Item 16. Form 10-K Summary

| --- | --- |

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/ Samuel N. Hazen
		Samuel N. Hazen Chief Executive Officer

Dated: February 20, 2020

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/ Samuel N. Hazen Samuel N. Hazen		Chief Executive Officer and Director (Principal Executive Officer)		February 20, 2020
/s/ William B. Rutherford William B. Rutherford		Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)		February 20, 2020
/s/ Thomas F. Frist III Thomas F. Frist III		Chairman and Director		February 20, 2020
/s/ Meg G. Crofton Meg G. Crofton		Director		February 20, 2020
/s/ Robert J. Dennis Robert J. Dennis		Director		February 20, 2020
/s/ Nancy-Ann DeParle Nancy-Ann DeParle		Director		February 20, 2020
/s/ William R. Frist William R. Frist		Director		February 20, 2020
/s/ Charles O. Holliday, Jr. Charles O. Holliday, Jr.		Director		February 20, 2020
/s/ Geoffrey G. Meyers Geoffrey G. Meyers		Director		February 20, 2020
/s/ Michael W. Michelson Michael W. Michelson		Director		February 20, 2020
/s/ Wayne J. Riley Wayne J. Riley		Director		February 20, 2020
/s/ John W. Rowe John W. Rowe		Director		February 20, 2020

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, 2019, 2018 and 2017			F- 5
Consolidated Comprehensive Income Statements for the years ended December 31, 2019, 2018 and 2017			F- 6
Consolidated Balance Sheets, December 31, 2019 and 2018			F- 7
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2019, 2018 and 2017			F- 8
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017			F- 9
Notes to Consolidated Financial Statements			F- 10
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, 2019 and 2018, 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, 2019, 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, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, 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 20, 2020 expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, effective January 1, 2019, the Company adopted ASU No.

2016-02,

Leases (Topic 842), on a modified retrospective basis.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

F-2

		Revenue Recognition
Description of the Matter		For the year ended December 31, 2019, the Company’s revenues were $51.336 billion. As discussed in Note 1 to the consolidated financial statements, revenues are based upon the estimated amounts the Company expects to be entitled to receive from patients and third-party payers. Estimates of contractual allowances under managed care, commercial, and governmental insurance plans are based upon the payment terms specified in the related contractual agreements or as mandated under government payer programs. Management continually reviews the contractual allowances estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care insurance coverage may have discounts applied (uninsured discounts and contractual discounts). The Company also records estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues and accounts receivable at the estimated amounts the Company expects to collect. The primary collection risks relate to uninsured patient accounts, including amounts owed from patients after insurance has paid the amounts covered by the applicable agreement. Implicit price concessions relate primarily to amounts due directly from patients and are based upon management’s assessment of historical write-offs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Auditing management’s estimates of contractual allowances and implicit price concessions was complex and judgmental due to the significant data inputs and subjective assumptions utilized in determining related amounts.
How We Addressed the Matter in Our Audit		We tested internal controls that address the risks of material misstatement related to the measurement and valuation of revenues, including estimation of contractual allowances and implicit price concessions. For example, we tested management’s internal controls over the key data inputs to the contractual allowances and implicit price concessions models, significant assumptions underlying management’s models, and management’s internal controls over retrospective hindsight reviews of historical reserve accuracy. To test the estimated contractual allowances and implicit price concessions, we performed audit procedures that included, among others, assessing methodologies and evaluating the significant assumptions discussed above and testing the completeness and accuracy of the underlying data used by the Company in its estimates. We compared the significant assumptions used by management to current industry and economic trends and considered changes, if any, to the Company’s business and other relevant factors. We also assessed the historical accuracy of management’s estimates as a source of potential corroborative or contrary evidence.
		Professional Liability Claims
Description of the Matter		At December 31, 2019, the Company’s reserves for professional liability risks were $1.827 billion and the Company’s related provision for losses for the year ended December 31, 2019 was $497 million. As discussed in Note 1 to the consolidated financial statements, reserves for professional liability risks represent the estimated ultimate cost of all reported and unreported losses incurred and unpaid as of the

F-3

		consolidated balance sheet date. Management determines professional liability reserves and provisions for losses using individual case-basis valuations and actuarial analyses. Trends in the average frequency (number of claims) and ultimate average severity (cost per claim) of claims are significant assumptions in estimating the reserves. Auditing management’s professional liability claims reserves was complex and judgmental due to the significant estimations required in determining the reserves, particularly the actuarial methodology and assumptions related to the severity and frequency of claims.
How We Addressed the Matter in Our Audit		We tested management’s internal controls that address the risks of material misstatement over the Company’s professional liability claims reserve estimation process. For example, we tested internal controls over management’s review of the actuarial methodology and significant assumptions, and the completeness and accuracy of claims data supporting the recorded reserves. To test the Company’s determination of the estimated professional liability expense and reserves, we performed audit procedures that included, among others, testing the completeness and accuracy of underlying claims data used by the Company and its actuaries in its determination of reserves and reviewing the Company’s insurance contracts to assess self-insured limits, deductibles and coverage limits. Additionally, with the involvement of our actuarial specialists, we performed audit procedures that included, among others, assessing the actuarial valuation methodologies utilized by management and its actuaries, testing the significant assumptions, including consideration of Company-specific claim reporting and payment data, assessing the accuracy of management’s historical reserve estimates, and developing an independent range of reserves for comparison to the Company’s recorded amounts.

/s/ Ernst & Young LLP

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

Nashville, Tennessee

February 20, 2020

F-4

HCA HEALTHCARE, INC.

CONSOLIDATED INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

(Dollars in millions, except per share amounts)

		2019				2018				2017
Revenues		$	51,336			$	46,677			$	43,614
Salaries and benefits			23,560				21,425				20,059
Supplies			8,481				7,724				7,316
Other operating expenses			9,481				8,608				8,051
Equity in earnings of affiliates			(43	)			(29	)			(45	)
Depreciation and amortization			2,596				2,278				2,131
Interest expense			1,824				1,755				1,690
Gains on sales of facilities			(18	)			(428	)			(8	)
Losses on retirement of debt			211				9				39
			46,092				41,342				39,233
Income before income taxes			5,244				5,335				4,381
Provision for income taxes			1,099				946				1,638
Net income			4,145				4,389				2,743
Net income attributable to noncontrolling interests			640				602				527
Net income attributable to HCA Healthcare, Inc.		$	3,505			$	3,787			$	2,216
Per share data:
Basic earnings per share		$	10.27			$	10.90			$	6.12
Diluted earnings per share		$	10.07			$	10.66			$	5.95
Shares used in earnings per share calculations (in millions):
Basic			341.210				347.297				362.305
Diluted			348.226				355.303				372.221

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

F-5

HCA HEALTHCARE, INC.

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

(Dollars in millions)

		2019				2018				2017
Net income		$	4,145			$	4,389			$	2,743
Other comprehensive income (loss) before taxes:
Foreign currency translation			5				(71	)			97
Unrealized gains (losses) on available-for-sale securities			15				(7	)			1
Realized gains included in other operating expenses			—				—				(2	)
			15				(7	)			(1	)
Defined benefit plans			(63	)			44				(43	)
Pension costs included in salaries and benefits			13				21				18
			(50	)			65				(25	)
Change in fair value of derivative financial instruments			(50	)			23				11
Interest (benefits) costs included in interest expense			(17	)			(10	)			20
			(67	)			13				31
Other comprehensive (loss) income before taxes			(97	)			—				102
Income taxes (benefits) related to other comprehensive income items			(18	)			8				42
Other comprehensive (loss) income			(79	)			(8	)			60
Comprehensive income			4,066				4,381				2,803
Comprehensive income attributable to noncontrolling interests			640				602				527
Comprehensive income attributable to HCA Healthcare, Inc.		$	3,426			$	3,779			$	2,276

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

F-6

HCA HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2019 AND 2018

(Dollars in millions)

		2019				2018
ASSETS
Current assets:
Cash and cash equivalents		$	621			$	502
Accounts receivable			7,380				6,789
Inventories			1,849				1,732
Other			1,346				1,190
			11,196				10,213
Property and equipment, at cost:
Land			2,178				1,944
Buildings			17,669				15,659
Equipment			25,756				23,577
Construction in progress			1,632				1,785
			47,235				42,965
Accumulated depreciation			(24,520	)			(23,208	)
			22,715				19,757
Investments of insurance subsidiaries			315				362
Investments in and advances to affiliates			249				232
Goodwill and other intangible assets			8,269				7,953
Right-of-use operating lease assets			1,834				—
Other			480				690
		$	45,058			$	39,207
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable		$	2,905			$	2,577
Accrued salaries			1,775				1,580
Other accrued expenses			2,932				2,624
Long-term debt due within one year			145				788
			7,757				7,569
Long-term debt, less debt issuance costs and discounts of $ 239 and $ 157			33,577				32,033
Professional liability risks			1,370				1,275
Right-of-use operating lease obligations			1,499				—
Income taxes and other liabilities			1,420				1,248
Stockholders’ deficit:
Common stock $ 0.01 par; authorized 1,800,000,000 shares; outstanding 338,445,600 shares — 2019 and 342,895,200 shares — 2018			3				3
Accumulated other comprehensive loss			(460	)			(381	)
Retained deficit			(2,351	)			(4,572	)
Stockholders’ deficit attributable to HCA Healthcare, Inc.			(2,808	)			(4,950	)
Noncontrolling interests			2,243				2,032
			(565	)			(2,918	)
		$	45,058			$	39,207

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

F-7

HCA HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

(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, 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	)
Other											(10	)											63				53
Balances, December 31, 2017			350.092				4				—				(278	)			(6,532	)			1,811				(4,995	)
Comprehensive income (loss)															(8	)			3,787				602				4,381
Repurchase of common stock			(14.070	)			(1	)			(103	)							(1,426	)							(1,530	)
Share-based benefit plans			6.873								115																115
Cash dividends declared ($ 1.40 share)																			(496	)							(496	)
Distributions																							(441	)			(441	)
Reclassification of stranded tax effects															(95	)			95								—
Other											(12	)											60				48
Balances, December 31, 2018			342.895				3				—				(381	)			(4,572	)			2,032				(2,918	)
Comprehensive income (loss)															(79	)			3,505				640				4,066
Repurchase of common stock			(7.949	)							(302	)							(729	)							(1,031	)
Share-based benefit plans			3.500								313																313
Cash dividends declared ($ 1.60 share)																			(555	)							(555	)
Distributions																							(542	)			(542	)
Other											(11	)											113				102
Balances, December 31, 2019			338.446			$	3			$	—			$	(460	)		$	(2,351	)		$	2,243			$	(565	)

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

F-8

HCA HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

(Dollars in millions)

		2019				2018				2017
Cash flows from operating activities:
Net income		$	4,145			$	4,389			$	2,743
Adjustments to reconcile net income to net cash provided by operating activities:
Increase (decrease) in cash from operating assets and liabilities:
Accounts receivable			(326	)			(423	)			(601	)
Inventories and other assets			(158	)			(242	)			(69	)
Accounts payable and accrued expenses			396				698				374
Depreciation and amortization			2,596				2,278				2,131
Income taxes			250				74				433
Gains on sales of facilities			(18	)			(428	)			(8	)
Losses on retirement of debt			211				9				39
Amortization of debt issuance costs			30				31				31
Share-based compensation			347				268				270
Other			129				107				83
Net cash provided by operating activities			7,602				6,761				5,426
Cash flows from investing activities:
Purchase of property and equipment			(4,158	)			(3,573	)			(3,015	)
Acquisition of hospitals and health care entities			(1,682	)			(1,253	)			(1,212	)
Sales of hospitals and health care entities			61				808				25
Change in investments			25				57				(73	)
Other			34				60				(4	)
Net cash used in investing activities			(5,720	)			(3,901	)			(4,279	)
Cash flows from financing activities:
Issuances of long-term debt			6,451				2,000				1,502
Net change in revolving bank credit facilities			(560	)			(640	)			760
Repayment of long-term debt			(5,324	)			(1,704	)			(753	)
Distributions to noncontrolling interests			(542	)			(441	)			(448	)
Payment of debt issuance costs			(73	)			(25	)			(26	)
Payment of dividends			(550	)			(487	)			—
Repurchases of common stock			(1,031	)			(1,530	)			(2,051	)
Other			(142	)			(248	)			(45	)
Net cash used in financing activities			(1,771	)			(3,075	)			(1,061	)
Effect of exchange rate changes on cash and cash equivalents			8				(15	)			—
Change in cash and cash equivalents			119				(230	)			86
Cash and cash equivalents at beginning of period			502				732				646
Cash and cash equivalents at end of period		$	621			$	502			$	732
Interest payments		$	1,914			$	1,744			$	1,700
Income tax payments, net		$	849			$	872			$	1,205

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

F-9

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, 2019, these affiliates owned and operated 184 hospitals, 123 freestanding surgery centers and provided extensive outpatient and ancillary services. HCA Healthcare, Inc.’s facilities are located in 21 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 $370 million, $344 million and $340 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Revenues

Our revenues generally relate to contracts with patients in which our performance obligations are to provide health care services to the patients. Revenues are recorded during the period our obligations to provide health care services are satisfied.

Our performance obligations for inpatient services are generally satisfied over periods that average approximately five days

, and revenues are recognized based on charges incurred in relation to total expected charges.

Our performance obligations for outpatient services are generally satisfied over a period of less than one day

. The contractual relationships with patients, in most cases, also involve a third-party payer (Medicare, Medicaid, managed care health plans and commercial insurance companies, including plans offered through the health insurance exchanges) and the transaction prices for the services provided are dependent upon the terms provided by (Medicare and Medicaid) or negotiated with (managed care health plans and commercial insurance companies) the third-party payers. The payment arrangements with third-party payers for the services we provide to the related patients typically specify payments at amounts less than our standard charges. Medicare generally pays for inpatient and outpatient services at prospectively determined rates based on clinical, diagnostic and other factors. Services provided to patients having Medicaid coverage are generally paid at prospectively determined rates per discharge, per identified service or per covered member. Agreements with commercial insurance carriers, managed care and preferred provider organizations generally provide for payments based

F-10

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Revenues (continued)

upon predetermined rates per diagnosis, per diem rates or discounted

fee-for-service

rates. Management continually reviews the contractual estimation process to consider and incorporate updates to laws and regulations and the frequent changes in managed care contractual terms resulting from contract renegotiations and renewals.

Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual a

djustments

under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. 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 estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record these revenues at the estimated amounts we expect to collect. Our revenues by primary third-party payer classification and other (including uninsured patients) for the years ended December 31, are summarized in the following table (dollars in millions):

		Years Ended December 31,
		2019				Ratio				2018				Ratio				2017				Ratio
Medicare		$	10,798				21.0	%		$	9,831				21.1	%		$	9,285				21.3	%
Managed Medicare			6,452				12.6				5,497				11.8				4,680				10.7
Medicaid			1,572				3.1				1,358				2.9				1,316				3.0
Managed Medicaid			2,450				4.8				2,403				5.1				2,165				5.0
Managed care and other insurers			26,544				51.6				24,467				52.4				23,342				53.5
International (managed care and other insurers)			1,162				2.3				1,156				2.5				1,097				2.5
Other			2,358				4.6				1,965				4.2				1,729				4.0
Revenues		$	51,336				100.0	%		$	46,677				100.0	%		$	43,614				100.0	%

Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. 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 $51 million, $29 million and $41 million in 2019, 2018 and 2017, respectively. The adjustments to estimated reimbursement amounts related primarily to cost reports filed during previous years resulted in net increases to revenues of $13 million, $51 million and $56 million in 2019, 2018 and 2017, 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 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.

F-11

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Revenues (continued)

P

rior to November 2017,

patients

treated at hospitals for non-e

lective care,

who have income at or below 200% of the federal poverty level, were eligible for charity care. During November 2017, we expanded our charity policy to include patients who have income above 200%, but at or below 400%,

of the federal poverty level and we limit the patient responsibility amounts for these patients to a percentage of their annual household income, computed on a sliding scale based upon their annual income and the applicable percentage 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. We may 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.

The collection of outstanding receivables for Medicare, Medicaid, managed care payers, other third-party payers and patients is our primary source of cash and is critical to our operating performance. The primary collection risks relate to uninsured patient accounts, including patient accounts for which the primary insurance carrier has paid the amounts covered by the applicable agreement, but patient responsibility amounts (deductibles and copayments) remain outstanding. Implicit price concessions relate primarily to amounts due directly from patients. Estimated implicit price concessions are recorded for all uninsured accounts, regardless of the age of those accounts. Accounts are written off when all reasonable internal and external collection efforts have been performed.

The estimates for implicit price concessions are based upon management’s assessment of historical writeoffs and expected net collections, business and economic conditions, trends in federal, state and private employer health care coverage and other collection indicators. Management relies on the results of detailed reviews of historical writeoffs and collections at facilities that represent a majority of our revenues and accounts receivable (the “hindsight analysis”) as a primary source of information in estimating the collectability of our accounts receivable. We perform the hindsight analysis quarterly, utilizing rolling twelve-months accounts receivable collection and writeoff data. We believe our quarterly updates to the estimated implicit price concession amounts at each of our hospital facilities provide reasonable estimates of our revenues and valuations of our accounts receivable. These routine, quarterly changes in estimates have not resulted in material adjustments to the valuations of our accounts receivable or

period-to-period

comparisons of our results of operations. At December 31, 2019 and 2018, estimated implicit price concessions of $6.953 billion and $6.280 billion, respectively, had been recorded to

adjust our revenues and accounts receivable to the estimated amounts we expect to collect

.

F-12

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Revenues (continued)

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the years ended December 31, follows (dollars in millions):

		2019				2018				2017
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)		$	44,118			$	40,035			$	37,557
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)			12.0	%			12.4	%			12.9	%
Total uncompensated care		$	31,105			$	26,757			$	23,420
Multiply by the cost-to-charges ratio			12.0	%			12.4	%			12.9	%
Estimated cost of total uncompensated care		$	3,733			$	3,318			$	3,021

The total uncompensated care amounts include charity care of $13.260 billion, $8.611 billion and $4.861 billion. The estimated costs of charity care were $1.591 billion, $1.068 billion and $627 million for the years ended December 31, 2019, 2018 and 2017, respectively.

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 $486 million and $449 million at December 31, 2019 and 2018, 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. Days revenues in accounts receivable were 50 days, 51 days and 52 days at December 31, 2019, 2018 and 2017, 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.

F-13

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

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 $2.579 billion in 2019, $2.262 billion in 2018 and $2.111 billion in 2017. 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.

Investments of Insurance Subsidiaries

At December 31, 2019 and 2018, 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 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 fair value are due to credit-related or noncredit-related factors. 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 a cre

d

it-related 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 to be a credit-related impairment. The 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

F-14

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Goodwill and Intangible Assets (continued)

quantitative analyses of market multiples, revenues and cash flows and reviews of recent sales of similar facilities.

No

goodwill impairments were recognized during 2019, 2018 or 2017.

During 2019, goodwill increased by $332 million related to acquisitions and declined by $4 million related to foreign currency translation and other adjustments. During 2018, goodwill increased by $636 million related to acquisitions and declined by $60 million related to foreign currency translation and other adjustments.

During 2019, identifiable intangible assets declined by $12 million due to amortization, foreign currency translation and other adjustments. During 2018, identifiable intangible assets declined by $17 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, 2019 and 2018 was $184 million and accumulated amortization was $123 million and $111 million, respectively. The gross carrying amount of indefinite-lived identifiable intangible assets at both December 31, 2019 and 2018 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.

Debt Issuance Costs and Discounts

Debt issuance costs

and discounts

are amortized based upon the terms of the respective debt obligations. The gross carrying amount of debt issuance costs

and discounts

at December 31, 2019 and 2018 was $413 million and $360 million, respectively, and accumulated amortization was $174 million and $203 million, respectively. Amortization of debt issuance costs

and discounts

is included in interest expense and was $30 million, $31 million and $31 million for 2019, 2018 and 2017, respectively.

Professional Liability Claims

Reserves for professional liability risks were $1.827 billion and $1.741 billion at December 31, 2019 and 2018, respectively. The current portion of the reserves, $457 million and $466 million at December 31, 2019 and 2018, respectively, is included in “other accrued expenses” in the consolidated balance sheets. Provisions for losses related to professional liability risks were $497 million, $447 million and $466 million for 2019, 2018 and 2017, 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. During 2019 and 2018, we recorded reduction

s

to the provision for professional liability risks of $50 million and $70 million, respectively, due to the receipt of updated actuarial information. 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 2,300 and 2,200 individual claims at December 31, 2019 and 2018, 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 2019 and 2018, $408 million and $358 million, respectively, of net payments were made for professional and general liability claims. The estimation of the timing of payments beyond a year can vary

F-15

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 — ACCOUNTING POLICIES (continued)

Professional Liability Claims (continued)

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, in most cases, to a $

million per occurrence self-insured retention, our facilities are insured by our 100% owned insurance subsidiary for losses up to $

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 $37 million and $40 million at December 31, 2019 and 2018, respectively, recorded in “other assets,” and $9 million and $10 million at December 31, 2019 and 2018, 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 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 is recognized in earnings and generally the derivative is terminated.

The net interest paid or received on interest rate swaps is recognized as adjustments to 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 2019 presentation.

F-16

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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 stock-based compensation and stock ownership in the Company. Stock option, stock appreciation right (“SARs”) and restricted share unit (“RSUs”) grants vest solely based upon continued employment over a specific period of time, and performance share unit (“PSUs”) grants vest based upon both continued employment over a specific period of time and the achievement of predetermined financial targets over time. At December 31, 2019, there were 20.328 million 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, 2019, 6.883 million shares of common stock were reserved for issuance under the ESPP provisions. During 2019, 2018 and 2017, the Company recognized $12 million, $10 million and $9 million, respectively, of compensation expense related to the ESPP.

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

0% of target for 2019 grants and 80% of target for 2018 and prior grants) to two times the original PSU grant (for actual performance of 110% or more of target for 2019 grants and 120% or more of target for 2018 and prior grants). Each grant is valued as a single award with an expected term equal to the average expected term of the component vesting tranches. The expected term of the share-based award is limited by the contractual term. We use historical exercise behavior data and other factors to estimate the expected term of the options and SARs.

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. The expected dividend yield is estimated based on the assumption that the dividend yield at date of grant will be maintained over the expected life of the grant.

		2019				2018				2017
Risk-free interest rate			2.50	%			2.62	%			2.13	%
Expected volatility			27	%			29	%			31	%
Expected life, in years			6.18				6.15				6.17
Expected dividend yield			1.16	%			1.37	%			—

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 Stock Options and SARs and Performance Stock Options and SARs activity during 2019, 2018 and 2017 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, 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
Granted			2,342				—				2,342				101.96
Exercised			(3,917	)			(1,774	)			(5,691	)			27.86
Cancelled			(221	)			(145	)			(366	)			68.43
Options and SARs outstanding, December 31, 2018			9,360				2,667				12,027				61.49
Granted			1,349				—				1,349				138.31
Exercised			(1,137	)			(523	)			(1,660	)			44.45
Cancelled			(522	)			—				(522	)			93.26
Options and SARs outstanding, December 31, 2019			9,050				2,144				11,194			$	71.79				5.7 y ears			$	851
Options and SARs exercisable, December 31, 2019			5,273				2,144				7,417			$	53.09				4.4 years			$	703

The weighted average fair values of stock options and SARs granted during 2019, 2018 and 2017 were $38.21, $28.90 and $28.47 per share, respectively. The total intrinsic value of stock options and SARs exercised during 2019, 2018 and 2017 was $153 million, $456 million and $177 million, respectively. The total fair value of RSUs and PSUs that vested during 2019, 2018 and 2017 was $346 million, $413 million and $188 million, respectively. As of December 31, 2019, the unrecognized compensation cost related to nonvested stock options and SARs was $73 million.

F-18

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 2019, 2018 and 2017 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, 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
Granted			1,464				—				1,261				2,725				101.85
Performance adjustment			—				—				1,250				1,250				69.27
Vested			(1,487	)			(136	)			(2,500	)			(4,123	)			67.33
Cancelled			(319	)			(91	)			(151	)			(561	)			78.82
RSUs and PSUs outstanding, December 31, 2018			3,123				—				3,422				6,545				86.32
Granted			973				—				796				1,769				138.45
Performance adjustment			—				—				227				227				69.94
Vested			(1,216	)			—				(1,251	)			(2,467	)			75.97
Cancelled			(260	)			—				(159	)			(419	)			103.27
RSUs and PSUs outstanding, December 31, 2019			2,620				—				3,035				5,655			$	105.23

As of December 31, 2019, the unrecognized compensation cost related to RSUs and PSUs was $338 million.

NOTE 3 — ACQUISITIONS AND DISPOSITIONS

During 2019, we paid $1.384 billion to acquire a seven-hospital health system in North Carolina and $298 million to acquire nonhospital health care entities. During 2018, we paid $792 million to acquire two hospital facilities and $461 million to acquire nonhospital health care entities. During 2017, we paid $1.000 billion to acquire eight hospital facilities and $212 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 $332 million, $636 million and $693 million in 2019, 2018 and 2017, 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 2019, we received proceeds of $25 million and recognized a pretax loss of $1 million ($1 million after tax) related to the sale of a hospital facility from our American Group (a Louisiana market). During 2019, we also received proceeds of $36 million and recognized

pretax gain

s

of $19 million ($14 million after tax) related to sales of real estate and other investments. During 2018, we received proceeds of $758 million and recognized a pretax gain of $353 million ($265 million after tax) related to the sale of two hospital facilities from our American Group (Oklahoma market). During 2018, we also received proceeds of $50 million and recognized

F-19

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 3 —

ACQUISITIONS

AND DISPOSITIONS (

continued

)

pretax gains of $75 million ($59 million after tax) related to sales of real estate and other investments. During 2017, we received proceeds of $25 million and recognized pretax gains of $8 million ($5 million after tax) related to sales of real estate and other investments.

NOTE 4 — INCOME TAXES

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

		2019				2018				2017
Current:
Federal		$	670			$	759			$	1,067
State			134				149				120
Foreign			17				23				19
Deferred:
Federal			254				9				423
State			29				13				3
Foreign			(5	)			(7	)			6
		$	1,099			$	946			$	1,638

The 2017 Tax Cuts and Jobs Act (“Tax Act”) significantly revised U.S. corporate income taxes, including lowering the statutory corporate tax rate from 35% to 21% beginning in 2018, imposing a mandatory

one-time

transition tax on undistributed foreign earnings and creating a new U.S. minimum tax on earnings of foreign subsidiaries. Our provision for income taxes for the year ended December

31, 2018 included tax benefits of $613 million (including $67 million related to the remeasurement of certain deferred tax assets and liabilities) related to the reduction in our effective tax rate under the Tax Act. We completed our analysis of the impact of the Tax Act during the fourth quarter of 2018, reducing our provision for income taxes for the year ended December 31, 2018 by $67 million related to a remeasurement of certain deferred tax assets and liabilities for which we were unable to make reasonable estimates in 2017. For the year ended, December 31, 2017, a provisional amount of $301 million related to the remeasurement of our deferred tax assets and liabilities for which we were then able to make reasonable estimates was recorded as a component of our provision for income taxes. During 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. Adjustments during 2018 to the provisional amounts recorded in 2017 were not significant.

During 2018, we recorded a reduction to our provision for income taxes of $28 million for tax credits related to certain 2017 hurricane-related expenses. Our provision for income taxes for the years ended December 31, 2019, 2018 and 2017 included tax benefits of $65 million, $124 million and $82 million, respectively, related to the settlement of employee equity awards. Our foreign pretax income was $50 million, $86 million and $91 million for the years ended December 31, 2019, 2018 and 2017, respectively.

F-20

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:

		2019				2018				2017
Federal statutory rate			21.0	%			21.0	%			35.0	%
State income taxes, net of federal tax benefit			2.7				2.9				2.2
Change in liability for uncertain tax positions			0.4				(0.1	)			—
Tax benefit from settlements of employee equity awards			(1.3	)			(2.4	)			(2.0	)
Impact of Tax Act on deferred tax balances			—				(1.6	)			7.8
Other items, net			1.1				0.2				(0.5	)
Effective income tax rate on income attributable to HCA Healthcare, Inc.			23.9				20.0				42.5
Income attributable to noncontrolling interests from consolidated partnerships			(2.9	)			(2.3	)			(5.1	)
Effective income tax rate on income before income taxes			21.0	%			17.7	%			37.4	%

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

		2019								2018
		Assets				Liabilities				Assets				Liabilities
Depreciation and fixed asset basis differences		$	—			$	601			$	—			$	340
Allowances for professional liability and other risks			376				—				355				—
Accounts receivable			307				—				274				—
Compensation			292				—				256				—
Right-of-use lease assets and obligations			369				366				—				—
Other			461				538				424				491
		$	1,805			$	1,505			$	1,309			$	831

At December 31, 2019, federal and state net operating loss carryforwards (expiring in years

2022

t

hrough

2038

) available to offset future taxable income approximated $

million and $

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):

		2019				2018
Balance at January 1		$	390			$	399
Additions based on tax positions related to the current year			29				22
Additions for tax positions of prior years			119				10
Reductions for tax positions of prior years			(3	)			(14	)
Settlements			—				(2	)
Lapse of applicable statutes of limitations			(13	)			(25	)
Balance at December 31		$	522			$	390

Our liability for unrecognized tax benefits was $550 million, including accrued interest of $62 million and excluding $34 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2019 ($435 million, $48 million and $3 million, respectively, as of December 31, 2018). Unrecognized tax benefits of $160 million ($137 million as of December 31, 2018) would affect the effective rate, if recognized. The increase in our liability for unrecognized tax benefits relates primarily to the effect of certain federal and state legislative and regulatory developments during 2019.

F-21

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 4 — INCOME TAXES (continued)

The Internal Revenue Service began an examination of the Company’s 2016 and 2017 federal income tax returns during 2019. We are also subject to examination 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 2019, 2018 and 2017, we repurchased 7.949 million shares, 14.070 million shares and 25.092 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, 2019, 2018 and 2017 (dollars and shares in millions,

except

per share amounts):

		2019				2018				2017
Net income attributable to HCA Healthcare, Inc.		$	3,505			$	3,787			$	2,216
Weighted average common shares outstanding			341.210				347.297				362.305
Effect of dilutive incremental shares			7.016				8.006				9.916
Shares used for diluted earnings per share			348.226				355.303				372.221
Earnings per share:
Basic earnings per share		$	10.27			$	10.90			$	6.12
Diluted earnings per share		$	10.07			$	10.66			$	5.95

NOTE 6 — INVESTMENTS OF INSURANCE SUBSIDIARIES

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

		2019
		Amortized Cost				Unrealized Amounts								Fair Value
	Gains				Losses
Debt securities		$	359			$	18			$	—			$	377
Money market funds and other			85				—				—				85
		$	444			$	18			$	—				462
Amounts classified as current assets															(147	)
Investment carrying value														$	315

F-22

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 6 — INVESTMENTS OF INSURANCE SUBSIDIARIES (continued)

		2018
		Amortized Cost				Unrealized Amounts								Fair Value
	Gains				Losses
Debt securities		$	338			$	5			$	(2	)		$	341
Money market funds and other			68				—				—				68
		$	406			$	5			$	(2	)			409
Amounts classified as current assets															(47	)
Investment carrying value														$	362

At December 31, 2019 and 2018, the investments in debt securities of our insurance subsidiaries were classified as “available-for-sale.” Changes in unrealized gains and losses are recorded as adjustments to other comprehensive income (loss).

Scheduled maturities of investments in debt securities at December 31, 2019 were as follows (dollars in millions):

		Amortized Cost				Fair Value
Due in one year or less		$	9			$	9
Due after one year through five years			85				88
Due after five years through ten years			190				202
Due after ten years			75				78
		$	359			$	377

The average expected maturity of the investments in debt securities at December 31, 2019 was 5.6 years, compared to the average scheduled maturity of 10.5 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 us and our counterparties 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-23

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, 2019 (dollars in millions):

		Notional Amount				Maturity Date				Fair Value
Pay-fixed interest rate swaps		$	2,000				December 2021			$	3
Pay-fixed interest rate swaps			500				December 2022				(7	)

During the next 12 months, we estimate $1 million will be reclassified from

accumulated

other comprehensive income (“OCI”) and will

be included i

n

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, 2019 (dollars in millions):

Derivatives in Cash Flow Hedging Relationships		Amount of Loss Recognized in OCI on Derivatives, Net of Tax				Location of Gain Reclassified from Accumulated OCI into Operations				Amount of Gain Reclassified from Accumulated OCI into Operations
Interest rate swaps		$	37				Interest expense			$	17

Credit-risk-related Contingent Features

We have agreements with each of our derivative counterparties that contain a provision where we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of December 31, 2019, we have not been required to post any collateral related to these agreements. If we had breached these provisions at December 31, 2019, we would have been required to settle our obligations under the agreements at their aggregate, estimated termination value of $4 million.

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,

F-24

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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.

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.

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.

The following tables summarize our assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018, aggregated by the level in the fair value hierarchy within which those measurements fall (dollars in millions):

		December 31, 2019
		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:
Debt securities		$	377			$	—			$	377			$	—
Money market funds and other			85				85				—				—
Investments of insurance subsidiaries			462				85				377				—
Less amounts classified as current assets			(147	)			(83	)			(64	)			—
		$	315				2			$	313			$	—
Interest rate swaps (Other)		$	3			$	—			$	3			$	—
Liabilities:
Interest rate swaps (Income taxes and other liabilities)		$	7			$	—			$	7			$	—

F-25

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

Derivative Financial Instruments (continued)

		December 31, 2018
		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:
Debt securities		$	341			$	—			$	341			$	—
Money market funds and other			68				68				—				—
Investments of insurance subsidiaries			409				68				341				—
Less amounts classified as current assets			(47	)			(47	)			—				—
		$	362			$	21			$	341			$	—
Interest rate swaps (Other)		$	63			$	—			$	63			$	—

The estimated fair value of our long-term debt was $37.026 billion and $32.887 billion at December 31, 2019 and 2018, respectively, compared to carrying amounts, excluding debt issuance costs

and di

scounts

, aggregating $33.961 billion and $32.978 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, 2019, follows (dollars in millions):

		2019				2018
Senior secured asset-based revolving credit facility (effective interest rate of 3.0%)		$	2,480			$	3,040
Senior secured revolving credit facility			—				—
Senior secured term loan facilities (effective interest rate of 3.3%)			3,725				3,801
Senior secured notes (effective interest rate of 5.1%)			13,850				13,800
Other senior secured debt (effective interest rate of 5.4%)			654				585
Senior secured debt			20,709				21,226
Senior unsecured notes (effective interest rate of 6.3%)			13,252				11,752
Net debt issuance costs			(239	)			(157	)
Total debt (average life of 8.6 years, rates averaging 5.2 %)			33,722				32,821
Less amounts due within one year			145				788
		$	33,577			$	32,033

During January 2019, we issued $

1.500

billion aggregate principal amount of senior unsecured notes comprised of $

1.000

billion aggregate principal amount of

5.875

% notes due 2029 and $

million aggregate principal amount of

5.625

% notes due 2028. We used the net proceeds to fund the purchase of a seven-hospital health system located in western North Carolina.

F-26

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 9 — LONG-TERM DEBT (continued)

During June 2019, we issued $5.000 billion aggregate principal amount of senior secured notes comprised of $2.000 billion aggregate principal amount of 4 1/8% notes due 2029, $1.000 billion aggregate principal amount of 5 1/8% notes due 2039 and $2.000 billion aggregate principal amount of 5 1/4% notes due 2049. During July 2019, we redeemed all $600 million outstanding aggregate principal amount of 4.25% senior secured notes due 2019, all $3.000 billion outstanding aggregate principal amount of 6.50% senior secured notes due 2020 and all $1.350 billion outstanding aggregate principal amount of 5.875% senior secured notes due 2022. The pretax loss on retirement of debt for these redemptions was $211 million.

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

% of eligible accounts receivable, subject to customary reserves and eligibility criteria ($2.480 billion outstanding at December 31, 2019) (the “ABL credit facility”); (ii) a $2.000 billion senior secured revolving credit facility maturing on

June 28, 2022

(

none

outstanding at December 31, 2019 without giving effect to certain outstanding letters of credit); (iii) a $1.106 billion senior secured term loan

A-6

facility maturing on

July 16, 2024

; (iv) a $1.474 billion senior secured term loan

B-12

facility maturing on

March 13, 2025

; and (v) a $1.145 billion senior secured term loan

B-13

facility maturing on

March 18, 2026

. 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) $

1.250

billion aggregate principal amount of 4.75% first lien notes due 2023; (ii) $2.000 billion aggregate principal amount of 5.00% first lien notes due 2024; (iii) $1.400 billion aggregate principal amount of 5.25% first lien notes due 2025; (iv) $1.500 billion aggregate principal amount of 5.25% first lien notes due 2026; (v) $1.200 billion aggregate principal amount of 4.50% first lien notes due 2027; (vi) $

2.000

billion aggregate principal amount of 4 1/8% first lien notes due 2029; (vii) $

1.000

billion aggregate principal amount of 5 1/8% first lien notes due 2039; (viii) $1.500 billion aggregate principal amount of 5.50% first lien notes due 2047; and (ix) $

2.000

billion aggregate principal amount of 5 1/4% first lien notes due 2049. Finance leases and other secured debt totaled $654 million at December 31, 2019.

We use interest rate swap agreements to manage the variable rate exposure of our debt portfolio. At December 31, 2019, 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

F-27

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)

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) $12.391 billion aggregate principal amount of senior notes with maturities ranging from 2021 to 2033; (ii) an aggregate principal amount of $125 million medium-term notes maturing 2025; and (iii) an aggregate principal amount of $736 million debentures with maturities ranging from 2023 to 2095.

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.

Maturities of long-term debt in years 2021 through 2024, excluding amounts under the ABL credit facility, are $1.156 billion, $2.177 billion, $2.770 billion and $3.137 billion, respectively.

NOTE 10 —

LEASES

We adopted ASU No. 2016-02,

Leases (Topic 842)

, which requires leases with durations greater than 12 months to be recognized on the balance sheet, effective January 1, 2019, using the modified retrospective approach. Prior period financial statement amounts and disclosures have not been adjusted to reflect the

F-28

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10 — LEASES (continued)

provisions of the new standard. We elected the package of transition provisions available which allowed us to carry forward our historical assessments of whether contracts are or contain leases, the lease classification and the treatment of initial direct costs.

We lease property and equipment under finance and operating leases. For leases with terms greater than 12 months, we record the related assets and obligations at the present value of lease payments over the term. Many of our leases include rental escalation clauses and renewal options that are factored into our determination of lease payments

,

when appropriate. We do not separate lease and nonlease components of contracts. Generally, we use our estimated incremental borrowing rate to discount the lease payments, as most of our leases do not provide a readily determinable implicit interest rate.

The following table presents our lease-related assets and liabilities at December 31, 2019 (dollars in millions):

		Balance Sheet Classification		December 31, 2019
Assets:
Operating leases		Right-of-use operating lease assets		$	1,834
Finance leases		Property and equipment			520
Total lease assets				$	2,354
Liabilities:
Current:
Operating leases		Other accrued expenses		$	350
Finance leases		Long-term debt due within one year			87
Noncurrent:
Operating leases		Right-of-use operating lease obligations			1,499
Finance leases		Long-term debt			470
Total lease liabilities				$	2,406
Weighted-average remaining term:
Operating leases					10.8 years
Finance leases					12.0 years
Weighted-average discount rate:
Operating leases(1)					5.3	%
Finance leases					6.0	%

(1)	Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.

F-

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 10 — LEASES (continued)

The following table presents certain information related to lease expense for finance and operating leases for the year ended December 31, 2019 (dollars in millions):

		Year Ended December 31, 2019
Finance lease expense:
Amortization of leased assets		$	93
Interest on lease liabilities			32
Operating leases(2)			389
Short-term lease expense(2)			316
Variable lease expense(2)			150
		$	980

(2)	Expenses are included in “other operating expenses” in our consolidated income statements.

The following table presents supplemental cash flow information for the year ended December 31, 2019 (dollars in millions):

		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	404
Operating cash flows for finance leases			32
Financing cash flows for finance leases			79

Maturities of Lease Liabilities

The following table reconciles the undiscounted minimum lease payment amounts to the operating and finance lease liabilities recorded on the balance sheet at December 31, 2019 (dollars in millions):

		Operating Leases				Finance Leases
Year 1		$	411			$	110
Year 2			350				105
Year 3			285				99
Year 4			228				58
Year 5			182				60
Thereafter			1,074				368
Total minimum lease payments			2,530				800
Less: amount of lease payments representing interest			(681	)			(243	)
Present value of future minimum lease payments			1,849				557
Less: current lease obligations			(350	)			(87	)
Long-term lease obligations		$	1,499			$	470

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HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 11 — 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.

Texas operates a state Medicaid program pursuant to a waiver from CMS under Section 1115 of the Social Security Act (“Program”). The Program includes uncompensated-care pools; payments from these pools are intended to defray the uncompensated costs of services provided by our and other hospitals to Medicaid eligible or uninsured individuals. Separately, we and other hospitals provide charity care services in several communities in the state. In 2018, the Civil Division of the U.S. Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas requested information about whether the Program, as operated in Harris County, complied with the laws and regulations applicable to provider related donations, and the Company cooperated with that request. On May 21, 2019, a

qui tam

lawsuit asserting violations of the FCA and the Texas Medicaid Fraud Prevention Act related to the Program, as operated in Harris County, was unsealed by the U.S. District Court for the Southern District of Texas. Both the federal and state governments declined to intervene in the

qui tam

lawsuit. The Company believes that our participation is and has been consistent with the requirements of the Program and is vigorously defending against the lawsuit being pursued by the relator. We cannot predict what effect, if any, the

qui tam

lawsuit could have on the Company.

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 January 2020, January 2019, October 2017 and November 2016, our Board of Directors authorized share repurchase programs for up to $8 billion ($2 billion for each authorization) of our outstanding common stock. During 2019, we repurchased 7.949 million shares of our common stock at an average price of $129.71 per

F-31

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 — CAPITAL STOCK (continued)

Share Repurchase Transactions (continued)

share through market purchases pursuant to the October 2017 authorization (which was completed during the first quarter of 2019) and the January 2019 authorization. At December 31, 2019, we had $1.241 billion of repurchase authorization available under the January 2019 authorization.

During 2018, we repurchased 14.070 million shares of our common stock at an average price of $108.74 per share through market purchases pursuant to the October 2017 authorization. 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 November 2016 authorization (which was completed during the fourth quarter of 2017) and the October 2017 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 $532 million for 2019, $499 million for 2018 and $471 million for 2017. Our contributions are funded during the applicable or following 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’ compensation, years of vesting service and certain IRS limitations. Benefits expense under this plan was $44 million for 2019, $22 million for 2018 and $40 million for 2017. Accrued benefits liabilities under this plan totaled $227 million at December 31, 2019 and $205 million at December 31, 2018.

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 $19 million for 2019, $26 million for 2018 and $28 million for 2017. Accrued benefits liabilities under this plan totaled $192 million at December 31, 2019 and $195 million at December 31, 2018.

We maintain defined benefit pension plans which resulted from certain hospital acquisitions in prior years. Benefits expense under these plans was $11 million for 2019, $9 million for 2018, and $14 million for 2017. Accrued benefits liabilities under these plans totaled $63 million at December 31, 2019 and $68 million at December 31, 2018.

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, 2019, the National Group included 95 hospitals located in Alaska, California, Florida, southern Georgia, Idaho, Indiana, northern Kentucky, Nevada, New Hampshire, North Carolina, South Carolina, Utah and Virginia, and the American Group included 83 hospitals located in Colorado, northern Georgia, Kansas, southern Kentucky, Louisiana,

Mississippi, Missouri, Tennessee and Texas. We also operate six hospitals in England, and these facilities are included in the Corporate and other group.

F-32

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, gains on sales of facilities, losses on retirement of debt, 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,
		2019				2018				2017
Revenues:
National Group		$	25,913			$	22,581			$	20,772
American Group			23,173				21,959				20,912
Corporate and other			2,250				2,137				1,930
		$	51,336			$	46,677			$	43,614
Equity in earnings of affiliates:
National Group		$	(2	)		$	(4	)		$	(21	)
American Group			(44	)			(40	)			(37	)
Corporate and other			3				15				13
		$	(43	)		$	(29	)		$	(45	)
Adjusted segment EBITDA:
National Group		$	5,634			$	4,980			$	4,600
American Group			4,904				4,593				4,231
Corporate and other			(681	)			(624	)			(598	)
		$	9,857			$	8,949			$	8,233
Depreciation and amortization:
National Group		$	1,161			$	946			$	867
American Group			1,117				1,027				986
Corporate and other			318				305				278
		$	2,596			$	2,278			$	2,131

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HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 14 — SEGMENT AND GEOGRAPHIC INFORMATION (continued)

		For the Years Ended December 31,
		2019				2018				2017
Adjusted segment EBITDA		$	9,857			$	8,949			$	8,233
Depreciation and amortization			2,596				2,278				2,131
Interest expense			1,824				1,755				1,690
Gains on sales of facilities			(18	)			(428	)			(8	)
Losses on retirement of debt			211				9				39
Income before income taxes		$	5,244			$	5,335			$	4,381

		December 31,
		2019				2018				2017
Assets:
National Group		$	18,290			$	14,839			$	13,097
American Group			20,608				19,122				18,136
Corporate and other			6,160				5,246				5,360
		$	45,058			$	39,207			$	36,593

		National Group				American Group				Corporate and Other				Total
Goodwill and other intangible assets:
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
Acquisitions			132				504				—				636
Foreign currency translation, amortization and other			(9	)			(40	)			(28	)			(77	)
Balance at December 31, 2018			1,597				5,729				627				7,953
Acquisitions			155				39				138				332
F oreign currency translation, amortization and other			(13	)			(3	)			—				(16	)
Balance at December 31, 2019		$	1,739			$	5,765			$	765			$	8,269

F-3

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, 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	)
Unrealized losses on available-for-sale securities, net of $2 income tax benefit			(5	)			—				—				—				(5	)
Foreign currency translation adjustments, net of $8 income tax benefit			—				(63	)			—				—				(63	)
Defined benefit plans, net of $10 of income taxes			—				—				34				—				34
Change in fair value of derivative instruments, net of $5 of income taxes			—				—				—				18				18
Expense (income) reclassified into operations from other comprehensive income, net of $5 income tax benefit and $2 of income taxes, respectively			—				—				16				(8	)			8
Reclassification of stranded tax effects			1				(71	)			(30	)			5				(95	)
Balances at December 31, 2018			3				(283	)			(148	)			47				(381	)
Unrealized gains on available-for-sale securities, net of $4 of income taxes			11				—				—				—				11
Foreign currency translation adjustments, net of $5 of income taxes			—				—				—				—				—
Defined benefit plans, net of $14 income tax benefit			—				—				(49	)			—				(49	)
Change in fair value of derivative instruments, net of $13 income tax benefit			—				—				—				(37	)			(37	)
Expense (income) reclassified into operations from other comprehensive income, net of $3 income tax benefit and $3 of income taxes, respectively			—				—				10				(14	)			(4	)
Balances at December 31, 2019		$	14			$	(283	)		$	(187	)		$	(4	)		$	(460	)

F-3

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 16 — ACCRUED EXPENSES

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

		2019				2018
Professional liability risks		$	457			$	466
Defined contribution benefit plan			528				459
Interest			368				429
Right-of-use operating lease			350				—
Taxes other than income			325				308
Other			904				962
		$	2,932			$	2,624

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

HCA Inc. is a 100% owned direct subsidiary of HCA Healthcare, Inc. HCA Healthcare, Inc. has $1.000 billion aggregate principal amount of 6.25% senior unsecured notes due 2021 outstanding. 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, 2019 and 2018 and condensed consolidating statements of comprehensive income and cash flows for each of the three years in the period ended December 31, 2019, segregating HCA Healthcare, Inc. issuer, HCA Inc. issuer, the subsidiary guarantors, the subsidiary

non-guarantors

and eliminations, follow.

F-3

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, 2019

(Dollars in millions)

		HCA Healthcare, Inc. Issuer				HCA Inc. Issuer				Subsidiary Guarantors				Subsidiary Non- Guarantors				Eliminations				Condensed Consolidated
Revenues		$	—			$	—			$	29,220			$	22,116			$	—			$	51,336
Salaries and benefits			—				—				12,898				10,662				—				23,560
Supplies			—				—				4,802				3,679				—				8,481
Other operating expenses			7				—				4,643				4,831				—				9,481
Equity in earnings of affiliates			(3,597	)			—				(6	)			(37	)			3,597				(43	)
Depreciation and amortization			—				—				1,447				1,149				—				2,596
Interest expense (income)			64				4,025				(2,001	)			(264	)			—				1,824
Gains on sales of facilities			—				—				(14	)			(4	)			—				(18	)
Losses on retirement of debt			—				211				—				—				—				211
Management fees			—				—				(768	)			768				—				—
			(3,526	)			4,236				21,001				20,784				3,597				46,092
Income (loss) before income taxes			3,526				(4,236	)			8,219				1,332				(3,597	)			5,244
Provision (benefit) for income taxes			21				(976	)			1,874				180				—				1,099
Net income (loss)			3,505				(3,260	)			6,345				1,152				(3,597	)			4,145
Net income attributable to noncontrolling interests			—				—				91				549				—				640
Net income (loss) attributable to HCA Healthcare, Inc.		$	3,505			$	(3,260	)		$	6,254			$	603			$	(3,597	)		$	3,505
Comprehensive income (loss) attributable to HCA Healthcare, Inc.		$	3,426			$	(3,311	)		$	6,215			$	614			$	(3,518	)		$	3,426

F-3

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, 2018

(Dollars in millions)

		HCA Healthcare, Inc. Issuer				HCA Inc. Issuer				Subsidiary Guarantors				Subsidiary Non- Guarantors				Eliminations				Condensed Consolidated
Revenues		$	—			$	—			$	27,482			$	19,195			$	—			$	46,677
Salaries and benefits			—				—				12,287				9,138				—				21,425
Supplies			—				—				4,560				3,164				—				7,724
Other operating expenses			8				—				4,463				4,137				—				8,608
Equity in earnings of affiliates			(3,688	)			—				(7	)			(22	)			3,688				(29	)
Depreciation and amortization			—				—				1,335				943				—				2,278
Interest expense (income)			64				3,580				(1,635	)			(254	)			—				1,755
Gains on sales of facilities			—				—				(357	)			(71	)			—				(428	)
Losses on retirement of debt			—				9				—				—				—				9
Management fees			—				—				(639	)			639				—				—
			(3,616	)			3,589				20,007				17,674				3,688				41,342
Income (loss) before income taxes			3,616				(3,589	)			7,475				1,521				(3,688	)			5,335
Provision (benefit) for income taxes			(171	)			(834	)			1,714				237				—				946
Net income (loss)			3,787				(2,755	)			5,761				1,284				(3,688	)			4,389
Net income attributable to noncontrolling interests			—				—				99				503				—				602
Net income (loss) attributable to HCA Healthcare, Inc.		$	3,787			$	(2,755	)		$	5,662			$	781			$	(3,688	)		$	3,787
Comprehensive income (loss) attributable to HCA Healthcare, Inc.		$	3,779			$	(2,745	)		$	5,712			$	713			$	(3,680	)		$	3,779

F-3

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		$	—			$	—			$	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 (income)			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-3

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, 2019

(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		$	—			$	—			$	118			$	503			$	—			$	621
Accounts receivable, net			—				—				4,037				3,343				—				7,380
Inventories			—				—				1,208				641				—				1,849
Other			—				—				727				619				—				1,346
			—				—				6,090				5,106				—				11,196
Property and equipment, net			—				—				13,418				9,297				—				22,715
Investments of insurance subsidiaries			—				—				—				315				—				315
Investments in and advances to affiliates			36,684				—				29				220				(36,684	)			249
Goodwill and other intangible assets			—				—				5,743				2,526				—				8,269
Right-of-use operating lease assets			—				—				455				1,379				—				1,834
Other			300				3				29				148				—				480
		$	36,984			$	3			$	25,764			$	18,991			$	(36,684	)		$	45,058
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable		$	—			$	—			$	1,903			$	1,002			$	—			$	2,905
Accrued salaries			—				—				1,070				705				—				1,775
Other accrued expenses			85				341				1,001				1,505				—				2,932
Long-term debt due within one year			—				54				50				41				—				145
			85				395				4,024				3,253				—				7,757
Long-term debt, net			998				32,016				213				350				—				33,577
Intercompany balances			38,089				(4,314	)			(33,828	)			53				—				—
Professional liability risks			—				—				—				1,370				—				1,370
Right-of-use operating lease obligations			—				—				345				1,154				—				1,499
Income taxes and other liabilities			620				7				252				541				—				1,420
			39,792				28,104				(28,994	)			6,721				—				45,623
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.			(2,808	)			(28,101	)			54,652				10,133				(36,684	)			(2,808	)
Noncontrolling interests			—				—				106				2,137				—				2,243
			(2,808	)			(28,101	)			54,758				12,270				(36,684	)			(565	)
		$	36,984			$	3			$	25,764			$	18,991			$	(36,684	)		$	45,058

F-

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, 2018

(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		$	—			$	—			$	174			$	328			$	—			$	502
Accounts receivable, net			—				—				3,964				2,825				—				6,789
Inventories			—				—				1,178				554				—				1,732
Other			—				—				669				521				—				1,190
			—				—				5,985				4,228				—				10,213
Property and equipment, net			—				—				12,450				7,307				—				19,757
Investments of insurance subsidiaries			—				—				—				362				—				362
Investments in and advances to affiliates			33,166				—				29				203				(33,166	)			232
Goodwill and other intangible assets			—				—				5,724				2,229				—				7,953
Other			478				64				35				113				—				690
		$	33,644			$	64			$	24,223			$	14,442			$	(33,166	)		$	39,207
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY
Current liabilities:
Accounts payable		$	—			$	—			$	1,721			$	856			$	—			$	2,577
Accrued salaries			—				—				998				582				—				1,580
Other accrued expenses			142				403				905				1,174				—				2,624
Long-term debt due within one year			—				696				55				37				—				788
			142				1,099				3,679				2,649				—				7,569
Long-term debt, net			996				30,544				212				281				—				32,033
Intercompany balances			36,951				(6,789	)			(28,415	)			(1,747	)			—				—
Professional liability risks			—				—				—				1,275				—				1,275
Income taxes and other liabilities			505				—				223				520				—				1,248
			38,594				24,854				(24,301	)			2,978				—				42,125
Stockholders’ (deficit) equity attributable to HCA Healthcare, Inc.			(4,950	)			(24,790	)			48,437				9,519				(33,166	)			(4,950	)
Noncontrolling interests			—				—				87				1,945				—				2,032
			(4,950	)			(24,790	)			48,524				11,464				(33,166	)			(2,918	)
		$	33,644			$	64			$	24,223			$	14,442			$	(33,166	)		$	39,207

F-4

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, 2019

(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)		$	3,505			$	(3,260	)		$	6,345			$	1,152			$	(3,597	)		$	4,145
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Change in operating assets and liabilities			—				(62	)			17				(43	)			—				(88	)
Depreciation and amortization			—				—				1,447				1,149				—				2,596
Income taxes			250				—				—				—				—				250
Gains on sales of facilities			—				—				(14	)			(4	)			—				(18	)
Losses on retirement of debt			—				211				—				—				—				211
Amortization of debt issuance costs			—				30				—				—				—				30
Share-based compensation			—				—				347				—				—				347
Equity in earnings of affiliates			(3,597	)			—				—				—				3,597				—
Other			109				—				23				(3	)			—				129
Net cash provided by (used in) operating activities			267				(3,081	)			8,165				2,251				—				7,602
Cash flows from investing activities:
Purchase of property and equipment			—				—				(2,342	)			(1,816	)			—				(4,158	)
Acquisition of hospitals and health care entities			—				—				(43	)			(1,639	)			—				(1,682	)
Sales of hospitals and health care entities			—				—				42				19				—				61
Change in investments			—				—				6				19				—				25
Other			—				—				(7	)			41				—				34
Net cash used in investing activities			—				—				(2,344	)			(3,376	)			—				(5,720	)
Cash flows from financing activities:
Issuance of long-term debt			—				6,451				—				—				—				6,451
Net change in revolving bank credit facilities			—				(560	)			—				—				—				(560	)
Repayment of long-term debt			—				(5,227	)			(59	)			(38	)			—				(5,324	)
Distributions to noncontrolling interests			—				—				(104	)			(438	)			—				(542	)
Payment of debt issuance costs			—				(73	)			—				—				—				(73	)
Payment of dividends			(550	)			—				—				—				—				(550	)
Repurchases of common stock			(1,031	)			—				—				—				—				(1,031	)
Changes in intercompany balances with affiliates, net			1,457				2,490				(5,714	)			1,767				—				—
Other			(143	)			—				—				1				—				(142	)
Net cash (used in) provided by financing activities			(267	)			3,081				(5,877	)			1,292				—				(1,771	)
Effect of exchange rate changes on cash and cash equivalents			—				—				—				8				—				8
Change in cash and cash equivalents			—				—				(56	)			175				—				119
Cash and cash equivalents at beginning of period			—				—				174				328				—				502
Cash and cash equivalents at end of period		$	—			$	—			$	118			$	503			$	—			$	621

F-4

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, 2018

(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)		$	3,787			$	(2,755	)		$	5,761			$	1,284			$	(3,688	)		$	4,389
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Change in operating assets and liabilities			—				23				(178	)			188				—				33
Depreciation and amortization			—				—				1,335				943				—				2,278
Income taxes			74				—				—				—				—				74
Gains on sales of facilities			—				—				(357	)			(71	)			—				(428	)
Losses on retirement of debt			—				9				—				—				—				9
Amortization of debt issuance costs			—				31				—				—				—				31
Share-based compensation			—				—				268				—				—				268
Equity in earnings of affiliates			(3,688	)			—				—				—				3,688				—
Other			91				—				25				(9	)			—				107
Net cash provided by (used in) operating activities			264				(2,692	)			6,854				2,335				—				6,761
Cash flows from investing activities:
Purchase of property and equipment			—				—				(2,008	)			(1,565	)			—				(3,573	)
Acquisition of hospitals and health care entities			—				—				(897	)			(356	)			—				(1,253	)
Sales of hospitals and health care entities			—				—				770				38				—				808
Change in investments			—				—				12				45				—				57
Other			—				—				(9	)			69				—				60
Net cash used in investing activities			—				—				(2,132	)			(1,769	)			—				(3,901	)
Cash flows from financing activities:
Issuance of long-term debt			—				2,000				—				—				—				2,000
Net change in revolving bank credit facilities			—				(640	)			—				—				—				(640	)
Repayment of long-term debt			—				(1,590	)			(72	)			(42	)			—				(1,704	)
Distributions to noncontrolling interests			—				—				(83	)			(358	)			—				(441	)
Payment of debt issuance costs			—				(25	)			—				—				—				(25	)
Payment of dividends			(487	)			—				—				—				—				(487	)
Repurchases of common stock			(1,530	)			—				—				—				—				(1,530	)
Changes in intercompany balances with affiliates, net			2,004				2,947				(4,505	)			(446	)			—				—
Other			(252	)			—				—				4				—				(248	)
Net cash (used in) provided by financing activities			(265	)			2,692				(4,660	)			(842	)			—				(3,075	)
Effect of exchange rate changes on cash and cash equivalents			—				—				—				(15	)			—				(15	)
Change in cash and cash equivalents			(1	)			—				62				(291	)			—				(230	)
Cash and cash equivalents at beginning of period			1				—				112				619				—				732
Cash and cash equivalents at end of period		$	—			$	—			$	174			$	328			$	—			$	502

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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	)			(219	)			116				—				(296	)
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	)
Sales 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-4

HCA HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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 and cash flows are combined into one line item in the Healthtrust consolidated statements of stockholder’s deficit and cash flows.

Reconciliations of the HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit and Consolidated Statements of Cash Flows presentations to the Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit

and Consolidated Statements of Cash Flows

presentations for the years ended December 31, are as follows (dollars in millions):

		2019				2018				2017
Presentation in HCA Healthcare, Inc. Consolidated Statements of Stockholders’ Deficit:
Repurchases of common stock		$	(1,031	)		$	(1,530	)		$	(2,051	)
Share-based benefit plans			313				115				281
Cash dividends declared ($1.60 per share — 2019 and $1.40 per share — 2018)			(555	)			(496	)			—
Other			(11	)			(12	)			(10	)
Presentation in Healthtrust, Inc. — The Hospital Company Consolidated Statements of Stockholder’s Deficit:
Distributions to HCA Healthcare, Inc., net of contributions from HCA Healthcare, Inc.		$	(1,284	)		$	(1,923	)		$	(1,780	)
Presentation in HCA Healthcare, Inc. Consolidated Statements of Cash Flows (cash flows from financing activities):
Repurchases of common stock		$	(1,031	)		$	(1,530	)		$	(2,051	)
Payment of dividends			(550	)			(487	)			—
Presentation in Healthtrust, Inc. — The Hospital Company Consolidated Statements of Cash Flows (cash flows from financing activities):
Cash distributions to HCA Healthcare, Inc.		$	(1,581	)		$	(2,017	)		$	(2,051	)

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-4

HCA HEALTHCARE, INC.

QUARTERLY CONSOLIDATED FINANCIAL INFORMATION

(UNAUDITED)

(Dollars in millions, except per share amounts)

		2019
		First				Second				Third				Fourth
Revenues		$	12,517			$	12,602			$	12,694			$	13,523
Net income		$	1,181	(a)		$	927	(b)		$	764	(c)		$	1,273
Net income attributable to HCA Healthcare, Inc.		$	1,039	(a)		$	783	(b)		$	612	(c)		$	1,071
Basic earnings per share		$	3.03			$	2.29			$	1.80			$	3.16
Diluted earnings per share		$	2.97			$	2.25			$	1.76			$	3.09

		2018
		First				Second				Third				Fourth
Revenues		$	11,423			$	11,529			$	11,451			$	12,274
Net income		$	1,282	( d )		$	966	( e )		$	896	( f )		$	1,245	( g )
Net income attributable to HCA Healthcare, Inc.		$	1,144	( d )		$	820	( e )		$	759	( f )		$	1,064	( g )
Basic earnings per share		$	3.26			$	2.35			$	2.20			$	3.09
Diluted earnings per share		$	3.18			$	2.31			$	2.15			$	3.01

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

(b)	Second quarter results include $14 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

(c)	Third quarter results include $ 162 million of losses on retirement of debt (See Note 9 of the notes to consolidated financial statements).

(d)	F irst quarter results include $305 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

( e )	Second quarter results include $8 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

( f )	Third quarter results include $ 5 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements) and $7 million of losses on retirement of debt (See Note 9 of the notes to consolidated financial statements).

( g )	Fourth quarter results include $6 million of gains on sales of facilities (See Note 3 of the notes to consolidated financial statements).

F-4