milton johnson svp and controller
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Milton Johnson SVP and Controller. Mark Kimbrough VP, Investor Relations. HCA. 2004. Goldman Sachs. - PowerPoint PPT PresentationTRANSCRIPT
Milton JohnsonMilton JohnsonSVP and ControllerSVP and Controller
Goldman SachsGoldman Sachs20042004HCAHCA
Mark KimbroughMark KimbroughVP, Investor RelationsVP, Investor Relations
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 in 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) increases in the amount and risk of collectability of uninsured accounts and deductibles and co-pay amounts for insured accounts, (ii) the ability to achieve operating and financial targets and achieve expected levels of patient volumes and control the costs of providing services, (iii) the highly competitive nature of the health care business, (iv) the efforts of insurers, health care providers and others to contain health care costs, (v) possible changes in the Medicare and Medicaid programs that may impact reimbursements to health care providers and insurers, (vi) the ability to attract and retain qualified management and personnel, including affiliated physicians, nurses and medical support personnel, (vii) potential liabilities and other claims that may be asserted against the Company, (viii) fluctuations in the market value of the Company’s common stock, (ix) the impact of the Company’s charity care and self-pay discounting policy changes, (x) changes in accounting practices, (xi) changes in general economic conditions, (xii) future divestitures which may result in charges, (xiii) changes in revenue mix and the ability to enter into and renew managed care provider arrangements on acceptable terms, (xiv) the availability and terms of capital to fund the expansion of the Company’s business, (xv) changes in business strategy or development plans, (xvi) delays in receiving payments for services provided, (xvii) the possible enactment of Federal or state health care reform, (xviii) the outcome of pending and any future tax audits and litigation associated with the Company’s tax positions, (xix) 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, (xx) changes in Federal, state or local regulations affecting the health care industry, (xxi) the ability to successfully integrate the operations of Health Midwest, (xxii) 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 (xxiii) 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.
Goldman SachsGoldman Sachs20042004HCAHCA 22
Goldman SachsGoldman Sachs20042004HCAHCA 33
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%
Compared to the National Average of 4.5%
Las Vegas+22%
Las Vegas+22%
Southern California
+9%
Southern California
+9%
Denver+9%
Denver+9%
Dade+8%
Dade+8%
Nashville+8%
Nashville+8%
Panhandle+10%
Panhandle+10%
Tampa Bay+8%
Tampa Bay+8%
Dallas/Ft. Worth+12%
Dallas/Ft. Worth+12%
Austin+18%
Austin+18%
Richmond+8%
Richmond+8%
Palm Beach+11%
Palm Beach+11%
Houston+10%
Houston+10%
Kansas City+5%
Kansas City+5%
Percent Growth in Market Population 2000-2005
Percent Growth in Market Population 2000-2005
Generally 25-40% Market Share40% of facilities in Texas & Florida
Generally 25-40% Market Share40% of facilities in Texas & Florida
Goldman SachsGoldman Sachs20042004HCAHCA 44
Health Care Market Outlook StrongHealth Care Market Outlook StrongU
.S. H
ealt
hca
re E
xpen
dit
ure
s($
Bill
ion
s)
National Health Care Spending 1990 – 2010National Health Care Spending 1990 – 2010
National Health Care Expenditures as a Share of Total GDP
12.0%13.4%
13.3% 14.8% 15.4% 15.9% 16.4% 17.1%
Source: U.S. Centers for Medicare and Medicaid Services—National Health Expenditure Projections, 2003
Will the U.S. economy shift 2.3% of GDP to health care services over the next seven years?Will the U.S. economy shift 2.3% of GDP to health care services over the next seven years?
Goldman SachsGoldman Sachs20042004HCAHCA 55
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 02
100
150
200
250
300
350
400
450
500
550
600
Outpatient Visits
Inpatient Admissions
Ad
mis
sio
ns
(mil
lio
ns)
Ou
tpat
ien
t V
isit
s (m
illi
on
s)
Inpatient Admissions and Outpatient Visits Inpatient Admissions and Outpatient Visits 1980 - 20021980 - 2002
Goldman SachsGoldman Sachs20042004HCAHCA 66
-1.0%
1.0%
3.0%
5.0%
7.0%
1Q 00 2Q 00 3Q 00 4Q 00 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
Admissions Rolling 12 mo. Avg
HCA Admission Trends 2001 to 1Q 2004HCA Admission Trends 2001 to 1Q 2004Same FacilitySame Facility
6.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
HCAMarket
Competitors
15.4%
HCA Growing Medicare Market Share
Growth in Medicare Admissions 1998-2001
HCA Growing Medicare Market Share
Growth in Medicare Admissions 1998-2001
Goldman SachsGoldman Sachs20042004HCAHCA 77
Admissions growth rates vary by market Admissions growth rates vary by market A
dm
issi
on
s C
han
ge
Admissions % Change
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
-15% -10% -5% 0% 5% 10% 15%
Total Admissions Determine Bubble
Size
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Top 15 Top 15 Markets in Markets in AdmissionAdmissions Growths Growth+11,860/+11,860/
+5.9% vs. +5.9% vs. PYPY
Bottom 15 Bottom 15 Markets in Markets in AdmissionAdmissions Growths Growth
-2,773/-2,773/-2.6% vs. -2.6% vs.
PYPY
Bottom 15 Bottom 15 Markets in Markets in AdmissionAdmissions Growths Growth
-2,773/-2,773/-2.6% vs. -2.6% vs.
PYPY
Average Chg.+2.5% 1
Volume Variance by Market – 1st Quarter – Same Market
Houston-2.6%
So. Cal-5.6%
Indiana-12.3%
Far West Una.-3.2%
Treasure Coast-2.4%
Switzerland-6.4%
Las Vegas-0.8%
Dallas/Dallas/Ft. WorthFt. Worth
+5.6%+5.6%
Tampa Tampa BayBay
+3.1%
Austin +6.1%
El Paso+9.7%
Ft. Myers+5.9%
San Antonio
+3.1%
No. VA-3.9%
N. Cent. Fla.+5.2%
Jacksonville+4.5%
San Jose+3.9%
Panhandle+2.7%
N. Monroe-11.0%
Mid America-5.2%
Columbus+1.6%
S.Carolina0.1%
Rio Grande+12.8%
NW Ga.+12.9%
Mid. GA+0.3%
Cent. La.-1.4%Corpus Christi
-1.7%
Nashville+14.9%
Denver 2+6.1%
Richmond+4.9%
1: Same Facility2: Denver is a non-
consolidating JV Market
Goldman SachsGoldman Sachs20042004HCAHCA 88
HCA Capital ExpendituresHCA Capital Expenditures
ER & Outpatient Services19%/$720
Replacement Facilities3%/$98M
New & Expanded Services
18%/$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
expansions
Four NewFacilities
378 Beds
Open Heart, ImagingCardiology, Oncology, etc.
37 ERExpansions
37 ERExpansions
Distribution of Capital Dollars2002 and Beyond
Distribution of Capital Dollars2002 and Beyond
New Denver FacilityNew 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
$1.8
Routine
Patient Safety & Infrastructure
New Facilities
Expansions
Goldman SachsGoldman Sachs20042004HCAHCA 99
The Genesis of the Bad Debt/Charity The 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
NationalAverage:15.2% 1
18.118.1%%
>20% Uninsured
15-20% 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
HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states
HCAHCAWeightedAverage:22.6% 2
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%
Goldman SachsGoldman Sachs20042004HCAHCA 1010
ER has the highest volume of uninsured… ER has the highest volume of uninsured… requires interventionrequires intervention
MedicareMedicare
103,820103,820
MedicareMedicare
103,820103,820
UninsuredUninsured
13,31313,313
UninsuredUninsured
13,31313,313
Managed/ Managed/ MedicaidMedicaid
92,86992,869
Managed/ Managed/ MedicaidMedicaid
92,86992,869
AdmittedAdmitted 210,002AdmittedAdmitted 210,002
ER VisitsER Visits 1,025,639ER VisitsER Visits
1,025,639
ER VisitsER Visits1,235,641 2.3%
ER VisitsER Visits1,235,641 2.3%
MedicareMedicare
109,235109,235
MedicareMedicare
109,235109,235
UninsuredUninsured
231,436231,43695%95%
UninsuredUninsured
231,436231,43695%95%
Managed/ Managed/ MedicaidMedicaid
684,968684,968
Managed/ Managed/ MedicaidMedicaid
684,968684,968
17% 83%
5% 95%
Admitted 6.6% Managed/Medicaid 6.4% Medicare 5.9% Uninsured 15.2%
ER Visits 1.5% Managed/Medicaid 3.3% Medicare 0.5% Uninsured 20.1%
Net % Change 1Q03-04 Net % Change 1Q03-04
1st Quarter 2004 – Eastern & Western Groups
1010
Goldman SachsGoldman Sachs20042004HCAHCA 1111
Outpatient Svcs.6%
Direct Admissions
14%
ER Visits41%
Admissions Thru ER39%
75-80%Uninsured Patients
“ “How System is Accessed”How System is Accessed”
20-25%Co-Pay &
Deductibles
Origination of Bad Debt ExpenseOrigination of Bad Debt Expense
1Q 01 vs. 1Q 04 front- 1Q 01 vs. 1Q 04 front- end collections end collections 93%, 93%, percent collected percent collected 53%, 53%, co-pays/deductibles co-pays/deductibles 25%25% Intensify collections atIntensify collections at discharge and postdischarge and post dischargedischargeMinimum front-end Minimum front-end deposit requirementsdeposit requirements
1111
Goldman SachsGoldman Sachs20042004HCAHCA 1212
Outpatient Svcs.6%
Direct Admissions
14%
ER Visits41%
Admissions Thru ER39%
Bad Debt Action Plan75-80%
Uninsured Patients
Screen all potential non-emergent patients by qualified medical personnelOnce stabilized or deemed non-emergent, proceed with collection effort Mandatory ER case management
Patient Financial Management Committee In-house case management Concurrent financial counseling Standard discharge process
Executive Management approval must be obtained
Minimum deposit standards
Enhanced front-end collection goals
Follow-up care criteria established.
1212
Goldman SachsGoldman Sachs20042004HCAHCA 1313
9.4%
37.2%
OutpatientOutpatientERER
OutpatientOutpatientERER
Enhanced Outpatient Services FocusEnhanced Outpatient Services Focus
12.5%Hospital BasedHospital BasedHospital BasedHospital Based
FreestandingFreestandingFreestandingFreestanding
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
OutpatientOutpatientDiagnostic Diagnostic ServicesServices
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
ImagingImagingCardiologyCardiologyOncologyOncologyOrthopedicsOrthopedicsNeurologyNeurology
Hospital BasedHospital BasedHospital BasedHospital BasedOutpatient Outpatient SurgeriesSurgeriesOutpatient Outpatient SurgeriesSurgeries
15.3%ASC BasedASC BasedASC 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
Goldman SachsGoldman Sachs20042004HCAHCA 1414
2004 Managed Care Contracting
2005 Contract
Pricing Timeline*
6,844 Facility Level Active Contracts
*Anticipated Completion Dates
Pre-2004 1Q04 2Q04 3Q04 4Q04
83% of 2004 and 42% of 2005 contracts 83% of 2004 and 42% of 2005 contracts completed.completed.
83% of 2004 and 42% of 2005 contracts 83% of 2004 and 42% of 2005 contracts completed.completed.
2005Cumulative
42%42% 55%55% 75%75% 95%95%35%35% 100%100%
15.0%
10.5% 11.4%13.0% 13.3%
9.6%7.0% 7.3%
11.1%
0%
16%
1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04
11.1% 9.9%
Net Revenue per Adjusted AdmissionManaged Care & Other Discounted
1414
Goldman SachsGoldman Sachs20042004HCAHCA 1515
4.7%
8.1%5.4%
5.6% 5.5% 5.3%
3.8%
6.0%6.2%
7.5%
9.3%
7.4%7.8%
5.5%
10.4%
7.6%
8.9%
10.8%10.2%
8.0%
6.0%7.0%
8.8%8.5%8.0%
5.2%
-1%
1%
3%
5%
7%
9%
11%
13%
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
20012001 20022002 20032003 20042004
7.0% 9.4%7.4%
6.4%6.7%6.5%
Same Facility – Percent Change from Prior Year
Operating Expenses per Operating Expenses per Adjusted Admission Managed EffectivelyAdjusted Admission Managed EffectivelyO
per
atin
g E
xpe
nse
s /A
A –
Pe
rce
nt
Ch
ang
e f
rom
Pri
or
Yea
r
Operating Expense/AA Operating Expense/AA (Adj. For Bad Debt)
1515
Goldman SachsGoldman Sachs20042004HCAHCA 1616
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 2003
3.3%
3.4%
3.5%
3.6%
3.7%
3.8%
3.9%
Employee Satisfaction(Gallup Score)
Employee Turnover
Nurse Turnover
Tu
rno
ver
Rat
eS
atisfaction
Sco
re
1616
Goldman SachsGoldman Sachs20042004HCAHCA 1717
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 New Dividend PolicyDividend Policy
Share Share Repurchase Repurchase ProgramProgram
Capital Capital ReinvestmentReinvestment
BalanceBalanceSheetSheet
Goldman SachsGoldman Sachs20042004HCAHCA 1818
$7.3 Billion$7.3 Billion
244 Million Shares244 Million Shares
38% of outstanding 38% of outstanding sharesshares
Average Price: Average Price: $30.03$30.03
Opportunities Of Having Opportunities Of Having Strong Cash FlowStrong Cash Flow
Share Share repurchase repurchase programprogram
$1.3B: 37.9M Shares1997
1998
1999
2000
2001
20032002
YTD 20041
1: 2004 purchases through 5-6-04 2: Includes other activities affecting share balance (stock option exercises, restricted grants, and ESPP activity).
$33.59/share$22.68/share
$930M: 41M Shares
$1.4B: 55.6M Shares $24.61/share$1.3B: 43.5M Shares $28.65/share$706M: 19.2M Shares$706M: 19.2M Shares $36.88/share$1.1B: 31.1M Shares $35.76/sh
are
$422M: 10.0M Shares$42.19/share
650M Shares 12/31/96
465M Shares2 4/30/04
$282M: 6.2M Shares$45.53/share
Goldman SachsGoldman Sachs20042004HCAHCA 1919
HCA is Investing Significantly in Programs HCA 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
Goldman SachsGoldman Sachs20042004HCAHCA 2020
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….