0001193125-21-315476.txt : 20211101 0001193125-21-315476.hdr.sgml : 20211101 20211101163028 ACCESSION NUMBER: 0001193125-21-315476 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 67 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211101 DATE AS OF CHANGE: 20211101 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HCA Healthcare, Inc. CENTRAL INDEX KEY: 0000860730 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-GENERAL MEDICAL & SURGICAL HOSPITALS, NEC [8062] IRS NUMBER: 273865930 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11239 FILM NUMBER: 211367628 BUSINESS ADDRESS: STREET 1: ONE PARK PLZ CITY: NASHVILLE STATE: TN ZIP: 37203 BUSINESS PHONE: 6153449551 MAIL ADDRESS: STREET 1: ONE PARK PLAZA CITY: NASHVILLE STATE: TN ZIP: 37203 FORMER COMPANY: FORMER CONFORMED NAME: HCA Holdings, Inc. DATE OF NAME CHANGE: 20101126 FORMER COMPANY: FORMER CONFORMED NAME: HCA INC/TN DATE OF NAME CHANGE: 20010627 FORMER COMPANY: FORMER CONFORMED NAME: HCA THE HEALTHCARE CO DATE OF NAME CHANGE: 20010419 10-Q 1 d232147d10q.htm FORM 10-Q Form 10-Q
Table of Contents
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us-gaap:NoncontrollingInterestMember 2021-06-30 iso4217:USD utr:Year xbrli:shares xbrli:pure hca:Hospital iso4217:USD xbrli:shares hca:Surgery_Center hca:Endoscopy_Center hca:State
 
 
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 September 30, 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 October 25, 2021
Voting common stock, $.01 par value    311,022,800 shares
 
 
 
HCA HEALTHCARE, INC.
Form 10-Q
September 30, 2021
 
 
  
 
  
Page of
Form 10-Q
 
Part I.
  
Financial Information
  
Item 1.
  
Financial Statements (Unaudited):
  
  
  
 
2
 
  
  
 
3
 
  
  
 
4
 
  
  
 
5
 
  
  
 
6
 
  
  
 
7
 
Item 2.
  
  
 
18
 
Item 3.
  
  
 
37
 
Item 4.
  
  
 
37
 
Part II.
  
  
Item 1.
  
  
 
37
 
Item 1A.
  
  
 
37
 
Item 2.
  
  
 
37
 
Item 6.
  
  
 
39
 
  
 
40
 
 
1
HCA HEALTHCARE, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
Unaudited
(Dollars in millions, except per share amounts)
 
    
Quarter
    
Nine Months
  
    
2021
    
2020
    
2021
    
2020
  
Revenues
   
$
15,276
 
   $ 13,311    
$
43,688
 
   $ 37,240  
         
Salaries and benefits
   
 
7,094
 
     6,097    
 
19,780
 
     17,545  
Supplies
   
 
2,463
 
     2,128    
 
7,067
 
     5,999  
Other operating expenses
   
 
2,530
 
     2,251    
 
7,424
 
     6,825  
Government stimulus income reversal
   
 
—
 
     822    
 
—
 
     —  
Equity in earnings of affiliates
   
 
(35
) 
     (40 )   
 
(78
) 
     (48 ) 
Depreciation and amortization
   
 
716
 
     694    
 
2,125
 
     2,059  
Interest expense
   
 
398
 
     385    
 
1,168
 
     1,201  
Losses (gains) on sales of facilities
   
 
(1,047
) 
     (14 )   
 
(1,057
) 
     6  
Losses on retirement of debt
   
 
—
 
     —    
 
12
 
     295  
    
 
 
    
 
 
    
 
 
    
 
 
  
    
 
12,119
 
     12,323    
 
36,441
 
     33,882  
    
 
 
    
 
 
    
 
 
    
 
 
  
Income before income taxes
   
 
3,157
 
     988    
 
7,247
 
     3,358  
Provision for income taxes
   
 
685
 
     209    
 
1,531
 
     665  
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income
   
 
2,472
 
     779    
 
5,716
 
     2,693  
Net income attributable to noncontrolling interests
   
 
203
 
     111    
 
574
 
     365  
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income attributable to HCA Healthcare, Inc.
   
$
2,269
 
   $ 668    
$
5,142
 
   $ 2,328  
    
 
 
    
 
 
    
 
 
    
 
 
  
Per share data:
                                 
Basic earnings
   
$
7.13
 
   $ 1.97    
$
15.67
 
   $ 6.89  
Diluted earnings
   
$
7.00
 
   $ 1.95    
$
15.43
 
   $ 6.79  
Shares used in earnings per share calculations (in millions):
                                 
Basic
   
 
318.072
 
     338.168    
 
328.048
 
     338.057  
Diluted
   
 
324.029
 
     343.346    
 
333.248
 
     343.014  
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 AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
Unaudited
(Dollars in millions)
 
    
Quarter
     
Nine Months
  
    
2021
    
2020
     
2021
    
2020
  
Net income
   
$
2,472
 
   $ 779     
$
5,716
 
   $ 2,693  
Other comprehensive income (loss) before taxes:
                                  
Foreign currency translation
   
 
(31
) 
     42     
 
(20
) 
     (39 ) 
         
Unrealized gains (losses) on
available-for-sale
securities
   
 
(3
) 
     1     
 
(12
) 
     13  
         
Defined benefit plans
   
 
—
 
     —     
 
—
 
     —  
Pension costs included in salaries and benefits
   
 
7
 
     4     
 
21
 
     12  
    
 
 
    
 
 
     
 
 
    
 
 
  
    
 
7
 
     4     
 
21
 
     12  
         
Change in fair value of derivative financial instruments
   
 
(1
) 
     —     
 
(1
) 
     (66 ) 
Interest costs included in interest expense
   
 
10
 
     9     
 
28
 
     15  
    
 
 
    
 
 
     
 
 
    
 
 
  
    
 
9
 
     9     
 
27
 
     (51 ) 
    
 
 
    
 
 
     
 
 
    
 
 
  
Other comprehensive income (loss) before taxes
   
 
(18
) 
     56     
 
16
 
     (65 ) 
Income taxes (benefits) related to other comprehensive income items
   
 
(1
) 
     9     
 
6
 
     (10 ) 
    
 
 
    
 
 
     
 
 
    
 
 
  
Other comprehensive income (loss)
   
 
(17
) 
     47     
 
10
 
     (55 ) 
    
 
 
    
 
 
     
 
 
    
 
 
  
Comprehensive income
   
 
2,455
 
     826     
 
5,726
 
     2,638  
Comprehensive income attributable to noncontrolling interests
   
 
203
 
     111     
 
574
 
     365  
    
 
 
    
 
 
     
 
 
    
 
 
  
Comprehensive income attributable to HCA Healthcare, Inc.
   
$
2,252
 
   $ 715     
$
5,152
 
   $ 2,273  
    
 
 
    
 
 
     
 
 
    
 
 
  
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)
 
    
September 30,
2021
    
December 31,
2020
  
ASSETS
                 
Current assets:
                 
Cash and cash equivalents
   
$
1,027
 
   $ 1,793  
Accounts receivable
   
 
8,433
 
     7,051  
Inventories
   
 
2,019
 
     2,025  
Other
   
 
1,769
 
     1,464  
    
 
 
    
 
 
  
    
 
13,248
 
     12,333  
     
Property and equipment, at cost
   
 
50,695
 
     49,317  
Accumulated depreciation
   
 
(27,148
) 
     (26,118 ) 
    
 
 
    
 
 
  
    
 
23,547
 
     23,199  
     
Investments of insurance subsidiaries
   
 
418
 
     388  
Investments in and advances to affiliates
   
 
412
 
     422  
Goodwill and other intangible assets
   
 
9,153
 
     8,578  
Right-of-use
operating lease assets
   
 
2,099
 
     2,024  
Other
   
 
685
 
     546  
    
 
 
    
 
 
  
    
$
49,562
 
   $ 47,490  
    
 
 
    
 
 
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                 
Current liabilities:
                 
Accounts payable
   
$
3,759
 
   $ 3,535  
Accrued salaries
   
 
2,134
 
     1,720  
Other accrued expenses
   
 
3,481
 
     3,240  
Long-term debt due within one year
   
 
250
 
     209  
    
 
 
    
 
 
  
    
 
9,624
 
     8,704  
     
Long-term debt, less debt issuance costs and discounts of $253 and $236
   
 
32,049
 
     30,795  
Professional liability risks
   
 
1,522
 
     1,486  
Right-of-use
operating lease obligations
   
 
1,742
 
     1,673  
Income taxes and other liabilities
   
 
2,800
 
     1,940  
     
Stockholders’ equity:
                 
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 313,502,400 shares — 2021 and 339,425,600 shares — 2020
   
 
3
 
     3  
Capital in excess of par value
   
 
—
 
     294  
Accumulated other comprehensive loss
   
 
(492
) 
     (502 ) 
Retained (deficit) earnings
     
(206
)
 		     777  
    
 
 
    
 
 
  
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.
   
 
(695
) 
     572  
Noncontrolling interests
   
 
2,520
 
     2,320  
    
 
 
    
 
 
  
    
 
1,825
 
     2,892  
    
 
 
    
 
 
  
    
$
49,562
 
   $ 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 AND NINE MONTHS ENDED SEPTEMBER 30, 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  
Comprehensive income
                               16       1,450       214       1,680  
Repurchase of common stock
      (11.261 )               (142 )              (2,145 )              (2,287 ) 
Share-based benefit plans
      0.372                140                               140  
Cash dividends declared ($0.48 per share)
                                       (161 )              (161 ) 
Distributions
                                               (123 )      (123 ) 
Other
                       2                       57       59  
    
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balances, June 30, 2021
      322.825       3        —       (475 )      (121 )      2,383       1,790  
Comprehensive income
                            
 
(17
) 
  
 
2,269
 
  
 
203
 
  
 
2,455
 
Repurchase of common stock
   
 
(9.605
) 
           
 
(130
) 
          
 
(2,199
) 
          
 
(2,329
) 
Share-based benefit plans
   
 
0.282
 
           
 
127
 
                          
 
127
 
Cash dividends declared ($0.48 per share)
                                    
 
(155
) 
          
 
(155
) 
Distributions
                                            
 
(144
) 
  
 
(144
) 
Other
                    
 
3
 
                  
 
78
 
  
 
81
 
    
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Balances, September 30, 2021
   
 
313.502
 
  
$
3
 
   
$
—
 
  
$
(492
) 
  
$
(206
) 
  
$
2,520
 
  
$
1,825
 
    
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
    
 
 
  
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 NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
Unaudited
(Dollars in millions)
 
    
2021
    
2020
  
Cash flows from operating activities:
                 
Net income
   
$
5,716
 
   $ 2,693  
Adjustments to reconcile net income to net cash provided by operating activities:
                 
Increase (decrease) in cash from operating assets and liabilities:
                 
Accounts receivable
   
 
(1,312
) 
     930  
Inventories and other assets
   
 
(333
) 
     (36 ) 
Accounts payable and accrued expenses
   
 
731
 
     542  
Contract liabilities-deferred revenues
   
 
—
 
     6,123  
Depreciation and amortization
   
 
2,125
 
     2,059  
Income taxes
   
 
185
 
     (114 ) 
Losses (gains) on sales of facilities
   
 
(1,057
) 
     6  
Losses on retirement of debt
   
 
12
 
     295  
Amortization of debt issuance costs and discounts
   
 
21
 
     22  
Share-based compensation
   
 
341
 
     229  
Other
   
 
87
 
     66  
    
 
 
    
 
 
  
Net cash provided by operating activities
   
 
6,516
 
     12,815  
    
 
 
    
 
 
  
Cash flows from investing activities:
                 
Purchase of property and equipment
   
 
(2,385
) 
     (2,087 ) 
Acquisition of hospitals and health care entities
   
 
(488
) 
     (380 ) 
Sales of hospitals and health care entities
   
 
1,980
 
     68  
Change in investments
   
 
(38
) 
     (40 ) 
Other
   
 
2
 
     (44 ) 
    
 
 
    
 
 
  
Net cash used in investing activities
   
 
(929
) 
     (2,483 ) 
    
 
 
    
 
 
  
Cash flows from financing activities:
                 
Issuances of long-term debt
   
 
4,337
 
     2,700  
Net change in revolving credit facilities
   
 
500
 
     (2,480 ) 
Repayment of long-term debt
   
 
(3,787
) 
     (3,403 ) 
Distributions to noncontrolling interests
   
 
(501
) 
     (393 ) 
Payment of debt issuance costs
   
 
(38
) 
     (35 ) 
Payment of dividends
   
 
(476
) 
     (153 ) 
Repurchase of common stock
   
 
(6,143
) 
     (441 ) 
Other
   
 
(241
) 
     (156 ) 
    
 
 
    
 
 
  
Net cash used in financing activities
   
 
(6,349
) 
     (4,361 ) 
    
 
 
    
 
 
  
Effect of exchange rate changes on cash and cash equivalents
   
 
(4
) 
     (4 ) 
    
 
 
    
 
 
  
Change in cash and cash equivalents
   
 
(766
) 
     5,967  
Cash and cash equivalents at beginning of period
   
 
1,793
 
     621  
    
 
 
    
 
 
  
Cash and cash equivalents at end of period
   
$
1,027
 
   $ 6,588  
    
 
 
    
 
 
  
Interest payments
   
$
1,127
 
   $ 1,230  
Income tax payments, net
   
$
1,346
 
   $ 779  
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 September 30, 2021, these affiliates owned and operated 183 hospitals, 123 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 $117 million for the quarters ended September 30, 2021 and 2020, respectively, and $301 million and $289 million for the nine months ended September 30, 2021 and 2020, respectively. Operating results for the quarter and nine months ended September 30, 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. During the second quarter of 2021, our patient volumes experienced a strong rebound as the effects of the pandemic moderated and certain pandemic-related restrictions and policies were eased. During the third quarter of 2021, our patient volumes remained strong, with the exception of inpatient surgeries, and included a resurgence of
COVID-19
admissions. Inpatient surgery volumes were constrained during the quarter as capacity was used to treat the surge of COVID-19 patients. 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
 
7
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 — BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenues (continued)
 
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 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 nine months ended September 30, 2021 and 2020 included $33 million and $55 million, respectively, 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 and nine months ended September 30, 2021 and 2020 are summarized in the following table (dollars in millions):
 
    
Quarter
  
    
2021
     
    Ratio    
    
2020
     
    Ratio    
  
Medicare
   
$
2,645
 
   
 
17.3
% 
   $ 2,603        19.6 % 
Managed Medicare
   
 
2,124
 
   
 
13.9
 
     1,760        13.2  
Medicaid
   
 
692
 
   
 
4.5
 
     445        3.3  
Managed Medicaid
   
 
813
 
   
 
5.3
 
     707        5.3  
Managed care and insurers
   
 
7,998
 
   
 
52.4
 
     6,752        50.7  
International (managed care and insurers)
   
 
324
 
   
 
2.1
 
     307        2.3  
Other
   
 
680
 
   
 
4.5
 
     737        5.6  
    
 
 
     
 
 
    
 
 
     
 
 
  
Revenues
   
$
15,276
 
   
 
100.0
% 
   $ 13,311        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)
 
    
Nine Months
  
    
2021
     
    Ratio    
    
2020
     
    Ratio    
  
Medicare
   
$
7,816
 
   
 
17.9
% 
   $ 7,618        20.5 % 
Managed Medicare
   
 
6,281
 
   
 
14.4
 
     5,074        13.6  
Medicaid
   
 
1,722
 
   
 
3.9
 
     1,423        3.8  
Managed Medicaid
   
 
2,369
 
   
 
5.4
 
     1,904        5.1  
Managed care and insurers
   
 
22,300
 
   
 
51.0
 
     19,028        51.0  
International (managed care and insurers)
   
 
995
 
   
 
2.3
 
     838        2.3  
Other
   
 
2,205
 
   
 
5.1
 
     1,355        3.7  
    
 
 
     
 
 
    
 
 
     
 
 
  
Revenues
   
$
43,688
 
   
 
100.0
% 
   $ 37,240        100.0 % 
    
 
 
     
 
 
    
 
 
     
 
 
  
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 and nine months ended September 30, 2021 and 2020 follows (dollars in millions):
 
    
Quarter
    
Nine Months
  
    
2021
    
2020
    
2021
    
2020
  
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)
   
$
12,803
 
   $ 11,170    
$
36,396
 
   $ 32,428  
Cost-to-charges
ratio (patient care costs as percentage of gross patient charges)
   
 
11.8
% 
     12.0 %   
 
11.4
% 
     12.1 % 
Total uncompensated care
   
$
7,782
 
   $ 7,023    
$
22,299
 
   $ 21,625  
Multiply by the
cost-to-charges
ratio
   
 
11.8
% 
     12.0 %   
 
11.4
% 
     12.1 % 
    
 
 
    
 
 
    
 
 
    
 
 
  
Estimated cost of total uncompensated care
   
$
916
 
   $ 843    
$
2,542
 
   $ 2,617  
    
 
 
    
 
 
    
 
 
    
 
 
  
The total uncompensated care amounts include
 
charity care of $3.509 billion and $3.160 billion, respectively, and the related estimated costs of charity care were $413 million and $376 million, respectively, for the quarters ended September 30, 2021 and 2020. The total uncompensated care amounts include charity care of $10.135 billion and $9.972 billion, respectively, and the related estimated costs of charity care were $1.155 billion and $1.207 billion, respectively, for the nine months ended September 30, 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 nine months ended September 30, 2021, we paid $67 million to acquire two hospital facilities, one in southern Georgia and one in Tennessee, and $91 million to acquire other nonhospital health care
entities (noncontrolling interests of $111 million were recorded).
 We also paid $330 million and assumed certain liabilities to acquire an 80% interest (noncontrolling interests of $101 million were recorded) in a venture providing post-acute care services (home health and hospice). 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 $601 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2020, we paid $380 million to acquire a hospital in New Hampshire
and other nonhospital health care entities. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition
 
9
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 2 — ACQUISITIONS AND DISPOSITIONS (continued)
 
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 nine months ended September 30, 2021, we received proceeds of $860 million and recognized a pretax gain of $655 million related to the sale of four hospital facilities in Georgia (two facilities in northern Georgia and two facilities in southern Georgia). We received proceeds of $647 million on September 30, 2021 related to the sale of a hospital facility in northern Georgia, which sale was effective October 1, 2021. We also received proceeds of $473 million and recognized a pretax gain of $402 
million related to sales of other health care entity investments and minor real estate assets. During the nine months ended September 30, 2020, we received proceeds of
 
$
68
 million and recognized a net pretax loss of $
6
 million related to the
sale
of a hospital facility in Mississippi and sales of real estate and other investments.
NOTE 3 — INCOME TAXES
Our provisions for income taxes for the quarters ended September 30, 2021 and 2020 were $685 million and $209 million, respectively, and the effective tax rates were 23.2% and 23.8%, respectively. Our provisions for income taxes for the nine months ended September 30, 2021 and 2020 were $1.531 billion and $665 million, respectively, and the effective tax rates were 22.9% and 22.2%, respectively. Our provisions for income taxes included tax benefits related to settlements of employee equity awards of $96 million and $59 million for the nine months ended September 30, 2021 and 2020, respectively.
Our liability for unrecognized tax benefits was $626 million, including accrued interest of $95 million, as of September 30, 2021 ($508 million and $73 million, respectively, as of December 31, 2020). Unrecognized tax benefits of $192 million ($157 million as of December 31, 2020) would affect the effective rate, if recognized.
The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at September 30, 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.
 
10
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4 — EARNINGS PER SHARE (continued)
 
The following table sets forth the computation of basic and diluted earnings per share for the quarters and nine months ended September 30, 2021 and 2020 (dollars and shares in millions, except per share amounts):
 
    
Quarter
     
Nine Months
  
    
2021
     
2020
     
2021
     
2020
  
Net income attributable to HCA Healthcare, Inc.
   
$
2,269
 
    $ 668     
$
5,142
 
    $ 2,328  
         
Weighted average common shares outstanding
   
 
318.072
 
      338.168     
 
328.048
 
      338.057  
Effect of dilutive incremental shares
   
 
5.957
 
      5.178     
 
5.200
 
      4.957  
    
 
 
     
 
 
     
 
 
     
 
 
  
Shares used for diluted earnings per share
   
 
324.029
 
      343.346     
 
333.248
 
      343.014  
    
 
 
     
 
 
     
 
 
     
 
 
  
Earnings per share:
                                    
Basic earnings
   
$
7.13
 
    $ 1.97     
$
15.67
 
    $ 6.89  
Diluted earnings
   
$
7.00
 
    $ 1.95     
$
15.43
 
    $ 6.79  
NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES
A summary of our insurance subsidiaries’ investments at September 30, 2021 and December 31, 2020 follows (dollars in millions):
 
    
September 30, 2021
  
    
Amortized
Cost
     
Unrealized
Amounts
     
Fair
Value
  
    
Gains
     
Losses
  
Debt securities
   
$
391
 
   
$
21
 
   
$
(1
) 
   
$
411
 
Money market funds and other
   
 
119
 
   
 
—
 
   
 
—
 
   
 
119
 
    
 
 
     
 
 
     
 
 
     
 
 
  
    
$
510
 
   
$
21
 
   
$
(1
) 
   
 
530
 
    
 
 
     
 
 
     
 
 
           
Amounts classified as current assets
                              
 
(112
) 
                               
 
 
  
Investment carrying value
                              
$
418
 
                               
 
 
  
 
    
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 September 30, 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).
 
11
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 5 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)
 
Scheduled maturities of investments in debt securities at September 30, 2021 were as follows (dollars in millions):
 
    
Amortized
Cost
     
Fair
Value
  
Due in one year or less
    $ —      $ —  
Due after one year through five years
      134        141  
Due after five years through ten years
      177        187  
Due after ten years
      80        83  
    
 
 
     
 
 
  
     $ 391      $ 411  
    
 
 
     
 
 
  
The average expected maturity of the investments in debt securities at September 30, 2021 was 5.5 years, compared to the average scheduled maturity of 9.3 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 6 — 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 us and our counterparties based on common notional principal amounts and maturity dates.
Pay-fixed
interest rate swaps effectively convert 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 September 30, 2021 (dollars in millions):
 
    
Notional
Amount
     
Maturity Date
     
Fair
Value
  
Pay-fixed
interest rate swaps
    $ 2,000        December 2021      $ (7 ) 
Pay-fixed
interest rate swaps
      500        December 2022        (12 ) 
During the next 12 months, we estimate $17 million will be reclassified from other comprehensive income (“OCI”) and will be included in interest expense.
Derivatives — Results of Operations
The following table presents the effect of our interest rate swaps on our results of operations for the nine months ended September 30, 2021 (dollars in millions):
 
Derivatives in Cash Flow Hedging Relationships
   
Amount of Loss
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
    $ 1        Interest expense      $ 28  
 
12
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 6 — FINANCIAL INSTRUMENTS (continued)
 
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 September 30, 2021, we have not been required to post any collateral related to these agreements. If we had breached these provisions at September 30, 2021, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $19 million.
NOTE 7 — 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, and fair value measurements should be determined based on the assumptions market participants would use in pricing assets or liabilities. 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 entity’s 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 inputs for the asset or liability, which are typically based on an entity’s 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.
Investment Securities
The investments of our insurance subsidiaries 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.
Derivative Financial Instruments
We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. 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 and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of these instruments.
 
13
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 7 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)
 
The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):
 
    
September 30, 2021
  
          
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
   
$
411
 
  
$
—
 
  
$
411
 
  
$
—
 
Money market funds and other
   
 
119
 
  
 
119
 
  
 
—
 
  
 
—
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Investments of insurance subsidiaries
   
 
530
 
  
 
119
 
  
 
411
 
  
 
—
 
Less amounts classified as current assets
   
 
(112
) 
  
 
(105
) 
  
 
(7
) 
  
 
—
 
    
 
 
    
 
 
    
 
 
    
 
 
  
    
$
418
 
  
$
14
 
  
$
404
 
  
$
—
 
    
 
 
    
 
 
    
 
 
    
 
 
  
Liabilities:
                                 
Interest rate swaps (Other accrued expenses)
   
$
17
 
  
$
—
 
  
$
17
 
  
$
—
 
Interest rate swaps (Income taxes and other liabilities)
   
 
2
 
  
 
—
 
  
 
2
 
  
 
—
 
 
    
December 31, 2020
  
          
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
    $ 416     $ —     $ 416     $ —  
Money market funds and other
      88       88       —       —  
    
 
 
    
 
 
    
 
 
    
 
 
  
Investments of insurance subsidiaries
      504       88       416       —  
Less amounts classified as current assets
      (116 )      (87 )      (29 )      —  
    
 
 
    
 
 
    
 
 
    
 
 
  
     $ 388     $ 1     $ 387     $ —  
    
 
 
    
 
 
    
 
 
    
 
 
  
Liabilities:
                                 
Interest rate swaps (Income taxes and other liabilities)
    $ 46     $ —     $ 46     $ —  
The estimated fair value of our long-term debt was $36.567 billion and $35.814 billion at September 30, 2021 and December 31, 2020, respectively, compared to carrying amounts, excluding debt issuance costs and discounts, aggregating $32.552 billion and $31.240 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.
 
14
HCA HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
 
NOTE 8 — LONG-TERM DEBT
A summary of long-term debt at September 30, 2021 and December 31, 2020, including related interest rates at September 30, 2021, follows (dollars in millions):
 
    
September 30,
2021
    
December 31,
2020
  
Senior secured asset-based revolving credit facility (effective interest rate of 2.7%)
   
$
500
 
   $ —  
Senior secured revolving credit facility
   
 
—
 
     —  
Senior secured term loan facilities (effective interest rate of 3.1%)
   
 
1,980
 
     3,671  
Senior secured notes (effective interest rate of 4.8%)
   
 
16,200
 
     13,850  
Other senior secured debt (effective interest rate of 4.2%)
   
 
920
 
     767  
    
 
 
    
 
 
  
Senior secured debt
   
 
19,600
 
     18,288  
Senior unsecured notes (effective interest rate of 5.5%)
   
 
12,952
 
     12,952  
Debt issuance costs and discounts
   
 
(253
) 
     (236 ) 
    
 
 
    
 
 
  
Total debt (average life of 9.5 years, rates averaging 4.9%)
   
 
32,299
 
     31,004  
Less amounts due within one year
   
 
250
 
     209  
    
 
 
    
 
 
  
    
$
32,049
 
   $ 30,795  
    
 
 
    
 
 
  
During June 2021, we issued $2.350 billion aggregate principal amount of senior secured notes comprised of $850 million aggregate principal amount of