Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report on

Form 10-Q

includes certain disclosures which contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected share-based compensation expense, expected capital expenditures and expected net claim payments and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) developments related to

COVID-19,

including, without limitation, the length and severity of the pandemic and the spread of virus strains with new epidemiological characteristics; the volume of canceled or rescheduled procedures and the volume of

COVID-19

patients cared for across our health systems; measures we are taking to respond to the

COVID-19

pandemic; the impact and terms of government and administrative regulation and stimulus (including the Families First Coronavirus Response Act, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Paycheck Protection Program and Health Care Enhancement Act, the Consolidated Appropriations Act, 2021, the American Rescue Plan Act of 2021 and other enacted and potential future legislation) and whether such programs continue or new similar programs are enacted in the future; changes in revenues due to declining patient volumes, changes in payer mix and deteriorating macroeconomic conditions (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions, including the impact of any current or future vaccine mandates; supply shortages and disruptions; and the timing, availability and adoption of effective medical treatments and vaccines, (2) the impact of our substantial indebtedness and the ability to refinance such indebtedness on acceptable terms, as well as risks associated with disruptions in the financial markets and the business of financial institutions as the result of the

COVID-19

pandemic, which could impact us from a financial perspective, (3) the impact of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “Affordable Care Act”), including the effects of changes or court challenges to the Affordable Care Act or additional changes to its implementation, the possible enactment of additional federal or state health care reforms and possible changes to other federal, state or local laws or regulations affecting the health care industry, including proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and also including any such laws or governmental regulations which are adopted in response to the

COVID-19

pandemic, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and those required under the

Pay-As-You-Go

Act of 2010 (“PAYGO Act”) as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, and attain expected levels of patient volumes and control the costs of providing services, (7) possible changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs or Medicaid waiver programs, that may impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (8) the highly competitive nature of the health care business, (9) changes in service mix, revenue mix and surgical volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (10) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (11) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (12) increases in wages and the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF (Continued)

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Forward-Looking Statements (continued)

and technical support personnel, (13) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (14) changes in accounting practices, (15) changes in general economic conditions nationally and regionally in our markets, including inflation and economic and business conditions (and the impact thereof on the economy, financial markets and banking industry) resulting from the

COVID-19

pandemic, (16) the emergence of and effects related to other pandemics, epidemics and infectious diseases, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) potential adverse impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of potential cybersecurity incidents or security breaches, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record (“EHR”) technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, or similar events beyond our control, (25) changes in the U.S. federal, state, or foreign tax laws including interpretive guidance that may be issued by taxing authorities or other standard setting bodies, and (26) other risk factors described in our annual report on

Form 10-K

for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

COVID-19

Pandemic

On March 11, 2020, the World Health Organization designated

COVID-19

as a global pandemic. Patient volumes and the related revenues for most of our services were significantly impacted during the latter portion of the first quarter and the first half of the second quarter of 2020 and have continued to be impacted as various policies were implemented by federal, state and local governments in response to the

COVID-19

pandemic. During the second quarter of 2021, our patient volumes experienced a strong rebound as the effects of the pandemic moderated and certain pandemic-related restrictions and policies were eased. During the third quarter of 2021, our patient volumes remained strong, with the exception of inpatient surgeries, and included a resurgence of

COVID-19

admissions. Inpatient surgery volumes were constrained during the quarter as capacity was used to treat the surge of COVID-19 patients. We believe the extent of the

COVID-19

pandemic’s impact on our operating results and financial condition has been and will continue to be driven by many factors, most of which are beyond our control and ability to forecast. Because of these uncertainties, we cannot estimate how long or to what extent the pandemic will impact our operations.

Third Quarter 2021 Operations Summary

Revenues increased to $15.276 billion in the third quarter of 2021 from $13.311 billion in the third quarter of 2020. Net income attributable to HCA Healthcare, Inc. totaled $2.269 billion, or $7.00 per diluted share, for the quarter ended September 30, 2021, compared to $668 million, or $1.95 per diluted share, for the quarter ended September 30, 2020. Third quarter results for 2021 and 2020 include gains on sales of facilities of $1.047 billion, or $2.43 per diluted share, and $14 million, or $0.03 per diluted share, respectively. Third quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in the second quarter of 2020 related to general distribution Provider Relief Funds (“PRFs”) established by the CARES Act. During October 2020, we announced we would return, or repay early, our share of the PRFs of approximately $1.6 billion and approximately $4.4 billion in Medicare accelerated payments (repaid during

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Third Quarter 2021 Operations Summary (continued)

the fourth quarter of 2020). All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 324.029 million shares for the quarter ended September 30, 2021 and 343.346 million shares for the quarter ended September 30, 2020. During the first nine months of 2021, we repurchased 29.343 million shares of our common stock.

Revenues increased 14.8% on a consolidated basis and 15.0% on a same facility basis for the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. The increase in consolidated revenues can be primarily attributed to the combined impact of a 5.9% increase in revenue per equivalent admission and a 8.4% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 5.2% increase in same facility revenue per equivalent admission and a 9.3% increase in same facility equivalent admissions.

During the quarter ended September 30, 2021, consolidated admissions increased 5.9% and same facility admissions increased 6.8% compared to the quarter ended September 30, 2020. Surgeries increased 2.6% on a consolidated basis and 2.3% on a same facility basis during the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. Emergency department visits increased 28.9% on a consolidated basis and 31.2% on a same facility basis during the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. Consolidated and same facility uninsured admissions increased 0.7% and 1.2%, respectively, for the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020.

Cash flows from operating activities declined $440 million, from $2.717 billion for the third quarter of 2020 to $2.277 billion for the third quarter of 2021. The decline in cash provided by operating activities was primarily related to the net impact of negative changes in working capital items of $797 million, primarily related to an increase in accounts receivable, offset by a $269 million increase in net income, excluding the government stimulus income reversal and gains on sales of facilities.

Results of Operations

Revenue/Volume Trends

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 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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF (Continued)

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Revenues increased 14.8% from $13.311 billion in the third quarter of 2020 to $15.276 billion in the third quarter of 2021. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments 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

self-pay

revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for

non-elective

care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and nine months ended September 30, 2021 and 2020 are summarized in the following table (dollars in millions):

		Quarter
		2021				Ratio				2020				Ratio
Medicare		$	2,645				17.3	%		$	2,603				19.6	%
Managed Medicare			2,124				13.9				1,760				13.2
Medicaid			692				4.5				445				3.3
Managed Medicaid			813				5.3				707				5.3
Managed care and insurers			7,998				52.4				6,752				50.7
International (managed care and insurers)			324				2.1				307				2.3
Other			680				4.5				737				5.6
Revenues		$	15,276				100.0	%		$	13,311				100.0	%
		Nine Months
		2021				Ratio				2020				Ratio
Medicare		$	7,816				17.9	%		$	7,618				20.5	%
Managed Medicare			6,281				14.4				5,074				13.6
Medicaid			1,722				3.9				1,423				3.8
Managed Medicaid			2,369				5.4				1,904				5.1
Managed care and insurers			22,300				51.0				19,028				51.0
International (managed care and insurers)			995				2.3				838				2.3
Other			2,205				5.1				1,355				3.7
Revenues		$	43,688				100.0	%		$	37,240				100.0	%

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

Consolidated and same facility revenue per equivalent admission increased 5.9% and 5.2%, respectively, in the third quarter of 2021, compared to the third quarter of 2020. Consolidated and same facility equivalent admissions increased 8.4% and 9.3%, respectively, in the third quarter of 2021, compared to the third quarter of 2020. Consolidated and same facility outpatient surgeries increased 7.2% and 6.4%, respectively, in the third quarter of 2021, compared to the third quarter of 2020. Consolidated and same facility inpatient surgeries declined 5.3% and 4.9%, respectively, in the third quarter of 2021, compared to the third quarter of 2020. Consolidated and same facility emergency department visits increased 28.9% and 31.2%, respectively, in the third quarter of 2021, compared to the third quarter of 2020.

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 quarters and nine months ended September 30, 2021 and 2020 follows (dollars in millions):

		Quarter								Nine Months
		2021				2020				2021				2020
Patient care costs (salaries and benefits, supplies, other operating expenses and depreciation and amortization)		$	12,803			$	11,170			$	36,396			$	32,428
Cost-to-charges ratio (patient care costs as percentage of gross patient charges)			11.8	%			12.0	%			11.4	%			12.1	%
Total uncompensated care		$	7,782			$	7,023			$	22,299			$	21,625
Multiply by the cost-to-charges ratio			11.8	%			12.0	%			11.4	%			12.1	%
Estimated cost of total uncompensated care		$	916			$	843			$	2,542			$	2,617

Same facility uninsured admissions increased by 463 admissions, or 1.2%, in the third quarter of 2021 compared to the third quarter of 2020. Same facility uninsured admissions increased 6.6% in the second quarter of 2021 compared to the second quarter of 2020. Same facility uninsured admissions declined 15.7% in the first quarter of 2021 compared to the first quarter of 2020. Same facility uninsured admissions in 2020, compared to 2019, declined 9.1% in the fourth quarter, declined 14.2% in the third quarter, declined 10.0% in the second quarter, and increased 7.1% in the first quarter. The declines in the first quarter of 2021, compared to the first quarter of 2020, and the last three quarters of 2020, compared to the last three quarters of 2019, were primarily due to the reimbursement received, as provided for under the Families First Coronavirus Response Act and subsequent legislation, for uninsured patients diagnosed with

COVID-19

and the resulting classification of those patients as an insured admission, as well as general declines in patient volumes resulting from the pandemic’s impact on our operations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and nine months ended September 30, 2021 and 2020 are set forth in the following table.

		Quarter								Nine Months
		2021				2020				2021				2020
Medicare			21	%			25	%			23	%			26	%
Managed Medicare			21				19				21				19
Medicaid			4				5				5				6
Managed Medicaid			14				13				13				12
Managed care and insurers			32				30				31				29
Uninsured			8				8				7				8
			100	%			100	%			100	%			100	%

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and nine months ended September 30, 2021 and 2020 are set forth in the following table.

		Quarter								Nine Months
		2021				2020				2021				2020
Medicare			22	%			25	%			24	%			27	%
Managed Medicare			16				15				16				15
Medicaid			7				5				6				5
Managed Medicaid			5				6				6				6
Managed care and insurers			50				49				48				47
			100	%			100	%			100	%			100	%

At September 30, 2021, we had 91 hospitals in the states of Texas and Florida. During the quarter ended September 30, 2021, 57% of our admissions and 50% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 71% of our uninsured admissions during the quarter ended September 30, 2021.

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. In December 2017, the Centers for Medicare & Medicaid Services (“CMS”) announced that it will phase out federal matching funds for Designated State Health Programs under waivers granted under Section 1115 of the Social Security Act. Texas currently operates its Healthcare Transformation and Quality Improvement Program pursuant to a Medicaid waiver. In December 2017, CMS approved an extension of this waiver through September 30, 2022, but indicated that it will phase out some of the federal funding. Our Texas Medicaid revenues included Medicaid supplemental payments of $151 million and $154 million during the third quarters of 2021 and 2020, respectively, and $437 million and $455 million during the first nine months of 2021 and 2020, respectively.

In addition, we receive supplemental payments in several other states. We are aware these supplemental payment programs are currently being reviewed by certain state agencies and some states have made requests to CMS to replace their existing supplemental payment programs. It is possible these reviews and requests will

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Revenue/Volume Trends (continued)

result in the restructuring of such supplemental payment programs and could result in the payment programs being reduced or eliminated. Because deliberations about these programs are ongoing, we are unable to estimate the financial impact the program structure modifications, if any, may have on our results of operations.

Key Performance Indicators

We present certain metrics and statistical information that management uses when assessing our results of operations. We believe this information is useful to investors as it provides insight to how management evaluates operational performance and trends between reporting periods. Information on how these metrics and statistical information are defined is provided in the following tables summarizing operating results and operating data.

Operating Results Summary

The following is a comparative summary of results of operations for the quarters and nine months ended September 30, 2021 and 2020 (dollars in millions):

		Quarter
		2021								2020
		Amount				Ratio				Amount				Ratio
Revenues		$	15,276				100.0			$	13,311				100.0
Salaries and benefits			7,094				46.4				6,097				45.8
Supplies			2,463				16.1				2,128				16.0
Other operating expenses			2,530				16.6				2,251				16.9
Government stimulus income reversal			—				—				822				6.2
Equity in earnings of affiliates			(35	)			(0.2	)			(40	)			(0.3	)
Depreciation and amortization			716				4.7				694				5.2
Interest expense			398				2.6				385				2.9
Gains on sales of facilities			(1,047	)			(6.9	)			(14	)			(0.1	)
			12,119				79.3				12,323				92.6
Income before income taxes			3,157				20.7				988				7.4
Provision for income taxes			685				4.5				209				1.5
Net income			2,472				16.2				779				5.9
Net income attributable to noncontrolling interests			203				1.3				111				0.9
Net income attributable to HCA Healthcare, Inc.		$	2,269				14.9			$	668				5.0
% changes from prior year:
Revenues			14.8	%							4.9	%
Income before income taxes			219.6								0.9
Net income attributable to HCA Healthcare, Inc.			239.7								9.0
Admissions(a)			5.9								(3.9	)
Equivalent admissions(b)			8.4								(9.1	)
Revenue per equivalent admission			5.9								15.3
Same facility % changes from prior year(c):
Revenues			15.0								4.5
Admissions(a)			6.8								(3.8	)
Equivalent admissions(b)			9.3								(9.0	)
Revenue per equivalent admission			5.2								14.8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Operating Results Summary (continued)

		Nine Months
		2021								2020
		Amount				Ratio				Amount				Ratio
Revenues		$	43,688				100.0			$	37,240				100.0
Salaries and benefits			19,780				45.3				17,545				47.1
Supplies			7,067				16.2				5,999				16.1
Other operating expenses			7,424				17.0				6,825				18.3
Equity in earnings of affiliates			(78	)			(0.2	)			(48	)			(0.1	)
Depreciation and amortization			2,125				4.8				2,059				5.6
Interest expense			1,168				2.7				1,201				3.2
Losses (gains) on sales of facilities			(1,057	)			(2.4	)			6				—
Losses on retirement of debt			12				—				295				0.8
			36,441				83.4				33,882				91.0
Income before income taxes			7,247				16.6				3,358				9.0
Provision for income taxes			1,531				3.5				665				1.8
Net income			5,716				13.1				2,693				7.2
Net income attributable to noncontrolling interests			574				1.3				365				0.9
Net income attributable to HCA Healthcare, Inc.		$	5,142				11.8			$	2,328				6.3
% changes from prior year:
Revenues			17.3	%							(1.5	)%
Income before income taxes			115.8								(7.7	)
Net income attributable to HCA Healthcare, Inc.			120.8								(4.4	)
Admissions(a)			5.9								(5.1	)
Equivalent admissions(b)			8.4								(9.8	)
Revenue per equivalent admission			8.2								9.1
Same facility % changes from prior year(c):
Revenues			17.5								(2.1	)
Admissions(a)			6.2								(5.3	)
Equivalent admissions(b)			8.8								(9.9	)
Revenue per equivalent admission			7.9								8.6

(a)	Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume.

(b)

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues to the volume measure (admissions) used to measure inpatient volume, resulting in a general measure of combined inpatient and outpatient volume.

(c)	Same facility information excludes the operations of hospitals and their related facilities which were either acquired or divested during the current and prior period.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended September 30, 2021 and 2020

Revenues increased to $15.276 billion in the third quarter of 2021 from $13.311 billion in the third quarter of 2020. Net income attributable to HCA Healthcare, Inc. totaled $2.269 billion, or $7.00 per diluted share, for the quarter ended September 30, 2021, compared to $668 million, or $1.95 per diluted share, for the quarter ended September 30, 2020. Third quarter results for 2021 and 2020 include gains on sales of facilities of $1.047 billion, or $2.43 per diluted share, and $14 million, or $0.03 per diluted share, respectively. Third quarter results for 2020 include the reversal of $822 million, or $1.72 per diluted share, of government stimulus income recorded in the second quarter of 2020 related to general distribution PRFs established by the CARES Act. During October 2020, we announced we would return, or repay early, our share of the PRFs of approximately $1.6 billion and approximately $4.4 billion in Medicare accelerated payments (repaid during the fourth quarter of 2020). All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 324.029 million shares for the quarter ended September 30, 2021 and 343.346 million shares for the quarter ended September 30, 2020. During the first nine months of 2021, we repurchased 29.343 million shares of our common stock.

Revenues increased 14.8% on a consolidated basis and 15.0% on a same facility basis for the quarter ended September 30, 2021, compared to the quarter ended September 30, 2020. The increase in consolidated revenues can be primarily attributed to the combined impact of a 5.9% increase in revenue per equivalent admission and a 8.4% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 5.2% increase in same facility revenue per equivalent admission and a 9.3% increase in same facility equivalent admissions.

Salaries and benefits, as a percentage of revenues, were 46.4% in the third quarter of 2021 and 45.8% in the third quarter of 2020. Salaries and benefits per equivalent admission increased 7.4% in the third quarter of 2021 compared to the third quarter of 2020. Same facility labor rate increases averaged 8.0% for the third quarter of 2021 compared to the third quarter of 2020 primarily due to certain contract, overtime and other premium rate labor costs being incurred during the third quarter of 2021 to support our clinical staff and address the surge of

COVID-19

patients.

Supplies, as a percentage of revenues, were 16.1% in the third quarter of 2021 and 16.0% in the third quarter of 2020. Supply costs per equivalent admission increased 6.8% in the third quarter of 2021 compared to the third quarter of 2020. Supply costs per equivalent admission increased 24.0% for pharmacy supplies and 9.4% for general medical and surgical items and declined 4.9% for medical devices in the third quarter of 2021 compared to the third quarter of 2020. The increase in pharmacy supplies is primarily related to certain

COVID-19

therapies used in the surge of

COVID-19

cases during the third quarter of 2021, and the increase in general medical and surgical items is primarily related to an increased utilization of personal protective equipment (“PPE”).

Other operating expenses, as a percentage of revenues, were 16.6% in the third quarter of 2021 and 16.9% in the third quarter of 2020. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. Provisions for losses related to professional liability risks were $49 million and $26 million for the third quarters of 2021 and 2020, respectively. During the third quarters of 2021 and 2020, we recorded reductions of $87 million, or $0.21 per diluted share, and $112 million, or $0.25 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.

During the third quarter of 2020, we recorded the reversal of $822 million of government stimulus income previously recorded in the second quarter of 2020 related to general distribution funds received from the PRFs established by the CARES Act.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Quarters Ended September 30, 2021 and 2020 (continued)

Equity in earnings of affiliates was $35 million and $40 million in the third quarters of 2021 and 2020, respectively.

Depreciation and amortization increased $22 million, from $694 million in the third quarter of 2020 to $716 million in the third quarter of 2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $398 million in the third quarter of 2021 and $385 million in the third quarter of 2020. Our average debt balance was $32.450 billion for the third quarter of 2021 compared to $30.952 billion for the third quarter of 2020. The average effective interest rate for our long-term debt was 4.9% for both of the quarters ended September 30, 2021 and 2020.

During the third quarters of 2021 and 2020, we recorded gains on sales of facilities of $1.047 billion and $14 million, respectively. The gains on sales of facilities for the third quarter of 2021 include a $655 million gain related to the sale of four hospital facilities in Georgia and gains of $392 million related to the sales of other health care entity investments and minor real estate assets.

The effective tax rates were 23.2% and 23.8% for the third quarters of 2021 and 2020, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.

Net income attributable to noncontrolling interests increased from $111 million for the third quarter of 2020 to $203 million for the third quarter of 2021. The increase in net income attributable to noncontrolling interests related primarily to an increase in partnership operating income as well as the impact of the government stimulus income reversal for certain hospital and surgery center partnerships in the third quarter of 2020.

Nine Months Ended September 30, 2021 and 2020

Revenues increased to $43.688 billion in the first nine months of 2021 from $37.240 billion in the first nine months of 2020. Net income attributable to HCA Healthcare, Inc. totaled $5.142 billion, or $15.43 per diluted share, for the first nine months ended September 30, 2021, compared to $2.328 billion, or $6.79 per diluted share, for the first nine months ended September 30, 2020. Results for the first nine months of 2021 included gains on sales of facilities of $1.057 billion, or $2.39 per diluted share, and losses on retirement of debt of $12 million, or $0.03 per diluted share. Results for the first nine months of 2020 included losses on sales of facilities of $6 million, or $0.03 per diluted share, and losses on retirement of debt of $295 million, or $0.66 per diluted share. Revenues for the first nine months of 2021 and 2020, respectively, include $33 million, or $0.07 per diluted share, and $55 million, or $0.12 per diluted share, related to the settlement of Medicare outlier calculations for prior periods. Results for the first nine months of 2020 also included $60 million, or $0.13 per diluted share, of employee retention payroll tax credits, established by the CARES Act. Our provision for income taxes for the first nine months of 2021 and 2020 included tax benefits of $96 million, or $0.29 per diluted share, and $59 million, or $0.17 per diluted share, respectively, related to employee equity award settlements. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 333.248 million shares for the nine months ended September 30, 2021 and 343.014 million shares for the nine months ended September 30, 2020. During the first nine months of 2021, we repurchased 29.343 million shares of our common stock.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Nine Months Ended September 30, 2021 and 2020 (continued)

Revenues increased 17.3% on a consolidated basis and 17.5% on a same facility basis for the nine months ended September 30, 2021, compared to the nine months ended September 30, 2020. The increase in consolidated revenues can be primarily attributed to the combined impact of an 8.2% increase in revenue per equivalent admission and an 8.4% increase in equivalent admissions. The increase in same facility revenues can be primarily attributed to the combined impact of a 7.9% increase in revenue per equivalent admission and an 8.8% increase in equivalent admissions.

Salaries and benefits, as a percentage of revenues, were 45.3% in the first nine months of 2021 and 47.1% in the first nine months of 2020. Salaries and benefits per equivalent admission increased 4.0% in the first nine months of 2021 compared to the first nine months of 2020. Same facility labor rate increases averaged 7.3% for the first nine months of 2021 compared to the first nine months of 2020 primarily due to an increased utilization of contract, overtime and other premium rate labor costs during the 2021 period to support our clinical staff and address the surges of COVID-19 cases during the first and third quarters of 2021.

Supplies, as a percentage of revenues, were 16.2% in the first nine months of 2021 and 16.1% in the first nine months of 2020. Supply costs per equivalent admission increased 8.6% in the first nine months of 2021 compared to the first nine months of 2020. Supply costs per equivalent admission increased 3.6% for medical devices, 14.8% for pharmacy supplies and 10.7% for general medical and surgical items in the first nine months of 2021 compared to the first nine months of 2020. The increase in pharmacy supplies is primarily related to certain

COVID-19

therapies used in the surges of

COVID-19

cases during the first and third quarters of 2021, and the increase in general medical and surgical items is primarily related to increased utilization of PPE.

Other operating expenses, as a percentage of revenues, were 17.0% in the first nine months of 2021 and 18.3% in the first nine months of 2020. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. Provisions for losses related to professional liability risks were $318 million and $305 million for the first nine months of 2021 and 2020, respectively. During the first nine months of 2021 and 2020, we recorded reductions of $87 million, or $0.20 per diluted share, and $112 million, or $0.25 per diluted share, respectively, to our provision for professional liability risks related to the receipt of updated actuarial information.

Equity in earnings of affiliates was $78 million and $48 million in the first nine months of 2021 and 2020, respectively.

Depreciation and amortization increased $66 million, from $2.059 billion in the first nine months of 2020 to $2.125 billion in the first nine months of 2021. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Interest expense was $1.168 billion in the first nine months of 2021 and $1.201 billion in the first nine months of 2020. Our average debt balance was $31.780 billion for the first nine months of 2021 compared to $32.223 billion for the first nine months of 2020. The average effective interest rate for our long-term debt declined to 4.9% for the nine months ended September 30, 2021 from 5.0% for the nine months ended September 30, 2020.

During the first nine months of 2021 and 2020, we recorded net gains of $1.057 billion and net losses on sales of facilities of $6 million, respectively. The gains on sales of facilities for the first nine months of 2021 are primarily related to the sale of four hospital facilities in Georgia and other health care entity investments.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operations (continued)

Nine Months Ended September 30, 2021 and 2020 (continued)

During June 2021, we issued $2.350 billion aggregate principal amount of senior secured notes comprised of $850 million aggregate principal amount of 2 3/8% notes due 2031 and $1.500 billion aggregate principal amount of 3 1/2% notes due 2051 (the “June 2021 Notes”). We also amended and restated our senior secured revolving credit facility and our senior secured asset-based revolving credit facility, including increasing availability under the asset-based revolving credit facility to $4.500 billion, extending the maturity date on both facilities to June 30, 2026 and entering into a new $1.500 billion term loan

A-7

facility and a new $500 million term

loan B-14

facility (the “Credit Agreement Transactions”). We used the net proceeds from the June 2021 Notes and the Credit Agreement Transactions to retire the $1.071 billion term

loan A-6

facility, the $1.455 billion term

loan B-12

facility and the $1.131 billion term

loan B-13

facility. The pretax loss on retirement of debt was $12 million. During February 2020, we issued $2.700 billion aggregate principal amount of 3.50% senior unsecured notes due 2030. During March 2020, we used the net proceeds for the redemption of all $1.000 billion outstanding aggregate principal amount of HCA Healthcare, Inc.’s 6.25% senior notes due 2021 and, together with available funds, for the redemption of all $2.000 billion outstanding aggregate principal amount of HCA Inc.’s 7.50% senior notes due 2022. The pretax loss on retirement of debt was $295 million.

The effective tax rates were 22.9% and 22.2% for the first nine months of 2021 and 2020, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the first nine months of 2021 and 2020 included tax benefits of $96 million and $59 million, respectively, related to employee equity award settlements. Excluding the effect of these adjustments, the effective tax rate for the first nine months of 2021 and 2020 would have been 24.4% and 24.2%, respectively.

Net income attributable to noncontrolling interests increased from $365 million for the first nine months of 2020 to $574 million for the first nine months of 2021. The increase in net income attributable to noncontrolling interests related primarily to the partnership operations of two of our Texas markets and our surgery center partnerships.

Liquidity and Capital Resources

Cash provided by operating activities declined $6.299 billion, from $12.815 billion for the first nine months of 2020 to $6.516 billion for the first nine months of 2021. The $12.815 billion of cash flows from operating activities in the first nine months of 2020 included $6.123 billion of government stimulus refund liability related to unapplied accelerated Medicare payments and PRFs established by the CARES Act (approximately $6 billion was returned or repaid early and reversed out of cash flow from operations in the fourth quarter of 2020). The decline in cash provided by operating activities also included the net impact of negative changes in working capital items of $2.350 billion, primarily related to an increase in accounts receivable, offset by an increase in net income, excluding losses and gains on sales of facilities and losses on retirement of debt, of $2.001 billion. The combination of interest payments and net income tax payments in the first nine months of 2021 and 2020 totaled $2.473 billion and $2.009 billion, respectively. Working capital totaled $3.624 billion at September 30, 2021 and $3.629 billion at December 31, 2020.

Cash used in investing activities was $929 million in the first nine months of 2021 compared to $2.483 billion in the first nine months of 2020. Acquisitions of hospitals and health care entities increased from $380 million in the first nine months of 2020 to $488 million in the first nine months of 2021. Excluding acquisitions, capital expenditures were $2.385 billion in the first nine months of 2021 and $2.087 billion in the first nine months of 2020. Planned capital expenditures are expected to approximate $3.7 billion in 2021. At

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

September 30, 2021, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $3.6 billion. We expect to finance capital expenditures with internally generated and borrowed funds. Sales of hospitals and health care entities increased $1.912 billion primarily related to the proceeds from our sales of five hospitals in Georgia (the sale of one hospital was effective October 1, 2021) and other health care entity investments.

Cash used in financing activities totaled $6.349 billion in the first nine months of 2021 compared to $4.361 billion in the first nine months of 2020. During the first nine months of 2021, net cash flows used in financing activities included a net increase of $1.050 billion in our indebtedness, payment of dividends of $476 million, repurchase of common stock of $6.143 billion and distributions to noncontrolling interests of $501 million. During the first nine months of 2020, net cash flows used in financing activities included a net decline of $3.183 billion in our indebtedness, payment of dividends of $153 million, repurchase of common stock of $441 million and distributions to noncontrolling interests of $393 million.

We are a highly leveraged company with significant debt service requirements. Our debt totaled $32.299 billion at September 30, 2021. Our interest expense was $1.168 billion for the first nine months of 2021 and $1.201 billion for the first nine months of 2020.

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($5.920 billion and $5.590 billion available as of September 30, 2021 and October 31, 2021, respectively) and anticipated access to public and private debt markets.

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $530 million and $504 million at September 30, 2021 and December 31, 2020, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $159 million and $188 million at September 30, 2021 and December 31, 2020, respectively. Our facilities are insured by a 100% owned insurance subsidiary for losses up to $75 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Additionally, the insurance subsidiary has entered into reinsurance contracts providing reimbursement for a certain portion of losses in excess of self-insured retentions. Net reserves for the self-insured professional liability risks retained were $1.795 billion and $1.736 billion at September 30, 2021 and December 31, 2020, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $476 million. We estimate that approximately $434 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

During June 2021, we issued $2.350 billion aggregate principal amount of senior secured notes comprised of $850 million aggregate principal amount of 2 3/8% notes due 2031 and $1.500 billion aggregate principal amount of 3 1/2% notes due 2051 (the “June 2021 Notes”). We also amended and restated our senior secured revolving credit facility and our senior secured asset-based revolving credit facility, including increasing availability under the asset-based revolving credit facility to $4.500 billion, extending the maturity date on both facilities to June 30, 2026 and entering into a new $1.500 billion term loan

A-7

facility and a new $500 million term loan

B-14

facility (the “Credit Agreement Transactions”). We used the net proceeds from the June 2021 Notes and the Credit Agreement Transactions to retire the $1.071 billion term loan

A-6

facility, the $1.455 billion term loan

B-12

facility and the $1.131 billion term loan

B-13

facility.

Management believes that cash flows from operations, amounts available under our senior secured credit facilities and our anticipated access to public and private debt markets will be sufficient to meet expected liquidity needs during the next 12 months.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information

HCA Inc., a direct wholly-owned subsidiary of HCA Healthcare, Inc., is the primary obligor under a substantial portion of our indebtedness, including our senior secured credit facilities, senior secured notes and senior unsecured notes. The senior secured notes and senior unsecured notes issued by HCA Inc. are fully and unconditionally guaranteed on an unsecured basis by HCA Healthcare, Inc. The senior secured credit facilities and senior secured notes are fully and unconditionally guaranteed on a senior secured basis 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 senior secured asset-based revolving credit facility). For a list of subsidiary guarantors, see Exhibit 22 to this quarterly report on Form

10-Q.

The subsidiary guarantees rank senior in right of payment to all subordinated indebtedness of each subsidiary guarantor, equally in right of payment with all senior indebtedness of the subsidiary guarantors and are structurally subordinated in right of payment to all indebtedness and other liabilities of any nonguarantor subsidiaries of the subsidiary guarantors (other than indebtedness and liabilities owed to one of the subsidiary guarantors). The subsidiary guarantees are secured by first-priority liens on the subsidiary guarantors’ assets, subject to certain exceptions, that secure our senior secured cash flow credit facility on a first-priority basis. The subsidiary guarantees are secured by second-priority liens on the subsidiary guarantors’ assets that secure our senior secured asset-based revolving credit facility on a first-priority basis and our senior secured cash flow credit facility on a second-priority basis.

The subsidiary guarantees may be automatically and unconditionally released and discharged upon certain customary events, including in the event such guarantee is released under our senior secured credit facilities. The indentures governing the senior secured notes include a “savings clause” intended to limit each subsidiary guarantor’s obligations as necessary to prevent the guarantee from constituting a fraudulent conveyance under applicable law, which could reduce a subsidiary guarantor’s liability on its guarantee to zero. For further information regarding the guarantees, refer to the applicable indentures that are filed as exhibits to our annual report on Form

10-K

for the year ended December 31, 2020.

Summarized financial information is presented on a combined basis and transactions between the combining entities have been eliminated. Financial information for nonguarantor entities has been excluded. The summarized operating results information for the nine months ended September 30, 2021 and year ended December 31, 2020 and the summarized balance sheet information at September 30, 2021 and December 31, 2020, for HCA Healthcare, Inc., HCA Inc. and the subsidiary guarantors (the Parent, Subsidiary Issuer and Subsidiary Guarantors) follow (dollars in millions):

Nine Months Ended September 30, 2021 and Year Ended December 31, 2020:

		Nine Months September 30, 2021				Year December 31, 2020
Revenues		$	26,140			$	31,040
Income before income taxes			4,578				4,016
Net income			3,546				3,172
Net income attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors			3,474				3,091

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information (continued)

At September 30, 2021 and December 31, 2020:
		September 30, 2021				December 31, 2020
Current assets		$	7,821			$	7,442
Property and equipment, net			15,285				14,939
Goodwill and other intangible assets			5,707				5,763
Total noncurrent assets			22,277				21,771
Total assets			30,098				29,213
Current liabilities			5,859				5,316
Long-term debt, net			31,597				30,444
Intercompany balances			3,229				2,090
Income taxes and other liabilities			1,841				1,004
Total noncurrent liabilities			37,179				34,035
Stockholders’ deficit attributable to Parent, Subsidiary Issuer and Subsidiary Guarantors			(13,155	)			(10,247	)
Noncontrolling interests			215				109

The first-priority liens securing the subsidiary guarantees discussed above include liens on (i) substantially all of the capital stock of substantially all wholly owned first-tier subsidiaries of HCA Inc. or of the subsidiary guarantors (but limited to 65% of the stock of any such wholly owned first-tier subsidiary that is a foreign subsidiary), subject to certain limited exceptions, and (ii) substantially all indebtedness owing to HCA Inc. or to the subsidiary guarantors, including any and all intercompany indebtedness owed by HCA Healthcare, Inc. or any subsidiary thereof to HCA Inc., or any subsidiary guarantor. For a list of affiliates whose securities are pledged as collateral for the senior secured notes, see Exhibit 22 to this quarterly report on Form

10-Q.

Under the first lien intercreditor agreement, the administrative agent for the lenders under the cash flow credit facility, subject to the occurrence of certain events, has the exclusive right to direct foreclosures and take other actions with respect to these liens, and the trustee for the senior secured notes has no right to take any such actions. In certain circumstances, including upon certain events of default under the senior secured credit facilities and the senior secured notes, the collateral agent in respect of the cash flow credit facility and the senior secured notes could proceed against the collateral granted to it to secure such indebtedness, including the aforementioned pledged capital stock and pledged indebtedness, and require such collateral to be delivered to the collateral agent to the extent not already in its possession for purposes of perfecting the lien on such assets. For further information regarding the collateral, including events or circumstances that may require delivery of the collateral, refer to the applicable indentures, the first lien intercreditor agreement, the cash flow credit agreement and the pledge agreement that are filed as exhibits to our annual report on Form

10-K

for the year ended December 31, 2020.

There is no trading market for any of HCA Healthcare, Inc.’s affiliates whose securities are pledged as collateral for the senior secured notes.

Rule

13-02

of Regulation

S-X

requires the presentation of summarized financial information of the combined affiliates whose securities are pledged as collateral for the senior secured notes unless such information is not material. The rule provides that such information is not material if the assets, liabilities and results of operations of the combined affiliates whose securities are pledged as collateral are not materially different than the corresponding amounts presented in the consolidated financial statements of the Registrant.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Summarized Financial Information (continued)

Healthtrust, Inc. — The Hospital Company (“Healthtrust”) is the first-tier subsidiary of HCA Inc., and the common stock of Healthtrust is pledged as collateral for the senior secured notes. Due to the corporate structure relationship of HCA Healthcare, Inc. and Healthtrust, all of HCA Healthcare, Inc.’s operating subsidiaries, including all other affiliates whose securities are pledged as collateral for the senior secured notes, are also subsidiaries of Healthtrust. The corporate structure relationship, combined with the application of push-down accounting in Healthtrust’s consolidated financial statements related to HCA Healthcare Inc.’s debt and financial instruments, mean that the assets, liabilities and results of operations of Healthtrust (and, therefore, of the combined affiliates whose securities are pledged as collateral for the senior secured notes) are not materially different than the corresponding amounts presented in the financial statements of HCA Healthcare, Inc. As a result, summarized financial information of affiliates whose securities are pledged as collateral for the senior secured notes is not required to be presented under Rule

13-02.

Market Risk

We are exposed to market risk related to changes in market values of securities. The investment securities held by our insurance subsidiaries were recorded at $530 million at September 30, 2021. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At September 30, 2021, we had a net unrealized gain of $20 million on the insurance subsidiaries’ investments.

We are exposed to market risk related to market illiquidity. Investment securities held by our insurance subsidiaries could be impaired by the inability to access the capital markets. Should the insurance subsidiaries require significant amounts of cash in excess of normal cash requirements to pay claims and other expenses on short notice, we may have difficulty selling these investments in a timely manner or be forced to sell them at a price less than what we might otherwise have been able to in a normal market environment. We may be required to recognize credit-related impairments on our investment securities in future periods should issuers default on interest payments or should the fair market valuations of the securities deteriorate due to ratings downgrades or other issue-specific factors.

We are also exposed to market risk related to changes in interest rates, and we periodically enter into interest rate swap agreements to manage our exposure to these fluctuations. Our interest rate swap agreements involve the exchange of fixed and variable rate interest payments between two parties, based on common notional principal amounts and maturity dates. The notional amounts of the swap agreements represent balances 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. The interest payments under these agreements are settled on a net basis. These derivatives have been recognized in the financial statements at their respective fair values. Changes in the fair value of these derivatives, which are designated as cash flow hedges, are included in other comprehensive income. At September 30, 2021, our variable rate debt was fully covered by our interest rate swap agreements.

Our variable debt is comprised primarily of amounts outstanding under the senior secured credit facilities. Borrowings under the senior secured credit facilities bear interest at a rate equal to an applicable margin plus, 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. The applicable margin for borrowings under the senior secured credit facilities may fluctuate according to a leverage ratio. The average effective interest rate for our long-term debt was 4.9% and 5.0% for the nine months ended September 30, 2021 and 2020, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources (continued)

Market Risk (continued)

The estimated fair value of our total long-term debt was $36.567 billion at September 30, 2021. The estimates of fair value are based upon the quoted market prices for the same or similar issues of long-term debt with the same maturities. To mitigate the impact of fluctuations in interest rates, we generally target a portion of our debt portfolio to be maintained at fixed rates.

We are exposed to currency translation risk related to our foreign operations. We currently do not consider the market risk related to foreign currency translation to be material to our consolidated financial statements or our liquidity.

Tax Examinations

The Internal Revenue Service was conducting an examination of the Company’s 2016, 2017 and 2018 federal income tax returns at September 30, 2021. We are also subject to examination by state and foreign taxing authorities. Management believes HCA Healthcare, Inc. and its predecessors, subsidiaries and affiliates properly reported taxable income and paid taxes in accordance with applicable laws and agreements established with IRS, state and foreign taxing authorities and final resolution of any disputes will not have a material, adverse effect on our results of operations or financial position. However, if payments due upon final resolution of any issues exceed our recorded estimates, such resolutions could have a material, adverse effect on our results of operations or financial position.

Operating Data

		2021				2020
Number of hospitals in operation at:
March 31			186				186
June 30			187				186
September 30			183				187
December 31							185
Number of freestanding outpatient surgical centers in operation at:
March 31			121				123
June 30			122				122
September 30			123				121
December 31							121
Licensed hospital beds at(a):
March 31			49,561				49,357
June 30			49,693				49,403
September 30			48,950				49,473
December 31							49,265
Weighted average beds in service(b):
Quarter:
First			42,363				42,177
Second			42,464				42,309
Third			42,088				42,426
Fourth							42,072
Year							42,246

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

		2021				2020
Average daily census(c):
Quarter:
First			29,678				28,822
Second			28,901				24,844
Third			31,144				28,186
Fourth							29,065
Year							27,734
Admissions(d):
Quarter:
First			506,380				528,244
Second			532,041				452,992
Third			536,848				506,756
Fourth							521,917
Year							2,009,909
Equivalent admissions(e):
Quarter:
First			832,489				889,035
Second			916,212				723,136
Third			905,627				835,576
Fourth							864,583
Year							3,312,330
Average length of stay (days)(f):
Quarter:
First			5.3				5.0
Second			4.9				5.0
Third			5.3				5.1
Fourth							5.1
Year							5.1
Emergency room visits(g):
Quarter:
First			1,841,778				2,264,707
Second			2,128,428				1,516,116
Third			2,338,180				1,813,661
Fourth							1,855,823
Year							7,450,307
Outpatient surgeries(h):
Quarter:
First			231,228				226,319
Second			262,107				170,911
Third			249,192				232,493
Fourth							252,760
Year							882,483

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Operating Data (continued)

		2021				2020
Inpatient surgeries(i):
Quarter:
First			127,590				135,145
Second			136,460				118,591
Third			126,436				133,492
Fourth							135,157
Year							522,385
Days revenues in accounts receivable(j):
Quarter:
First			48				49
Second			48				50
Third			51				44
Fourth							45
Outpatient revenues as a % of patient revenues(k):
Quarter:
First			36	%			37	%
Second			38	%			32	%
Third			34	%			36	%
Fourth							35	%
Year							35	%

(a)	Licensed beds are those beds for which a facility has been granted approval to operate from the applicable state licensing agency.

(b)	Represents the average number of beds in service, weighted based on periods owned.

(c)	Represents the average number of patients in our hospital beds each day.

(d)	Represents the total number of patients admitted to our hospitals and is used by management and certain investors as a general measure of inpatient volume.

(e)

Equivalent admissions are used by management and certain investors as a general measure of combined inpatient and outpatient volume. Equivalent admissions are computed by multiplying admissions (inpatient volume) by the sum of gross inpatient revenues and gross outpatient revenues and then dividing the resulting amount by gross inpatient revenues. The equivalent admissions computation “equates” outpatient revenues to the volume measure (admissions) used to measure inpatient volume resulting in a general measure of combined inpatient and outpatient volume.

(f)	Represents the average number of days admitted patients stay in our hospitals.

(g)	Represents the number of patients treated in our emergency rooms.

(h)	Represents the number of surgeries performed on patients who were not admitted to our hospitals. Pain management and endoscopy procedures are not included in outpatient surgeries.

(i)	Represents the number of surgeries performed on patients who have been admitted to our hospitals. Pain management and endoscopy procedures are not included in inpatient surgeries.

(j)	Revenues per day is calculated by dividing revenues for the quarter by the days in the quarter. Days revenues in accounts receivable is then calculated as accounts receivable at the end of the quarter divided by revenues per day.

(k)	Represents the percentage of patient revenues related to patients who are not admitted to our hospitals.