Introduction This chapter describes methods for assessing the.docx

Introduction
This chapter describes methods for assessing the financial
health of hospitals and safety net institutions. The examples
used are drawn principally from hospitals, but the principles
and approaches apply to clinics and other safety net providers.
The chapter discusses:
hospital financial health.
using alternative data.
tions in interpreting this data.
The goal of this chapter is to enable the reader to identify
potential measures, data sources for implementing these
measures, and conceptual and accounting issues in
implementing and interpreting these measures. It is not intended
to be a primer on accounting or financial management, although
accounting and financial management concepts are discussed
(Lane, Longstreth, and Nixon, 2001).
Return to Contents
Measuring the Financial Health of Safety Net Hospitals
One definition of the financial health of an institution is its
ability to continue to operate as a going concern. There are
three dimensions to this ability:
1. Revenues and expenses must be in balance.
2. Adequate resources (that is, capital) must be available to
deliver services and finance operations both in the short and
long term.
3. The institution must be able to replenish or renew itself.
The first two dimensions are explicitly captured in a variety of
measures; the third, ability to renew, is generally inferred from

a range of data.
Revenues and Expenses
The first dimension of financial health is that revenues and
expenses be in balance. More generally, we should expect that
revenues at least match expenses ("break even"), and most
financial analysts would expect an institution's revenues to
exceed expenses, so as to finance increases in working capital
and build funds as a cushion for a financial downturn and for
renewal or expansion. The standard measure of profitability is
margin:
(Revenues - Expenses) Revenues
Hospitals are multiproduct firms, with multiple sources of
revenues. They provide inpatient and outpatient health care
services, and they may provide other services to those using the
hospital (parking, cafeteria, and so on) or to outside
organizations (selling laboratory services, laundry, or catering
services, for example, to other hospitals or health care
providers). Some hospitals are involved in medical or related
education, whereas others conduct research. Some receive
philanthropy, government subsidies, or interest and investment
income that may not be directly tied to any operational
activities. Analyzing the margin requires specifying the level at
which revenues are being aggregated and allocating expenses to
match the revenues.
There are three common measures of margin. The broadest
measure is total margin, which is computed as follows:
(Total revenues from all sources - Total expenses) Total
revenues from all sources
The second measure is operating margin. In computing
operating margin, only revenues from operational activities,
whether patient care or other, are considered, and expenses
associated with nonoperating revenues, such as the costs of
managing investments, are subtracted from expenses.
The third frequently used measure is patient care margin, the
margin on what is considered the core business of the hospital
or health care institution. For this measure, only revenues for

patient care services are considered, and these are compared
with operating costs for patient care services. Revenues are
usually recorded separately for each activity that bills for its
services (designated as "revenue centers" in most reporting
systems), and calculating estimated patient care revenues is
relatively straightforward.
Estimating patient care expenses is more difficult. Some
expenses are incurred within patient care units, but many
expenses, including such activities as housekeeping, utilities,
insurance, and central administration, are aggregated at levels
above revenue centers, sometimes at the hospital level. These
operating expenses must be allocated among patient care and
other operations. Cost allocation, while subject to extensive
accounting rules, involves a substantial degree of discretion. In
addition, outside analysts of hospital performance often must
rely on imprecise allocations based on aggregate data available
in publicly available sources. Operating expenses might, for
example, be allocated to patient care based on the proportion of
operating revenues derived from patient care. Margin analysis
of a subset of hospital activities may thus have more focus, but
may also involve less precision.
The analysis of patient care margins may be further extended to
examine the margins from each payer. Although hospitals set up
schedules of charges for each service they provide, few insurers
pay these rates. The Federal Medicare and State Medicaid
programs establish the amounts that they pay by regulation,
except in a few places where the Medicaid rates are established
through negotiation. Most insurers, particularly those with any
volume in a community, will negotiate rates with hospitals.
These may be established as a percentage of the charges that
hospitals bill, fixed payments per day, per admission, or by
diagnosis, or on some other basis. Small insurers who do not
have a negotiated rate with a hospital and uninsured patients
will be billed the full charges for care received, although the
amount actually paid may be subject to individual negotiation.
Because of the variety of negotiated rates, the profit margin for

each payer will differ. Computing these margins requires having
the amount of revenue from the payer and the patient care
expenses allocated to that payer. Expenses are typically
allocated to a given payer based on the proportion of the
charges billed to that payer. That is, if based on the nominal
schedule of charges (which, as noted above, virtually no one
actually pays), Medicaid patients were billed for 10 percent of
the total charges, then 10 percent of the patient care expenses
would be allocated to Medicaid. Within the hospital, this
estimate can be made at the department level, with Medicaid or
other payers' share of charges in departments such as
laboratory, radiology, and intensive care units being used to
allocate the expenses of those departments. However, for those
analyzing margin using publicly available data, often only
hospital-level aggregate charges are available to make this
allocation.
In the analysis of margins described above, the denominator is
revenues, and profits or margin is defined as a proportion of
revenues. An alternative measure, markup or the markup ratio,
is obtained by using the following formula:
(Revenues - Expenses) Expenses
This is a direct measure of how much the hospital's earnings
exceed or fall short of covering its expenses. For most analysis
of safety net institutions, the measure of interest is net markup,
based on net revenues, rather than gross markup, based on
billed charges.
One factor that can complicate the interpretation of margins and
other measures of financial health is the use of accrual
accounting for revenues and expenses. A cash accounting
system records expenses as they are paid and revenues as they
are received. Most organizations use accrual accounting, in
which revenues and expenses are charged against the fiscal year
to which they apply, rather than the year in which they are
incurred. Thus, a payment for insurance made in 1 fiscal year
that covers periods of 2 fiscal years will be allocated between
the years. Revenues that will be received from Medicare,

Medicaid, or other third-party payers will be estimated based on
current charges and projected contractual adjustments pending
final settlement with the payer, and bad debt and charity write-
offs will likewise be estimated, if final payment has not been
received. Once a fiscal year is closed, if the revenues or
expenses differ from projection, the difference will often be
recorded in the current fiscal year rather than restating the
earlier year report.
For example, if a hospital has overestimated its Medicare
revenues for fiscal year (FY) 2000, and the hospital does not
reach a final settlement with the Centers for Medicare &
Medicaid Services (CMS) until FY 2002, in FY 2002, it will
reduce its Medicare revenues by the difference between the
final FY 2000 and estimated FY 2000 Medicare revenues. This
difference will be subtracted from its estimate of FY 2002
Medicare revenues.
It is clear from this description that in an accrual system the
revenues and expenses both contain estimates. Correcting these
estimates as more accurate data become available will change
figures in subsequent fiscal years. Furthermore, hospitals
exercise control over when corrected data will become available
(for example, by seeking to speed or delay settlement with
third-party payers) and some discretion over whether the
estimates of projected revenues are high or low. Both of these
factors can lead to substantial year-to-year swings in margins
that are larger than the true year-to-year variations in revenues
or expenses.
Measures of Capital and Adequate Resources
Revenues and expenses are reported for a specific time period,
generally 1 year, and represent the flow of funds to and from
the hospital during that year. They are generally drawn from a
revenue and expense or income statement. Other measures
present a picture of a hospital's financial health at a given point
in time. These include its cash on hand and other assets, both
physical (such as plant and equipment) and financial (such as
investments and revenues expected but not yet received). They

also include its liabilities and debts. The difference between
assets and liabilities is the equity in the hospital, and it may be
positive (more assets than liabilities) or negative. Assets and
liabilities are reported on the hospital's balance sheet.
Both assets and liabilities are classified as short or long term.
Short-term assets are cash, those that can be immediately
converted to cash, or those, such as accounts receivable, which
the hospital expects to have in hand within the next 12 months.
Short-term liabilities are those that must be paid within a 12-
month period, such as money due to vendors for goods and
services received but not yet paid for. Measures of whether a
hospital can meet its short-term liabilities are said to determine
the hospital's liquidity.
Long-term assets include physical plant and long-term
investments. Long-term liabilities are those that will not be paid
within the next year but are due after that, such as loans or
bonds that will be paid over several years. Whether a hospital
can meet its long-term liabilities is said to be a good measure of
the institution's solvency.
Capital costs can be accounted for in two ways. One is by
measuring the cash spent to pay for the capital, or the schedule
of payments. The second is by measuring depreciation, which is
an estimate of the wear and tear or proportion of useful life of
the asset that has been consumed. The two sets of charges need
not match over time. For example, if a piece of equipment has a
useful life of 10 years and is bought with cash, the equipment
will be entered as an asset at its full price, and the cash used to
purchase the equipment will be drawn down from the cash on
the balance sheet. If the hospital depreciates equipment using
straight line accounting methods, each year for 10 years it will
record one-tenth of the price as a depreciation charge on its
revenue and expense statement, and reduce the asset's value on
its balance sheet by one-tenth of the purchase price. After 10
years, the asset will have no balance sheet value, even if the
hospital continues to use it. In this case, the cash outflow and
the charges for the equipment on the revenue and expense

statement do not match, with the cash outlay preceding the
depreciation charges of the equipment on the revenue and
expense statement.
If the hospital borrows the money to pay for the equipment,
with one-tenth of the principal due each year, the cash out will
match the depreciation. If the hospital takes a loan that defers
the principal payments to later years, the depreciation will be
higher than the actual cash outlays in the early years and lower
in the later years. Level payment loans, in which the payment is
fixed for the entire loan period, with interest payments higher
and principal payments lower in the early years, lead to
depreciation being higher than actual cash outlays for principal
in those early years, and are a common form of loan for large
equipment and physical plant.
Because depreciation and cash outlays for capital need not
match over time, it is critical to consider both depreciation-
based measures and cash or cashflow-based measures in
examining the institution's financial health. A hospital with
large level-payment loans will have more cash coming in and
larger margins on a cash flow basis than it appears on its
revenue and expense statement. At the same time, it will have
long-term liabilities to repay principal that will be larger than
later depreciation charges, and a depreciation-based projection
may underestimate the hospital's cash needs. If the institution
treats the cash coming in early in this cycle as discretionary
income, it may be short of funds to fully pay the loan in later
years.
Hospitals differ in scale. A 1,000-bed hospital will have both
higher anticipated receipts and more that it owes to vendors
than a 100-bed hospital. To accommodate the differences in
scale, measures of financial health based on assets and
liabilities (like margins) are presented as ratios that can be
consistently interpreted across hospitals of different sizes.
Many financial ratios and several publications such as the
Ingenix Almanac of Hospital Financial & Operating Indicators
(Petrie, 2003) present data on the average and range of these

indicators for hospitals of different size, ownership, location,
and so forth.
Ability of the Hospital to Renew Itself
Financial indicators examine current or recent financial
performance, including the ability to pay for current operations
and existing capital. They do not look forward to assess the
ability to finance future operations or replace capital. In
general, higher margins and more free cash flow indicate a
stronger financial position and imply a greater ability to finance
expansion. Other ratios, described in accounting texts, that also
provide an indication of ability to finance additional capital or
replace existing physical plant include: Free Operating Cash
Flow to Revenue, Free Operating Cash Flow, Growth Rate in
Equity, Debt Service Coverage, Equity Financing Ratio, and
Replacement Viability Ratio. Credit ratings can also provide an
independent assessment of the ability of the hospital to obtain
and pay off debt.
Cash flow figures prominently on the list above and in the
solvency measures. Cash is necessary to pay for operations and
capital. Financially strong institutions will generate the cash
they need to sustain themselves through operations. Financially
weak institutions will generate cash through either explicit
borrowing or implicit borrowing by lengthening the time they
take to pay their bills. If depreciation is larger than principal
payments because principal payments are being deferred,
financially strong institutions will build reserves to cover these
future outlays. Financially weak institutions will not build these
reserves. Assessing these issues requires examining cash flows
of hospitals the sources and uses of funds on a cash basis.
Return to Contents
Complications of Assessing Hospital Financial Health
There are several dimensions to hospitals and health care
institutions that complicate assessing their financial health.
Some of these are general issues, affecting both safety net and
non-safety net providers, whereas others are specific to
assessing the financial status of safety net hospitals.

Common Problems in Assessing Hospital Financial Health
Assessing hospital financial health can be problematic because
of the mix of operations, the multilevel nature of the modern
hospital, the mix of payers, and the mix of ownership. Each of
these problems is addressed in greater detail below.
Mix of Operations
As noted, hospitals are multiproduct entities, often providing
inpatient and outpatient care, and sometimes providing long-
term patient care, education, and research. Each of these
activities has its own stream of revenues, whereas the
production costs for many activities are joint. Management
decisions about what areas to expand or contract, which can be
critical for safety net providers facing tight financial
circumstances, often are influenced by assessments of which
activities are profitable and which are losing money. These
decisions are very sensitive to the allocation of expenses to
specific activities. As noted, there is substantial discretion in
the allocation of expenses, particularly those not incurred in a
specific patient care or revenue center.
It is useful to think of two categories of expenses. The first is
direct expenses incurred in specific revenue centers related to
the production of the services of each center. These might
include nurses salaries, supplies, laboratory, drug, radiology,
and therapist services. The second category is expenses incurred
in running the institution that cannot be tied directly to specific
patients, but which must be allocated to patient care. These
include utilities, housekeeping, employee benefits,
administration, physical plant, and equipment costs. These are
the costs most subject to allocation.
In addition to the distinction between costs incurred directly in
the revenue center and overhead costs that must be allocated to
revenue centers, a distinction must also be drawn between costs
that vary directly with the volume of services and those that are
fixed and will be incurred at a given level regardless of volume.
Drug costs or floor nursing will vary directly with volume; ward
clerks, housekeeping costs, and central administration will not.

(The distinction is not rigid. Some costs that are fixed in the
short term can be adjusted in the long term by reorganizing
care. For example, in the short term, housekeeping costs may be
fixed by the number of units open. If volume falls and the
hospital can close units, housekeeping can be reduced.)
Economists distinguish between marginal costs, the costs that
must be incurred to treat one additional patient, and fixed costs.
To remain a going concern, an institution must cover both its
marginal and fixed costs from all its revenues. But profitability
judgments about individual services can differ depending on
whether the service is covering its marginal costs or its
marginal costs plus its allocated share of fixed or indirect costs.
The Multilevel Nature of the Modern Hospital
In addition to being multiproduct firms, hospitals are multilevel
organizations. Some hospitals are parts of chains or systems
that own several institutions. The chain or parent company may
provide services to the hospital and charge back for these.
Analyzing operating costs under these circumstances, the
hospital may look low in some areas, simply because these
expenses are incurred by the parent organization and high in
areas such as central administration if the charges are assigned
to these cost centers.
Likewise, many nonsystem hospitals now either directly own
affiliates or are owned by a holding company that also owns
affiliated organizations. These organizations may include
physician practices or physician office buildings, home health
agencies, managed care organizations, or entities that self-
insure the hospital, among other activities. These affiliated
organizations may charge the hospital for services or may be
charged by the hospital for services. The financial arrangements
can influence the relative profitability of the different entities,
including the hospital. Assets, including those to support
charity care, may be owned or held by the parent organization,
rather than the hospital. Financial data and an integrated
financial report may not be available for the overall operation.
Mix of Payers

Hospital patients may have insurance from Medicare, Medicaid,
private insurers, or health maintenance organizations, or have
no insurance and be responsible for their own hospital bills.
Each third-party payer establishes either unilaterally or through
negotiation the basis on which it pays hospitals. For some
payers, the approaches are straightforward—they pay a fixed
amount per admission or per day or a percentage of charges. For
others, notably Medicare and Medicaid, the payment rules can
be complex. Furthermore, special revenue streams from
Medicare and Medicaid, such as funds for disproportionate
share payments or for medical education, may be recorded in
financial reports in nonstandard places.
Mix of Ownership
Hospitals can be owned by for-profit corporations or
partnerships, nonprofit corporations, or government at the local,
State, or Federal level. Each type of ownership can lead to
variations in accounting and financial reporting. For-profit
hospitals are typically in multihospital systems, and the
problems cited above with respect to central system versus
hospital-level charging are relevant for analyzing expenses.
Government ownership and organization also can lead to unique
financial and operating arrangements. In for-profit and
nonprofit hospitals, physicians are most likely not employed by
the hospital. Although this is also the case for many
government-owned facilities, in many cases the physicians
practicing at these hospitals will be employees of the local
government. They can be organized into a separate entity that
bills for their services, or they can be employees of the
hospitals with their costs built into the hospital's costs and
revenues for their services credited to the hospital as well. In
this latter case, both the expenses and revenues per patient will
appear higher in the government hospital.
It can also be the case that some expenses associated with the
hospital do not appear in the hospital financial reports. When
government bonds are used to finance capital construction, for
example, all the assets of the hospital may not be reported on

available hospital financial reports. Likewise, pension liability
for hospital employees may not be carried on the hospital
financial statements, but rather on the statements of universities
or government entities with which the hospital is affiliated.
Problems Specific to the Safety Net: Accounting for Care for
Those Who Cannot Pay for Themselves
As noted, government hospitals, especially those owned by city
or county governments, may be subject to special accounting
treatment that leaves some of their costs unreported on their
revenue and expense statement or balance sheet, or results in
apparently higher expenses. In addition to these issues, safety
net hospitals vary widely in how they account for charity care
and the funds they receive to help pay for such care.
One of the key services safety net hospitals and other
institutions provide is care for those who cannot fully pay for
their own care. This may include the uninsured and those who
have insurance but whose insurance has substantial deductibles
or coinsurance or will not pay for needed services. It may not
include all the uninsured, as the uninsured who can afford it
may be expected to pay for some or all of their care. There is a
clear distinction drawn in principle between charity care, which
is rendered to patients with no expectation that they will pay,
and bad debt, which is care rendered with an expectation of
payment but for which no payment was received. Analysis of
hospital financial reports indicates, however, that this
distinction is blurred in practice. Some hospitals report virtually
no bad debt; others virtually no charity care. As a result,
analysts have routinely added these two amounts together to
create an estimate of "uncompensated care," care for which the
hospital receives no direct payment from the patient or third-
party insurer.
Safety net hospitals may have a variety of potential sources to
fund such care. They may receive grants, special program funds,
or general subsidies from government entities. They may
receive contributions from the public or from private
organizations to provide such care, or may have received capital

contributions to create an endowment to fund such care. In the
absence of such funding streams, they will use profits earned on
other patients ("cost shifting") or profits from other operations
to underwrite such care.
Hospitals vary widely in how they report subsidies or grants and
how they charge the costs of charity care against these funding
streams. Among the options are:
1. Treat the funds as the equivalent of a third-party payer.
Charging the care of specific patients against these funds would
reduce the level of charity or bad debt reported by the hospital.
2. Report charity and bad debt as incurred. This option consists
of three possible reporting methods:
o Report the subsidies and grants as another source of patient
care revenues.
o Report the subsidies and grants as other operating revenue,
but not patient care revenue. Relative to the approaches above,
patient care margins will be lower under this approach but
operating and total margins will be the same.
o Report subsidies or funds from endowment or contributions as
nonoperating revenue. Relative to the approaches above, patient
care margins and operating margins will be lower, but total
margins will be comparable.
The choice of approach is partly driven by how closely the
funding is tied to specific patients. California, for example, is
one of a substantial number of States that require hospitals to
submit an annual financial and statistical report. The report
includes a revenue and expense statement. In the revenue
statement, hospitals report gross patient care revenues,
deductions from those revenues to estimate net patient care
revenues, and nonoperating revenues. Separate schedules
provide for reporting charges by revenue center for a selected
group of payers. In the current version of the report, provisions
for bad debt and charity discounts are reported as deductions
from patient care revenue. In the same schedule, Medicaid
disproportionate share payments for hospitals providing high

levels of care for the uninsured and restricted donations and
subsidies for charity care are to be reported as credits
augmenting patient care revenues. County allocations of tax
revenues and general county appropriations, by contrast, are
reported as nonoperating revenues.
Even within a single reporting system, hospitals vary in which
treatment they use. As part of a reform of Medicaid in
California in the 1980s, the State ended its provision of
Medicaid for adults on general assistance and sent the funds
that were being spent on the program to counties as block grants
to serve the same population. The State, which collects financial
data from each hospital did not change its reports, and hospitals
appear to have accounted for funds it received through this
source as another source of patient care revenue, option 2. In
1993, the State changed the reporting form to add the county
indigent care programs to the list of programs for which
revenues, patient days, and admissions were to be reported.
Some, but not all, county hospitals in the State attributed care
for all their uninsured patients to this program. They reported
no charity care, although in the past they had reported
substantial amounts. The net burden of these patients needed to
be estimated by subtracting the billed charges for the indigent
care
program from the reported revenues. Other county hospitals,
however, continued to report substantial charity write-offs.
Accounting rule changes have also led to variations in how
hospitals report charity and bad debt. Currently, on their
audited statements, hospitals will add bad debt and charity care
to their expenses and not report charges for this care as part of
their gross patient care revenue. In the past, and in many current
State reporting systems, the charges for charity and bad debt
were included in gross patient care revenue, and then explicit
write-offs were reported for bad debt and charity. This change
in accounting does not change margins where the denominator
is net revenues, since these charges would be netted out in any
case. However, it can bury estimates of charity care and bad

debt in footnotes to the accounting statement. In addition,
markups will appear lower, since the revision raises the amount
being reported as expenses.
For those trying to assess the financial health of safety net
hospitals, two implications can be drawn from the discussion
above. First, understanding the sources of data being analyzed
and the institution being studied is critical. Hospital financial
reports, even those standardized by external regulators, leave
hospitals with substantial discretion in completing the report.
Constructing meaningful financial data requires an
understanding of how the institution has exercised its discretion
in reporting standard elements like charity care and bad debt
and whether the institution has unique variations in its
expenses, such as having a large salaried physician staff or
capital expenses paid by other entities.
Second, because of the limitations noted above, conducting
longitudinal analysis that looks at change over time within the
same institution is advisable. As the example of the change in
reporting in California makes clear, it is still necessary to
examine the reporting closely. But longitudinal analysis can
allow the analyst to examine trends and large year-to-year
changes in a given line item and can provide a warning that
reporting may have changed.
Income Statements Consolidated Income Statements - USD ($)3
Months Ended12 Months Endedshares in Thousands, $ in
MillionsDec. 31, 2018Sep. 30, 2018Jun. 30, 2018Mar. 31,
2018Dec. 31, 2017Sep. 30, 2017Jun. 30, 2017Mar. 31, 2017Dec.
31, 2018Dec. 31, 2017Dec. 31, 2016Income Statement
[Abstract]Revenues$12,274$11,451$11,529$11,423$11,562$10,
696$10,733$10,623$46,677$43,614$41,490Salaries and
benefits21,42520,05918,897Supplies7,7247,3166,933Other
operating expenses8,6088,0517,496Equity in earnings of
affiliates-29-45-54Depreciation and
amortization2,2782,1311,966Interest
expense1,7551,6901,707Gains on sales of facilities-428-8-

23Losses on retirement of debt9394Legal claim benefits-
246Total expenses including equity in earnings of
affiliates41,34239,23336,680Income before income
taxes5,3354,3814,810Provision for income
taxes9461,6381,378Net
income1,2458969661,2826415307957774,3892,7433,432Net
income attributable to noncontrolling interests602527542Net
income attributable to HCA Healthcare,
Inc.$1,064$759$820$1,144$474$426$657$659$3,787$2,216$2,8
90Per share data:Basic earnings per
share$3.09$2.20$2.35$3.26$1.34$1.18$1.79$1.78$10.90$6.12$7
.53Diluted earnings per
share$3.01$2.15$2.31$3.18$1.30$1.15$1.75$1.74$10.66$5.95$7
.30Shares used in earnings per share calculations (in
millions):Basic347,297362,305383,591Diluted355,303372,2213
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Comprehensive Income StatementsConsolidated Comprehensive
Income Statements - USD ($)12 Months Ended$ in MillionsDec.
31, 2018Dec. 31, 2017Dec. 31, 2016Statement of
Comprehensive Income [Abstract]Net
income$4,389$2,743$3,432Other comprehensive income (loss)
before taxes:Foreign currency translation-7197-224Unrealized
gains (losses) on available-for-salesecurities-71-9Realized gains
included in other operating expenses-2Total unrealized gains
(losses) on available-for-sale securities-7-1-9Defined benefit
plans44-43-35Pension costs included in salaries and
benefits211818Total defined benefit plans65-25-17Change in
fair value of derivative financial instruments231120Interest
(benefits) costs included in interest expense-1020109Total
change in fair value of derivative financial

instruments1331129Other comprehensive income (loss) before
taxes102-121Income taxes (benefits) related to other
comprehensive income items842-48Other comprehensive
income (loss)-860-73Comprehensive
income4,3812,8033,359Comprehensive income attributable to
noncontrolling interests602527542Comprehensive income
attributable to HCA Healthcare,
Inc.$3,779$2,276$2,817javascript:void(0);javascript:void(0);jav
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Balance SheetsConsolidated Balance Sheets - USD ($)Dec. 31,
2018Dec. 31, 2017$ in MillionsCurrent assets:Cash and cash
equivalents$502$732Accounts
receivable6,7896,501Inventories1,7321,573Other1,1901,171Tot
al current assets10,2139,977Property and equipment, at
cost:Land1,9441,746Buildings15,65914,249Equipment23,57722
,168Construction in progress1,7851,921Property and equipment,
at cost42,96540,084Accumulated depreciation-23,208-
22,189Property and equipment, net19,75717,895Investments of
insurance subsidiaries362418Investments in and advances to
affiliates232199Goodwill and other intangible
assets7,9537,394Other690710Total assets39,20736,593Current
liabilities:Accounts payable2,5772,606Accrued
salaries1,5801,369Other accrued expenses2,6241,983Long-term
debt due within one year788200Total current
liabilities7,5696,158Long-term debt, less net debt issuance
costs of $157 and $16432,03332,858Professional liability
risks1,2751,198Income taxes and other
liabilities1,2481,374Stockholders' deficit:Common stock $0.01
par; authorized 1,800,000,000 shares; outstanding 342,895,200
shares-2018 and 350,091,600 shares-201734Accumulated other
comprehensive loss-381-278Retained deficit-4,572-
6,532Stockholders' deficit attributable to HCA Healthcare, Inc.-

4,950-6,806Noncontrolling interests2,0321,811Total
stockholders' deficit-2,918-4,995Total liabilities and
stockholders'
deficit$39,207$36,593javascript:void(0);javascript:void(0);java
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Balance Sheets (Parenthetical)Consolidated Balance Sheets
(Parenthetical) - USD ($)Dec. 31, 2018Dec. 31, 2017$ in
MillionsStatement of Financial Position [Abstract]Debt issuance
costs$157$164Common stock, par value$0.01$0.01Common
stock, shares authorized1,800,000,0001,800,000,000Common
stock, shares
outstanding342,895,200350,091,600javascript:void(0);javascript
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Statements of Cash FlowsConsolidated Statements of Cash
Flows - USD ($)12 Months Ended$ in MillionsDec. 31,
2018Dec. 31, 2017Dec. 31, 2016Cash flows from operating
activities:Net income$4,389$2,743$3,432Increase (decrease) in
cash from operating assets and liabilities:Accounts receivable-
423-60110Inventories and other assets-242-69-112Accounts
payable and accrued expenses698374144Depreciation and
amortization2,2782,1311,966Income taxes74433123Gains on
sales of facilities-428-8-23Losses on retirement of
debt9394Legal claim benefits-246Amortization of debt issuance
costs313134Share-based
compensation268270251Other1078370Net cash provided by
(used in) operating activities6,7615,4265,653Cash flows from
investing activities:Purchase of property and equipment-3,573-

3,015-2,760Acquisition of hospitals and health care entities-
1,253-1,212-576Disposal of hospitals and health care
entities8082526Change in investments57-7364Other60-46Net
cash used in investing activities-3,901-4,279-3,240Cash flows
from financing activities:Issuances of long-term
debt2,0001,5025,400Net change in revolving bank credit
facilities-640760-110Repayment of long-term debt-1,704-753-
4,475Distributions to noncontrolling interests-441-448-
434Payment of debt issuance costs-25-26-40Payment of cash
dividends-487Repurchases of common stock-1,530-2,051-
2,751Other-248-45-98Net cash (used in) provided by financing
activities-3,075-1,061-2,508Effect on exchange rate changes in
cash and cash equivalents-15Change in cash and cash
equivalents-23086-95Cash and cash equivalents at beginning of
period732646741Cash and cash equivalents at end of
period502732646Interest payments1,7441,7001,666Income tax
payments,
net$872$1,205$1,255javascript:void(0);javascript:void(0);javas
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Stockholders' DeficitConsolidated Statements of Stockholders'
Deficit - USD ($)TotalCommon Stock [Member]Capital in
Excess of Par Value [Member]Accumulated Other
Comprehensive Loss [Member]Retained Deficit
[Member]Equity Attributable to Noncontrolling Interests
[Member]$ in MillionsBalances at Dec. 31,
2015($6,046)$4($265)($7,338)$1,553Balance, shares at Dec.

31, 2015398,739,000Comprehensive income (loss)3,359-
732,890542Repurchase of common stock($2,751)($231)-
2,520Repurchase of common stock, shares-36,325,000-
36,325,000Share-based benefit plans$233233Share-based
benefit plans, shares8,122,000Distributions-434-434Other6-
28Balance at Dec. 31, 2016-5,633$4-338-6,9681,669Balance,
shares at Dec. 31, 2016370,536,000Comprehensive income
(loss)2,803602,216527Repurchase of common stock($2,051)-
271-1,780Repurchase of common stock, shares-25,092,000-
benefit plans, shares4,648,000Distributions-448-448Acquisition
of entities with noncontrolling interests6363Other-10-10Balance
at Dec. 31, 2017-4,995$4-278-6,5321,811Balance, shares at
Dec. 31, 2017350,092,000Comprehensive income (loss)4,381-
83,787602Repurchase of common stock($1,530)($1)-103-
1,426Repurchase of common stock, shares-14,070,000-
benefit plans, shares6,873,000Cash dividends declared ($1.40
share)-496-496Distributions-441-441Acquisition of entities
with noncontrolling interests6060Reclassification of stranded
tax effects-9595Other-12($12)Balance at Dec. 31,
2018($2,918)$3($381)($4,572)$2,032Balance, shares at Dec.
31,
2018342,895,000javascript:void(0);javascript:void(0);javascript
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Introduction

stitutions.
Return to Contents
long term.
a range of data.

margin:
match the revenues.

allocation.
billed charges.

Medicare revenues.
or expenses.

expense statement.

years.
and so forth.

and pay off debt.
Return to Contents

Mix of Operations

Mix of Payers

Mix of Ownership

party insurer.

care revenues.

care

reporting in California makes clear, it is still necessary to
examine the reporting closely. But longitudinal analysis can
allow the analyst to examine trends and large year-to-year
changes in a given line item and can provide a warning that
reporting may have changed.
Introduction
measures available to assess

Return to Contents
long term.
a range of data.
margin:

match the revenues.

allocation.

billed charges.
Medicare revenues.

or expenses.

expense statement.

years.
and so forth.
and pay off debt.

Return to Contents
Mix of Operations

Mix of Payers
Mix of Ownership

party insurer.
care revenues.

care

Introduction This chapter describes methods for assessing the.docx

Introduction This chapter describes methods for assessing the.docx

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