HCA Holdings 2014 Annual Report Download

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Patient first.
2014 Annual Report to Shareholders

Table of contents

  • Page 1
    Patient first. 2014 Annual Report to Shareholders

  • Page 2
    ... health care services companies in the United States. At December 31, 2014, we operated 166 hospitals, comprised of 162 general, acute care hospitals; three psychiatric hospitals; and one rehabilitation hospital. In addition, we operated 113 freestanding surgery centers. Our facilities are located...

  • Page 3
    ... markets, we plan to deploy capital for new hospitals and new outpatient facilities. In others, we plan to provide capital to increase bed and emergency room capacity as well as to equip our nurses and other caregivers with the tools and technology required to continue to take care of our patients...

  • Page 4
    ... costs. Second, we are improving our clinical information systems to provide a better user experience for our nurses and physicians - and better outcomes for our patients. These improvements will create more comprehensive clinical data that we can then leverage across our business to improve...

  • Page 5
    ... President - Physician Services Group Jana J. Davis Senior Vice President - Corporate Affairs Jane D. Englebright Senior Vice President and Chief Nursing Officer Jon M. Foster President - American Group Charles J. Hall President - National Group Samuel N. Hazen Chief Operating Officer A. Bruce Moore...

  • Page 6
    ... has filed an annual report on Form 10-K for the year ended December 31, 2014, with the United States Securities and Exchange Commission (SEC). Shareholders may obtain a copy of this report, without charge, by writing: Investor Relations, HCA Holdings, Inc., One Park Plaza, Nashville, TN 37203 or...

  • Page 7
    ..., Tennessee (Address of Principal Executive Offices) 37203 (Zip Code) Registrant's 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...

  • Page 8
    ... 1. Business ...3 36 51 51 52 54 Item 1A. Risk Factors ...Item 1B. Item 2. Item 3. Item 4. Part II Item 5. Item 6. Item 7. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis...

  • Page 9
    ... 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...

  • Page 10
    ... 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...

  • Page 11
    ... 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...

  • Page 12
    ..., 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...

  • Page 13
    ... at 2% for federal fiscal year 2014, but increases to 3% for federal fiscal year 2015 and thereafter. Each hospital's 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...

  • Page 14
    ... the patient's 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: 0.2% in 2015...

  • Page 15
    ...our hospitals. Also, more Medicare procedures that historically have been performed in ASCs may be moved to physicians' offices. Commercial third-party payers may adopt similar policies. For each federal fiscal year, the Health Reform Law provides for an annual reduction to the ASC payment system by...

  • Page 16
    ... 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...

  • Page 17
    ...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 hospital's cost of services. The Health Reform Law requires states to expand Medicaid coverage to...

  • Page 18
    ... 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...

  • Page 19
    ...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% of our total...

  • Page 20
    ... 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...

  • Page 21
    ...table includes only those facilities that are consolidated for financial reporting purposes. 2014 Years Ended December 31, 2013 2012 2011 2010 Number of hospitals at end of period(a) ...Number of freestanding outpatient surgery centers at end of period(b) ...Number of licensed beds at end of period...

  • Page 22
    ... Competition Generally, other hospitals in the communities we serve 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...

  • Page 23
    ... 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...

  • Page 24
    ... 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...

  • Page 25
    ... (h) coverage on the hospital's 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...

  • Page 26
    ... 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...

  • Page 27
    ... 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...

  • Page 28
    ... 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...

  • Page 29
    ... 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 to, or entering into fee-splitting arrangements with, health care providers designed to induce or...

  • Page 30
    ... 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...

  • Page 31
    ... 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...

  • Page 32
    ... 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...

  • Page 33
    ... account inflation experienced by hospitals and other entities outside the health care industry in purchasing goods and services. 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...

  • Page 34
    ... Health Reform Law prohibits the use of federal funds under the Medicaid program to reimburse providers for medical services provided to treat HACs. States may add additional provider-preventable conditions to the list of HACs for which Medicaid reimbursement will not be allowed. Outpatient Market...

  • Page 35
    ... 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...

  • Page 36
    ... covered by employer-sponsored plans; the rate paid by state governments and private payers pursuant to contracts with the state 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...

  • Page 37
    ... 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...

  • Page 38
    ...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...

  • Page 39
    ... President - Physician Services Group Senior Vice President - Corporate Affairs Senior Vice President and Chief Nursing Officer President - American Group President - National Group Chief Operating Officer President - Service Line and Operations Integration Senior Vice President - Provider Relations...

  • Page 40
    ...President - Physician Services Group since October 2011. From October 2011 to January 2015, Dr. Cuffe also served as a Vice President of the Company. Prior to that time, Dr. Cuffe served Duke University Health System as Vice President for Ambulatory Services and Chief Medical Officer from March 2011...

  • Page 41
    ... current Chairman-elect for the American Hospital Association. William B. Rutherford has served as the Company's Executive Vice President and Chief Financial Officer since January 2014. Mr. Rutherford previously served as Chief Operating Officer of the Company's Clinical and Physician Services Group...

  • Page 42
    ... 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...

  • Page 43
    ...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...

  • Page 44
    ... among hospitals and other health care providers for patients has intensified in recent years. Generally, other hospitals in the 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...

  • Page 45
    ... 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") requires automatic spending reductions of $1.2 trillion for federal fiscal years 2013...

  • Page 46
    ... many states will ultimately 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...

  • Page 47
    ... covered by employer-sponsored plans; the rate paid by state governments and private payers pursuant to contracts with the state 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...

  • Page 48
    ... 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...

  • Page 49
    ... 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...

  • Page 50
    ... 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...

  • Page 51
    ... 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. Changes in treatment regimens and medical technology advances...

  • Page 52
    ... 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...

  • Page 53
    ... of our patients and employees. In addition, we have made significant investments in technology to adopt and utilize electronic health records and to become meaningful users of health information technology. The secure maintenance of this information is critical to our business operations. We have...

  • Page 54
    ... of acquisitions. A component of our business strategy is acquiring hospitals and other health care businesses. We may encounter difficulty acquiring new facilities or other businesses as a result of competition from other purchasers that may be willing to pay purchase prices that are higher than...

  • Page 55
    ... conditions and changes in those states. We operated 166 hospitals at December 31, 2014, 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, 2014...

  • Page 56
    ...and the terms thereof) and 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...

  • Page 57
    ... operated by us as of December 31, 2014: State Hospitals Beds Alaska ...California ...Colorado ...Florida ...Georgia ...Idaho ...Indiana ...Kansas ...Kentucky ...Louisiana ...Mississippi ...Missouri ...Nevada ...New Hampshire ...Oklahoma ...South Carolina ...Tennessee ...Texas ...Utah ...Virginia...

  • Page 58
    ... cardiology services provided at any Company facility (other than peer reviews). The Company cooperated with the government's request and produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. On February 23, 2015, the United States District...

  • Page 59
    ... 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 Company's stock pursuant or traceable to the Company's Registration Statement issued in connection with the March 9, 2011 initial public offering...

  • Page 60
    ... that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCA's purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCA's construction of new hospitals counted towards its $450 million five-year capital...

  • Page 61
    ... Investors, LLC at a purchase price of $73.26 per share, the closing price of our common stock on the New York Stock Exchange (the "NYSE") on December 5, 2014, less a discount of 1%, and repurchases in the open market of 1,964,661 shares of our common stock at an average price of $72.44 per share...

  • Page 62
    ... 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...

  • Page 63
    ... to HCA Holdings, Inc...Per common share data: Basic earnings per share ...Diluted earnings per share ...Cash dividends declared per share ...Financial Position: Assets ...Working capital ...Long-term debt, including amounts due within one year ...Equity securities with contingent redemption rights...

  • Page 64
    2014 2013 2012 2011 2010 Operating Data: Number of hospitals at end of period(a) ...Number of freestanding outpatient surgical centers at end of period(b) ...Number of licensed beds at end of period(c) ...Weighted average licensed beds(d) ...Admissions(e) ...Equivalent admissions(f) ...Average ...

  • Page 65
    ... 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 programs or...

  • Page 66
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Forward-Looking Statements (continued) technology and recognize income for the related Medicare or Medicaid incentive payments, and (22) other risk factors described in this annual ...

  • Page 67
    ... 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...

  • Page 68
    ... 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...

  • Page 69
    ... AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Critical Accounting Policies and Estimates (continued) Revenues (continued) requirements or incentives, most of which became effective on January 1, 2014, for individuals to obtain, and large employers to provide, insurance...

  • Page 70
    ... changes in the percentage of our patients having adequate health care coverage, increases in patient responsibility amounts under certain health care coverages, general economic conditions, patient accounting service center operations, payer mix, or trends in federal, state, and private employer...

  • Page 71
    ......Accounts receivable aging at December 31, 2013: Medicare and Medicaid ...Managed care and other insurers ...Uninsured ...Total ... 13% 23 17 53% 12% 21 20 53% 1% 5 7 13% 2% 4 8 14% 2% 5 27 34% 1% 5 27 33% Professional Liability Claims We, along with virtually all health care providers, operate...

  • Page 72
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Critical Accounting Policies and Estimates (continued) Professional Liability Claims (continued) data includes information regarding our business, including historical paid losses and...

  • Page 73
    ..., 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...

  • Page 74
    ... compared to 2012. We recorded $142 million of Medicaid revenues during the second quarter of 2014 related to the receipt of reimbursements in excess of our estimates for the indigent care component of the Texas Medicaid Waiver Program for the program year ended September 30, 2013. We recorded $94...

  • Page 75
    ... in discounts provided to the uninsured and previously uninsured patients obtaining medical coverage through the health insurance exchanges and Medicaid expansion programs. At December 31, 2014, we owned and operated 42 hospitals and 31 surgery centers in the state of Florida. Our Florida facilities...

  • Page 76
    ... 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...

  • Page 77
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Electronic Health Record Incentive Payments The American Recovery and Reinvestment Act of 2009 provides for Medicare and Medicaid incentive payments,...

  • Page 78
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Operating Results Summary The following are comparative summaries of operating results for the years ended December 31, 2014, 2013 and 2012 (dollars ...

  • Page 79
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Years Ended December 31, 2014 and 2013 Net income attributable to HCA Holdings, Inc. totaled $1.875 billion, or $4.16 per diluted share, for the year...

  • Page 80
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Years Ended December 31, 2014 and 2013 (continued) averaged 2.3% for 2014 compared to 2013. Share-based compensation expense increased from $113 ...

  • Page 81
    ... related primarily to growth in operating results of hospital joint ventures in two of our Texas markets and our group purchasing organization. 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...

  • Page 82
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Years Ended December 31, 2013 and 2012 (continued) Supplies, as a percentage of revenues, were 17.5% in 2013 and 17.3% in 2012. Supply costs per ...

  • Page 83
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Years Ended December 31, 2013 and 2012 (continued) Net income attributable to noncontrolling interests increased from $401 million for 2012 to $440 ...

  • Page 84
    ...31, 2015) and anticipated access to public and private debt and equity markets. These amounts reflect the October 2014 amendment to our senior secured asset-based revolving credit facility, which increased the revolving credit commitments by $750 million. During 2012, our Board of Directors declared...

  • Page 85
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) Financing Activities (continued) amount of our outstanding 5.75% senior unsecured notes. During April 2014, we used proceeds from the March...

  • Page 86
    ... 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...

  • Page 87
    HCA HOLDINGS, INC. MANAGEMENT'S 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 ...

  • Page 88
    ... 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 government's prospective payment system. Total...

  • Page 89
    ... Commission (2013 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, 2014. Ernst & Young, LLP, the independent registered public accounting...

  • Page 90
    ... financial reporting as of December 31, 2014, 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, 2014 and 2013, and the related...

  • Page 91
    ...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...

  • Page 92
    ... 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...

  • Page 93
    ...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 Company's Current Report on Form 8-K filed July 25...

  • Page 94
    ...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 Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (File No. 001...

  • Page 95
    ... and Bank of America, N.A., as Collateral Agent (filed as exhibit 4.11 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2008 (File No. 001-11239), and incorporated herein by reference). $2,500,000,000 Credit Agreement, dated as of September 30, 2011, by and among...

  • Page 96
    ... as Exhibit 4.5 to the Company's Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). 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...

  • Page 97
    ...Hercules Holding II, LLC and certain other parties thereto (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K filed November 24, 2010, and incorporated herein by reference). Registration Rights Agreement, dated as of March 16, 1989, by and among HCA-Hospital Corporation of America and...

  • Page 98
    ...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 Company's Current Report on Form 8-K filed August 1, 2011, and incorporated...

  • Page 99
    ...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 Company's Current Report on...

  • Page 100
    ...'s Current Report on Form 8-K filed October 17, 2014, and incorporated herein by reference). Supplemental Indenture No. 11, dated as of January 16, 2015, among HCA Inc., HCA Holdings, Inc., Law Debenture Trust Company of New York, as trustee, and Deutsche Bank Trust Company Americas, as paying agent...

  • Page 101
    ...).* 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 (filed as Exhibit 10.17(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and...

  • Page 102
    ...28(g) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference).* Third Amendment to Employment Agreement effective December 31, 2014 (R. Milton Johnson).* Second Amendment to Employment Agreement effective January 29, 2015 (Samuel...

  • Page 103
    ... 10.48 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference).* 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...

  • Page 104
    ... Form of 2014 PEP Restricted Share Unit Agreement (Officers) (filed as Exhibit 10.2 to the Company's Current Report on Form 8-K filed April 3, 2014, and incorporated herein by reference).* HCA Holdings, Inc. Employee Stock Purchase Plan (filed as Exhibit 10.1 to the Company's Current Report on Form...

  • Page 105
    ..., thereunto duly authorized. HCA HOLDINGS, INC. By: /s/ R. MILTON JOHNSON R. Milton Johnson Chairman and Chief Executive Officer Dated: February 26, 2015 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...

  • Page 106
    HCA HOLDINGS, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm ...Consolidated Financial Statements: Consolidated Income Statements for the years ended December 31, 2014, 2013 and 2012 ...Consolidated Comprehensive Income Statements for ...

  • Page 107
    ...three years in the period ended December 31, 2014, 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...

  • Page 108
    ...YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 (Dollars in millions, except per share amounts) 2014 2013 2012 Revenues before the provision for doubtful accounts ...Provision for doubtful accounts ...Revenues ...Salaries and benefits ...Supplies ...Other operating expenses ...Electronic health record...

  • Page 109
    ... STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 (Dollars in millions) 2014 2013 2012 Net income ...Other comprehensive income (loss) before taxes: Foreign currency translation ...Unrealized gains (losses) on available-for-sale securities ...Defined benefit plans ...Pension costs...

  • Page 110
    ... year ...338 786 5,480 5,695 Long-term debt ...Professional liability risks ...Income taxes and other liabilities ...Stockholders' deficit: Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 420,477,900 shares - 2014 and 439,604,000 shares - 2013 ...Capital in excess of par value...

  • Page 111
    HCA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2014, 2013 AND 2012 (Dollars in millions) Equity (Deficit) Attributable to HCA Holdings, Inc. in Accumulated Equity Common Stock Capital Excess of Other Attributable to Shares Par Par Comprehensive ...

  • Page 112
    ... loan costs ...Share-based compensation ...Other ...Net cash provided by operating activities ...Cash flows from investing activities: Purchase of property and equipment ...Acquisition of hospitals and health care entities ...Disposal of hospitals and health care entities ...Change in investments...

  • Page 113
    ... subsidiaries are partners. At December 31, 2014, these affiliates owned and operated 166 hospitals, 113 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...

  • Page 114
    ... health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Thirdparty payers include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans (includes plans offered through the health insurance exchanges...

  • Page 115
    ... emergency medical conditions exists regardless of an individual's 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...

  • Page 116
    ... 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...

  • Page 117
    .... Days revenues in accounts receivable were 54 days, 54 days and 51 days at December 31, 2014, 2013 and 2012, respectively. Adverse changes in general economic conditions, patient accounting service center operations, changes in payer mix or federal or state governmental health care coverage could...

  • Page 118
    ... 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 2014, 2013 and 2012. Since...

  • Page 119
    ... 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...

  • Page 120
    ... 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...

  • Page 121
    ...2014 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...

  • Page 122
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2 - SHARE-BASED COMPENSATION (continued) Employee Stock Purchase Plan (continued) common stock at a discount (through payroll deductions over three-month periods). At December 31, 2014, 11,772,000 shares of common stock ...

  • Page 123
    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 Stock Options and SARs and Performance Stock Options and SARs activity during 2014, 2013 and 2012 is ...

  • Page 124
    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 2014, 2013 and 2012 is summarized below (share amounts in ...

  • Page 125
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 3 - ACQUISITIONS AND DISPOSITIONS (continued) During 2014, we received proceeds of $51 million and recognized a net pretax gain of $29 million ($18 million after tax) related to the sale of a hospital facility and sales ...

  • Page 126
    ... 503 $425 21 25 (18) (5) (3) $445 $ During 2014, the IRS Examination Division began an audit of HCA Holding's Inc.'s 2011 and 2012 federal income tax returns. We are also subject to examination by state and foreign taxing authorities. During 2013, we finalized settlements with the IRS resolving...

  • Page 127
    ... at December 31 follows (dollars in millions): 2014 Unrealized Amounts Gains Losses Amortized Cost Fair Value Debt securities: States and municipalities ...Money market funds ...Equity securities ...Amounts classified as current assets ...Investment carrying value ... $477 61 538 1 $539 $18 - 18...

  • Page 128
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6 - INVESTMENTS OF INSURANCE SUBSIDIARIES (continued) At December 31, 2014 and 2013, the investments of our insurance subsidiaries were classified as "availablefor-sale." Changes in temporary unrealized gains and losses ...

  • Page 129
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 7 - FINANCIAL INSTRUMENTS (continued) Derivatives - Results of Operations The following table presents the effect of our interest rate swaps on our results of operations for the year ended December 31, 2014 (dollars in ...

  • Page 130
    ... (Level 1) (Level 2) (Level 3) Fair Value Assets: Investments of insurance subsidiaries: Debt securities: States and municipalities . . Money market funds ...Equity securities ...Investments of insurance subsidiaries ...Less amounts classified as current assets ...Liabilities: Interest rate swaps...

  • Page 131
    ... (Level 1) (Level 2) (Level 3) Fair Value Assets: Investments of insurance subsidiaries: Debt securities: States and municipalities . . Money market funds ...Equity securities ...Investments of insurance subsidiaries ...Less amounts classified as current assets ...Liabilities: Interest rate swaps...

  • Page 132
    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, 2014, follows (dollars in millions): 2014 2013 Senior secured asset-based revolving credit facility (...

  • Page 133
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9 - LONG-TERM DEBT (continued) Senior Secured Credit Facilities And Other Senior Secured Debt We have entered into the following senior secured credit facilities: (i) a $3.250 billion asset-based revolving credit facility...

  • Page 134
    ... 9 - LONG-TERM DEBT (continued) Senior Unsecured Notes (continued) Inc.; (v) an aggregate principal amount of $1.000 billion senior notes due 2021 issued by HCA Holdings, Inc.; and (vi) $2 million of unamortized debt discounts that reduce the indebtedness. General Debt Information The senior secured...

  • Page 135
    ... physicians; increased access to information about fees and performance; and restrictions on future arrangements between private providers and National Health Service private patient units. HCA disagrees with the Authority's assessment of the competitive conditions for hospitals in London, as well...

  • Page 136
    ...CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 10 - CONTINGENCIES AND LEGAL CLAIM COSTS (continued) 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...

  • Page 137
    ... that HCA did not fund the level of capital expenditures and uncompensated care agreed to in connection with HCA's purchase of hospitals from Health Midwest in 2003. The central issue in the case was whether HCA's construction of new hospitals counted towards its $450 million five-year capital...

  • Page 138
    ...purchase price of $73.26 per share, the closing price of the Company's common stock on the New York Stock Exchange on December 5, 2014, less a discount of 1%. The repurchase was made pursuant to the Company's $1.0 billion repurchase program adopted by the Company's board of directors in October 2014...

  • Page 139
    ... INFORMATION We operate in one line of business, which is operating hospitals and related health care entities. We operate in two geographically organized groups: the National and American Groups. At December 31, 2014, the National Group included 82 hospitals located in Alaska, California, Florida...

  • Page 140
    ...): For the Years Ended December 31, 2014 2013 2012 Revenues: National Group ...American Group ...Corporate and other ...Equity in earnings of affiliates: National Group ...American Group ...Corporate and other ...Adjusted segment EBITDA: National Group ...American Group ...Corporate and other...

  • Page 141
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION (continued) For the Years Ended December 31, 2014 2013 2012 Adjusted segment EBITDA ...Depreciation and amortization ...Interest expense ...Losses (gains) on sales of facilities ...

  • Page 142
    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 Availablefor-Sale Securities Foreign Currency Translation Adjustments Change ...

  • Page 143
    ... doubtful accounts: Year ended December 31, 2012 ...Year ended December 31, 2013 ...Year ended December 31, 2014 ... $4,106 4,846 5,488 $3,770 3,858 3,169 $(3,030) (3,216) (3,646) $4,846 5,488 5,011 NOTE 17 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED...

  • Page 144
    ...-RELATED INFORMATION (continued) Our condensed consolidating balance sheets at December 31, 2014 and 2013 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2014, segregating HCA Holdings, Inc. issuer, HCA...

  • Page 145
    ... 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, 2013 (Dollars in millions) HCA...

  • Page 146
    ... 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...

  • Page 147
    ...Investments in and advances to affiliates ...Goodwill and other intangible assets ...Deferred loan costs ...Other ...LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Accounts payable ...Accrued salaries ...Other accrued expenses ...Long-term debt due within one year ...Long-term...

  • Page 148
    ...Investments in and advances to affiliates ...Goodwill and other intangible assets ...Deferred loan costs ...Other ...LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Accounts payable ...Accrued salaries ...Other accrued expenses ...Long-term debt due within one year ...Long-term...

  • Page 149
    ... costs ...Share-based compensation ...Equity in earnings of affiliates ...Other ...Net cash (used in) provided by operating activities ...Cash flows from investing activities: Purchase of property and equipment ...Acquisition of hospitals and health care entities ...Disposal of hospitals and health...

  • Page 150
    ... costs ...Share-based compensation ...Equity in earnings of affiliates ...Other ...Net cash provided by (used in) operating activities ...Cash flows from investing activities: Purchase of property and equipment ...Acquisition of hospitals and health care entities ...Disposal of hospitals and health...

  • Page 151
    ... costs ...Share-based compensation ...Equity in earnings of affiliates ...Other ...Net cash provided by (used in) operating activities ...Cash flows from investing activities: Purchase of property and equipment ...Acquisition of hospitals and health care entities ...Disposal of hospitals and health...

  • Page 152
    ...The Hospital Company Consolidated Statements of Stockholder's Deficit presentation for the years ended December 31, 2014, 2013 and 2012 are as follows (dollars in millions): 2014 2013 2012 Presentation in HCA Holdings, Inc. Consolidated Statements of Stockholders' Deficit: Share-based benefit plans...

  • Page 153
    HCA HOLDINGS, INC. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (Dollars in millions) 2014 First Second Third Fourth Revenues ...Net income ...Net income attributable to HCA Holdings, Inc...Basic earnings per share ...Diluted earnings per share ... $8,832 $ 454(a) $ 347(a) $ 0.78 $ 0.76...

  • Page 154
    ... of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of...

  • Page 155
    ... of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of...

  • Page 156
    ... 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, 2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned certifies, pursuant to 18...