bear stearns/sept. 2004hca vic campbell senior vice president larry kloess ceo, centennial hospital...

Bear Stearns/Sept.Bear Stearns/Sept.20042004HCAHCA

Vic CampbellVic CampbellSenior Vice President

Larry KloessLarry KloessCEO, Centennial Hospital

Mark KimbroughMark KimbroughVP, Investor Relations

Bear Stearns/Sept.Bear Stearns/Sept.20042004HCAHCA 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) increases in the amount and risk of collectability of uninsured accounts and deductibles and co-pay amounts for insured accounts, (ii) the ability to achieve operating and financial targets and achieve expected levels of patient volumes and control the costs of providing services, (iii) the highly competitive nature of the health care business, (iv) the efforts of insurers, health care providers and others to contain health care costs, (v) possible changes in the Medicare and Medicaid programs that may impact reimbursements to health care providers and insurers, (vi) the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical support personnel, (vii) potential liabilities and other claims that may be asserted against the Company, (viii) fluctuations in the market value of the Company’s common stock, (ix) the impact of the Company’s charity care and self-pay discounting policy changes, (x) changes in accounting practices, (xi) changes in general economic conditions, (xii) future divestitures which may result in charges, (xiii) changes in revenue mix and the ability to enter into and renew managed care provider arrangements on acceptable terms, (xiv) the availability and terms of capital to fund the expansion of the Company’s business, (xv) changes in business strategy or development plans, (xvi) delays in receiving payments for services provided, (xvii) the possible enactment of Federal or state health care reform, (xviii) the outcome of pending and any future tax audits and litigation associated with the Company’s tax positions, (xix) 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, (xx) changes in Federal, state or local regulations affecting the health care industry, (xxi) the ability to successfully integrate the operations of Health Midwest, (xxii) the ability to develop and implement the payroll and human resources information system within the expected time and cost projections and, upon implementation, to realize the expected benefits and efficiencies, and (xxiii) 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. All references to “Company” and “HCA” as used throughout this document refer to HCA Inc. and its affiliates.


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

$1.65

Routine

Patient Safety & Infrastructure

New Facilities

Expansions


Source: AHA Annual Survey, 1980 - 2002

27

28

29

30

31

32

33

34

35

36

37

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02

100

150

200

250

300

350

400

450

500

550

600

Outpatient Visits

Inpatient Admissions

Ad

mis

sio

ns

(mil

lio

ns)

Ou

tpat

ien

t V

isit

s (m

illi

on

s)

Inpatient Admissions and Outpatient Visits Inpatient Admissions and Outpatient Visits 1980 - 20021980 - 2002


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%

1Q 00 2Q 00 3Q 00 4Q 00 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 2Q04

Admissions Rolling 12 mo. Avg

HCA Admission Trends 2001 to 2Q 2004HCA Admission Trends 2001 to 2Q 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

Bear Stearns/Sept.Bear Stearns/Sept.20042004HCAHCA 88Volume Variance by Market – June YTD

(3,000)

-20%

El PasoEl Paso+4.9%+4.9%

Total Admissions Determine Bubble

Size

HoustonHouston-2.7%-2.7%So. CalSo. Cal

-7.5%-7.5%

IndyIndy-12.5%-12.5% Las VegasLas Vegas

+3.3% +3.3% 11

DadeDade+2.5%+2.5%

S.CarolinaS.Carolina-2.0%-2.0%

Treas. CoastTreas. Coast-2.9%-2.9%

West VAWest VA-1.8%-1.8%

Cent. La.Cent. La.-2.0%-2.0%

Far West Una.Far West Una.-3.4%-3.4%

OrlandoOrlando -0.7%-0.7%

Mid. GaMid. Ga-1.4%-1.4%

North VANorth VA-2.5%-2.5%

Delta Una.Delta Una.-8.3%-8.3%

SwissSwiss-5.4%-5.4%

MidAmer Una.MidAmer Una.-3.1%-3.1%

Denver Denver 22+2.7%+2.7%

Tampa BayTampa Bay+3.2%+3.2%

Nashville Nashville 11+13.0%+13.0%

Brownsville/Brownsville/ValleyValley+13.0%+13.0%JacksonvilleJacksonville

+7.4%+7.4%

AtlantaAtlanta+9.0%+9.0%

ChattanoogaChattanooga+8.6%+8.6%

NW Ga.NW Ga.+11.3%+11.3%

AustinAustin+5.1%+5.1%

D/FW+3.0%

PanhandlePanhandle+4.6%+4.6%OklahomaOklahoma

-1.8%-1.8%

LafayetteLafayette+6.0%+6.0%

Admissions % Change

(2,000)

(1,000)

-

1,000

2,000

3,000

4,000

5,000

-15% -10% -5% 0% 5% 10% 15% 20%

Ad

mis

sio

ns

Ch

an

ge

2: Denver is a non-consolidating JV Market

Top 15 Top 15 Markets in Markets in

Admissions Admissions GrowthGrowth

+18,367/ +18,367/ +5.2%+5.2%

Top 15 Top 15 Markets in Markets in


+18,367/ +18,367/ +5.2%+5.2%

Bottom 15 Bottom 15 Markets in Markets in


-6,787/ -6,787/ -3.2% -3.2%

Bottom 15 Bottom 15 Markets in Markets in


-6,787/ -6,787/ -3.2% -3.2%

+1.5% same facility+1.9% same market

1: Same Market

Inpatient Admissions Growth Continues to Inpatient Admissions Growth Continues to Vary Widely by MarketVary Widely by Market

June YTD – Same MarketJune YTD – Same Market


4.4%

3.3%

4.6%

1.8%

4.0%

2.5%

0.3%

-0.7% -0.8%

2.4%

1.4%

2.6%2.3%

0.1%

-2%

0%

2%

4%

6%

8%

10%

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

Inpatient surgeries Rolling 12 mo. Avg.

Inpatient Surgery Trends ImprovingInpatient Surgery Trends Improving2001 to 22001 to 2ndnd Quarter 2004 - Same Facility Quarter 2004 - Same Facility

-3.3%

2.3%8.8%

0.6%

-2.4%

5.8%

-15%

0%

15%

Jan Feb Mar Apr May Jun

Inpatient Surgeries (2004)

1: Includes Kansas City facilities.

1

111


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


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

83% of 2004 and 50% of 2005 contracts 83% of 2004 and 50% of 2005 contracts completed.completed.

83% of 2004 and 50% of 2005 contracts 83% of 2004 and 50% of 2005 contracts completed.completed.

2005Cumulative

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

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%

Net Revenue per Adjusted AdmissionManaged Care & Other Discounted

1111


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

•Medicare outlier threshold of $16,350 (Oct ‘00), $21,025 (Oct ‘01),$33,560 (Oct ‘02), $30,150 (Oct ‘03) and $25,800 (Oct ’04)

•Law changed for 2003 to base outlier cost-to-charge ratio on latest“filed” cost reports versus latest “settled” cost reports.

Dol

lars

in M

illio

ns

$0

$50

$100

$150

$200

$250

$300

$350

2001 2002 2003 2004

$2845.1%

$2183.7%

$602.0%

Medicare Outlier Payments % of O/L Payments to Total Medicare

$240 4.7%

6 months


Labor CostLabor Cost

* Eastern and Western Consolidated Operations

$48

$34

$41

$28$35

$24

$32

$22

$34

$23

$34

$22

$0

$25

$50

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

15%vs.

Q103

15%vs.

Q10325%vs.

Q103

25%vs.

Q103

33%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%

4.9%4.5%4.8%4.8%6.4%

0%

5%

10% 20012001

+6.5% +5.1% +4.7% +4.5%+4.5%JUNE YTDJUNE YTD

Wage RateSame Facility - % Change from PY

20022002 20032003 20042004

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

Total Operations* Nursing

Contract Labor Reduction$/Adj. Patient Day

1: Includes Kansas City facilities.

1


4.7%

8.1%5.4%

5.6%5.5%5.5% 5.3%

3.8%

6.0%6.2%

7.5%

9.3%

7.4%7.8%

5.5%

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%

-1%

1%

3%

5%

7%

9%

11%

13%

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

20012001 20022002 20032003 20042004

7.0% 9.4%7.4%

6.4%6.7%6.5%

Bad Debt Impact on Operating Expenses per Bad Debt Impact on Operating Expenses per Adjusted AdmissionAdjusted 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


The Genesis of the Bad Debt/CharityThe Genesis of the Bad Debt/Charity Care IssueCare Issue

22.222.2%%

23.523.5%%

21.221.2%%

22.222.2%%

17.017.0%%

19.219.2%%

29.729.7%%

23.523.5%%

15.115.1%% 15.415.4%%

19.719.7%%

16.716.7%%20.320.3%%15.415.4%%

19.319.3%%15.915.9%%

16.416.4%%

NationalAverage:15.2% 1

NationalAverage:15.2% 1

18.118.1%%

>20% Uninsured

15-20% Uninsured

<15% Uninsured

25.625.6%%

14.6%

22.822.8%%

HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states

HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states

HCAHCAWeightedAverage:22.6% 2

HCAHCAWeightedAverage:22.6% 2

1: U.S. Census Bureau “Health Insurance Coverage in the United States: 2002”.2: Kaiser Commission: Health Ins. Coverage of Nonelderly Adults 2001-2002.

13.1%13.1%


Bad Debts & CharityBad Debts & CharityQuarterly TrendingQuarterly Trending

Bad DebtsBad Debts

$368

$123

$371

$143$411

$156

$431

$156

$428

$182

$577

$209

$566

$229

$636

$201

$694

$218

$661

$232

$0

$1,000

1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04

$610

$786 $795$837

$1B

$0

$587$567$514$491

Charity Bad Debts

$912 $893

7.6%8.3%

10.6%11.7%

7.6%8.6% 8.1%

10.3%11.4% 11.3%

5%

1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q 04

BD % of Net RevenueBD % of Net Revenue

Bad Debts & CharityBad Debts & Charity

14%


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

1717

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

20022002 20032003 20042004

103.6%100.8%

105.1%101.8%

105.9%103.6%

100.5% 99.6%103.0%103.5%

49 4950

51 51

4849

5150

49

90%

100%

110%

120%

130%

140%

150%

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

30

35

40

45

50

55

Cas

h C

olle

ctio

ns

Cas

h C

olle

ctio

ns

% A

dju

sted

Net

Rev

enue

% A

dju

sted

Net

Rev

enue

Days in A

ccounts Receivable

Days in A

ccounts Receivable


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 Repurchase Share Repurchase ProgramProgram$7.5B in 8 years$7.5B in 8 years

Capital ReinvestmentCapital Reinvestment$1.65B in 2004$1.65B in 2004

Balance SheetBalance Sheet55% @ 6/30/0455% @ 6/30/04Debt-to-debt and Debt-to-debt and total equity ratiototal equity ratio


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

2121


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….

bear stearns/sept. 2004hca vic campbell senior vice president larry kloess ceo, centennial hospital...

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