Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA
Jack O. Bovender, Jr.Jack O. Bovender, Jr.Chairman and CEO
Milton JohnsonMilton JohnsonExecutive Vice President and CFO
Vic CampbellVic CampbellSenior Vice President
Mark KimbroughMark KimbroughVP, Investor Relations
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 22
This presentation contains forward-looking statements based on current management expectations. Those forward-looking statements include all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to (i) the increased leverage resulting from the financing of the tender offer, (ii) increases in the amount and risk of collectability of uninsured accounts and deductibles and co-pay amounts for insured accounts, (iii) the ability to achieve operating and financial targets, achieve expected levels of patient volumes and control the costs of providing services, (iv) the highly competitive nature of the health care business, (v) the efforts of insurers, health care providers and others to contain health care costs, (vi) possible changes in the Medicare and Medicaid programs that may impact reimbursements to health care providers and insurers, (vii) the ability to attract and retain qualified management and other personnel, including affiliated physicians, nurses and medical support personnel, (viii) potential liabilities and other claims that may be asserted against the Company, (ix) fluctuations in the market value of the Company’s common stock, (x) the impact of the Company’s charity care and self-pay discounting policy changes, (xi) changes in accounting practices, (xii) changes in general economic conditions, (xiii) future divestitures which may result in charges, (xiv) changes in revenue mix and the ability to enter into and renew managed care provider arrangements on acceptable terms, (xv) the availability and terms of capital to fund the expansion of the Company’s business, (xvi) changes in business strategy or development plans, (xvii) delays in receiving payments for services provided, (xviii) the possible enactment of Federal or state health care reform, (xix) the outcome of pending and any future tax audits, appeals and litigation associated with the Company’s tax positions, (xx) the outcome of the Company’s continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures and the Company’s corporate integrity agreement with the government, (xxi) changes in Federal, state or local regulations affecting the health care industry, (xxii) the ability to successfully integrate the operations of Health Midwest, (xxiii) the ability to develop and implement the payroll and human resources information systems within the expected time and cost projections and, upon implementation, to realize the expected benefits and efficiencies, (xxiv) the continuing impact of the recent hurricanes on the Company’s Florida facilities and the ability to obtain recoveries under the Company’s insurance policies, and (xxv) other risk factors detailed in the Company’s filings with the SEC. Many of the factors that will determine the Company’s future results are beyond the ability of the Company to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Notwithstanding any statement in this press release, the safe harbor protections of the Private Securities Litigation Reform Act of 1995 do not apply to statements made in connection with a tender offer.
All references to “Company” and “HCA” as used throughout this document refer to HCA Inc. and its affiliates.
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 33
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 44
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 55
Capital Regional Medical CenterCapital Regional Medical Center
Tallahassee, FL ($100M) 200 beds
Opened: August 2003
HCA
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 66
Stonecrest Medical CenterStonecrest Medical Center
Smyrna, TN ($96M) 75 beds
Opened: December 2004
HCA
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 77
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 88
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 99
-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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1010
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)
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1111
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1212
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)
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1313
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%
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1414
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)
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1515
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1616
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1717
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1818
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 1919
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 2020
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
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 2121
$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
Opportunities Of Having Strong Cash Flow
Share Share repurchase repurchase programprogram
$1.3B: 37.9M Shares1997
1998
1999
2000
2001
20032002
20041
1: 2004 purchases through 3-12-04 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$1.3B: 43.5M Shares $28.65/share$706M: 19.2M Shares$706M: 19.2M Shares $36.88/share$1.1B: 31.1M Shares $35.76/share
$600M: 14.5M Shares$41.45/share
650M Shares 12/31/96
491M Shares2 12/31/03
$282M: 6.2M Shares$45.53/share
Impact of Tender OfferImpact of Tender Offer
$10 Billion$10 Billion
311 Million Shares311 Million Shares
48% of outstanding shares48% of outstanding shares
Average Price: $32.20Average Price: $32.20
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 2222
Employee Satisfaction at Record LevelsEmployee Satisfaction at Record Levels
26.7%25.9%
22.8%
20.1%
18.8%18.3%
17.0% 16.8%
3.5%
3.6%
3.7%
3.8%
15%
20%
25%
30%
2000 2001 2002 2003
3.3%
3.4%
3.5%
3.6%
3.7%
3.8%
3.9%
Employee Satisfaction(Gallup Score)
Employee Turnover
Nurse Turnover
Tu
rno
ver
Rat
eS
atisfaction
Sco
re
Merrill Lynch/Dec 04Merrill Lynch/Dec 0420042004HCAHCA 2323
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….
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