cibc/nov 2004. 2004hca mark kimbrough vp, investor relations

CIBC/Nov 2004.CIBC/Nov 2004.20042004HCAHCA

Mark KimbroughMark KimbroughVP, Investor Relations

CIBC/Nov 2004CIBC/Nov 200420042004HCAHCA 22

This press release contains forward-looking statements based on current management expectations. Those forward-looking statements include all statements regarding our estimated results of operations for future periods and all statements other than those made solely with respect to historical fact. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These factors include, but are not limited to (i) the number of shares tendered and the price at which the Company determines to purchase shares in the tender offer, (ii) availability and cost of adequate financing on terms acceptable to the Company, including the ability of the Company to successfully refinance its existing credit facility and to borrow approximately $2.5 billion pursuant to the terms and conditions of the commitment letters and on terms satisfactory to us, (iii) increases in the amount and risk of collectability of uninsured accounts and deductibles and co-pay amounts for insured accounts, (iv) the ability to achieve operating and financial targets and achieve expected levels of patient volumes and control the costs of providing services, (v) the highly competitive nature of the health care business, (vi) the continuing impact of the hurricanes on the Company’s Florida facilities and the ability to obtain recoveries under the Company’s insurance policies, (vii) the efforts of insurers, health care providers and others to contain health care costs, (viii) possible changes in the Medicare and Medicaid programs that may impact reimbursements to health care providers and insurers, (ix) the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical support personnel, (x) potential liabilities and other claims that may be asserted against the Company, (xi) fluctuations in the market value of the Company’s common stock, (xii) the impact of the Company’s charity care and self-pay discounting policy changes, (xiii) changes in accounting practices, (xiv) changes in general economic conditions, (xv) future divestitures which may result in charges, (xvi) changes in revenue mix and the ability to enter into and renew managed care provider arrangements on acceptable terms, (xvii) the availability and terms of capital to fund the expansion of the Company’s business, (xviii) changes in business strategy or development plans, (xix) delays in receiving payments for services provided, (xx) the possible enactment of Federal or state health care reform, (xxi) the outcome of pending and any future tax audits and litigation associated with the Company’s tax positions, (xxii) the outcome of the Company’s continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures and the Company’s corporate integrity agreement with the government, (xxiii) changes in Federal, state or local regulations affecting the health care industry, (xxiv) the ability to successfully integrate the operations of Health Midwest, (xxv) the ability to develop and implement the payroll and human resources information system within the expected time and cost projections and, upon implementation, to realize the expected benefits and efficiencies, and (xxvi) other risk factors detailed in the Company’s filings with the SEC. Many of the factors that will determine the Company’s future results are beyond the ability of the Company to control or predict. In light of the significant uncertainties inherent in the forward-looking statements contained herein, readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. All references to “Company” and “HCA” as used throughout this document refer to HCA Inc. and its affiliates.


HCA is located in 16 of 20 Fastest HCA is located in 16 of 20 Fastest Growing Large US CitiesGrowing Large US Cities

Switzerland

U.K.

%%

%

%%%

Compared to the National Average of 4.5%

Las Vegas+22%

Southern California

+9%

Denver+9%

Dade+8%

Nashville+8%

Panhandle+10%

Tampa Bay+8%

Dallas/Ft. Worth+12%

Austin+18%

Richmond+8%

Palm Beach+11%

Houston+10%

Kansas City+5%

Percent Growth in Market Population 2000-2005

Generally 25-40% Market Share40% of facilities in Texas & Florida


HCA Capital ExpendituresHCA Capital Expenditures

ER & Outpatient Services19%/$720

Replacement Facilities3%/$98M New & Expanded

Services18%/$740M

New Facilities10%/$395MBeds

14%/$550M

Surgery/Spec'l Units

22%/$870M

Land & Improvements

14%/$565M

1,565 New Beds

54 Facilities with Surgeryand/or ICU/CCU

expansionsFour NewFacilities

378 Beds

Open Heart, ImagingCardiology, Oncology, etc.

37 ERExpansions

37 ERExpansions

Distribution of Capital Dollars2002 and Beyond

New Denver Facility

Expansions

$0.0

$0.5

$1.0

$1.5

$2.0

2000 2001 2002 2003 2004E

Billions2000

$1.22001

$1.42002

$1.72003

$1.82004E

$1.6

Routine

Patient Safety & InfrastructureNew Facilities

Expansions


Capital Regional Medical CenterCapital Regional Medical CenterTallahassee, FL ($100M) 200 beds

Opened: August 2003

HCA


Stonecrest Medical CenterStonecrest Medical CenterSmyrna, TN ($96M) 75 beds

Opened: December 2004

HCA


Source: AHA Annual Survey, 1980 - 2002

27

28

29

30

31

32

33

34

35

36

37

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02100

150

200

250

300

350

400

450

500

550

600

Outpatient Visits

Inpatient Admissions

Adm

issi

ons

(mill

ions

)

Out

patie

nt V

isits

(m

illio

ns)

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


Socio-Demographics—Age WaveDriving Healthcare Utilization

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

95

100

105

110

115

120

125

Acu

te C

are

Util

izat

ion

Inde

x(2

003=

100)

Baby Boomer Impact Accelerates

1.58% CAGR 2003-2012

121

119

117

115113

112110

108106

105103

102100

9897

96

1.7%1.6%

1.6%1.6%

1.5%1.6%

1.6%1.6%

1.6%1.6%

1.6%1.5%

1.6%1.5%

1.4%

1.56%3-Year CAGR

1.59%3-Year CAGR

1.58%3-Year CAGR

1.62%3-Year CAGR


-1.0%

1.0%

3.0%

5.0%

7.0%

Admissions Rolling 12 mo. Avg

HCA Admission Trends 2001 to 3Q 2004HCA Admission Trends 2001 to 3Q 2004Same FacilitySame Facility

6.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

HCA MarketCompetitors

15.4%

*

HCA Growing Medicare Market Share

Growth in Medicare Admissions 1998-2001

*2Q includes same-market admissions


-10.0%

0.0%

10.0%

-1% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

Admissions GrowthAdmissions GrowthSept YTD 2004Sept YTD 2004

Top 15 Markets+4.9%

+24,605 Admission

s

Top 15/Bottom 15 MarketsTop 15/Bottom 15 MarketsAdmissions GrowthAdmissions Growth

Bubble Size determined by

total admissions

% G

row

t h

% of Total Admissions

Bottom 15 Markets

-3.3%-9,174

Admissions

Same Market 1: Denver is a non-consolidating JV Market

Average% Change

+1.3%Same Facility

TampaTampaBayBay+3.6%+3.6%

Houston-2.9%

D/FW+1.0%

Nashville+10.5%

LasVegas+6.1%

Brownsville/Valley+12.0%

Austin +4.9%

Jacksonville+6.6%

Panhandle+4.4% Dade

+3.4%Palm Beach+3.0%

Northwest Georgia+7.6%

Atlanta+8.4%

Chattanooga+6.8%

Lafayette+6.9%

Ft.Myers+3.6%

So.California

-6.8%

Northwest-3.5%

Delta Una. –9.4%

S. Carolina-2.0%

W. VA-2.7%

Treasure Coast-2.4%

Cent. LA –1.8%

Indiana-5.6%

Oklahoma-1.0%

Middle GA-1.2%

Broward-0.4%

Switzerland-2.6%

Orlando-0.7%

NewOrleans

-0.2%


4.4%

3.3%

4.6%

1.8%

4.0%

2.5%

0.3%

-0.7% -0.8%

2.4%

1.4%1.9%

2.6%2.3%

0.1%

-2%

0%

2%

4%

6%

8%

10%

1Q 012Q 01

3Q 014Q 01

1Q 022Q 02

3Q 024Q 02

1Q 032Q 03

3Q 034Q 03

1Q 042Q 04

3Q 04

Inpatient surgeries Rolling 12 mo. Avg.

Inpatient Surgery Trends ImprovingInpatient Surgery Trends Improving2001 to 32001 to 3rdrd Quarter 2004 - Same Facility Quarter 2004 - Same Facility

1: Includes Kansas City facilities.

1

-3.3%

2.3%8.8%

0.6%

-2.4%

5.8%

-0.8%

5.5%1.0%

-15%

0%

15%

Jan Feb Mar Apr May Jun Jul Aug Sep

Inpatient Surgeries (2004)


9.4%

37.2%

OutpatientOutpatientERER

Enhanced Outpatient Services FocusEnhanced Outpatient Services Focus

12.5%Hospital BasedHospital Based

FreestandingFreestanding

OutpatientOutpatientDiagnostic Diagnostic ServicesServices

ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology

Hospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeries15.3%

ASC BasedASC Based

70%

30%

2003% of HCA

Net Revenue

As a % of Outpatient Surgeries

O/P Comprised of Three Business LinesO/P Comprised of Three Business Lines


2004 Managed Care Contracting2004 Managed Care Contracting

2005 Contract

Pricing Timeline*

6,844 Facility Level Active Contracts

*Anticipated Completion Dates

Pre-2004 1Q04 2Q04 3Q04 4Q04

100% of 2004 and 75% of 2005 contracts 100% of 2004 and 75% of 2005 contracts completed.completed.

2005Cumulative

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

Net Revenue per Adjusted AdmissionManaged Care & Other Discounted

15.0%

10.5%11.4%

13.0% 13.3%

9.6%7.0% 7.3%

11.1%9.2%

0%

16%

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

11.1%9.9%

3Q 04

6.6%

9.0%


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

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

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

Dol

lars

in M

illio

ns

$0

$50$100

$150$200

$250$300

$350

2001 2002 2003 2004

$2845.1%

$2183.7%

$902.0%

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

$240 4.7%

9 months


LaborLabor CostCost

* Eastern and Western Consolidated Operations

$48

$34$41

$28$35

$24$32

$22

$34

$23

$34

$22

$32

$20

$0

$25

$50

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

15%vs.

Q103

25%vs.

Q10333%vs.

Q103

29%vs.

Q10329%vs.

Q103

7.0%

4.4%4.9%4.7%5.2%5.4%5.0%5.4%7.0%

5.0%4.9%4.5%4.8%4.8%6.4%

0%

5%

10% 20012001

+6.5% +5.1% +4.7% +4.6%+4.6%Sept YTDSept YTD

Wage Rate Same Facility - % Change from PY

20022002 20032003 20042004

1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

Total Operations* Nursing

1: Includes Kansas City facilities.

1

3Q04

Contract Labor Reduction$/Adj. Patient Day

33%vs.

Q103


Bad Debt Impact on Operating Expenses Bad Debt Impact on Operating Expenses per Adjusted Admissionper Adjusted Admission

Op e

rati n

g Ex

p ens

es/ A

A –

Per

cen t

Cha

n ge

f rom

Pr io

r Yea

r

Operating Expense/AA Operating Expense/AA (Adj. For Bad Debt)

Same Facility – Percent Change from Prior Year

4.7%

8.1%5.4%

5.6% 5.5%5.5%5.8%

5.3%

3.8%

6.0%6.2%7.5%

9.3%

7.4%7.8%

5.5%

7.6%6.6%

10.4%

7.6%

8.9%

10.8%10.2%

8.0%

6.0%7.0%

8.8%8.5%8.0%

5.2%

0%

5%

10%

15%

1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04

20012001 20022002 20032003 20042004

7.0% 9.4%7.4%

6.4%6.7%6.5% 6.0%

8.5%Sept. YTDSept. YTD

Sept. YTDSept. YTD

7.0%1

5.1%1

1: Adjusted for $26M in net hurricane operating expense impact during the 3rd quarter


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

22.222.2%%

23.523.5%%

21.221.2%%

22.222.2%%

17.017.0%%

19.219.2%%

29.729.7%%

23.523.5%%

15.115.1%% 15.415.4%%

19.719.7%%16.716.7%%

20.320.3%%15.415.4%%

19.319.3%%15.915.9%%

16.416.4%%

NationalAverage:15.2% 1

18.118.1%%

>20% Uninsured15-20% Uninsured<15% Uninsured

25.625.6%%

14.6%

22.822.8%%

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

HCAHCAWeightedAverage:22.6% 2

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

13.1%13.1%


Bad Debts & CharityQuarterly Trending

Bad DebtsBad Debts

$368

$123$371$143

$411

$156

$431

$156

$428

$182

$577

$209

$566

$229

$636

$201

$694

$218

$661

$232

$688

$228

$0

$1,000

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

$610$786 $795 $837$1B

$0

$587$567$514$491

Charity Bad Debts

$912 $893

7.6%5.2%

8.3%10.6% 11.7%

7.6% 8.6% 8.1%10.3% 11.4% 11.3% 11.9%

5.1%5.0%5.1%5.1%5.0%4.0%4.2%4.2%3.9%3.7%

0%

14%

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

BD % of Net Revenue BD & Charity % of Gross RevenueBD % of Net Revenue BD & Charity % of Gross Revenue

Bad Debts & CharityBad Debts & Charity $916


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

4

1618

14

25

103

9

0

5

10

15

20

25

30

1997 1998 1999 2000 2001 2002 2003 2004

HCA Large Claims DecliningHCA Large Claims Declining


HCA is Investing Significantly in ProgramsHCA is Investing Significantly in Programs for Patient Safety and Improved Patient Outcomesfor Patient Safety and Improved Patient Outcomes

E MAR: Medication Error Prevention

E POM: Physician Order Entry

100% Participation in CMS Quality Reporting Initiative Member of NQF and

Leapfrog Cardiovascular, OB and

Emergency Department Initiatives


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

49 49 50 51 5148 49 51 50 49 47

40

55Days in Accounts ReceivableDays in Accounts Receivable

101.8% 103.4%103.6%

105.9%105.1%103.6%

100.8%103.5% 102.8%98.0%

100.5%96%

110%

Cash CollectionsCash Collections% Adjusted Net Revenue% Adjusted Net Revenue


Strong Cash Flow Trends Provide Strong Cash Flow Trends Provide OpportunitiesOpportunities

$1,301$1,584

$2,046

$2,786 $2,822

$0

$3,500

1999 2000 2001 2002 2003

Net Cash Provided by Operating ActivitiesDollars in Millions

Excluding settlements with government agencies and investigation related costs.

New DividendNew DividendPolicyPolicy$250mm annually$250mm annually

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

Capital ReinvestmentCapital Reinvestment$1.6B in 2004$1.6B in 2004

Balance SheetBalance Sheet53% @ 9/30/0453% @ 9/30/04Debt-to-debt and Debt-to-debt and total equity ratiototal equity ratio


October 13, 2004October 13, 2004

HCA announces $2.5 billion share repurchase in the form of a modified “Dutch Auction” tender.

Offer to purchase up to 61 million shares at a price between $35 to $41 per share.


Employee Satisfaction at Record LevelsEmployee Satisfaction at Record Levels

26.7%25.9%

22.8%

20.1%

18.8% 18.3%

17.0% 16.8%

3.5%

3.6%

3.7%

3.8%

15%

20%

25%

30%

2000 2001 2002 20033.3%

3.4%

3.5%

3.6%

3.7%

3.8%

3.9%

Employee Satisfaction(Gallup Score)

Employee Turnover

Nurse Turnover

Tur n

ove r

Rat

eSatisfaction Score


A prudent financial strategy that provides for a strong A prudent financial strategy that provides for a strong balance sheet and return of cash to shareholders through balance sheet and return of cash to shareholders through

share repurchase and/or dividendsshare repurchase and/or dividends

Excellent Investment OpportunitiesExcellent Investment Opportunities

Strong Cash FlowsStrong Cash Flows

Excellent Long-Term Earnings Growth OutlookExcellent Long-Term Earnings Growth Outlook

Great AssetsGreat Assets

In Summary We Have….In Summary We Have….

cibc/nov 2004. 2004hca mark kimbrough vp, investor relations

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