1 Vic Campbell Senior Vice President Mark Kimbrough Vice President, Investor Relations Bryan Rogers President, Midwest Division Clifton Mills CFO, Midwest Division
Jan 03, 2016
1
Vic Campbell Senior Vice President
Mark Kimbrough Vice President, Investor Relations
Bryan Rogers President, Midwest Division
Clifton Mills CFO, Midwest Division
2
Cautionary Note Regarding Forward-looking StatementsCautionary Note Regarding Forward-looking StatementsCautionary Note Regarding Forward-looking StatementsCautionary Note Regarding Forward-looking Statements
HCA’s management will be making some forward-looking statements during today’s presentation. Those forward-looking statements are based on management’s current expectations and are subject to risks and uncertainties that may cause those forward looking statements to be materially incorrect.
Certain of those risks and uncertainties are discussed in HCA’s filings with the Securities and Exchange Commission, including the company’s report on Form 10-K and its quarterly reports on form 10-Q, to which you are referred. Management cautions
you not to rely on, and makes no promises to update any of the forward looking statements.
3
HCA Hospitals LocatedHCA Hospitals Locatedin Growth Marketsin Growth Markets
HCA Hospitals LocatedHCA Hospitals Locatedin Growth Marketsin Growth Markets
Switzerland
U.K.
Percent Growth in Market Population
2000-2005Compared to the
National Average of 4.5%
Percent Growth in Market Population
2000-2005Compared to the
National Average of 4.5%
Las Vegas+22%
Las Vegas+22%
Southern California
+9%
Southern California
+9%
Denver+9%
Denver+9%
Dade+8%
Dade+8%
Nashville+8%
Nashville+8%
Panhandle+10%
Panhandle+10%
Tampa Bay+8%
Tampa Bay+8%
Dallas/Ft. Worth+12%
Dallas/Ft. Worth+12%
Austin+18%
Austin+18%
Richmond+8%
Richmond+8%
Palm Beach+11%
Palm Beach+11%Houston
+10%Houston
+10%
Kansas City+5%
Kansas City+5%
187 Hospitals
94 Surgery Centers
Generally 25%-40%
Market Share
40% of facilities in
Texas & Florida
4
What Will Drive HCA’s Future SuccessWhat Will Drive HCA’s Future SuccessWhat Will Drive HCA’s Future SuccessWhat Will Drive HCA’s Future Success
• Aging Population and Improving Economy
• Located in Large, Growth Markets
• Aging Population and Improving Economy
• Located in Large, Growth Markets
• Capital Investments
• Enhanced Outpatient Strategy
• Capital Investments
• Enhanced Outpatient Strategy
• Quality and Patient Safety Initiatives• Quality and Patient Safety Initiatives
• Prudent use of Company’s Strong Cash Flows• Prudent use of Company’s Strong Cash Flows
5
Midwest Division
Facility ExpansionProjects
New & ReplacementFacilities
Infrastructure Develop.,IT&S, & Pat. Safety
Shared Services
Routine Capital
Note: Does not include potential new and replacement facilities. Note: Does not include potential new and replacement facilities.
$0.0
$0.5
$1.0
$1.5
$2.0`
2000 2001 2002 2003 2004 2005E
Billions 2000$1.2
2001$1.4
2002$1.7
2003$1.8
2004$1.5
2005E$1.6
HCA Capital ExpendituresHCA Capital Expenditures
New Denver FacilityNew Denver Facility
Distribution of Capital Dollars2005 and Beyond
1,611 New BedsThree New Facilities
310 Beds
Open Heart, Cardiology
Oncology, etc.
33 ERExpansi
ons
Three Facilities511 Beds
Land &Improvements12%/$505M
Surgery/SpecialUnits
21%/$875M
Beds14%/$590M
New Facilities8%/$340M
ER Services8%/$325
OutpatientServices/MOBs
11%/$480M
ReplacementFacilities
10%/$420M
New andExpandedServices
16%/$690M
6
3.6%
1.1%1.2%
2.1%2.8%
-0.1%
1.1%
3.1%1.9%
0.9%
3.5%
0.3%2.5% 1.1% 2.5%
1.7%
-0.9%
-0.4%
2.0%3.0%1.5%
2.8% 3.6%
1.8%
3.4%
-0.2%
2.5%
-3%
0%
3%
6%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
3.5%2.0%
3.0%
-0.7%
-0.3%
1.0%
3.4%
-1.4%
0.9%2.1%2.3% 3.0%
0.6%
-0.4%
0.9%
2.6%
1.8%2.2%0.4%2.3% 2.5%
1.8%
4.2%3.9% 4.3%
0.4%
0.2%
-3%
0%
3%
6%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
1999 2000 2001 2002 2003 2004
+2.7% +2.8% +2.7% +2.5% +0.6% +0.7%
VolumeVolume
+2.5% +2.6% +2.6% +2.6% +0.0% +1.3%
EquivalentAdmissions
Same Facility% Change from PY
EquivalentAdmissions
Same Facility% Change from PY
AdmissionsSame Facility
% Change from PY
AdmissionsSame Facility
% Change from PY
2005
7
0.7%
1.7%
0.4%
2.0%1.9%
1.4%
4.6%1.6%
2.2%
2.8% 4.2% 3.2%
3.3%1.8%
0.3%
-0.7%
2.5%2.6%
-0.8%
2.3%4.4% 4.0%
0.1%
1.1%2.6%
3.7%2.4%
-5%
5%
15%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
-0.2%1.2%
1.5%1.8%
0.7%
0.9%
-2.8%
-0.4%
-0.9%
-2.5%
2.9%
-1.3%
-5.0%-3.2%
2.9% 0.1%
-3.6%-2.9%
2.0%0.0%
-3.3%
3.1%
-0.6%
-0.2%
-0.7%
2.6% 1.8%
-10%
0%
10%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
0.1%0.6%
3.5%
-0.9%
1.2%
1.9% -1.6%
-2.5%
1.0%2.8%
-2.3%-2.4%
0.8%
3.3%
-1.5%
-0.2%
0.7%
-0.4%
0.6% 0.1%
3.3%2.0% 1.1%
1.2%
1.9%1.1%
1.4%
-5%
5%
15%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
VolumeVolume
+2.2% +3.5% +3.6% +2.8% -0.2%
InpatientSurgeries
Same Facility% Change from PY
InpatientSurgeries
Same Facility% Change from PY
+2.2%
1999 2000 2001 2002 2003 2004 2005
+0.4% -0.8% -1.2% +2.2% -3.0%
OutpatientSurgeries
Same Facility% Change from PY
OutpatientSurgeries
Same Facility% Change from PY
+1.4%
+1.1% +0.8% +0.5% +2.4% -1.9%Total
SurgeriesSame Facility
% Change from PY
TotalSurgeries
Same Facility% Change from PY
+1.7% +0.7%Sep YTD
+0.8%Sep YTD
+0.7%Sep YTD
8
10.4%10.3%8.3%
8.5%
6.7%7.2%
8.1%
7.2%7.2%
8.2%
7.3%
11.4%
7.6% 8.6%10.6%
8.1%7.6%
8.2%7.7%7.1%7.9%
11.7%
11.3% 10.5%
11.9%
9.3%8.9%
13.9%10.9%
11.6%
0%
10%
20%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
40.0%39.9%38.4%
39.1%
39.6%
38.9%37.7%
38.7%39.6%
40.1%39.7%
38.7%39.2%
38.9%40.0%
39.4%38.9%38.3%38.9%
39.8%38.4%
38.5%38.5%39.8%
40.0%
38.1%
39.4%38.3%
38.2%37.7%
35%
45%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
16.9%
16.2%16.2%
15.9%16.0%
15.9%15.8%
15.9%16.4%
15.8%
15.6%16.4%
16.0% 16.1% 16.0%
16.0%16.0%16.2%
16.3%
15.9%
15.9%16.5%
16.7% 16.8%
16.7%
17.1%17.3%
16.2%16.8%
16.8%
14%
20%
1Q99
2Q99
3Q99
4Q99
1Q00
2Q00
3Q00
4Q00
1Q01
2Q01
3Q01
4Q01
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
7.6% 7.5% 7.7% 8.0% 10.1% 11.4%
1999 2000 2001 2002 2003 2004 2005
39.3% 39.0% 39.4% 39.2% 38.5% 38.4%
16.0% 15.9% 16.0% 16.1% 16.2% 16.7%
Operating ExpensesOperating Expenses
Bad DebtAs Reported
% of Net Revenue
Bad DebtAs Reported
% of Net Revenue
SuppliesSame Facility
% of Net Revenue
SuppliesSame Facility
% of Net Revenue
SW&B1Same Facility
% of Net Revenue
SW&B1Same Facility
% of Net Revenue
39.2% Sep YTD
9.6%
Sep YTD
17.0% Sep YTD
12.2%
9
4.4% 4.5%
5.7%
4.7%4.8%
4.3%4.7%
4.2%4.1%4.1%
3.7%
4.4%
4.9% 5.0%
3.9%
3%
6%
UninsuredUninsured
18.3%17.7%
17.0%
20.4%
21.5%19.7%
18.2%17.5%
17.1%
19.6%
19.3% 19.5%20.8%
20.3% 20.5%
10%
25%
1Q 0
0
2Q 0
0
3Q 0
0
4Q 0
0
1Q 0
1
2Q 0
1
3Q 0
1
4Q 0
1
1Q02
2Q02
3Q02
4Q02
1Q03
2Q03
3Q03
4Q03
1Q04
2Q04
3Q04
4Q04
1Q05
2Q05
3Q05
4Q05
UninsuredAdmissions
Same Facility% of Total Admissions
20002000 20012001 20022002 20032003 20042004
UninsuredER Visits
Same Facility% of Total ER Visits
N/A
N/A
HCA Financial History – 2005.ppt
17,136 16,111 15,782 16,47318,416 17,961 17,944 18,929 19,532 18,947 18,871
20,39422,820
0
25,000
3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05
7.2%vs.
PY
2.4%vs.
PY
7.5%vs.
PY
11.5%vs.
PY
13.7%vs.
PY15.2%
vs.
PY
7.1%vs.
PY
3.7%vs.
PY
UninsuredAdmissions
Same Facility% Chg from Prior Year
2004: +9.7%
20052005
+5.0%+5.0% Sep YTD Sep YTD
+7.7% +7.7% Sep YTD Sep YTD
+20.2% +20.2% Sep YTDSep YTD
3.3%vs.
PY
5.1%vs.
PY
15.0%vs.
PY
10
Cash flow in 2005 Remains PositiveCash flow in 2005 Remains Positive
$1,301$1,584
$2,046
$2,786 $2,822$3,049
$2,529
$0
$3,500
1999 2000 2001 2002 2003 2004 2005
Net Cash Provided by Operating Activities1
Dollars in Millions
Excluding settlements with government agencies and investigation related costs.
1: 1999-2003 are non-GAAP numbers2: YTD 2005- 9/30/05
2
Uses of Cash
(1) Capital Reinvestment
$1.5B in 2004 in existing assets
(2) Share Repurchase Program
$10.0B in 8 years
$2.5B “Dutch Auction” underway
(3) Dividend Policy
$250mm annually
(4) Acquisitions – opportunistic
$1B Health Midwest - April 2003
(5) Debt Repayment
% Debt to Cap at September 30
11
Prudent Financial Strategy Focused on Shareholder Value
Strong Cash Flows
Great Assets
In Summary We Have….In Summary We Have….
12
Bryan Rogers, President
Midwest Division
13
Midwest Division HospitalsMidwest Division Hospitals Midwest Division HospitalsMidwest Division Hospitals
The “Big Six” Hospitals:
Research Medical Center
Baptist-Lutheran Medical Center
Overland Park Regional Medical Center
Menorah Medical Center
Independence Regional Health Center
Medical Center of Independence
Suburban /Rural/Specialty Hospitals:
Allen County Hospital
Lafayette Regional Health Center
Lee’s Summit Hospital
Research Belton Hospital
Research Psychiatric Center
The “Big Six” Hospitals:
Research Medical Center
Baptist-Lutheran Medical Center
Overland Park Regional Medical Center
Menorah Medical Center
Independence Regional Health Center
Medical Center of Independence
Suburban /Rural/Specialty Hospitals:
Allen County Hospital
Lafayette Regional Health Center
Lee’s Summit Hospital
Research Belton Hospital
Research Psychiatric Center
14
Kansas City MarketplaceKansas City MarketplaceKansas City MarketplaceKansas City Marketplace
Kansas City Profile– 26+ Full Service Acute Hospitals
– 6,507 Licensed / 5,254 Staffed Beds
– 3,343 ADC
– 64% Occupancy (staffed)
– 1.87M Residents in MSA - 2004
– 5.9% Population Growth 2004-09
• PRO– No dominant system– High “use rate” for service utilization– Lack of inpatient “niche” traction– Missouri: Certificate of Need state– Low % of uninsured population
• CON– Provider owned MCOs / dueling
systems
– Available bed capacity
– Irrational capital spending by stand alone single hospital franchises
– Low commodity pricing
15
2004 Kansas City Market Share2004 Kansas City Market Share2004 Kansas City Market Share2004 Kansas City Market Share
11 County Service Area
25%
11%
9%8%8%7%
6%
6%5%
4%11%
HCA Saint Luke's North Kansas City
Carondolet Shawnee Truman
Sisters of Charity Kansas University Olathe
Children's Other
16
Characteristics of Health MidwestCharacteristics of Health MidwestCharacteristics of Health MidwestCharacteristics of Health Midwest
System Developed through Acquisition (13)
Poor Management Control Systems
Centralized Decision Making
Declining Market Share
Lack of Leadership
Attempted Vertical Integration
Low Employee Morale
Lack of Capital Spending
System Developed through Acquisition (13)
Poor Management Control Systems
Centralized Decision Making
Declining Market Share
Lack of Leadership
Attempted Vertical Integration
Low Employee Morale
Lack of Capital Spending
17
Recruited 54 New Physicians to Market
Managed Care Pricing: 9% 2004; 9% 2005
ASC Development Projects Approved (Independence, MMC, OPRMC)
New Service Development
Pancreas / Transplant Services (RMC)
Gyn Oncology (OPRMC / RMC)
Trauma (OPRMC/Independence)
Open Heart Services (OPRMC / BLMC)
Cyberknife JV (MMC)
Chest Pain Accreditation
The Cancer Institute Unwind (Health Midwest/St. Luke’s Oncology JV)
CON Approval: Independence & Lee’s Summit
Imaging
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
MRI & CT Outpatient Volumes
MRI 3,637 6,926 10,125 11,206
CT 23,869 25,287 32,240 34,783
2002 2003 2004 2005
Growth 2003-2005
62%- MRI
38% - CT
Key Accomplishments - Key Accomplishments - GrowthGrowth Key Accomplishments - Key Accomplishments - GrowthGrowth
18
Key Accomplishments – Key Accomplishments – Cost /EfficiencyCost /Efficiency Key Accomplishments – Key Accomplishments – Cost /EfficiencyCost /Efficiency
• Labor Reductions
• Closed Unprofitable Services (Skilled Nursing, Rehabilitation Units)
• “Shed” Non-core Businesses (EHS, Trinity Manor, Fitness Center)
• Built Flexible Workforce (implemented “All About Staffing”)
• Case Management: Avoidable Day Reduction
• Supply Chain Warehouse
• PAS Implementation
19
Capital InvestmentCapital InvestmentCapital InvestmentCapital Investment
Major Capital Initiatives:
• $281 Million – New Independence Hospital ($196M) & New Lee’s Summit Hospital ($85M)
• $92 Million – Research Medical Center (ER, Patient Rooms, Cancer, Imaging)
• $25 Million – Overland Park Regional Health Center (Women’s Services & ICU)
• $15 Million – Outpatient Strategy Development (ASC, JVs, etc.)
• $32 Million – Financial & Clinical Information System
• $16 Million – Imaging Investment
CATEGORY 2003 2004 2005 2006 2007 2008 TOTAL
TOTAL CAPITAL 55.8 107.2 129.7 131.4 63.4 10.3 497.8
Cumulative Capital 55.8 163.0 292.7 424.1 487.5 497.8
First 2 years, spend or commit $300M;Year 3, spend or commit $50MYear 4, spend or commit $50MYear 5, spend or commit $50M
Capital Improvement Covenant
20
New Replacement HospitalsNew Replacement HospitalsNew Replacement HospitalsNew Replacement Hospitals
Site Summary: 39 acres purchased for $8M Bed Profile Proposed:
– Medical / Surgical 48– Intensive Care Unit 10– Women’s Services 6
TOTAL 64
ER Bays 14 treatment bays Surgical OR 4 PACU 8 positions Prep & Recovery 12 positions
Site Summary: 89 acres purchased for $15M Bed Profile Proposed:
– Medical / Surgical 156– Intensive Care Unit 28– NICU (Level II & III) 12– GYN/Antepartum 9– Post Partum 16
TOTAL 221
ER Bays 32 treatment bays Surgical OR 10 PACU 15 positions Prep & Recovery 30 positions
Lee’s SummitLee’s Summit IndependenceIndependence
21
12500
13000
13500
14000
14500
15000
ADMITS 4 per. Mov. Avg. (ADMITS)
Stabilized Run RateStabilized Run Rate Stabilized Run RateStabilized Run Rate
Admissions
22
Long Run StrategyLong Run StrategyLong Run StrategyLong Run Strategy
#1: Growth: Increase Market Share in High Margin Services
#2: Execute Capital Investment Strategy
#3: Upgrade Quality / Satisfaction
#4: HCA Goodwill / Communication Efforts
#5: Execute Revenue Plan to Address Provider Reimbursement
#6: Bed Consolidation
#7: Shared Service Initiatives / Continued Reduction in Fixed Costs
#8: Geographical Expansion into New Markets
#1: Growth: Increase Market Share in High Margin Services
#2: Execute Capital Investment Strategy
#3: Upgrade Quality / Satisfaction
#4: HCA Goodwill / Communication Efforts
#5: Execute Revenue Plan to Address Provider Reimbursement
#6: Bed Consolidation
#7: Shared Service Initiatives / Continued Reduction in Fixed Costs
#8: Geographical Expansion into New Markets