Vic Campbell Senior Vice President Larry Kloess CEO
Vic Campbell Senior Vice President Larry Kloess CEO, Centennial Hospital Mark Kimbrough VP, Investor Relations HCA 2004 Bear Stearns/Sept.
This presentation contains forward-looking statements based on current management expectations. Those forward-looking statements include 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 forwardlooking 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 2004 Bear Stearns/Sept.
HCA is located in 16 of 20 Fastest Growing Large US Cities Dallas/Ft. Worth +12% þGenerally 25 -40% Market Share þ 40% of facilities in Texas & Florida Denver +9% Kansas City +5% Las Vegas +22% U. K. Nashville +8% Richmond +8% Austin +18% Southern California +9% Compared to the National Average of 4. 5% HCA Panhandle +10% %% % Percent Growth in Market Population 2000 -2005 Palm Beach +11% % Houston +10% Switzerland Tampa Bay +8% 3 Dade +8% 2004 Bear Stearns/Sept.
HCA Capital Expenditures Billions 2000 2001 2002 2003 2004 E $1. 2 $1. 4 $1. 7 $1. 8 $1. 65 Expansions New Denver Facility Patient Safety & Infrastructure New Facilities Expansions 37 37 ER ER Expansions Open Heart, Imaging Cardiology, Oncology, etc. Routine 54 Facilities with Surgery and/or ICU/CCU expansions Distribution of Capital Dollars 1, 565 New Beds Four New Facilities 378 Beds 2002 and Beyond HCA 4 2004 Bear Stearns/Sept.
Inpatient Admissions and Outpatient Visits 1980 - 2002 Admissions (millions) Outpatient Visits (millions) Inpatient Admissions Outpatient Visits Source: AHA Annual Survey, 1980 - 2002 HCA 5 2004 Bear Stearns/Sept.
Socio-Demographics—Age Wave Driving Healthcare Utilization 1. 56% 3 -Year CAGR Acute Care Utilization Index (2003=100) 125 1. 59% 3 -Year CAGR 1. 62% 3 -Year CAGR 1. 58% 3 -Year CAGR 121 119 120 2 R 2 115 8% 1. 5 110 G CA 106 103 105 102 100 98 100 97 96 HCA 1. 6% 115 1. 6% 113 1. 6% 112 1. 5% 110 1. 6% 108 105 95 01 2 3 00 1. 7% 117 1. 6% Baby Boomer Impact Accelerates 1. 5% 1. 6% 1. 5% 1. 4% 20 2 2 2 2 00 001 002 003 004 005 006 007 008 009 010 011 012 013 014 015 6 2004 Bear Stearns/Sept.
HCA Admission Trends 2001 to 2 Q 2004 Same Facility 15. 4% HCA Growing Medicare Market Share Growth in Medicare Admissions 1998 -2001 HCA Market Competitors * *2 Q includes same-market admissions HCA 7 2004 Bear Stearns/Sept.
Inpatient Admissions Growth Continues to Vary Widely by Market 5, 000 +1. 5% same facility +1. 9% same market June YTD – Same Market Nashville 1 4, 000 +13. 0% Tampa Bay Admissions Change 3, 000 +3. 2% 2, 000 D/FW Cent. La. Mid. Ga -2. 0% -1. 4% Mid. Amer Una. -3. 1% North VA 1, 000 -3. 4% (1, 000) (2, 000) (3, 000) -20% Bottom 15 Markets in Admissions Growth -12. 5% +7. 4% Dade HCA Volume Variance by Market – June YTD Top 15 Markets in Admissions Growth +9. 0% +6. 0% Chattanooga -0. 7% +8. 6% Panhandle Oklahoma -1. 8% Treas. Coast -2. 9% West VA Houston +4. 6% +3. 3% 1 Total Admissions Determine Bubble Size S. Carolina -7. 5% +18, 367/ +5. 2% El Paso Las Vegas +4. 9% -1. 8% -2. 7% -2. 0% -6, 787/ -3. 2% -15% NW Ga. +11. 3% -5. 4% -8. 3% So. Cal +13. 0% Atlanta Lafayette Orlando Swiss Delta Una. Indy Jacksonville +2. 7% +2. 5% Far West Una. Brownsville/ Valley +5. 1% Denver 2 -2. 5% - Austin +3. 0% 1: Same Market 2: Denver is a non-consolidating JV Market -10% -5% 0% 8 5% 10% Admissions % Change 15% 2004 20% Bear Stearns/Sept.
Inpatient Surgery Trends Improving 2001 to 2 nd Quarter 2004 - Same Facility 1 1 HCA 1: Includes Kansas City facilities. 9 2004 Bear Stearns/Sept.
Enhanced Outpatient Services Focus O/P Comprised of Three Business Lines 2003 As a % of Outpatient Surgeries % of HCA Net Revenue 15. 3% Outpatient Surgeries Hospital Based 70% ASC Based 30% 12. 5% Outpatient Diagnostic Services Hospital Based 9. 4% Freestanding ðImaging ðCardiology ðOncology ðOrthopedics ðNeurology Outpatient ER 37. 2% HCA 10 2004 Bear Stearns/Sept.
2004 Managed Care Contracting 6, 844 Facility Level Active Contracts 2005 Contract Pricing Timeline* 35% 42% 55% 75% 95% Pre-2004 1 Q 04 2 Q 04 3 Q 04 4 Q 04 *Anticipated Completion Dates 100% 2005 Cumulative Net Revenue per Adjusted Admission Managed Care & Other Discounted 11. 1% 16% 15. 0% 10. 5% 11. 4% 9. 9% 13. 0% 13. 3% 11. 1% 9. 6% 7. 0% 7. 3% 3 Q 03 4 Q 03 9. 2% 0% 1 Q 02 2 Q 02 3 Q 02 4 Q 02 1 Q 03 2 Q 03 1 Q 04 2 Q 04 83% of 2004 and 50% of 2005 contracts completed. HCA 2004 Bear Stearns/Sept.
Medicare Reimbursement Improves Oct. 1, 2004 with Outlier Threshold Change and Full Market Basket Update Medicare Outlier Payments Dollars in Millions % of O/L Payments to Total Medicare $240 $218 4. 7% 3. 7% $284 5. 1% $60 2. 0% 6 months • 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. HCA 12 2004 Bear Stearns/Sept.
Labor Cost Wage Rate Same Facility - % Change from PY 2001 2002 2003 2004 1 +6. 5% 1 Q 01 2 Q 01 3 Q 01 4 Q 01 1 Q 02 2 Q 02 3 Q 02 +4. 5% +4. 7% +5. 1% 4 Q 02 1 Q 03 2 Q 03 3 Q 03 JUNE YTD 4 Q 03 2 Q 04 1: Includes Kansas City facilities. Contract Labor Reduction $/Adj. Patient Day Total Operations* 15% vs. Q 103 25% vs. Q 103 33% vs. Q 103 29% vs. Q 103 Nursing 29% vs. Q 103 * Eastern and Western Consolidated Operations HCA 2004 Bear Stearns/Sept.
Bad Debt Impact on Operating Expenses per Operating Expenses/AA – Percent Change from Prior Year Adjusted Admission 2001 2002 2003 7. 0% 7. 4% 9. 4% 6. 5% 6. 7% 6. 4% Operating Expense/AA 2004 Operating Expense/AA (Adj. For Bad Debt) Same Facility – Percent Change from Prior Year HCA 2004 Bear Stearns/Sept.
The Genesis of the Bad Debt/Charity Care Issue HCA is in 14 of the 20 highest uninsured states, with 72% of its hospitals in those states 17. 0% 13. 1% 22. 2% 21. 2% 15. 9% 18. 1% 19. 2% 23. 5% 15. 1% 15. 4% 23. 5% 29. 7% 22. 2% National Average: 15. 2% 19. 3% 16. 4% 14. 6% 15. 4% 20. 3% 16. 7% 1 HCA Weighted Average: 19. 7% 25. 6% 22. 8% 22. 6% 2 >20% Uninsured 15 -20% Uninsured <15% Uninsured 1: U. S. Census Bureau “Health Insurance Coverage in the United States: 2002”. 2: Kaiser Commission: Health Ins. Coverage of Nonelderly Adults 2001 -2002. HCA 15 2004 Bear Stearns/Sept.
Bad Debts & Charity Quarterly Trending Bad Debts & Charity $1 B $786 $491 $514 $567 $587 $795 $837 $912 $893 $610 $0 Charity 14% Bad Debts BD % of Net Revenue HCA 2004 Bear Stearns/Sept.
HCA Reduces Malpractice Reserves by $59 Million in 2 Q 2004 HCA Large Claims Declining HCA 2004 Bear Stearns/Sept.
HCA is Investing Significantly in Programs for 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 HCA 18 2004 Bear Stearns/Sept.
Accounts Receivable Indicators Cash Collections % Adj. Net Revenue / Days in A/R 2003 2004 % Adjusted Net Revenue Days in Accounts Receivable Cash Collections 2002 HCA 19 2004 Bear Stearns/Sept.
Strong Cash Flow Trends Provide Opportunities Net Cash Provided by Operating Activities Dollars in Millions Capital Reinvestment $1. 65 B in 2004 Balance Sheet 55% @ 6/30/04 Debt-to-debt and total equity ratio Share Repurchase Program $7. 5 B in 8 years New Dividend Policy $250 mm annually Excluding settlements with government agencies and investigation related costs. HCA 20 2004 Bear Stearns/Sept.
Employee Satisfaction at Record Levels Employee Satisfaction Employee Turnover Satisfaction Score Turnover Rate (Gallup Score) Nurse Turnover HCA 2004 Bear Stearns/Sept.
In Summary We Have…. Great Assets Excellent Investment Opportunities Strong Cash Flows Excellent Long-Term Earnings Growth Outlook A prudent financial strategy that provides for a strong balance sheet and return of cash to shareholders through share repurchase and/or dividends HCA 22 2004 Bear Stearns/Sept.
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