Item 16. Form 10-K Summary

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Item 16. Form 10-K Summary

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None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


HCA HEALTHCARE, INC.

By:		/s/ R. MILTON JOHNSON
		R. Milton Johnson
		Chairman and Chief Executive Officer

Dated: February 23, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature	Title	Date

/s/ R. MILTON JOHNSON R. Milton Johnson	Chairman, Chief Executive Officer and Director (Principal Executive Officer)	February 23, 2018

/s/ WILLIAM B. RUTHERFORD William B. Rutherford	Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	February 23, 2018

/s/ ROBERT J. DENNIS Robert J. Dennis	Director	February 23, 2018

/s/ NANCY-ANN DEPARLE Nancy-Ann DeParle	Director	February 23, 2018

/s/ THOMAS F. FRIST III Thomas F. Frist III	Director	February 23, 2018

/s/ WILLIAM R. FRIST William R. Frist	Director	February 23, 2018

/s/ CHARLES O. HOLLIDAY, JR. Charles O. Holliday, Jr.	Director	February 23, 2018

/s/ ANN H. LAMONT Ann H. Lamont	Director	February 23, 2018

/s/ JAY O. LIGHT Jay O. Light	Director	February 23, 2018

/s/ GEOFFREY G. MEYERS Geoffrey G. Meyers	Director	February 23, 2018

/s/ MICHAEL W. MICHELSON Michael W. Michelson	Director	February 23, 2018

/s/ WAYNE J. RILEY Wayne J. Riley	Director	February 23, 2018

/s/ JOHN W. ROWE John W. Rowe	Director	February 23, 2018

HCA HEALTHCARE, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


	Page

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Financial Statements:

Consolidated Income Statements for the years ended December 31, 2017, 2016 and 2015		F-3

Consolidated Comprehensive Income Statements for the years ended December 31, 2017, 2016 and 2015		F-4

Consolidated Balance Sheets, December 31, 2017 and 2016		F-5

Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2017, 2016 and 2015		F-6

Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015		F-7

Notes to Consolidated Financial Statements		F-8

Quarterly Consolidated Financial Information (Unaudited)		F-46

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

HCA Healthcare, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of HCA Healthcare, Inc. (the “Company”) as of December 31, 2017 and 2016, and the related consolidated statements of income, comprehensive income, stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2018 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1994.

Nashville, Tennessee

February 23, 2018

F-2

HCA HEALTHCARE, INC.

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(Dollars in millions, except per share amounts)


	2017			2016			2015
Revenues before provision for doubtful accounts	$	47,653		$	44,747		$	43,591
Provision for doubtful accounts		4,039			3,257			3,913

Revenues		43,614			41,490			39,678

Salaries and benefits		20,059			18,897			18,115
Supplies		7,316			6,933			6,638
Other operating expenses		8,051			7,496			7,056
Equity in earnings of affiliates		(45	)		(54	)		(46	)
Depreciation and amortization		2,131			1,966			1,904
Interest expense		1,690			1,707			1,665
Losses (gains) on sales of facilities		(8	)		(23	)		5
Losses on retirement of debt		39			4			135
Legal claim costs (benefits)		—			(246	)		249

		39,233			36,680			35,721

Income before income taxes		4,381			4,810			3,957
Provision for income taxes		1,638			1,378			1,261

Net income		2,743			3,432			2,696
Net income attributable to noncontrolling interests		527			542			567

Net income attributable to HCA Healthcare, Inc.	$	2,216		$	2,890		$	2,129

Per share data:
Basic earnings per share	$	6.12		$	7.53		$	5.14
Diluted earnings per share	$	5.95		$	7.30		$	4.99
Shares used in earnings per share calculations (in millions):
Basic		362.305			383.591			414.193
Diluted		372.221			395.851			426.721

The accompanying notes are an integral part of the consolidated financial statements.

F-3

HCA HEALTHCARE, INC.

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(Dollars in millions)


	2017			2016			2015
Net income	$	2,743		$	3,432		$	2,696
Other comprehensive income (loss) before taxes:
Foreign currency translation		97			(224	)		(63	)

Unrealized gains (losses) on available-for-sale securities		1			(9	)		1
Realized gains included in other operating expenses		(2	)		—			—

		(1	)		(9	)		1

Defined benefit plans		(43	)		(35	)		30
Pension costs included in salaries and benefits		18			18			32

		(25	)		(17	)		62

Change in fair value of derivative financial instruments		11			20			(36	)
Interest costs included in interest expense		20			109			125

		31			129			89

Other comprehensive income (loss) before taxes		102			(121	)		89
Income taxes (benefits) related to other comprehensive income items		42			(48	)		31

Other comprehensive income (loss)		60			(73	)		58

Comprehensive income		2,803			3,359			2,754
Comprehensive income attributable to noncontrolling interests		527			542			567

Comprehensive income attributable to HCA Healthcare, Inc.	$	2,276		$	2,817		$	2,187

The accompanying notes are an integral part of the consolidated financial statements.

F-4

HCA HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2017 AND 2016

(Dollars in millions)


	2017			2016
ASSETS
Current assets:
Cash and cash equivalents	$	732		$	646
Accounts receivable, less allowance for doubtful accounts of $5,488 and $4,988		6,501			5,826
Inventories		1,573			1,503
Other		1,171			1,111

		9,977			9,086
Property and equipment, at cost:
Land		1,746			1,611
Buildings		14,249			13,546
Equipment		22,168			20,580
Construction in progress		1,921			1,318

		40,084			37,055
Accumulated depreciation		(22,189	)		(20,703	)

		17,895			16,352

Investments of insurance subsidiaries		418			336
Investments in and advances to affiliates		199			206
Goodwill and other intangible assets		7,394			6,704
Other		710			1,074

	$	36,593		$	33,758

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	2,606		$	2,318
Accrued salaries		1,369			1,265
Other accrued expenses		1,983			2,035
Long-term debt due within one year		200			216

		6,158			5,834

Long-term debt, less net debt issuance costs of $164 and $170		32,858			31,160
Professional liability risks		1,198			1,148
Income taxes and other liabilities		1,374			1,249
Stockholders’ deficit:
Common stock $0.01 par; authorized 1,800,000,000 shares; outstanding 350,091,600 shares—2017 and 370,535,900 shares—2016		4			4
Accumulated other comprehensive loss		(278	)		(338	)
Retained deficit		(6,532	)		(6,968	)

Stockholders’ deficit attributable to HCA Healthcare, Inc.		(6,806	)		(7,302	)
Noncontrolling interests		1,811			1,669

		(4,995	)		(5,633	)

	$	36,593		$	33,758

The accompanying notes are an integral part of the consolidated financial statements.

F-5

HCA HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(Dollars in millions)


	Equity (Deficit) Attributable to HCA Healthcare, Inc.														Equity Attributable to Noncontrolling Interests			Total
	Common Stock					Capital in Excess of Par Value			Accumulated Other Comprehensive Loss			Retained Deficit
	Shares (in millions)			Par Value
Balances, December 31, 2014		420.478		$	4	$	—		$	(323	)	$	(7,575	)	$	1,396		$	(6,498	)
Comprehensive income										58			2,129			567			2,754
Repurchase of common stock		(31.991	)				(505	)					(1,892	)					(2,397	)
Share-based benefit plans		10.252					523												523
Distributions																(495	)		(495	)
Acquisition of entities with noncontrolling interests																85			85
Other							(18	)											(18	)

Balances, December 31, 2015		398.739			4		—			(265	)		(7,338	)		1,553			(6,046	)
Comprehensive income (loss)										(73	)		2,890			542			3,359
Repurchase of common stock		(36.325	)				(231	)					(2,520	)					(2,751	)
Share-based benefit plans		8.122					233												233
Distributions																(434	)		(434	)
Other							(2	)								8			6

Balances, December 31, 2016		370.536			4		—			(338	)		(6,968	)		1,669			(5,633	)
Comprehensive income										60			2,216			527			2,803
Repurchase of common stock		(25.092	)				(271	)					(1,780	)					(2,051	)
Share-based benefit plans		4.648					281												281
Distributions																(448	)		(448	)
Acquisition of entities with noncontrolling interests																63			63
Other							(10	)											(10	)

Balances, December 31, 2017		350.092		$	4	$	—		$	(278	)	$	(6,532	)	$	1,811		$	(4,995	)

The accompanying notes are an integral part of the consolidated financial statements.

F-6

HCA HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017, 2016 AND 2015

(Dollars in millions)


	2017			2016			2015
Cash flows from operating activities:
Net income	$	2,743		$	3,432		$	2,696
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable		(4,640	)		(3,247	)		(4,114	)
Provision for doubtful accounts		4,039			3,257			3,913

Accounts receivable, net		(601	)		10			(201	)
Inventories and other assets		(69	)		(112	)		(314	)
Accounts payable and accrued expenses		374			144			192
Depreciation and amortization		2,131			1,966			1,904
Income taxes		433			123			(160	)
Losses (gains) on sales of facilities		(8	)		(23	)		5
Losses on retirement of debt		39			4			135
Legal claim costs (benefits)		—			(246	)		149
Amortization of debt issuance costs		31			34			35
Share-based compensation		270			251			239
Other		83			70			54

Net cash provided by operating activities		5,426			5,653			4,734

Cash flows from investing activities:
Purchase of property and equipment		(3,015	)		(2,760	)		(2,375	)
Acquisition of hospitals and health care entities		(1,212	)		(576	)		(351	)
Disposal of hospitals and health care entities		25			26			73
Change in investments		(73	)		64			63
Other		(4	)		6			7

Net cash used in investing activities		(4,279	)		(3,240	)		(2,583	)

Cash flows from financing activities:
Issuances of long-term debt		1,502			5,400			5,548
Net change in revolving bank credit facilities		760			(110	)		150
Repayment of long-term debt		(753	)		(4,475	)		(4,920	)
Distributions to noncontrolling interests		(448	)		(434	)		(495	)
Payment of debt issuance costs		(26	)		(40	)		(50	)
Repurchases of common stock		(2,051	)		(2,751	)		(2,397	)
Other		(45	)		(98	)		188

Net cash used in financing activities		(1,061	)		(2,508	)		(1,976	)

Change in cash and cash equivalents		86			(95	)		175
Cash and cash equivalents at beginning of period		646			741			566

Cash and cash equivalents at end of period	$	732		$	646		$	741

Interest payments	$	1,700		$	1,666		$	1,650
Income tax payments, net	$	1,205		$	1,255		$	1,186

The accompanying notes are an integral part of the consolidated financial statements.

F-7

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — ACCOUNTING POLICIES

Reporting Entity

HCA Healthcare, Inc. is a holding company whose affiliates own and operate hospitals and related health care entities. The term “affiliates” includes direct and indirect subsidiaries of HCA Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners. At December 31, 2017, these affiliates owned and operated 179 hospitals, 120 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 20 states and England. The terms “Company,” “HCA,” “we,” “our” or “us,” as used herein and unless otherwise stated or indicated by context, refer to HCA Healthcare, Inc. and its affiliates. The terms “facilities” or “hospitals” refer to entities owned and operated by affiliates of HCA and the term “employees” refers to employees of affiliates of HCA.

Basis of Presentation

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

The consolidated financial statements include all subsidiaries and entities controlled by HCA. We generally define “control” as ownership of a majority of the voting interest of an entity. The consolidated financial statements include entities in which we absorb a majority of the entity’s expected losses, receive a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. The accounts of acquired entities are included in our consolidated financial statements for periods subsequent to our acquisition of controlling interests. Significant intercompany transactions have been eliminated. Investments in entities we do not control, but in which we have a substantial ownership interest and can exercise significant influence, are accounted for using the equity method.

The majority of our expenses are “cost of revenue” items. Costs that could be classified as general and administrative include our corporate office costs, which were $373 million, $373 million and $327 million for the years ended December 31, 2017, 2016 and 2015, respectively.

F-8

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Revenues

Revenues consist primarily of net patient service revenues that are recorded based upon established billing rates less allowances for contractual adjustments. Revenues are recorded during the period the health care services are provided, based upon the estimated amounts due from the patients and third-party payers. Third-party payers include federal and state agencies (under the Medicare and Medicaid programs), managed care health plans and commercial insurance companies (including plans offered through the health insurance exchanges), and employers. Estimates of contractual allowances under managed care health plans are based upon the payment terms specified in the related contractual agreements. Contractual payment terms in managed care agreements are generally based upon predetermined rates per diagnosis, per diem rates or discounted fee-for-service rates. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured discounts and contractual discounts). We also record a provision for doubtful accounts (based primarily on historical collection experience) related to uninsured accounts to record net self pay revenues at the estimated amounts we expect to collect. Our revenues from third party payers and other (including uninsured patients) for the years ended December 31, are summarized in the following table (dollars in millions):


	Years Ended December 31,
	2017			Ratio			2016			Ratio			2015			Ratio
Medicare	$	9,483			21.7	%	$	8,895			21.4	%	$	8,654			21.8	%
Managed Medicare		4,788			11.0			4,355			10.5			4,133			10.4
Medicaid		1,631			3.7			1,597			3.8			1,705			4.3
Managed Medicaid		2,349			5.4			2,478			6.0			2,234			5.6
Managed care and other insurers		24,813			56.9			23,441			56.5			21,882			55.2
International (managed care and other insurers)		1,097			2.5			1,195			2.9			1,295			3.3
Other		3,492			8.0			2,786			6.7			3,688			9.3

Revenues before provision for doubtful accounts		47,653			109.2			44,747			107.8			43,591			109.9
Provision for doubtful accounts		(4,039	)		(9.2	)		(3,257	)		(7.8	)		(3,913	)		(9.9	)

Revenues	$	43,614			100.0	%	$	41,490			100.0	%	$	39,678			100.0	%

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. As a result, there is at least a reasonable possibility recorded estimates will change by a material amount. Estimated reimbursement amounts are adjusted in subsequent periods as cost reports are prepared and filed and as final settlements are determined (in relation to certain government programs, primarily Medicare, this is generally referred to as the “cost report” filing and settlement process). The adjustments to estimated Medicare and Medicaid reimbursement amounts and disproportionate-share funds related primarily to cost reports filed during the respective year resulted in net increases to revenues of $41 million, $31 million and $48 million in 2017, 2016 and 2015, respectively. The adjustments to estimated reimbursement amounts related primarily to cost reports filed during previous years resulted in net increases to revenues of $56 million, $90 million and $85 million in 2017, 2016 and 2015, respectively.

The Emergency Medical Treatment and Labor Act (“EMTALA”) requires any hospital participating in the Medicare program to conduct an appropriate medical screening examination of every person who presents to the hospital’s emergency room for treatment and, if the individual is suffering from an emergency medical condition, to either stabilize the condition or make an appropriate transfer of the individual to a facility able to handle the condition. The obligation to screen and stabilize emergency medical conditions exists regardless of an

F-9

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Revenues (continued)

individual’s ability to pay for treatment. Federal and state laws and regulations require, and our commitment to providing quality patient care encourages, us to provide services to patients who are financially unable to pay for the health care services they receive. Prior to November 2017, patients treated at hospitals for nonelective care, who have income at or below 200% of the federal poverty level, are eligible for charity care. During November 2017, we expanded our charity care policy to limit the patient responsibility amounts for patients who have income above 200%, but at or below 400%, of the federal poverty level to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable multiple of the federal poverty level. The federal poverty level is established by the federal government and is based on income and family size. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. We provide discounts to uninsured patients who do not qualify for Medicaid or charity care. In implementing the uninsured discount policy, we may first attempt to provide assistance to uninsured patients to help determine whether they may qualify for Medicaid, other federal or state assistance or charity care. If an uninsured patient does not qualify for these programs, the uninsured discount is applied.

To quantify the total impact of and trends related to uninsured accounts, we believe it is beneficial to view charity care, uninsured discounts and the provision for doubtful accounts in combination, rather than each separately. A summary of these amounts for the years ended December 31, follows (dollars in millions):


	2017		Ratio			2016		Ratio			2015		Ratio
Charity care	$	4,861		21	%	$	4,151		20	%	$	3,682		20	%
Uninsured discounts		14,520		62			13,047		64			10,692		59
Provision for doubtful accounts		4,039		17			3,257		16			3,913		21

Total uncompensated care	$	23,420		100	%	$	20,455		100	%	$	18,287		100	%

A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):


	2017			2016			2015
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)	$	37,557		$	35,304		$	33,760

Cost-to-charges ratio (patient care costs as percentage of gross patient charges)		12.9	%		13.5	%		14.5	%

Total uncompensated care	$	23,420		$	20,455		$	18,287
Multiply by the cost-to-charges ratio		12.9	%		13.5	%		14.5	%

Estimated cost of total uncompensated care	$	3,021		$	2,761		$	2,652

The sum of charity care, uninsured discounts and the provision for doubtful accounts, as a percentage of the sum of revenues, charity care, uninsured discounts and the provision for doubtful accounts was 34.9% for 2017, 33.0% for 2016 and 31.5% for 2015.

F-10

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Recent Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) and the International Accounting Standards Board issued a final, converged, principles-based standard on revenue recognition. Companies across all industries will use a five-step model to recognize revenue from customer contracts. The new standard, which replaces nearly all existing revenue recognition guidance, will require significant management judgments and change the way many companies recognize revenue in their financial statements. In July 2015, the FASB decided to defer the effective date of the new revenue standard by one year to annual and interim periods beginning after December 15, 2017 for public entities and permit entities to adopt one year earlier if they choose. We believe the most significant impact of adopting the new standard will be to the presentation of our income statement where the provision for doubtful accounts will be recorded as a direct reduction to revenues and will not be presented as a separate line item. We expect to adopt the new standard using the full retrospective application, and we do not believe the adoption will have a significant impact on our recognition of net revenues or related disclosures for any period.

In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (“ASU 2016-02”), which requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public business entities for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. We are continuing to evaluate the provisions of ASU 2016-02 (and developments concerning its transition provision options) to determine how our financial statements will be affected, and we believe the primary effect of adopting the new standard will be to record right-of-use assets and obligations for our leases currently classified as operating leases.

Cash and Cash Equivalents

Cash and cash equivalents include highly liquid investments with a maturity of three months or less when purchased. Our insurance subsidiaries’ cash equivalent investments in excess of the amounts required to pay estimated professional liability claims during the next twelve months are not included in cash and cash equivalents as these funds are not available for general corporate purposes. Carrying values of cash and cash equivalents approximate fair value due to the short-term nature of these instruments.

Our cash management system provides for daily investment of available balances and the funding of outstanding checks when presented for payment. Outstanding, but unpresented, checks totaling $480 million and $565 million at December 31, 2017 and 2016, respectively, have been included in “accounts payable” in the consolidated balance sheets. Upon presentation for payment, these checks are funded through available cash balances or our credit facility.

Accounts Receivable

We receive payments for services rendered from federal and state agencies (under the Medicare and Medicaid programs), managed care health plans, commercial insurance companies, employers and patients. We recognize that revenues and receivables from government agencies are significant to our operations, but do not believe there are significant credit risks associated with these government agencies. We do not believe there are any other significant concentrations of revenues from any particular payer that would subject us to any significant credit risks in the collection of our accounts receivable.

F-11

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Accounts Receivable (continued)

Additions to the allowance for doubtful accounts are made by means of the provision for doubtful accounts. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts and subsequent recoveries are added. The amount of the provision for doubtful accounts is based upon management’s assessment of historical and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. The provision for doubtful accounts and the allowance for doubtful accounts relate to “uninsured” amounts due directly from patients (including copayment and deductible amounts from patients who have health care coverage). Accounts are written off when all reasonable internal and external collection efforts have been performed. We consider the return of an account from the secondary collection agency to be the culmination of our reasonable collection efforts and the timing basis for writing off the account balance. Writeoffs are based upon specific identification and the writeoff process requires a writeoff adjustment entry to the patient accounting system. Management relies on the results of detailed reviews of historical writeoffs and recoveries at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information to utilize in estimating the collectibility of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data. At December 31, 2017 and 2016, the allowance for doubtful accounts represented 100% and 98%, respectively, of the $5.488 billion and $5.116 billion, respectively, patient due accounts receivable balance. The patient due accounts receivable balance represents the estimated uninsured portion of our accounts receivable. The estimated uninsured portion of Medicaid pending and uninsured discount pending accounts is included in our patient due accounts receivable balance. Days revenues in accounts receivable were 52 days, 50 days and 53 days at December 31, 2017, 2016 and 2015, respectively. Changes in general economic conditions, patient accounting service center operations, payer mix, or federal or state governmental health care coverage could affect our collection of accounts receivable, cash flows and results of operations.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market.

Property and Equipment

Depreciation expense, computed using the straight-line method, was $2.111 billion in 2017, $1.946 billion in 2016 and $1.880 billion in 2015. Buildings and improvements are depreciated over estimated useful lives ranging generally from 10 to 40 years. Estimated useful lives of equipment vary generally from four to 10 years.

When events, circumstances or operating results indicate the carrying values of certain long-lived assets expected to be held and used might be impaired, we prepare projections of the undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the projections indicate the recorded amounts are not expected to be recoverable, such amounts are reduced to estimated fair value. Fair value may be estimated based upon internal evaluations that include quantitative analyses of revenues and cash flows, reviews of recent sales of similar assets and independent appraisals.

Long-lived assets to be disposed of are reported at the lower of their carrying amounts or fair value less costs to sell or close. The estimates of fair value are usually based upon recent sales of similar assets and market responses based upon discussions with and offers received from potential buyers.

F-12

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Investments of Insurance Subsidiaries

At December 31, 2017 and 2016, the investments of our 100% owned insurance subsidiaries were classified as “available-for-sale” as defined in Accounting Standards Codification (“ASC”) No. 320, Investments—Debt and Equity Securities and are recorded at fair value. The investment securities are held for the purpose of providing a funding source to pay liability claims covered by the insurance subsidiaries. We perform quarterly assessments of individual investment securities to determine whether declines in market value are temporary or other-than-temporary. Our investment securities evaluation process involves subjective judgments, often involves estimating the outcome of future events, and requires a significant level of professional judgment in determining whether an impairment has occurred. We evaluate, among other things, the financial position and near term prospects of the issuer, conditions in the issuer’s industry, liquidity of the investment, changes in the amount or timing of expected future cash flows from the investment, and recent downgrades of the issuer by a rating agency, to determine if, and when, a decline in the fair value of an investment below amortized cost is considered other-than-temporary. The length of time and extent to which the fair value of the investment is less than amortized cost and our ability and intent to retain the investment, to allow for any anticipated recovery of the investment’s fair value, are important components of our investment securities evaluation process.

Goodwill and Intangible Assets

Goodwill is not amortized but is subject to annual impairment tests. In addition to the annual impairment review, impairment reviews are performed whenever circumstances indicate a possible impairment may exist. Impairment testing for goodwill is done at the reporting unit level. Reporting units are one level below the business segment level, and our impairment testing is performed at the operating division level. We compare the fair value of the reporting unit assets to the carrying amount, on at least an annual basis, to determine if there is potential impairment. If the fair value of the reporting unit assets is less than their carrying value, an impairment loss is recognized. Fair value is estimated based upon internal evaluations of each reporting unit that include quantitative analyses of market multiples, revenues and cash flows and reviews of recent sales of similar facilities. No goodwill impairments were recognized during 2017, 2016 and 2015. Since January 1, 2000, we have recognized total goodwill impairments of $102 million in the aggregate. None of the goodwill impairments related to evaluations of goodwill at the reporting unit level, as all recognized goodwill impairments during this period related to goodwill allocated to asset disposal groups.

During 2017, goodwill increased by $693 million related to acquisitions and by $12 million related to foreign currency translation and other adjustments. During 2016, goodwill increased by $41 million related to acquisitions and declined by $49 million related to sales, foreign currency translation and other adjustments.

During 2017, identifiable intangible assets declined by $15 million due to amortization, foreign currency translation and other adjustments. During 2016, identifiable intangible assets declined by $19 million due to amortization, foreign currency translation and other adjustments. Identifiable intangible assets are amortized over estimated lives ranging generally from three to 10 years. The gross carrying amount of identifiable intangible assets at both December 31, 2017 and 2016 was $184 million and accumulated amortization was $94 million and $79 million, respectively. The gross carrying amount of indefinite-lived identifiable intangible assets at both December 31, 2017 and 2016 was $269 million. Indefinite-lived identifiable intangible assets are not amortized but are subject to annual impairment tests, and impairment reviews are performed whenever circumstances indicate a possible impairment may exist.

F-13

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Debt Issuance Costs

Debt issuance costs are amortized based upon the terms of the respective debt obligations. The gross carrying amount of debt issuance costs at December 31, 2017 and 2016 was $353 million and $334 million, respectively, and accumulated amortization was $189 million and $164 million, respectively. Amortization of debt issuance costs is included in interest expense and was $31 million, $34 million and $35 million for 2017, 2016 and 2015, respectively.

Professional Liability Claims

Reserves for professional liability risks were $1.627 billion and $1.539 billion at December 31, 2017 and 2016, respectively. The current portion of the reserves, $429 million and $391 million at December 31, 2017 and 2016, respectively, is included in “other accrued expenses” in the consolidated balance sheets. Provisions for losses related to professional liability risks were $466 million, $430 million and $344 million for 2017, 2016 and 2015, respectively, and are included in “other operating expenses” in our consolidated income statements. Provisions for losses related to professional liability risks are based upon actuarially determined estimates. Loss and loss expense reserves represent the estimated ultimate net cost of all reported and unreported losses incurred through the respective consolidated balance sheet dates. The reserves for unpaid losses and loss expenses are estimated using individual case-basis valuations and actuarial analyses. Those estimates are subject to the effects of trends in loss severity and frequency. The estimates are continually reviewed and adjustments are recorded as experience develops or new information becomes known. Adjustments to the estimated reserve amounts are included in current operating results. The reserves for professional liability risks cover approximately 2,500 and 2,700 individual claims at December 31, 2017 and 2016, respectively, and estimates for unreported potential claims. The time period required to resolve these claims can vary depending upon the jurisdiction and whether the claim is settled or litigated. During both 2017 and 2016, $357 million of net payments were made for professional and general liability claims. The estimation of the timing of payments beyond a year can vary significantly. Although considerable variability is inherent in professional liability reserve estimates, we believe the reserves for losses and loss expenses are adequate; however, there can be no assurance the ultimate liability will not exceed our estimates.

A portion of our professional liability risks is insured through a 100% owned insurance subsidiary. Subject to a $15 million per occurrence self-insured retention, our facilities are insured by our 100% owned insurance subsidiary for losses up to $50 million per occurrence. The insurance subsidiary has obtained reinsurance for professional liability risks generally above a retention level of $25 million per occurrence. We also maintain professional liability insurance with unrelated commercial carriers for losses in excess of amounts insured by our insurance subsidiary.

The obligations covered by reinsurance and excess insurance contracts are included in the reserves for professional liability risks, as we remain liable to the extent the reinsurers and excess insurance carriers do not meet their obligations under the reinsurance and excess insurance contracts. The amounts receivable under the reinsurance contracts include $19 million and $36 million at December 31, 2017 and 2016, respectively, recorded in “other assets,” and $5 million and $9 million at December 31, 2017 and 2016, respectively, recorded in “other current assets.”

Financial Instruments

Derivative financial instruments are employed to manage interest rate risks, and are not used for trading or speculative purposes. We recognize our interest rate swap derivative instruments in the consolidated balance

F-14

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Financial Instruments (continued)

sheets at fair value. Changes in the fair value of derivatives are recognized periodically in stockholders’ equity, as a component of other comprehensive income (loss), provided the derivative financial instrument qualifies for hedge accounting. Gains and losses on derivatives designated as cash flow hedges, to the extent they are effective, are recorded in other comprehensive income (loss), and subsequently reclassified to earnings to offset the impact of the forecasted transactions when they occur. In the event the forecasted transaction to which a cash flow hedge relates is no longer likely, the amount in other comprehensive income (loss) is recognized in earnings and generally the derivative is terminated.

The net interest paid or received on interest rate swaps is recognized as interest expense. Gains and losses resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments to interest expense over the remaining term of the debt originally associated with the terminated swap.

Noncontrolling Interests in Consolidated Entities

The consolidated financial statements include all assets, liabilities, revenues and expenses of less than 100% owned entities that we control. Accordingly, we have recorded noncontrolling interests in the earnings and equity of such entities.

Reclassifications

Certain prior year amounts have been reclassified to conform to the 2017 presentation.

NOTE 2 — SHARE-BASED COMPENSATION

Stock Incentive Plan

Our stock incentive plan is designed to promote the long term financial interests and growth of the Company by attracting and retaining management and other personnel, motivating them to achieve long range goals and aligning their interests with those of our stockholders through opportunities for increased stock, or stock-based, ownership in the Company. Portions of the options, stock appreciation rights (“SARs”) and restricted share units (“RSUs”) granted vest solely based upon continued employment over a specific period of time, and portions of the options, SARs and RSUs, and all performance share units (“PSUs”) vest based both upon continued employment over a specific period of time and upon the achievement of predetermined financial targets over time. We granted 1,879,100 and 1,601,300 SARs and 2,787,700 and 2,628,500 RSUs and PSUs during 2017 and 2016, respectively. At December 31, 2017, there were 11,284,400 exercisable stock options and SARs, and there were 22,755,600 shares available for future grants under the stock incentive plan.

Employee Stock Purchase Plan

Our employee stock purchase plan (“ESPP”) provides our participating employees an opportunity to obtain shares of our common stock at a discount (through payroll deductions over three-month periods). At December 31, 2017, 8,681,600 shares of common stock were reserved for issuance under the ESPP provisions. During 2017 and 2016, the Company recognized $9 million and $8 million, respectively, of compensation expense for each year related to the ESPP.

F-15

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — SHARE-BASED COMPENSATION (continued)

Stock Option, SAR, RSU and PSU Activity

The fair value of each stock option and SAR award is estimated on the grant date, using valuation models and the weighted average assumptions indicated in the following table. Awards under our stock incentive plan generally vest based on continued employment (“Time Stock Options and SARs” and “Time RSUs”) and based upon continued employment and the achievement of certain financial targets (“Performance Stock Options and SARs”, “Performance RSUs” and “PSUs”). PSUs have a three-year cumulative earnings per share target, and the number of PSUs earned can vary from zero (for actual performance of less than 80% of target) to two times the original PSU grant (for actual performance of 120% or more of target). Each grant is valued as a single award with an expected term equal to the average expected term of the component vesting tranches. We use historical exercise behavior data and other factors to estimate the expected term of the options and SARs. The expected term of the share-based award is limited by the contractual term, and employee post-vesting termination behavior is incorporated in the historical exercise behavior data.

Compensation cost is recognized on the straight-line attribution method. The straight-line attribution method requires that total compensation expense recognized must at least equal the vested portion of the grant-date fair value. The expected volatility is derived using historical stock price information for our common stock and the volatility implied by the trading of options to purchase our stock on open-market exchanges. The risk-free interest rate is the approximate yield on United States Treasury Strips having a life equal to the expected share-based award life on the date of grant. The expected life is an estimate of the number of years a share-based award will be held before it is exercised.


	2017			2016			2015
Risk-free interest rate		2.13	%		1.70	%		1.59	%
Expected volatility		31	%		36	%		36	%
Expected life, in years		6.17			6.25			6.25
Expected dividend yield		—			—			—

F-16

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — SHARE-BASED COMPENSATION (continued)

Stock Option, SAR, RSU and PSU Activity (continued)

Information regarding Time Stock Options and SARs and Performance Stock Options and SARs activity during 2017, 2016 and 2015 is summarized below (share amounts in thousands):


	Time Stock Options and SARs			Performance Stock Options and SARs			Total Stock Options and SARs			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (dollars in millions)
Options and SARs outstanding, December 31, 2014		15,051			14,744			29,795		$	21.39
Granted		1,746			—			1,746			69.16
Exercised		(4,093	)		(3,988	)		(8,081	)		12.77
Cancelled		(539	)		(329	)		(868	)		32.59

Options and SARs outstanding, December 31, 2015		12,165			10,427			22,592			27.73
Granted		1,601			—			1,601			69.96
Exercised		(2,521	)		(4,171	)		(6,692	)		15.85
Cancelled		(309	)		(126	)		(435	)		55.17

Options and SARs outstanding, December 31, 2016		10,936			6,130			17,066			35.65
Granted		1,879			—			1,879			81.83
Exercised		(1,549	)		(1,366	)		(2,915	)		21.49
Cancelled		(110	)		(178	)		(288	)		52.92

Options and SARs outstanding, December 31, 2017		11,156			4,586			15,742			43.47		5.4 years	$	699

Options and SARs exercisable, December 31, 2017		7,060			4,224			11,284		$	32.49		4.4 years	$	625

The weighted average fair values of stock options and SARs granted during 2017, 2016 and 2015 were $28.47, $26.60 and $26.10 per share, respectively. The total intrinsic value of stock options and SARs exercised during the year ended December 31, 2017 was $177 million. As of December 31, 2017, the unrecognized compensation cost related to nonvested stock options and SARs was $74 million.

F-17

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 2 — SHARE-BASED COMPENSATION (continued)

Stock Option, SAR, RSU and PSU Activity (continued)

Information regarding Time RSUs, Performance RSUs and PSUs activity during 2017, 2016 and 2015 is summarized below (share amounts in thousands):


	Time RSUs			Performance RSUs			PSUs			Total RSUs and PSUs			Weighted Average Grant Date Fair Value
RSUs and PSUs outstanding, December 31, 2014		5,895			2,781			—			8,676		$	39.89
Granted		1,694			—			1,411			3,105			69.43
Vested		(1,953	)		(928	)		—			(2,881	)		37.61
Cancelled		(334	)		(113	)		(40	)		(487	)		47.26

RSUs and PSUs outstanding, December 31, 2015		5,302			1,740			1,371			8,413			51.15
Granted		1,450			—			1,178			2,628			69.95
Vested		(2,242	)		(870	)		—			(3,112	)		41.71
Cancelled		(399	)		(80	)		(163	)		(642	)		59.66

RSUs and PSUs outstanding, December 31, 2016		4,111			790			2,386			7,287			61.21
Granted		1,484			—			1,304			2,788			81.90
Vested		(1,824	)		(430	)		—			(2,254	)		51.20
Cancelled		(306	)		(133	)		(128	)		(567	)		64.06

RSUs and PSUs outstanding, December 31, 2017		3,465			227			3,562			7,254			72.05

As of December 31, 2017, the unrecognized compensation cost related to RSUs and PSUs was $257 million.

NOTE 3 — ACQUISITIONS AND DISPOSITIONS

During 2017, we paid $1.000 billion to acquire eight hospital facilities and $212 million to acquire nonhospital health care entities. During 2016, we paid $343 million to acquire three hospital facilities and $233 million to acquire nonhospital health care entities. During 2015, we paid $15 million to acquire a hospital and $336 million to acquire nonhospital health care entities. Purchase price amounts have been allocated to the related assets acquired and liabilities assumed based upon their respective fair values. The purchase price paid in excess of the fair value of identifiable net assets of these acquired entities aggregated $693 million, $41 million and $323 million in 2017, 2016 and 2015, respectively. The consolidated financial statements include the accounts and operations of the acquired entities subsequent to the respective acquisition dates. The pro forma effects of these acquired entities on our results of operations for periods prior to the respective acquisition dates were not significant.

During 2017, we received proceeds of $25 million and recognized a net pretax gain of $8 million ($5 million after tax) related to sales of real estate and other investments. During 2016, we received proceeds of $26 million and recognized a net pretax gain of $23 million ($19 million after tax) related to sales of real estate and other investments. During 2015, we received proceeds of $73 million and recognized a net pretax loss of $5 million ($3 million after tax) related to the sale of a hospital facility and sales of real estate and other investments.

F-18

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 — INCOME TAXES

The provision for income taxes consists of the following (dollars in millions):


	2017		2016			2015
Current:
Federal	$	1,067	$	1,129		$	1,259
State		120		125			119
Foreign		19		37			40
Deferred:
Federal		423		75			(163	)
State		3		(5	)		(27	)
Foreign		6		17			33

	$	1,638	$	1,378		$	1,261

Our provision for income taxes for the year ended December 31, 2017 included an increase of $301 million related to the estimated impact of tax rate changes under the 2017 Tax Cuts and Jobs Act (the “Tax Act”) on our deferred tax assets and liabilities. Our provision for income taxes for the years ended December 31, 2017 and 2016 also included tax benefits of $82 million and $162 million, respectively, related to the settlement of employee equity awards. The provision for income taxes reflects $14 million and $15 million of reductions in interest expense (net of tax) and $7 million of interest expense (net of tax) for the years ended December 31, 2017, 2016 and 2015, respectively. During 2016, the IRS completed its examination of our 2011 and 2012 tax years, resolving all outstanding federal tax issues. We reduced our provision for income taxes for the year ended December 31, 2016 by $51 million, including interest (net of tax), as a result of this resolution. Our foreign pretax income was $91 million, $149 million and $178 million for the years ended December 31, 2017, 2016 and 2015, respectively.

The Tax Act was enacted on December 22, 2017. The Tax Act significantly revises U.S. corporate income taxes, including lowering the statutory corporate tax rate from 35% to 21% beginning in 2018 and imposing a mandatory one-time transition tax on undistributed foreign earnings. Due to the complexity and uncertainty regarding numerous provisions of the Tax Act, we have not completed our accounting for its effects. However, we have made reasonable estimates and recorded provisional amounts in our financial statements as of December 31, 2017.

A provisional amount of $301 million related to the remeasurement of our deferred tax assets and liabilities, primarily based on the lower tax rates at which they are expected to reverse in the future, was recorded as a component of our provision for income taxes for the year ended December 31, 2017.

We also reclassified a provisional amount of $127 million from our deferred tax liabilities for the one-time transition tax, based on our estimated undistributed post-1986 foreign earnings and profits. Because we had previously recorded U.S. taxes on these earnings, the transition tax liability, which is payable over an 8-year period, did not affect our 2017 provision for income taxes.

As we complete our analysis of the Tax Act, collect and prepare necessary data, and interpret any additional guidance issued by federal and state taxing authorities or other standard-setting bodies, we may make adjustments to the provisional amounts and record additional amounts for those federal, state, and foreign tax assets and liabilities for which we were unable to make reasonable estimates as of December 31, 2017. Any adjustments or additional amounts recorded may materially impact our provision for income taxes and effective tax rate in the periods in which they are made.

F-19

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 — INCOME TAXES (continued)

A reconciliation of the federal statutory rate to the effective income tax rate follows:


	2017			2016			2015
Federal statutory rate		35.0	%		35.0	%		35.0	%
State income taxes, net of federal tax benefit		2.2			2.1			1.6
Change in liability for uncertain tax positions		—			(1.0	)		0.2
Tax benefit from settlements of employee equity awards		(2.0	)		(3.6	)		—
Impact of rate change on deferred tax balances		7.8			—			—
Other items, net		(0.5	)		(0.2	)		0.4

Effective income tax rate on income applicable to HCA Healthcare, Inc.		42.5			32.3			37.2
Income attributable to noncontrolling interests from consolidated partnerships		(5.1	)		(3.6	)		(5.3	)

Effective income tax rate on income before income taxes		37.4	%		28.7	%		31.9	%

A summary of the items comprising the deferred tax assets and liabilities at December 31 follows (dollars in millions):


	2017				2016
	Assets		Liabilities		Assets		Liabilities
Depreciation and fixed asset basis differences	$	—	$	260	$	—	$	235
Allowances for professional liability and other risks		345		—		495		—
Accounts receivable		243		—		351		—
Compensation		263		—		359		—
Other		420		501		794		918

	$	1,271	$	761	$	1,999	$	1,153

At December 31, 2017, federal and state net operating loss carryforwards (expiring in years 2020 through 2036) available to offset future taxable income approximated $82 million and $121 million, respectively. Utilization of net operating loss carryforwards in any one year may be limited.

The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):


	2017			2016
Balance at January 1	$	377		$	487
Additions based on tax positions related to the current year		40			11
Additions for tax positions of prior years		11			8
Reductions for tax positions of prior years		(13	)		(18	)
Settlements		—			(101	)
Lapse of applicable statutes of limitations		(16	)		(10	)

Balance at December 31	$	399		$	377

Our liability for unrecognized tax benefits was $439 million, including accrued interest of $44 million and excluding $4 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2017 ($418 million, $45 million and $4 million, respectively, as of December 31, 2016). Unrecognized tax benefits of $145 million ($137 million as of December 31, 2016) would affect the effective rate, if recognized.

F-20

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 — INCOME TAXES (continued)

We are subject to examination by the IRS for tax years 2014 and later as well as by state and foreign taxing authorities. Depending on the resolution of any federal, state and foreign tax disputes, the completion of examinations by federal, state or foreign taxing authorities, or the expiration of statutes of limitation for specific taxing jurisdictions, we believe it is reasonably possible that our liability for unrecognized tax benefits may significantly increase or decrease within the next 12 months. However, we are currently unable to estimate the range of any possible change.

NOTE 5 — EARNINGS PER SHARE

We compute basic earnings per share using the weighted average number of common shares outstanding. We compute diluted earnings per share using the weighted average number of common shares outstanding plus the dilutive effect of outstanding stock options, SARs, RSUs and PSUs, computed using the treasury stock method. During 2017, 2016 and 2015, we repurchased 25.092 million shares, 36.325 million shares and 31.991 million shares, respectively, of our common stock. The following table sets forth the computations of basic and diluted earnings per share for the years ended December 31, 2017, 2016 and 2015 (dollars and shares in millions, except per share amounts):


	2017		2016		2015
Net income attributable to HCA Healthcare, Inc.	$	2,216	$	2,890	$	2,129
Weighted average common shares outstanding		362.305		383.591		414.193
Effect of dilutive incremental shares		9.916		12.260		12.528

Shares used for diluted earnings per share		372.221		395.851		426.721

Earnings per share:
Basic earnings per share	$	6.12	$	7.53	$	5.14
Diluted earnings per share	$	5.95	$	7.30	$	4.99

NOTE 6 — INVESTMENTS OF INSURANCE SUBSIDIARIES

A summary of the insurance subsidiaries’ investments at December 31 follows (dollars in millions):


	2017
	Amortized Cost		Unrealized Amounts				Fair Value
		Gains		Losses
States and municipalities debt securities	$	361	$	10	$	—	$	371
Money market funds and other		101		—		—		101

	$	462	$	10	$	—		472

Amounts classified as current assets								(54	)

Investment carrying value							$	418

F-21

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)


	2016
	Amortized Cost		Unrealized Amounts					Fair Value
		Gains		Losses
States and municipalities debt securities	$	345	$	9	$	(1	)	$	353
Money market funds and other		29		3		—			32

	$	374	$	12	$	(1	)		385

Amounts classified as current assets									(49	)

Investment carrying value								$	336

At December 31, 2017 and 2016, the investments of our insurance subsidiaries were classified as “available-for-sale.” Changes in temporary unrealized gains and losses are recorded as adjustments to other comprehensive income (loss).

Scheduled maturities of investments in debt securities at December 31, 2017 were as follows (dollars in millions):


	Amortized Cost		Fair Value
Due in one year or less	$	31	$	31
Due after one year through five years		84		86
Due after five years through ten years		187		194
Due after ten years		59		60

	$	361	$	371

The average expected maturity of the investments in debt securities at December 31, 2017 was 4.8 years, compared to the average scheduled maturity of 6.5 years. Expected and scheduled maturities may differ because the issuers of certain securities have the right to call, prepay or otherwise redeem such obligations prior to their scheduled maturity date.

NOTE 7 — FINANCIAL INSTRUMENTS

Interest Rate Swap Agreements

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. These swap agreements involve the exchange of fixed and variable rate interest payments between two parties based on common notional principal amounts and maturity dates. Pay-fixed interest rate swaps effectively convert variable rate obligations to fixed interest rate obligations. The interest payments under these agreements are settled on a net basis. The net interest payments, based on the notional amounts in these agreements, generally match the timing of the related liabilities, for the interest rate swap agreements which have been designated as cash flow hedges. The notional amounts of the swap agreements represent amounts used to calculate the exchange of cash flows and are not our assets or liabilities. Our credit risk related to these agreements is considered low because the swap agreements are with creditworthy financial institutions.

F-22

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 7 — FINANCIAL INSTRUMENTS (continued)

Interest Rate Swap Agreements (continued)

The following table sets forth our interest rate swap agreements, which have been designated as cash flow hedges, at December 31, 2017 (dollars in millions):


	Notional Amount		Maturity Date		Fair Value
Pay-fixed interest rate swaps	$	2,000		December 2021	$	48
Pay-fixed interest rate swaps		500		December 2022		2

During the next 12 months, we estimate $5 million will be reclassified from other comprehensive income (“OCI”) and will reduce interest expense.

Derivatives — Results of Operations

The following table presents the effect of our interest rate swaps on our results of operations for the year ended December 31, 2017 (dollars in millions):


Derivatives in Cash Flow Hedging Relationships		Amount of Gain Recognized in OCI on Derivatives, Net of Tax				Location of Loss Reclassified from Accumulated OCI into Operations				Amount of Loss Reclassified from Accumulated OCI into Operations
Interest rate swaps		$	7				Interest expense			$	20

NOTE 8 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE

Accounting Standards Codification 820, Fair Value Measurements and Disclosures (“ASC 820”) emphasizes fair value is a market-based measurement, and fair value measurements should be determined based on the assumptions market participants would use in pricing assets or liabilities. ASC 820 utilizes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment.

F-23

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 8 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)

Cash Traded Investments

Our cash traded investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Certain types of cash traded instruments are classified within Level 3 of the fair value hierarchy because they trade infrequently and therefore have little or no price transparency. The valuation of these securities involves the consideration of market factors and management’s judgment.

Derivative Financial Instruments

We have entered into interest rate swap agreements to manage our exposure to fluctuations in interest rates. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. We incorporate credit valuation adjustments to reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements of these instruments.

Although we determined the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. We assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions, and at December 31, 2017 and 2016, we determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 and 2016, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):


	December 31, 2017
	Fair Value			Fair Value Measurements Using
		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Investments of insurance subsidiaries:
States and municipalities debt securities	$	371		$	—		$	371	$	—
Money market funds and other		101			101			—		—

Investments of insurance subsidiaries		472			101			371		—
Less amounts classified as current assets		(54	)		(54	)		—		—

	$	418		$	47		$	371	$	—

Interest rate swaps (Other)	$	50		$	—		$	50	$	—

F-24

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 8 — ASSETS AND LIABILITIES MEASURED AT FAIR VALUE (continued)


	December 31, 2016
	Fair Value			Fair Value Measurements Using
		Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)
Assets:
Investments of insurance subsidiaries:
States and municipalities debt securities	$	353		$	—		$	347		$	6
Money market funds and other		32			32			—			—

Investments of insurance subsidiaries		385			32			347			6
Less amounts classified as current assets		(49	)		(28	)		(21	)		—

	$	336		$	4		$	326		$	6

Interest rate swaps (Other)	$	31		$	—		$	31		$	—
Liabilities:
Interest rate swaps (Income taxes and other liabilities)	$	12		$	—		$	12		$	—

The $6 million reduction in the Level 3 investments of our insurance subsidiaries during 2017 resulted from settlements. The estimated fair value of our long-term debt was $34.689 billion and $32.833 billion at December 31, 2017 and 2016, respectively, compared to carrying amounts, excluding net debt issuance costs, aggregating $33.222 billion and $31.546 billion, respectively. The estimates of fair value are generally based upon the quoted market prices or quoted market prices for similar issues of long-term debt with the same maturities.

NOTE 9 — LONG-TERM DEBT

A summary of long-term debt at December 31, including related interest rates at December 31, 2017, follows (dollars in millions):


	2017			2016
Senior secured asset-based revolving credit facility (effective interest rate of 3.0%)	$	3,680		$	2,920
Senior secured revolving credit facility		—			—
Senior secured term loan facilities (effective interest rate of 3.5%)		3,891			3,981
Senior secured notes (effective interest rate of 5.4%)		15,300			13,800
Other senior secured debt (effective interest rate of 5.7%)		599			593

Senior secured debt		23,470			21,294
Senior unsecured notes (effective interest rate of 6.4%)		9,752			10,252
Net debt issuance costs		(164	)		(170	)

Total debt (average life of 6.8 years, rates averaging 5.2%)		33,058			31,376
Less amounts due within one year		200			216

	$	32,858		$	31,160

F-25

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — LONG-TERM DEBT (continued)

2017 Activity

During June 2017, we issued $1.500 billion aggregate principal amount of 5.500% senior secured notes due 2047. We used the net proceeds for general corporate purposes, including funding the purchase of certain hospital acquisitions, and the redemption, during July 2017, of all $500 million aggregate principal amount of our existing 8.000% senior notes maturing in October 2018. The pretax loss on retirement of debt was $39 million.

During June 2017, we amended our senior secured revolving credit facilities by (i) increasing the commitments under the senior secured asset-based revolving credit facility to $3.750 billion, (ii) extending the maturity date of the revolving credit commitments to June 28, 2022, (iii) amending the incremental facility provisions to permit the incurrence of additional incremental credit facilities in an aggregate principal amount of $1.5 billion and (iv) providing that the commitment fee for unutilized commitments under the senior secured asset-based revolving credit facility shall be 0.250% per annum.

Senior Secured Credit Facilities And Other Senior Secured Debt

We have entered into the following senior secured credit facilities: (i) a $3.750 billion asset-based revolving credit facility maturing on June 28, 2022 with a borrowing base of 85% of eligible accounts receivable, subject to customary reserves and eligibility criteria ($3.680 billion outstanding at December 31, 2017) (the “ABL credit facility”); (ii) a $2.000 billion senior secured revolving credit facility maturing on June 28, 2022 (none outstanding at December 31, 2017 without giving effect to certain outstanding letters of credit); (iii) a $1.225 billion senior secured term loan A-5 facility maturing on June 10, 2020; (iv) a $1.188 billion senior secured term loan B-8 facility maturing on February 15, 2024; and (v) a $1.478 billion senior secured term loan B-9 facility maturing on March 18, 2023. We refer to the facilities described under (ii) through (v) above, collectively, as the “cash flow credit facility” and, together with the ABL credit facility, the “senior secured credit facilities.”

Borrowings under the senior secured credit facilities bear interest at a rate equal to, at our option, either (a) a base rate determined by reference to the higher of (1) the federal funds rate plus 0.50% or (2) the prime rate of Bank of America or (b) a LIBOR rate for the currency of such borrowing for the relevant interest period, plus, in each case, an applicable margin. The applicable margin for borrowings under the senior secured credit facilities may be reduced subject to attaining certain leverage ratios.

The senior secured credit facilities contain a number of covenants that restrict, subject to certain exceptions, our (and some or all of our subsidiaries’) ability to incur additional indebtedness, repay subordinated indebtedness, create liens on assets, sell assets, make investments, loans or advances, engage in certain transactions with affiliates, pay dividends and distributions, and enter into sale and leaseback transactions. In addition, we are required to satisfy and maintain a maximum total leverage ratio covenant under the cash flow credit facility and, in certain situations under the ABL credit facility, a minimum interest coverage ratio covenant.

Senior secured notes consists of (i) $3.000 billion aggregate principal amount of 6.50% first lien notes due 2020; (ii) $1.350 billion aggregate principal amount of 5.875% first lien notes due 2022; (iii) $1.250 billion aggregate principal amount of 4.75% first lien notes due 2023; (iv) $1.500 billion aggregate principal amount of 3.75% first lien notes due 2019; (v) $2.000 billion aggregate principal amount of 5.00% first lien notes due 2024; (vi) $600 million aggregate principal amount of 4.25% first lien notes due 2019; (vii) $1.400 billion aggregate

F-26

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — LONG-TERM DEBT (continued)

Senior Secured Credit Facilities And Other Senior Secured Debt (continued)

principal amount of 5.25% first lien notes due 2025; (viii) $1.500 billion aggregate principal amount of 5.25% first lien notes due 2026; (ix) $1.200 billion aggregate principal amount of 4.50% first lien notes due 2027; and (x) $1.500 billion aggregate principal amount of 5.50% first lien notes due 2047. Capital leases and other secured debt totaled $599 million at December 31, 2017.

We use interest rate swap agreements to manage the variable rate exposure of our debt portfolio. At December 31, 2017, we had entered into effective interest rate swap agreements, in a total notional amount of $2.500 billion, in order to hedge a portion of our exposure to variable rate interest payments associated with the senior secured credit facilities. The effect of the interest rate swaps is reflected in the effective interest rates for the senior secured credit facilities.

Senior Unsecured Notes

Senior unsecured notes consist of (i) $7.891 billion aggregate principal amount of senior notes with maturities ranging from 2022 to 2033; (ii) an aggregate principal amount of $125 million medium-term notes maturing 2025; (iii) an aggregate principal amount of $736 million debentures with maturities ranging from 2023 to 2095; and (iv) an aggregate principal amount of $1.000 billion senior notes due 2021.

General Debt Information

The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture (the “1993 Indenture”) dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our ABL credit facility).

All obligations under the ABL credit facility, and the guarantees of those obligations, are secured, subject to permitted liens and other exceptions, by a first-priority lien on substantially all of the receivables of the borrowers and each guarantor under such ABL credit facility (the “Receivables Collateral”).

All obligations under the cash flow credit facility and the guarantees of such obligations are secured, subject to permitted liens and other exceptions, by:

	•		a first-priority lien on the capital stock owned by HCA Inc., or by any U.S. guarantor, in each of their respective first-tier subsidiaries;

	•		a first-priority lien on substantially all present and future assets of HCA Inc. and of each U.S. guarantor other than (i) “Principal Properties” (as defined in the 1993 Indenture), (ii) certain other real properties and (iii) deposit accounts, other bank or securities accounts, cash, leaseholds, motor-vehicles and certain other exceptions; and

	•		a second-priority lien on certain of the Receivables Collateral.

Our senior secured notes and the related guarantees are secured by first-priority liens, subject to permitted liens, on our and our subsidiary guarantors’ assets, subject to certain exceptions, that secure our cash flow credit facility on a first-priority basis and are secured by second-priority liens, subject to permitted liens, on our and our subsidiary guarantors’ assets that secure our ABL credit facility on a first-priority basis and our other cash flow credit facility on a second-priority basis.

F-27

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — LONG-TERM DEBT (continued)

General Debt Information (continued)

Maturities of long-term debt in years 2019 through 2022, excluding amounts under the ABL credit facility, are $2.284 billion, $4.177 billion, $1.078 billion and $3.449 billion, respectively.

NOTE 10 — CONTINGENCIES

We operate in a highly regulated and litigious industry. As a result, various lawsuits, claims and legal and regulatory proceedings have been and can be expected to be instituted or asserted against us. We are also subject to claims and suits arising in the ordinary course of business, including claims for personal injuries or wrongful restriction of, or interference with, physicians’ staff privileges. In certain of these actions the claimants may seek punitive damages against us which may not be covered by insurance. We are also subject to claims by various taxing authorities for additional taxes and related interest and penalties. The resolution of any such lawsuits, claims or legal and regulatory proceedings could have a material, adverse effect on our results of operations, financial position or liquidity.

Government Investigations, Claims and Litigation

Health care companies are subject to numerous investigations by various governmental agencies. Under the federal False Claims Act (“FCA”), private parties have the right to bring qui tam, or “whistleblower,” suits against companies that submit false claims for payments to, or improperly retain overpayments from, the government. Some states have adopted similar state whistleblower and false claims provisions. Certain of our individual facilities have received, and from time to time, other facilities may receive, government inquiries from, and may be subject to investigation by, federal and state agencies. Depending on whether the underlying conduct in these or future inquiries or investigations could be considered systemic, their resolution could have a material, adverse effect on our results of operations, financial position or liquidity.

NOTE 11 — LEASES

We lease medical office buildings and certain equipment under operating lease agreements. Commitments relating to noncancellable operating leases for each of the next five years and thereafter are as follows (dollars in millions):


For the Year Ended December 31,
2018	$	289
2019		278
2020		239
2021		198
2022		157
Thereafter		1,118

		2,279
Less sublease income		(11	)

	$	2,268

F-28

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE 12 — CAPITAL STOCK

The amended and restated certificate of incorporation authorizes the Company to issue up to 1,800,000,000 shares of common stock, and our amended and restated by-laws set the number of directors constituting the board of directors of the Company at not less than three members, the exact number to be determined from time to time by resolution adopted by the affirmative vote of a majority of the total number of directors then in office.

Share Repurchase Transactions

During October 2017, our board of directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During 2017, we repurchased 25.092 million shares of our common stock at an average price of $81.73 per share through market purchases pursuant to the $2.0 billion November 2016 (which was completed during the fourth quarter of 2017) and the $2 billion October 2017 share repurchase programs. At December 31, 2017, we had $1.802 billion of repurchase authorization available under the October 2017 authorization.

During November 2016, our board of directors authorized a share repurchase program for up to $2 billion of our outstanding common stock. During May 2016, the Company repurchased 9.361 million shares of its common stock beneficially owned by affiliates of Kohlberg Kravis Roberts & Co. at a purchase price of $80.12 per share, the closing price of the Company’s common stock on the New York Stock Exchange on May 10, 2016, less a discount of 1%. During 2016, we also repurchased 26.964 million shares of our common stock at an average price of $74.20 per share through market purchases, resulting in total repurchases of 36.325 million shares of our common stock at an average price of $75.72 per share for the year ended December 31, 2016 pursuant to the $3 billion October 2015 (which was completed during the fourth quarter of 2016) and the $2 billion November 2016 share repurchase programs. At December 31, 2016, we had $1.853 billion of repurchase authorization available under the November 2016 authorization.

During October 2015, May 2015 and February 2015, our board of directors authorized share repurchase programs for up to $3 billion, $1 billion and $1 billion, respectively, of our outstanding common stock. During April 2015, the Company entered into an agreement to repurchase 3.806 million shares of its common stock beneficially owned by affiliates of Bain Capital Investors, LLC (the “Bain Entities”) and certain charitable organizations that received shares of common stock as charitable contributions from certain partners and other employees of the Bain Entities at a purchase price of $77.26 per share, the closing price of the Company’s common stock on the New York Stock Exchange on April 17, 2015, less a discount of 1%. During 2015, we also repurchased 28.185 million shares of our common stock at an average price of $74.62 per share through market purchases, resulting in total repurchases pursuant to the October 2015, May 2015 and February 2015 authorizations of 31.991 million shares of our common stock at an average price of $74.93 per share. At December 31, 2015, we had $2.603 billion of repurchase authorization available under the $3.0 billion October 2015 authorization.

NOTE 13 — EMPLOYEE BENEFIT PLANS

We maintain defined contribution benefit plans that are available to employees who meet certain minimum requirements. Certain of the plans require that we match specified percentages of participant contributions up to certain maximum levels (generally, 100% of the first 3% to 9%, depending upon years of vesting service, of compensation deferred by participants). The cost of these plans totaled $471 million for 2017, $444 million for 2016 and $432 million for 2015. Our contributions have been funded periodically during each year.

We maintain the noncontributory, nonqualified Restoration Plan to provide certain retirement benefits for eligible employees. Eligibility for the Restoration Plan is based upon earning eligible compensation in excess of the Social Security Wage Base and attaining 1,000 or more hours of service during the plan year. Company credits to participants’ account balances (the Restoration Plan is not funded) depend upon participants’

F-29

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 13 — EMPLOYEE BENEFIT PLANS (continued)

compensation, years of vesting service and certain IRS limitations related to the HCA 401(k) plan. Benefits expense under this plan was $40 million for 2017, $20 million for 2016 and $20 million for 2015. Accrued benefits liabilities under this plan totaled $201 million at December 31, 2017 and $175 million at December 31, 2016.

We maintain a Supplemental Executive Retirement Plan (“SERP”) for certain executives (the SERP is not funded). The plan is designed to ensure that upon retirement the participant receives the value of a prescribed life annuity from the combination of the SERP and our other benefit plans. Benefits expense under the plan was $28 million for 2017, $22 million for 2016 and $33 million for 2015. Accrued benefits liabilities under this plan totaled $223 million at December 31, 2017 and $222 million at December 31, 2016.

We maintain defined benefit pension plans which resulted from certain hospital acquisitions in prior years. Benefits expense under these plans was $14 million for 2017, $21 million for 2016, and $25 million for 2015. Accrued benefits liabilities under these plans totaled $118 million at December 31, 2017 and $111 million at December 31, 2016.

NOTE 14 — SEGMENT AND GEOGRAPHIC INFORMATION

We operate in one line of business, which is operating hospitals and related health care entities. We operate in two geographically organized groups: the National and American Groups. At December 31, 2017, the National Group included 87 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, South Carolina, Utah and Virginia, and the American Group included 86 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.

F-30

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

Adjusted segment EBITDA is defined as income before depreciation and amortization, interest expense, losses (gains) on sales of facilities, losses on retirement of debt, legal claim costs (benefits), income taxes and net income attributable to noncontrolling interests. We use adjusted segment EBITDA as an analytical indicator for purposes of allocating resources to geographic areas and assessing their performance. Adjusted segment EBITDA is commonly used as an analytical indicator within the health care industry, and also serves as a measure of leverage capacity and debt service ability. Adjusted segment EBITDA should not be considered as a measure of financial performance under generally accepted accounting principles, and the items excluded from adjusted segment EBITDA are significant components in understanding and assessing financial performance. Because adjusted segment EBITDA is not a measurement determined in accordance with generally accepted accounting principles and is thus susceptible to varying calculations, adjusted segment EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The geographic distributions of our revenues, equity in earnings of affiliates, adjusted segment EBITDA, depreciation and amortization, assets and goodwill and other intangible assets are summarized in the following table (dollars in millions):


	For the Years Ended December 31,
	2017			2016			2015
Revenues:
National Group	$	20,772		$	19,845		$	18,756
American Group		20,912			19,670			18,875
Corporate and other		1,930			1,975			2,047

	$	43,614		$	41,490		$	39,678

Equity in earnings of affiliates:
National Group	$	(21	)	$	(20	)	$	(7	)
American Group		(37	)		(38	)		(32	)
Corporate and other		13			4			(7	)

	$	(45	)	$	(54	)	$	(46	)

Adjusted segment EBITDA:
National Group	$	4,600		$	4,565		$	4,271
American Group		4,231			4,173			4,207
Corporate and other		(598	)		(520	)		(563	)

	$	8,233		$	8,218		$	7,915

Depreciation and amortization:
National Group	$	867		$	806		$	769
American Group		986			908			885
Corporate and other		278			252			250

	$	2,131		$	1,966		$	1,904

F-31

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)


	For the Years Ended December 31,
	2017			2016			2015
Adjusted segment EBITDA	$	8,233		$	8,218		$	7,915
Depreciation and amortization		2,131			1,966			1,904
Interest expense		1,690			1,707			1,665
Losses (gains) on sales of facilities		(8	)		(23	)		5
Losses on retirement of debt		39			4			135
Legal claim costs (benefits)		—			(246	)		249

Income before income taxes	$	4,381		$	4,810		$	3,957


	December 31,
	2017			2016			2015
Assets:
National Group	$	13,097		$	12,320		$	11,332
American Group		18,136			16,208			15,240
Corporate and other		5,360			5,230			6,172

	$	36,593		$	33,758		$	32,744


	National Group			American Group			Corporate and Other			Total
Goodwill and other intangible assets:
Balance at December 31, 2014	$	1,170		$	4,614		$	632		$	6,416
Acquisitions		318			27			—			345
Foreign currency translation, amortization and other		(7	)		(3	)		(20	)		(30	)

Balance at December 31, 2015		1,481			4,638			612			6,731
Acquisitions		—			33			8			41
Foreign currency translation, amortization and other		(23	)		(10	)		(35	)		(68	)

Balance at December 31, 2016		1,458			4,661			585			6,704
Acquisitions		19			612			62			693
Foreign currency translation, amortization and other		(3	)		(8	)		8			(3	)

Balance at December 31, 2017	$	1,474		$	5,265		$	655		$	7,394

F-32

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 15 — OTHER COMPREHENSIVE LOSS

The components of accumulated other comprehensive loss are as follows (dollars in millions):


	Unrealized Gains on Available- for-Sale Securities			Foreign Currency Translation Adjustments			Defined Benefit Plans			Change in Fair Value of Derivative Instruments			Total
Balances at December 31, 2014	$	13		$	(36	)	$	(174	)	$	(126	)	$	(323	)
Unrealized gains on available-for-sale securities, net of $1 of income taxes		—			—			—			—			—
Foreign currency translation adjustments, net of $25 income tax benefit		—			(38	)		—			—			(38	)
Defined benefit plans, net of $11 of income taxes		—			—			19			—			19
Change in fair value of derivative instruments, net of $14 income tax benefit		—			—			—			(22	)		(22	)
Expense reclassified into operations from other comprehensive income, net of $12 and $46, respectively, income tax benefits		—			—			20			79			99

Balances at December 31, 2015		13			(74	)		(135	)		(69	)		(265	)
Unrealized losses on available-for-sale securities, net of $3 income tax benefit		(6	)		—			—			—			(6	)
Foreign currency translation adjustments, net of $87 income tax benefit		—			(137	)		—			—			(137	)
Defined benefit plans, net of $13 income tax benefit		—			—			(22	)		—			(22	)
Change in fair value of derivative instruments, net of $8 of income taxes		—			—			—			12			12
Expense reclassified into operations from other comprehensive income, net of $7 and $40, respectively, income tax benefits		—			—			11			69			80

Balances at December 31, 2016		7			(211	)		(146	)		12			(338	)
Unrealized gains on available-for-sale securities		1			—			—			—			1
Foreign currency translation adjustments, net of $35 of income taxes		—			62			—			—			62
Defined benefit plans, net of $10 income tax benefit		—			—			(33	)		—			(33	)
Change in fair value of derivative instruments, net of $4 of income taxes		—			—			—			7			7
Expense (income) reclassified into operations from other comprehensive income, net of $1 of income taxes and $7 and $7 income tax benefits, respectively		(1	)		—			11			13			23

Balances at December 31, 2017	$	7		$	(149	)	$	(168	)	$	32		$	(278	)

F-33

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16 — ACCRUED EXPENSES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

A summary of other accrued expenses at December 31 follows (dollars in millions):


	2017		2016
Professional liability risks	$	429	$	391
Interest		406		409
Taxes other than income		299		283
Other		849		952

	$	1,983	$	2,035

A summary of activity for the allowance of doubtful accounts follows (dollars in millions):


	Balance at Beginning of Year		Provision for Doubtful Accounts		Accounts Written off, Net of Recoveries			Balance at End of Year
Allowance for doubtful accounts:
Year ended December 31, 2015	$	5,011	$	3,913	$	(3,598	)	$	5,326
Year ended December 31, 2016		5,326		3,257		(3,595	)		4,988
Year ended December 31, 2017		4,988		4,039		(3,539	)		5,488

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION

HCA Inc. is a 100% owned direct subsidiary of HCA Healthcare, Inc. On December 6, 2012, HCA Healthcare, Inc. issued $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021. These notes are senior unsecured obligations and are not guaranteed by any of our subsidiaries.

The senior secured credit facilities and senior secured notes described in Note 9 are jointly and severally, and fully and unconditionally guaranteed by substantially all existing and future, direct and indirect, 100% owned material domestic subsidiaries that are “Unrestricted Subsidiaries” under our Indenture dated December 16, 1993 (except for certain special purpose subsidiaries that only guarantee and pledge their assets under our ABL credit facility).

Our condensed consolidating balance sheets at December 31, 2017 and 2016 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2017, segregating HCA Healthcare, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary non-guarantors and eliminations, follow.

F-34

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2017

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Condensed Consolidated
Revenues before provision for doubtful accounts	$	—		$	—		$	27,992		$	19,661		$	—		$	47,653
Provision for doubtful accounts		—			—			2,218			1,821			—			4,039

Revenues		—			—			25,774			17,840			—			43,614

Salaries and benefits		—			—			11,619			8,440			—			20,059
Supplies		—			—			4,286			3,030			—			7,316
Other operating expenses		6			—			4,249			3,796			—			8,051
Equity in earnings of affiliates		(2,476	)		—			(6	)		(39	)		2,476			(45	)
Depreciation and amortization		—			—			1,237			894			—			2,131
Interest expense		64			3,088			(1,309	)		(153	)		—			1,690
Gains on sales of facilities		—			—			(2	)		(6	)		—			(8	)
Losses on retirement of debt		—			39			—			—			—			39
Management fees		—			—			(621	)		621			—			—

		(2,406	)		3,127			19,453			16,583			2,476			39,233

Income (loss) before income taxes		2,406			(3,127	)		6,321			1,257			(2,476	)		4,381
Provision (benefit) for income taxes		190			(1,154	)		2,293			309			—			1,638

Net income (loss)		2,216			(1,973	)		4,028			948			(2,476	)		2,743
Net income attributable to noncontrolling interests		—			—			108			419			—			527

Net income (loss) attributable to HCA Healthcare, Inc.	$	2,216		$	(1,973	)	$	3,920		$	529		$	(2,476	)	$	2,216

Comprehensive income (loss) attributable to HCA Healthcare, Inc.	$	2,276		$	(1,953	)	$	3,898		$	591		$	(2,536	)	$	2,276

F-35

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2016

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors (as adjusted)			Subsidiary Non- Guarantors (as adjusted)			Eliminations			Condensed Consolidated
Revenues before provision for doubtful accounts	$	—		$	—		$	26,468		$	18,279		$	—		$	44,747
Provision for doubtful accounts		—			—			2,041			1,216			—			3,257

Revenues		—			—			24,427			17,063			—			41,490

Salaries and benefits		—			—			10,971			7,926			—			18,897
Supplies		—			—			4,090			2,843			—			6,933
Other operating expenses		6			—			3,912			3,578			—			7,496
Equity in earnings of affiliates		(2,738	)		—			(7	)		(47	)		2,738			(54	)
Depreciation and amortization		—			—			1,141			825			—			1,966
Interest expense		64			2,756			(970	)		(143	)		—			1,707
Losses (gains) on sales of facilities		—			—			4			(27	)		—			(23	)
Losses on retirement of debt		—			4			—			—			—			4
Legal claim benefits		—			(246	)		—			—			—			(246	)
Management fees		—			—			(588	)		588			—			—

		(2,668	)		2,514			18,553			15,543			2,738			36,680

Income (loss) before income taxes		2,668			(2,514	)		5,874			1,520			(2,738	)		4,810
Provision (benefit) for income taxes		(222	)		(928	)		2,133			395			—			1,378

Net income (loss)		2,890			(1,586	)		3,741			1,125			(2,738	)		3,432
Net income attributable to noncontrolling interests		—			—			93			449			—			542

Net income (loss) attributable to HCA Healthcare, Inc.	$	2,890		$	(1,586	)	$	3,648		$	676		$	(2,738	)	$	2,890

Comprehensive income (loss) attributable to HCA Healthcare, Inc.	$	2,817		$	(1,505	)	$	3,637		$	533		$	(2,665	)	$	2,817

F-36

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING COMPREHENSIVE INCOME STATEMENT

FOR THE YEAR ENDED DECEMBER 31, 2015

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors (as adjusted)			Subsidiary Non- Guarantors (as adjusted)			Eliminations			Condensed Consolidated
Revenues before provision for doubtful accounts	$	—		$	—		$	25,711		$	17,880		$	—		$	43,591
Provision for doubtful accounts		—			—			2,329			1,584			—			3,913

Revenues		—			—			23,382			16,296			—			39,678

Salaries and benefits		—			—			10,593			7,522			—			18,115
Supplies		—			—			3,933			2,705			—			6,638
Other operating expenses		(2	)		—			3,685			3,373			—			7,056
Equity in earnings of affiliates		(2,352	)		—			(8	)		(38	)		2,352			(46	)
Depreciation and amortization		—			—			1,085			819			—			1,904
Interest expense		115			2,445			(816	)		(79	)		—			1,665
Losses on sales of facilities		—			—			—			5			—			5
Losses on retirement of debt		122			13			—			—			—			135
Legal claim costs		120			129			—			—			—			249
Management fees		—			—			(515	)		515			—			—

		(1,997	)		2,587			17,957			14,822			2,352			35,721

Income (loss) before income taxes		1,997			(2,587	)		5,425			1,474			(2,352	)		3,957
Provision (benefit) for income taxes		(132	)		(962	)		1,983			372			—			1,261

Net income (loss)		2,129			(1,625	)		3,442			1,102			(2,352	)		2,696
Net income attributable to noncontrolling interests		—			—			92			475			—			567

Net income (loss) attributable to HCA Healthcare, Inc.	$	2,129		$	(1,625	)	$	3,350		$	627		$	(2,352	)	$	2,129

Comprehensive income (loss) attributable to HCA Healthcare, Inc.	$	2,187		$	(1,568	)	$	3,389		$	589		$	(2,410	)	$	2,187

F-37

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2017

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Condensed Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	1		$	—		$	112		$	619		$	—		$	732
Accounts receivable, net		—			—			3,693			2,808			—			6,501
Inventories		—			—			1,030			543			—			1,573
Other		—			—			663			508			—			1,171

		1			—			5,498			4,478			—			9,977

Property and equipment, net		—			—			11,110			6,785			—			17,895
Investments of insurance subsidiaries		—			—			—			418			—			418
Investments in and advances to affiliates		29,581			—			22			177			(29,581	)		199
Goodwill and other intangible assets		—			—			4,893			2,501			—			7,394
Other		510			50			47			103			—			710

	$	30,092		$	50		$	21,570		$	14,462		$	(29,581	)	$	36,593

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	—		$	—		$	1,793		$	813		$	—		$	2,606
Accrued salaries		—			—			862			507			—			1,369
Other accrued expenses		29			378			536			1,040			—			1,983
Long-term debt due within one year		—			97			64			39			—			200

		29			475			3,255			2,399			—			6,158

Long-term debt, net		995			31,367			307			189			—			32,858
Intercompany balances		35,322			(9,742	)		(25,228	)		(352	)		—			—
Professional liability risks		—			—			—			1,198			—			1,198
Income taxes and other liabilities		552			—			357			465			—			1,374

		36,898			22,100			(21,309	)		3,899			—			41,588
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.		(6,806	)		(22,050	)		42,755			8,876			(29,581	)		(6,806	)
Noncontrolling interests		—			—			124			1,687			—			1,811

		(6,806	)		(22,050	)		42,879			10,563			(29,581	)		(4,995	)

	$	30,092		$	50		$	21,570		$	14,462		$	(29,581	)	$	36,593

F-38

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2016

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors (as adjusted)			Subsidiary Non- Guarantors (as adjusted)			Eliminations			Condensed Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	—		$	—		$	113		$	533		$	—		$	646
Accounts receivable, net		—			—			3,388			2,438			—			5,826
Inventories		—			—			1,001			502			—			1,503
Other		—			—			592			519			—			1,111

		—			—			5,094			3,992			—			9,086

Property and equipment, net		—			—			10,464			5,888			—			16,352
Investments of insurance subsidiaries		—			—			—			336			—			336
Investments in and advances to affiliates		27,045			—			24			182			(27,045	)		206
Goodwill and other intangible assets		—			—			4,612			2,092			—			6,704
Other		877			—			43			154			—			1,074

	$	27,922		$	—		$	20,237		$	12,644		$	(27,045	)	$	33,758

LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable	$	—		$	—		$	1,607		$	711		$	—		$	2,318
Accrued salaries		—			—			811			454			—			1,265
Other accrued expenses		29			572			528			906			—			2,035
Long-term debt due within one year		—			97			72			47			—			216

		29			669			3,018			2,118			—			5,834

Long-term debt, net		993			29,693			304			170			—			31,160
Intercompany balances		33,784			(10,277	)		(22,495	)		(1,012	)		—			—
Professional liability risks		—			—			—			1,148			—			1,148
Income taxes and other liabilities		418			12			397			422			—			1,249

		35,224			20,097			(18,776	)		2,846			—			39,391
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.		(7,302	)		(20,097	)		38,857			8,285			(27,045	)		(7,302	)
Noncontrolling interests		—			—			156			1,513			—			1,669

		(7,302	)		(20,097	)		39,013			9,798			(27,045	)		(5,633	)

	$	27,922		$	—		$	20,237		$	12,644		$	(27,045	)	$	33,758

F-39

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2017

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors			Subsidiary Non- Guarantors			Eliminations			Condensed Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,216		$	(1,973	)	$	4,028		$	948		$	(2,476	)	$	2,743
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Change in operating assets and liabilities		—			(193	)		(2,437	)		(1,705	)		—			(4,335	)
Provision for doubtful accounts		—			—			2,218			1,821			—			4,039
Depreciation and amortization		—			—			1,237			894			—			2,131
Income taxes		433			—			—			—			—			433
Gains on sales of facilities		—			—			(2	)		(6	)		—			(8	)
Losses on retirement of debt		—			39			—			—			—			39
Amortization of debt issuance costs		—			31			—			—			—			31
Share-based compensation		—			—			270			—			—			270
Equity in earnings of affiliates		(2,476	)		—			—			—			2,476			—
Other		78			—			—			5			—			83

Net cash provided by (used in) operating activities		251			(2,096	)		5,314			1,957			—			5,426

Cash flows from investing activities:
Purchase of property and equipment		—			—			(1,681	)		(1,334	)		—			(3,015	)
Acquisition of hospitals and health care entities		—			—			(26	)		(1,186	)		—			(1,212	)
Disposal of hospitals and health care entities		—			—			14			11			—			25
Change in investments		—			—			(1	)		(72	)		—			(73	)
Other		—			—			—			(4	)		—			(4	)

Net cash used in investing activities		—			—			(1,694	)		(2,585	)		—			(4,279	)

Cash flows from financing activities:
Issuance of long-term debt		—			1,500			—			2			—			1,502
Net change in revolving bank credit facilities		—			760			—			—			—			760
Repayment of long-term debt		—			(628	)		(77	)		(48	)		—			(753	)
Distributions to noncontrolling interests		—			—			(140	)		(308	)		—			(448	)
Payment of debt issuance costs		—			(26	)		—			—			—			(26	)
Repurchases of common stock		(2,051	)		—			—			—			—			(2,051	)
Changes in intercompany balances with affiliates, net		1,867			490			(3,404	)		1,047			—			—
Other		(66	)		—			—			21			—			(45	)

Net cash (used in) provided by financing activities		(250	)		2,096			(3,621	)		714			—			(1,061	)

Change in cash and cash equivalents		1			—			(1	)		86			—			86
Cash and cash equivalents at beginning of period		—			—			113			533			—			646

Cash and cash equivalents at end of period	$	1		$	—		$	112		$	619		$	—		$	732

F-40

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2016

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors (as adjusted)			Subsidiary Non- Guarantors (as adjusted)			Eliminations			Condensed Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,890		$	(1,586	)	$	3,741		$	1,125		$	(2,738	)	$	3,432
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Change in operating assets and liabilities		(25	)		39			(2,180	)		(1,049	)		—			(3,215	)
Provision for doubtful accounts		—			—			2,041			1,216			—			3,257
Depreciation and amortization		—			—			1,141			825			—			1,966
Income taxes		123			—			—			—			—			123
Losses (gains) on sales of facilities		—			—			4			(27	)		—			(23	)
Losses on retirement of debt		—			4			—			—			—			4
Legal claim benefits		—			(246	)		—			—			—			(246	)
Amortization of debt issuance costs		1			33			—			—			—			34
Share-based compensation		—			—			251			—			—			251
Equity in earnings of affiliates		(2,738	)		—			—			—			2,738			—
Other		71			—			—			(1	)		—			70

Net cash provided by (used in) operating activities		322			(1,756	)		4,998			2,089			—			5,653

Cash flows from investing activities:
Purchase of property and equipment		—			—			(1,554	)		(1,206	)		—			(2,760	)
Acquisition of hospitals and health care entities		—			—			(199	)		(377	)		—			(576	)
Disposal of hospitals and health care entities		—			—			10			16			—			26
Change in investments		—			—			(15	)		79			—			64
Other		—			—			—			6			—			6

Net cash used in investing activities		—			—			(1,758	)		(1,482	)		—			(3,240	)

Cash flows from financing activities:
Issuance of long-term debt		—			5,400			—			—			—			5,400
Net change in revolving bank credit facilities		—			(110	)		—			—			—			(110	)
Repayment of long-term debt		—			(4,358	)		(74	)		(43	)		—			(4,475	)
Distributions to noncontrolling interests		—			—			(64	)		(370	)		—			(434	)
Payment of debt issuance costs		—			(40	)		—			—			—			(40	)
Repurchases of common stock		(2,751	)		—			—			—			—			(2,751	)
Changes in intercompany balances with affiliates, net		2,532			864			(3,149	)		(247	)		—			—
Other		(103	)		—			—			5			—			(98	)

Net cash (used in) provided by financing activities		(322	)		1,756			(3,287	)		(655	)		—			(2,508	)

Change in cash and cash equivalents		—			—			(47	)		(48	)		—			(95	)
Cash and cash equivalents at beginning of period		—			—			160			581			—			741

Cash and cash equivalents at end of period	$	—		$	—		$	113		$	533		$	—		$	646

F-41

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

HCA HEALTHCARE, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2015

(Dollars in millions)


	HCA Healthcare, Inc. Issuer			HCA Inc. Issuer			Subsidiary Guarantors (as adjusted)			Subsidiary Non- Guarantors (as adjusted)			Eliminations			Condensed Consolidated
Cash flows from operating activities:
Net income (loss)	$	2,129		$	(1,625	)	$	3,442		$	1,102		$	(2,352	)	$	2,696
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Change in operating assets and liabilities		(12	)		44			(2,786	)		(1,482	)		—			(4,236	)
Provision for doubtful accounts		—			—			2,329			1,584			—			3,913
Depreciation and amortization		—			—			1,085			819			—			1,904
Income taxes		(160	)		—			—			—			—			(160	)
Losses on sales of facilities		—			—			—			5			—			5
Losses on retirement of debt		122			13			—			—			—			135
Legal claim costs		20			129			—			—			—			149
Amortization of debt issuance costs		3			32			—			—			—			35
Share-based compensation		—			—			239			—			—			239
Equity in earnings of affiliates		(2,352	)		—			—			—			2,352			—
Other		66			3			(5	)		(10	)		—			54

Net cash (used in) provided by operating activities		(184	)		(1,404	)		4,304			2,018			—			4,734

Cash flows from investing activities:
Purchase of property and equipment		—			—			(1,560	)		(815	)		—			(2,375	)
Acquisition of hospitals and health care entities		—			—			(51	)		(300	)		—			(351	)
Disposal of hospitals and health care entities		—			—			48			25			—			73
Change in investments		—			—			7			56			—			63
Other		—			—			(6	)		13			—			7

Net cash used in investing activities		—			—			(1,562	)		(1,021	)		—			(2,583	)

Cash flows from financing activities:
Issuance of long-term debt		—			5,548			—			—			—			5,548
Net change in revolving bank credit facilities		—			150			—			—			—			150
Repayment of long-term debt		(1,632	)		(3,189	)		(60	)		(39	)		—			(4,920	)
Distributions to noncontrolling interests		—			—			(85	)		(410	)		—			(495	)
Payment of debt issuance costs		—			(50	)		—			—			—			(50	)
Repurchases of common stock		(2,397	)		—			—			—			—			(2,397	)
Changes in intercompany balances with affiliates, net		4,006			(1,055	)		(2,526	)		(425	)		—			—
Other		207			—			—			(19	)		—			188

Net cash provided by (used in) financing activities		184			1,404			(2,671	)		(893	)		—			(1,976	)

Change in cash and cash equivalents		—			—			71			104			—			175
Cash and cash equivalents at beginning of period		—			—			89			477			—			566

Cash and cash equivalents at end of period	$	—		$	—		$	160		$	581		$	—		$	741

F-42

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)

The above supplemental condensed consolidating financial information as of December 31, 2016, and for the years ended December 31, 2016 and 2015, has been adjusted to properly record the impact of certain subsidiaries that were non-guarantors becoming guarantors, primarily related to the Company acquiring previous noncontrolling interests of non-guarantor subsidiaries that then became guarantor subsidiaries. We believe the impact of these adjustments was immaterial as they had no impact to our consolidated income statements, balance sheets or statements of cash flows, had no impact on any liquidity measures of the Company, nor did they impact any financial ratios based on our consolidated balance sheets or income statements. There was also no impact to our loan covenant reporting or compliance. The impact of the adjustments was limited to reclassifications between the Subsidiary Guarantors and Subsidiary Non-Guarantors columns of the condensed consolidating financial statements. The application of these adjustments to the consolidating information for 2016 and 2015 is summarized as follows (dollars in millions):


	As Previously Reported			Adjustment			As Adjusted
Year ended December 31, 2016
Net income (loss) attributable to HCA Healthcare, Inc.:
HCA Healthcare, Inc. Issuer	$	2,890		$	—		$	2,890
HCA Inc. Issuer		(1,586	)		—			(1,586	)
Subsidiary Guarantors		3,235			413			3,648
Subsidiary Non-Guarantors		1,089			(413	)		676
Eliminations		(2,738	)		—			(2,738	)

Condensed Consolidated	$	2,890		$	—		$	2,890



	As Previously Reported			Adjustment			As Adjusted
December 31, 2016
Total assets:
HCA Healthcare, Inc. Issuer	$	27,922		$	—		$	27,922
HCA Inc. Issuer		—			—			—
Subsidiary Guarantors		14,714			5,523	(a)		20,237
Subsidiary Non-Guarantors		18,167			(5,523	)(a)		12,644
Eliminations		(27,045	)		—			(27,045	)

Condensed Consolidated	$	33,758		$	—		$	33,758

(a)	Amounts include $2,884 of goodwill and other intangible assets and $2,001 of property and equipment, net.

F-43

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)


	As Previously Reported			Adjustment			As Adjusted
December 31, 2016
Total liabilities:
HCA Healthcare, Inc. Issuer	$	35,224		$	—		$	35,224
HCA Inc. Issuer		20,097			—			20,097
Subsidiary Guarantors		(23,194	)		4,418	(b)		(18,776	)
Subsidiary Non-Guarantors		7,264			(4,418	)(b)		2,846
Eliminations		—			—			—

Condensed Consolidated	$	39,391		$	—		$	39,391

(b)	Amounts include $3,952 of intercompany balances.


	As Previously Reported			Adjustment			As Adjusted
Year ended December 31, 2016
Net cash provided (used in) operating activities:
HCA Healthcare, Inc. Issuer	$	322		$	—		$	322
HCA Inc. Issuer		(1,756	)		—			(1,756	)
Subsidiary Guarantors		4,425			573			4,998
Subsidiary Non-Guarantors		2,662			(573	)		2,089
Eliminations		—			—			—

Condensed Consolidated	$	5,653		$	—		$	5,653



	As Previously Reported			Adjustment			As Adjusted
Year ended December 31, 2015
Net income (loss) attributable to HCA Healthcare, Inc.:
HCA Healthcare, Inc. Issuer	$	2,129		$	—		$	2,129
HCA Inc. Issuer		(1,625	)		—			(1,625	)
Subsidiary Guarantors		2,970			380			3,350
Subsidiary Non-Guarantors		1,007			(380	)		627
Eliminations		(2,352	)		—			(2,352	)

Condensed Consolidated	$	2,129		$	—		$	2,129

F-44

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 17 — SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION AND OTHER COLLATERAL-RELATED INFORMATION (continued)


	As Previously Reported			Adjustment			As Adjusted
Year ended December 31, 2015
Net cash provided (used in) operating activities:
HCA Healthcare, Inc. Issuer	$	(184	)	$	—		$	(184	)
HCA Inc. Issuer		(1,404	)		—			(1,404	)
Subsidiary Guarantors		3,772			532			4,304
Subsidiary Non-Guarantors		2,550			(532	)		2,018
Eliminations		—			—			—

Condensed Consolidated	$	4,734		$	—		$	4,734

Healthtrust, Inc. — The Hospital Company (“Healthtrust”) is the first-tier subsidiary of HCA Inc. The common stock of Healthtrust has been pledged as collateral for the senior secured credit facilities and senior secured notes described in Note 9. Rule 3-16 of Regulation S-X under the Securities Act requires the filing of separate financial statements for any affiliate of the registrant whose securities constitute a substantial portion of the collateral for any class of securities registered or being registered. We believe the separate financial statements requirement applies to Healthtrust due to the pledge of its common stock as collateral for the senior secured notes. Due to the corporate structure relationship of HCA and Healthtrust, HCA’s operating subsidiaries are also the operating subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrust’s consolidated financial statements related to HCA’s debt and financial instruments, results in the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA. The consolidated financial statements of HCA and Healthtrust present the identical amounts for revenues, expenses, net income, assets, liabilities, total stockholders’ deficit, net cash provided by operating activities, net cash used in investing activities and net cash used in financing activities. Certain individual line items in the HCA consolidated statements of stockholders’ deficit are combined into one line item in the Healthtrust consolidated statements of stockholder’s deficit.

Reconciliations of the HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit presentation to the Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit presentation for the years ended December 31, 2017, 2016 and 2015 are as follows (dollars in millions):


	2017			2016			2015
Presentation in HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit:
Share-based benefit plans	$	281		$	233		$	523
Other		(10	)		(2	)		(18	)

Presentation in Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit:
Distributions from HCA Healthcare, Inc., net of contributions to HCA Healthcare, Inc.	$	271		$	231		$	505

Due to the consolidated financial statements of Healthtrust being substantially identical to the consolidated financial statements of HCA, except for the items presented in the table above, the separate consolidated financial statements of Healthtrust are not presented.

F-45

HCA HEALTHCARE, INC.

QUARTERLY CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)

(Dollars in millions, except per share amounts)


	2017
	First			Second			Third			Fourth
Revenues	$	10,623		$	10,733		$	10,696		$	11,562
Net income	$	777	(a)	$	795	(b)	$	530	(c)	$	641	(d)
Net income attributable to HCA Healthcare, Inc.	$	659	(a)	$	657	(b)	$	426	(c)	$	474	(d)
Basic earnings per share	$	1.78		$	1.79		$	1.18		$	1.34
Diluted earnings per share	$	1.74		$	1.75		$	1.15		$	1.30


	2016
	First			Second			Third			Fourth
Revenues	$	10,260		$	10,319		$	10,270		$	10,641
Net income	$	811	(e)	$	791	(f)	$	745	(g)	$	1,085	(h)
Net income attributable to HCA Healthcare, Inc.	$	694	(e)	$	658	(f)	$	618	(g)	$	920	(h)
Basic earnings per share	$	1.75		$	1.70		$	1.63		$	2.46
Diluted earnings per share	$	1.69		$	1.65		$	1.59		$	2.39

(a)	First quarter results include $1 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

(b)	Second quarter results include $1 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

(c)	Third quarter results include $4 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements) and $25 million of losses on retirement of debt (See Note 9 of the notes to consolidated financial statements).

(d)	Fourth quarter results include $1 million of losses on sales of facilities (See Note 3 of the notes to consolidated financial statements).

(e)	First quarter results include $2 million of losses on sales of facilities (See Note 3 of the notes to consolidated financial statements) and $7 million of legal claim costs (See Note 10 of the notes to consolidated financial statements).

(f)	Second quarter results include $4 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements) and $7 million of legal claim costs (See Note 10 of the notes to consolidated financial statements).

(g)	Third quarter results include $2 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements), $2 million of losses on retirement of debt (See Note 9 of the notes to consolidated financial statements) and $7 million of legal claim costs (See Note 10 of the notes to consolidated financial statements).

(h)	Fourth quarter results include $15 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements) and $176 million of legal claim benefits (See Note 10 of the notes to consolidated financial statements).

F-46

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