time RSUs) and based upon achievement of certain financial targets (Performance Stock Options and SARs and Performance RSUs). Each grant is valued as a single award with an expected term equal to the average expected term of the component vesting tranches. We use historical exercise behavior data and other factors to estimate the expected term of the options and SARs. The expected term of the share-based award is limited by the contractual term, and employee post-vesting termination behavior is incorporated in the historical exercise behavior data.
F-16
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 SHARE-BASED COMPENSATION (continued)
Stock Option, SAR and RSU Activity (continued)
Compensation cost is recognized on the straight-line attribution method. The straight-line attribution method requires that total compensation expense recognized must at least equal the vested portion of the grant-date fair value. The expected volatility is derived using historical stock price information for our common stock and that of certain peer group companies. The risk-free interest rate is the approximate yield on United States Treasury Strips having a life equal to the expected share-based award life on the date of grant. The expected life is an estimate of the number of years a share-based award will be held before it is exercised.
2013 | 2012 | 2011 | ||||||||||
Risk-free interest rate |
1.20 | % | 1.18 | % | 0.89 | % | ||||||
Expected volatility |
45 | % | 50 | % | 41 | % | ||||||
Expected life, in years |
6.25 | 6.25 | 5.00 | |||||||||
Expected dividend yield |
| | |
Information regarding Time Stock Options and SARs and Performance Stock Options and SARs activity during 2013, 2012 and 2011 is summarized below (share amounts in thousands):
Time
Stock Options and SARs |
Performance
Stock Options and SARs |
Total
Stock Options and SARs |
Weighted
Average Exercise Price |
Weighted
Average Remaining Contractual Term |
Aggregate
Intrinsic Value (dollars in millions) |
|||||||||||||||||||
Options outstanding, December 31, 2010 |
24,517 | 26,009 | 50,526 | $ | 8.58 | |||||||||||||||||||
Granted |
644 | 644 | 1,288 | 23.35 | ||||||||||||||||||||
Exercised |
(3,312 | ) | (1,732 | ) | (5,044 | ) | 6.31 | |||||||||||||||||
Cancelled |
(110 | ) | (348 | ) | (458 | ) | 5.88 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Options outstanding, December 31, 2011 |
21,739 | 24,573 | 46,312 | 9.26 | ||||||||||||||||||||
Granted |
3,174 | 3,174 | 6,348 | 27.03 | ||||||||||||||||||||
Exercised |
(5,530 | ) | (5,128 | ) | (10,658 | ) | 7.60 | |||||||||||||||||
Cancelled |
(192 | ) | (568 | ) | (760 | ) | 9.49 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Options and SARs outstanding, December 31, 2012 |
19,191 | 22,051 | 41,242 | 11.56 | ||||||||||||||||||||
Granted |
2,432 | 2,432 | 4,864 | 37.49 | ||||||||||||||||||||
Exercised |
(4,498 | ) | (5,843 | ) | (10,341 | ) | 8.49 | |||||||||||||||||
Cancelled |
(316 | ) | (263 | ) | (579 | ) | 25.50 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Options and SARs outstanding, December 31, 2013 |
16,809 | 18,377 | 35,186 | 15.82 | 5.4 years | $ | 1,122 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Options and SARs exercisable, December 31, 2013 |
11,960 | 13,527 | 25,487 | $ | 10.55 | 4.1 years | $ | 947 |
The weighted average fair values of stock options and SARs granted during 2013, 2012 and 2011 were $16.68, $13.16 and $8.53 per share, respectively. The total intrinsic value of stock options and SARs exercised in the year ended December 31, 2013 was $334 million. As of December 31, 2013, the unrecognized compensation cost related to nonvested stock options and SARs was $104 million.
F-17
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 SHARE-BASED COMPENSATION (continued)
Stock Option, SAR and RSU Activity (continued)
Information regarding Time RSUs and Performance RSUs activity during 2013, 2012 and 2011 is summarized below (share amounts in thousands):
Time RSUs |
Performance
RSUs |
Total RSUs |
Weighted
Average Grant Date Fair Value |
|||||||||||||
RSUs outstanding, December 31, 2010 |
| | | | ||||||||||||
Granted |
80 | | 80 | $ | 30.00 | |||||||||||
Vested |
| | | | ||||||||||||
Cancelled |
| | | | ||||||||||||
|
|
|
|
|
|
|||||||||||
RSUs outstanding, December 31, 2011 |
80 | | 80 | 30.00 | ||||||||||||
Granted |
3,162 | 1,485 | 4,647 | 26.98 | ||||||||||||
Vested |
(4 | ) | | (4 | ) | 30.00 | ||||||||||
Cancelled |
(164 | ) | (75 | ) | (239 | ) | 26.99 | |||||||||
|
|
|
|
|
|
|||||||||||
RSUs outstanding, December 31, 2012 |
3,074 | 1,410 | 4,484 | 27.03 | ||||||||||||
Granted |
3,305 | 1,554 | 4,859 | 37.43 | ||||||||||||
Vested |
(831 | ) | (352 | ) | (1,183 | ) | 27.30 | |||||||||
Cancelled |
(449 | ) | (213 | ) | (662 | ) | 31.91 | |||||||||
|
|
|
|
|
|
|||||||||||
RSUs outstanding, December 31, 2013 |
5,099 | 2,399 | 7,498 | 33.30 | ||||||||||||
|
|
|
|
|
|
As of December 31, 2013, the unrecognized compensation cost related to RSUs was $185 million.
During 2012, our Board of Directors declared three distributions to the Companys stockholders and holders of certain vested share-based awards. The distributions totaled $6.50 per share and vested share-based award (subject to limitations for certain awards), or $3.142 billion in the aggregate. Pursuant to the terms of our share-based award plans, the holders of nonvested stock options and SARs received $6.50 per share reductions to the exercise price of the applicable share-based awards (subject to certain limitations for certain share-based awards that resulted in deferred distributions for a portion of the declared distribution, which will be paid upon the vesting of the applicable share-based award). The holders of any nonvested RSUs will be paid the applicable distribution amounts upon the vesting of the applicable RSUs. There were no distributions declared during 2013 and 2011.
NOTE 3 ACQUISITIONS AND DISPOSITIONS
HealthONE Acquisition
During October 2011, we completed the acquisition of the Colorado Health Foundations (Foundation) approximate 40% remaining ownership interest in the HCA-HealthONE LLC (HealthONE) joint venture for $1.450 billion. HealthONEs assets included seven hospitals and 12 freestanding surgery centers in the Denver area. We accounted for our investment in HealthONE using the equity method through October 2011 with our share of their operations all recorded in the line item Equity in earnings of affiliates in our consolidated income statements, and we began consolidating HealthONEs operations in our consolidated income statements beginning November 2011.
F-18
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 ACQUISITIONS AND DISPOSITIONS (continued)
HealthONE Acquisition (continued)
The total cost of the HealthONE acquisition has been allocated to the assets acquired and liabilities assumed based upon their respective fair values in accordance with ASC No. 805, Business Combinations . The purchase price represented a premium over the fair value of the net tangible and identifiable intangible assets acquired due to the value of the expected cash flows and HealthONEs assembled workforce.
We identified and analyzed the acquired fixed assets, contracts, contractual commitments and legal contingencies to record the fair value of all assets acquired and liabilities assumed, resulting in goodwill of $2.261 billion being recorded as of December 31, 2011. We also recorded a gain of $1.522 billion related to this acquisition due to the remeasurement of our previous equity investment in HealthONE, based upon our acquisition of the Foundations ownership interest and the resulting consolidation of the entire enterprise at estimated fair value. During 2012, we recorded final adjustments to the purchase price allocation which resulted in a $30 million increase to noncontrolling interests, a $26 million reduction to property and equipment and a $56 million increase to goodwill. The amount of tax deductible goodwill is $981 million.
A summary of the final purchase price allocation, including assumed liabilities, follows (dollars in millions):
Current assets |
$ | 400 | ||
Property and equipment |
1,014 | |||
Identifiable intangible asset (trade name) |
269 | |||
Goodwill |
2,317 | |||
Other assets |
7 | |||
Liabilities |
152 | |||
Noncontrolling interests |
123 |
The acquired HealthONE operating results have been included in our consolidated income statements since the acquisition date. The revenues and net income attributable to HCA Holdings, Inc. related to the acquired HealthONE operations for the period from November 1, 2011 through December 31, 2011 were $347 million and $15 million, respectively. The following unaudited pro forma combined summary of operations data gives effect to including the acquired HealthONE operating results in our operating results as if the acquisition had occurred as of January 1, 2011 (dollars in millions):
Year Ended
December 31, 2011 |
||||
Pro forma revenues |
$ | 31,383 | ||
Pro forma net income attributable to HCA Holdings, Inc. |
2,507 |
Pro forma adjustments to net income attributable to HCA Holdings, Inc. include adjustments to record HealthONEs operating results on a consolidated basis and eliminate the equity method operating results, to record depreciation expense based on the estimated fair value assigned to the long-lived assets acquired, to record interest expense assuming the increase in long-term debt used to fund the acquisition had occurred as of January 1, 2011 and to record the related tax effects. This pro forma result is not necessarily indicative of the actual results of operations that would have occurred if the acquisition had occurred on January 1, 2011.
F-19
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 3 ACQUISITIONS AND DISPOSITIONS (continued)
Other Acquisitions and Dispositions
During 2013, we paid $277 million and recorded goodwill and identifiable intangible assets of $183 million and $113 million, respectively, related to the acquisition of The Outsource Group, which was acquired by our Parallon affiliate and is included in the Corporate and other Group. During 2013, we also paid $146 million and recorded goodwill of $58 million related to the acquisition of three hospitals, and we paid $57 million to acquire nonhospital health care entities. During 2012, we paid $58 million and assumed liabilities of $33 million to acquire a hospital and paid $200 million to acquire other nonhospital health care entities. During 2011, we paid $136 million to acquire a hospital and $96 million to acquire other nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. The purchase price paid in excess of the fair value of identifiable net assets of these acquired entities aggregated $265 million, $232 million and $68 million in 2013, 2012 and 2011, respectively. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.
During 2013, we received proceeds of $33 million and recognized a net pretax loss of $10 million ($7 million after tax) related to the sale of a hospital facility in the American Group and other real estate investments. During 2012, we received proceeds of $30 million and recognized a net pretax gain of $15 million ($9 million after tax) related to the sales of real estate investments. During 2011, we received proceeds of $281 million and recognized a net pretax gain of $142 million ($80 million after tax) related to the sales of a hospital facility in the National Group and our investment in a hospital joint venture.
NOTE 4 INCOME TAXES
The provision for income taxes consists of the following (dollars in millions):
2013 | 2012 | 2011 | ||||||||||
Current: |
||||||||||||
Federal |
$ | 827 | $ | 604 | $ | (119 | ) | |||||
State |
86 | 58 | (12 | ) | ||||||||
Foreign |
44 | 43 | 44 | |||||||||
Deferred: |
||||||||||||
Federal |
(53 | ) | 167 | 714 | ||||||||
State |
20 | (8 | ) | 71 | ||||||||
Foreign |
26 | 24 | 21 | |||||||||
|
|
|
|
|
|
|||||||
$ | 950 | $ | 888 | $ | 719 | |||||||
|
|
|
|
|
|
The provision for income taxes reflects $4 million, $53 million and $100 million ($3 million, $33 million and $63 million net of tax, respectively) reductions in interest related to taxing authority examinations for the years ended December 31, 2013, 2012 and 2011, respectively. Our foreign income before income taxes was $187 million, $178 million and $173 million for the years ended December 31, 2013, 2012 and 2011, respectively.
F-20
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 INCOME TAXES (continued)
A reconciliation of the federal statutory rate to the effective income tax rate follows:
2013 | 2012 | 2011 | ||||||||||
Federal statutory rate |
35.0 | % | 35.0 | % | 35.0 | % | ||||||
State income taxes, net of federal tax benefit |
2.3 | 2.2 | 2.0 | |||||||||
Change in liability for uncertain tax positions |
0.5 | | 1.0 | |||||||||
Nontaxable gain on acquisition of controlling interest in equity investment |
| | (13.8 | ) | ||||||||
Tax exempt interest income |
(0.2 | ) | (0.2 | ) | (0.2 | ) | ||||||
Other items, net |
0.3 | (1.4 | ) | (1.4 | ) | |||||||
|
|
|
|
|
|
|||||||
Effective income tax rate on income applicable to HCA Holdings, Inc. |
37.9 | 35.6 | 22.6 | |||||||||
Income attributable to noncontrolling interests from consolidated partnerships |
(5.7 | ) | (4.9 | ) | (2.4 | ) | ||||||
|
|
|
|
|
|
|||||||
Effective income tax rate on income before income taxes |
32.2 | % | 30.7 | % | 20.2 | % | ||||||
|
|
|
|
|
|
A summary of the items comprising the deferred tax assets and liabilities at December 31 follows (dollars in millions):
2013 | 2012 | |||||||||||||||
Assets | Liabilities | Assets | Liabilities | |||||||||||||
Depreciation and fixed asset basis differences |
$ | | $ | 229 | $ | | $ | 292 | ||||||||
Allowances for professional liability and other risks |
365 | | 355 | | ||||||||||||
Accounts receivable |
423 | | 405 | | ||||||||||||
Compensation |
240 | | 237 | | ||||||||||||
Other |
638 | 698 | 744 | 595 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 1,666 | $ | 927 | $ | 1,741 | $ | 887 | |||||||||
|
|
|
|
|
|
|
|
At December 31, 2013, state net operating loss carryforwards (expiring in years 2014 through 2033) available to offset future taxable income approximated $17 million. Utilization of net operating loss carryforwards in any one year may be limited. Net deferred tax assets related to such carryforwards are not significant.
We expect the IRS Examination Division will begin an audit of HCA Holdings, Inc.s 2011 federal income tax return in 2014.
The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):
2013 | 2012 | |||||||
Balance at January 1 |
$ | 425 | $ | 445 | ||||
Additions based on tax positions related to the current year |
21 | 16 | ||||||
Additions for tax positions of prior years |
25 | 92 | ||||||
Reductions for tax positions of prior years |
(18 | ) | (19 | ) | ||||
Settlements |
(5 | ) | (103 | ) | ||||
Lapse of applicable statutes of limitations |
(3 | ) | (6 | ) | ||||
|
|
|
|
|||||
Balance at December 31 |
$ | 445 | $ | 425 | ||||
|
|
|
|
F-21
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 INCOME TAXES (continued)
During 2013, we finalized settlements with the IRS resolving all outstanding issues for HCA Inc.s 2007, 2008 and 2009 tax years. During 2012, we finalized settlements with the IRS for our 2005 and 2006 tax years resolving all outstanding issues, including the timing of recognition of certain patient service revenues, the deductibility of certain debt retirement costs and our method for calculating the tax allowance for doubtful accounts.
Our liability for unrecognized tax benefits was $462 million, including accrued interest of $30 million and excluding $13 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2013 ($426 million, $14 million and $13 million, respectively, as of December 31, 2012). Unrecognized tax benefits of $160 million ($125 million as of December 31, 2012) would affect the effective rate, if recognized.
Depending on the resolution of any IRS disputes, the completion of examinations by federal, state or international taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.
NOTE 5 EARNINGS PER SHARE
We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding plus the dilutive effect of outstanding stock options, SARs and RSUs, computed using the treasury stock method. During September 2011, we repurchased 80,771,143 shares of our common stock. During November 2013, we repurchased 10,656,436 shares of our common stock. The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2013, 2012 and 2011 (dollars in millions, except per share amounts, and shares in thousands):
2013 | 2012 | 2011 | ||||||||||
Net income attributable to HCA Holdings, Inc |
$ | 1,556 | $ | 1,605 | $ | 2,465 | ||||||
Weighted average common shares outstanding |
445,066 | 440,178 | 476,609 | |||||||||
Effect of dilutive incremental shares |
16,847 | 19,225 | 19,334 | |||||||||
|
|
|
|
|
|
|||||||
Shares used for diluted earnings per share |
461,913 | 459,403 | 495,943 | |||||||||
|
|
|
|
|
|
|||||||
Earnings per share: |
||||||||||||
Basic earnings per share |
$ | 3.50 | $ | 3.65 | $ | 5.17 | ||||||
Diluted earnings per share |
$ | 3.37 | $ | 3.49 | $ | 4.97 |
F-22
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 INVESTMENTS OF INSURANCE SUBSIDIARIES
A summary of the insurance subsidiaries investments at December 31 follows (dollars in millions):
2013 | ||||||||||||||||
Amortized
Cost |
Unrealized
Amounts |
Fair
Value |
||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 385 | $ | 11 | $ | (3 | ) | $ | 393 | |||||||
Auction rate securities |
7 | | | 7 | ||||||||||||
Asset-backed securities |
12 | | | 12 | ||||||||||||
Money market funds |
94 | | | 94 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
498 | 11 | (3 | ) | 506 | ||||||||||||
Equity securities |
2 | 2 | | 4 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 500 | $ | 13 | $ | (3 | ) | 510 | |||||||||
|
|
|
|
|
|
|||||||||||
Amounts classified as current assets |
(62 | ) | ||||||||||||||
|
|
|||||||||||||||
Investment carrying value |
$ | 448 | ||||||||||||||
|
|
2012 | ||||||||||||||||
Amortized
Cost |
Unrealized
Amounts |
Fair
Value |
||||||||||||||
Gains | Losses | |||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 395 | $ | 23 | $ | | $ | 418 | ||||||||
Auction rate securities |
74 | | (6 | ) | 68 | |||||||||||
Asset-backed securities |
14 | | | 14 | ||||||||||||
Money market funds |
67 | | | 67 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
550 | 23 | (6 | ) | 567 | ||||||||||||
Equity securities |
2 | 1 | | 3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 552 | $ | 24 | $ | (6 | ) | 570 | |||||||||
|
|
|
|
|
|
|||||||||||
Amounts classified as current assets |
(55 | ) | ||||||||||||||
|
|
|||||||||||||||
Investment carrying value |
$ | 515 | ||||||||||||||
|
|
At December 31, 2013 and 2012, the investments of our insurance subsidiaries were classified as available-for-sale. Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income (loss). At December 31, 2013 and 2012, $1 million and $9 million, respectively, of our investments were subject to the restrictions included in insurance bond collateralization and assumed reinsurance contracts.
F-23
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)
Scheduled maturities of investments in debt securities at December 31, 2013 were as follows (dollars in millions):
Amortized
Cost |
Fair
Value |
|||||||
Due in one year or less |
$ | 110 | $ | 110 | ||||
Due after one year through five years |
180 | 186 | ||||||
Due after five years through ten years |
100 | 102 | ||||||
Due after ten years |
89 | 89 | ||||||
|
|
|
|
|||||
479 | 487 | |||||||
Auction rate securities |
7 | 7 | ||||||
Asset-backed securities |
12 | 12 | ||||||
|
|
|
|
|||||
$ | 498 | $ | 506 | |||||
|
|
|
|
The average expected maturity of the investments in debt securities at December 31, 2013 was 3.8 years, compared to the average scheduled maturity of 5.4 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.
NOTE 7 FINANCIAL INSTRUMENTS
Interest Rate Swap Agreements
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between two parties based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively convert LIBOR indexed variable rate obligations to fixed interest rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities, for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.
The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at December 31, 2013 (dollars in millions):
Notional
Amount |
Maturity Date |
Fair
Value |
||||||||||
Pay-fixed interest rate swaps |
$ | 500 | December 2014 | $ | (5 | ) | ||||||
Pay-fixed interest rate swaps |
3,000 | December 2016 | (248 | ) | ||||||||
Pay-fixed interest rate swaps |
1,000 | December 2017 | (42 | ) |
During the next 12 months, we estimate $127 million will be reclassified from other comprehensive income (OCI) to interest expense.
F-24
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 FINANCIAL INSTRUMENTS (continued)
Cross Currency Swaps
The Company and certain subsidiaries have incurred obligations and entered into various intercompany transactions where such obligations are denominated in currencies, other than the functional currencies of the parties executing the trade. In order to mitigate the currency exposure risks and better match the cash flows of our obligations and intercompany transactions with cash flows from operations, we enter into various cross currency swaps. At December 31, 2013, we are not party to any cross currency swaps.
Derivatives Results of Operations
The following tables present the effect of our interest rate and cross currency swaps on our results of operations for the year ended December 31, 2013 (dollars in millions):
Derivatives in Cash Flow Hedging Relationships |
Amount of Gain
Recognized in OCI on Derivatives, Net of Tax |
Location of Loss
Reclassified from Accumulated OCI into Operations |
Amount of Loss
Reclassified from Accumulated OCI into Operations |
|||||||||
Interest rate swaps |
$ | 2 | Interest expense | $ | 131 |
Derivatives Not Designated as Hedging Instruments |
Location of Gain
Recognized in Operations on Derivatives |
Amount of Gain
Recognized in Operations on Derivatives |
||||||
Cross currency swap (matured November 2013) |
Other operating expenses | $ | 13 |
Credit-risk-related Contingent Features
We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of December 31, 2013, we have not been required to post any collateral related to these agreements. If we had breached these provisions at December 31, 2013, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $308 million.
NOTE 8 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE
Accounting Standards Codification 820, Fair Value Measurements and Disclosures (ASC 820) emphasizes fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 utilizes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs classified within Levels 1 and 2 of the hierarchy) and the reporting entitys own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable
F-25
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
inputs for the asset or liability, which are typically based on an entitys own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Cash Traded Investments
Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain types of cash traded instruments are classified within Level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. The valuation of these securities involves managements judgment, after consideration of market factors and the absence of market transparency, market liquidity and observable inputs. Our valuation models derived fair market values compared to tax-equivalent yields of other securities of similar credit worthiness and similar effective maturities.
Derivative Financial Instruments
We have entered into interest rate and cross currency swap agreements to manage our exposure to fluctuations in interest rates and foreign currency risks. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates and implied volatilities. To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterpartys nonperformance risk in the fair value measurements.
Although we determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions, and at December 31, 2013 and 2012, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.
F-26
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
Derivative Financial Instruments (continued)
The following table summarizes our assets and liabilities measured at fair value on a recurring basis as of December 31, 2013 and 2012, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
December 31, 2013 | ||||||||||||||||
Fair Value | Fair Value Measurements Using | |||||||||||||||
Quoted Prices in
Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other
Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
||||||||||||||
Assets: |
||||||||||||||||
Investments of insurance subsidiaries: |
||||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 393 | $ | | $ | 393 | $ | | ||||||||
Auction rate securities |
7 | | | 7 | ||||||||||||
Asset-backed securities |
12 | | 12 | | ||||||||||||
Money market funds |
94 | 94 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
506 | 94 | 405 | 7 | |||||||||||||
Equity securities |
4 | 3 | | 1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Investments of insurance subsidiaries |
510 | 97 | 405 | 8 | ||||||||||||
Less amounts classified as current assets |
(62 | ) | (62 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 448 | $ | 35 | $ | 405 | $ | 8 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Interest rate swaps (Income taxes and other liabilities) |
$ | 295 | $ | | $ | 295 | $ | |
F-27
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 8 ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
Derivative Financial Instruments (continued)
December 31, 2012 | ||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||
Fair Value |
Quoted Prices in
Active Markets for Identical Assets and Liabilities (Level 1) |
Significant Other
Observable Inputs (Level 2) |
Significant
Unobservable Inputs (Level 3) |
|||||||||||||
Assets: |
||||||||||||||||
Investments of insurance subsidiaries: |
||||||||||||||||
Debt securities: |
||||||||||||||||
States and municipalities |
$ | 418 | $ | | $ | 418 | $ | | ||||||||
Auction rate securities |
68 | | | 68 | ||||||||||||
Asset-backed securities |
14 | | 14 | | ||||||||||||
Money market funds |
67 | 67 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
567 | 67 | 432 | 68 | |||||||||||||
Equity securities |
3 | 1 | | 2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Investments of insurance subsidiaries |
570 | 68 | 432 | 70 | ||||||||||||
Less amounts classified as current assets |
(55 | ) | (55 | ) | | | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 515 | $ | 13 | $ | 432 | $ | 70 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities: |
||||||||||||||||
Cross currency swap (Income taxes and other liabilities) |
$ | 13 | $ | | $ | 13 | $ | | ||||||||
Interest rate swaps (Income taxes and other liabilities) |
429 | | 429 | |
The following table summarizes the activity related to the auction rate and equity securities investments of our insurance subsidiaries which have fair value measurements based on significant unobservable inputs (Level 3) during the year ended December 31, 2013 (dollars in millions):
Asset balances at December 31, 2012 |
$ | 70 | ||
Unrealized gains included in other comprehensive income |
6 | |||
Settlements |
(68 | ) | ||
|
|
|||
Asset balances at December 31, 2013 |
$ | 8 | ||
|
|
The estimated fair value of our long-term debt was $29.603 billion and $30.781 billion at December 31, 2013 and 2012, respectively, compared to carrying amounts aggregating $28.376 billion and $28.930 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.
F-28
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 LONG-TERM DEBT
A summary of long-term debt at December 31, including related interest rates at December 31, 2013, follows (dollars in millions):
2013 | 2012 | |||||||
Senior secured asset-based revolving credit facility (effective interest rate of 1.7%) |
$ | 2,440 | $ | 1,470 | ||||
Senior secured revolving credit facility |
| | ||||||
Senior secured term loan facilities (effective interest rate of 5.3%) |
5,598 | 5,958 | ||||||
Senior secured first lien notes (effective interest rate of 7.1%) |
9,695 | 9,688 | ||||||
Other senior secured debt (effective interest rate of 6.8%) |
448 | 423 | ||||||
|
|
|
|
|||||
First lien debt |
18,181 | 17,539 | ||||||
Senior secured second lien notes |
| 197 | ||||||
Senior unsecured notes (effective interest rate of 7.2%) |
10,195 | 11,194 | ||||||
|
|
|
|
|||||
Total debt (average life of 6.3 years, rates averaging 6.3%) |
28,376 | 28,930 | ||||||
Less amounts due within one year |
786 | 1,435 | ||||||
|
|
|
|
|||||
$ | 27,590 | $ | 27,495 | |||||
|
|
|
|
2013 Activity
During March 2013, we redeemed all $201 million aggregate principal amount of our 9 7 / 8 % senior secured second lien notes due 2017, at a redemption price of 104.938% of the principal amount. The pretax loss on retirement of debt related to this redemption was $17 million.
During November 2013, our $329 million senior secured European term loan facility matured.
2012 Activity
During February 2012, we issued $1.350 billion aggregate principal amount of 5.875% senior secured first lien notes due 2022. After the payment of related fees and expenses, we used the proceeds for general corporate purposes.
During October 2012, we replaced our $2.000 billion senior secured revolving credit facility maturing on November 17, 2015, with a new facility on substantially the same terms other than foregoing a scheduled increase in interest rates and extending the maturity date to November 17, 2016.
During October 2012, we issued $2.500 billion aggregate principal amount of notes, comprised of $1.250 billion of 4.75% senior secured first lien notes due 2023 and $1.250 billion of 5.875% senior unsecured notes due 2023. After the payment of related fees and expenses, we used the proceeds for general corporate purposes.
During December 2012, we issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. After the payment of related fees and expenses, we used the proceeds to pay a distribution to our stockholders and holders of certain vested stock awards.
Senior Secured Credit Facilities And Other First Lien Debt
We have entered into the following senior secured credit facilities: (i) a $2.500 billion asset-based revolving credit facility maturing on September 30, 2016 with a borrowing base of 85% of eligible accounts receivable, subject to customary reserves and eligibility criteria ($2.440 billion outstanding at December 31, 2013) (the
F-29
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 LONG-TERM DEBT (continued)
Senior Secured Credit Facilities And Other First Lien Debt (continued)
ABL credit facility); (ii) a $2.000 billion senior secured revolving credit facility maturing on November 17, 2016 (none outstanding at December 31, 2013 without giving effect to certain outstanding letters of credit); (iii) a $512 million senior secured term loan A-2 facility maturing on May 2, 2016; (iv) a $724 million senior secured term loan A-4 facility maturing on February 2, 2016; (v) a $2.367 billion senior secured term loan B-4 facility maturing on May 1, 2018; and (vi) a $1.995 billion senior secured term loan B-5 facility maturing on March 31, 2017. We refer to the facilities described under (ii) through (vi) above, collectively, as the cash flow credit facility and, together with the ABL credit facility, the senior secured credit facilities.
Borrowings under the senior secured credit facilities bear interest at a rate equal to, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% or (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period, plus, in each case, an applicable margin. The applicable margin for borrowings under the senior secured credit facilities may be reduced subject to attaining certain leverage ratios.
The senior secured credit facilities contain a number of covenants that restrict, subject to certain exceptions, our (and some or all of our subsidiaries) ability to incur additional indebtedness, repay subordinated indebtedness, create liens on assets, sell assets, make investments, loans or advances, engage in certain transactions with affiliates, pay dividends and distributions, and enter into sale and leaseback transactions. In addition, we are required to satisfy and maintain a maximum total leverage ratio covenant under the cash flow credit facility and, in certain situations under the ABL credit facility, a minimum interest coverage ratio covenant.
Senior secured first lien notes consist of (i) $1.500 billion aggregate principal amount of 8 1 / 2 % senior secured first lien notes due 2019; (ii) $1.250 billion aggregate principal amount of 7 7 / 8 % senior secured first lien notes due 2020; (iii) $1.400 billion aggregate principal amount of 7 1 / 4 % senior secured first lien notes due 2020; (iv) $3.000 billion aggregate principal amount of 6.50% senior secured first lien notes due 2020; (v) $1.350 billion aggregate principal amount of 5.875% first lien notes due 2022; (vi) $1.250 billion aggregate principal amount of 4.75% first lien notes due 2023; and (vii) $55 million of unamortized debt discounts that reduce the senior secured first lien indebtedness. Capital leases and other secured debt totaled $448 million at December 31, 2013.
We use interest rate swap agreements to manage the variable rate exposure of our debt portfolio. At December 31, 2013, we had entered into effective interest rate swap agreements, in a total notional amount of $4.500 billion, in order to hedge a portion of our exposure to variable rate interest payments associated with the senior secured credit facilities. The effect of the interest rate swaps is reflected in the effective interest rates for the senior secured credit facilities.
Senior Unsecured Notes
Senior unsecured notes consist of (i) $6.541 billion aggregate principal amount of senior notes with maturities ranging from 2014 to 2033; (ii) an aggregate principal amount of $246 million medium-term notes with maturities ranging from 2014 to 2025; (iii) an aggregate principal amount of $886 million debentures with maturities ranging from 2015 to 2095; (iv) an aggregate principal amount of $1.525 billion senior notes due 2021 issued by HCA Holdings, Inc.; (v) an aggregate principal amount of $1.000 billion senior notes due 2021 issued by HCA Holdings, Inc.; and (vi) $3 million of unamortized debt discounts that reduce the indebtedness.
F-30
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 9 LONG-TERM DEBT (continued)
General Debt Information
The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are Unrestricted Subsidiaries under our Indenture (the 1993 Indenture) dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our ABL credit facility).
All obligations under the ABL credit facility, and the guarantees of those obligations, are secured, subject to permitted liens and other exceptions, by a first-priority lien on substantially all of the receivables of the borrowers and each guarantor under such ABL credit facility (the Receivables Collateral).
All obligations under the cash flow credit facility and the guarantees of such obligations are secured, subject to permitted liens and other exceptions, by:
|
a first-priority lien on the capital stock owned by HCA Inc., or by any U.S. guarantor, in each of their respective first-tier subsidiaries; |
|
a first-priority lien on substantially all present and future assets of HCA Inc. and of each U.S. guarantor other than (i) Principal Properties (as defined in the 1993 Indenture), (ii) certain other real properties and (iii) deposit accounts, other bank or securities accounts, cash, leaseholds, motor-vehicles and certain other exceptions; and |
|
a second-priority lien on certain of the Receivables Collateral. |
Our senior secured first lien notes and the related guarantees are secured by first-priority liens, subject to permitted liens, on our and our subsidiary guarantors assets, subject to certain exceptions, that secure our cash flow credit facility on a first-priority basis and are secured by second-priority liens, subject to permitted liens, on our and our subsidiary guarantors assets that secure our ABL credit facility on a first-priority basis and our other cash flow credit facility on a second-priority basis.
Maturities of long-term debt in years 2015 through 2018, excluding amounts under the ABL credit facility, are $1.065 million, $2.282 billion, $2.028 billion and $2.803 billion, respectively.
NOTE 10 CONTINGENCIES AND LEGAL CLAIM COSTS
We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered by insurance. The resolution of any such lawsuits, claims or legal and regulatory proceedings could have a material, adverse effect on our results of operations or financial position.
Government Investigations, Claims and Litigation
Health care companies are subject to numerous investigations by various governmental agencies. Further, under the federal False Claims Act (FCA), private parties have the right to bring qui tam , or whistleblower, suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our
F-31
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 CONTINGENCIES AND LEGAL CLAIM COSTS (continued)
Government Investigations, Claims and Litigation (continued)
individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our financial position, results of operations and liquidity.
As initially disclosed in 2010, the Civil Division of the Department of Justice (DOJ) has contacted the Company in connection with its nationwide review of whether, in certain cases, hospital charges to the federal government relating to implantable cardio-defibrillators (ICDs) met the CMS criteria. In connection with this nationwide review, the DOJ has indicated that it will be reviewing certain ICD billing and medical records at 95 HCA hospitals; the review covers the period from October 2003 to the present. In August 2012, HCA, along with non-HCA hospitals across the country subject to the DOJs review, received from the DOJ a proposed framework for resolving the DOJs review of ICDs. The Company is cooperating in the review. The review could potentially give rise to claims against the Company under the federal FCA or other statutes, regulations or laws. At this time, we cannot predict what effect, if any, this review or any resulting claims could have on the Company.
In July 2012, the Civil Division of the U.S. Attorneys Office in Miami requested information on reviews assessing the medical necessity of interventional cardiology services provided at any Company facility (other than peer reviews). The Company is cooperating with the governments request and has produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. At this time, we cannot predict what effect, if any, the request or any resulting claims, including any potential claims under the federal FCA, other statutes, regulations or laws, could have on the Company.
Securities Class Action Litigation
On October 28, 2011, a shareholder action, Schuh v. HCA Holdings, Inc. et al., was filed in the United States District Court for the Middle District of Tennessee seeking monetary relief. The case sought to include as a class all persons who acquired the Companys stock pursuant or traceable to the Companys Registration Statement issued in connection with the March 9, 2011 initial public offering. The lawsuit asserted a claim under Section 11 of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserted a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors. The action alleged various deficiencies in the Companys disclosures in the Registration Statement. Subsequently, two additional class action complaints, Kishtah v. HCA Holdings, Inc. et al. and Daniels v. HCA Holdings, Inc. et al., setting forth substantially similar claims against substantially the same defendants were filed in the same federal court on November 16, 2011 and December 12, 2011, respectively. All three of the cases were consolidated. On May 3, 2012, the court appointed New England Teamsters & Trucking Industry Pension Fund as Lead Plaintiff for the consolidated action. On July 13, 2012, the lead plaintiff filed an amended complaint asserting claims under Sections 11 and 12(a)(2) of the Securities Act of 1933 against the Company, certain members of the board of directors, and certain underwriters in the offering. It further asserts a claim under Section 15 of the Securities Act of 1933 against the same members of the board of directors and Hercules Holdings II, LLC, a majority shareholder of the Company at the time of the initial public offering. The consolidated complaint alleges deficiencies in the Companys disclosures in the Registration Statement and Prospectus relating to: (1) the accounting for the Companys 2006 recapitalization and 2010 reorganization; (2) the Companys failure to maintain effective internal controls relating to its accounting for such transactions; and (3) the Companys Medicare and Medicaid revenue growth rates. The Company and other defendants moved to dismiss the amended complaint on September 11, 2012. The Court granted the motion in part on May 28, 2013. The action is proceeding to discovery on the remaining claims.
F-32
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 CONTINGENCIES AND LEGAL CLAIM COSTS (continued)
Securities Class Action Litigation (continued)
In addition to the above described shareholder class actions, on December 8, 2011, a federal shareholder derivative action, Sutton v. Bracken, et al., putatively initiated in the name of the Company, was filed in the United States District Court for the Middle District of Tennessee against certain officers and present and former directors of the Company seeking monetary relief. The action alleges breaches of fiduciary duties by the named officers and directors in connection with the accounting and earnings claims set forth in the shareholder class actions. Setting forth substantially similar claims against substantially the same defendants, an additional federal derivative action, Schroeder v. Bracken, et al., was filed in the United States District Court for the Middle District of Tennessee on December 16, 2011, and a state derivative action, Bagot v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court on December 20, 2011. The federal derivative actions were consolidated in the Middle District of Tennessee and stayed pending developments in the shareholder class actions. The state derivative action had also been stayed pending developments in the shareholder class actions, but that stay has expired. The plaintiff in the state derivative action subsequently filed an amended complaint on September 9, 2013 that added additional allegations made in the shareholder class actions. On September 24, 2013, an additional state derivative action, Steinberg v. Bracken, et al., was filed in Tennessee state court in the Davidson County Circuit Court. This action against our board of directors has been consolidated with the earlier filed state derivative action. The plaintiffs in the consolidated action filed a consolidated complaint on December 4, 2013. The Company has filed a motion to again stay the state derivative action pending developments in the class action, but the Court has not yet acted on that motion.
Health Midwest Litigation
In October 2009, the Health Care Foundation of Greater Kansas City, a nonprofit health foundation, filed suit against HCA Inc. in the Circuit Court of Jackson County, Missouri and alleged that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCAs purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCAs construction of new hospitals counted towards its $450 million five-year capital commitments. In addition, the plaintiff alleged that HCA did not make its required capital expenditures in a timely fashion. On January 24, 2013, the Court ruled in favor of the plaintiff and awarded at least $162 million. The Court also ordered a court-supervised accounting of HCAs capital expenditures, as well as of expenditures on charity and uncompensated care during the ten years following the purchase. Should the accounting fail to satisfy the Court concerning HCAs compliance with its capital and charity care commitments, the amount of the judgment award could substantially increase. The Court also indicated it would award plaintiff attorneys fees, which the parties have stipulated are about $12 million. HCA recorded $175 million of legal claim costs in the fourth quarter of 2012 related to this ruling. The accounting for HCAs capital expenditures and charity and uncompensated care is ongoing and will likely not be concluded before the fourth quarter of 2014. HCA plans to appeal the trial courts ruling on the breach of contract claim and order for the accounting once the trial court rules on the accounting and enters final judgment.
F-33
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 11 LEASES
We lease medical office buildings and certain equipment under operating lease agreements. Commitments relating to noncancellable operating leases for each of the next five years and thereafter are as follows (dollars in millions):
For the Year Ended December 31, |
||||
2014 |
$ | 293 | ||
2015 |
267 | |||
2016 |
215 | |||
2017 |
175 | |||
2018 |
132 | |||
Thereafter |
740 | |||
|
|
|||
1,822 | ||||
Less sublease income |
(30 | ) | ||
|
|
|||
$ | 1,792 | |||
|
|
NOTE 12 CAPITAL STOCK
The amended and restated certificate of incorporation authorizes the Company to issue up to 1,800,000,000 shares of common stock, and our amended and restated by-laws set the number of directors constituting the board of directors of the Company at not less than three members, the exact number to be determined from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office.
During March 2011, we completed the initial public offering of 87,719,300 shares of our common stock at a price of $30.00 per share and realized net proceeds (after costs of the offering) of $2.506 billion. During September 2011, we repurchased 80,771,143 shares of our common stock beneficially owned by affiliates of Bank of America Corporation at a purchase price of $18.61 per share, the closing price of the Companys common stock on the New York Stock Exchange on September 14, 2011. The shares repurchased represented approximately 15.6% of our total shares outstanding at the time of the repurchase. During November 2013, we repurchased 10,656,436 shares of our common stock at a price of $46.92 per share.
Distributions
During 2012, our Board of Directors declared three distributions to the Companys stockholders and holders of certain vested share-based awards. The distributions totaled $6.50 per share and vested share-based award (subject to limitations for certain awards), or $3.142 billion in the aggregate. Pursuant to the terms of our share-based award plans, the holders of nonvested stock options and SARs received $6.50 per share reductions to the exercise price of the applicable share-based awards (subject to certain limitations for certain share-based awards that resulted in deferred distributions for a portion of the declared distribution, which will be paid upon the vesting of the applicable share-based award). The holders of nonvested RSUs will be paid the applicable distribution amounts upon the vesting of the applicable RSUs. There were no distributions declared during 2013 and 2011.
NOTE 13 EMPLOYEE BENEFIT PLANS
We maintain contributory, defined contribution benefit plans that are available to employees who meet certain minimum requirements. Certain of the plans require that we match specified percentages of participant
F-34
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 13 EMPLOYEE BENEFIT PLANS (continued)
contributions up to certain maximum levels (generally, 100% of the first 3% to 9%, depending upon years of vesting service, of compensation deferred by participants). The cost of these plans totaled $374 million for 2013, $371 million for 2012 and $322 million for 2011. Our contributions are funded periodically during each year.
We maintain the noncontributory, nonqualified Restoration Plan to provide certain retirement benefits for eligible employees. Eligibility for the Restoration Plan is based upon earning eligible compensation in excess of the Social Security Wage Base and attaining 1,000 or more hours of service during the plan year. Company credits to participants account balances (the Restoration Plan is not funded) depend upon participants compensation, years of vesting service and certain IRS limitations related to the HCA 401(k) plan. Benefits expense under this plan was $29 million for 2013, $20 million for 2012 and $25 million for 2011. Accrued benefits liabilities under this plan totaled $137 million at December 31, 2013 and $120 million at December 31, 2012.
We maintain a Supplemental Executive Retirement Plan (SERP) for certain executives. The plan is designed to ensure that upon retirement the participant receives the value of a prescribed life annuity from the combination of the SERP and our other benefit plans. Benefits expense under the plan was $43 million for 2013, $51 million for 2012 and $33 million for 2011. Accrued benefits liabilities under this plan totaled $214 million at December 31, 2013 and $242 million at December 31, 2012.
We maintain defined benefit pension plans which resulted from certain hospital acquisitions in prior years. Benefits expense under these plans was $37 million for 2013, $49 million for 2012, and $39 million for 2011. Accrued benefits liabilities under these plans totaled $81 million at December 31, 2013 and $196 million at December 31, 2012.
NOTE 14 SEGMENT AND GEOGRAPHIC INFORMATION
We operate in one line of business, which is operating hospitals and related health care entities. Effective January 1, 2013, we reorganized our operational groups into two geographically organized groups: the National and American Groups. The acquired HealthONE operating results have been included in the American Group operating results for periods subsequent to November 1, 2011. Prior to November 1, 2011, the American Group recorded its share of the HealthONE operating results in equity in earnings of affiliates.
At December 31, 2013, the National Group included 82 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia, and the American Group included 77 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.
Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains) on sales of facilities, losses on retirement of debt, legal claim costs, gain on acquisition of controlling interest in equity investment, termination of management agreement, income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because
F-35
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14 SEGMENT AND GEOGRAPHIC INFORMATION (continued)
adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA, depreciation and amortization, assets and goodwill and other intangible assets are summarized in the following table (dollars in millions):
For the Years Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Revenues: |
||||||||||||
National Group |
$ | 15,968 | $ | 15,505 | $ | 14,741 | ||||||
American Group |
16,487 | 16,115 | 13,714 | |||||||||
Corporate and other |
1,727 | 1,393 | 1,227 | |||||||||
|
|
|
|
|
|
|||||||
$ | 34,182 | $ | 33,013 | $ | 29,682 | |||||||
|
|
|
|
|
|
|||||||
Equity in earnings of affiliates: |
||||||||||||
National Group |
$ | (9 | ) | $ | (9 | ) | $ | (7 | ) | |||
American Group |
(24 | ) | (28 | ) | (251 | ) | ||||||
Corporate and other |
4 | 1 | | |||||||||
|
|
|
|
|
|
|||||||
$ | (29 | ) | $ | (36 | ) | $ | (258 | ) | ||||
|
|
|
|
|
|
|||||||
Adjusted segment EBITDA: |
||||||||||||
National Group |
$ | 3,301 | $ | 3,325 | $ | 3,052 | ||||||
American Group |
3,662 | 3,575 | 3,141 | |||||||||
Corporate and other |
(389 | ) | (369 | ) | (132 | ) | ||||||
|
|
|
|
|
|
|||||||
$ | 6,574 | $ | 6,531 | $ | 6,061 | |||||||
|
|
|
|
|
|
|||||||
Depreciation and amortization: |
||||||||||||
National Group |
$ | 718 | $ | 694 | $ | 639 | ||||||
American Group |
835 | 816 | 680 | |||||||||
Corporate and other |
200 | 169 | 146 | |||||||||
|
|
|
|
|
|
|||||||
$ | 1,753 | $ | 1,679 | $ | 1,465 | |||||||
|
|
|
|
|
|
For the Years Ended December 31, | ||||||||||||
2013 | 2012 | 2011 | ||||||||||
Adjusted segment EBITDA |
$ | 6,574 | $ | 6,531 | $ | 6,061 | ||||||
Depreciation and amortization |
1,753 | 1,679 | 1,465 | |||||||||
Interest expense |
1,848 | 1,798 | 2,037 | |||||||||
Losses (gains) on sales of facilities |
10 | (15 | ) | (142 | ) | |||||||
Losses on retirement of debt |
17 | | 481 | |||||||||
Legal claim costs |
| 175 | | |||||||||
Gain on acquisition of controlling interest in equity investment |
| | (1,522 | ) | ||||||||
Termination of management agreement |
| | 181 | |||||||||
|
|
|
|
|
|
|||||||
Income before income taxes |
$ | 2,946 | $ | 2,894 | $ | 3,561 | ||||||
|
|
|
|
|
|
F-36
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 14 SEGMENT AND GEOGRAPHIC INFORMATION (continued)
As of December 31, | ||||||||
2013 | 2012 | |||||||
Assets: |
||||||||
National Group |
$ | 10,206 | $ | 9,451 | ||||
American Group |
13,911 | 13,744 | ||||||
Corporate and other |
4,714 | 4,880 | ||||||
|
|
|
|
|||||
$ | 28,831 | $ | 28,075 | |||||
|
|
|
|
National
Group |
American
Group |
Corporate
and Other |
Total | |||||||||||||
Goodwill and other intangible assets: |
||||||||||||||||
Balance at December 31, 2012 |
$ | 1,035 | $ | 4,189 | $ | 315 | $ | 5,539 | ||||||||
Acquisitions |
68 | 13 | 297 | 378 | ||||||||||||
Dispositions |
| (1 | ) | | (1 | ) | ||||||||||
Foreign currency translation and other |
1 | (11 | ) | (3 | ) | (13 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2013 |
$ | 1,104 | $ | 4,190 | $ | 609 | $ | 5,903 | ||||||||
|
|
|
|
|
|
|
|
F-37
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 15 OTHER COMPREHENSIVE LOSS
The components of accumulated other comprehensive loss are as follows (dollars in millions):
Unrealized
Gains on Available- for-Sale Securities |
Foreign
Currency Translation Adjustments |
Defined
Benefit Plans |
Change
in Fair Value of Derivative Instruments |
Total | ||||||||||||||||
Balances at December 31, 2010 |
$ | 6 | $ | (19 | ) | $ | (143 | ) | $ | (272 | ) | $ | (428 | ) | ||||||
Unrealized gains on available-for-sale securities, net of $1 of income taxes |
1 | | | | 1 | |||||||||||||||
Foreign currency translation adjustments, net of $3 income tax benefit |
| (6 | ) | | | (6 | ) | |||||||||||||
Defined benefit plans, net of $25 income tax benefit |
| | (42 | ) | | (42 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $114 income tax benefit |
| | | (197 | ) | (197 | ) | |||||||||||||
Expense reclassified into operations from other comprehensive income, net of $9 and $125, respectively, income tax benefits |
| | 16 | 216 | 232 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at December 31, 2011 |
7 | (25 | ) | (169 | ) | (253 | ) | (440 | ) | |||||||||||
Unrealized gains on available-for-sale securities, net of $2 of income taxes |
4 | | | | 4 | |||||||||||||||
Foreign currency translation adjustments, net of $13 of income taxes |
| 24 | | | 24 | |||||||||||||||
Defined benefit plans, net of $33 income tax benefit |
| | (56 | ) | | (56 | ) | |||||||||||||
Change in fair value of derivative instruments, net of $55 income tax benefit |
| | | (96 | ) | (96 | ) | |||||||||||||
Expense reclassified into operations from other comprehensive income, net of $17 and $44, respectively, income tax benefits |
| | 29 | 78 | 107 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at December 31, 2012 |
11 | (1 | ) | (196 | ) | (271 | ) | (457 | ) | |||||||||||
Unrealized losses on available-for-sale securities, net of $3 income tax benefit |
(4 | ) | | | | (4 | ) | |||||||||||||
Foreign currency translation adjustments, net of $6 of income taxes |
| 12 | | | 12 | |||||||||||||||
Defined benefit plans, net of $50 of income taxes |
| | 84 | | 84 | |||||||||||||||
Change in fair value of derivative instruments, net of $1 of income taxes |
| | | 2 | 2 | |||||||||||||||
Expense reclassified into operations from other comprehensive income, net of $14 and $49, respectively, income tax benefits |
| | 24 | 82 | 106 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balances at December 31, 2013 |
$ | 7 | $ | 11 | $ | (88 | ) | $ | (187 | ) | $ | (257 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
F-38
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 16 ACCRUED EXPENSES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
A summary of other accrued expenses at December 31 follows (dollars in millions):
2013 | 2012 | |||||||
Professional liability risks |
$ | 331 | $ | 324 | ||||
Interest |
392 | 409 | ||||||
Taxes other than income |
252 | 235 | ||||||
Legal claim costs |
189 | 175 | ||||||
Other |
749 | 706 | ||||||
|
|
|
|
|||||
$ | 1,913 | $ | 1,849 | |||||
|
|
|
|
A summary of activity for the allowance of doubtful accounts follows (dollars in millions):
Balance
at Beginning of Year |
Provision
for Doubtful Accounts |
Accounts
Written off, Net of Recoveries |
Balance
at End of Year |
|||||||||||||
Allowance for doubtful accounts: |
||||||||||||||||
Year ended December 31, 2011 |
$ | 3,939 | $ | 2,824 | $ | (2,657 | ) | $ | 4,106 | |||||||
Year ended December 31, 2012 |
4,106 | 3,770 | (3,030 | ) | 4,846 | |||||||||||
Year ended December 31, 2013 |
4,846 | 3,858 | (3,216 | ) | 5,488 |
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION
On November 22, 2010, HCA Inc. reorganized by creating a new holding company structure. HCA Holdings, Inc. became the parent company, and HCA Inc. became HCA Holdings, Inc.s 100% owned direct subsidiary. On November 23, 2010, HCA Holdings, Inc. issued $1.525 billion aggregate principal amount of 7 3 / 4 % senior unsecured notes due 2021. On December 6, 2012, HCA Holdings, Inc. issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.
The senior secured credit facilities and senior secured notes described in Note 9 are jointly and severally, and fully and unconditionally guaranteed 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 ABL credit facility).
F-39
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
Our condensed consolidating balance sheets at December 31, 2013 and 2012 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2013, segregating HCA Holdings, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary non-guarantors and eliminations, follow.
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2013
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 20,042 | $ | 17,998 | $ | | $ | 38,040 | ||||||||||||
Provision for doubtful accounts |
| | 2,262 | 1,596 | | 3,858 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 17,780 | 16,402 | | 34,182 | ||||||||||||||||||
Salaries and benefits |
| | 8,387 | 7,259 | | 15,646 | ||||||||||||||||||
Supplies |
| | 3,158 | 2,812 | | 5,970 | ||||||||||||||||||
Other operating expenses |
8 | (2 | ) | 2,998 | 3,233 | | 6,237 | |||||||||||||||||
Electronic health record incentive income |
| | (142 | ) | (74 | ) | | (216 | ) | |||||||||||||||
Equity in earnings of affiliates |
(1,875 | ) | | (2 | ) | (27 | ) | 1,875 | (29 | ) | ||||||||||||||
Depreciation and amortization |
| | 855 | 898 | | 1,753 | ||||||||||||||||||
Interest expense |
184 | 2,253 | (523 | ) | (66 | ) | | 1,848 | ||||||||||||||||
Losses (gains) on sales of facilities |
| | 20 | (10 | ) | | 10 | |||||||||||||||||
Loss on retirement of debt |
| 17 | | | | 17 | ||||||||||||||||||
Management fees |
| | (632 | ) | 632 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1,683 | ) | 2,268 | 14,119 | 14,657 | 1,875 | 31,236 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
1,683 | (2,268 | ) | 3,661 | 1,745 | (1,875 | ) | 2,946 | ||||||||||||||||
Provision (benefit) for income taxes |
(73 | ) | (860 | ) | 1,362 | 521 | | 950 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
1,756 | (1,408 | ) | 2,299 | 1,224 | (1,875 | ) | 1,996 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 69 | 371 | | 440 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 1,756 | $ | (1,408 | ) | $ | 2,230 | $ | 853 | $ | (1,875 | ) | $ | 1,556 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 1,756 | $ | (1,324 | ) | $ | 2,338 | $ | 861 | $ | (1,875 | ) | $ | 1,756 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-40
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2012
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 19,415 | $ | 17,368 | $ | | $ | 36,783 | ||||||||||||
Provision for doubtful accounts |
| | 2,144 | 1,626 | | 3,770 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 17,271 | 15,742 | | 33,013 | ||||||||||||||||||
Salaries and benefits |
| | 7,959 | 7,130 | | 15,089 | ||||||||||||||||||
Supplies |
| | 2,995 | 2,722 | | 5,717 | ||||||||||||||||||
Other operating expenses |
3 | 5 | 3,013 | 3,027 | | 6,048 | ||||||||||||||||||
Electronic health record incentive income |
| | (219 | ) | (117 | ) | | (336 | ) | |||||||||||||||
Equity in earnings of affiliates |
(1,668 | ) | | (5 | ) | (31 | ) | 1,668 | (36 | ) | ||||||||||||||
Depreciation and amortization |
| | 821 | 858 | | 1,679 | ||||||||||||||||||
Interest expense |
123 | 2,167 | (468 | ) | (24 | ) | | 1,798 | ||||||||||||||||
Losses (gains) on sales of facilities |
| | 3 | (18 | ) | | (15 | ) | ||||||||||||||||
Legal claim costs |
| 175 | | | | 175 | ||||||||||||||||||
Management fees |
| | (569 | ) | 569 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(1,542 | ) | 2,347 | 13,530 | 14,116 | 1,668 | 30,119 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
1,542 | (2,347 | ) | 3,741 | 1,626 | (1,668 | ) | 2,894 | ||||||||||||||||
Provision (benefit) for income taxes |
(46 | ) | (839 | ) | 1,313 | 460 | | 888 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
1,588 | (1,508 | ) | 2,428 | 1,166 | (1,668 | ) | 2,006 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 62 | 339 | | 401 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 1,588 | $ | (1,508 | ) | $ | 2,366 | $ | 827 | $ | (1,668 | ) | $ | 1,605 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 1,588 | $ | (1,526 | ) | $ | 2,339 | $ | 855 | $ | (1,668 | ) | $ | 1,588 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-41
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2011
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Revenues before provision for doubtful accounts |
$ | | $ | | $ | 18,126 | $ | 14,380 | $ | | $ | 32,506 | ||||||||||||
Provision for doubtful accounts |
| | 1,644 | 1,180 | | 2,824 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Revenues |
| | 16,482 | 13,200 | | 29,682 | ||||||||||||||||||
Salaries and benefits |
| | 7,584 | 5,856 | | 13,440 | ||||||||||||||||||
Supplies |
| | 2,851 | 2,328 | | 5,179 | ||||||||||||||||||
Other operating expenses |
| 4 | 2,741 | 2,725 | | 5,470 | ||||||||||||||||||
Electronic health record incentive income |
| | (126 | ) | (84 | ) | | (210 | ) | |||||||||||||||
Equity in earnings of affiliates |
(2,531 | ) | | (86 | ) | (172 | ) | 2,531 | (258 | ) | ||||||||||||||
Depreciation and amortization |
| | 777 | 688 | | 1,465 | ||||||||||||||||||
Interest expense |
120 | 2,390 | (342 | ) | (131 | ) | | 2,037 | ||||||||||||||||
Gains on sales of facilities |
| | (127 | ) | (15 | ) | | (142 | ) | |||||||||||||||
Gain on acquisition of controlling interest in equity investment |
| | | (1,522 | ) | | (1,522 | ) | ||||||||||||||||
Losses on retirement of debt |
| 481 | | | | 481 | ||||||||||||||||||
Termination of management agreement |
| 181 | | | | 181 | ||||||||||||||||||
Management fees |
| | (491 | ) | 491 | | | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(2,411 | ) | 3,056 | 12,781 | 10,164 | 2,531 | 26,121 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Income (loss) before income taxes |
2,411 | (3,056 | ) | 3,701 | 3,036 | (2,531 | ) | 3,561 | ||||||||||||||||
Provision (benefit) for income taxes |
(42 | ) | (1,068 | ) | 1,271 | 558 | | 719 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) |
2,453 | (1,988 | ) | 2,430 | 2,478 | (2,531 | ) | 2,842 | ||||||||||||||||
Net income attributable to noncontrolling interests |
| | 63 | 314 | | 377 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net income (loss) attributable to HCA Holdings, Inc. |
$ | 2,453 | $ | (1,988 | ) | $ | 2,367 | $ | 2,164 | $ | (2,531 | ) | $ | 2,465 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Comprehensive income (loss) attributable to HCA Holdings, Inc. |
$ | 2,453 | $ | (1,969 | ) | $ | 2,341 | $ | 2,159 | $ | (2,531 | ) | $ | 2,453 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-42
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2013
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | | $ | | $ | 112 | $ | 302 | $ | | $ | 414 | ||||||||||||
Accounts receivable, net |
| | 2,565 | 2,643 | | 5,208 | ||||||||||||||||||
Inventories |
| | 692 | 487 | | 1,179 | ||||||||||||||||||
Deferred income taxes |
489 | | | | | 489 | ||||||||||||||||||
Other |
| | 301 | 446 | | 747 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
489 | | 3,670 | 3,878 | | 8,037 | |||||||||||||||||||
Property and equipment, net |
| | 7,504 | 6,115 | | 13,619 | ||||||||||||||||||
Investments of insurance subsidiaries |
| | | 448 | | 448 | ||||||||||||||||||
Investments in and advances to affiliates |
20,356 | | 13 | 108 | (20,356 | ) | 121 | |||||||||||||||||
Goodwill and other intangible assets |
| | 1,695 | 4,208 | | 5,903 | ||||||||||||||||||
Deferred loan costs |
30 | 207 | | | | 237 | ||||||||||||||||||
Other |
250 | | 48 | 168 | | 466 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 21,125 | $ | 207 | $ | 12,930 | $ | 14,925 | $ | (20,356 | ) | $ | 28,831 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY | ||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Accounts payable |
$ | 1 | $ | | $ | 1,169 | $ | 633 | $ | | $ | 1,803 | ||||||||||||
Accrued salaries |
| | 694 | 499 | | 1,193 | ||||||||||||||||||
Other accrued expenses |
272 | 353 | 464 | 824 | | 1,913 | ||||||||||||||||||
Long-term debt due within one year |
| 702 | 45 | 39 | | 786 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
273 | 1,055 | 2,372 | 1,995 | | 5,695 | |||||||||||||||||||
Long-term debt |
2,525 | 24,701 | 181 | 183 | | 27,590 | ||||||||||||||||||
Intercompany balances |
26,107 | (10,513 | ) | (19,428 | ) | 3,834 | | | ||||||||||||||||
Professional liability risks |
| | | 949 | | 949 | ||||||||||||||||||
Income taxes and other liabilities |
490 | 296 | 521 | 218 | | 1,525 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
29,395 | 15,539 | (16,354 | ) | 7,179 | | 35,759 | ||||||||||||||||||
Stockholders (deficit) equity attributable to HCA Holdings, Inc. |
(8,270 | ) | (15,332 | ) | 29,185 | 6,503 | (20,356 | ) | (8,270 | ) | ||||||||||||||
Noncontrolling interests |
| | 99 | 1,243 | | 1,342 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(8,270 | ) | (15,332 | ) | 29,284 | 7,746 | (20,356 | ) | (6,928 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 21,125 | $ | 207 | $ | 12,930 | $ | 14,925 | $ | (20,356 | ) | $ | 28,831 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-43
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2012
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||
Cash and cash equivalents |
$ | 22 | $ | | $ | 383 | $ | 300 | $ | | $ | 705 | ||||||||||||
Accounts receivable, net |
| | 2,448 | 2,224 | | 4,672 | ||||||||||||||||||
Inventories |
| | 629 | 457 | | 1,086 | ||||||||||||||||||
Deferred income taxes |
385 | | | | | 385 | ||||||||||||||||||
Other |
122 | | 342 | 451 | | 915 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
529 | | 3,802 | 3,432 | | 7,763 | |||||||||||||||||||
Property and equipment, net |
| | 7,417 | 5,768 | | 13,185 | ||||||||||||||||||
Investments of insurance subsidiaries |
| | | 515 | | 515 | ||||||||||||||||||
Investments in and advances to affiliates |
18,481 | | 16 | 88 | (18,481 | ) | 104 | |||||||||||||||||
Goodwill and other intangible assets |
| | 1,697 | 3,842 | | 5,539 | ||||||||||||||||||
Deferred loan costs |
32 | 258 | | | | 290 | ||||||||||||||||||
Other |
469 | | 31 | 179 | | 679 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 19,511 | $ | 258 | $ | 12,963 | $ | 13,824 | $ | (18,481 | ) | $ | 28,075 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY | ||||||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||
Accounts payable |
$ | | $ | | $ | 1,203 | $ | 565 | $ | | $ | 1,768 | ||||||||||||
Accrued salaries |
| | 638 | 482 | | 1,120 | ||||||||||||||||||
Other accrued expenses |
30 | 567 | 464 | 788 | | 1,849 | ||||||||||||||||||
Long-term debt due within one year |
| 1,360 | 39 | 36 | | 1,435 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
30 | 1,927 | 2,344 | 1,871 | | 6,172 | |||||||||||||||||||
Long-term debt |
2,525 | 24,304 | 173 | 493 | | 27,495 | ||||||||||||||||||
Intercompany balances |
26,131 | (12,407 | ) | (17,130 | ) | 3,406 | | | ||||||||||||||||
Professional liability risks |
| | | 973 | | 973 | ||||||||||||||||||
Income taxes and other liabilities |
485 | 442 | 629 | 220 | | 1,776 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
29,171 | 14,266 | (13,984 | ) | 6,963 | | 36,416 | ||||||||||||||||||
Stockholders (deficit) equity attributable to HCA Holdings, Inc. |
(9,660 | ) | (14,008 | ) | 26,847 | 5,642 | (18,481 | ) | (9,660 | ) | ||||||||||||||
Noncontrolling interests |
| | 100 | 1,219 | | 1,319 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
(9,660 | ) | (14,008 | ) | 26,947 | 6,861 | (18,481 | ) | (8,341 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 19,511 | $ | 258 | $ | 12,963 | $ | 13,824 | $ | (18,481 | ) | $ | 28,075 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-44
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2013
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | 1,756 | $ | (1,408 | ) | $ | 2,299 | $ | 1,224 | $ | (1,875 | ) | $ | 1,996 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||||||
Change in operating assets and liabilities |
(11 | ) | 17 | (2,320 | ) | (1,958 | ) | | (4,272 | ) | ||||||||||||||
Provision for doubtful accounts |
| | 2,262 | 1,596 | | 3,858 | ||||||||||||||||||
Depreciation and amortization |
| | 855 | 898 | | 1,753 | ||||||||||||||||||
Income taxes |
143 | | | | | 143 | ||||||||||||||||||
Losses (gains) on sales of facilities |
| | 20 | (10 | ) | | 10 | |||||||||||||||||
Loss on retirement of debt |
| 17 | | | | 17 | ||||||||||||||||||
Amortization of deferred loan costs |
3 | 52 | | | | 55 | ||||||||||||||||||
Share-based compensation |
113 | | | | | 113 | ||||||||||||||||||
Equity in earnings of affiliates |
(1,875 | ) | | | | 1,875 | | |||||||||||||||||
Other |
| 9 | 2 | (4 | ) | | 7 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) operating activities |
129 | (1,313 | ) | 3,118 | 1,746 | | 3,680 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of property and equipment |
| | (921 | ) | (1,022 | ) | | (1,943 | ) | |||||||||||||||
Acquisition of hospitals and health care entities |
| | | (481 | ) | | (481 | ) | ||||||||||||||||
Disposal of hospitals and health care entities |
| | 17 | 16 | | 33 | ||||||||||||||||||
Change in investments |
| | (16 | ) | 52 | | 36 | |||||||||||||||||
Other |
| | | 9 | | 9 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash used in investing activities |
| | (920 | ) | (1,426 | ) | | (2,346 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Net change in revolving bank credit facilities |
| 970 | | | | 970 | ||||||||||||||||||
Repayment of long-term debt |
| (1,254 | ) | (34 | ) | (374 | ) | | (1,662 | ) | ||||||||||||||
Distributions to noncontrolling interests |
| | (71 | ) | (364 | ) | | (435 | ) | |||||||||||||||
Payment of debt issuance costs |
| (5 | ) | | | | (5 | ) | ||||||||||||||||
Repurchase of common stock |
(500 | ) | | | | | (500 | ) | ||||||||||||||||
Distributions to stockholders |
(16 | ) | | | | | (16 | ) | ||||||||||||||||
Income tax benefits |
113 | | | | | 113 | ||||||||||||||||||
Changes in intercompany balances with affiliates, net |
342 | 1,602 | (2,364 | ) | 420 | | | |||||||||||||||||
Other |
(90 | ) | | | | | (90 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash (used in) provided by financing activities |
(151 | ) | 1,313 | (2,469 | ) | (318 | ) | | (1,625 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in cash and cash equivalents |
(22 | ) | | (271 | ) | 2 | | (291 | ) | |||||||||||||||
Cash and cash equivalents at beginning of period |
22 | | 383 | 300 | | 705 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | | $ | 112 | $ | 302 | $ | | $ | 414 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-45
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2012
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | 1,588 | $ | (1,508 | ) | $ | 2,428 | $ | 1,166 | $ | (1,668 | ) | $ | 2,006 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||||||
Change in operating assets and liabilities |
57 | (28 | ) | (1,927 | ) | (1,765 | ) | | (3,663 | ) | ||||||||||||||
Provision for doubtful accounts |
| | 2,144 | 1,626 | | 3,770 | ||||||||||||||||||
Depreciation and amortization |
| | 821 | 858 | | 1,679 | ||||||||||||||||||
Income taxes |
96 | | | | | 96 | ||||||||||||||||||
Losses (gains) on sales of facilities |
| | 3 | (18 | ) | | (15 | ) | ||||||||||||||||
Legal claim costs |
| 175 | | | | 175 | ||||||||||||||||||
Amortization of deferred loan costs |
2 | 60 | | | | 62 | ||||||||||||||||||
Share-based compensation |
56 | | | | | 56 | ||||||||||||||||||
Equity in earnings of affiliates |
(1,668 | ) | | | | 1,668 | | |||||||||||||||||
Other |
| 14 | (1 | ) | (4 | ) | | 9 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) operating activities |
131 | (1,287 | ) | 3,468 | 1,863 | | 4,175 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of property and equipment |
| | (1,039 | ) | (823 | ) | | (1,862 | ) | |||||||||||||||
Acquisition of hospitals and health care entities |
| | (110 | ) | (148 | ) | | (258 | ) | |||||||||||||||
Disposal of hospitals and health care entities |
| | 2 | 28 | | 30 | ||||||||||||||||||
Change in investments |
| | (11 | ) | 27 | | 16 | |||||||||||||||||
Other |
| | (2 | ) | 13 | | 11 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash used in investing activities |
| | (1,160 | ) | (903 | ) | | (2,063 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Issuances of long-term debt |
1,000 | 3,850 | | | | 4,850 | ||||||||||||||||||
Net change in revolving bank credit facilities |
| (685 | ) | | | | (685 | ) | ||||||||||||||||
Repayment of long-term debt |
| (2,309 | ) | (20 | ) | (112 | ) | | (2,441 | ) | ||||||||||||||
Distributions to noncontrolling interests |
| | (60 | ) | (341 | ) | | (401 | ) | |||||||||||||||
Payment of debt issuance costs |
(12 | ) | (50 | ) | | | | (62 | ) | |||||||||||||||
Distributions to stockholders |
(3,148 | ) | | | | | (3,148 | ) | ||||||||||||||||
Income tax benefits |
174 | | | | | 174 | ||||||||||||||||||
Changes in intercompany balances with affiliates, net |
1,938 | 481 | (1,960 | ) | (459 | ) | | | ||||||||||||||||
Other |
(61 | ) | | | (6 | ) | | (67 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash (used in) provided by financing activities |
(109 | ) | 1,287 | (2,040 | ) | (918 | ) | | (1,780 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in cash and cash equivalents |
22 | | 268 | 42 | | 332 | ||||||||||||||||||
Cash and cash equivalents at beginning of period |
| | 115 | 258 | | 373 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of period |
$ | 22 | $ | | $ | 383 | $ | 300 | $ | | $ | 705 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-46
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
HCA HOLDINGS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2011
(Dollars in millions)
HCA
Holdings, Inc. Issuer |
HCA Inc.
Issuer |
Subsidiary
Guarantors |
Subsidiary
Non- Guarantors |
Eliminations |
Condensed
Consolidated |
|||||||||||||||||||
Cash flows from operating activities: |
||||||||||||||||||||||||
Net income (loss) |
$ | 2,453 | $ | (1,988 | ) | $ | 2,430 | $ | 2,478 | $ | (2,531 | ) | $ | 2,842 | ||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||||||||||||||||||
Change in operating assets and liabilities |
6 | 71 | (1,755 | ) | (1,275 | ) | | (2,953 | ) | |||||||||||||||
Provision for doubtful accounts |
| | 1,644 | 1,180 | | 2,824 | ||||||||||||||||||
Depreciation and amortization |
| | 777 | 688 | | 1,465 | ||||||||||||||||||
Income taxes |
912 | | | | | 912 | ||||||||||||||||||
Gains on sales of facilities |
| | (127 | ) | (15 | ) | | (142 | ) | |||||||||||||||
Gain on acquisition of controlling interest in equity investment |
| | | (1,522 | ) | | (1,522 | ) | ||||||||||||||||
Losses on retirement of debt |
| 481 | | | | 481 | ||||||||||||||||||
Amortization of deferred loan costs |
| 70 | | | | 70 | ||||||||||||||||||
Share-based compensation |
26 | | | | | 26 | ||||||||||||||||||
Pay-in-kind interest |
| (78 | ) | | | | (78 | ) | ||||||||||||||||
Equity in earnings of affiliates |
(2,531 | ) | | | | 2,531 | | |||||||||||||||||
Other |
| 9 | | (1 | ) | | 8 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) operating activities |
866 | (1,435 | ) | 2,969 | 1,533 | | 3,933 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||
Purchase of property and equipment |
| | (910 | ) | (769 | ) | | (1,679 | ) | |||||||||||||||
Acquisition of hospitals and health care entities |
| | (142 | ) | (1,540 | ) | | (1,682 | ) | |||||||||||||||
Disposal of hospitals and health care entities |
| | 200 | 81 | | 281 | ||||||||||||||||||
Change in investments |
| | 34 | 46 | | 80 | ||||||||||||||||||
Other |
| | | 5 | | 5 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash used in investing activities |
| | (818 | ) | (2,177 | ) | | (2,995 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||
Issuances of long-term debt |
| 5,500 | | | | 5,500 | ||||||||||||||||||
Net change in revolving bank credit facilities |
| (449 | ) | | | | (449 | ) | ||||||||||||||||
Repayment of long-term debt |
| (6,577 | ) | (17 | ) | (46 | ) | | (6,640 | ) | ||||||||||||||
Distributions to noncontrolling interests |
| | (77 | ) | (301 | ) | | (378 | ) | |||||||||||||||
Payment of debt issuance costs |
| (92 | ) | | | | (92 | ) | ||||||||||||||||
Issuance of common stock |
2,506 | | | | | 2,506 | ||||||||||||||||||
Repurchase of common stock |
(1,503 | ) | | | | | (1,503 | ) | ||||||||||||||||
Distributions to stockholders |
(31 | ) | | | | | (31 | ) | ||||||||||||||||
Income tax benefits |
63 | | | | | 63 | ||||||||||||||||||
Changes in intercompany balances with affiliates, net |
(1,918 | ) | 3,053 | (2,098 | ) | 963 | | | ||||||||||||||||
Other |
11 | | | 37 | | 48 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Net cash provided by (used in) financing activities |
(872 | ) | 1,435 | (2,192 | ) | 653 | | (976 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Change in cash and cash equivalents |
(6 | ) | | (41 | ) | 9 | | (38 | ) | |||||||||||||||
Cash and cash equivalents at beginning of period |
6 | | 156 | 249 | | 411 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cash and cash equivalents at end of period |
$ | | $ | | $ | 115 | $ | 258 | $ | | $ | 373 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
F-47
HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 17 SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)
Healthtrust, Inc. The Hospital Company (Healthtrust) is the first-tier subsidiary of HCA Inc. The common stock of Healthtrust has been pledged as collateral for the senior secured credit facilities and senior secured notes described in Note 9. Rule 3-16 of Regulation S-X under the Securities Act requires the filing of separate financial statements for any affiliate of the registrant whose securities constitute a substantial portion of the collateral for any class of securities registered or being registered. We believe the separate financial statements requirement applies to Healthtrust due to the pledge of its common stock as collateral for the senior secured notes. Due to the corporate structure relationship of HCA and Healthtrust, HCAs operating subsidiaries are also the operating subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrusts consolidated financial statements related to HCAs debt and financial instruments, results in the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA. The consolidated financial statements of HCA and Healthtrust present the identical amounts for revenues, expenses, net income, assets, liabilities, total stockholders deficit, net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities. Certain individual line items in the HCA consolidated statements of stockholders deficit are combined into one line item in the Healthtrust consolidated statements of stockholders deficit.
Reconciliations of the HCA Holdings, Inc. Consolidated Statements of Stockholders Deficit presentation to the Healthtrust, Inc. The Hospital Company Consolidated Statements of Stockholders Deficit presentation for the years ended December 31, 2013, 2012 and 2011 are as follows (dollars in millions):
2013 | 2012 | 2011 | ||||||||||
Presentation in HCA Holdings, Inc. Consolidated Statements of Stockholders Deficit: |
||||||||||||
Share-based benefit plans |
$ | 139 | $ | 169 | $ | 35 | ||||||
Reclassification of certain equity securities with contingent redemption rights |
| | 141 | |||||||||
Other |
(6 | ) | (17 | ) | 36 | |||||||
|
|
|
|
|
|
|||||||
Presentation in Healthtrust, Inc. The Hospital Company Consolidated Statements of Stockholders Deficit: |
||||||||||||
Distributions from HCA Holdings, Inc., net of contributions to HCA Holdings, Inc. |
$ | 133 | $ | 152 | $ | 212 | ||||||
|
|
|
|
|
|
Due to the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA, except for the items presented in the table above, the separate consolidated financial statements of Healthtrust are not presented.
F-48
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(Dollars in millions)
2013 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Revenues |
$ | 8,440 | $ | 8,450 | $ | 8,456 | $ | 8,836 | ||||||||
Net income |
$ | 438 | (a) | $ | 537 | (b) | $ | 467 | (c) | $ | 554 | (d) | ||||
Net income attributable to HCA Holdings, Inc. |
$ | 344 | (a) | $ | 423 | (b) | $ | 365 | (c) | $ | 424 | (d) | ||||
Basic earnings per share |
$ | 0.77 | $ | 0.95 | $ | 0.82 | $ | 0.96 | ||||||||
Diluted earnings per share |
$ | 0.74 | $ | 0.91 | $ | 0.79 | $ | 0.92 |
2012 | ||||||||||||||||
First | Second | Third | Fourth | |||||||||||||
Revenues |
$ | 8,405 | $ | 8,112 | $ | 8,062 | $ | 8,434 | ||||||||
Net income |
$ | 639 | (e) | $ | 485 | (f) | $ | 455 | (g) | $ | 427 | (h) | ||||
Net income attributable to HCA Holdings, Inc. |
$ | 540 | (e) | $ | 391 | (f) | $ | 360 | (g) | $ | 314 | (h) | ||||
Basic earnings per share |
$ | 1.23 | $ | 0.89 | $ | 0.82 | $ | 0.71 | ||||||||
Diluted earnings per share |
$ | 1.18 | $ | 0.85 | $ | 0.78 | $ | 0.68 |
(a) |
First quarter results include $11 million of losses on sales of facilities (See NOTE 3 of the notes to consolidated financial statements) and $11 million of loss on retirement of debt (See NOTE 9 of the notes to consolidated financial statements). |
(b) |
Second quarter results include $3 million of gains on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(c) |
Third quarter results include $1 million of losses on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(d) |
Fourth quarter results include $2 million of gains on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(e) |
First quarter results include $1 million of losses on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(f) |
Second quarter results include $1 million of losses on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(g) |
Third quarter results include $5 million of gains on sales of facilities (See NOTE 3 of the notes to consolidated financial statements). |
(h) |
Fourth quarter results include $6 million of gains on sales of facilities (See NOTE 3 of the notes to consolidated financial statements) and $110 million of legal claim costs (See NOTE 10 of the notes to consolidated financial statements). |
F-49
Exhibit 10.17(b)
FORM OF
STOCK APPRECIATION RIGHTS AGREEMENT
This STOCK APPRECIATION RIGHTS AGREEMENT (the Agreement ), dated as of (the Grant Date ) is made by and between HCA Holdings, Inc., a Delaware corporation (hereinafter referred to as the Company ), and the individual whose name is set forth below, who is an employee of the Company or a Subsidiary or Affiliate of the Company, hereinafter referred to as the Grantee . Any capitalized terms herein not otherwise defined in Article I shall have the meaning set forth in the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as amended and restated (the Plan ).
WHEREAS, the Company wishes to carry out the Plan, the terms of which are hereby incorporated by reference and made a part of this Agreement; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company, including any subcommittee formed pursuant to Section 3(a) of the Plan, (or, if no such committee is appointed, the Board of Directors of the Company) (the Committee ) has determined that it would be to the advantage and best interest of the Company and its shareholders to grant an award of Stock Appreciation Rights ( SARs ) as provided for herein to the Grantee as an incentive for increased efforts during his or her term of office, employment or service with the Company or its Subsidiaries or Affiliates, and has advised the Company thereof and instructed the undersigned officers to issue said SARs;
NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:
STOCK APPRECIATION RIGHTS GRANT
Grantee: | [Participant Name] | |
[ParticipantAddress] | ||
Aggregate number of Time SARs granted hereunder (Time SARs): | [Time SAR Award] | |
Aggregate number of EBTIDA Performance SARs granted hereunder (EBTIDA Performance SARs): | [EBITDA Performance SAR Award] | |
Base Price of all SARs granted hereunder: | [Base Price] | |
Grant Date of Award (Grant Date): | [Grant Date] |
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.
Section 1.1 . | Cause |
Cause shall mean Cause as such term may be defined in any employment agreement or change-in-control agreement in effect at the time of termination of employment between the Grantee and the Company or any of its Subsidiaries or Affiliates, or, if there is no such employment or change-in-control agreement, Cause shall mean (i) willful and continued failure by Grantee (other than by reason of a Permanent Disability) to perform his or her material duties with respect to the Company or its Subsidiaries which continues beyond ten (10) business days after a written demand for substantial performance is delivered to Grantee by the Company (the Cure Period ); (ii) willful or intentional engaging by Grantee in material misconduct that causes material and demonstrable injury, monetarily or otherwise, to the Company, the Investors or their respective Affiliates; (iii) conviction of, or a plea of nolo contendere to, a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a misdemeanor for which a sentence of more than six months imprisonment is imposed; or (iv) Grantees engaging in any action in breach of restrictive covenants made by Grantee under any Management Stockholders Agreement (if applicable) or other agreement containing restrictive covenants (e.g., covenants not to disclose confidential information, to compete with the business of the Company or its Subsidiaries or to solicit the employees thereof to terminate their employment) or any employment or change-in-control agreement between the Grantee and the Company or any of its Subsidiaries, which continues beyond the Cure Period (to the extent that, in the Boards reasonable judgment, such breach can be cured).
Section 1.2. | EBITDA Performance SARs |
EBITDA Performance SARs shall mean the SARs granted on the terms and conditions set forth herein, with respect to all or any part of an aggregate number of shares of Common Stock set forth above opposite the term EBITDA Performance SARs.
Section 1.3. | Fiscal Year |
Fiscal Year shall mean each of the , , and fiscal years of the Company (which, for the avoidance of doubt, ends on December 31 of any given calendar year).
Section 1.4. | Good Reason |
Good Reason shall mean Good Reason as such term may be defined in any employment agreement or change-in-control agreement in effect at the time of
2
termination of employment between the Grantee and the Company or any of its Subsidiaries or Affiliates, or, if there is no such employment or change-in-control agreement, Good Reason shall mean (i) (A) a reduction in Grantees base salary (other than a general reduction in base salary that affects all similarly situated employees (defined as all employees within the same Company pay grade as that of Grantee) in substantially the same proportions that the Board implements in good faith after consultation with the Chief Executive Officer (CEO) and Chief Operating Officer of the Company, if any); (B) a reduction in Grantees annual incentive compensation opportunity; or (C) the reduction of benefits payable to Grantee under the Companys Supplemental Executive Retirement Plan (if Grantee is a participant in such plan), in each case other than any isolated, insubstantial and inadvertent failure by the Company that is not in bad faith and is cured within ten (10) business days after Grantee gives the Company written notice of such event; provided that the events described in (i)(A) or (i)(B) above will not be deemed to give rise to Good Reason if employment is terminated, but Grantee declines an offer of employment involving a loss of compensation of less than 15% from a purchaser, transferee, outsourced vendor, new operating entity or affiliated employer; (ii) a substantial diminution in Grantees title, duties and responsibilities, other than any isolated, insubstantial and inadvertent failure by the Company that is not in bad faith and is cured within ten (10) business days after Grantee gives the Company written notice of such event; or (iii) a transfer of Grantees primary workplace to a location that is more than twenty (20) miles from his or her workplace as of the date of this Agreement; provided that Good Reason shall not be deemed to occur merely because Grantees willful decision to change position or status within the Company or any of its Subsidiaries causes one or more of the occurrences described in (i), (ii), or (iii) to come about.
Section 1.5. | Permanent Disability |
Permanent Disability shall mean Disability as such term is defined in any employment agreement between Grantee and the Company or any of its Subsidiaries, or, if there is no such employment agreement, Disability as defined in the long-term disability plan of the Company.
Section 1.6. | Retirement |
Retirement shall mean Grantees resignation (other than for Good Reason) from service with the Company and the Service Recipients (i) after attaining 65 years of age or (ii) after attaining 55 years of age and completing ten (10) years of service with the Company or any Service Recipient.
Section 1.7. | SARs |
SARs shall mean the aggregate of the Time SARs and the EBITDA Performance SARs granted under Section 2.1 of this Agreement.
3
Section 1.8. | Secretary |
Secretary shall mean the Secretary of the Company.
Section 1.9. | Time SARs |
Time SARs shall mean the SARs granted on the terms and conditions set forth herein with respect to all or any part of an aggregate number of shares of Common Stock set forth above opposite the term Time SARs.
ARTICLE II
GRANT OF SARS
Section 2.1. | Grant of SARs |
For good and valuable consideration, on and as of the date hereof the Company irrevocably grants to the Grantee an award of the following SARs: (a) the Time SARs and (b) the EBITDA Performance SARs (together, the Award ), in each case on the terms and conditions set forth in this Agreement. Each SAR represents the right to receive pursuant to this Agreement, upon exercise of the SAR, a payment from the Company in shares of Common Stock having a value equal to the excess of the Fair Market Value of one Share on the exercise date over the Base Price (as defined below).
Section 2.2. Base Price
Subject to Section 2.4, the base price of each SAR granted pursuant to this Agreement (the Base Price ) shall be as set forth above.
Section 2.3. No Guarantee of Employment
Nothing in this Agreement or in the Plan shall confer upon the Grantee any right to continue in the employ of the Company or any Service Recipient or shall interfere with or restrict in any way the rights of the Company and the Service Recipients, which are hereby expressly reserved, to terminate the employment of the Grantee at any time for any reason whatsoever, with or without cause, subject to the applicable provisions of, if any, the Grantees employment agreement with the Company or offer letter provided by the Company or a Service Recipient to the Grantee.
Section 2.4. Adjustments to SARs
The SARs shall be subject to the adjustment provisions of Sections 8 and 9 of the Plan, provided , however , that in the event of the payment of an extraordinary dividend by the Company to its stockholders, then: first , the Base Price of each SAR shall be reduced by the amount of the dividend per share paid, but only to the extent the Committee determines it to be permitted under applicable tax laws and it will not have adverse tax consequences to the Grantee; and, if such reduction cannot be fully effected
4
due to such tax laws, second , the Company shall pay to the Grantee a cash payment, on a per SAR basis, equal to the balance of the amount of the dividend not permitted to be applied to reduce the Base Price of the applicable SARs as follows: (a) for each Share with respect to which a vested SAR relates, promptly following the date of such dividend payment; and (b), for each Share with respect to which an unvested SAR relates, on the date on which such SAR becomes vested and exercisable with respect to such Share.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1. | Commencement of Exercisability |
(a) So long as the Grantee continues to be employed by the Company or any other Service Recipient, this Award shall become vested and exercisable pursuant to the following schedules:
(i) Time SARs . This Award shall become vested and exercisable with respect to 25% of the Time SARs on each of the first four anniversaries of the Grant Date.
(ii) EBITDA Performance SARs . This Award shall be eligible to become vested as to 25% of the EBITDA Performance SARs (the Eligible SARs ) at the end of each of the four Fiscal Years, if the Company, on a consolidated basis, achieves its annual EBITDA targets for the given Fiscal Year, as each such target shall be established by the Committee on the attached Schedule A or otherwise within the first ninety days of each such Fiscal Year (each, once so established, an EBITDA Target ) for the given Fiscal Year. In the event the actual EBITDA for a Fiscal Year equals or exceeds the minimum percentage of the EBITDA Target set forth on Schedule A for such year, a portion of the Eligible SARs shall become vested as provided in the attached Schedule A as of the last day of the applicable Fiscal Year. Subject to the immediately preceding sentence, in the event that the EBITDA Target is not achieved in a particular Fiscal Year, then that portion of the Eligible SARs that failed to vest due to the Companys failure to achieve 100% of its EBITDA Target shall be forfeited and immediately terminated as of the date the actual EBITDA for the Fiscal Year has been certified by the Committee. Any portion of the Eligible SAR that becomes vested pursuant to this Section 3.1(a)(ii) shall become first exercisable upon the determination by the Committee that the applicable EBITDA Targets have been achieved.
(b) Notwithstanding the foregoing (but subject to Section 3.1(c) below), upon the occurrence of a Change in Control (the definition of which is set forth on Schedule B attached hereto):
(i) this Award shall become immediately vested and exercisable immediately prior to a Change in Control as to 100% of the Time SARs (but only to the extent this Award has not otherwise terminated or become exercisable with respect to such SARs);
5
(ii) this Award shall become immediately vested and exercisable immediately prior to a Change in Control as to 100% of the Eligible SARs with respect to (i) the Fiscal Year in which the Change in Control occurs and (ii) each subsequent Fiscal Year (but only to the extent this Award has not otherwise terminated or become exercisable with respect to such SARs); and
(c) Notwithstanding the foregoing, no part of this Award shall become vested as to any additional SARs as of any date following the termination of Grantees employment with the Company or any Service Recipient for any reason and any SAR, which is (or determined to be) unvested as of the Grantees termination of employment, shall immediately expire without payment therefor.
Section 3.2 . | Expiration of SARs |
The Grantee may not exercise any SAR granted pursuant to this Award after the first to occur of the following events:
(a) The tenth anniversary of the Grant Date so long as the Grantee remains employed with the Company or any Service Recipient through such date;
(b) The third anniversary of the date of the Grantees termination of employment with the Company and all Service Recipients, if the Grantees employment terminates by reason of death or Permanent Disability;
(c) Immediately upon the date of the Grantees termination of employment by the Company or any Service Recipient for Cause, including if a vested SAR has not yet become exercisable pursuant to Section 3.1(a)(ii);
(d) One hundred and eighty (180) days after the date of the Grantees termination of employment by the Company or any Service Recipient without Cause (for any reason other than as set forth in Section 3.2(b));
(e) One hundred and eighty (180) days after the date of the Grantees termination of employment with the Company or any Service Recipient by the Grantee for Good Reason;
(f) The third anniversary of the date of the Grantees termination of employment with the Company or any Service Recipient by the Grantee upon Retirement.
(g) Sixty (60) days after the date of the Grantees termination of employment with the Company or any Service Recipient by the Grantee without Good Reason (except due to Retirement, death or Permanent Disability); or
(h) At the discretion of the Company, if the Committee so determines pursuant to Section 9 of the Plan.
6
For the avoidance of doubt, for purposes of this Agreement, Grantees employment shall not be deemed to have terminated so long as Grantee remains employed by any Service Recipient.
ARTICLE IV
EXERCISE
Section 4.1. | Person Eligible to Exercise |
The Grantee may exercise only that portion of this Award that has both vested and become exercisable at the time Grantee desires to exercise this Award and that has not expired pursuant to Section 3.2. During the lifetime of the Grantee, only the Grantee (or his or her duly authorized legal representative) may exercise the SARs granted pursuant to this Award or any portion thereof. After the death of the Grantee, any vested and exercisable portion of this Award may, prior to the time when such portion becomes unexercisable under Section 3.2, be exercised by his personal representative or by any person empowered to do so under the Grantees will or under the then applicable laws of descent and distribution.
Section 4.2. | Partial Exercise |
Any vested and exercisable portion of this Award, or the entire Award, if then wholly vested and exercisable, may be exercised in whole or in part at any time prior to the time when the Award or portion thereof becomes unexercisable under Section 3.2.
Section 4.3. | Manner of Exercise |
Subject to the Companys code of conduct and securities trading policies as in effect from time to time, this Award, or any exercisable portion thereof, may be exercised solely by delivering to the Company or its designated agent all of the following prior to the time when the Award or such portion becomes unexercisable under Section 3.2:
(a) Notice in writing (or such other medium acceptable to the Company or its designated agent) signed or acknowledged by the Grantee or other person then entitled to exercise the Award, stating the number of SARs subject to the Award in respect of which the Award is thereby being exercised, such notice complying with all applicable rules established by the Committee;
(b) [intentionally omitted]
(c) (i) Full payment (in cash or by check or by a combination thereof) to satisfy the minimum withholding tax obligation with respect to which the Award or portion thereof is exercised or (ii) indication that the Grantee elects to satisfy the withholding tax obligation through an arrangement that is compliant with the Sarbanes-Oxley Act of 2002 (and any other applicable laws and exchange rules) and that provides
7
for the delivery of irrevocable instructions to a broker to sell Shares obtained upon the exercise of the Award and to deliver promptly to the Company an amount to satisfy the minimum withholding tax obligation that would otherwise be required to be paid by the Grantee to the Company pursuant to clause (i) of this subsection (c), or (iii) if made available by the Company, indication that the Grantee elects to have the number of Shares that would otherwise be issued to the Grantee upon exercise of such Award (or portion thereof) reduced by a number of Shares having an aggregate Fair Market Value, on the date of such exercise, equal to the payment to satisfy the minimum withholding tax obligation that would otherwise be required to be made by the Grantee to the Company pursuant to clause (i) of this subsection (c).
(d) If required by the Company, a bona fide written representation and agreement, in a form satisfactory to the Company, signed by the Grantee or other person then entitled to exercise such Award or portion thereof, stating that the shares of Common Stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the Act ), and then applicable rules and regulations thereunder, and that the Grantee or other person then entitled to exercise such Award or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above; provided, however, that the Company may, in its reasonable discretion, take whatever additional actions it deems reasonably necessary to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; and
(e) In the event the Award or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Grantee, appropriate proof of the right of such person or persons to exercise the Award.
Without limiting the generality of the foregoing, the Company may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on exercise of this Award (or portion thereof) does not violate the Act, and may issue stop-transfer orders covering such Shares. Share certificates evidencing stock issued on exercise of any portion of this Award shall bear an appropriate legend referring to the provisions of subsection (d) above and the agreements herein. The written representation and agreement referred to in subsection (d) above shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Act, and such registration is then effective in respect of such shares.
8
Section 4.4. | Conditions to Issuance of Stock Certificates |
The Shares issuable (whether by certificate or otherwise) upon the exercise of this Award, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares, which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. If share certificates are to be issued, the Company shall not be required to issue or deliver any certificate or certificates for Shares purchased upon the exercise of this Award or portion thereof prior to fulfillment of all of the following conditions:
(a) The obtaining of approval or other clearance from any state or federal governmental agency which the Committee shall, in its reasonable and good faith discretion, determine to be necessary or advisable; and
(b) The lapse of such reasonable period of time following the exercise of the Award as the Committee may from time to time establish for reasons of administrative convenience or as may otherwise be required by applicable law.
Section 4.5. | Rights as Stockholder |
Except as otherwise provided in Section 2.4 of this Agreement, the holder of any SARs subject to this Award shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any Shares issuable upon the exercise of this Award or any portion thereof unless and until certificates representing such Shares shall have been issued by the Company to such holder, or the Company or its designated agent has otherwise recorded the appropriate book entries evidencing Grantees ownership of the Shares.
ARTICLE V
MISCELLANEOUS
Section 5.1. | Administration |
The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.
Section 5.2. | Award Not Transferable |
No part of, or interest in, this Award shall be liable for the debts, contracts or engagements of the Grantee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.
9
Section 5.3. | Notices |
Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or its designee, and any notice to be given to the Grantee shall be addressed to him at the address (including an electronic address) reflected in the Companys books and records. By a notice given pursuant to this Section 5.3, either party may hereafter designate a different address for notices to be given to him. Any notice, which is required to be given to the Grantee, shall, if the Grantee is then deceased, be given to the Grantees personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.3. Any notice shall have been deemed duly given when (i) delivered in person, (ii) delivered in an electronic form approved by the Company, (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iv) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.
Section 5.4. | Titles; Pronouns |
Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.
Section 5.5. | Applicability of Plan |
The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are governed by the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern.
Section 5.6. | Amendment |
Subject to Section 10 of the Plan, this Agreement may be amended only by a writing executed by the parties hereto, which specifically states that it is amending this Agreement.
Section 5.7 | Governing Law |
The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.
10
Section 5.8 | Arbitration |
In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator. Such arbitration process shall take place within the Nashville, Tennessee metropolitan area. The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrators reasoning. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator. If the Grantee substantially prevails on any of his or her substantive legal claims, then the Company shall reimburse all legal fees and arbitration fees incurred by the Grantee to arbitrate the dispute.
IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.
HCA HOLDINGS, INC. | ||
By: |
|
|
Its: |
|
|
Grantee: | ||
(electronically accepted) |
11
Schedule A
EBITDA Targets
Fiscal Year |
FY1 |
FY2 |
FY3 |
FY4 |
||||||||||||
EBITDA Target |
TBD | 1 | TBD | 1 | TBD | 1 | TBD | 1 |
Partial Vesting Schedule
Actual EBITDA (% of Budget) |
100%+ |
99.0% - 99.9% |
98.0% - 98.9% |
97.0% - 97.9% |
96.0% - 96.9% |
< 96.0% |
||||||
% Eligible SARs 2 Vesting | 100% | 80% | 60% | 40% | 20% | 0% |
EBITDA means earnings before interest, taxes, depreciation, amortization, net income attributable to noncontrolling interests, gains or losses on sales of facilities, gains or losses on extinguishment of debt, asset or investment impairment charges, restructuring charges, any expenses for share-based compensation under ASC Topic 718, and any other expenses or losses resulting from significant, unusual and/or nonrecurring events, as described in managements discussion and analysis of financial condition and results of operations appearing in the Companys annual report for the Fiscal Year, as determined in good faith by the Board or the Committee in consultation with the CEO. In the event the Company disposes of or acquires any facility during the Fiscal Year, the EBITDA target for such year shall be adjusted appropriately (based on the number of days during the year for which the facility was owned) to reflect the acquisition or disposition.
In addition to any adjustments enumerated in the definition of EBITDA, above, the Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting the Grantee, the Company, or any Subsidiary or Affiliate, or the financial statements of the Company or of any Subsidiary or Affiliate; in the event of changes in applicable laws, regulations or accounting principles; or in the event the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Agreement. The Committee is also authorized to adjust performance targets or awards downward to avoid unwarranted windfalls.
1 | The annual EBITDA targets for each of FY1, FY2, FY3 and FY4 shall be determined during the first 90 days of the relevant Fiscal Year, in accordance with Section 3.1(a)(ii) hereof. |
2 | For the avoidance of doubt, the Eligible SARs with respect to any Fiscal Year equals 25% of the EBITDA Performance SARs granted hereunder. |
Schedule B
Definition of Change in Control
For purposes of this Agreement, the term Change in Control shall mean, in lieu of any definition contained in the Plan:
(i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than, as of the date of determination, (A) any and all of an employee benefit plan (or trust forming a part thereof) maintained by (1) the Company or (2) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company; (B) Hercules Holding II, LLC, a Delaware limited liability company (or any successor) (Hercules Holding II), but only for so long as Hercules Holding II continues to hold at least 30% of the voting power of the Companys voting equity securities, or (C) any Equity Sponsor (as defined in the Companys Amended and Restated Certificate of Incorporation dated as of March 8, 2011), but only for so long as the Equity Sponsors, in the aggregate, continue to hold at least 30% of the voting power of the Companys voting equity securities (any of the foregoing, Permitted Holders); or
(ii) any Person or Group, other than the Permitted Holders, becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto) (except that a Person shall be deemed to have beneficial ownership of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; or
(iii) a reorganization, recapitalization, merger or consolidation (a Corporate Transaction) involving the Company, unless securities representing more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction (or the parent of such corporation) are Beneficially Owned subsequent to such transaction by the Person or Persons who were the Beneficial Owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(iv) during any period of 12 months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office.
2
Exhibit 10.28(g)
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AGREEMENT (the Amendment) is made by and between R. Milton Johnson (the Executive) and HCA Holdings, Inc., a Delaware corporation (the Company), effective as of January 1, 2014.
WITNESSETH:
WHEREAS , HCA Inc. previously entered into an Employment Agreement (the Employment Agreement) with the Executive dated November 16, 2006;
WHEREAS , on November 22, 2010, the Company completed a corporate reorganization pursuant to which the Company became the direct parent company of, and successor issuer to, HCA Inc. (the Corporate Reorganization);
WHEREAS , the Company assumed the Employment Agreement in connection with the Corporate Reorganization;
WHEREAS , the Employment Agreement was previously amended effective February 9, 2011; and
WHEREAS , the Company and the Executive desire to further amend the Employment Agreement so as to reflect the Executives appointment, responsibilities and duties as Chief Executive Officer and President of the Company.
NOW, THEREFORE , for the reasons set forth above, and other valid consideration, the receipt of which is hereby acknowledged, the Company and the Executive hereby amend the Employment Agreement as follows:
1. Amendment . Section 2(a) of the Employment Agreement is deleted in its entirety and replaced with the following:
a. During the Employment Term, Executive shall serve as the Chief Executive Officer and President of the Company. In such position, Executive shall have such duties, authority and responsibility as shall be determined from time to time by the Board of Directors of the Company which duties, authority and responsibility are consistent with those attendant to such position with the Company with respect to the business of the Company. For so long as Executive is an officer with the Company, Executive shall serve as a member of the Board of Directors of the Company. Executive shall, if requested, also serve as a member of the Board of Directors of any affiliate of the Company, without additional compensation.
2. Certain Definitions . Capitalized terms used in this Amendment not otherwise defined herein shall have the same meaning as set forth in the Employment Agreement.
1
3. Effect of Amendment . Except as modified hereby, the Employment Agreement shall remain unaffected and in full force and effect.
4. Counterparts . This Amendment may be executed in counterparts, each of which shall be an original but all of which shall constitute but one document.
[Signature page follows]
2
IN WITNESS WHEREOF , the undersigned have executed this Agreement, intending to be legally bound, as of the date first stated above.
HCA HOLDINGS, INC. |
||
By: | /s/ John M . Steele | |
Name: | John M. Steele | |
Title: | Senior Vice President Human Resources | |
/s/ R. Milton Johnson |
||
|
||
R. Milton Johnson |
3
Exhibit 10.44
HCA HOLDINGS, INC.
2013 SENIOR OFFICER PERFORMANCE EXCELLENCE PROGRAM
Purpose and Administration of the Program
The 2013 Senior Officer Performance Excellence Program (the Program) has been established by HCA Holdings, Inc. (the Company) to encourage outstanding performance from its senior officers. Awards under the Program shall be administered as Performance-Based Awards pursuant to the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (the 2006 Plan). Subject to applicable law, all designations, determinations, interpretations, and other decisions under or with respect to the Program or any award shall be within the sole discretion of the Compensation Committee, including any subcommittee formed pursuant to Section 3(a) of the 2006 Plan (the Committee), may be made at any time and shall be final, conclusive and binding upon all persons. Designations, determinations, interpretations, and other decisions made by the Committee with respect to the Program or any Award, including but not limited to the application of the PEP Recoupment Policy described herein, need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated.
Participation
All officers of the Company who have been designated by the Committee as executive officers of the Company during 2013 (the Fiscal Year) are eligible to receive an award pursuant to the Program (each, a Participant).
Incentive Calculation and Payment of Awards
Awards shall be calculated based on the financial results for the Fiscal Year and shall be paid within two and one-half months following the end of the Fiscal Year. No awards will be paid to a Participant until the Chairman and Chief Executive Officer have affirmed that senior officer behaviors and actions during the Fiscal Year were consistent with the Companys stated mission and values, the Code of Conduct and other regulatory requirements.
The Committee will make awards pursuant to the Program (each, an Award) as set forth on Schedule A hereto, on such terms as the Committee may prescribe based on the performance criteria set forth on Schedule A hereto and such other factors as it may deem appropriate. The targets for the performance criteria shall be determined by the Committee in its discretion within the first ninety (90) days of the Fiscal Year. The Committee shall determine and certify whether and to what extent each performance or other goal has been met prior to the payment of any Award hereunder. A Participant is required to remain employed with the Company through the end of the Fiscal Year in order to have a legally binding right to the Award.
Awards pursuant to the Program that are attributable to the performance goals being met at the applicable target level or below will be paid solely in cash. In the event performance goals are achieved above the applicable target level, the amount of an Award attributable to performance results in excess of the applicable target level shall be payable 50% in cash and 50% in restricted share units. The number of restricted stock units will be determined by dividing the cash amount of the relevant portion of the Award by the per share Fair Market Value (as such term is defined in the 2006 Plan) on the date of the determination, and rounding down, with any fractional amount payable in cash. Any restricted share units granted under this Program will be pursuant to the terms contained in the Restricted Share Unit Agreement attached to this Plan as Exhibit 1; except that, for the avoidance of doubt, any Prorata Bonus, as such term is defined in any employment agreement between a Participant and the Company in effect as of the effective date of this Program, shall be paid 100% in cash if such amounts become payable under such employment agreement, and no restricted share units will be issued in respect of such Prorata Bonus amount.
Any restricted share units issued as payment under this Program may be issued pursuant to the 2006 Plan or other appropriate equity plan in effect at such time, unless the Committee determines that such awards may be made independent of any equity plan. Except as the Committee may otherwise determine in its sole and absolute discretion, termination of a Participants employment prior to the end of the Fiscal Year will result in the forfeiture of the Award by the Participant, and no payments shall be made with respect thereto.
This Program is not a qualified plan for federal income tax purposes, and any payments are subject to applicable tax withholding requirements.
Adjustments for Unusual or Nonrecurring Events
In addition to any adjustments enumerated in the definition of the performance goals set forth on Schedule A hereto, the Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring events affecting any Participant, the Company, or any subsidiary or affiliate, or the financial statements of the Company or of any subsidiary or affiliate; in the event of changes in applicable laws, regulations or accounting principles; or in the event the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Program. The Committee is also authorized to adjust performance targets or awards downward to avoid unwarranted windfalls. Notwithstanding the foregoing, the Committee shall not have the discretion to increase any award payable to any covered employee (within the meaning of Section 162(m) of the Internal Revenue Code, as amended (the Code) and the regulations promulgated thereunder) in excess of that provided by the application of the terms and conditions of Schedule A attached hereto.
PEP Recoupment Policy
The Company may recover any incentive compensation awarded or paid pursuant to this Program based on (i) achievement of financial results that were subsequently the subject of a restatement due to material noncompliance with any financial reporting requirement under either GAAP or the federal securities laws, other than as a result of changes to accounting rules and regulations, or (ii) a subsequent finding that the financial information or performance metrics used by the Committee to determine the amount of the incentive compensation were materially inaccurate, in each case regardless of individual fault. In addition, the Company may recover any incentive compensation awarded or paid pursuant to this Program based on a Participants conduct which is not in good faith and which materially disrupts, damages, impairs or interferes with the business of the Company and its affiliates. This PEP Recoupment Policy applies to any incentive compensation earned or paid to a Participant pursuant to this Program (including, but not limited to, the restricted share units issued hereunder). Subsequent changes in status, including retirement or termination of employment, do not affect the Companys rights to recover compensation under this policy. The Committee will administer this policy and exercise its discretion and business judgment in the fair application of this policy based on the facts and circumstances as it deems relevant in its sole discretion. More specifically, the Committee shall determine in its discretion any appropriate amounts to recoup, the officers from whom such amounts shall be recouped (which need not be all officers who received the bonus compensation at issue) and the timing and form of recoupment; provided, that only compensation paid or settled within three years prior to the Committee taking action under this PEP Recoupment Policy shall be subject to recoupment; provided further, that any recoupment pursuant to clause (i) or (ii) of the first sentence of this paragraph shall not exceed the portion of any applicable bonus paid hereunder that is in excess of the amount of performance-based or incentive compensation that would have been paid or granted based on the actual, restated financial statements or actual level of the applicable financial or performance metrics as determined by the Committee in its sole discretion.
For avoidance of doubt, the Company may set off the amounts of any such required recoupment against any amounts otherwise owed by the Company to a Participant as determined by the Committee in its sole discretion, solely to the extent any such offset complies with the requirements of Section 409A of the Internal Revenue Code and the guidance issued thereunder.
If any restatement of the Companys financial results indicates that the Company should have made higher performance-based payments than those actually made under the Program for a period affected by the restatement, then the Committee shall have discretion, but not the obligation to cause the Company to make appropriate incremental payments to affected Participants then-currently employed by the Company. The Committee will determine, in its sole discretion, the amount, form and timing of any such incremental payments, which shall be no more than the difference
between the amount of performance-based compensation that was paid or awarded and the amount that would have been paid or granted based on the actual, restated financial statements.
Other Provisions
No Right to Employment
The grant of an award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any subsidiary or affiliate.
No Trust or Fund Created
Neither the Program nor any award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any subsidiary or affiliate and a Participant or any other person. To the extent that any person acquires a right to receive payments from the Company or any subsidiary or affiliate pursuant to an award, such right shall be no greater than the right of any unsecured general creditor of the Company or any subsidiary or affiliate.
No Rights to Awards
No person shall have any claim to be granted any award and there is no obligation for uniformity of treatment among Participants. The terms and conditions of awards, if any, need not be the same with respect to each Participant. The Company reserves the right to terminate the Program at any time in the Companys sole discretion.
Section 409A of the Internal Revenue Code
This Program is intended to comply with Section 409A of the Code and will be interpreted in a manner intended to comply with Section 409A of the Code.
Interpretation and Governing Law
This Program shall be governed by and interpreted and construed in accordance with the internal laws of the State of Tennessee, without reference to principles of conflicts or choices of laws. In the event the terms of this Program are inconsistent with the terms of any written employment agreement between a Participant and the Company, the terms of such written employment agreement shall govern the Participants participation in the Program. Program awards to covered employees of the Company are intended to be deductible under Section 162(m) of the Code, and the provisions of this Program and any award hereunder shall be interpreted and administered under the 2006 Plan as a Performance-Based Award consistently therewith. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the 2006 Plan.
Schedule A
2013 Measures and Weightings
EBITDA 1 | Other 2 | |||||||
All Participants | 100 | % | |
1 For the purposes of this calculation, EBITDA means earnings before interest, taxes, depreciation, amortization, net income attributable to noncontrolling interests, gains or losses on sales of facilities, gains or losses on extinguishment of debt, asset or investment impairment charges, restructuring charges, any expenses for share-based compensation under ASC Topic 718, and any other expenses or losses resulting from significant, unusual and/or nonrecurring events, as described in managements discussion and analysis of financial condition and results of operations appearing in the Companys annual report for the Fiscal Year, as determined in good faith by the Board or the Committee in consultation with the CEO. In the event the Company disposes of any facility during the Fiscal Year, the EBITDA target for such year shall be adjusted appropriately (based on the number of days during the year for which the facility was owned) to reflect the disposition.
2 The Committee reserves the right to apply negative discretion to final Award determinations with respect to any Participant based on the Committees subjective evaluation of the Participants annual performance including, if and as determined by the Committee, an evaluation of quality of performance with a primary focus on CMS Core Measures, Hospital Acquired Conditions, and HCAHPS performance against industry benchmarks. No adjustment to an individual Award pursuant to this note 2 shall exceed 20% of the target PEP Award of the individual.
2013 PEP Opportunities
Each Participant in the Program is assigned annual award opportunities expressed in terms of Threshold, Target and Maximum levels of performance. The opportunities, expressed as percentages of base salary, for the following positions are as set forth below.
Threshold Level
(25% of Target Level) |
Target Level |
Maximum Level
(200% of Target Level) |
||||||||||
Chairman & CEO |
37.5 | % | 150 | % | 300 | % | ||||||
President & CFO |
25 | % | 100 | % | 200 | % |
Threshold Level
(25% of Target Level) |
Target Level |
Maximum Level
(200% of Target Level) |
||||||||||
President of Operations |
21.25 | % | 85 | % | 170 | % | ||||||
Group Presidents |
18.75 | % | 75 | % | 150 | % |
The Target annual award opportunity for senior officers other than those listed above will range from 50% to 65% of base salary, as determined by the Committee. Participants shall receive 100% of the target award for target performance, 25% of the target award for a minimum acceptable (threshold) level of performance, and a maximum of 200% of the target award for maximum performance.
The Threshold, Target and Maximum percentages shall be finally determined by the Committee; provided, that the maximum dollar amount that may be paid to any Participant under the Program with respect to the Fiscal year shall not exceed the amount set forth in Section 5(f)(iii) of the 2006 Plan.
Payouts between threshold and maximum for Participants shall be calculated by the Committee in its sole discretion using straight-line interpolation. The threshold, target and maximum EBITDA performance levels and other goals (if applicable) shall be set by the Committee in its sole discretion. Final Awards are subject to reduction in the Committees discretion as described in note 2 of 2013 Measures and Weightings.
Exhibit 10.45
HCA Holdings, Inc.
Restricted Share Unit Agreement
This RESTRICTED SHARE UNIT AGREEMENT (this Agreement) is made and entered into as of the day of , 2014 (the Grant Date), between HCA Holdings, Inc., a Delaware corporation (the Company), and [officer] , (the Grantee). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Companys 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of Restricted Share Units; and
WHEREAS, in the Compensation Committee of Board of Directors of the Company or a subcommittee thereof (or if no such committee is appointed, the Board of Directors of the Company) (each, the Committee) has administered the 2013 Senior Officer Performance Excellence Program (the 2013 PEP) and determined that Grantee is entitled to an award thereunder, a portion of which is payable as a restricted share unit award under the Plan;
NOW, THEREFORE, the parties hereto agree as follows:
RESTRICTED SHARE UNIT GRANT
Grantee: | [Participant Name] | |
[ParticipantAddress] | ||
Aggregate number of Restricted Share Units | ||
Granted hereunder: | [Award] | |
Grant Date: | [Grant Date] |
1. Grant of Restricted Share Unit Award .
1.1 The Company hereby grants to the Grantee the award (Award) of Restricted Share Units (RSUs) set forth above on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. A bookkeeping account will be maintained by the Company to keep track of the RSUs and any dividend equivalent units that may accrue as provided Section 3 .
1.2 This Agreement shall be construed in accordance and consistent with, and subject to, the terms of the Plan; and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same meanings as are set forth in the Plan.
1.3 The Grantees rights with respect to the Award shall remain forfeitable at all times prior to the dates on which the RSUs shall vest in accordance with Section 2 hereof. This Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by Grantee other than by will or the laws of descent and distribution.
2. Vesting and Payment .
2.1 General . Except as provided in Section 2.2 and Section 2.3 , the Award shall vest on the second anniversary of the date hereof with respect to one-half (1/2) of the RSUs, and shall expire with respect to the remaining RSUs on the third anniversary of the Grant Date (each, a Vesting Date).
2.2 Early Vesting . Notwithstanding Section 2.1 above, but subject to Section 2.3 , all RSUs covered by the Award shall immediately vest upon the occurrence of a Change in Control (the definition of which is set forth on Schedule A attached hereto), or upon the Grantees death or Disability. For purposes of this Agreement, Disability shall have the same meaning as such term is defined under Section 409A of the Code.
2.3 Termination of Employment . Except as provided in Section 2.2 or as otherwise provided by the Committee, if the Grantees service as an employee of the Company terminates for any reason, the Grantee shall forfeit all rights with respect to all RSUs that are not vested on such date; provided, that in the event of the Grantees Retirement, the Grantee shall become vested in any RSUs that were, immediately prior to such Retirement, unvested, and such newly vested RSUs shall continue to be payable on each applicable Vesting Date that occurs following the date of such Retirement as provided in Section 2.1 or, if earlier, upon the occurrence of an event described in Section 2.2 . For purposes of this Agreement, Retirement means Grantees resignation from service with the Company (and its subsidiaries, if applicable) (i) after attaining 65 years of age or (ii) after attaining 55 years of age and completing ten years of service with the Company or any of its subsidiaries.
2.4 Settlement . The Grantee shall be entitled to settlement of the RSUs covered by this Agreement at the time that such RSUs vest pursuant to Section 2.1 , Section 2.2 or Section 2.3 , as applicable (any such date, the Settlement Date). Such settlement shall be made as promptly as practicable thereafter (but in no event after the thirtieth day following the Settlement Date), through the issuance to the Grantee (or to the executors or administrators of Grantees estate in the event of the Grantees death) of a stock certificate (or evidence such Shares have been registered in the name of the Grantee with the relevant stock agent) for a number of Shares equal to the number of such vested RSUs and Dividend Equivalent Units that may have accrued pursuant to Section 3 hereof; provided, that any cash-based dividend equivalent rights granted pursuant to Section 3 hereof and any fractional Dividend Equivalent Units shall be paid in cash when (and only if) the RSUs to which they relate are settled.
2.5 Withholding Obligations . Prior to the settlement of any RSUs subject to this Award, Grantee shall provide (i) full payment (in cash or by check or by a combination thereof) to satisfy the minimum withholding tax obligation with respect to which the Award or portion thereof shall settle or (ii) indication that the Grantee elects to satisfy the withholding tax obligation through an arrangement that is compliant with the Sarbanes-Oxley Act of 2002 (and any other applicable laws and exchange rules) and that provides for the delivery of irrevocable instructions to a broker to sell Shares issuable upon the vesting of the Award and to deliver promptly to the Company an amount to satisfy the minimum withholding tax obligation that would otherwise be required to be paid by the Grantee to the Company pursuant to clause (i) of this Section 2.5 , or (iii) if made available by the Company, indication that the Grantee elects to have the number of Shares that would otherwise be issued to the Grantee upon settlement of the Award (or portion thereof) reduced by a number of Shares having an aggregate Fair Market Value, on the date of such issuance, equal to the payment to satisfy the minimum withholding tax obligation that would otherwise be required to be made by the Grantee to the Company pursuant to clause (i) of this Section 2.5 .
3. Dividend Rights .
The Grantee shall receive dividend equivalent rights in respect of the RSUs covered by this Award at the time of any payment of dividends to stockholders on Shares. At the Companys option, the RSUs will be credited with either (a) additional Restricted Share Units (the Dividend Equivalent Units) (including fractional units) for cash dividends paid on shares of the Companys Common Stock by (i) multiplying the cash dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid, and (ii) dividing the product determined above by the Fair Market Value of a Share, in each case, on the date the dividend record date, or (b) a cash amount equal to the amount that would be payable to the Grantee as a stockholder in respect of a number of Shares equal to the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid as of the dividend record date. The RSUs will be credited with Dividend Equivalent Units for stock dividends paid on shares of the Companys Common Stock by multiplying the stock dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid on the dividend record date. Each Dividend Equivalent Unit shall have a value equal to one Share. Each Dividend Equivalent Unit or cash dividend equivalent right will vest and be settled or payable at the same time as the RSU to which the dividend equivalent right relates. For the avoidance of doubt, no dividend equivalent rights shall accrue under this Section 3 in the event that any dividend equivalent rights or other applicable adjustments pursuant to Section 5 hereof provide similar benefits.
4. No Right to Continued Service .
Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right to continue service an officer or employee of the Company.
5. Adjustments .
The provisions of Section 8 and Section 9 of the Plan are hereby incorporated by reference, and the RSUs (and any Dividend Equivalent Units) are subject to such provisions. Any determination made by the Committee or the Board pursuant to such provisions shall be made in accordance with the provisions of the Plan and shall be final and binding for all purposes of the Plan and this Agreement.
6. Administration Subject to Plan .
The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are governed by the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award.
7. Modification of Agreement .
Subject to the restrictions contained in Sections 6 and 10 of the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would adversely affect the rights of the Grantee or any holder or beneficiary of the Award in more than a de minimis way shall not to that extent be effective without the consent of the Grantee, holder or beneficiary affected.
8. Section 409A .
Notwithstanding anything herein to the contrary, to the maximum extent permitted by applicable law, the settlement of the RSUs (including any dividend equivalent rights related thereto) to be made to the Grantee pursuant to this Agreement is intended to qualify as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Regulations and this Agreement shall be interpreted consistently therewith. However, under certain circumstances, settlement of the RSUs or any dividend equivalent rights may not so qualify, and in that case, the Committee shall administer the grant and settlement of such RSUs and any dividend equivalent rights in strict compliance with Section 409A of the Code. Further, notwithstanding anything herein to the contrary, if at the time of a Participants termination of employment with the Company and all Service Recipients, the Participant is a specified employee as defined in Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of service is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Participant) to the minimum extent necessary to satisfy Section 409A of the Code until the date that is six months and one day following the Participants
termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code), if such payment or benefit is payable upon a termination of employment. Each payment of RSUs (and related dividend equivalent units) constitutes a separate payment for purposes of Section 409A of the Code.
9. Severability .
If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
10. Governing Law .
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of law principles thereof, except to the extent that such laws are preempted by Federal law.
11. Successors in Interest .
This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantees legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantees heirs, executors, administrators and successors.
12. Resolution of Disputes .
Any dispute or disagreement which may arise under, or as a result of, or in any way related to, the interpretation, construction or application of this Agreement shall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusive on the Grantee and the Company for all purposes.
13. Notices .
Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or its designee, and any notice to be given to the Grantee shall be addressed to him at the address (including an electronic address) then reflected in the Companys books and records. By a notice given pursuant to this Section 13 , either party may hereafter designate a different address for notices to be given to him. Any notice, which is required to be given to the Grantee, shall, if the Grantee is then deceased, be given to the Grantees personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 13 . Any notice shall have been deemed duly given when (i) delivered in person, (ii) delivered in an electronic form approved by the Company, (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post
office regularly maintained by the United States Postal Service, or (iv) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.
IN WITNESS WHEREOF, the parties have caused this Restricted Share Unit Agreement to be duly executed effective as of the day and year first above written.
HCA Holdings, Inc. | ||
By: |
|
|
Grantee: | ||
(electronically accepted) |
Schedule A
Definition of Change in Control
For purposes of this Agreement, the term Change in Control shall mean, in lieu of any definition contained in the Plan:
(i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than, as of the date of determination, (A) any and all of an employee benefit plan (or trust forming a part thereof) maintained by (1) the Company or (2) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company; (B) Hercules Holding II, LLC, a Delaware limited liability company (or any successor) (Hercules Holding II), but only for so long as Hercules Holding II continues to hold at least 30% of the voting power of the Companys voting equity securities, or (C) any Equity Sponsor (as defined in the Companys Amended and Restated Certificate of Incorporation dated as of March 8, 2011), but only for so long as the Equity Sponsors, in the aggregate, continue to hold at least 30% of the voting power of the Companys voting equity securities (any of the foregoing, Permitted Holders); or
(ii) any Person or Group, other than the Permitted Holders, becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto) (except that a Person shall be deemed to have beneficial ownership of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; or
(iii) a reorganization, recapitalization, merger or consolidation (a Corporate Transaction) involving the Company, unless securities representing more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction (or the parent of such corporation) are Beneficially Owned subsequent to such transaction by the Person or Persons who were the Beneficial Owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(iv) during any period of 12 months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office.
Exhibit 10.46
SCOPE: Group and Division Presidents, Group CFOs, and Corporate Senior Officers. Corporate payroll executives who are a party to an employment agreement are not subject to this policy.
PURPOSE: To provide a consistent procedure in processing severance payments to eligible executives.
POLICY:
1. | Eligible: |
Severance may be granted to executives who qualify under one or more of the following criteria and in consideration of the signing of a Separation Agreement and General Release acceptable to the Plan Administrator, in its sole discretion.
a. | Involuntary Separation |
An executive who incurs an involuntary separation from service initiated by the employer where the executive and employer have a reasonable belief at the date of separation based on the surrounding facts and circumstances that the executive will provide no future services to the employer.
b. | Good Reason |
An executive who separates from service voluntarily within one year following the initial existence of one or more of the following conditions arising without the consent or willful decision of the executive: (i) a material diminution in the executives base compensation (other than a general reduction in base compensation that affects all similarly situated employees (defined as all employees within the same pay grade as that of the executive) in substantially the same proportions that the Board implements in good faith after consultation with the Chief Executive Officer and Chief Operating Officer of the employer), or (ii) a material diminution in the executives authority, duties, or responsibilities, or (iii) a transfer of the executives primary workplace to a location that is more than thirty five (35) miles from his or her workplace; provided that Good Reason shall not exist unless the executive has provided notice to Corporate Employee Relations within 90 days of the initial existence of the condition of the executives intention to separate from service as a result of the condition, and the employer has not remedied the condition within 30 days after receiving such notice.
2. | Not Eligible: |
Executives are not eligible for payment of severance under this policy:
a. | if upon separation from service, the executive receives an offer of employment from the purchaser, outsourced vendor or new operating entity and the offer involves a loss of base compensation of less than fifteen percent (15%). |
b. | if upon involuntary separation from service due to position elimination when prior to such a separation, the executive declines an offer of another job with an Affiliated Employer which does not involve relocation and does not involve a loss of base compensation in excess of fifteen percent (15%). |
c. | if covered by a previously issued employment agreement and separation from service occurs during the term of the employment agreement. |
d. | if the reason for separation from service results in an executive being not eligible for rehire. |
3. | Payment: |
Severance payments under this policy will be made in a lump sum and in compliance with all applicable federal and state laws, and subject to appropriate withholdings.
All payments are subject to the executives timely execution of the Separation Agreement and General Release, if applicable, and the expiration of the period for revocation of the General Release prior to payment. Except as otherwise provided in this policy, payments will be made concurrent with separation from service or in the next regularly scheduled payroll processing cycle applicable to the executive. In any event, payment must be made no later than the March 15 occurring after the calendar year in which the executives separation from service occurs, provided that if the executive has not executed the Separation Agreement and General Release, or if the period for revocation of the General Release has not expired by such March 15, any right to payment will be forfeited.
If an executive is re-employed by an Affiliated Employer within 180 days following separation from service and received severance, at the discretion of the employer, a pro-rated portion of the severance amount may be required to be repaid. The amount to be repaid shall be the amount of severance paid, multiplied by a fraction the numerator of which is 180 minus the number of days elapsed from the date of separation of service to the re-employment date, and the denominator of which is 180. If an executive is re-employed after more than 180 days following separation from service, no amount of severance is expected to be repaid.
4. | Amount of Payment: |
a. | Executives in the following positions prior to January 1, 2009: |
Group President
Group CFO
Division President
Senior Vice President
Twenty-four (24) months lump sum payment at current base compensation rate, eligibility to participate in PEP for the year of termination under the terms of the program and prorated through the effective date of separation from service, and payment of a lump sum, determined for existing coverage at the COBRA rate in effect on date of separation from service, of the amount needed in order to continue medical coverage under COBRA for eighteen (18) months.
b. | Executives in the following positions after January 1, 2009: |
Group President
Group CFO
Division President
Senior Vice President
Eighteen (18) months lump sum payment at current base compensation rate, eligibility to participate in PEP for the year of termination under the terms of the program and prorated through the effective date of separation from service, and payment of a lump sum, determined for existing coverage at the COBRA rate in effect on date of separation from service, of the amount needed in order to continue medical coverage under COBRA for eighteen (18) months.
5. | Administration: |
The Human Resources Policy Committee is the Plan Administrator for this policy and the only fiduciary under this policy for purposes of applying ERISA, shall perform its duties as the Plan Administrator in compliance with applicable law and in its sole discretion shall determine appropriate courses of action in light of the reasons and purposes for which this policy was established and is maintained. The Plan Administrator has full and sole discretionary authority to interpret this policy and documents relating to this policy and to make all interpretive and factual determinations as to whether any executive is entitled to receive any benefits under the terms of this policy. Any construction of the terms of this policy or of any document relating to this policy and any determination of fact adopted by the Plan Administrator shall be final and legally binding on all parties.
Any interpretation, determination or other action or inaction of the Plan Administrator that is challenged shall be subject to reversal only if it is arbitrary, capricious or otherwise an abuse of discretion. Any review of an interpretation, determination or other action or inaction of the Plan Administrator shall consider only such evidence presented to or considered by the Plan Administrator at the time of its action or inaction that is the subject of review. Accepting any benefits or making any claim for benefits under this policy constitutes agreement with, and consent to, any decisions that the Plan Administrator makes, in its sole discretion and, further, constitutes agreement to the limited standard and scope of review. The Plan Administrator may delegate any of its duties and responsibilities under this policy in writing to one or more persons or entities.
A claim for benefits under this policy must be filed within one (1) year from the date of the executives separation from service under this policy. The procedures for handling a claim for benefits under this policy (and an appeal of a claims denial, if any) shall comply with
those procedures imposed on employee welfare benefit plans generally (and not only on health or LTD plans) by ERISA section 503 and the regulations under it. An appeal of a denial of a claim for benefits under this policy must be filed within one (1) year after the date of the claims denial. No court action may be maintained for relief or benefits under this policy until the policys described claims review and appeal procedures have been exhausted. Questions arising under this policy shall be determined under applicable federal law, to the extent applicable, and otherwise under the law of the State of Tennessee.
The Human Resources Policy Committee may amend or terminate this policy, in whole or in part, at any time and from time to time, without prior notice and without the consent of any party.
PROCEDURE:
1. | The executives supervisor must initiate the request for payment. |
2. | Upon notification, Corporate Employee Relations will determine if severance is to be paid. |
3. | If severance is to be paid, a Separation Agreement and General Release acceptable to the Plan Administrator, in its sole discretion, must be signed by the executive and an executed version received by Corporate Employee Relations, except as expressly provided otherwise in this policy. |
4. | Separation from service as part of a planned reduction involving a group or class of employees does not require a Separation Agreement and General Release. |
5. | Upon receipt of the signed Separation Agreement and General Release, if required, and the expiration of the revocation period for the release, Corporate Employee Relations will supervise the process of computing the lump sum payment and will oversee the payment process. |
REFERENCES:
INTERNAL REVENUE CODE SECTION 409A:
1. | This policy is intended to comply with, or otherwise be exempt from, section 409A of the Internal Revenue Code of 1986, as amended (Section 409A). This policy shall be administered, interpreted, construed and applied in a manner that does not result in the imposition of additional taxes or interest under Section 409A. |
2. | The employer, each Affiliated Employer and the Plan Administrator do not guarantee any particular tax effect from this policy or payments under it. None of them shall be liable to pay any tax, penalty, or interest under, or as a result of, Section 409A, or for reporting any payment made under this policy as an amount includible in gross income under Section 409A. The executive shall remain liable for all taxes, interest or penalties imposed under Section 409A. |
3. | Termination of employment, separation from service retirement, resignation or words of similar import, as used in this policy shall mean, with respect to any payments of deferred compensation under this policy that might be subject to Section 409A, the executives separation from service as defined in Section 409A. |
4. | Notwithstanding any other part of this policy to the contrary, if payment of any amount of deferred compensation (as defined under Section 409A, after giving effect to the exemptions under it) under this policy is triggered by a separation from service that occurs while the executive is a specified employee (as defined under Section 409A and determined in good faith) with respect to the employer and if such amount is scheduled to be paid within six (6) months after such separation from service, the amount shall not be paid as otherwise provided in this policy, shall accrue without interest and shall be paid only on the first business day after the end of such six-month period, or, if earlier, within 15 days after the appointment of the personal representative or executor of the executives estate following the executives death. |
5. | If payment of any amount of deferred compensation (as defined under Section 409A, after giving effect to the exemptions under it) under this policy is contingent upon the executives taking any employment-related action, including but not limited to, agreeing to restrictive covenants or execution of a release and waiver of claims and if the period within which executive must take the employment-related action would begin in one calendar year and expire in a following calendar year, then any payments contingent on such employment-related action shall be made in such following calendar year (regardless of the year of execution of such release) if payment in such following calendar year is required in order to avoid taxes, interest or penalties under Section 409A. |
Exhibit 10.47
HCA Holdings, Inc.
Restricted Share Unit Agreement
This RESTRICTED SHARE UNIT AGREEMENT (this Agreement ) is made and entered into as of the day of , 20 (the Grant Date ), between HCA Holdings, Inc., a Delaware corporation (the Company ), and the individual whose name is set forth below (the Grantee ). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Companys 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (the Plan ).
WHEREAS, the Company has adopted the Plan, which permits the issuance of Restricted Share Units; and
WHEREAS, the Compensation Committee of the Board of Directors of the Company, including any subcommittee formed pursuant to Section 3(a) of the Plan (or, if no such committee is appointed, the Board of Directors of the Company) (the Committee ) has determined that it would be to the advantage and best interest of the Company and its shareholders to grant an award of the Restricted Share Units provided for herein to the Grantee as an incentive for increased efforts during his or her term of service or employment with the Company or its Subsidiaries or Affiliates, and has advised the Company thereof and instructed the undersigned officers to issue said Restricted Share Units;
NOW, THEREFORE, the parties hereto agree as follows:
RESTRICTED SHARE UNIT GRANT
Grantee: | [Participant Name] | |
[Participant Address] | ||
Aggregate number of Restricted Share Units Granted hereunder: |
[Award] | |
Grant Date: | [Grant Date] |
1. Grant of Restricted Share Unit Award.
1.1 The Company hereby grants to the Grantee the award ( Award ) of Restricted Share Units ( RSUs ) set forth above on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. A bookkeeping account will be maintained by the Company to keep track of the RSUs and any dividend equivalent rights that may accrue as provided Section 3 .
1.2 This Agreement shall be construed in accordance and consistent with, and subject to, the terms of the Plan; and, except as otherwise expressly set forth herein, the capitalized terms used in this Agreement shall have the same meanings as are set forth in the Plan.
1.3 The Grantees rights with respect to the Award shall remain forfeitable at all times prior to the dates on which the RSUs shall vest in accordance with Section 2 hereof. This Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by Grantee other than by will or the laws of descent and distribution.
2. Vesting and Payment.
2.1 The RSUs granted pursuant to Section 1.1 hereof shall vest upon the expiration of Grantees Employment Term (as such term is defined in the Amended and Restated Employment Agreement dated August 2, 2013 by and between the Company and Grantee) or Grantees sooner voluntary termination for any reason.
2.2 Change in Control . Notwithstanding the foregoing, upon the occurrence of a Change in Control (the definition of which is set forth on Schedule A attached hereto)this Award shall become vested immediately prior to a Change in Control (but only to the extent such Award has not otherwise terminated or become vested).
2.3 Settlement . The Grantee shall be entitled to settlement of the RSUs subject to this Award at the time that such RSUs vest pursuant to Section 2.1 or Section 2.2 , as applicable. Such settlement shall be made as promptly as practicable thereafter (but in no event after the thirtieth day following the applicable vesting date, or in the case of a Change in Control, the Change in Control). Any settlement of RSUs granted pursuant to this Award shall be made in Shares through the issuance to the Grantee of a stock certificate (or evidence such Shares have been registered in the name of the Grantee with the relevant stock agent) for a number of Shares equal to the number of such vested RSUs and Dividend Equivalent Units that may have accrued pursuant to Section 3 hereof; provided, that any cash-based dividend equivalent rights granted pursuant to Section 3 hereof and any fractional Dividend Equivalent Units shall be paid in cash when (and only if) the RSUs to which they relate are settled.
2.4 Withholding Obligations . Prior to the settlement of any RSUs subject to this Award, Grantee shall provide (i) full payment (in cash or by check or by a combination thereof) to satisfy the minimum withholding tax obligation with respect to which the Award or portion thereof shall settle or (ii) indication that the Grantee elects to satisfy the withholding tax obligation through an arrangement that is compliant with the Sarbanes-Oxley Act of 2002 (and any other applicable laws and exchange rules) and that provides for the delivery of irrevocable instructions to a broker to sell Shares issuable upon the vesting of the Award and to deliver promptly to the Company an amount to satisfy the minimum withholding tax obligation that would otherwise be
2
required to be paid by the Grantee to the Company pursuant to clause (i) of this Section 2.4 , or (iii) if made available by the Company, indication that the Grantee elects to have the number of Shares that would otherwise be issued to the Grantee upon settlement of the Award (or portion thereof) reduced by a number of Shares having an aggregate Fair Market Value, on the date of such issuance, equal to the payment to satisfy the minimum withholding tax obligation that would otherwise be required to be made by the Grantee to the Company pursuant to clause (i) of this Section 2.4 .
3. Dividend Rights.
The Grantee shall receive dividend equivalent rights in respect of the RSUs covered by this Award at the time of any payment of dividends to stockholders on Shares. At the Companys option, the RSUs will be credited with either (a) additional Restricted Share Units (the Dividend Equivalent Units ) (including fractional units) for cash dividends paid on shares of the Companys Common Stock by (i) multiplying the cash dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid, and (b) dividing the product determined above by the Fair Market Value of a Share, in each case, on the dividend record date, or (b) a cash amount equal to the amount that would be payable to the Grantee as a stockholder in respect of a number of Shares equal to the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid as of the dividend record date. The RSUs will be credited with Dividend Equivalent Units for stock dividends paid on shares of the Companys Common Stock by multiplying the stock dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid on the dividend record date. Each Dividend Equivalent Unit has a value equal to one Share. Each Dividend Equivalent Unit or cash dividend equivalent right will vest and be settled or payable at the same time as the RSU to which such dividend equivalent right relates. For the avoidance of doubt, no dividend equivalent rights shall accrue under this Section 3 in the event that any dividend equivalent rights or other applicable adjustments pursuant to Section 5 hereof provide similar benefits.
4. No Right to Continued Service.
Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right to continue service an officer or employee of the Company or any Service Recipient.
5. Adjustments.
The provisions of Section 8 and Section 9 of the Plan are hereby incorporated by reference, and the RSUs (and any Dividend Equivalent Units) are subject to such provisions. Any determination made by the Committee or the Board pursuant to such provisions shall be made in accordance with the provisions of the Plan and shall be final and binding for all purposes of the Plan and this Agreement.
3
6. Administration Subject to the Plan.
The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof. The terms of this Agreement are governed by the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern. The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Grantee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Award.
7. Modification of Agreement.
Subject to the restrictions contained in Sections 6 and 10 of the Plan, the Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate, the Award, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would adversely affect the rights of the Grantee or any holder or beneficiary of the Award in more than a de minimis way shall not to that extent be effective without the consent of the Grantee, holder or beneficiary affected.
8. Section 409A.
Notwithstanding anything herein to the contrary, to the maximum extent permitted by applicable law, the settlement of the RSUs (including any dividend equivalent rights) to be made to the Grantee pursuant to this Agreement is intended to qualify as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Regulations and this Agreement shall be interpreted consistently therewith. However, under certain circumstances, settlement of the RSUs or any dividend equivalent rights may not so qualify, and in that case, the Committee shall administer the grant and settlement of such RSUs and any dividend equivalent rights in strict compliance with Section 409A of the Code. Further, notwithstanding anything herein to the contrary, if at the time of a Participants termination of employment with the Company and all Service Recipients, the Participant is a specified employee as defined in Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of service is necessary in order to prevent the imposition of any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Participant) to the minimum extent necessary to satisfy Section 409A of the Code until the date that is six months and one day following the Participants termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code), if such payment or benefit is payable upon a termination of employment. Each payment of RSUs (and related dividend equivalent rights) constitutes a separate payment for purposes of Section 409A of the Code.
4
9. Severability.
If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
10. Governing Law.
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of law principles thereof, except to the extent that such laws are preempted by Federal law.
11. Successors in Interest.
This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantees legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantees heirs, executors, administrators and successors.
12. Resolution of Disputes.
In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator. Such arbitration process shall take place within the Nashville, Tennessee metropolitan area. The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrators reasoning. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator. If the Grantee substantially prevails on any of his or her substantive legal claims, then the Company shall reimburse all legal fees and arbitration fees incurred by the Grantee to arbitrate the dispute.
5
13. Notices.
Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or its designee, and any notice to be given to the Grantee shall be addressed to him at the address (including an electronic address) reflected in the Companys books and records. By a notice given pursuant to this Section 13 , either party may hereafter designate a different address for notices to be given to him. Any notice, which is required to be given to the Grantee, shall, if the Grantee is then deceased, be given to the Grantees personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 13 . Any notice shall have been deemed duly given when (i) delivered in person, (ii) delivered in an electronic form approved by the Company, (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iv) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.
IN WITNESS WHEREOF, the parties have caused this Restricted Share Unit Agreement to be duly executed effective as of the day and year first above written.
HCA Holdings, Inc. | ||
By: |
|
|
Grantee: | ||
(electronically accepted) |
6
Schedule A
Definition of Change in Control
For purposes of this Agreement, the term Change in Control shall mean, in lieu of any definition contained in the Plan:
(i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than, as of the date of determination, (A) any and all of an employee benefit plan (or trust forming a part thereof) maintained by (1) the Company or (2) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company; (B) Hercules Holding II, LLC, a Delaware limited liability company (or any successor) (Hercules Holding II), but only for so long as Hercules Holding II continues to hold at least 30% of the voting power of the Companys voting equity securities, or (C) any Equity Sponsor (as defined in the Companys Amended and Restated Certificate of Incorporation dated as of March 8, 2011), but only for so long as the Equity Sponsors, in the aggregate, continue to hold at least 30% of the voting power of the Companys voting equity securities (any of the foregoing, Permitted Holders); or
(ii) any Person or Group, other than the Permitted Holders, becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto) (except that a Person shall be deemed to have beneficial ownership of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; or
(iii) a reorganization, recapitalization, merger or consolidation (a Corporate Transaction) involving the Company, unless securities representing more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction (or the parent of such corporation) are Beneficially Owned subsequent to such transaction by the Person or Persons who were the Beneficial Owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(iv) during any period of 12 months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office.
7
Exhibit 10.48
HCA Holdings, Inc.
Restricted Share Unit Agreement
(Initial Award)
THIS RESTRICTED SHARE UNIT AGREEMENT (this Agreement) is made and entered into as of the day of , 20 (the Grant Date), between HCA Holdings, Inc., a Delaware corporation (the Company), and the individual whose name is set forth below (the Grantee). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of awards that are based on Shares of the Company, including the grant of a right to receive one Share at a specified date (or dates) in the future (a Restricted Share Unit); and
WHEREAS, the Company has determined that a portion of the Grantees annual retainer for services as a director of the Company (a Director) should be paid to the Grantee in the form of Restricted Share Units to be granted pursuant to the terms and conditions set forth in this award Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
RESTRICTED SHARE UNIT GRANT
Grantee: | [Participant Name] | |
[Participant Address] | ||
Aggregate number of Restricted Share Units granted hereunder: |
[Award] | |
Grant Date: | [Grant Date] |
1. Grant of Restricted Share Unit Award .
1.1 The Company hereby grants to the Grantee an award (Award) of Restricted Share Units (RSUs) as set forth above on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. A bookkeeping account will be maintained by the Company to keep track of the RSUs and any dividend equivalent rights that may accrue as provided Section 3.
1.2 The Grantees rights with respect to the Award shall remain forfeitable at all times prior to the dates on which the RSUs shall vest in accordance with Section 2 hereof. This Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by Grantee other than by will or the laws of descent and distribution.
2. Vesting and Payment .
2.1 Except as provided in Section 2.2, the Award shall vest in its entirety on the third anniversary of the Grant Date, so long as the Grantee continues to serve on the Board through such date (such period sometimes referred to as the Restricted Period).
2.2 Notwithstanding Section 2.1 above, all RSUs covered by the Award shall immediately vest upon the occurrence of a Change in Control (the definition of which is set forth on Schedule A attached hereto) that occurs prior to the expiration of the Restricted Period. If the Grantees service as a Director is terminated for any reason other than death or Disability, the Grantee shall forfeit all rights with respect to all RSUs (including Dividend Equivalent Units and other dividend equivalent rights) that are not vested on such date; provided, however, if such termination is with Cause (as defined below), all RSUs whether vested or unvested shall immediately become void and of no effect. If the Grantees service as a Director is terminated by death or Disability, the RSUs covered by the Award shall immediately vest, but only in proportion to the length of the Directors service as a director during such Restricted Period. For purposes of this Agreement, Cause shall mean the reasons for which a Director can be removed from the Board by the Company pursuant to the governing documents of the Company (including, without limitation, the Companys by-laws and charter). For purposes of this Agreement, Disability shall mean that the Grantee is unable to perform the essential duties of a Director. Notwithstanding the foregoing, this provision is subject in its entirety to Section 9 of the Plan.
2.3 The Grantee shall be entitled to payment in respect of all RSUs covered by the Award upon the vesting of this Award. Subject to the provisions of the Plan, such payment shall be made through the issuance to the Grantee, as promptly as practicable thereafter (or to the executors or administrators of Grantees estate, as promptly as practicable after the Companys receipt of notification of Grantees death, as the case may be), of a number of Shares equal to the number of such RSUs that have vested pursuant to this Award. Notwithstanding the foregoing, if the Grantee shall have elected to defer payment of the RSUs that become vested under this Award to such later date as may be permitted by the Company, in accordance with the requirements of Section 409A of the Code, by , 201 , payment of such vested RSUs shall instead be made on such later date (the Deferral Election).
3. Dividend Equivalent Rights .
Grantee shall receive dividend equivalent rights in respect of the RSUs covered by this Award at the time of any payment of dividends to stockholders on Shares. At the Companys option, the RSUs will be credited with either (a) additional units (the Dividend Equivalent Units ) (including fractional units) for cash dividends paid on shares of the Companys Common Stock by (i) multiplying the cash dividend paid per Share by the number of
RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid, and (b) dividing the product determined above by the Fair Market Value of a Share, in each case, on the dividend record date, or (b) a cash amount equal to the amount that would be payable to the Grantee as a stockholder in respect of a number of Shares equal to the number of RSUs and Dividend Equivalent Units then credited to the Grantee hereunder as of the dividend record date. The RSUs will be credited with Dividend Equivalent Units for stock dividends paid on shares of the Companys Common Stock by multiplying the stock dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid on the dividend record date. Each Dividend Equivalent Unit has a value equal to one Share. Each Dividend Equivalent Unit or cash dividend equivalent right will vest and be settled or payable at the same time as the RSU to which such dividend equivalent right relates. For the avoidance of doubt, no dividend equivalent rights shall accrue under this Section 3 in the event that any dividend equivalent rights or other applicable adjustments pursuant to Section 5 hereof provide similar benefits.
4. No Right to Continued Service .
Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right to continue service as a member of the Board.
5. Adjustments .
Notwithstanding anything else contained in this Agreement, the RSUs granted hereunder and this Agreement shall be subject to adjustment, substitution or cancellation in accordance with the provisions of Sections 8 and 9 of the Plan.
6. Grantee Bound by the Plan .
This Agreement shall be construed in accordance and consistent with, and subject to, the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern. The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.
7. Modification of Agreement .
Subject to the provisions of Section 3 of the Plan, this Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto.
8. Severability .
If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or
deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
9. Taxes; Section 409A .
The Grantee shall be responsible for all taxes due in connection with the grant or vesting or any payment or transfer with respect to the RSUs and Shares (and cash, if applicable) payable hereunder. Notwithstanding anything herein to the contrary, to the maximum extent permitted by applicable law, the settlement of the RSUs (including any dividend equivalent rights) to be made to the Grantee pursuant to this Agreement is intended to qualify as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Regulations and this Agreement shall be interpreted consistently therewith. However, under certain circumstances, including where Grantee has elected to defer settlement of this Award, settlement of the RSUs or any dividend equivalent rights may not so qualify, and in that case, the Committee shall administer the grant and settlement of such RSUs and any dividend equivalent rights in strict compliance with Section 409A of the Code. Each payment of RSUs (and related dividend equivalent rights) constitutes a separate payment for purposes of Section 409A of the Code.
10. Governing Law .
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of law principles thereof, except to the extent that such laws are preempted by Federal law.
11. Successors in Interest .
This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantees legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantees heirs, executors, administrators and successors.
12. Resolution of Disputes .
In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator. Such arbitration process shall take place within the Nashville, Tennessee metropolitan area. The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrators reasoning. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator. If the Grantee substantially prevails on any of his or her substantive legal claims, then the Company shall reimburse all legal fees and arbitration fees incurred by the Grantee to arbitrate the dispute.
13. Entire Agreement.
This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto.
14. Notices .
Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or its designee, and any notice to be given to the Grantee shall be addressed to him at the address (including an electronic address) reflected in the Companys books and records. By a notice given pursuant to this Section 14 , either party may hereafter designate a different address for notices to be given to him. Any notice, which is required to be given to the Grantee, shall, if the Grantee is then deceased, be given to the Grantees personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 14 . Any notice shall have been deemed duly given when (i) delivered in person, (ii) delivered in an electronic form approved by the Company, (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iv) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.
HCA Holdings, Inc. | ||
By: |
|
|
Grantee: | ||
(electronically accepted) |
Schedule A
Definition of Change in Control
For purposes of this Agreement, the term Change in Control shall mean, in lieu of any definition contained in the Plan:
(i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than, as of the date of determination, (A) any and all of an employee benefit plan (or trust forming a part thereof) maintained by (1) the Company or (2) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company; (B) Hercules Holding II, LLC, a Delaware limited liability company (or any successor) (Hercules Holding II), but only for so long as Hercules Holding II continues to hold at least 30% of the voting power of the Companys voting equity securities, or (C) any Equity Sponsor (as defined in the Companys Amended and Restated Certificate of Incorporation dated as of March 8, 2011), but only for so long as the Equity Sponsors, in the aggregate, continue to hold at least 30% of the voting power of the Companys voting equity securities (any of the foregoing, Permitted Holders); or
(ii) any Person or Group, other than the Permitted Holders, becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto) (except that a Person shall be deemed to have beneficial ownership of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; or
(iii) a reorganization, recapitalization, merger or consolidation (a Corporate Transaction) involving the Company, unless securities representing more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction (or the parent of such corporation) are Beneficially Owned subsequent to such transaction by the Person or Persons who were the Beneficial Owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(iv) during any period of 12 months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office.
Exhibit 10.49
HCA Holdings, Inc.
Restricted Share Unit Agreement
(Annual Award)
THIS RESTRICTED SHARE UNIT AGREEMENT (this Agreement) is made and entered into as of the day of , 20 (the Grant Date), between HCA Holdings, Inc., a Delaware corporation (the Company), and the individual whose name is set forth below (the Grantee). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (the Plan).
WHEREAS, the Company has adopted the Plan, which permits the issuance of awards that are based on Shares of the Company, including the grant of a right to receive one Share at a specified date (or dates) in the future (a Restricted Share Unit); and
WHEREAS, the Company has determined that a portion of the Grantees annual retainer for services as a director of the Company (a Director) should be paid to the Grantee in the form of Restricted Share Units, to be granted pursuant to the terms and conditions set forth in this award Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
RESTRICTED SHARE UNIT GRANT
Grantee: | [Participant Name] | |
[Participant Address] | ||
Aggregate number of Restricted Share Units granted hereunder: |
[Award] | |
Grant Date: | [Grant Date] |
1. Grant of Restricted Share Unit Award .
1.1 The Company hereby grants to the Grantee an award (Award) of Restricted Share Units (RSUs) as set forth above on the terms and conditions set forth in this Agreement and as otherwise provided in the Plan. A bookkeeping account will be maintained by the Company to keep track of the RSUs and any dividend equivalent rights that may accrue as provided Section 3.
1.2 The Grantees rights with respect to the Award shall remain forfeitable at all times prior to the dates on which the RSUs shall vest in accordance with Section 2 hereof. This Award may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by Grantee other than by will or the laws of descent and distribution.
2. Vesting and Payment .
2.1 Except as provided in Section 2.2, the Award shall vest in its entirety on the first anniversary of the Grant Date, so long as the Grantee continues to serve on the Board through such date (such one-year period sometimes referred to as the Restricted Period).
2.2 Notwithstanding Section 2.1 above, all RSUs covered by the Award shall immediately vest upon the occurrence of a Change in Control (the definition of which is set forth on Schedule A attached hereto) that occurs prior to the expiration of the Restricted Period. If the Grantees service as a Director is terminated for any reason other than death or Disability, the Grantee shall forfeit all rights with respect to all RSUs (including Dividend Equivalent Units and other dividend equivalent rights) that are not vested on such date; provided, however, if such termination is with Cause (as defined below), all RSUs whether vested or unvested shall immediately become void and of no effect. If the Grantees service as a Director is terminated by death or Disability, the RSUs covered by the Award shall immediately vest, but only in proportion to the length of the Directors service as a director during such Restricted Period. For purposes of this Agreement, Cause shall mean the reasons for which a Director can be removed from the Board by the Company pursuant to the governing documents of the Company (including, without limitation, the Companys by-laws and charter). For purposes of this Agreement, Disability shall mean that the Grantee is unable to perform the essential duties of a Director. Notwithstanding the foregoing, this provision is subject in its entirety to Section 9 of the Plan.
2.3 The Grantee shall be entitled to payment in respect of all RSUs covered by the Award upon the vesting of this Award. Subject to the provisions of the Plan, such payment shall be made through the issuance to the Grantee, as promptly as practicable thereafter (or to the executors or administrators of Grantees estate, as promptly as practicable after the Companys receipt of notification of Grantees death, as the case may be), of a number of Shares equal to the number of such RSUs that have vested pursuant to this Award. Notwithstanding the foregoing, if the Grantee shall have elected to defer payment of the RSUs that become vested under this Award to such later date as may be permitted by the Company, in accordance with the requirements of Section 409A of the Code, by , 201 , payment of such vested RSUs shall instead be made on such later date (the Deferral Election).
3. Dividend Equivalent Rights .
Grantee shall receive dividend equivalent rights in respect of the RSUs covered by this Award at the time of any payment of dividends to stockholders on Shares. At the Companys option, the RSUs will be credited with either (a) additional units (the Dividend Equivalent Units ) (including fractional units) for cash dividends paid on shares of the Companys Common Stock by (i) multiplying the cash dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid, and (b) dividing the product determined above by the Fair Market Value of a Share, in each case, on the dividend record date, or (b) a cash amount equal to the amount that would be payable to the Grantee as a stockholder in respect of a number of Shares equal to the number of RSUs
and Dividend Equivalent Units then credited to the Grantee hereunder as of the dividend record date. The RSUs will be credited with Dividend Equivalent Units for stock dividends paid on shares of the Companys Common Stock by multiplying the stock dividend paid per Share by the number of RSUs (and previously credited Dividend Equivalent Units) outstanding and unpaid on the dividend record date. Each Dividend Equivalent Unit has a value equal to one Share. Each Dividend Equivalent Unit or cash dividend equivalent right will vest and be settled or payable at the same time as the RSU to which such dividend equivalent right relates. For the avoidance of doubt, no dividend equivalent rights shall accrue under this Section 3 in the event that any dividend equivalent rights or other applicable adjustments pursuant to Section 5 hereof provide similar benefits.
4. No Right to Continued Service .
Nothing in this Agreement or the Plan shall be interpreted or construed to confer upon the Grantee any right to continue service as a member of the Board.
5. Adjustments .
Notwithstanding anything else contained in this Agreement, the RSUs granted hereunder and this Agreement shall be subject to adjustment, substitution or cancellation in accordance with the provisions of Sections 8 and 9 of the Plan.
6. Grantee Bound by the Plan .
This Agreement shall be construed in accordance and consistent with, and subject to, the terms of the Plan, and in the case of any inconsistency between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall govern. The Grantee hereby acknowledges receipt of a copy of the Plan and agrees to be bound by all the terms and provisions thereof.
7. Modification of Agreement .
Subject to the provisions of Section 3 of the Plan, this Agreement may be modified, amended, suspended or terminated, and any terms or conditions may be waived, but only by a written instrument executed by the parties hereto.
8. Severability .
If any provision of this Agreement is, or becomes, or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or the Award, or would disqualify the Plan or Award under any laws deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award, and the remainder of the Plan and Award shall remain in full force and effect.
9. Taxes; Section 409A .
The Grantee shall be responsible for all taxes due in connection with the grant or vesting or any payment or transfer with respect to the RSUs and Shares (and cash, if applicable) payable hereunder. Notwithstanding anything herein to the contrary, to the maximum extent permitted by applicable law, the settlement of the RSUs (including any dividend equivalent rights) to be made to the Grantee pursuant to this Agreement is intended to qualify as a short-term deferral pursuant to Section 1.409A-1(b)(4) of the Regulations and this Agreement shall be interpreted consistently therewith. However, under certain circumstances, including where Grantee has elected to defer settlement of this Award, settlement of the RSUs or any dividend equivalent rights may not so qualify, and in that case, the Committee shall administer the grant and settlement of such RSUs and any dividend equivalent rights in strict compliance with Section 409A of the Code. Each payment of RSUs (and related dividend equivalent rights) constitutes a separate payment for purposes of Section 409A of the Code.
10. Governing Law .
The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Delaware without giving effect to the conflicts of law principles thereof, except to the extent that such laws are preempted by Federal law.
11. Successors in Interest .
This Agreement shall inure to the benefit of and be binding upon any successor to the Company. This Agreement shall inure to the benefit of the Grantees legal representatives. All obligations imposed upon the Grantee and all rights granted to the Company under this Agreement shall be binding upon the Grantees heirs, executors, administrators and successors.
12. Resolution of Disputes .
In the event of any controversy among the parties hereto arising out of, or relating to, this Agreement which cannot be settled amicably by the parties, such controversy shall be finally, exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance with the American Arbitration Association rules, by a single independent arbitrator. Such arbitration process shall take place within the Nashville, Tennessee metropolitan area. The decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered pursuant to a written decision, which contains a detailed recital of the arbitrators reasoning. Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator. If the Grantee substantially prevails on any of his or her substantive legal claims, then the Company shall reimburse all legal fees and arbitration fees incurred by the Grantee to arbitrate the dispute.
13. Entire Agreement.
This Agreement and the Plan contain the entire agreement and understanding of the parties hereto with respect to the subject matter contained herein and supersede all prior communications, representations and negotiations in respect thereto.
14. Notices .
Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary or its designee, and any notice to be given to the Grantee shall be addressed to him at the address (including an electronic address) reflected in the Companys books and records. By a notice given pursuant to this Section 14 , either party may hereafter designate a different address for notices to be given to him. Any notice, which is required to be given to the Grantee, shall, if the Grantee is then deceased, be given to the Grantees personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 14 . Any notice shall have been deemed duly given when (i) delivered in person, (ii) delivered in an electronic form approved by the Company, (iii) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service, or (iv) enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.
HCA Holdings, Inc. | ||
By: |
|
|
Grantee: | ||
(electronically accepted) |
Schedule A
Definition of Change in Control
For purposes of this Agreement, the term Change in Control shall mean, in lieu of any definition contained in the Plan:
(i) the sale or disposition, in one or a series of related transactions, of all or substantially all of the assets of the Company to any Person or Group other than, as of the date of determination, (A) any and all of an employee benefit plan (or trust forming a part thereof) maintained by (1) the Company or (2) any corporation or other Person of which a majority of its voting power of its voting equity securities or equity interest is owned, directly or indirectly, by the Company; (B) Hercules Holding II, LLC, a Delaware limited liability company (or any successor) (Hercules Holding II), but only for so long as Hercules Holding II continues to hold at least 30% of the voting power of the Companys voting equity securities, or (C) any Equity Sponsor (as defined in the Companys Amended and Restated Certificate of Incorporation dated as of March 8, 2011), but only for so long as the Equity Sponsors, in the aggregate, continue to hold at least 30% of the voting power of the Companys voting equity securities (any of the foregoing, Permitted Holders); or
(ii) any Person or Group, other than the Permitted Holders, becomes the Beneficial Owner (as such term is defined in Rule 13d-3 under the Exchange Act (or any successor rule thereto) (except that a Person shall be deemed to have beneficial ownership of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company (or any entity which controls the Company), including by way of merger, consolidation, tender or exchange offer or otherwise; or
(iii) a reorganization, recapitalization, merger or consolidation (a Corporate Transaction) involving the Company, unless securities representing more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Company or the corporation resulting from such Corporate Transaction (or the parent of such corporation) are Beneficially Owned subsequent to such transaction by the Person or Persons who were the Beneficial Owners of the outstanding voting securities entitled to vote generally in the election of directors of the Company immediately prior to such Corporate Transaction, in substantially the same proportions as their ownership immediately prior to such Corporate Transaction; or
(iv) during any period of 12 months, individuals who at the beginning of such period constituted the Board (together with any new directors whose election by such Board or whose nomination for election by the shareholders of the Company was approved by a vote of a majority of the directors of the Company, then still in office, who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board then in office.
Exhibit 21
ALABAMA
CareOne Home Health Services, Inc.
Four Rivers Medical Center PHO, Inc.
Selma Medical Center Hospital, Inc.
ALASKA
Chugach PT, Inc.
Columbia Behavioral Healthcare, Inc.
Columbia North Alaska Healthcare, Inc.
ARKANSAS
Columbia Health System of Arkansas, Inc.
BERMUDA
Parthenon Insurance Company, Limited
CALIFORNIA
Center for Advanced Imaging, LLC
CFC Investments, Inc.
CH Systems
Chino Community Hospital Corporation, Inc.
Columbia ASC Management, L.P.
Columbia Riverside, Inc.
Columbia/HCA San Clemente, Inc.
Encino Hospital Corporation, Inc.
Far West Division, Inc.
Galen-Soch, Inc.
Good Samaritan Surgery Center, L.P.
HCA Health Services of California, Inc.
Healdsburg General Hospital, Inc.
L E Corporation
Las Encinas Hospital
Los Gatos Surgical Center, a California Limited Partnership
Los Gatos Surgical Center
Los Robles Regional Medical Center
Los Robles Hospital & Medical Center
Los Robles Regional Medical Center MOB, LLC
Los Robles SurgiCenter, LLC
Los Robles Surgicenter
MCA Investment Company
Mission Bay Memorial Hospital, Inc.
Neuro Affiliates Company
Riverside Healthcare System, L.P.
Riverside Community Hospital
Riverside Holdings, Inc.
San Joaquin Surgical Center, Inc.
San Jose Pathology Outreach, LLC
Southwest Surgical Clinic, Inc.
Surgicare of Good Samaritan, LLC
Surgicare of Los Gatos, Inc.
Surgicare of Los Robles, LLC
Surgicare of Riverside, LLC
Surgicare of West Hills, Inc.
West Hills Hospital
West Hills Hospital & Medical Center
West Hills Surgical Center, Ltd.
West Hills Surgical Center
West Los Angeles Physicians Hospital, Inc.
Westminster Community Hospital
COLORADO
Altitude Mid Level Providers, LLC
Center for Advanced Diagnostics LLC
Centrum Surgery Center, Ltd.
Centrum Surgical Center
Clear Creek Surgery Center, LLC
Clear Creek Surgery Center
Colorado Health Systems, Inc.
Columbine Psychiatric Center, Inc.
Continental Division I, Inc.
Denver Mid-Town Surgery Center, Ltd.
Midtown Surgical Center
Diagnostic Mammography Services, G.P.
Galen of Aurora, Inc.
HCA-HealthONE LLC
North Suburban Medical Center
Presbyterian/St. Lukes Medical Center
Rose Medical Center
Sky Ridge Medical Center
Swedish Medical Center
The Medical Center of Aurora
Health Care Indemnity, Inc.
HealthONE at Breckenridge, LLC
HealthONE Aurora Investment, LLC
HealthONE Clear Creek, LLC
HealthONE Clinic Services - Bariatric Medicine, LLC
HealthONE Clinic Services - Behavioral Health, LLC
HealthONE Clinic Services - Cancer Specialties, LLC
HealthONE Clinic Services - Cardiovascular, LLC
HealthONE Clinic Services - Medical Specialties, LLC
HealthONE Clinic Services - Neurosciences, LLC
HealthONE Clinic Services - Obstetrics and Gynecology, LLC
HealthONE Clinic Services - Occupational Medicine, LLC
HealthONE Clinic Services - Oncology Hematology, LLC
HealthONE Clinic Services - Orthopedic Specialists, LLC
HealthONE Clinic Services - Otolaryngology Specialists, LLC
HealthONE Clinic Services - Pediatric Cardiovascular Surgery, LLC
HealthONE Clinic Services - Pediatric Specialties, LLC
HealthONE Clinic Services - Primary Care, LLC
HealthONE Clinic Services - Spine Surgeons LLC
HealthONE Clinic Services - Surgery Neurological, LLC
HealthONE Clinic Services - Surgical Specialties, LLC
HealthONE Clinic Services - Youth Rehabilitation LLC
HealthONE Clinic Services LLC
HealthOne Heart Care LLC
HealthONE High Street Primary Care Center, LLC
HealthONE Institutes for Clinical Research, LLC
HealthOne Lincoln Investment, LLC
HealthONE Lowry, LLC
HealthONE of Denver, Inc.
HealthONE Radiation Therapy at Red Rocks, LLC
HealthONE Radiation Therapy at Thornton, LLC
HealthONE Ridge View Endoscopy Center, LLC
Ridge View Endoscopy Center
HealthONE Surgicare of Ridge View, LLC
HealthONE Urologic, LLC
HealthOne Westside Investment, LLC
Hospital-Based CRNA Services, Inc.
Lakewood Outpatient Surgical Center, Ltd.
Lakewood Surgicare, Inc.
Lincoln Surgery Center, LLC
Lincoln Surgery Center
Lowry Surgery Center, LLC
Lowry Surgery Center
Medical Care America Colorado, LLC
Medical Imaging of Colorado LLC
Mountain View MRI Associates, Ltd.
MOVCO, Inc.
New Rose Holding Company, Inc.
North Suburban Medical Group
North Suburban Spine Center, L.P.
Musculoskeletal Surgery Center
North Suburban Surgery Center, L.P.
North Suburban Surgery Center
Outpatient Surgery Center of Lakewood, L.P.
P/SL Hyperbaric Partnership
Park Ridge Surgery Center, LLC
Proaxis Therapy HealthOne LLC
Red Rocks Radiation and Oncology, LLC
Red Rocks Surgery Center, LLC
Red Rocks Surgery Center
Rocky Mountain Pediatric Hematology Oncology, LLC
Rocky Mountain Surgery Center, LLC
Rocky Mountain Surgery Center
Rose Ambulatory Surgery Center, L.P.
Rose Surgical Center
Rose Health Partners, LLC
Rose Medical Plaza, Ltd.
Rose POB, Inc.
Sky Ridge Spine Manager, LLC
Sky Ridge Surgery Center, L.P.
Sky Ridge Surgical Center
Sky Ridge Total Joint Manager, LLC
Southwest Medpro, Ltd.
Surgery Center of the Rockies, LLC
Surgery Center of the Rockies
Surgicare of Denver Mid-Town, Inc.
Surgicare of North Suburban, LLC
Surgicare of Park Ridge, LLC
Surgicare of Rose, LLC
Surgicare of Sky Ridge, LLC
Surgicare of Southeast Denver, Inc.
Surgicare of Swedish, LLC
Surgicare of Thornton, LLC
Swedish Medpro, Inc.
Swedish MOB II, Inc.
Swedish MOB III, Inc.
Swedish MOB IV, Inc.
Swedish MOB, LLC
Urology Surgery Center of Colorado, LLC
Urology Surgery Center
DELAWARE
AC Med, LLC
Aligned Business Consortium Group, L.P.
Alpharetta Imaging Services, LLC
Alternaco, LLC
American Medicorp Development Co.
Ami-Point GA, LLC
AOGN, LLC
Appledore Medical Group, Inc.
AR Holding 1, LLC
AR Holding 2, LLC
AR Holding 3, LLC
AR Holding 4, LLC
AR Holding 5, LLC
AR Holding 6, LLC
AR Holding 7, LLC
AR Holding 8, LLC
AR Holding 9, LLC
AR Holding 10, LLC
AR Holding 11, LLC
AR Holding 12, LLC
AR Holding 13, LLC
AR Holding 14, LLC
AR Holding 15, LLC
AR Holding 16, LLC
AR Holding 17, LLC
AR Holding 18, LLC
AR Holding 19, LLC
AR Holding 20, LLC
AR Holding 21, LLC
AR Holding 22, LLC
AR Holding 23, LLC
AR Holding 24, LLC
AR Holding 25, LLC
AR Holding 26, LLC
AR Holding 27, LLC
AR Holding 28, LLC
AR Holding 29, LLC
AR Holding 30, LLC
AR Holding 31, LLC
Arkansas Medical Park, LLC
ASD Shared Services, LLC
Atlanta Healthcare Management, L.P.
Atlanta Market GP, Inc.
Atlanta Orthopaedic Surgical Center, Inc.
Aventura Cancer Center Manager, LLC
Bayshore Partner, LLC
Belton Family Practice Clinic, LLC
Boca Raton Open Imaging Center, LLC
Boynton Beach EFL Imaging Center, LLC
Bradenton Outpatient Services, LLC
Brandon Imaging Manager, LLC
Brandon Regional Cancer Center, LLC
Brandon SRS Management Services, LLC
C/HCA Capital, Inc.
C/HCA, Inc.
California Imaging Center Manager, LLC
Cancer Centers of North Florida, LLC
Cancer Services of Aventura, LLC
CareSpot of Overland Park (W. 151st Street), LLC
Carolina Forest Imaging Manager, LLC
Centennial CyberKnife Center, LLC
Centennial CyberKnife Manager, LLC
Centerpoint Medical Center of Independence, LLC
Centerpoint Medical Center
Central Florida Diagnostic Cardiology Center, LLC
Central Florida Imaging Services, LLC
Central Health Holding Company, Inc.
Central Health Services Hospice, Inc.
Chattanooga ASC, LLC
CHC Finance Co.
CHC Payroll Agent, Inc.
CHCA Bayshore, L.P.
Bayshore Medical Center
CHCA Clear Lake, L.P.
Clear Lake Regional Medical Center
Mainland Medical Center, a campus of Clear Lake Regional Medical Center
CHCA Conroe, L.P.
Conroe Regional Medical Center
CHCA Hospital LP, Inc.
CHCA Mainland, L.P.
CHCA Palmyra Partner, Inc.
CHCA West Houston, L.P.
West Houston Medical Center
CHCA Womans Hospital, L.P.
Womans Hospital of Texas
Clear Lake Cardiac Catheterization Center, L.P.
Clear Lake Cardiac GP, LLC
Clear Lake Merger, LLC
Clear Lake Regional Partner, LLC
ClinicServ, LLC
Clipper Cardiovascular Associates, Inc.
Coastal Bend Hospital, Inc.
Coastal Healthcare Services, Inc.
Cobb Imaging Services, LLC
Coliseum Health Group, LLC
Coliseum Medical Center, LLC
Coliseum Medical Centers
Coliseum Psychiatric Center, LLC
Coliseum Center for Behavioral Health
Coliseum Surgery Center, L.L.C.
Columbia Behavioral Health, LLC
Columbia Hospital (Palm Beaches) Limited Partnership
West Palm Hospital
Columbia Hospital Corporation of Fort Worth
Columbia Hospital Corporation of Houston
Columbia Hospital Corporation-Delaware
Columbia Palm Beach GP, LLC
Columbia Rio Grande Healthcare, L.P.
Rio Grande Regional Hospital
Columbia Valley Healthcare System, L.P.
Valley Regional Medical Center
Columbia Westbank Healthcare, L.P.
Columbia/HCA Middle East Management Company
Columbia-SDH Holdings, Inc.
Columbus Cath Lab, Inc.
Columbus Cath Lab, LLC
Concept EFL Imaging Center, LLC
Concept West EFL Imaging Center, LLC
Conroe Partner, LLC
CoralStone Management, Inc.
COSCORP, LLC
CPS TN Processor 1, Inc.
CRMC-M, LLC
Dallas/Ft. Worth Physician, LLC
Delray EFL Imaging Center, LLC
Doctors Hospital of Augusta, LLC
Doctors Hospital
Douglasville Imaging Services, LLC
East Florida Imaging Holdings, LLC
EMMC, LLC
EP Health, LLC
EP Holdco, LLC
EPIC Development, Inc.
EPIC Diagnostic Centers, Inc.
EPIC Healthcare Management Company
EPIC Surgery Centers, Inc.
Extendicare Properties, Inc.
Fairview Park GP, LLC
Fairview Partner, LLC
Family Care of E. Jackson County, LLC
FHAL, LLC
Forest Park Surgery Pavilion, Inc.
Forest Park Surgery Pavilion, L.P.
Fort Bend Hospital, Inc.
Galen (Kansas) Merger, LLC
Galen BH, Inc.
Galen Finance, LLC
Galen Global Finance, Inc.
Galen GOK, LLC
Galen Holdco, LLC
Galen Hospital Alaska, Inc.
Alaska Regional Hospital
Galen International Capital, Inc.
Galen International Holdings, Inc.
Galen KY, LLC
Galen LA, LLC
Galen MCS, LLC
Galen Medical Corporation
Galen MRMC, LLC
Galen NMC, LLC
Galen NSH, LLC
Galen SOM, LLC
Galen SSH, LLC
Galendeco, Inc.
GalTex, LLC
Garden Park Community Hospital Limited Partnership
Gardens EFL Imaging Center, LLC
Georgia Health Holdings, Inc.
Georgia, L.P.
GHC-Galen Health Care, LLC
Good Samaritan Hospital, L.P.
Good Samaritan Hospital
Good Samaritan Hospital, LLC
Goppert-Trinity Family Care, LLC
GPCH-GP, Inc.
Garden Park Medical Center
Grand Strand Regional Medical Center, LLC
Grand Strand Regional Medical Center
Grandview Health Care Clinic, LLC
H.H.U.K., Inc.
HCA - IT&S Field Operations, Inc.
HCA - IT&S Inventory Management, Inc.
HCA - IT&S TN Field Operations, Inc.
HCA American Finance LLC
HCA Health Services of Midwest, Inc.
HCA Holdco, LLC
HCA Holdings, Inc.
HCA Imaging Services of North Florida, Inc.
HCA Inc.
HCA International Finance LLP
HCA Management Services, L.P.
HCA Outpatient Imaging Services Group, Inc.
HCA Property GP, LLC
HCA Psychiatric Company
HCA SFB 1 LLC
HCA Squared, LLC
HCA Wesley Rehabilitation Hospital, Inc.
HCA-Access Healthcare Holdings, LLC
HCA-Access Healthcare Partner, Inc.
HCA-EmCare Holdings, LLC
HCA-EMS Holdings, LLC
HCA-HBPS Holdings, LLC
HCAPS Anesthesia Manager, LLC
HCA-Solis Holdings, Inc.
HCA-Solis Mammography Services, LLC
HCA-Urgent Care Holdings, LLC
Health Insight Capital, LLC
Health Services (Delaware), Inc.
Health Services Merger, Inc.
Healthcare Technology Assessment Corporation
Healthco, LLC
Healthnet of Kentucky, LLC
Healthserv Acquisition, LLC
Healthtrust MOB Tennessee, LLC
Healthtrust Purchasing Group, L.P.
Healthtrust, Inc. - The Hospital Company
Hearthstone Home Health, Inc.
Heathrow Imaging, LLC
Hendersonville ODC, LLC
Henrico Doctors Hospital - Forest Campus Property, LLC
HHNC, LLC
Highway 50 Real Estate, LLC
hInsight - Nasolux Holdings, LLC
hInsight-Airstrip Holdings, LLC
hInsight-Healthbox Holdings, LLC
hInsight-I2 Holdings, LLC
hInsight-InVivoLink Holdings, LLC
hInsight-Mobile Heartbeat Holdings, LLC
HM OMCOS, LLC
Hospital Corp., LLC
Hospital Development Properties, Inc.
Hospital Partners Merger, LLC
Houston Healthcare Holdings, Inc.
Houston Womans Hospital Partner, LLC
HPG Enterprises, LLC
HPG Solutions, LLC
HSS Holdco, LLC
HSS Systems, LLC
HTI Hospital Holdings, Inc.
HTI MOB, LLC
Imaging Services of Appomattox, LLC
Imaging Services of Jacksonville, LLC
Imaging Services of Louisiana Manager, LLC
Imaging Services of Louisiana, LLC
Imaging Services of Orlando, LLC
Imaging Services of Richmond, LLC
Imaging Services of Roanoke, LLC
Imaging Services of West Boynton, LLC
IMX Holdings, LLC
Independence Regional Medical Group, LLC
Indian Path, LLC
Indianapolis Hospital Partner, LLC
Integrated Regional Laboratories, LLP
InterMedHx, LLC
Jackson County Medical Group, LLC
JCSH, LLC
JCSHLP, LLC
JFK Medical Center Limited Partnership
JFK Medical Center
Jupiter EFL Imaging Center, LLC
JV Investor, LLC
Kansas Healthserv, LLC
Katy Medical Center, Inc.
Kendall Regional Medical Center, LLC
Lake City Imaging, LLC
Lakeland Medical Center, LLC
Lakeside Radiology, LLC
Lakeview Medical Center, LLC
Lakeview Regional Medical Center
Laredo Medco, LLC
Lees Summit Family Care, LLC
Lewis-Gale Medical Center, LLC
LewisGale Medical Center
Low Country Health Services, Inc. of the Southeast
Macon Healthcare, LLC
Macon Northside Health Group, LLC
Macon Northside Hospital, LLC
Coliseum Northside Hospital
Management Services Holdings, Inc.
Mayhill Cancer Center, LLC
MCA-CTMC Holdings, LLC
San Marcos Surgery Center
Medical Arts Hospital of Texarkana, Inc.
Medical Care America, LLC
Medical Care Financial Services Corp.
Medical Care Real Estate Finance, Inc.
Medical Center of Plano Partner, LLC
Medical Centers of Oklahoma, LLC
Medical City Dallas Partner, LLC
Medical Corporation of America
Medical Office Buildings of Kansas, LLC
Medical Specialties, Inc.
MediStone Healthcare Ventures, Inc.
MediVision of Mecklenburg County, Inc.
MediVision of Tampa, Inc.
MediVision, Inc.
Miami Beach EFL Imaging Center, LLC
MidAmerica Oncology, LLC
Mid-Continent Health Services, Inc.
Middle Georgia Hospital, LLC
Midtown Diagnostics, LLC
Midwest Division - ACH, LLC
Midwest Division - CMC, LLC
Midwest Division - LRHC, LLC
Lafayette Regional Health Center
Midwest Division - LSH, LLC
Lees Summit Medical Center
Midwest Division - MCI, LLC
Midwest Division - MMC, LLC
Menorah Medical Center
Midwest Division - OPRMC, LLC
Overland Park Regional Medical Center
Midwest Division - PFC, LLC
Midwest Division - RMC, LLC
Research Medical Center
Midwest Holdings, Inc.
Midwest Medicine Associates, LLC
Midwest Metropolitan Physicians Group, LLC
Mira Healthcare, LLC
Mobile Corps., Inc.
MRT&C, Inc.
Nashville Shared Services General Partnership
North Augusta Imaging Management, LLC
North Augusta Imaging Services, LLC
North Brandon Imaging, LLC
North Florida Cancer Center Lake City, LLC
North Florida Cancer Center Live Oak, LLC
North Florida Cancer Center Tallahassee, LLC
North Florida Radiation Oncology, LLC
North Miami Beach Surgery Center Limited Partnership
North Miami Beach Surgical Center
North Miami Beach Surgical Center, LLC
North Tampa Imaging, LLC
North Texas Medical Center, Inc.
Northeast Florida Cancer Services, LLC
Northwest Fla. Home Health Agency, Inc.
Notami Hospitals, LLC
Notami, LLC
Notco, LLC
NTGP, LLC
NTMC Ambulatory Surgery Center, L.P.
NTMC Management Company
NTMC Venture, Inc.
Ocala Stereotactic Radiosurgery Partner, LLC
Ocala Stereotactic Radiosurgery, LLC
Ogden Tomotherapy Manager, LLC
Ogden Tomotherapy, LLC
OHH Imaging Services, LLC
Oncology Services of Corpus Christi Manager, LLC
Oncology Services of Corpus Christi, LLC
Orlando Outpatient Surgical Center, Inc.
Outpatient Cardiovascular Center of Central Florida, LLC
Outpatient GP, LLC
Outpatient LP, LLC
Outpatient Services - LAD, LLC
Outpatient Services Holdings, Inc.
Palm Beach EFL Imaging Center, LLC
Palms West Hospital Limited Partnership
Palms West Hospital
Palmyra Park GP, Inc.
Paragon SDS, Inc.
Paragon WSC, Inc.
Parallon Holdings, LLC
Parkland Physician Services, Inc.
Parkway Hospital, Inc.
Pearland Partner, LLC
Pinellas Medical, LLC
Pioneer Medical, LLC
Plano Heart Institute, L.P.
Plano Heart Management, LLC
Plantation General Hospital, L.P.
Mercy Hospital, a campus of Plantation General Hospital
Plantation General Hospital
PMM, Inc.
POH Holdings, LLC
Portsmouth Regional Ambulatory Surgery Center, LLC
Portsmouth Regional Ambulatory Surgery Center
Preferred Works WC, LLC
Primary Medical Management, Inc.
Radiation Oncology Center of Thornton, LLC
Radiation Oncology Manager, LLC
RCH, LLC
Red Rock at Smoke Ranch, LLC
Red Rock Holdco, LLC
Reston Hospital Center, LLC
Reston Hospital Center
RHA MSO, LLC
Riverside CyberKnife Manager, LLC
Riverside CyberKnife, LLC
Riverside Hospital, Inc.
Riverside Imaging, LLC
Round Rock Hospital, Inc.
Samaritan, LLC
San Bernardino Imaging, LLC
San Jose Healthcare System, LP
Regional Medical Center of San Jose
San Jose Hospital, L.P.
San Jose Medical Center, LLC
San Jose, LLC
San Marcos ASC, LLC
San Marcos Surgicenter, LLC
Sarah Cannon Research Institute, LLC
SCRI Holdings, LLC
SJMC, LLC
SMCH, LLC
Solis Mammography of Dallas, LLC
South Bay Imaging, LLC
South Brandon Imaging, LLC
South Valley Hospital, L.P.
Southtown Womens Clinic, LLC
Spalding Rehabilitation L.L.C.
Spalding Rehabilitation Hospital
Spring Hill Imaging, LLC
Springview KY, LLC
SSJ St. Petersburg Holdings, Inc.
Stereotactic Radiosurgery Systems of Brandon, LLC
Stiles Road Imaging LLC
Stones River Hospital, LLC
Suburban Medical Center at Hoffman Estates, Inc.
Summit General Partner, Inc.
Summit Outpatient Diagnostic Center, LLC
Sun Bay Medical Office Building, Inc.
Sun City Imaging, LLC
Sun-Med, LLC
Sunrise Hospital and Medical Center, LLC
Sunrise Hospital & Medical Center
Surgicare of Denton, Inc.
Surgicare of Plano, Inc.
Surgico, LLC
Swedish MOB Acquisition, Inc.
TBHI Outpatient Services, LLC
Terre Haute Hospital GP, Inc.
Terre Haute Hospital Holdings, Inc.
Terre Haute Regional Hospital, L.P.
Terre Haute Regional Hospital
The Medical Group of Kansas City, LLC
Total Imaging - Parsons, LLC
Town Plaza Family Practice, LLC
Trident Medical Center, LLC
Trident Medical Center
Tuckahoe Surgery Center, LP
Parham Surgery Center
U.S. Collections, Inc.
Ultra Imaging Management Services, LLC
Ultra Imaging of Tampa, LLC
Urgent Care Enterprise, LLC
Utah Medco, LLC
Value Health Management, Inc.
VHSC Plantation, LLC
Vision Consulting Group LLC
Washington Holdco, LLC
Wesley Cath Lab, LLC
Wesley Manager, LLC
Wesley Medical Center, LLC
Wesley Medical Center
Galichia Heart Hospital
West Boynton Beach Open Imaging Center, LLC
West Florida Imaging Services, LLC
West Florida PET Services, LLC
West Houston, LLC
Westbury Hospital, Inc.
WHG Medical, LLC
WJHC, LLC
Womans Hospital Merger, LLC
Womens Hospital Indianapolis GP, Inc.
Womens Hospital Indianapolis, L.P.
FLORIDA
Access 2 Health Care Physicians, LLC
Access Health Care Physicians, LLC
Access Management Co., LLC
Ace Leasing II, LLC
All About Staffing, Inc.
Ambulatory Laser Associates, GP
Ambulatory Surgery Center Group, Ltd.
Ambulatory Surgery Center
Atlantis Surgicare, LLC
Aventura Comprehensive Cancer Research Group of Florida, Inc.
Aventura Healthcare Specialists LLC
Aventura Neurosurgery, LLC
BAMI Property, LLC
Bannerman Family Care, LLC
Bay Hospital, Inc.
Gulf Coast Regional Medical Center
Bayonet Point Surgery Center, Ltd.
Bayonet Point Surgery and Endoscopy Center
Bayside Ambulatory Center, LLC
Bayside Ambulatory Center
Beach Primary Care, LLC
Behavioral Health Sciences of West Florida, LLC
Belleair Surgery Center, Ltd.
Belleair Surgery Center
Big Cypress Medical Center, Inc.
Bonita Bay Surgery Center, Inc.
Bonita Bay Surgery Center, Ltd.
Bradenton Cardiology Physician Network, LLC
Brandon Surgi-Center, Ltd.
Brandon Surgery Center
Broward Cardiovascular Surgeons, LLC
Broward Healthcare System, Inc.
Broward Neurosurgeons, LLC
Cape Coral Surgery Center, Inc.
Cape Coral Surgery Center, Ltd.
Capital Regional Healthcare, LLC
Capital Regional Heart Associates LLC
CCH-GP, Inc.
Cedarcare, Inc.
Cedars BTW Program, Inc.
Cedars Gastroenterologists, LLC
Cedars Healthcare Group, Ltd.
Cedars International Cardiology Consultants, LLC
Cedars Medical Center Hospitalists, LLC
Central Florida Cardiology Interpretations, LLC
Central Florida Division Practice, Inc.
Central Florida Obstetrics & Gynecology Associates, LLC
Central Florida Physician Network, LLC
Central Florida Regional Hospital, Inc.
Central Florida Regional Hospital
Collier County Home Health Agency, Inc.
Columbia Behavioral Health, Ltd.
Columbia Behavioral Healthcare of South Florida, Inc.
Columbia Central Florida Division, Inc.
Columbia Development of Florida, Inc.
Columbia Eye and Specialty Surgery Center, Ltd.
Tampa Eye & Specialty Surgery Center
Columbia Florida Group, Inc.
Columbia Hospital Corporation of Central Miami
Columbia Hospital Corporation of Kendall
Columbia Hospital Corporation of Miami
Columbia Hospital Corporation of Miami Beach
Columbia Hospital Corporation of North Miami Beach
Columbia Hospital Corporation of South Broward
Westside Regional Medical Center
Columbia Hospital Corporation of South Dade
Columbia Hospital Corporation of South Florida
Columbia Hospital Corporation of South Miami
Columbia Hospital Corporation of Tamarac
Columbia Hospital Corporation-SMM
Columbia Jacksonville Healthcare System, Inc.
Columbia Lake Worth Surgical Center Limited Partnership
Columbia Midtown Joint Venture
Columbia North Central Florida Health System Limited Partnership
Columbia North Florida Regional Medical Center Limited Partnership
Columbia Ocala Regional Medical Center Physician Group, Inc.
Columbia Palm Beach Healthcare System Limited Partnership
Columbia Park Healthcare System, Inc.
Columbia Park Medical Center, Inc.
Columbia Physician Services - Florida Group, Inc.
Columbia Primary Care, LLC
Columbia Resource Network, Inc.
Columbia Tampa Bay Division, Inc.
Columbia-Osceola Imaging Center, Inc.
Community Hospital Family Practice, LLC
Coral Springs Surgi-Center, Ltd.
Surgery Center at Coral Springs
Countryside Surgery Center, Ltd.
Countryside Surgery Center
Daytona Medical Center, Inc.
Diagnostic Breast Center, Inc.
Doctors Osteopathic Medical Center, Inc.
Doctors Same Day Surgery Center, Inc.
Doctors Same Day Surgery Center, Ltd.
Doctors Same Day Surgery Center
DOMC Property, LLC
East Florida Behavioral Health Network, LLC
East Florida Cardiology Network, LLC
East Florida Division, Inc.
East Florida Emergency Physician Group, LLC
East Florida Healthcare, LLC
East Florida Hospitalists, LLC
East Florida Primary Care, LLC
East Pointe Hospital, Inc.
Edward White Hospital, Inc.
Edward White Hospital
Emergency Providers Group LLC
Englewood Community Hospital, Inc.
Englewood Community Hospital
Family Care Partners, LLC
Fawcett Memorial Hospital, Inc.
Fawcett Memorial Hospital
Florida Home Health Services-Private Care, Inc.
Florida Outpatient Surgery Center, Ltd.
Florida Surgery Center
Fort Myers Market, Inc.
Fort Pierce Immediate Care Center, Inc.
Fort Pierce Orthopaedics, LLC
Fort Pierce Surgery Center, Ltd.
Fort Walton Beach Medical Center, Inc.
Fort Walton Beach Medical Center
Freeport Family Medicine, LLC
Ft. Pierce Surgicare, LLC
Ft. Walton Beach Anesthesia Services, LLC
Gainesville GYN Oncology of North Florida Regional Medical Center, LLC
Gainesville Physicians, LLC
Galen Diagnostic Multicenter, Ltd.
Galen Hospital-Pembroke Pines, Inc.
Galen of Florida, Inc.
St. Petersburg General Hospital
Galencare, Inc.
Brandon Regional Hospital
Northside Hospital
Grant Center Hospital of Ocala, Inc.
Greater Tampa Bay Physician Network, LLC
Greater Tampa Bay Physician Specialists, LLC
Greater Tampa Bay Physicians - Pinellas, LLC
Gulf Coast Inpatient Specialists, LLC
Gulf Coast Medical Center Primary Care, LLC
Gulf Coast Multispecialty Services, LLC
Hamilton Memorial Hospital, Inc.
HCA - Viera ALF, LLC
HCA - WHS Progressive, LLC
HCA - WHS Services, LLC
HCA Family Care Center, Inc.
HCA Health Services of Florida, Inc.
Blake Medical Center
Oak Hill Hospital
Regional Medical Center Bayonet Point
St. Lucie Medical Center
HCA Health Services of Miami, Inc.
HCA Outpatient Clinic Services of Miami, Inc.
HCA Sarasota Orthopedic and Spine Clinical Co-Management Company, LLC
HD&S Corp. Successor, Inc.
HealthCoast Physician Group, LLC
Heathrow Internal Medicine, LLC
Heritage Family Care, LLC
Homecare North, Inc.
Hospital Corporation of Lake Worth
ICC Healthcare, LLC
Integrated Regional Lab, LLC
Integrated Regional Laboratories Pathology Services, LLC
Intensive Care Consortium, Inc.
Internal Medicine Services of Osceola, LLC
Jacksonville Multispecialty Services, LLC
Jacksonville Specialists, LLC
Jacksonville Surgery Center, Ltd.
Jacksonville Surgery Center
JFK Internal Medicine Faculty Practice, LLC
JFK Occupational Medicine, LLC
JFK Real Properties, Ltd.
Kendall Healthcare Group, Ltd.
Kendall Regional Medical Center
Kendall Regional Primary and Urgent Care, LLC
Kendall Regional Urgent Care, LLC
Kendall Vascular Surgery, LLC
Kingsley Family Care, LLC
Kissimmee Surgicare, Ltd.
Kissimmee Surgery Center
LAD Imaging, LLC
Lake City Regional Medical Group, LLC
Lake Nona Hospital, Inc.
Largo Cardiology, LLC
Largo Medical Center, Inc.
Largo Medical Center
Largo Physician Group, LLC
Laurel Grove Surgery Center, LLC
Lawnwood Cardiovascular Surgery, LLC
Lawnwood Healthcare Specialists, LLC
Lawnwood Medical Center, Inc.
Lawnwood Regional Medical Center & Heart Institute
Lawnwood Pavilion Physician Services, LLC
Live Oak Immediate Care Center, LLC
M & M of Ocala, Inc.
Manatee Surgicare, Ltd.
Gulf Coast Surgery Center
Marion Community Hospital, Inc.
Ocala Regional Medical Center
Medical Associates of Ocala, LLC
Medical Center of Port St. Lucie, Inc.
Medical Center of Santa Rosa, Inc.
Medical Partners of North Florida, LLC
Memorial Family Practice Associates, LLC
Memorial Health Primary Care at St. Johns Bluff, LLC
Memorial Healthcare Group, Inc.
Memorial Hospital Jacksonville
Memorial Neurosurgery Group, LLC
Memorial Surgicare, Ltd.
Plaza Surgery Center II
Mercy ASC, LLC
MHS Partnership Holdings JSC, Inc.
MHS Partnership Holdings SDS, Inc.
Miami Beach Healthcare Group, Ltd.
Aventura Hospital and Medical Center
Miami Lakes Surgery Center, Ltd.
Miami Lakes Surgery Center
Miami-Dade Cardiology Consultants, LLC
Navarre Family Care, LLC
Network MS of Florida, Inc.
New Port Richey Hospital, Inc.
Medical Center of Trinity
New Port Richey Surgery Center, Ltd.
New Port Richey Surgery Center
Niceville Family Practice, LLC
North Central Florida Health System, Inc.
North Florida Division I, Inc.
North Florida Division Practice, Inc.
North Florida GI Center GP, Inc.
North Florida GI Center, Ltd.
North Florida Endoscopy Center
North Florida Immediate Care Center, Inc.
North Florida Neurosurgery, LLC
North Florida Outpatient Imaging Center, Ltd.
North Florida Physician Services, Inc.
North Florida Physicians, LLC
North Florida Regional Investments, Inc.
North Florida Regional Medical Center, Inc.
North Florida Regional Medical Center
North Florida Regional Otolaryngology, LLC
North Florida Regional Trauma, LLC
North Florida Rehab Investments, LLC
North Florida Surgical Associates, LLC
North Palm Beach County Surgery Center, LLC
North County Surgicenter
North River Physician Network, LLC
North Transfer Center, LLC
Northside MRI, Inc.
Northwest Florida Cardiology, LLC
Northwest Florida Healthcare Systems, Inc.
Northwest Florida Multispecialty Physicians, LLC
Northwest Florida Primary Care, LLC
Northwest Medical Center, Inc.
Northwest Medical Center
Notami Hospitals of Florida, Inc.
Lake City Medical Center
Oak Hill Acquisition, Inc.
Oak Hill Family Care, LLC
Oak Hill Hospitalists, LLC
Ocala Health Company Care, LLC
Ocala Health Imaging Services, LLC
Ocala Health Primary Care, LLC
Ocala Health Surgical Group, LLC
Ocala Health Trauma, LLC
Ocala Regional Outpatient Services, Inc.
Okaloosa Hospital, Inc.
Twin Cities Hospital
Okeechobee Hospital, Inc.
Raulerson Hospital
Orange Park Hospitalists, LLC
Orange Park Medical Center, Inc.
Orange Park Medical Center
Orlando Surgicare, Ltd.
Same Day Surgicenter of Orlando
Osceola Neurological Associates, LLC
Osceola Physician Network, LLC
Osceola Regional Hospital, Inc.
Osceola Regional Medical Center
Osceola Regional Hospitalists, LLC
Osceola Surgical Associates, LLC
Outpatient Surgical Services, Ltd.
Outpatient Surgical Services
Oviedo Medical Center, LLC
P&L Associates
Palm Beach General Surgery, LLC
Palm Beach Healthcare System, Inc.
Palm Beach Hospitalists Program, LLC
Palms West Gastroenterology, LLC
Palms West Pediatric Neurosurgery, Inc.
Palms West Surgery Center, Ltd.
Palms West Surgicenter
Park South Imaging Center, Ltd.
Pediatric Intensivist Group, LLC
Pensacola Primary Care, Inc.
Pinellas Surgery Center, Ltd.
Center for Special Surgery
Pinnacle Physician Network, LLC
Poinciana Medical Center, Inc.
Poinciana Medical Center
Port St. Lucie Surgery Center, Ltd.
St. Lucie Surgery Center
Premier Medical Management, Ltd.
Primary Care Medical Associates, Inc.
Pulmonary Renal Intensivist Group, LLC
Putnam Hospital, Inc.
Raulerson Gastroenterology, LLC
Raulerson GYN, LLC
Raulerson Primary Care, LLC
Sarasota Doctors Hospital, Inc.
Doctors Hospital of Sarasota
South Broward Practices, Inc.
South Florida Division Practice, Inc.
South Transfer Center, LLC
Southwest Florida Health System, Inc.
Southwest Florida Regional Medical Center, Inc.
Space Coast Surgical Center, Ltd.
Merritt Island Surgery Center
Specialty Hospitalists at Ft. Walton Beach, LLC
Spinal Disorder and Pain Treatment Institute, LLC
St. Lucie Hospitalists, LLC
St. Lucie Medical Center Hyperbarics, LLC
St. Lucie Medical Center Walk-In Clinic, LLC
St. Lucie Medical Specialists, LLC
St. Lucie West Primary Care, LLC
St. Petersburg General Surgery, LLC
Sun City Hospital, Inc.
South Bay Hospital
Surgery Center of Atlantis, LLC
Atlantis Outpatient Center
Surgery Center of Aventura, Ltd.
Surgery Center of Aventura
Surgery Center of Ft. Pierce, Ltd
Surgery Center of Port Charlotte, Ltd.
Gulf Pointe Surgery Center
Surgical Park Center, Ltd.
Surgical Park Center
Surgicare America - Winter Park, Inc.
Surgicare of Altamonte Springs, Inc.
Surgicare of Aventura, LLC
Surgicare of Bayonet Point, Inc.
Surgicare of Bayside, LLC
Surgicare of Brandon, Inc.
Surgicare of Central Florida, Inc.
Surgicare of Countryside, Inc.
Surgicare of Florida, Inc.
Surgicare of Ft. Pierce, Inc.
Surgicare of Kissimmee, Inc.
Surgicare of Laurel Grove, LLC
Surgicare of Manatee, Inc.
Surgicare of Merritt Island, Inc.
Surgicare of Miami Lakes, LLC
Surgicare of New Port Richey, Inc.
Surgicare of Orange Park, Inc.
Surgicare of Orange Park, Ltd.
Orange Park Surgery Center
Surgicare of Orlando, Inc.
Surgicare of Palms West, LLC
Surgicare of Pinellas, Inc.
Surgicare of Plantation, Inc.
Surgicare of Port Charlotte, LLC
Surgicare of Port St. Lucie, Inc.
Surgicare of St. Andrews, Inc.
Surgicare of St. Andrews, Ltd.
Surgery Center at St. Andrews
Surgicare of Stuart, Inc.
Surgicare of Tallahassee, Inc.
Tallahassee Community Network, Inc.
Tallahassee Medical Center, Inc.
Capital Regional Medical Center
Tallahassee Orthopaedic Surgery Partners, Ltd.
Tallahassee Outpatient Surgery Center
Tampa Bay Health System, Inc.
Tampa Surgi-Centre, Inc.
The Neurohealth Sciences Center, LLC
Total Imaging - Hudson, LLC
Total Imaging - North St. Petersburg, LLC
Travel Medicine and Infections, LLC
University Healthcare Specialists, LLC
University Hospital, Ltd.
University Hospital and Medical Center
Venture Ambulatory Surgery Center, LLC
Venture Ambulatory Surgery Center
Venture Medical Management, LLC
West Florida - MHT, LLC
Memorial Hospital of Tampa
West Florida - PPH, LLC
Palms of Pasadena Hospital
West Florida - PPHomeHealth Holdings, LLC
West Florida - PPHomeHealth, LLC
West Florida - TCH, LLC
Town & Country Hospital
West Florida Behavioral Health, Inc.
West Florida Cardiology Network, LLC
West Florida Cardiology Physicians, LLC
West Florida Division, Inc.
West Florida Gulf Coast Primary Care, LLC
West Florida HealthWorks, LLC
West Florida Internal Medicine, LLC
West Florida Physician Network, LLC
West Florida Regional Medical Center, Inc.
West Florida Hospital
West Florida Specialty Physicians, LLC
West Florida Trauma Network, LLC
West Jacksonville Medical Center, Inc.
Westside Surgery Center, Ltd.
Parkside Surgery Center
Wildwood Medical Center, Inc.
Womens Health Center of Central Florida, LLC
GEORGIA
Acworth Immediate Care, LLC
Albany Family Practice, LLC
AOSC Sports Medicine, Inc.
Atlanta Home Care, L.P.
Atlanta Outpatient Surgery Center, Inc.
Atlanta Surgery Center, Ltd.
Atlanta Outpatient Surgery Center
Augusta Inpatient Services, LLC
Augusta Multispecialty Services, LLC
Augusta Primary Care Services, LLC
Augusta Specialty Hospitalists, LLC
Augusta Urgent Care Services, LLC
Buckhead Surgical Services, L.P.
Byron Family Practice, LLC
Cartersville Medical Center, LLC
Cartersville Medical Center
Cartersville Occupational Medicine Center, LLC
Cartersville Physician Practice I, LLC
CCBH Psychiatric Hospitalists, LLC
Center for Occupational Medicine, LLC
Chatsworth Hospital Corp.
Church Street Partners
Coliseum Health Group, Inc.
Coliseum Park Hospital, Inc.
Coliseum Primary Care Services, LLC
Coliseum Primary Healthcare - Macon, LLC
Coliseum Primary Healthcare - Riverside, LLC
Coliseum Professional Associates, LLC
Coliseum Same Day Surgery Center, L.P.
Coliseum Same Day Surgery Center
Columbia Coliseum Same Day Surgery Center, Inc.
Columbia Polk General Hospital, Inc.
Columbia Surgicare of Augusta, Ltd.
Augusta Surgical Center
Columbia-Georgia PT, Inc.
Columbus Cardiology, Inc.
Columbus Doctors Hospital, Inc.
Diagnostic Services, G.P.
Doctors Hospital Columbus GA-Joint Venture
Doctors Hospital of Augusta Neurology, LLC
Doctors Hospital Surgery Center, L.P.
Evans Surgery Center
Doctors-I, Inc.
Doctors-II, Inc.
Doctors-III, Inc.
Doctors-IV, Inc.
Doctors-IX, Inc.
Doctors-V, Inc.
Doctors-VI, Inc.
Doctors-VII, Inc.
Doctors-VIII, Inc.
Doctors-X, Inc.
Dublin Community Hospital, LLC
Dublin Heart Specialists, LLC
Dublin Multispecialty, LLC
Dunwoody Physician Practice Network, Inc.
Eastside Behavioral Health Associates, LLC
Eastside General Surgery, LLC
Eastside Medical Center, LLC
Eastside Medical Center
Eastside Surgery Center, LLC
EHCA Diagnostics, LLC
EHCA Eastside Occupational Medicine Center, LLC
EHCA Metropolitan, LLC
EHCA Parkway, LLC
EHCA Peachtree, LLC
EHCA West Paces, LLC
EHCA, LLC
Fairview Medical Services, LLC
Fairview Park, Limited Partnership
Fairview Park Hospital
Georgia Psychiatric Company, Inc.
Grace Family Practice, LLC
Grayson Primary Care, LLC
Greater Gwinnett Internal Medicine Associates, LLC
Greater Gwinnett Physician Corporation
Gwinnett Community Hospital, Inc.
HCA Health Services of Georgia, Inc.
HCOL, Inc.
Heritage Medical Care, LLC
Hospitalists at Fairview Park, LLC
Hughston Hospital Services, LLC
Macon Psychiatric Hospitalists, LLC
Marietta Outpatient Medical Building, Inc.
Marietta Outpatient Surgery, Ltd.
Marietta Surgical Center
Marietta Surgical Center, Inc.
Med Corp., Inc.
MedFirst, Inc.
Medical Center - West, Inc.
Medical Oncology Associates, LLC
Middle Georgia Urgent Care Services, LLC
MOSC Sports Medicine, Inc.
North Georgia Primary Care Group, LLC
Northlake Medical Center, LLC
Northlake Physician Practice Network, Inc.
Northlake Surgical Center, L.P.
Northlake Surgical Center
Northlake Surgicare, Inc.
Orthopaedic Specialty Associates, L.P.
Orthopaedic Sports Specialty Associates, Inc.
Palmyra Brain & Spine Center, LLC
Palmyra Park Hospital, LLC
Palmyra Professional Fees, LLC
Redmond Anesthesia Services, LLC
Redmond Hospital Services, LLC
Redmond Neurosurgery, LLC
Redmond Park Health Services, Inc.
Redmond Park Hospital, LLC
Redmond Regional Medical Center
Redmond Physician Practice Company
Redmond Physician Practice Company II
Redmond Physician Practice Company III
Redmond Physician Practice XI, LLC
Rome Imaging Center Limited Partnership
Surgery Center of Rome, L.P.
The Surgery Center of Rome
Surgicare of Augusta, Inc.
Surgicare of Buckhead, LLC
Surgicare of Eastside, LLC
Surgicare of Evans, Inc.
Surgicare of Rome, Inc.
The Rankin Foundation
Urology Center of North Georgia, LLC
West Paces Services, Inc.
IDAHO
East Falls Cardiovascular and Thoracic Surgery, LLC
East Falls Family Medicine, LLC
East Falls OBGYN, LLC
East Falls Plastic Surgery, LLC
Eastern Idaho Health Services, Inc.
Eastern Idaho Regional Medical Center
Eastern Idaho Regional Medical Center Inpatient Services, LLC
Eastern Idaho Regional Medical Center Physician Services, LLC
EIRMC Hospitalist Services, LLC
Idaho Behavioral Health Services, LLC
Idaho Physician Services, Inc.
Patients First Neonatology, LLC
Patients First Neurology, LLC
West Valley Medical Center, Inc.
West Valley Medical Center
West Valley Medical Group, LLC
West Valley Professional Fee Billing, LLC
West Valley Therapy Services, LLC
ILLINOIS
Chicago Grant Hospital, Inc.
Columbia Chicago Division, Inc.
Columbia LaGrange Hospital, Inc.
Columbia Surgicare - North Michigan Ave., L.P.
Galen of Illinois, Inc.
Illinois Psychiatric Hospital Company, Inc.
Smith Laboratories, Inc.
INDIA
All About Staffing (India) Ltd.
INDIANA
Advanced Neurosurgery, LLC
Advanced Orthopedics, LLC
Advanced Plastic Surgery Center of Terre Haute, LLC
Advanced Radiation Oncology Care, LLC
Basic American Medical, Inc.
Family Medicine of Terre Haute, LLC
Hospitalists of the Wabash Valley, LLC
Jeffersonville MediVision, Inc.
Regional Hospital Healthcare Partners, LLC
Surgicare of Indianapolis, Inc.
Surgicare of Terre Haute, LLC
Terre Haute Heart Lung Vascular Associates, LLC
Terre Haute MOB, L.P.
Terre Haute Obstetrics and Gynecology, LLC
Wabash Cardiology Associates, LLC
Wabash Valley Hospitalists, LLC
KANSAS
Care for Women, LLC
College Park Ancillary, LLC
College Park Radiology, LLC
Family Health Medical Group of Overland Park, LLC
Galichia Anesthesia Services, LLC
Galichia Emergency Physicians, LLC
Health Partners of Kansas, Inc.
Heart of America ASC, LLC
Heart of America Surgery Center
Heart of America Surgicenter, LLC
Heartland Womens Group at Wesley, LLC
Johnson County Neurology, LLC
Johnson County Surgery Center, L.P.
Surgicenter of Johnson County
Johnson County Surgicenter, L.L.C.
Kansas Pulmonary and Sleep Specialists, LLC
Kansas Trauma and Critical Care Specialists, LLC
Menorah Medical Group, LLC
Menorah Urgent Care, LLC
MidAmerica Division, Inc.
Mid-America Surgery Center, LLC
Mid-America Surgery Institute, LLC
Mid-America Surgery Institute
Midwest Cardiology Specialists, LLC
Midwest Cardiovascular and Thoracic Surgeons of Kansas, LLC
Midwest Heart & Vascular Specialists, LLC
Midwest Oncology Associates, LLC
Mill Creek Outpatient Services, LLC
MMC Sleep Lab Management, LLC
Neurology Associates of Kansas, LLC
Neuroscience Associates of Kansas City, LLC
OPRMC-HBP, LLC
Overland Park Cardiovascular, Inc.
Overland Park Medical Specialists, LLC
Overland Park Orthopedics, LLC
Overland Park Surgical Specialties, LLC
Paragyn Surgical, LLC
Pediatric Specialty Clinic LLC
Physician Associates of Corporate Woods, LLC
Quivira Internal Medicine, Inc.
Statland Medical Group, LLC
Surgery Center of Overland Park, L.P.
Overland Park Surgery Center
Surgicare of Overland Park, LLC
Surgicare of Wichita, Inc.
Surgicare of Wichita, LLC
Surgicare of Wichita
Surgicenter of Johnson County, Ltd.
Wesley Physician Services, LLC
Wesley Physicians - Anesthesiologist, LLC
Wesley Physicians - Cardiovascular, LLC
Wesley Physicians - Medical Specialties LLC
Wesley Physicians - Obstetrics and Gynecology LLC
Wesley Physicians - Primary Care LLC
Wesley Physicians - Surgical Specialties LLC
Wesley Select Network, LLC
KENTUCKY
CHCK, Inc.
Commonwealth Specialists of Kentucky, LLC
Frankfort Hospital, Inc.
Frankfort Regional Medical Center
Frankfort Orthopedics, LLC
Frankfort Wound Care, LLC
Galen of Kentucky, Inc.
Greenview Hospital, Inc.
Greenview Regional Hospital
Greenview PrimeCare, LLC
Greenview Specialty Associates, LLC
Hospitalists at Greenview Regional Hospital, LLC
Kentucky Cardiopulmonary Interpretation Services, LLC
Southern Kentucky Medicine Associates, LLC
Southern Kentucky Urology, LLC
Surgery Center of Greenview, L.P.
Surgicare of Greenview, Inc.
Tri-County Community Hospital, Inc.
Western Kentucky Gastroenterology, LLC
LOUISIANA
Acadiana Care Center, Inc.
Acadiana Practice Management, Inc.
Acadiana Regional Pharmacy, Inc.
Center for Digestive Diseases, LLC
Childrens Multi-Specialty Group, LLC
CLASC Manager, LLC
Columbia Healthcare System of Louisiana, Inc.
Columbia West Bank Hospital, Inc.
Columbia/HCA Healthcare Corporation of Central Louisiana, Inc.
Columbia/HCA of Baton Rouge, Inc.
Columbia/HCA of New Orleans, Inc.
HCA Health Services of Louisiana, Inc.
Lafayette OB Hospitalists, LLC
Lafayette Pediatric Neurology Center, LLC
Lafayette Surgery Center Limited Partnership
Lafayette Surgicare
Lafayette Surgicare, Inc.
Lafayette Urogynecology & Urology Center, LLC
Lakeside Womens Services, LLC
Lakeview Cardiology Specialists, LLC
Lakeview Regional Physician Group, LLC
Louisiana Psychiatric Company, Inc.
Medical Center of Baton Rouge, Inc.
Metairie Primary Care Associates, LLC
New Iberia Healthcare Corporation
Notami (Opelousas), Inc.
Notami Hospitals of Louisiana, Inc.
Rapides After Hours Clinic, L.L.C.
Rapides Healthcare System, L.L.C.
Rapides Regional Medical Center
Rapides Regional Physician Group Primary Care, LLC
Rapides Regional Physician Group Specialty Care, LLC
Rapides Regional Physician Group, LLC
Rapides Surgery Center, LLC
RMCA Professionals Mgmt, LLC
Southwest Medical Center Family Practice, LLC
Southwest Medical Center Multi-Specialty Group, LLC
Southwest Medical Center Surgical Group, LLC
Surgicare Merger Company of Louisiana
Surgicare of Lakeview, Inc.
Surgicare Outpatient Center of Baton Rouge, Inc.
Surgicenter of East Jefferson, Inc.
Tchefuncte Cardiology AssociatesLakeview, LLC
The Regional Health System of Acadiana, LLC
The Regional Medical Center of Acadiana
Womens & Childrens Hospital, a Campus of The Regional Medical Center of Acadiana
TUHC Anesthesiology Group, LLC
TUHC Hospitalist Group, LLC
TUHC Physician Group, LLC
TUHC Primary Care and Pediatrics Group, LLC
TUHC Radiology Group, LLC
Tulane Clinic, LLC
Tulane Professionals Management, L.L.C.
University Healthcare System, L.C.
Tulane Medical Center
Uptown Primary Care Associates, LLC
WGH, Inc.
Womens & Childrens Pediatric Hematology/Oncology Center, LLC
Womens & Childrens Pediatric Orthopedic Center, LLC
Womens & Childrens Pulmonology Clinic, LLC
Womens and Childrens Professional Management, L.L.C.
Womens Multi-Specialty Group, LLC
LUXEMBOURG
HCA Luxembourg 1 Sarl
HCA Luxembourg 2 Sarl
HCA Luxembourg Equities Sàrl
HCA Luxembourg Investments Sàrl
HCA New Luxembourg 1 Sàrl
HCA New Luxembourg 2 Sàrl
HCA Switzerland GmbH
MASSACHUSETTS
Columbia Hospital Corporation of Massachusetts, Inc.
Orlando Outpatient Surgical Center, Ltd.
MISSISSIPPI
Brookwood Medical Center of Gulfport, Inc.
Coastal Imaging Center of Gulfport, Inc.
Coastal Imaging Center, L.P.
Galen of Mississippi, Inc.
Garden Park Hospitalist Program, LLC
Garden Park Investments, L.P.
Garden Park Physician Group - Specialty Care, LLC
Garden Park Physician Group, Inc.
Gulf Coast Medical Ventures, Inc.
Southern Urology Associates, LLC
VIP, Inc.
MISSOURI
Bone & Joint Specialists Physician Group, LLC
Cardiology Associates Medical Group, LLC
Cedar Creek Medical Group, LLC
Centerpoint Cardiology Services, LLC
Centerpoint Clinic of Blue Springs, LLC
Centerpoint Hospital Based Physicians, LLC
Centerpoint Medical Specialists, LLC
Centerpoint Orthopedics, LLC
Centerpoint Physicians Group, LLC
Centerpoint Womens Services, LLC
Clinishare, Inc.
Endocrinology Associates of Lees Summit, LLC
Eye Care Surgicare, Ltd., a Missouri limited partnership
Eye Surgicare of Independence, L.L.C.
Family Health Specialists of Lees Summit, LLC
Foot & Ankle Specialty Services, LLC
HCA Midwest Comprehensive Care, Inc.
Health Midwest Medical Group, Inc.
Health Midwest Office Facilities Corporation
Health Midwest Ventures Group, Inc.
HM Acquisition, LLC
Independence Neurosurgery Services, LLC
Independence Surgicare, Inc.
Jackson County Pulmonary Medical Group, LLC
Kansas City Gastroenterology & Hepatology Physicians Group, LLC
Kansas City Neurology Associates, LLC
Kansas City Perfusion Services, Inc.
Kansas City Pulmonology Practice, LLC
Kansas City Vascular & General Surgery Group, LLC
KC Pain ASC, LLC
KC Surgicare, LLC
Lees Summit Urgent Care, LLC
Medical Center Imaging, Inc.
MediCredit, Inc.
Metropolitan Multispecialty Physicians Group, Inc.
Mid-States Financial Services, Inc.
Midwest Cardiovascular & Thoracic Surgery, LLC
Midwest Division - RBH, LLC
Belton Regional Medical Center
Midwest Division Spine Care, LLC
Midwest Doctors Group, LLC
Midwest Infectious Disease Specialists, LLC
Midwest Specialty Care - Lees Summit, LLC
Midwest Trauma Services, LLC
Midwest Womens Healthcare Specialists, LLC
Missouri Healthcare System, L.P.
Notami Hospitals of Missouri, Inc.
Nuclear Diagnosis, Inc.
Ozarks Medical Services, Inc.
Precise Imaging, Inc.
Raymore Medical Group, LLC
Research Cardiology Associates, LLC
Research Family Physicians, LLC
Research Internal Medicine, LLC
Research Multi-Specialty Physicians Group, LLC
Research Neurology Associates, LLC
Research Neuroscience Institute, LLC
Research Psychiatric - 1500, LLC
RMC - Pulmonary, LLC
RMC Transplant Physicians, LLC
Senior Health Associates, LLC
Surgery Center of Independence, L.P.
Centerpoint Ambulatory Surgery Center
Surgical Care Medical Group, LLC
Surgicare of Kansas City, LLC
Surgicenter of Kansas City, L.L.C.
Surgicenter of Kansas City
The Outsource Group, Inc.
Womens Center at Brookside, LLC
NEVADA
CHC Holdings, Inc.
CHC Venture Co.
Columbia Hospital Corporation of West Houston
Fremont Womens Health, LLC
Health Service Partners, Inc.
Las Vegas ASC, LLC
Las Vegas Physical Therapy, Inc.
Las Vegas Surgicare, Inc.
Las Vegas Surgicare, Ltd., a Nevada Limited Partnership
Las Vegas Surgery Center
Midwest Division - Care Resources Holdings, LLC
Midwest Division - Care Resources, LLC
Midwest Division - Home Health Holdings, LLC
Midwest Division - Home Health, LLC
Midwest Division - SJMC, LLC
Midwest Division - SMH, LLC
Midwest Division - St. Joseph Pharmacy, LLC
Nevada Surgery Center of Southern Hills, L.P.
Nevada Surgicare of Southern Hills, LLC
Rhodes Limited-Liability Company
Sahara Outpatient Surgery Center, Ltd.
Sahara Surgery Center
SJSM Occupational Health, LLC
Southern Hills Medical Center, LLC
Southern Hills Hospital & Medical Center
Specialty Surgicare of Las Vegas, LP
Specialty Surgery Center
Sunrise Flamingo Surgery Center, Limited Partnership
Flamingo Surgery Center
Sunrise Mountainview Hospital, Inc.
MountainView Hospital
Sunrise Mountainview Multi-Specialty Clinics, LLC
Sunrise Outpatient Services, Inc.
Sunrise Physician Services, LLC
Sunrise Trauma Services, LLC
Surgicare of Las Vegas, Inc.
Surgicare of St. Marys, LLC
Value Health Holdings, Inc.
VH Holdco, Inc.
VH Holdings, Inc.
Western Plains Capital, Inc.
NEW HAMPSHIRE
Appledore Medical Group II, Inc.
Derry ASC, Inc.
HCA Health Services of New Hampshire, Inc.
Parkland Medical Center
Portsmouth Regional Hospital
Med-Point of New Hampshire, Inc.
Occupational Health Services of PRH, LLC
Parkland Hospitalists Program, LLC
Parkland Oncology, LLC
Salem Surgery Center, Limited Partnership
Salem Surgery Center
Surgicare of Salem, LLC
NORTH CAROLINA
Brunswick Anesthesia, LLC
CareOne Home Health Services, Inc.
Cumberland Medical Center, Inc.
HCA - Raleigh Community Hospital, Inc.
Heritage Hospital, Inc.
HTI Health Services of North Carolina, Inc.
Mecklenburg Surgical Land Development, Ltd.
Raleigh Community Medical Office Building, Ltd.
Wake Psychiatric Hospital, Inc.
OHIO
Columbia/HCA Healthcare Corporation of Northern Ohio
Columbia-CSA/HS Greater Canton Area Healthcare System, L.P.
Columbia-CSA/HS Greater Cleveland Area Healthcare System, L.P.
Lorain County Surgery Center, Ltd.
Surgicare of Lorain County, Inc.
Surgicare of Westlake, Inc.
Westlake Surgicare, L.P.
OKLAHOMA
Columbia Doctors Hospital of Tulsa, Inc.
Columbia Oklahoma Division, Inc.
Edmond General Surgery, LLC
Edmond Hospitalists, LLC
Edmond Intensivists, LLC
Edmond Physician Hospital Organization, Inc.
Edmond Physician Services, LLC
Edmond Podiatry Associates, LLC
Edmond Spine and Orthopedic Services, LLC
Family Medicine Associates of Edmond, LLC
HCA Health Services of Oklahoma, Inc.
OU Medical Center
OU Medical Center Edmond
Healthcare Oklahoma, Inc.
Medi Flight of Oklahoma, LLC
Medical Imaging, Inc.
Millenium Health Care of Oklahoma, Inc.
Oklahoma Outpatient Surgery Limited Partnership
Oklahoma Surgicare
Oklahoma Physicians - Medical Specialties LLC
Oklahoma Physicians - Obstetrics and Gynecology LLC
Oklahoma Physicians - Primary Care LLC
Oklahoma Physicians - Surgical Specialties LLC
Oklahoma Surgicare, Inc.
Oklahoma Transplant Physicians, LLC
Plains Healthcare System, Inc.
Stephenson Laser Center, L.L.C.
Surgicare of Northwest Oklahoma Limited Partnership
Surgicare of Tulsa, Inc.
SWMC, Inc.
PHILIPPINES
All About Staffing Philippines, Inc.
Career Staffing USA, Inc.
SOUTH CAROLINA
C/HCA Development, Inc.
Carolina Regional Surgery Center, Inc.
Carolina Regional Surgery Center, Ltd.
Grande Dunes Surgery Center
Coastal Carolina Home Care, Inc.
Coastal Carolina Multispecialty Associates, LLC
Coastal Carolina Primary Care, LLC
Coastal Inpatient Physicians, LLC
Colleton Ambulatory Care, LLC
Colleton Ambulatory Surgery Center
Colleton Diagnostic Center, LLC
Colleton Medical Anesthesia, LLC
Colleton Medical Hospitalists, LLC
Colleton Neurology Associates, LLC
Colleton Otolaryngology, Head and Neck Surgery, LLC
Columbia/HCA Healthcare Corporation of South Carolina
Columbia-CSA/HS Greater Columbia Area Healthcare System, L.P.
Doctors Hospital North Augusta Imaging Center, LLC
Doctors Memorial Hospital of Spartanburg, L.P.
Edisto Multispecialty Associates, Inc.
Grand Strand Senior Health Center, LLC
Grand Strand Specialty Associates, LLC
Grand Strand Surgical Specialists, LLC
North Augusta Rehab Health Center, LLC
North Charleston Diagnostic Imaging Center, LLC
South Atlantic Division, Inc.
South Carolina Imaging Employer Corp.
Tri-County Surgical Specialists, LLC
Trident Behavioral Health Services, LLC
Trident Eye Surgery Center, L.P.
Trident Eye Surgery Center
Trident Medical Services, Inc.
Trident Neonatology Services, LLC
Walterboro Community Hospital, Inc.
Colleton Medical Center
Waterway Primary Care, LLC
SWITZERLAND
Glemm SA
HCA Switzerland Holding Sàrl
HCA Switzerland Finance GmbH
TENNESSEE
Arthritis Specialists of Nashville, Inc.
Athens Community Hospital, Inc.
Atrium Surgery Center, Ltd.
Centennial Cardiovascular Consultants, LLC
Centennial Heart, LLC
Centennial Neuroscience, LLC
Centennial Primary Care, LLC
Centennial Psychiatric Associates, LLC
Centennial Surgery Center, L.P.
Centennial Surgery Center
Centennial Surgical Associates, LLC
Centennial Surgical Clinic, LLC
Central Tennessee Hospital Corporation
TriStar Horizon Medical Center
Chattanooga ASC Acquisition, Inc.
Chattanooga Diagnostic Associates, LLC
Chattanooga Healthcare Network Partner, Inc.
Chattanooga Healthcare Network, L.P.
Columbia Integrated Health Systems, Inc.
Columbia Medical Group - Centennial, Inc.
Columbia Medical Group - Daystar, Inc.
Columbia Medical Group - Parkridge, Inc.
Columbia Medical Group - Southern Hills, Inc.
Columbia Medical Group - The Frist Clinic, Inc.
Dickson Corporate Health Services, LLC
Dickson Surgery Center, L.P.
Frist Clinic Express, LLC
Gastroenterology Specialists of Middle Tennessee, LLC
H2U Wellness Centers, LLC
HCA - Information Technology & Services, Inc.
HCA - IT&S PBS Field Operations, Inc.
HCA ASD Financial Operations, LLC
HCA ASD Sales Services, LLC
HCA Central Group, Inc.
HCA Chattanooga Market, Inc.
HCA Development Company, Inc.
HCA Eastern Group, Inc.
HCA Health Services of Tennessee, Inc.
TriStar Centennial Medical Center
TriStar Ashland City Medical Center
TriStar Southern Hills Medical Center
TriStar StoneCrest Medical Center
TriStar Summit Medical Center
HCA Human Resources, LLC
HCA Long Term Health Services of Miami, Inc.
HCA Medical Services, Inc.
HCA Patient Safety Organization, LLC
HCA Physician Services, Inc.
HCA Realty, Inc.
Health to You, LLC
Healthcare Sales National Management Services Group, LLC
Healthtrust, Inc. - The Hospital Company
Hendersonville Hospital Corporation
TriStar Hendersonville Medical Center
Hendersonville Hospitalist Services, Inc.
Hendersonville OB/GYN, LLC
Hendersonville Primary Care, LLC
Hermitage Primary Care, LLC
Holly Hill/Charter Behavioral Health System, L.L.C.
Hometrust Management Services, Inc.
Horizon Orthopedics, LLC
Horizon Surgical, LLC
Hospital Corporation of Tennessee
Hospital Realty Corporation
Hospitalists at Centennial Medical Center, LLC
Hospitalists at Horizon Medical Center, LLC
Hospitalists at Parkridge, LLC
Hospitalists at StoneCrest, LLC
HTI Memorial Hospital Corporation
TriStar Skyline Madison Campus
TriStar Skyline Medical Center
Indian Path Hospital, Inc.
Indian Path Rehabilitation Center, Inc.
Internal Medicine Associates of Southern Hills, LLC
Lookout Valley Medical Center, LLC
Madison Behavioral Health, LLC
Madison Internal Medicine, LLC
McMinnville Cardiology, LLC
Med Group - Southern Hills Hospitalists, LLC
Medical Group - Dickson, Inc.
Medical Group - Southern Hills of Brentwood, LLC
Medical Group - Southern Hills of Nolensville, LLC
Medical Group - StoneCrest FP, Inc.
Medical Group - Stonecrest Pulmonology, LLC
Medical Group - StoneCrest, Inc.
Medical Group - Summit, Inc.
Medical Plaza Ambulatory Surgery Center Associates, L.P.
Plaza Day Surgery
Middle Tennessee Neurology LLC
Mid-State Physicians, LLC
Nashville Psychiatric Company, Inc.
Natchez Surgery Center, LLC
National Contact Center Management Group, LLC
Network Management Services, Inc.
Neurology Associates of Hendersonville, LLC
North Florida Regional Freestanding Surgery Center, L.P.
North Florida Surgical Pavilion
North Nashville Family Health Center, LLC
NPAS Solutions, LLC
NPAS, Inc.
Old Fort Village, LLC
OneSourceMed, Inc.
Palmer Medical Center, LLC
Parallon Business Solutions, LLC
Parallon Credentialing Solutions, LLC
Parallon Enterprises, LLC
Parallon Health Information Solutions, LLC
Parallon Payroll Solutions, LLC
Parallon Physician Services, LLC
Parallon Workforce Management Solutions, LLC
Park View Insurance Company
Parkridge East Specialty Associates, LLC
Parkridge Hospitalists, Inc.
Parkridge Medical Associates, LLC
Parkridge Medical Center, Inc.
Parkridge East Hospital
Parkridge Medical Center
Parkridge Valley Hospital
Parkridge Professionals, Inc.
Parkside Surgery Center, Inc.
Plano Ambulatory Surgery Associates, L.P.
Surgery Center of Plano
Portland Primary Care, LLC
Portland Surgical, LLC
Premier ASC, LLC
Premier Orthopaedic Surgery Center
Pulmonary Medicine of Dickson, LLC
Rio Grande Surgery Center Associates, L.P.
SCRI Development Innovations, LLC
SCRI Scientifics, LLC
Shelbyville Cardiology, LLC
Signal Mountain Primary Care, LLC
Skyline Medical Group, LLC
Skyline Neuroscience Associates, LLC
Skyline Rehab Associates, LLC
Skyline Riverside Medical Group, LLC
Southeast Surgical Solutions, LLC
Southern Hills Neurology Consultants, LLC
Southern Hills Orthopaedic Consultants, LLC
Southpoint, LLC
Specialist Group at Centennial, LLC
Spring Hill Hospital, Inc.
Spring Hill Physicians, LLC
SRS Acquisition, Inc.
St. Marks Ambulatory Surgery Associates, L.P.
St. Marks Outpatient Surgery Center
Sterling Primary Care Associates, LLC
Stonecrest Medical Group - Family Practice of Murfreesboro, LLC
Stonecrest Medical Group - SC Murfreesboro Family Practice, LLC
Sullins Surgical Center, Inc.
Summit Convenient Care at Lebanon, LLC
Summit Heart, LLC
Summit Research Solutions, LLC
Summit Surgery Center, L.P.
Summit Surgery Center
Summit Surgical Associates, LLC
Summit Walk-in Clinic, LLC
Surgery Center of Chattanooga, L.P.
Surgery Center of Chattanooga
Surgicare of Chattanooga, LLC
Surgicare of Dickson, LLC
Surgicare of Madison, Inc.
Surgicare of Natchez, LLC
Surgicare of Premier Orthopaedic, LLC
Surgicare of Southern Hills, Inc.
Surgicare of Wilson County, LLC
Surgicare Outpatient Center of Jackson, Inc.
Sycamore Shoals Hospital, Inc.
TCMC Madison-Portland, Inc.
Tennessee Healthcare Management, Inc.
Tennessee Valley Outpatient Diagnostic Center, LLC
The Charter Cypress Behavioral Health System, L.L.C.
Trident Ambulatory Surgery Center, L.P.
Trident Ambulatory Surgery Center
TriStar Cardiovascular Surgery, LLC
TriStar Gynecology Oncology, LLC
TriStar Health System, Inc.
TriStar Medical Group - Centennial Primary Care, LLC
TriStar Medical Network, LLC
TriStar OB/GYN, LLC
TriStar Orthopedics, LLC
TriStar Radiation Oncology, LLC
Vascular and Endovascular Specialists, LLC
Vision Holdings, LLC
WCP Properties, LLC
Wilson County Outpatient Surgery Center, L.P.
Womens and Childrens Specialists, LLC
TEXAS
360 Community Alliance, LLC
Acute Kids Urgent Care of Medical City Childrens Hospital, PLLC
Administrative Physicians of North Texas, PLLC
Ambulatory Endoscopy Clinic of Dallas, Ltd.
Ambulatory Endoscopy Clinic of Dallas
Arlington Diagnostic South, Inc.
Arlington Neurosurgeons, PLLC
Arlington Primary Care, PLLC
Arlington Primary Medicine, PLLC
Arlington Vascular Surgery, PLLC
Austin Heart Cardiology MSO, LLC
Austin Heart, PLLC
Austin Medical Center, Inc.
Austin Physicians Management, LLC
Bailey Square Ambulatory Surgical Center, Ltd.
Bailey Square Surgery Center
Bailey Square Outpatient Surgical Center, Inc.
Barrow Medical Center CT Services, Ltd.
Bay Area Healthcare Group, Ltd.
Corpus Christi Medical Center
Bay Area Surgical Center Investors, Ltd.
Bay Area Surgicare Center, Inc.
Bayshore Occupational and Family Medicine, PLLC
Bayshore Surgery Center, Ltd.
Bedford-Northeast Community Hospital, Inc.
Bellaire Imaging, Inc.
Brownsville Specialists of Texas, PLLC
Brownsville Surgical Specialists, PLLC
Brownsville-Valley Regional Medical Center, Inc.
C. Medrano, M.D., PLLC
Calder Urgent Care, PLLC
Calloway Creek Surgery Center, L.P.
Calloway Creek Surgery Center
Calloway Creek Surgicare, LLC
Capital Area Cardiology
Capital Area Neurosurgeons
Capital Area Occupational Medicine, PLLC
Capital Area Primary Care Providers
Capital Area Primary Care, PLLC
Capital Area Providers
Capital Area Specialists, PLLC
Capital Area Specialty Providers
Capital Area Surgeons, PLLC
Cardio Vascular Surgeons of North Texas, PLLC
Cardiology Specialists of North Texas, PLLC
Central San Antonio Surgical Center Investors, Ltd.
Central Texas Cardiac Arrhythmia Physicians, PLLC
CHC Management, Ltd.
CHC Payroll Company
CHC Realty Company
CHCA Pearland, L.P.
CHC-El Paso Corp.
CHC-Miami Corp.
Christina Cano-Gonzalez, M.D., PLLC
Clear Lake Family Physicians, PLLC
Clear Lake Multi-Specialty Group, PLLC
Clear Lake Regional Medical Center, Inc.
Clear Lake Surgicare, Ltd.
Bay Area Surgicare Center
Coastal Bend Hospital CT Services, Ltd.
Collin County Diagnostic Associates, PLLC
COL-NAMC Holdings, Inc.
Columbia Ambulatory Surgery Division, Inc.
Columbia Bay Area Realty, Ltd.
Columbia Call Center, Inc.
Columbia Central Group, Inc.
Columbia Champions Treatment Center, Inc.
Columbia GP of Mesquite, Inc.
Columbia Greater Houston Division Healthcare Network, Inc.
Columbia Hospital at Medical City Dallas Subsidiary, L.P.
Medical City Dallas Hospital
Columbia Hospital Corporation at the Medical Center
Columbia Hospital Corporation of Arlington
Columbia Hospital Corporation of Bay Area
Columbia Hospital Corporation of Corpus Christi
Columbia Hospital-El Paso, Ltd.
Columbia Medical Arts Hospital Subsidiary, L.P.
Columbia Medical Center at Lancaster Subsidiary, L.P.
Columbia Medical Center Dallas Southwest Subsidiary, L.P.
Columbia Medical Center of Arlington Subsidiary, L.P.
Medical Center of Arlington
Columbia Medical Center of Denton Subsidiary, L.P.
Denton Regional Medical Center
Columbia Medical Center of Las Colinas, Inc.
Las Colinas Medical Center
Columbia Medical Center of Lewisville Subsidiary, L.P.
Medical Center of Lewisville
Columbia Medical Center of McKinney Subsidiary, L.P.
Medical Center of McKinney
Columbia Medical Center of Plano Subsidiary, L.P.
Medical Center of Plano
Columbia North Hills Hospital Subsidiary, L.P.
North Hills Hospital
Columbia North Texas Healthcare System, L.P.
Columbia North Texas Subsidiary GP, LLC
Columbia North Texas Surgery Center Subsidiary, L.P.
Columbia Northwest Medical Center Partners, Ltd.
Columbia Northwest Medical Center, Inc.
Columbia Plaza Medical Center of Fort Worth Subsidiary, L.P.
Plaza Medical Center of Fort Worth
Columbia Psychiatric Management Co.
Columbia South Texas Division, Inc.
Columbia Specialty Hospital of Dallas Subsidiary, L.P.
Columbia Specialty Hospitals, Inc.
Columbia Surgery Group, Inc.
Columbia/HCA Healthcare Corporation of Central Texas
Columbia/HCA Heartcare of Corpus Christi, Inc.
Columbia/HCA International Group, Inc.
Columbia/HCA of Houston, Inc.
Columbia/HCA of North Texas, Inc.
Columbia/HCA Physician Hospital Organization Medical Center Hospital
Columbia-Quantum, Inc.
Comprehensive Radiology Management Services, Ltd.
Congenital Heart Surgery Center, PLLC
Conroe Hospital Corporation
Conroe Orthopedic Specialists, PLLC
Conroe Specialists of Texas, PLLC
Corpus Christi Healthcare Group, Ltd.
Corpus Christi Primary Care Associates, PLLC
Corpus Christi Radiation Oncology, PLLC
Corpus Christi Surgery Center, L.P.
Corpus Christi Surgery, Ltd.
Corpus Surgicare, Inc.
CP Surgery Center, LLC
Central Park Surgery Center
Dallas Cardiology Specialists, PLLC
Dallas CardioThoracic Surgery Consultants, PLLC
Dallas Hand Surgery Center, PLLC
Dallas Neuro-Stroke Affiliates, PLLC
Deep Purple Investments, LLC
Denton Cancer Center, PLLC
Denton County Hospitalist Program, PLLC
Denton Pediatric Physicians, PLLC
Denton Primary Care, PLLC
Denton Regional Ambulatory Surgery Center, L.P.
Day Surgery Center at Denton Regional Medical Center
DFW Physicians Group, PLLC
Doctors Bay Area Physician Hospital Organization
Doctors Hospital (Conroe), Inc.
E.P. Physical Therapy Centers, Inc.
East Houston Specialists, PLLC
El Paso Healthcare Provider Network
El Paso Healthcare System Physician Services, LLC
El Paso Healthcare System, Ltd.
Las Palmas Medical Center, a campus of Las Palmas Del Sol Healthcare
Del Sol Medical Center, a campus of Las Palmas Del Sol Healthcare
El Paso Nurses Unlimited, Inc.
El Paso Primary Care, PLLC
El Paso Surgery Centers, L.P.
East El Paso Surgery Center
Surgical Center of El Paso
El Paso Surgicenter, Inc.
Eldridge Family Practitioners, PLLC
Elite Family Health of Plano, PLLC
Elite OB-GYN Services of El Paso, PLLC
Elite Orthopaedics of El Paso, PLLC
Elite Orthopaedics of Irving, PLLC
Elite Orthopaedics of Plano, PLLC
Emergency Psychiatric Medicine, PLLC
Endoscopy Clinic of Dallas, Inc.
Endoscopy of Plano, L.P.
Endoscopy of Plano
Endoscopy Surgicare of Plano, LLC
EPIC Properties, Inc.
EPSC, L.P.
Family First Medicine in Brownsville, PLLC
Family Practitioners of Montgomery, PLLC
Family Practitioners of Pearland, PLLC
Flower Mound Surgery Center, Ltd.
Fort Worth Investments, Inc.
Frisco Warren Parkway 91, Inc.
G. Rowe, M.D. , PLLC
G. Schnider, M.D., PLLC
G.P. Martin Fletcher & Associates, LLC
Galen Hospital of Baytown, Inc.
General and Cardiovascular Surgeons of Conroe, PLLC
General Surgeons of Houston, PLLC
General Surgeons of North Richland Hills, PLLC
General Surgeons of Pasadena, PLLC
GI Associates of Denton, PLLC
GI Associates of Lewisville, PLLC
Gramercy Surgery Center, Ltd.
Gramercy Outpatient Surgery Center
Greater Houston Preferred Provider Option, Inc.
Green Oaks Hospital Subsidiary, L.P.
Green Oaks Hospital
Gulf Coast Division, Inc.
Gulf Coast Physician Administrators, Inc.
H2U Wellness Centers - Conroe ISD, PLLC
H2U Wellness Centers - Corpus Christi, PLLC
H2U Wellness Centers - Clear Lake Regional Medical Center, PLLC
H2U Wellness Centers - Conroe Regional Medical Center, PLLC
H2U Wellness Centers - Del Sol Medical Center, PLLC
H2U Wellness Centers - El Paso, PLLC
H2U Wellness Centers - Las Palmas Medical Center, PLLC
H2U Wellness Centers - Medical City Dallas, PLLC
H2U Wellness Centers - PISD, PLLC
H2U Wellness Centers - San Benito CISD, PLLC
HCA Central/West Texas Physicians Management, LLC
HCA Health Services of Texas, Inc.
HCA Pearland GP, Inc.
HCA Plano Imaging, Inc.
HCA Western Group, Inc.
HCAPS Conroe Affiliation, Inc.
Heart Specialist of North Texas, PLLC
Heartcare of Texas, Ltd.
Hidalgo County Family Practitioners, PLLC
Hidden Lakes Health Center, PLLC
Hip & Joint Specialists of North Texas, PLLC
Houston Northwest Surgical Partners, Inc.
Houston Pediatric Specialty Group, PLLC
HPG Energy, L.P.
HPG GP, LLC
HTI Gulf Coast, Inc.
HWCA, PLLC
Internal Medicine Associates of Huntsville, PLLC
J. M. Garcia, M.D., PLLC
Kathy L. Summers, M.D., PLLC
Kennedale Primary Care PLLC
Kingwood Multi-Specialty Group, PLLC
Kingwood Surgery Center, LLC
Humble Kingwood Endoscopy Center
KPH-Consolidation, Inc.
Kingwood Medical Center
Kyle Primary Care, PLLC
Lake Forest Family Health, PLLC
Las Colinas Primary Care, PLLC
Las Colinas Surgery Center, Ltd.
Las Colinas Surgery Center
Las Palmas Del Sol Cardiology, PLLC
Leadership Healthcare Holdings II L.P., L.L.P.
Leadership Healthcare Holdings L.P., L.L.P.
Leslie Cohan, M.D., PLLC
Lewisville Primary Care, PLLC
Lonestar Provider Network
Longview Regional Physician Hospital Organization, Inc.
M. Jamshidi, D.O., PLLC
Mainland Family Medicine, PLLC
Mainland Multi-Specialty Group, PLLC
Mainland Primary Care Physicians, PLLC
Mark Gottesman, M.D., PLLC
Martin Fletcher Associates Holdings, Inc.
Martin, Fletcher & Associates, L.P.
Martin, Fletcher Locums, Inc.
Mary Alice Cowan, M.D., PLLC
Maternal Fetal Medicine Specialists of Corpus Christi, PLLC
McKinney Surgeons, PLLC
MEC Endoscopy, LLC
Memorial Endoscopy Center
Med City Dallas Outpatient Surgery Center, L.P.
Medical City Dallas Ambulatory Surgery Center
Med-Center Hosp./Houston, Inc.
Medical Care Surgery Center, Inc.
Medical City Dallas Hospital, Inc.
Medical City Dallas Primary Care, PLLC
MediPurchase, Inc.
Methodist Cardiology Physicians
Methodist Healthcare System of San Antonio, Ltd., L.L.P.
Methodist Ambulatory Surgery Hospital - Northwest
Methodist Hospital
Methodist Specialty and Transplant Hospital
Methodist Stone Oak Hospital
Methodist Texsan Hospital, a Methodist Hospital facility
Metropolitan Methodist Hospital
Northeast Methodist HospitaL
Methodist Medical Center ASC, L.P.
Methodist Ambulatory Surgery Center - Medical Center
Methodist Physician Alliance
Metroplex Surgicenters, Inc.
MFA G.P., LLC
MFM Fact, PLLC
MGH Medical, Inc.
MHS SC Partner, L.L.C.
MHS Surgery Centers, L.P.
Mid-Cities Surgi-Center, Inc.
Movement Disorders of North Texas, PLLC
National Patient Account Services, Inc.
Navarro Memorial Hospital, Inc.
Neuro Texas, PLLC
Neuro-Hospitalist of Clear Lake, PLLC
Neurological Eye Specialists of North Texas, PLLC
Neurological Specialists of McKinney, PLLC
Neurological Specialists, PLLC
Neurosurgical Associates of North Texas, PLLC
Neurosurgical Specialists of El Paso, PLLC
Neurosurgical Specialists of North Texas, PLLC
North Austin Plastic Surgery Associates, PLLC
North Austin Surgery Center, L.P.
North Austin Surgery Center
North Central Methodist ASC, L.P.
Methodist Ambulatory Surgery Center - North Central
North Hills Cardiac Catheterization Center, L.P.
North Hills Catheterization Lab, LLC
North Hills Orthopaedic Surgeons, PLLC
North Hills Primary Care, PLLC
North Hills Surgicare, L.P.
Texas Pediatric Surgery Center
North Shore Specialists of Texas, PLLC
North Texas - MCA, LLC
North Texas Cardiology, PLLC
North Texas Craniofacial Fellowship Program, PLLC
North Texas Division, Inc.
North Texas General, L.P.
North Texas Geriatrics, PLLC
North Texas Heart Surgery Center, PLLC
North Texas Internal Medicine Specialists, PLLC
North Texas Neuro Stroke OP, PLLC
North Texas of Hope, PLLC
North Texas Pulmonary Critical Care, PLLC
North Texas Sports and Orthopedics Center, PLLC
North Texas Stroke Center, PLLC
Northeast Methodist Surgicare, Ltd.
Northeast PHO, Inc.
NT Urgent Care, PLLC
Oakwood Surgery Center, Ltd., LLP
Oakwood Surgery Center
OB Hospitalists of Womans Hospital, PLLC
OB/Gyn Associates of Denton, PLLC
OB/GYN of Brownsville, PLLC
Occupational and Family Medicine of South Texas
Orthopedic Hospital, Ltd.
Texas Orthopedic Hospital
Outpatient Womens and Childrens Surgery Center, Ltd.
Fannin Surgicare
Paragon of Texas Health Properties, Inc.
Paragon Physicians Hospital Organization of South Texas, Inc.
Paragon Surgery Centers of Texas, Inc.
Park Central Surgical Center, Ltd.
Park Central Surgical Center
Parkway Cardiac Center, Ltd.
Parkway Surgery Services, Ltd.
Pasadena Bayshore Hospital, Inc.
Pediatric Cardiac Intensivists of North Texas, PLLC
Pediatric Hospitalists of Conroe, PLLC
Pediatric Intensivists of El Paso, PLLC
Pediatric Intensivists of North Texas, PLLC
Pediatric Specialists of Clear Lake, PLLC
Pediatric Surgicare, Inc.
Physicians Ambulatory Surgery Center, LLC
Physicians Endoscopy Center
Plano Surgery Center - GP, LLC
Plano Urology, PLLC
Plaza Medical Specialists, PLLC
Plaza Primary Care, PLLC
Plaza Transplant Center, PLLC
Primary Care Plano, PLLC
Primary Care South, PLLC
Primary Care West, PLLC
Primary Health Network of South Texas
Quantum/Bellaire Imaging, Ltd.
Rim Building Partners, L.P.
Rio Grande ASC Acquisition, LLC
Rio Grande Healthcare MSO, Inc.
Rio Grande NP, Inc.
Rio Grande Regional Hospital, Inc.
Rio Grande Regional Investments, Inc.
Rio Grande Valley Cardiology, PLLC
Rosewood Medical Center, Inc.
Rosewood Professional Building, Ltd.
Round Rock Trauma Surgeons, PLLC
Royal Oaks Surgery Center, L.P.
S. Faro, M.D. & C. Faro, M.D., PLLC
S.A. Medical Center, Inc.
San Antonio Division, Inc.
San Antonio Regional Hospital, Inc.
San Antonio Surgicenter, LLC
Sante Fe Family Practitioners, PLLC
SAPN, LLC
South Austin Surgery Center, Ltd.
Surgicare of South Austin
South Texas Surgicare, Inc.
Southern Texas Physicians Network
Specialty Associates of West Houston, PLLC
Spring Branch Family Practitioners, PLLC
Spring Branch Medical Center, Inc.
St. Davids Healthcare Partnership, L.P., LLP
Heart Hospital of Austin, a Campus of St. Davids Medical Center
St. Davids North Austin Medical Center
St. Davids Round Rock Medical Center
St. Davids Georgetown Hospital
St. Davids Medical Center
St. Davids South Austin Medical Center
St. Davids Cardiology, PLLC
St. Davids Neurology, PLLC
St. Davids OB Hospitalist, PLLC
St. Davids Physical Medicine and Rehabilitation, PLLC
St. Davids Specialized Womens Services, PLLC
STPN Manager, LLC
Sugar Land Surgery Center, Ltd.
Sugar Land Surgery Center
Sun Towers/Vista Hills Holding Co.
Surgery Center of Bay Area Houston, LLC
Bay Area Houston Endoscopy Center
Surgical Center of Irving, Inc.
Surgical Facility of West Houston, L.P.
Surgical Specialists of Clear Lake, PLLC
Surgical Specialists of Corpus Christi, PLLC
Surgicare of Arlington, LLC
Surgicare of Bay Area Endoscopy, LLC
Surgicare of Central Park Surgery Center, LLC
Surgicare of Central San Antonio, Inc.
Surgicare of Flower Mound, Inc.
Surgicare of Fort Worth Co-GP, LLC
Surgicare of Fort Worth, Inc.
Surgicare of Gramercy, Inc.
Surgicare of Houston Womens, Inc.
Surgicare of Kingwood, LLC
Surgicare of McKinney, Inc.
Surgicare of Medical City Dallas, LLC
Surgicare of Memorial Endoscopy, LLC
Surgicare of North Austin, LLC
Surgicare of North San Antonio, Inc.
Surgicare of Northeast San Antonio, Inc.
Surgicare of Pasadena, Inc.
Surgicare of Round Rock, Inc.
Surgicare of Royal Oaks, LLC
Surgicare of South Austin, Inc.
Surgicare of Southwest Houston, LLC
Surgicare of Sugar Land, Inc.
Surgicare of Travis Center, Inc.
Tarrant County Surgery Center, L.P.
Trinity Park Surgery Center
Texas HSS, LLC
Texas Institute of Medicine and Surgery
Texas Psychiatric Company, Inc.
The Cardiovascular Partnership for Quality, LLC
The West Texas Division of Columbia, Inc.
THN Physicians Association, Inc.
Travis Surgery Center, L.P.
Tuscan Imaging Center at Las Colinas, LLC
Urological Specialists of Arlington, PLLC
Urology Services of El Paso, PLLC
Village Oaks Medical Center, Inc.
W & C Hospital, Inc.
West Houston ASC, Inc.
West Houston Healthcare Group, Ltd.
West Houston Internal Specialists, PLLC
West Houston Outpatient Medical Facility, Inc.
West Houston Surgicare, Inc.
West LPN Fort Worth Oncology, PLLC
West LPN, Inc.
West McKinney Imaging Services, LLC
West Park Surgery Center, L.P.
McKinney Surgery Center
WHMC, Inc.
Womans Health Group, PLLC
Womans Hospital of Texas, Incorporated
Women Practitioners of Houston, PLLC
Women Specialists of Bayshore, PLLC
Women Specialists of Mainland, PLLC
Womens Link Specialty Obstetrical Referral Clinic, PLLC
Womens Surgical Specialists of Texas, PLLC
WomensLink Center of Wylie - A Medical Center of Plano Facility, LLC
UNITED KINGDOM
52 Alderley Road LLP
Basil Street Practice Limited
Blossoms Healthcare LLP
Chelsea Outpatient Centre LLP
Enhancecorp Limited
Galen Health Partners Limited
General Medical Clinics Limited
Get Yourself Tested Limited
Hamsard 3160 Limited
Harley Street Clinic @ The Groves LLP
HCA Finance, LP
HCA Global Capital
HCA International Holdings Limited
HCA International Limited
Princess Grace Hospital
The Harley Street Clinic
The Portland Hospital for Women and Children
The Wellington Hospital
HCA Luxembourg Finance Limited
HCA Purchasing Limited
HCA Staffing Limited
HCA Swiss Capital 1 LLP
HCA Swiss Capital 2 LLP
HCA UK Capital Limited
HCA UK Holdings Limited
HCA UK Investments Limited
HCA UK Limited
HCA UK Services Limited
HealthTrust Europe Company Limited
HealthTrust - Europe LLP
Leaders in Oncology Care Limited
LOC @ The Christie LLP
LOC @ The London Bridge Hospital LLP
LOC @ The Wellington Hospital LLP
LOC Partnership LLP
London Back Limited
London Oncology Clinic LLP
London Radiography & Radiotherapy Services Limited
PET CT LLP
Robotic Radiosurgery LLP
Roodlane Medical Limited
Sarah Cannon Research UK Limited
SCRI Global Services Limited
St. Martins Healthcare Limited
Lister Hospital
London Bridge Hospital
St. Martins Ltd.
St. Martins Medical Services Limited
The Christie Clinic LLP
The Glynne Medical Practice Limited
The Harley Street Cancer Clinic Limited
The London Stone Centre Limited
The Prostate Centre Limited
Walk In Health Limited
Wellington Diagnostic Services LLP
UTAH
Alta Internal Medicine, LLC
Bountiful Surgery Center, LLC
Lakeview Endoscopy Center
Brigham City Community Hospital Physician Services, LLC
Brigham City Community Hospital, Inc.
Brigham City Community Hospital
Brigham City Health Plan, Inc.
Columbia Ogden Medical Center, Inc.
Ogden Regional Medical Center
East Layton Internal Medicine, LLC
General Hospitals of Galen, Inc.
Gynecology Specialists of Utah, LLC
Healthtrust Utah Management Services, Inc.
Hospital Corporation of Utah
Lakeview Hospital
HTI Physician Services of Utah, Inc.
Jordan Family Health, L.L.C.
Lakeview Hospital Physician Services, LLC
Lakeview Internal Medicine, LLC
Lakeview Neurosurgery Clinic, LLC
Lakeview Professional Billing, LLC
Lakeview Regional Medical Center Inpatient Services, LLC
Lakeview Urology & General Surgery, LLC
Layton Family Practice, LLC
Lone Peak General Surgery, LLC
Lone Peak Hospital, Inc.
Lone Peak Hospital
Maternal Fetal Services of Utah, LLC
Mountain Division, Inc.
Mountain View Hospital, Inc.
Mountain View Hospital
Mountain View Medical Office Building, Ltd.
Mountain West Surgery Center, LLC
Mountain West Surgery Center
MountainStar Behavioral Health, LLC
MountainStar Brigham General Surgery, LLC
Mountainstar Brigham OBGYN, LLC
MountainStar Canyon Surgical Clinic, LLC
MountainStar Cardiology Ogden Regional, LLC
MountainStar Cardiology St. Marks, LLC
Mountainstar Cardiovascular Services, LLC
MountainStar Intensivist Services, LLC
MountainStar Medical Group - Brigham City Community Hospital, LLC
MountainStar Medical Group - Ogden Regional Medical Center, LLC
MountainStar Medical Group - St. Marks Hospital, LLC
MountainStar Medical Group Neurosurgery - St. Marks, LLC
Mountainstar Ogden Pediatrics, LLC
MountainStar Urgent Care, LLC
Mt. Ogden Utah Surgical Center, LLC
Mt. Ogden Surgical Center
MVH Professional Services, LLC
Northern Utah Healthcare Corporation
St. Marks Hospital
Northern Utah Healthcare Imaging Holdco, LLC
Northern Utah Imaging, LLC
Ogden Imaging, LLC
Ogden Internal Medicine & Urology, LLC
Ogden Regional Health Plan, Inc.
Ogden Regional Medical Center Professional Billing, LLC
Ogden Senior Center, LLC
Ridgeline Surgicenter, LLC
Ridgeline Endoscopy Center
Salt Lake City Surgicare, Inc.
Shadow Mountain Family Medicine, LLC
St. Marks Gynecology Oncology Care, LLC
St. Marks Investments, Inc.
St. Marks Physician Billing, LLC
St. Marks Physicians, Inc.
St. Marks Professional Services, LLC
St. Marks South Jordan Family Practice, LLC
Surgicare of Bountiful, LLC
Surgicare of Mountain West, LLC
Surgicare of Mt. Ogden, LLC
Surgicare of Ridgeline, LLC
Surgicare of Utah, LLC
Surgicare of Wasatch Front, LLC
The Wasatch Endoscopy Center, Ltd.
Wasatch Endoscopy Center
Timpanogos Pain Specialists, LLC
Timpanogos Regional Medical Services, Inc.
Timpanogos Regional Hospital
Utah Imaging GP, LLC
Utah Surgery Center, L.P.
South Towne Surgery Center
Wasatch Front Surgery Center, LLC
Utah Surgical Center
West Jordan Hospital Corporation
West Valley Imaging, LLC
VIRGIN ISLANDS
The London Breast Institute UK Ltd
VIRGINIA
Alleghany General and Bariatric Services, LLC
Alleghany Hospitalists, LLC
Alleghany Primary Care, Inc.
Alleghany Specialists, LLC
Ambulatory Services Management Corporation of Chesterfield County, Inc.
Appomattox Imaging, LLC
Arlington Surgery Center, L.P.
Arlington Surgicare, LLC
Ashburn ASC, LLC
Ashburn Imaging, LLC
Atrium Surgery Center, L.P.
Atrium Surgicare, LLC
Blacksburg Family Care, LLC
Buford Road Imaging, L.L.C.
Capital Anesthesia Services, LLC
Capital Division, Inc.
Cardiac Surgical Associates, LLC
Cardiothoracic Surgeons of Roanoke Valley, LLC
Carlin Springs Urgent Care, LLC
Central Shared Services, LLC
Chesterfield Imaging, LLC
Chippenham & Johnston-Willis Hospitals, Inc.
CJW Medical Center
Chippenham & Johnston-Willis Sports Medicine, LLC
Chippenham Ambulatory Surgery Center, LLC
Boulders Ambulatory Surgery Center
Chippenham Pediatric Specialists, LLC
Christiansburg Family Medicine, LLC
Christiansburg Internal Medicine, LLC
CJW Infectious Disease, LLC
CJW Wound Healing Center, LLC
Colonial Heights Ambulatory Surgery Center, L.P.
Colonial Heights Surgery Center
Colonial Heights Surgicare, LLC
Columbia Arlington Healthcare System, L.L.C.
Columbia Healthcare of Central Virginia, Inc.
Columbia Medical Group - Southwest Virginia, Inc.
Columbia Pentagon City Hospital, L.L.C.
Columbia/Alleghany Regional Hospital, Incorporated
LewisGale Hospital Alleghany
Columbia/HCA John Randolph, Inc.
John Randolph Medical Center
Commonwealth Perinatal Services, LLC
Crewe Outpatient Imaging, LLC
CVMC Property, LLC
Daleville Imaging Manager, LLC
Daleville Imaging, L.P.
Dominion Hospital Physicians Group, LLC
Fairfax Surgical Center, L.P.
Fairfax Surgical Center
Family Medicine of Blacksburg, LLC
Family Practice at Forest Hill, LLC
Family Practice at Retreat, LLC
Fort Chiswell Family Practice, LLC
Galen of Virginia, Inc.
Galen Property, LLC
Galen Virginia Hospital Corporation
Generations Family Practice, Inc.
GYN-Oncology of Southwest Virginia, LLC
Hanover Outpatient Surgery Center, L.P.
HCA Health Services of Virginia, Inc.
Henrico Doctors Hospital
HCA Richmond Cardiac Clinical Co-Management Company, LLC
HDH Thoracic Surgeons, LLC
Henrico Doctors Family Medicine, LLC
Henrico Doctors Neurology Associates, LLC
Henrico Doctors OB GYN Specialists, LLC
Henrico Radiation Oncology, LLC
Henrico Surgical Specialists, LLC
HSS Virginia, L.P.
Institute of Advanced ENT Surgery, LLC
Internal Medicine of Blacksburg, LLC
James River Internists, LLC
John Randolph Family Practice, LLC
John Randolph OB/GYN, LLC
John Randolph Surgeons, LLC
Lewis Gale Physicians Specialists, LLC
Lewis-Gale Hospital, Incorporated
Lewis-Gale Physicians, LLC
LGMC Ambulatory Surgery Center, LLC
Loudoun Surgery Center, L.P.
Loudoun Surgery Center, LLC
Management Services of the Virginias, Inc.
Mechanicsville Imaging, LLC
Montgomery Cancer Center, LLC
Montgomery Hospitalists, LLC
Montgomery Regional Hospital, Inc.
LewisGale Hospital Montgomery
Montgomery Surgery Associates, LLC
Northern Virginia Community Hospital, LLC
Northern Virginia Hospital Corporation
Orthopedics Specialists, LLC
Pavilion 2 Condominium Property, LLC
Pediatric Specialists for CJW, LLC
Preferred Hospitals, Inc.
Primary Care of West End, LLC
Primary Health Group, Inc.
Pulaski Community Hospital, Inc.
LewisGale Hospital Pulaski
Pulaski Radiologists, LLC
Pulaski Urology, LLC
Quick Care Centers, LLC
Radford Family Medicine, LLC
Reston Hospitalists, LLC
Reston Surgery Center, L.P.
Reston Surgery Center
Retreat Cardiology, LLC
Retreat Hospital, LLC
Retreat Internal Medicine, LLC
Retreat Surgical Associates, LLC
Richmond Imaging Employer Corp.
Richmond Multi-Specialty, LLC
Richmond Pediatric Surgeons, LLC
Roanoke Imaging, LLC
Roanoke Neurosurgery, LLC
Roanoke Surgery Center, L.P.
Blue Ridge Surgery Center
Roanoke Valley Gynecology, LLC
Salem Hospitalists, LLC
Short Pump Imaging, LLC
Southwest Virginia Fertility Center, LLC
Southwest Virginia Orthopedics and Spine, LLC
Southwestern Virginia Oncology, LLC
Specialty Physicians of Northern Virginia, LLC
Spotsylvania Condominium Property, LLC
Spotsylvania Medical Center, Inc.
Spotsylvania Regional Medical Center
Spotsylvania Multi-Specialty Group, LLC
Spotsylvania Radiation Therapy Center, LLC
Spotsylvania Regional Surgery Center, LLC
Stafford Imaging, LLC
Surgical Associates of Southwest Virginia, LLC
Surgical Associates of the New River Valley, LLC
Surgicare of Ashburn, LLC
Surgicare of Chippenham, LLC
Surgicare of Fairfax, Inc.
Surgicare of Hanover, Inc.
Surgicare of Reston, Inc.
Surgicare of Roanoke, LLC
Surgicare of Spotsylvania, LLC
Surgicare of Tuckahoe, Inc.
Surgicare of Winchester, LLC
Tri-City Multi-Specialty, LLC
Urology Specialists of Richmond, LLC
Virginia Gynecologic Oncology, LLC
Virginia Hematology & Oncology Associates, Inc.
Virginia Hospitalists, Inc.
Virginia Psychiatric Company, Inc.
Dominion Hospital
Virginia Quality Care Partners, LLC
West Creek Ambulatory Surgery Center, LLC
West Creek Medical Center, Inc.
Winchester Surgery Center, LLC
Womens & Childrens Center, LLC
Womens Health Center of SWVA, LLC
WASHINGTON
ACH, Inc.
Capital Network Services, Inc.
WEST VIRGINIA
Columbia Parkersburg Healthcare System, LLC
Galen of West Virginia, Inc.
HCA Health Services of West Virginia, Inc.
Hospital Corporation of America
Parkersburg SJ Holdings, Inc.
Teays Valley Health Services, LLC
Tri Cities Health Services Corp.
Exhibit 23
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1) | Registration Statement (Form S-8 No. 333-173866) pertaining to the HCA-Hospital Corporation of America Nonqualified Initial Option Plan, HCA, Inc. 2000 Equity Incentive Plan and HCA 2005 Equity Incentive Plan, |
(2) | Registration Statement (Form S-8 No. 333-172887) pertaining to the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated of HCA Holdings, Inc., |
(3) | Registration Statement (Form S-8 No. 333-150714) pertaining to the 2006 Stock Incentive Plan for Key Employees of HCA, Inc. and its Affiliates, and |
(4) | Registration Statement (Form S-3 No. 333-175791) of HCA Holdings, Inc.; |
of our reports dated February 26, 2014, with respect to the consolidated financial statements of HCA Holdings, Inc. and the effectiveness of internal control over financial reporting of HCA Holdings, Inc., included in this Annual Report (Form 10-K) of HCA Holdings, Inc. for the year ended December 31, 2013.
/s/ Ernst & Young LLP
Nashville, Tennessee
February 26, 2014
EXHIBIT 31.1
CERTIFICATIONS
I, R. Milton Johnson, certify that:
1. I have reviewed this annual report on Form 10-K of HCA Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit and compliance committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
By: |
/s/ R. M ILTON J OHNSON |
|
R. Milton Johnson Chief Executive Officer and President |
Date: February 26, 2014
EXHIBIT 31.2
CERTIFICATIONS
I, William B. Rutherford, certify that:
1. I have reviewed this annual report of Form 10-K of HCA Holdings, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit and compliance committee of the registrants board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
By: |
/s/ W ILLIAM B. R UTHERFORD |
|
William B. Rutherford Chief Financial Officer and Executive Vice President |
Date: February 26, 2014
EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of HCA Holdings, Inc. (the Company) on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), each of the undersigned certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
By: |
/s/ R. M ILTON J OHNSON |
|
R. Milton Johnson Chief Executive Officer and President |
February 26, 2014
By: |
/s/ W ILLIAM B. R UTHERFORD |
|
William B. Rutherford Chief Financial Officer and Executive Vice President |
February 26, 2014