UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

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 Healthcare, 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)

(615) 344-9551

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Voting common stock, $.01 par value	HCA	New York Stock Exchange

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class of Common Stock	Outstanding at April 26, 2021
Voting common stock, $.01 par value	330,655,500 shares

HCA HEALTHCARE, INC.

Form 10-Q

March 31, 2021

		Page of Form 10-Q
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited):
	Condensed Consolidated Income Statements — for the quarters ended March 31, 2021 and 2020		2
	Condensed Consolidated Comprehensive Income Statements — for the quarters ended March 31, 2021 and 2020		3
	Condensed Consolidated Balance Sheets — March 31, 2021 and December 31, 2020		4
	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) — for the quarters ended March 31, 2021 and 2020		5
	Condensed Consolidated Statements of Cash Flows — for the quarters ended March 31, 2021 and 2020		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
Item 4.	Controls and Procedures		33
Part II.	Other Information
Item 1.	Legal Proceedings		33
Item 1A.	Risk Factors		33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 6.	Exhibits		35
Signatures			36

1

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED INCOME STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2021 AND 2020

Unaudited

(Dollars in millions, except per share amounts)

	2021			2020
Revenues	$	13,977		$	12,861
Salaries and benefits		6,301			6,118
Supplies		2,224			2,123
Other operating expenses		2,421			2,427
Equity in earnings of affiliates		(21	)		(7	)
Depreciation and amortization		697			674
Interest expense		384			428
Gains on sales of facilities		(2	)		(7	)
Losses on retirement of debt		—			295
	12,004			12,051
Income before income taxes		1,973			810
Provision for income taxes		393			112
Net income		1,580			698
Net income attributable to noncontrolling interests		157			117
Net income attributable to HCA Healthcare, Inc.	$	1,423		$	581
Per share data:
Basic earnings	$	4.21		$	1.72
Diluted earnings	$	4.14		$	1.69
Shares used in earnings per share calculations (in millions):
Basic		338.123			338.242
Diluted		343.321			344.096

The accompanying notes are an integral part of the condensed consolidated financial statements.

2

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE QUARTERS ENDED MARCH 31, 2021 AND 2020

Unaudited

(Dollars in millions)

	2021			2020
Net income	$	1,580		$	698
Other comprehensive income (loss) before taxes:
Foreign currency translation		8			(73	)
Unrealized losses on available-for-sale securities		(11	)		(5	)
Defined benefit plans		—			—
Pension costs included in salaries and benefits		7			4
	7			4
Change in fair value of derivative financial instruments		1			(60	)
Interest expense (benefits) included in interest expense		9			(1	)
		10			(61	)
Other comprehensive income (loss) before taxes		14			(135	)
Income taxes (benefits) related to other comprehensive income items		3			(24	)
Other comprehensive income (loss)		11			(111	)
Comprehensive income		1,591			587
Comprehensive income attributable to noncontrolling interests		157			117
Comprehensive income attributable to HCA Healthcare, Inc.	$	1,434		$	470

The accompanying notes are an integral part of the condensed consolidated financial statements.

3

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

Unaudited

(Dollars in millions)

	March 31, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	1,030		$	1,793
Accounts receivable		7,424			7,051
Inventories		2,068			2,025
Other		1,514			1,464
		12,036			12,333
Property and equipment, at cost		49,877			49,317
Accumulated depreciation		(26,689	)		(26,118	)
		23,188			23,199
Investments of insurance subsidiaries		393			388
Investments in and advances to affiliates		427			422
Goodwill and other intangible assets		8,575			8,578
Right-of-use operating lease assets		2,083			2,024
Other		575			546
	$	47,277		$	47,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	3,524		$	3,535
Accrued salaries		1,767			1,720
Other accrued expenses		3,117			3,240
Long-term debt due within one year		234			209
		8,642			8,704
Long-term debt, less debt issuance costs and discounts of $229 and $236		30,838			30,795
Professional liability risks		1,553			1,486
Right-of-use operating lease obligations		1,730			1,673
Income taxes and other liabilities		2,032			1,940
Stockholders’ equity:
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 333,714,500 shares — 2021 and  339,425,600 shares — 2020		3			3
Capital in excess of par value		—			294
Accumulated other comprehensive loss		(491	)		(502	)
Retained earnings		735			777
Stockholders’ equity attributable to HCA Healthcare, Inc.		247			572
Noncontrolling interests		2,235			2,320
		2,482			2,892
	$	47,277		$	47,490

The accompanying notes are an integral part of the condensed consolidated financial statements.

4

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

FOR THE QUARTERS ENDED MARCH 31, 2021 AND 2020

Unaudited

(Dollars in millions)

	Equity (Deficit) Attributable to HCA Healthcare, Inc.														Equity Attributable to Noncontrolling Interests			Total
	Common Stock					Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Earnings (Deficit)
	Shares (in millions)			Par Value
Balances, December 31, 2019		338.446		$	3	$	—		$	(460	)	$	(2,351	)	$	2,243		$	(565	)
Comprehensive income										(111	)		581			117			587
Repurchase of common stock		(3.287	)										(441	)					(441	)
Share-based benefit plans		2.449					2						(35	)					(33	)
Cash dividends declared ($0.43 per share)													(148	)					(148	)
Distributions																(154	)		(154	)
Other							(2	)								53			51
Balances, March 31, 2020		337.608			3		—			(571	)		(2,394	)		2,259			(703	)
Comprehensive income										9			1,079			137			1,225
Share-based benefit plans		0.352					93												93
Distributions																(45	)		(45	)
Other							(5	)								3			(2	)
Balances, June 30, 2020		337.960			3		88			(562	)		(1,315	)		2,354			568
Comprehensive income										47			668			111			826
Share-based benefit plans		0.410					97												97
Distributions																(194	)		(194	)
Other																2			2
Balances, September 30, 2020		338.370			3		185			(515	)		(647	)		2,273			1,299
Comprehensive income										13			1,426			268			1,707
Share-based benefit plans		1.056					108												108
Cash dividends declared ($0.43 per share)													(2	)					(2	)
Distributions																(233	)		(233	)
Other							1									12			13
Balances, December 31, 2020		339.426			3		294			(502	)		777			2,320			2,892
Comprehensive income										11			1,423			157			1,591
Repurchase of common stock		(8.477	)				(225	)					(1,302	)					(1,527	)
Share-based benefit plans		2.765					(75	)											(75	)
Cash dividends declared ($0.48 per share)													(163	)					(163	)
Distributions																(234	)		(234	)
Other							6									(8	)		(2	)
Balances, March 31, 2021		333.714		$	3	$	—		$	(491	)	$	735		$	2,235		$	2,482

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE QUARTERS ENDED MARCH 31, 2021 AND 2020

Unaudited

(Dollars in millions)

	2021			2020
Cash flows from operating activities:
Net income	$	1,580		$	698
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable		(371	)		464
Inventories and other assets		(85	)		(196	)
Accounts payable and accrued expenses		(371	)		(784	)
Depreciation and amortization		697			674
Income taxes		406			121
Gains on sales of facilities		(2	)		(7	)
Losses on retirement of debt		—			295
Amortization of debt issuance costs and discounts		8			7
Share-based compensation		97			82
Other		29			21
Net cash provided by operating activities		1,988			1,375
Cash flows from investing activities:
Purchase of property and equipment		(654	)		(853	)
Acquisition of hospitals and health care entities		(22	)		(328	)
Sales of hospitals and health care entities		20			35
Change in investments		(2	)		(1	)
Other		9			2
Net cash used in investing activities		(649	)		(1,145	)
Cash flows from financing activities:
Issuances of long-term debt		—			2,700
Net change in revolving credit facilities		80			1,440
Repayment of long-term debt		(47	)		(3,327	)
Distributions to noncontrolling interests		(234	)		(154	)
Payment of debt issuance costs		—			(34	)
Payment of dividends		(169	)		(152	)
Repurchase of common stock		(1,527	)		(441	)
Other		(207	)		(141	)
Net cash used in financing activities		(2,104	)		(109	)
Effect of exchange rate changes on cash and cash equivalents		2			(11	)
Change in cash and cash equivalents		(763	)		110
Cash and cash equivalents at beginning of period		1,793			621
Cash and cash equivalents at end of period	$	1,030		$	731
Interest payments	$	375		$	468
Income tax refunds, net	$	(13	)	$	(9	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

6

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity

HCA Healthcare, 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 Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At March 31, 2021, these affiliates owned and operated 186 hospitals, 121 freestanding surgery centers, 21 freestanding endoscopy centers and provided extensive outpatient and ancillary services. HCA Healthcare, 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 Healthcare, Inc. and its affiliates. 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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included and are of a normal and recurring nature.

The majority of our expenses are “costs of revenues” items. Costs that could be classified as general and administrative would include our corporate office costs, which were $87 million and $96 million for the quarters ended March 31, 2021 and 2020, respectively. Operating results for the quarter ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. For further information, refer to the consolidated financial statements and footnotes thereto included in our annual report on Form 10-K for the year ended December 31, 2020.

COVID-19 Pandemic

On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic. Patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter of 2020 and have continued to be impacted as various policies were implemented by federal, state and local governments in response to the COVID-19 pandemic, and the public remains wary of real or perceived opportunities for exposure to the virus. We believe the extent of the COVID-19 pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Because of these uncertainties, we cannot estimate how long or to what extent the pandemic will impact our operations.

Revenues

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied. Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days, and revenues are recognized based on charges incurred in relation to total expected charges. Our performance obligations for outpatient services are generally satisfied over a period of less than one day. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered

7

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Our revenues for the quarter ended March 31, 2020 include $55 million related to the settlement of Medicare outlier calculations for prior periods. 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.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for non-elective care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters ended March 31, 2021 and 2020 are summarized in the following table (dollars in millions):

	2021		Ratio			2020		Ratio
Medicare	$	2,559		18.3	%	$	2,743		21.3	%
Managed Medicare		2,053		14.7			1,826		14.2
Medicaid		527		3.8			414		3.2
Managed Medicaid		725		5.2			666		5.2
Managed care and insurers		6,885		49.1			6,645		51.6
International (managed care and insurers)		333		2.4			292		2.3
Other		895		6.5			275		2.2
Revenues	$	13,977		100.0	%	$	12,861		100.0	%

8

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenues (continued)

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters ended March 31, 2021 and 2020 follows (dollars in millions):

	2021			2020
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	11,643		$	11,342
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		11.4	%		11.9	%
Total uncompensated care	$	6,821		$	7,873
Multiply by the cost-to-charges ratio		11.4	%		11.9	%
Estimated cost of total uncompensated care	$	778		$	937

The total uncompensated care amounts include charity care of $2.942 billion and $3.735 billion, respectively, and the related estimated costs of charity care were $335 million and $444 million, respectively, for the quarters ended March 31, 2021 and 2020.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2 — ACQUISITIONS AND DISPOSITIONS

During the quarter ended March 31, 2021, we paid $22 million to acquire nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. During the quarter ended March 31, 2020, we paid  $328 million to acquire a hospital in New Hampshire and nonhospital health care entities. 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 the quarter ended March 31, 2021, we received proceeds of $20 million and recognized a pretax gain of $2 million related to sales of real estate and other investments. During the quarter ended March 31, 2020, we received proceeds of $35 million and recognized a pretax gain of $7 million related to sales of real estate and other investments.

NOTE 3 — INCOME TAXES

Our provisions for income taxes for the quarters ended March 31, 2021 and 2020 were $393 million and $112 million, respectively, and the effective tax rates were 21.7% and 16.2%, respectively. Our provision for income taxes included tax benefits related to settlements of employee equity awards of  $74 million and $53 million for the quarters ended March 31, 2021 and 2020, respectively.

Our liability for unrecognized tax benefits was $596 million, including accrued interest of $88 million, as of March 31, 2021 ($508 million and $73 million, respectively, as of December 31, 2020). Unrecognized tax benefits of $179 million ($157 million as of December 31, 2020) would affect the effective rate, if recognized.

9

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3 — INCOME TAXES (continued)

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at March 31, 2021. We are also subject to examination by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign 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 4 — 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 equity awards, computed using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share for the quarters ended March 31, 2021 and 2020 (dollars and shares in millions, except per share amounts):

	2021		2020
Net income attributable to HCA Healthcare, Inc.	$	1,423	$	581
Weighted average common shares outstanding		338.123		338.242
Effect of dilutive incremental shares		5.198		5.854
Shares used for diluted earnings per share		343.321		344.096
Earnings per share:
Basic earnings	$	4.21	$	1.72
Diluted earnings	$	4.14	$	1.69

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of our insurance subsidiaries’ investments at March 31, 2021 and December 31, 2020 follows (dollars in millions):

	March 31, 2021
	Amortized Cost		Unrealized Amounts					Fair Value
			Gains		Losses
Debt securities	$	376	$	22	$	(1	)	$	397
Money market funds and other		104		—		—			104
	$	480	$	22	$	(1	)		501
Amounts classified as current assets									(108	)
Investment carrying value								$	393

10

HCA HEALTHCARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

	December 31, 2020
	Amortized Cost		Unrealized Amounts				Fair Value
			Gains		Losses
Debt securities	$	384	$	32	$	—	$	416
Money market funds and other		88		—		—		88
	$	472	$	32	$	—		504
Amounts classified as current assets								(116	)
Investment carrying value							$	388

At March 31, 2021 and December 31, 2020, the investments in debt securities of our insurance subsidiaries were classified as “available-for-sale.” Changes in unrealized gains and losses that are not credit-related are recorded as adjustments to other comprehensive income (loss).

Scheduled maturities of investments in debt securities at March 31, 2021 were as follows (dollars in millions):

	Amortized Cost			Fair Value
Due in one year or less	$	4		$	4
Due after one year through five years		144			152
Due after five years through ten years		157			167
Due after ten years		71