HCA Holdings 2013 Annual Report Download

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2013 ANNUAL REPORT TO STOCKHOLDERS
ABOVE ALL ELSE
we are committed to the care and improvement of human life.

Table of contents

  • Page 1
    ABOVE ALL ELSE we are committed to the care and improvement of human life. 2013 ANNUAL REPORT TO STOCKHOLDERS

  • Page 2
    ...Relations, HCA Holdings, Inc., One Park Plaza, Nashville, TN 37203 or by visiting the Company's website at www. hcahealthcare.com. Common Stock and Dividend Information The Common Stock of HCA Holdings, Inc. is listed on the New York Stock Exchange (NYSE) under the symbol "HCA". On February 28, 2014...

  • Page 3
    ...M. Foster President American Group Charles J. Hall President National Group A. Bruce Moore, Jr. President Service Line and Operations Integration P. Martin Paslick Senior Vice President and Chief Information Officer Jonathan B. Perlin, M.D. President Clinical Services Group and Chief Medical Officer...

  • Page 4
    ... in 2014. Added 1500+ active medical staff and 200+ access points over the past two years.1 New technological capabilities and enhanced services Over past 2 years, added approximately 900 new inpatient beds 1 Includes Free-standing EDs, Urgent Care Centers, Surgery Centers, Provider clinics...

  • Page 5
    ... For the fiscal year ended December 31, 2013 Or ' TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-11239 HCA Holdings, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware (State or...

  • Page 6
    ... Matters and Issuer Purchases of Equity Securities ...Selected Financial Data ...Management's Discussion and Analysis of Financial Condition and Results of Operations ...Quantitative and Qualitative Disclosures about Market Risk ...Financial Statements and Supplementary Data ...Changes in and...

  • Page 7
    ... facilities. Our psychiatric hospitals provide a full range of mental health care services through inpatient, partial hospitalization and outpatient settings. On November 17, 2006, HCA Inc. was acquired by a private investor group, including affiliates of or funds sponsored by Bain Capital Partners...

  • Page 8
    ... 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 9
    ...of management services to our health care facilities, including patient safety programs; ethics and compliance programs; national supply contracts; equipment purchasing and leasing contracts; accounting, financial and clinical systems; governmental reimbursement assistance; construction planning and...

  • Page 10
    ...services provided. Our hospitals generally offer discounts from established charges to certain group purchasers of health care services, including private insurance companies, employers, health maintenance organizations ("HMOs"), preferred provider organizations ("PPOs") and other managed care plans...

  • Page 11
    ...increased to 2% for federal fiscal year 2014, and will increase 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...

  • Page 12
    ... similar clinically and in terms of the resources they require. A payment rate is established for each APC. Depending on the services provided, a hospital may be paid for more than one APC for a patient visit. The APC payment rates are updated for each calendar year. The Health Reform Law provides...

  • Page 13
    ... general, acute care hospitals and critical access hospitals are reimbursed under a prospective payment system (the "IPF PPS"), a per diem payment, with adjustments to account for certain patient and facility characteristics. The IPF PPS contains an "outlier" policy for extraordinarily costly cases...

  • Page 14
    .... The legislation would also provide an annual payment increase of 0.5% beginning in 2014 and extending through 2018 and would maintain 2018 rates through 2023. In addition, the legislation would require CMS to transition physician payments to a more value-based model beginning in 2018. Other...

  • Page 15
    ... In addition, the Health Reform Law requires managed Medicare plans to keep annual administrative costs lower than 15% of annual premium revenue. The Health Reform Law also implements fee payment adjustments based on service benchmarks and quality ratings. The Congressional Budget Office ("CBO") has...

  • Page 16
    ... the cost of Medicaid programs. However, general economic conditions in the states in which we operate may require reductions in premium payments to these plans and may reduce enrollment in these plans. Accountable Care Organizations and Bundled Payment Initiatives Pursuant to the Health Reform Law...

  • Page 17
    ... of the state. The selected state programs will provide one payment for both hospital and physician services provided to Medicaid patients for certain episodes of inpatient care. Disproportionate Share Hospital Payments In addition to making payments for services provided directly to beneficiaries...

  • Page 18
    ...audits of cost reports. Managed Care and Other Discounted Plans Most of our hospitals offer discounts from established charges to certain large group purchasers of health care services, including managed care plans and private insurance companies. Admissions reimbursed by commercial managed care and...

  • Page 19
    ...care inpatient-bed-days and a charity care factor; and (3) a transition factor applicable to the payment year. In order to maximize their incentive payments, acute care hospitals must have begun participating in the incentive program by federal fiscal year 2013. Beginning in federal fiscal year 2015...

  • Page 20
    .... The data set forth in this table includes only those facilities that are consolidated for financial reporting purposes. 2013 Years Ended December 31, 2012 2011 2010 2009 Number of hospitals at end of period(a) ...Number of freestanding outpatient surgery centers at end of period(b) ...Number of...

  • Page 21
    ...care professionals, location, breadth of services, technology offered, quality and condition of the facilities and prices charged. The Health Reform Law requires hospitals to publish annually a list of their standard charges for items and services. We have increased our focus on operating outpatient...

  • Page 22
    ... Health care facility construction and operation are subject to numerous federal, state and local regulations relating to the adequacy of medical care, equipment, personnel, operating policies and procedures, maintenance of adequate records, fire prevention, rate-setting and compliance with building...

  • Page 23
    ... of health care facilities, the acquisition of existing facilities, the transfer or change of ownership and the addition of new beds or services may be subject to review by and prior approval of, or notifications to, state regulatory agencies under a CON program. Such laws generally require the...

  • Page 24
    ... 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 25
    ...health services" include inpatient and outpatient hospital services, clinical laboratory services and radiology services. Sanctions for violating the Stark Law include denial of payment, civil monetary penalties of up to $15,000 per claim submitted and exclusion from the federal health care programs...

  • Page 26
    ... unnecessary goods and services and cost report fraud. Federal enforcement officials have the ability to exclude from Medicare and Medicaid any investors, officers and managing employees associated with business entities that have committed health care fraud, even if the officer or managing employee...

  • Page 27
    ... 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 28
    ... Some of the states in which we operate have laws prohibiting corporations and other entities from employing physicians, practicing medicine for a profit and making certain direct and indirect payments or feesplitting arrangements between health care providers designed to induce or encourage...

  • Page 29
    ... of our health care operations. Private payers may conduct similar post-payment audits, and we also perform internal audits and monitoring. In addition to national enforcement initiatives, federal and state investigations have addressed a wide variety of routine health care operations such as: cost...

  • Page 30
    ... 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 31
    ...internet website through which consumers may access health plan ratings that are assigned by the state based on quality and price, view governmental health program eligibility requirements and calculate the actual cost of health coverage. Health insurers participating in an Exchange must offer a set...

  • Page 32
    ...and to link payments to quality and efficiency. First, in federal fiscal year 2013, HHS was directed to implement a value-based purchasing program for inpatient hospital services. This program rewards hospitals that meet certain quality performance standards established by HHS. The Health Reform Law...

  • Page 33
    ...in 2015 - are the same for outpatients. Medicare and Medicaid DSH Payments. The Medicare DSH program provides for additional payments to hospitals that treat a disproportionate share of low-income patients. Under the Health Reform Law, beginning in federal fiscal year 2014, Medicare DSH payments are...

  • Page 34
    ... in MA plans. Effective in 2014, the Health Reform Law requires MA plans to keep annual administrative costs lower than 15% of annual premium revenue. The Health Reform Law reduces, over a three year period starting in 2012, premium payments to the MA plans such that CMS' managed care per capita...

  • Page 35
    ... in Medicaid and to purchase health insurance); the possibility of enactment of additional federal or state health care reforms and possible changes to the Health Reform Law; our ability to participate in health insurance plans offered through the Exchanges and the terms of our participation as well...

  • Page 36
    ... high deductible plans, since health insurers offering those kinds of products have traditionally sought to pay lower rates to hospitals; the amount of overall revenues the Company will generate from Medicare and Medicaid business when the reductions are implemented (42% of our revenues in 2013 were...

  • Page 37
    ... of operations. Our hospitals, like most hospitals, have experienced rising labor costs. In some markets, nurse and medical support personnel availability has become a significant operating issue to health care providers. To address this challenge, we have implemented several initiatives to improve...

  • Page 38
    ... Vice President Senior Vice President - Corporate Affairs President - American Group President - National Group President - Operations President - Service Line and Operations Integration Senior Vice President and Chief Information Officer President - Clinical Services Group and Chief Medical Officer...

  • Page 39
    ... Galen Health Care, Inc. A. Bruce Moore, Jr. was appointed President - Service Line and Operations Integration in February 2011. Prior to that, Mr. Moore had served as President - Outpatient Services Group since January 2006. Mr. Moore served as Senior Vice President and as Chief Operating Officer...

  • Page 40
    ... Hospital Association. William B. Rutherford has served as the Company's Chief Financial Officer and Executive Vice President since January 2014. Mr. Rutherford previously served as Chief Operating Officer of the Company's Clinical and Physician Services Group since January 2011 and Chief Financial...

  • Page 41
    ... President and Chief Ethics and Compliance Officer of the Company since May 2007. From October 1997 to May 2007, Mr. Yuspeh served as Senior Vice President - Ethics, Compliance and Corporate Responsibility of the Company. From September 1991 until October 1997, Mr. Yuspeh was a partner with the law...

  • Page 42
    ... 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...

  • Page 43
    ... and other health care providers for patients has intensified in recent years. Generally, other hospitals in the local communities we serve provide services similar to those offered by our hospitals. In addition, CMS publicizes on its Hospital Compare website performance data related to quality...

  • Page 44
    ...In recent years, legislative and regulatory changes have resulted in limitations on and, in some cases, reductions in levels of payments to health care providers for certain services under the Medicare program. The Budget Control Act of 2011 (the "BCA") provides for new spending on program integrity...

  • Page 45
    ... payment systems to determine payment rates. Changes to government health care programs that reduce payments under these programs may negatively impact payments from commercial third-party payers. Current or future health care reform and deficit reduction efforts, changes in laws or regulations...

  • Page 46
    ... in Medicaid and to purchase health insurance the possibility of enactment of additional federal or state health care reforms and possible changes to the Health Reform Law; our ability to participate in health insurance plans offered through the Exchanges and the terms of our participation as well...

  • Page 47
    ... 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 48
    ... issues associated with healthrelated and personal information and medical records; screening, stabilization and transfer of individuals who have emergency medical conditions; licensure and certification; hospital rate or budget review; preparing and filing of cost reports; operating policies and...

  • Page 49
    ... 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 50
    ...for federal fiscal year 2014 and 3% for federal fiscal year 2015 and thereafter. As required by the Health Reform Law, HHS has implemented a value-based purchasing program for inpatient hospital services that reduces inpatient hospital payments for all discharges by 1.25% in federal fiscal year 2014...

  • Page 51
    ... our shared services initiatives, our information systems are essential to a number of critical areas of our operations, including accounting and financial reporting; billing and collecting accounts; coding and compliance; clinical systems; medical records and document storage; inventory management...

  • Page 52
    ... expenditures or to make changes in services or bed capacity. In giving approval, these states consider the need for additional or expanded health care facilities or services. We currently operate health care facilities in a number of states with CON laws or that require other types of approvals...

  • Page 53
    ... conditions and changes in those states. We operated 165 hospitals at December 31, 2013, and 78 of those hospitals are located in Florida and Texas. Our Florida and Texas facilities' combined revenues represented approximately 46% of our consolidated revenues for the year ended December 31, 2013...

  • Page 54
    ... into corporate transactions (and the terms thereof) and to potentially prevent changes in the composition of our Board of Directors and any transaction that requires stockholder approval. Additionally, the Investors are in the business of making investments in companies and may acquire and hold...

  • Page 55
    ... table lists, by state, the number of hospitals (general, acute care, psychiatric and rehabilitation) directly or indirectly owned and operated by us as of December 31, 2013: State Hospitals Beds Alaska ...California ...Colorado ...Florida ...Georgia ...Idaho ...Indiana ...Kansas ...Kentucky...

  • Page 56
    ... necessity of interventional cardiology services provided at any Company facility (other than peer reviews). The Company is cooperating with the government's request and has produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. At this time, we...

  • Page 57
    ... claim costs in the fourth quarter of 2012 related to this ruling. The accounting for HCA's capital expenditures and charity and uncompensated care is ongoing and will likely not be concluded before the fourth quarter of 2014. HCA plans to appeal the trial court's ruling on the breach of contract...

  • Page 58
    ... at a price of $46.92 per share. Our common stock is traded on the New York Stock Exchange (the "NYSE") (symbol "HCA"). During 2012, our Board of Directors declared three distributions to the Company's stockholders and holders of certain vested share-based awards. The distributions totaled $6.50 per...

  • Page 59
    ... HCA Holdings, Inc. S&P 500 S&P Health Care ...2013, in comparison to the cumulative returns of the S&P 500 Index and the S&P Health Care Index. The graph assumes $100 invested on March 10, 2011 in our common stock and in each index with the subsequent reinvestment of dividends. The stock performance...

  • Page 60
    ... ...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 ...Noncontrolling...

  • Page 61
    2013 2012 2011 2010 2009 Operating Data: Number of hospitals at end of period(a) ...165 162 163 156 155 Number of freestanding outpatient surgical centers at end of period(b) ...115 112 108 97 97 Number of licensed beds at end of period(c) ...42,896 41,804 41,594 38,827 38,839 Weighted average ...

  • Page 62
    ..., Medicaid and other state programs, including Medicaid upper payment limit ("UPL") programs or Waiver Programs, that may impact reimbursements to health care providers and insurers, (7) the highly competitive nature of the health care business, (8) changes in service mix, revenue mix and surgical...

  • Page 63
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Forward-Looking Statements (continued) recognize income for the related Medicare or Medicaid incentive payments, and (21) other risk factors described in this annual report on Form 10...

  • Page 64
    ... intend to focus on selectively developing and acquiring new hospitals, outpatient facilities and other health care service providers. We believe the challenges faced by the hospital industry may spur consolidation and we believe our size, scale, national presence and access to capital will position...

  • Page 65
    ... Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from payers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Laws and regulations...

  • Page 66
    ... HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Critical Accounting Policies and Estimates (continued) Revenues (continued) We do not pursue collection of amounts related to patients who meet our guidelines to qualify as charity care...

  • Page 67
    ..., 2012 and 2011, respectively. Management expects a continuation of the challenges related to the collection of the patient due accounts. Adverse changes in the percentage of our patients having adequate health care coverage, general economic conditions, patient accounting service center operations...

  • Page 68
    ... company-specific data includes information regarding our business, including historical paid losses and loss adjustment expenses, historical and current case loss reserves, actual and projected hospital statistical data, professional liability retentions for each policy year, geographic information...

  • Page 69
    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) Reserves and provisions for professional liability risks are based upon actuarially ...

  • Page 70
    ... revenues depend upon inpatient occupancy levels, the ancillary services and therapy programs ordered by physicians and provided to patients, the volume of outpatient procedures and the charge and negotiated payment rates for such services. Gross charges typically do not reflect what our facilities...

  • Page 71
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Revenue/Volume Trends (continued) Revenues increased 3.5% to $34.182 billion for 2013 from $33.013 billion for 2012 and increased 11.2% for 2012 from...

  • Page 72
    ... revenues, before provision for doubtful accounts, related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care plans and other insurers and the uninsured for the years ended December 31, 2013, 2012 and 2011 are set forth below. Years Ended December 31, 2013 2012 2011 Medicare...

  • Page 73
    ...DSRIP program are designed to provide incentive payments to hospitals and other providers for their investments in delivery system reforms that increase access to health care, improve the quality of care and enhance the health of patients and families they serve. We provide indigent care services in...

  • Page 74
    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 (continued) For 2014, we estimate EHR incentive income will be recognized in the range of $110 million to...

  • Page 75
    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, 2013, 2012 and 2011 (dollars ...

  • Page 76
    ... in 2012 to $3.858 billion in 2013. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to uninsured amounts due directly from patients, including copayment and deductible amounts for patients who have health care coverage. The self-pay revenue deductions...

  • Page 77
    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) Other operating expenses, as a percentage of revenues, declined to 18.2% in 2013 from 18.3% in ...

  • Page 78
    ... in 2011 to $3.770 billion in 2012. The provision for doubtful accounts and the allowance for doubtful accounts relate primarily to uninsured amounts due directly from patients, including copayment and deductible amounts for patients who have health care coverage. The self-pay revenue deductions...

  • Page 79
    ... care entity investments. Net gains on sales of facilities were $142 million for 2011 and related to the sale of a hospital facility and other health care entity investments. During January 2013, a Missouri judge ruled in favor of a nonprofit health foundation in a lawsuit against HCA. In the case...

  • 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, 2012 and 2011 (continued) During October 2011, we completed our acquisition of the Colorado Health Foundation's ("Foundation...

  • Page 81
    ... additional cost to complete and equip over the next five years of approximately $1.8 billion. We expect to finance capital expenditures with internally generated and borrowed funds. During 2013, we received cash of $33 million from sales of a hospital, real estate investments and other health care...

  • Page 82
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) During 2012, our Board of Directors declared three distributions to our stockholders and holders of certain vested share-based awards. The ...

  • Page 83
    ... 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 84
    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 85
    ... rendered to Medicare patients are established under the federal government's prospective payment system. Total fee-for-service Medicare revenues were 23.3%, 25.1% and 25.8% of our revenues for 2013, 2012 and 2011, respectively. Management believes hospital industry operating margins have been, and...

  • Page 86
    ... Disclosures about Market Risk Information with respect to this Item is provided under the caption "Market Risk" under Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Item 8. Financial Statements and Supplementary Data Information with respect...

  • Page 87
    ... of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of HCA Holdings, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders' deficit, and cash flows for each of the three years in the period ended December...

  • Page 88
    ...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 89
    ... 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 90
    ...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 91
    ...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 92
    ... Current Report on Form 8-K filed May 28, 2013, and incorporated herein by reference). Indenture, dated as of April 22, 2009, among HCA Inc., the guarantors party thereto, Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York...

  • Page 93
    ... and Law Debenture Trust Company of New York as the Initial Additional Authorized Representative (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K filed April 28, 2009, and incorporated herein by reference). Additional General Intercreditor Agreement, dated as of August 1, 2011, by...

  • Page 94
    ... (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 the persons listed on the signature pages thereto (filed...

  • Page 95
    ..., dated as of November 23, 2010, among HCA Holdings, Inc., Deutsche Bank Trust Company Americas, as paying agent, registrar and transfer agent, and Law Debenture Trust Company of New York, as trustee (filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed November 24, 2010, and...

  • Page 96
    ...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 97
    ... Exhibit 4.48) HCA-Hospital Corporation of America Nonqualified Initial Option Plan (filed as Exhibit 4.6 to the Company's Registration Statement on Form S-3 (File No. 33-52379), and incorporated herein by reference).* Form of Indemnity Agreement with certain officers and directors (filed as Exhibit...

  • Page 98
    ...Stock Option Agreement (2011) (filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and incorporated herein by reference).* Form of Stock Appreciation Right Award Agreement Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings...

  • Page 99
    ... States of America, acting through the United States Department of Justice and on behalf of the Office of Inspector General of the Department of Health and Human Services, the TRICARE Management Activity (filed as Exhibit 10.2 to the Company's Quarterly Report of Form 10-Q for the quarter ended...

  • Page 100
    ... Omnibus Amendment to Stock Option Agreements Issued Under the 2006 Stock Incentive Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as amended, effective February 16, 2011 (filed as Exhibit 10.38 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010...

  • Page 101
    ... Act of 2002. The following financial information from our annual report on Form 10-K for the year ended December 31, 2013, filed with the SEC on February 26, 2014, formatted in Extensible Business Reporting Language (XBRL): (i) the consolidated balance sheets at December 31, 2013 and 2012, (ii) the...

  • Page 102
    ..., thereunto duly authorized. HCA HOLDINGS, INC. By: /s/ R. MILTON JOHNSON R. Milton Johnson President and Chief Executive Officer Dated: February 26, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the...

  • Page 103
    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, 2013, 2012 and 2011 ...Consolidated Comprehensive Income Statements for ...

  • Page 104
    ...three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), HCA Holdings, Inc.'s internal control over financial reporting...

  • Page 105
    ...YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (Dollars in millions, except per share amounts) 2013 2012 2011 Revenues before the provision for doubtful accounts ...Provision for doubtful accounts ...Revenues ...Salaries and benefits ...Supplies ...Other operating expenses ...Electronic health record...

  • Page 106
    ...) 2013 2012 2011 Net income ...Other comprehensive income (loss) before taxes: Foreign currency translation ...Unrealized (losses) gains on available-for-sale securities ...Defined benefit plans ...Pension costs included in salaries and benefits ...Change in fair value of derivative financial...

  • Page 107
    ...849 Long-term debt due within one year ...786 1,435 5,695 6,172 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 439,604,000 shares - 2013 and 443,200,200 shares - 2012...

  • Page 108
    ... FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011 (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 Retained Noncontrolling (000) Value Value Loss Deficit Interests...

  • Page 109
    ... costs ...55 62 70 Share-based compensation ...113 56 26 Pay-in-kind interest ...- - (78) Other ...7 9 8 Net cash provided by operating activities ...Cash flows from investing activities: Purchase of property and equipment ...Acquisition of hospitals and health care entities ...Disposal of hospitals...

  • Page 110
    ... required to appoint a board of directors comprised of a majority of independent members within one year of such date. Our common stock is traded on the NYSE (symbol "HCA"). HCA Holdings, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term...

  • Page 111
    ... recorded during the period the 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, commercial insurance companies...

  • Page 112
    ... 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 services...

  • Page 113
    ... or our credit facility. Accounts Receivable We receive payments for services rendered from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. We recognize that revenues and receivables from...

  • Page 114
    ... 54 days, 51 days and 52 days at December 31, 2013, 2012 and 2011, respectively. Adverse changes in general economic conditions, patient accounting service center operations, payer mix or trends in federal or state governmental health care coverage could affect our collection of accounts receivable...

  • Page 115
    ... to justify recording a contract-based asset based upon our analysis of the related control, regulatory and legal considerations. The physician recruiting liability amount of $15 million at both December 31, 2013 and 2012 represents the amount of expense recognized in excess of payments made through...

  • Page 116
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 1 - ACCOUNTING POLICIES (continued) Professional Liability Claims Reserves for professional liability risks were $1.279 billion and $1.297 billion at December 31, 2013 and 2012, respectively. The current portion of the ...

  • Page 117
    ... of certified EHR technology for the applicable period. However, unlike Medicaid, this initial payment amount will be adjusted based upon an updated calculation using the annual cost report information for the cost report period that began during the applicable payment year. Thus, incentive income...

  • Page 118
    ... 2013 presentation. NOTE 2 - SHARE-BASED COMPENSATION Stock Incentive Plan The 2006 Stock Incentive Plan for Key Employees of HCA Holdings Inc. and its Affiliates, as Amended and Restated (the "Stock Incentive Plan") is designed to promote the long term financial interests and growth of the Company...

  • Page 119
    ... of the number of years a share-based award will be held before it is exercised. 2013 2012 2011 Risk-free interest rate ...Expected volatility ...Expected life, in years ...Expected dividend yield ... 1.20% 1.18% 0.89% 45% 50% 41% 6.25 6.25 5.00 - - - Information regarding Time Stock Options and...

  • Page 120
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2 - SHARE-BASED COMPENSATION (continued) Stock Option, SAR and RSU Activity (continued) Information regarding Time RSUs and Performance RSUs activity during 2013, 2012 and 2011 is summarized below (share amounts in ...

  • Page 121
    ... method operating results, to record depreciation expense based on the estimated fair value assigned to the long-lived assets acquired, to record interest expense assuming the increase in long-term debt used to fund the acquisition had occurred as of January 1, 2011 and to record the related tax...

  • Page 122
    ... affiliate and is included in the Corporate and other Group. During 2013, we also paid $146 million and recorded goodwill of $58 million related to the acquisition of three hospitals, and we paid $57 million to acquire nonhospital health care entities. During 2012, we paid $58 million and assumed...

  • Page 123
    ... Division will begin an audit of HCA Holdings, Inc.'s 2011 federal income tax return in 2014. The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions): 2013 2012 Balance at January 1 ...Additions based on tax positions related to the current year...

  • Page 124
    ... shares of our common stock. The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2013, 2012 and 2011 (dollars in millions, except per share amounts, and shares in thousands): 2013 2012 2011 Net income attributable to HCA Holdings...

  • Page 125
    ...(62) $448 Amortized Cost 2012 Unrealized Amounts Gains Losses Fair Value Debt securities: States and municipalities ...Auction rate securities ...Asset-backed securities ...Money market funds ...Equity securities ...Amounts classified as current assets ...Investment carrying value ... $395 74 14...

  • Page 126
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6 - INVESTMENTS OF INSURANCE SUBSIDIARIES (continued) Scheduled maturities of investments in debt securities at December 31, 2013 were as follows (dollars in millions): Amortized Cost Fair Value Due in one year or less ...

  • Page 127
    ... related to these agreements. If we had breached these provisions at December 31, 2013, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $308 million. NOTE 8 - ASSETS AND LIABILITIES MEASURED AT FAIR VALUE Accounting...

  • Page 128
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 8 - ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued) inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances ...

  • Page 129
    ...Fair Value Assets: Investments of insurance subsidiaries: Debt securities: States and municipalities . . Auction rate securities ...Asset-backed securities ...Money market funds ...Equity securities ...Investments of insurance subsidiaries ...Less amounts classified as current assets ...Liabilities...

  • Page 130
    ...Fair Value Assets: Investments of insurance subsidiaries: Debt securities: States and municipalities ...Auction rate securities ...Asset-backed securities ...Money market funds ...Equity securities ...Investments of insurance subsidiaries ...Less amounts classified as current assets ...Liabilities...

  • Page 131
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9 - LONG-TERM DEBT A summary of long-term debt at December 31, including related interest rates at December 31, 2013, follows (dollars in millions): 2013 2012 Senior secured asset-based revolving credit facility (...

  • Page 132
    ...our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% or (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period, plus, in each case, an applicable margin. The applicable...

  • Page 133
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9 - LONG-TERM DEBT (continued) General Debt Information The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect,...

  • Page 134
    ... necessity of interventional cardiology services provided at any Company facility (other than peer reviews). The Company is cooperating with the government's request and has produced medical records associated with particular reviews at eight hospitals, located primarily in Florida. At this time, we...

  • Page 135
    ... claim costs in the fourth quarter of 2012 related to this ruling. The accounting for HCA's capital expenditures and charity and uncompensated care is ongoing and will likely not be concluded before the fourth quarter of 2014. HCA plans to appeal the trial court's ruling on the breach of contract...

  • Page 136
    ... of the offering) of $2.506 billion. During September 2011, we repurchased 80,771,143 shares of our common stock beneficially owned by affiliates of Bank of America Corporation at a purchase price of $18.61 per share, the closing price of the Company's common stock on the New York Stock Exchange on...

  • Page 137
    ... INFORMATION We operate in one line of business, which is operating hospitals and related health care entities. Effective January 1, 2013, we reorganized our operational groups into two geographically organized groups: the National and American Groups. The acquired HealthONE operating results...

  • Page 138
    ... and other intangible assets are summarized in the following table (dollars in millions): For the Years Ended December 31, 2013 2012 2011 Revenues: National Group ...American Group ...Corporate and other ...Equity in earnings of affiliates: National Group ...American Group ...Corporate and other...

  • Page 139
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION (continued) As of December 31, 2013 2012 Assets: National Group ...American Group ...Corporate and other ... $10,206 13,911 4,714 $28,831 $ 9,451 13,744 4,880 $28,075 Corporate ...

  • Page 140
    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 141
    ... doubtful accounts: Year ended December 31, 2011 ...Year ended December 31, 2012 ...Year ended December 31, 2013 ... $3,939 4,106 4,846 $2,824 3,770 3,858 $(2,657) (3,030) (3,216) $4,106 4,846 5,488 NOTE 17 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED...

  • Page 142
    ...-RELATED INFORMATION (continued) Our condensed consolidating balance sheets at December 31, 2013 and 2012 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2013, segregating HCA Holdings, Inc. issuer, HCA...

  • Page 143
    ... accounts ...Revenues ...Salaries and benefits ...Supplies ...Other operating expenses ...Electronic health record incentive income ...Equity in earnings of affiliates ...Depreciation and amortization ...Interest expense ...Losses (gains) on sales of facilities ...Legal claim costs ...Management...

  • Page 144
    ... - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued) HCA HOLDINGS, INC. CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2011 (Dollars in millions) HCA Holdings, Inc. Issuer HCA Inc. Issuer Subsidiary...

  • Page 145
    ...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 146
    ...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 147
    ...cash provided by (used in) operating activities: Change in operating assets and liabilities ...Provision for doubtful accounts ...Depreciation and amortization ...Income taxes ...Losses (gains) on sales of facilities ...Loss on retirement of debt ...Amortization of deferred loan costs ...Share-based...

  • Page 148
    ... provided by (used in) operating activities: Change in operating assets and liabilities ...Provision for doubtful accounts ...Depreciation and amortization ...Income taxes ...Losses (gains) on sales of facilities ...Legal claim costs ...Amortization of deferred loan costs ...Share-based compensation...

  • Page 149
    ...deferred loan costs ...Share-based compensation ...Pay-in-kind interest ...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...

  • Page 150
    ...): 2013 2012 2011 Presentation in HCA Holdings, Inc. Consolidated Statements of Stockholders' Deficit: Share-based benefit plans ...Reclassification of certain equity securities with contingent redemption rights ...Other ...Presentation in Healthtrust, Inc. - The Hospital Company Consolidated...

  • Page 151
    HCA HOLDINGS, INC. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (Dollars in millions) 2013 First Second Third Fourth Revenues ...Net income ...Net income attributable to HCA Holdings, Inc...Basic earnings per share ...Diluted earnings per share ... $8,440 $ 438(a) $ 344(a) $ 0.77 $ 0.74...

  • Page 152
    ... registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit and compliance committee of the registrant's board of directors (or persons performing the equivalent functions...

  • Page 153
    ... registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit and compliance committee of the registrant's board of directors (or persons performing the equivalent functions...

  • Page 154
    ... OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of HCA Holdings, Inc. (the "Company") on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned certifies, pursuant to 18...