JP Morgan/Jan 2005

JP Morgan/Jan 2005JP Morgan/Jan 200520052005HCAHCA

Jack O. Bovender, Jr.Jack O. Bovender, Jr.Chairman and CEO

Vic CampbellVic CampbellSenior Vice President

JP Morgan/Jan 2005JP Morgan/Jan 200520052005HCAHCA 22

Cautionary 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.


HCA is located in 16 of 20 Fastest HCA is located in 16 of 20 Fastest Growing Large US CitiesGrowing Large US Cities

Switzerland

U.K.

%%

%

%%%

Compared to the National Average of 4.5%

Compared 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%

Percent Growth in Market Population 2000-2005

Percent Growth in Market Population 2000-2005

Generally 25-40% Market Share40% of facilities in Texas & Florida

Generally 25-40% Market Share40% of facilities in Texas & Florida


HCA Capital ExpendituresHCA Capital Expenditures

ER & Outpatient Services19%/$720

Replacement Facilities3%/$98M

New & Expanded Services

18%/$740M

New Facilities10%/$395MBeds

14%/$550M

Surgery/Spec'l Units

22%/$870M

Land & Improvements

14%/$565M

1,565 New Beds

54 Facilities with Surgeryand/or ICU/CCU

expansions

Four NewFacilities

378 Beds

Open Heart, ImagingCardiology, Oncology, etc.

37 ERExpansions

37 ERExpansions

Distribution of Capital Dollars2002 and Beyond

Distribution of Capital Dollars2002 and Beyond

New Denver FacilityNew Denver Facility

Expansions

$0.0

$0.5

$1.0

$1.5

$2.0

2000 2001 2002 2003 2004E

Billions2000

$1.22001

$1.42002

$1.72003

$1.82004E

$1.6

Routine

Patient Safety & Infrastructure

New Facilities

Expansions


Capital Regional Medical CenterCapital Regional Medical Center

Tallahassee, FL ($100M) 200 beds

Opened: August 2003

HCA


Stonecrest Medical CenterStonecrest Medical Center

Smyrna, TN ($96M) 75 beds

Opened: December 2004

HCA


Inpatient Admissions and Outpatient Visits Inpatient Admissions and Outpatient Visits 1980 - 20031980 - 2003

Source: AHA Annual Survey 1980 - 2003

Inp

atie

nt

Ad

mis

sio

ns

(mil

lio

ns)

Ou

tpat

ien

t V

isit

s (m

illi

on

s)

27

28

29

30

31

32

33

34

35

36

37

100

150

200

250

300

350

400

450

500

550

600

Inpatient Admissions Outpatient Visits


Socio-Demographics—Age WaveDriving Healthcare Utilization

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

95

100

105

110

115

120

125

Acu

te C

are

Uti

lizat

ion

Ind

ex(2

003=

100)

Baby Boomer Impact Accelerates

1.58% CAGR 2003-2012

1.58% CAGR 2003-2012

121

119

117

115

113

112

110

108

106

105

103

102100

9897

96

1.7%1.6%

1.6%1.6%

1.5%1.6%

1.6%1.6%

1.6%1.6%

1.6%1.5%

1.6%1.5%

1.4%

1.56%3-Year CAGR

1.59%3-Year CAGR

1.58%3-Year CAGR

1.62%3-Year CAGR


-1.0%

1.0%

3.0%

5.0%

7.0%

Admissions Rolling 12 mo. Avg

HCA Admission Trends 2001 to 3Q 2004HCA Admission Trends 2001 to 3Q 2004Same FacilitySame Facility

6.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

HCAMarket

Competitors

15.4%

*

HCA Growing Medicare Market Share

Growth in Medicare Admissions 1998-2001

HCA Growing Medicare Market Share

Growth in Medicare Admissions 1998-2001

*2Q includes same-market admissions


4.4%

3.3%

4.6%

1.8%

4.0%

2.5%

0.3%

-0.7% -0.8%

2.4%

1.4%1.9%

2.6%2.3%

0.1%

-2%

0%

2%

4%

6%

8%

10%

1Q 012Q 01

3Q 014Q 01

1Q 022Q 02

3Q 024Q 02

1Q 032Q 03

3Q 034Q 03

1Q 042Q 04

3Q 04

Inpatient surgeries Rolling 12 mo. Avg.

Inpatient Surgery Trends ImprovingInpatient Surgery Trends Improving2001 to 32001 to 3rdrd Quarter 2004 - Same Facility Quarter 2004 - Same Facility

1: Includes Kansas City facilities.

1

-3.3%

2.3%8.8%

0.6%

-2.4%

5.8%

-0.8%

5.5%1.0%

-15%

0%

15%

Jan Feb Mar Apr May Jun Jul Aug Sep

Inpatient Surgeries (2004)


9.4%

37.2%

OutpatientOutpatientERER

OutpatientOutpatientERER

Enhanced Outpatient Services FocusEnhanced Outpatient Services Focus

12.5%Hospital BasedHospital BasedHospital BasedHospital Based

FreestandingFreestandingFreestandingFreestanding

OutpatientOutpatientDiagnostic Diagnostic ServicesServices

OutpatientOutpatientDiagnostic Diagnostic ServicesServices

ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology

ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology

Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries

15.3%ASC BasedASC BasedASC BasedASC Based

70%

30%

2003% of HCA

Net Revenue

As a % of Outpatient Surgeries

O/P Comprised of Three Business LinesO/P Comprised of Three Business Lines


Outpatient Strategy ProcessingOutpatient Strategy Processing

Transactions totaling $41 million completed20–30 imaging center and 8-10 surgery center transactions expected to

be completed over the next 12 months

Sarah Cannon Research Institute

(Nashville)

Sarah Cannon Research Institute

(Nashville)

Austin Radiology Assoc.2 imaging centers

Austin Radiology Assoc.2 imaging centers

Diversified Radiology (Denver)

4 imaging centers/fifth under

construction

Diversified Radiology (Denver)

4 imaging centers/fifth under

construction

Thousand Oaks

Diagnostic Imaging

Thousand Oaks

Diagnostic Imaging

Millcreek Imaging CenterSalt Lake City, UT

Millcreek Imaging CenterSalt Lake City, UT

HCA Surgery Centers

LAD Imaging Centers

(Orange City, Deltona)

LAD Imaging Centers

(Orange City, Deltona)


2004 Managed Care Contracting2004 Managed Care Contracting

2005 Contract

Pricing Timeline*

6,844 Facility Level Active Contracts

*Anticipated Completion Dates

Pre-2004 1Q04 2Q04 3Q04 4Q04

75% of 2005 and 35% of 2006 contracts 75% of 2005 and 35% of 2006 contracts completedcompleted

75% of 2005 and 35% of 2006 contracts 75% of 2005 and 35% of 2006 contracts completedcompleted

2005Cumulative

42%42% 55%55% 75%75% 95%95%35%35% 100%100%

Net Revenue per Adjusted AdmissionManaged Care & Other Discounted

15.0%

10.5%11.4%

13.0% 13.3%

9.6%

7.0% 7.3%

11.1%9.2%

0%

16%

1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04

11.1%9.9%

3Q 04

6.6%

9.0%


Medicare Reimbursement Improves Oct. 1, 2004with Outlier Threshold Change and Full Market Basket Update

Hospitals receive full market basket update 3.3% beginning

October 1, 2004

Hospitals receive full market basket update 3.3% beginning

October 1, 2004

Medicare outlier threshold reduced from $30,150 (Oct ’03),

to $25,800 (Oct ’04)

Medicare outlier threshold reduced from $30,150 (Oct ’03),

to $25,800 (Oct ’04)


LaborLabor CostCost

* Eastern and Western Consolidated Operations

$48

$34$41

$28$35

$24

$32

$22

$34

$23

$34

$22

$32

$20

$0

$25

$50

Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04

15%vs.

Q103

15%vs.

Q103

25%vs.

Q103

25%vs.

Q10333%vs.

Q103

33%vs.

Q103

29%vs.

Q103

29%vs.

Q103

29%vs.

Q103

29%vs.

Q103

7.0%

4.4%4.9%4.7%5.2%5.4%5.0%5.4%7.0%

5.0%4.9%4.5%4.8%4.8%6.4%

0%

5%

10%20012001

+6.5% +5.1% +4.7% +4.6%+4.6%Sept YTDSept YTD

Wage Rate Same Facility - % Change from PY

20022002 20032003 20042004

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

Total Operations* Nursing

1: Includes Kansas City facilities.

1

3Q04

Contract Labor Reduction$/Adj. Patient Day

33%vs.

Q103

33%vs.

Q103


Bad Debt Impact on Operating Expenses Bad Debt Impact on Operating Expenses per Adjusted Admissionper Adjusted Admission

Op

erat

ing

Exp

en

ses /

AA

– P

erc

en

t C

han

ge

fro

m P

rio

r Y

ear

Operating Expense/AA Operating Expense/AA (Adj. For Bad Debt)

Same Facility – Percent Change from Prior Year

4.7%

8.1%5.4%

5.6% 5.5%5.5%

5.8%5.3%

3.8%

6.0%6.2%

7.5%

9.3%

7.4%7.8%

5.5%

7.6%6.6%

10.4%

7.6%

8.9%

10.8%10.2%

8.0%

6.0%

7.0%

8.8%8.5%8.0%

5.2%

0%

5%

10%

15%

1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04

20012001 20022002 20032003 20042004

7.0% 9.4%7.4%

6.4%6.7%6.5% 6.0%

8.5%Sept. YTDSept. YTD

Sept. YTDSept. YTD

7.0%1

5.1%1

1: Adjusted for $26M in net hurricane operating expense impact during the 3rd quarter


Revisions Made to the Uninsured PolicyRevisions Made to the Uninsured Policy

• Provide a discount to all uninsured non-elective patients similar to managed care rates

• Continue to attempt to qualify uninsured patients for Medicaid and other state and federal programs

• Charity care will continue to be provided for those uninsured patients with income levels at or below 200 percent of the Federal Poverty

Level

• The Company estimates that there will be nomaterial impact on earnings


HCA Reduces Malpractice Reserves by HCA Reduces Malpractice Reserves by $59 Million in 2Q 2004$59 Million in 2Q 2004

4

1618

14

25

103

9

0

5

10

15

20

25

30

1997 1998 1999 2000 2001 2002 2003 2004

HCA Large Claims DecliningHCA Large Claims Declining


HCA is Investing Significantly in ProgramsHCA is Investing Significantly in Programs for Patient Safety and Improved Patient Outcomesfor Patient Safety and Improved Patient Outcomes

E MAR: Medication Error Prevention

E POM: Physician Order Entry

100% Participation in CMS Quality Reporting Initiative

Member of NQF and Leapfrog

Cardiovascular, OB and Emergency Department Initiatives


Accounts Receivable IndicatorsCash Collections % Adj. Net Revenue / Days in A/R

49 49 50 51 5148 49

51 50 49 4740

55Days in Accounts ReceivableDays in Accounts Receivable

101.8%103.4%

103.6%105.9%105.1%

103.6%

100.8%103.5% 102.8%98.0%

100.5%96%

110%

Cash CollectionsCash Collections% Adjusted Net Revenue% Adjusted Net Revenue


Strong Cash Flow Trends Provide Strong Cash Flow Trends Provide OpportunitiesOpportunities

$1,301

$1,584

$2,046

$2,786 $2,822

$0

$3,500

1999 2000 2001 2002 2003

Net Cash Provided by Operating ActivitiesDollars in Millions

Excluding settlements with government agencies and investigation related costs.

New DividendNew DividendPolicyPolicy$250mm annually$250mm annually

Share Share Repurchase Repurchase ProgramProgram$10.0B in 8 years$10.0B in 8 years$2.5B “Dutch Auction” $2.5B “Dutch Auction” completed at $39.75 incompleted at $39.75 inNovember ‘04November ‘04

Capital ReinvestmentCapital Reinvestment$1.6B in 2004$1.6B in 2004

$7.5 Billion$7.5 Billion

249 Million Shares249 Million Shares

38% of outstanding shares38% of outstanding shares

Average Price: $30.20Average Price: $30.20

$1.3B: 37.9M Shares

1: 2004 purchases through 12/31/04 2: Includes other activities affecting share balance (stock option exercises, restricted grants, and ESPP activity).

$33.59/share$22.68/share

$930M: 41M Shares

$1.4B: 55.6M Shares $24.61/share

650M Shares 12/31/96

422M Shares2 12/31/04

Impact of Tender OfferImpact of Tender Offer

$10 Billion$10 Billion

312 Million Shares312 Million Shares

48% of outstanding shares48% of outstanding shares

Average Price: $32.20Average Price: $32.20

$3.1B: 77.4 Shares

$1.1B: 31.1M Shares

$282M: 6.2M Shares

$706M: 19.2M Shares

$1.3B: 43.5M Shares

$1.4B: 55.6M Shares

$1.3B: 37.9M Shares

$930M: 41M Shares

2004

200320022001

2000

1999

1998

1997

$40.0

5$35.7

6$45.53

$36.88

$28.65

$24.61

$22.68

$33.59

1Avg

Sha

re P

rice

Share Repurchase

Opportunities of HavingOpportunities of HavingStrong Cash FlowStrong Cash Flow

2222


A prudent financial strategy that provides for a strong A prudent financial strategy that provides for a strong balance sheet and return of cash to shareholders through balance sheet and return of cash to shareholders through

share repurchase and/or dividendsshare repurchase and/or dividends

Excellent Investment OpportunitiesExcellent Investment Opportunities

Strong Cash FlowsStrong Cash Flows

Excellent Long-Term Earnings Growth OutlookExcellent Long-Term Earnings Growth Outlook

Great AssetsGreat Assets

In Summary We Have….In Summary We Have….

JP Morgan/Jan 2005

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