HCA Healthcare, Inc. — 2022 Form 10-K
Business context and reporting period. This is HCA Healthcare’s annual report for the fiscal year ended December 31, 2022, not a standalone fourth-quarter filing. HCA operates hospitals and outpatient facilities in 20 U.S. states and England; at year-end it operated 182 hospitals, 126 freestanding surgery centers and 21 endoscopy centers.
Financial performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $60.233 billion | $58.752 billion |
| Income before income taxes | $8.580 billion | $9.833 billion |
| Net income attributable to HCA | $5.643 billion | $6.956 billion |
| Diluted EPS | $19.15 | $21.16 |
| Adjusted segment EBITDA | $12.067 billion | $12.644 billion |
| Cash from operating activities | $8.522 billion | $8.959 billion |
| Capital expenditures | $4.395 billion | $3.577 billion |
| Total debt | $38.084 billion | $34.579 billion |
- Revenue rose 2.5%; same-facility revenue increased 3.2%. Consolidated equivalent admissions rose 2.1%, while revenue per equivalent admission increased 0.4%.
- Income attributable to HCA fell 18.9%. Results included facility-sale gains of $1.301 billion in 2022 versus $1.620 billion in 2021, and debt-retirement losses of $78 million versus $12 million. These gains materially affected reported earnings.
- Adjusted segment EBITDA declined about 4.6%; its ratio to revenue was approximately 20.0%, versus 21.5% in 2021. Salaries and benefits rose to 46.0% of revenue from 45.6%; other operating expenses rose to 18.5% from 17.0%.
- Operating cash flow decreased $437 million. The company cited a $649 million unfavorable working-capital change, principally lower accounts payable and accrued expenses, partly offset by $847 million less in cash interest and income-tax payments.
- Cash and cash equivalents were $908 million; working capital was $3.741 billion. HCA reported $3.535 billion of availability under its senior secured credit facilities at year-end. Its balance sheet showed a stockholders’ deficit of $73 million, compared with equity of $1.489 billion a year earlier.
- Debt increased by $3.505 billion year over year. Interest expense rose to $1.741 billion from $1.566 billion. About $4.780 billion of long-term debt carried variable rates; management estimated a 1 percentage-point rate increase would reduce annual pretax earnings by about $48 million.
Material changes and operating trends
- Consolidated admissions declined 0.7%, despite a 2.1% increase in equivalent admissions. Emergency-room visits rose 5.9%, outpatient surgeries increased 1.5%, and inpatient surgeries were approximately flat.
- Outpatient revenue reached 38% of patient revenue, up from 37%. Domestic managed-care and other insurer revenue represented 48.3% of total revenue, down from 51.6%; the filing reports Medicare and Medicaid programs together contributed 43.6%.
- Days revenue in accounts receivable increased to 53 from 49. Recorded implicit price concessions were $6.780 billion at year-end; estimated cost of uncompensated care rose to $3.491 billion from $3.350 billion.
- HCA repurchased $7.000 billion of stock and paid $653 million in dividends during 2022. It issued $6.0 billion of senior notes and redeemed $2.5 billion of 2023 notes.
Outlook, commentary, risks and unusual items
- Management expected 2023 capital expenditures of approximately $4.3 billion and said operating cash flow, credit-facility availability and anticipated debt-market access should meet liquidity needs for the foreseeable future. The filing does not provide formal revenue or earnings guidance.
- Management expects inflation to continue affecting labor and operating costs. Staffing shortages, use of contract and premium-rate labor, and difficulty recruiting and retaining nurses and other clinicians may constrain capacity and margins.
- Hurricane Ian resulted in an estimated $85 million of additional expenses and lost revenue, before insurance recoveries. The company also recorded $244 million of revenue and $90 million of other operating expenses tied to Texas directed-payment-program assessments for September–December 2021.
- Key exposures include substantial leverage and debt covenants; reimbursement, Medicaid supplemental-payment and regulatory changes; payer mix and patient collections; competition and shifts to outpatient care; and cybersecurity, litigation and professional-liability claims. Florida and Texas accounted for 50% of 2022 revenue, and 91 of 182 hospitals were located in those states.
- A Texas qui tam lawsuit concerning the Harris County Medicaid waiver program remained under active defense; the filing says the company cannot predict its effect. Professional-liability reserves were $2.043 billion, with estimated net reserves ranging from $1.802 billion to $2.159 billion.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting. Management reported effective disclosure controls and financial-reporting controls as of December 31, 2022.
Important facts for investors to verify
- How much of reported earnings and cash generation is sustainable without facility-sale gains, and how 2023 operating margins develop as labor and other costs evolve.
- Whether higher receivables days and patient responsibility amounts affect collections, working capital and operating cash flow.
- Debt maturities, interest-rate exposure, covenant headroom and credit availability, including subsequent changes to facilities after year-end.
- The duration and financial effect of Texas supplemental-payment programs, Medicaid redeterminations and other reimbursement changes.
- Potential outcomes and reserve adequacy for the Texas qui tam matter, professional-liability claims and other legal or regulatory contingencies.
- Whether the planned capital spending, dividends and buybacks remain consistent with debt reduction and liquidity priorities.