HCA Holdings 2015 Annual Report Download

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2015 Annual Report to Shareholders
Advancing
the Patient
Experience

Table of contents

  • Page 1
    Advancing the Patient Experience 2015 Annual Report to Shareholders

  • Page 2
    ... and Services 121 Access Centers Surgery Centers 116 Company Overview HCA Holdings, Inc. is one of the leading health care services companies in the United States. At December 31, 2015, we operated 168 hospitals, comprised of 164 general, acute care hospitals; three psychiatric hospitals; and...

  • Page 3
    ...in our facilities, in areas such as trauma, cardiac care and the neurosciences. We continue to enhance market access points for these services through the development of freestanding emergency rooms and the acquisition and development of additional urgent care centers in our markets. At year-end, we...

  • Page 4
    ...health care as it was intended, with patients at the center of the care model. As we continue to invest in clinical technologies and best practices that improve quality of care, expand access points, increase the complexities and capabilities of our service offerings and partner with our physicians...

  • Page 5
    ... For the fiscal year ended December 31, 2015 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
    ... 1. Business ...3 33 48 48 49 52 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 7
    ...care facilities, walk-in clinics, diagnostic centers and rehabilitation facilities. Our psychiatric hospitals provide a full range of mental health care services through inpatient, partial hospitalization and outpatient settings. Our common stock is traded on the New York Stock Exchange (symbol "HCA...

  • Page 8
    ... We currently own, manage or operate hospitals, freestanding surgery centers, freestanding emergency care facilities, urgent care facilities, walk-in clinics, diagnostic and imaging centers, radiation and oncology therapy centers, comprehensive rehabilitation and physical therapy centers, physician...

  • Page 9
    ...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 10
    ... market basket updates if they fail to submit data for patient care quality indicators to the Secretary of the Department of Health and Human Services ("HHS"). As of federal fiscal year 2015, hospitals that do not participate lose an additional one-quarter of the percentage increase in their payment...

  • Page 11
    ..., freestanding surgery center services and services provided by independent diagnostic testing facilities. Hospital outpatient services paid under PPS are classified into groups called ambulatory payment classifications ("APCs"). Services for each APC are similar clinically and in terms of...

  • Page 12
    ... policy for extraordinarily costly cases and an adjustment to a facility's base payment if it maintains a full-service emergency department. CMS has established the IPF PPS payment rate in a manner intended to be budget neutral. The rehabilitation, psychiatric and long-term care market basket update...

  • Page 13
    ...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 14
    ... or payment reductions based on their performance with respect to clinical quality, resource use, clinical improvement activities, and meaningful use of electronic health records ("EHRs"). While consolidating certain existing physician incentive programs, MIPS also requires CMS to provide, beginning...

  • Page 15
    ...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 16
    ... in recent years, as state governments seek to control the cost of Medicaid programs. However, general economic conditions in the states in which we operate may require reductions in premium payments to these plans and may reduce enrollment in these plans. Accountable Care Organizations and Bundled...

  • Page 17
    ... a new methodology will be required prior to fiscal year 2017. TRICARE TRICARE is the Department of Defense's health care program for members of the armed forces. For inpatient services, TRICARE reimburses hospitals based on a DRG system modeled on the Medicare inpatient PPS. For outpatient services...

  • 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
    ... of the hospital and the number and quality of physicians and other health care professionals providing patient care within the facility. Generally, we believe the ability of a hospital to be a market leader is determined by its breadth of services, level of technology, quality and condition of the...

  • Page 20
    ... table includes only those facilities that are consolidated for financial reporting purposes. Years Ended December 31, 2014 2013 2012 2015 2011 Number of hospitals at end of period ...Number of freestanding outpatient surgery centers at end of period ...Number of licensed beds at end of period...

  • Page 21
    ... and retain quality physicians, skilled clinical personnel and other health care professionals, location, breadth of services, technology offered, quality and condition of the facilities and prices charged. Hospitals must make public a list of their standard charges for items and services or their...

  • 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
    ... (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 24
    ... in a position to refer business, such as physicians, and those providing items or services for which Medicare or Medicaid pays, and (b) certain "gainsharing" arrangements, i.e., the practice of giving physicians a share of any reduction in a hospital's costs for patient care attributable in part to...

  • Page 25
    ... 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 26
    ... 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 27
    ... require covered entities, including health plans and most health care providers, to implement administrative, physical and technical safeguards to protect the security of such information. Certain provisions of the security and privacy regulations apply to business associates (entities that handle...

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

  • Page 29
    ... 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 30
    ... coverage, excluding persons based upon pre-existing conditions or denying coverage for any individual who is willing to pay the premiums for such coverage. Larger employers are subject to new requirements and incentives to provide health insurance benefits to their full time employees. Employers...

  • Page 31
    ... of health insurance coverage under the Health Reform Law may result in an increase in the number of patients using our facilities who have either private or public program coverage. In addition, the Health Reform Law provides for initiatives that create possible sources of additional revenue, such...

  • Page 32
    ...laws and regulations. As part of the ethics and compliance program, we provide annual ethics and compliance training to our employees and encourage all employees to report any violations to their supervisor, an ethics and compliance officer or a toll-free telephone ethics line. The Health Reform Law...

  • Page 33
    ...a significant operating issue to health care providers. To address this challenge, we have implemented several initiatives to improve retention, recruiting, compensation programs and productivity. Our hospitals are staffed by licensed physicians, including both employed physicians and physicians who...

  • Page 34
    ... board of directors of Avenue Financial Holdings, Inc. Victor L. Campbell has served as Senior Vice President of the Company since February 1994. He is responsible for government and investor relations. Prior to that time, Mr. Campbell served as HCA-Hospital Corporation of America's Vice President...

  • Page 35
    ...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 36
    of the Company from February 1994 to July 1995. Prior to that time, Mr. Hazen served in various hospital and regional Chief Financial Officer positions with Humana Inc. and Galen Health Care, Inc. A. Bruce Moore, Jr. was appointed President - Service Line and Operations Integration in February 2011....

  • Page 37
    ... as Senior Vice President and General Counsel of the Company since November 1997 and Chief Labor Relations Officer since March 2009. Mr. Waterman served as a partner in the law firm of Latham & Watkins from September 1993 to October 1997; he was Chair of the firm's health care group during 1997...

  • Page 38
    ... to obtain additional financing for working capital, capital expenditures, share repurchases, product or service line development, debt service requirements, acquisitions and general corporate or other purposes; and limiting our ability to adjust to changing market conditions and placing us at...

  • Page 39
    ... 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 40
    ... provision for doubtful accounts is based upon management's assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal and state governmental and private employer health care coverage, the rate of growth in uninsured patient admissions and...

  • Page 41
    ... at a later date. It is unclear how 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...

  • Page 42
    ... restricted network 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 (42.1% of our revenues in 2015...

  • Page 43
    ..., Medicaid or other government health care programs. Reimbursement rates are set forth by contract when our facilities are in-network, and payers utilize plan structures to encourage or require the use of in-network providers. Revenues derived from nongovernment payers (domestic only) accounted for...

  • Page 44
    ...and personal information and medical records; screening, stabilization and transfer of individuals who have emergency medical conditions; licensure, certification and enrollment with government programs; hospital rate or budget review; debt collection; preparing and filing of cost reports; operating...

  • Page 45
    ... or other applicable laws and regulations, we could be subject to liabilities, including civil penalties, the loss of our licenses to operate one or more facilities, exclusion of one or more facilities from participation in the Medicare, Medicaid and other federal and state health care programs and...

  • Page 46
    ... compliance with any of these laws, regulations or programs, depending on the nature of the findings, our business, our financial position and our results of operations could be negatively impacted. Changes to physician utilization practices and treatment methodologies, governmental or managed care...

  • Page 47
    ... value-based purchasing of health care services. These value-based purchasing programs include both public reporting of quality data and preventable adverse events tied to the quality and efficiency of care provided by facilities. Governmental programs including Medicare currently require hospitals...

  • Page 48
    ...our business operations. In addition to our shared services initiatives, our information systems are essential to a number of critical areas of our operations, including accounting and financial reporting; billing and collecting accounts; coding and compliance; clinical systems; medical records and...

  • Page 49
    ... certain capital expenditures or to make changes in services or bed capacity. In giving approval, these states consider the need for additional or expanded health care facilities or services. We currently operate health care facilities in a number of states with CON laws or that require other types...

  • Page 50
    ... pay purchase prices that are higher than we believe are reasonable. Some states require CONs in order to acquire a hospital or other facility or to expand facilities or services. In addition, the acquisition of health care facilities often involves licensure approvals or reviews and complex change...

  • Page 51
    ... on long-term investments in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue specific factors. We are also exposed to market risk related to changes in interest rates, and...

  • Page 52
    ... 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, 2015: State Hospitals Beds Alaska ...California ...Colorado ...Florida ...Georgia ...Idaho ...Indiana ...Kansas ...Kentucky...

  • Page 53
    ...conditions on HCA and other private health care providers, including: regulation of incentives to referring 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...

  • Page 54
    ... of the board of directors and Hercules Holding II, LLC, a majority shareholder of the Company at the time of the initial public offering. The consolidated complaint alleges deficiencies in the Company's disclosures in the Registration Statement and Prospectus relating to: (1) the accounting for the...

  • Page 55
    ... fourth quarter of 2015, HCA recorded legal claim costs, net of expected insurance recoveries, of $120 million for the expected settlements of the shareholder action, the derivative cases and related costs. Health Midwest Litigation In October 2009, the Health Care Foundation of Greater Kansas City...

  • Page 56
    ... the case in the total sum of $434 million, with interest continuing to accrue at 9% per annum, compounded annually, from and after November 19, 2015, until the matter is resolved. At December 31, 2015, the Company had an accrued liability of $438 million for the damages, costs and interest related...

  • Page 57
    ... on the New York Stock Exchange ("NYSE") (symbol "HCA"). There were no dividends or distributions declared during 2015 or 2014. The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share reported on the NYSE for our common stock. Sales Price High Low...

  • Page 58
    STOCK PERFORMANCE GRAPH COMPARISON OF CUMULATIVE TOTAL RETURN Among HCA Holdings Inc., the S&P 500 Index and the S&P Health Care Index $300 $250 $200 $150 $100 $50 $0 3/10/11 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2015 HCA Holdings Inc. S&P 500 S&P Health Care 3/10/2011 12/31/...

  • Page 59
    ... HOLDINGS, INC. SELECTED FINANCIAL DATA AS OF AND FOR THE YEARS ENDED DECEMBER 31 (Dollars in millions, except per share amounts) 2015 2014 2013 2012 2011 Summary of Operations: Revenues before provision for doubtful accounts ...Provision for doubtful accounts ...Revenues ...Salaries and benefits...

  • Page 60
    2015 2014 2013 2012 2011 Operating Data: Number of hospitals at end of period ...Number of freestanding outpatient surgical centers at end of period ...Number of licensed beds at end of period(a) ...Weighted average licensed beds(b) ...Admissions(c) ...Equivalent admissions(d) ...Average length...

  • Page 61
    ...in our markets, (15) the emergence and effects related to infectious diseases, (16) future divestitures which may result in charges and possible impairments of long-lived assets, (17) changes in business strategy or development plans, (18) delays in receiving payments for services provided, (19) the...

  • Page 62
    ... for 2014, compared to 2013. We believe the reversal of the 2014 declines during 2015 was primarily due to the anniversary of the benefits from the health insurance exchanges and Medicaid expansion programs that we began realizing during the second quarter of 2014. Interest expense totaled $1.665...

  • Page 63
    ...'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Business Strategy We are committed to providing the communities we serve with high quality, cost-effective health care while growing our business, increasing our profitability and creating long-term value for our...

  • Page 64
    ... consolidated financial statements. Revenues Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from payers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related...

  • Page 65
    ..., business and economic conditions, trends in federal, state, and private employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical writeoffs and recoveries at facilities that represent a majority of our revenues and accounts...

  • Page 66
    ... of revenues, the provision for doubtful accounts, uninsured discounts and charity care was 31.5% for 2015, 30.2% for 2014 and 31.3% for 2013. We believe the decline from 2013 to 2014 was primarily due to previously uninsured patients obtaining medical coverage through the health insurance exchanges...

  • Page 67
    ......Accounts receivable aging at December 31, 2014: Medicare and Medicaid ...Managed care and other insurers ...Uninsured ...Total ... 12% 25 22 59% 13% 23 17 53% 1% 5 6 12% 1% 5 7 13% 1% 5 23 29% 2% 5 27 34% Professional Liability Claims We, along with virtually all health care providers, operate...

  • Page 68
    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 69
    ...including government programs and managed care health plans, under which the facilities are paid based upon the cost of providing services, predetermined rates per diagnosis, fixed per diem rates or discounts from gross charges. We do not pursue collection of amounts related to patients who meet our...

  • Page 70
    ... compared to 2013. 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 71
    ...state of Florida. Our Florida facilities' revenues totaled $9.059 billion, $8.336 billion and $7.551 billion for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, we owned and operated 38 hospitals and 25 surgery centers in the state of Texas. Our Texas facilities...

  • Page 72
    ...payments. In the second quarter of 2014, we recorded $142 million of Medicaid revenues 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. On October 1, 2014, the Texas...

  • Page 73
    ...recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that...

  • Page 74
    ... to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume. (c) Same facility information excludes the operations of hospitals and their related facilities that were either acquired, divested or removed from service during the current and prior year. 70

  • Page 75
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Years Ended December 31, 2015 and 2014 Net income attributable to HCA Holdings, Inc. totaled $2.129 billion, or $4.99 per diluted share, for the year...

  • Page 76
    ... rate for our long-term debt declined from 6.1% for 2014 to 5.6% for 2015. Net losses on sales of facilities were $5 million for 2015 and related to sales of real estate and other investments. Net gains on sales of facilities were $29 million for 2014 and related to the sale of a hospital facility...

  • Page 77
    ... amounts for patients who have health care coverage. The self-pay revenue deductions for charity care and uninsured discounts increased $278 million and $789 million, respectively, during 2014 compared to 2013. The sum of the provision for doubtful accounts, uninsured discounts and charity care, as...

  • Page 78
    ...recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that...

  • Page 79
    ... two of our Texas markets and our group purchasing organization. Liquidity and Capital Resources Our primary cash requirements are paying our operating expenses, servicing our debt, capital expenditures on our existing properties, acquisitions of hospitals and other health care entities, repurchases...

  • Page 80
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) hospitals and health care entities during 2015, 2014 and 2013, respectively. Planned capital expenditures are expected to approximate $2.7 ...

  • Page 81
    HCA HOLDINGS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources (continued) Financing Activities We are a highly leveraged company with significant debt service requirements. Our debt totaled $30.488 billion and $29...

  • Page 82
    ...(a) Total Payments Due by Period Current 2-3 Years 4-5 Years After 5 Years Long-term debt including interest, excluding the senior secured credit facilities(b) ...Loans outstanding under the senior secured credit facilities, including interest(b) ...Professional liability claims(c) ...Operating...

  • Page 83
    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 84
    ... prices. Revenues for general, acute care hospital services rendered to Medicare patients are established under the federal government's prospective payment system. Total fee-for-service Medicare revenues were 21.8%, 22.6% and 23.3% of our revenues for 2015, 2014 and 2013, respectively. Management...

  • Page 85
    ... 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 86
    ... States), the consolidated balance sheets of HCA Holdings, Inc. as of December 31, 2015 and 2014, and the related consolidated statements of income, comprehensive income, stockholders' deficit, and cash flows for each of the three years in the period ended December 31, 2015 and our report dated...

  • Page 87
    ...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 88
    ... units and performance share units into account. * For additional information concerning our equity compensation plans, see the discussion in Note 2 - Share-Based Compensation in the notes to the consolidated financial statements. Item 13. Certain Relationships and Related Transactions, and Director...

  • Page 89
    ...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 90
    ...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 91
    ...). Security Agreement, dated as November 17, 2006, and amended and restated as of March 2, 2009, among the Company, the Subsidiary Grantors named therein and Bank of America, N.A., as Collateral Agent (filed as Exhibit 4.10 to the Company's Annual Report on Form 10-K for the fiscal year ended...

  • Page 92
    ...). Security Agreement, dated as of September 30, 2011, by and among HCA Inc., the subsidiary borrowers party thereto and Bank of America, N.A., as collateral agent (filed as Exhibit 4.5 to the Company's Current Report on Form 8-K filed October 3, 2011, and incorporated herein by reference). General...

  • Page 93
    ... as Exhibit 4.4 to the Company's Current Report on Form 8-K filed November 24, 2010 (File No. 000-18406), 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...

  • Page 94
    ...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 95
    ...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 96
    ... agent (filed as Exhibit 4.4 to the Company's Current Report on Form 8-K filed December 8, 2015, and incorporated herein by reference). 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...

  • Page 97
    ... Stock Option Agreement (2010) (filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (File No. 001-11239), and incorporated herein by reference).* Form of 2x Time Stock Option Agreement (filed as Exhibit 10.2 to the Company's Quarterly Report...

  • Page 98
    ...).* 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 99
    ...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 (File No...

  • Page 100
    ... Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.49 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference).* HCA Holdings, Inc. 2014 Senior Officer Performance...

  • Page 101
    ... Plan for Key Employees of HCA Holdings, Inc. and its Affiliates, as Amended and Restated (filed as Exhibit 10.47 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference).* HCA Holdings, Inc. 2015 Senior Officer Performance...

  • Page 102
    ... the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ /s/ R. MILTON JOHNSON R. Milton Johnson Chairman, Chief Executive Officer and Director (Principal...

  • 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, 2015, 2014 and 2013 ...Consolidated Comprehensive Income Statements for ...

  • Page 104
    ...with the standards of the Public Company Accounting Oversight Board (United States), HCA Holdings, Inc.'s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of...

  • Page 105
    HCA HOLDINGS, INC. CONSOLIDATED INCOME STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Dollars in millions, except per share amounts) 2015 2014 2013 Revenues before the provision for doubtful accounts ...Provision for doubtful accounts ...Revenues ...Salaries and benefits ......

  • Page 106
    ... STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Dollars in millions) 2015 2014 2013 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 107
    ...-term debt due within one year ...233 338 5,516 Long-term debt, less net debt issuance costs of $167 and $219 ...Professional liability risks ...Income taxes and other liabilities ...Stockholders' deficit: Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 398,738,700 shares - 2015...

  • Page 108
    .... CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013 (Dollars in millions) Equity (Deficit) Attributable to HCA Holdings, Inc. Capital in Accumulated Common Stock Excess of Other Shares Par Par Comprehensive Retained (in millions) Value Value Loss...

  • Page 109
    ...issuance 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 110
    ...INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ACCOUNTING POLICIES Reporting Entity HCA Holdings, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term "affiliates" includes direct and indirect subsidiaries of HCA Holdings, Inc. and...

  • Page 111
    ... health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Revenues related to uninsured patients...

  • Page 112
    ... 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 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
    ... balance. Days revenues in accounts receivable were 53 days, 54 days and 54 days at December 31, 2015, 2014 and 2013, respectively. Changes in general economic conditions, patient accounting service center operations, payer mix, or federal or state governmental health care coverage could affect...

  • Page 115
    ... defined in Accounting Standards Codification ("ASC") No. 320, Investments - Debt and Equity Securities and are recorded at fair value. The investment securities are held for the purpose of providing a funding source to pay liability claims covered by the insurance subsidiaries. We perform quarterly...

  • Page 116
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 1 - ACCOUNTING POLICIES (continued) Debt Issuance Costs Debt issuance costs are amortized based upon the terms of the respective debt obligations. The gross carrying amount of debt issuance costs at December 31, 2015 and ...

  • Page 117
    ...recognize income related to Medicare and Medicaid incentive payments using a gain contingency model that is based upon when our eligible hospitals have demonstrated meaningful use of certified EHR technology for the applicable period and the cost report information for the full cost report year that...

  • Page 118
    ...-free interest rate is the approximate yield on United States Treasury Strips having a life equal to the expected share-based award life on the date of grant. The expected life is an estimate of the number of years a share-based award will be held before it is exercised. 2015 2014 2013 Risk-free...

  • Page 119
    ... during 2015, 2014 and 2013 were $26.10, $19.13 and $16.68 per share, respectively. The total intrinsic value of stock options and SARs exercised in the year ended December 31, 2015 was $544 million. As of December 31, 2015, the unrecognized compensation cost related to nonvested stock options and...

  • Page 120
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 2 - SHARE-BASED COMPENSATION (continued) Stock Option, SAR, RSU and PSU Activity (continued) Information regarding Time RSUs, Performance RSUs and PSUs activity during 2015, 2014 and 2013 is summarized below (share ...

  • Page 121
    ... $187 million for the years ended December 31, 2015, 2014 and 2013, respectively. A reconciliation of the federal statutory rate to the effective income tax rate follows: 2015 2014 2013 Federal statutory rate ...State income taxes, net of federal tax benefit ...Change in liability for uncertain tax...

  • Page 122
    ...72 (11) (1) (5) $503 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. Our liability for unrecognized tax benefits was $554 million, including accrued...

  • Page 123
    ... - $ (1) $444 34 478 4 482 (50) $432 Amortized Cost 2014 Unrealized Amounts Gains Losses 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 2 $20...

  • Page 124
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 6 - INVESTMENTS OF INSURANCE SUBSIDIARIES (continued) The average expected maturity of the investments in debt securities at December 31, 2015 was 3.8 years, compared to the average scheduled maturity of 5.4 years. ...

  • Page 125
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 8 - ASSETS AND LIABILITIES MEASURED AT FAIR VALUE Accounting Standards Codification 820, Fair Value Measurements and Disclosures ("ASC 820") emphasizes fair value is a market-based measurement, not an entity-specific ...

  • Page 126
    ... 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 (Income taxes and...

  • Page 127
    ... market prices for similar issues of long-term debt with the same maturities. NOTE 9 - LONG-TERM DEBT A summary of long-term debt at December 31, including related interest rates at December 31, 2015, follows (dollars in millions): 2015 2014 Senior secured asset-based revolving credit facility...

  • Page 128
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 9 - LONG-TERM DEBT (continued) 2015 Activity During December 2015, we issued $500 million aggregate principal amount of 5.875% senior notes due 2026. We used the net proceeds for general corporate purposes. During ...

  • Page 129
    ... STATEMENTS (Continued) NOTE 9 - LONG-TERM DEBT (continued) Senior Secured Credit Facilities And Other Senior Secured Debt (continued) Borrowings under the senior secured credit facilities bear interest at a rate equal to, at our option, either (a) a base rate determined by reference to the higher...

  • Page 130
    ... on our results of operations, financial position or liquidity. In July 2012, the Civil Division of the U.S. Attorney's Office in Miami requested information on reviews assessing the medical necessity of interventional cardiology services provided at any Company facility (other than peer reviews...

  • Page 131
    ...conditions on HCA and other private health care providers, including: regulation of incentives to referring 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...

  • Page 132
    ... of the board of directors and Hercules Holding II, LLC, a majority shareholder of the Company at the time of the initial public offering. The consolidated complaint alleges deficiencies in the Company's disclosures in the Registration Statement and Prospectus relating to: (1) the accounting for the...

  • Page 133
    ... fourth quarter of 2015, HCA recorded legal claim costs, net of expected insurance recoveries, of $120 million for the expected settlements of the shareholder action, the derivative cases and related costs. Health Midwest Litigation In October 2009, the Health Care Foundation of Greater Kansas City...

  • Page 134
    ... 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 which was completed during the fourth quarter of 2014 through market purchases of...

  • Page 135
    ... for 2013. Accrued benefits liabilities under these plans totaled $131 million at December 31, 2015 and $172 million at December 31, 2014. NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION We operate in one line of business, which is operating hospitals and related health care entities. We operate in...

  • Page 136
    HCA HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION (continued) Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia, and the American Group included 78 hospitals located in Colorado, northern Georgia, Kansas, southern ...

  • Page 137
    ... STATEMENTS (Continued) NOTE 14 - SEGMENT AND GEOGRAPHIC INFORMATION (continued) For the Years Ended December 31, 2015 2014 2013 Adjusted segment EBITDA ...Depreciation and amortization ...Interest expense ...Losses (gains) on sales of facilities ...Losses on retirement of debt ...Legal claim costs...

  • Page 138
    ... Gains on Availablefor-Sale Securities Foreign Currency Translation Adjustments Change in Fair Value of Derivative Instruments Defined Benefit Plans Total Balances at December 31, 2012 ...Unrealized losses on available-for-sale securities, net of $3 income tax benefit ...Foreign currency...

  • Page 139
    ... doubtful accounts: Year ended December 31, 2013 ...Year ended December 31, 2014 ...Year ended December 31, 2015 ... $4,846 5,488 5,011 $3,858 3,169 3,913 $(3,216) (3,646) (3,598) $5,488 5,011 5,326 NOTE 17 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED...

  • Page 140
    ...-RELATED INFORMATION (continued) Our condensed consolidating balance sheets at December 31, 2015 and 2014 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2015, segregating HCA Holdings, Inc. issuer, HCA...

  • Page 141
    ...RELATED INFORMATION (continued) HCA HOLDINGS, INC. CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 (Dollars in millions) HCA Holdings, Inc. Issuer HCA Inc. Issuer Subsidiary Guarantors Subsidiary NonGuarantors Condensed Consolidated Eliminations Revenues...

  • Page 142
    ... 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 Subsidiary Holdings, Inc. HCA Inc. Subsidiary NonCondensed...

  • Page 143
    ... CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE 17 - SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued) HCA HOLDINGS, INC. CONDENSED CONSOLIDATING BALANCE SHEET DECEMBER 31, 2015 (Dollars in millions) HCA Subsidiary Holdings, Inc. HCA...

  • Page 144
    ... liabilities: Accounts payable ...Accrued salaries ...Other accrued expenses ...Long-term debt due within one year ...Long-term debt, net ...Intercompany balances ...Professional liability risks ...Income taxes and other liabilities ...Stockholders' (deficit) equity attributable to HCA Holdings...

  • Page 145
    ... 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 146
    ... 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 147
    ... 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 148
    ...The Hospital Company Consolidated Statements of Stockholder's Deficit presentation for the years ended December 31, 2015, 2014 and 2013 are as follows (dollars in millions): 2015 2014 2013 Presentation in HCA Holdings, Inc. Consolidated Statements of Stockholders' Deficit: Share-based benefit plans...

  • Page 149
    HCA HOLDINGS, INC. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED) (Dollars in millions) 2015 First Second Third Fourth Revenues ...Net income ...Net income attributable to HCA Holdings, Inc...Basic earnings per share ...Diluted earnings per share ... $9,676 $ 720(a) $ 591(a) $ 1.41 $ 1.36...

  • Page 150
    ...'s auditors and the audit and compliance committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to...

  • Page 151
    ...'s auditors and the audit and compliance committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to...

  • Page 152
    ... 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, 2015, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned certifies, pursuant to 18...

  • Page 153
    ...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 154
    ... Registered Public Accounting Firm Ernst & Young LLP Nashville, Tennessee Corporate Headquarters One Park Plaza Nashville, Tennessee 37203 615-344-9551 Form 10-K The Company has filed an annual report on Form 10-K for the year ended December 31, 2015 with the United States Securities and Exchange...