01—Abstract
Summary
Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.
HCA Healthcare's 2022 10-K shows a company that grew revenue modestly while absorbing margin pressure from labor and other costs.
Revenues rose 2.5% to $60.233 billiona, driven by a 2.1% increase in equivalent admissions and a 0.4% increase in revenue per equivalent admission. Same facility revenues rose 3.2%. Net income attributable to HCA fell 18.9% to $5.643 billion ($19.15 diluted EPS, versus $21.16 in 2021), largely because 2021 included larger gains on facility sales ($1.620 billion versus $1.301 billion in 2022).
Operating pressure is visible in salaries and benefits rising to 46.0%b of revenue from 45.6%, and other operating expenses rising to 18.5% from 17.0%. Same facility salary cost per full-time equivalent rose 3.3%, reflecting inflation and premium labor. The balance sheet is highly leveraged.
Total debt reached $38.084 billionc, up from $34.579 billion, and interest expense increased to $1.741 billion. Operating cash flow declined to $8.522 billion from $8.959 billion, and free cash flow after $4.395 billion of capital expenditures was roughly $4.1 billion. HCA returned substantial capital to shareholders, repurchasing $7.0 billion of stock and paying $653 million in dividends.
Stockholders' equity moved to a deficit of $73 milliond, including noncontrolling interests. Management guided to roughly $4.3 billion in 2023 capital expenditures and recently raised the quarterly dividend to $0.60.
Key risks for investors include concentration in Florida and Texas (about 50% of revenue), exposure to government payers (about 43.6% of revenue from Medicare and Medicaid), an expiring COVID-19 public health emergency and provider relief, deficit-driven Medicare sequestration, Medicaid supplemental payment reviews, and rising labor costs and union activity. Investors should weigh strong cash generation and capital returns against high leverage and reimbursement policy uncertainty.
02—Key points
Key Highlights
- Revenue grew 2.5% to $60.233 billion, with same facility revenue up 3.2%, driven by a 3.3% same facility increase in equivalent admissions.
- Net income attributable to HCA fell 18.9% to $5.643 billion ($19.15 diluted EPS) from $6.956 billion in 2021, which included larger facility sale gains ($1.620 billion versus $1.301 billion in 2022).
- Salaries and benefits rose to 46.0% of revenue (45.6% in 2021), and same facility salary cost per FTE rose 3.3% amid inflation and premium labor use.
- Total debt increased to $38.084 billion, and interest expense rose 11% to $1.741 billion; the company issued $6.0 billion of senior notes and redeemed $2.5 billion of 2023 maturities.
- Operating cash flow fell 4.9% to $8.522 billion, while capital expenditures rose to $4.395 billion, a 23% increase.
- HCA returned about $7.65 billion to shareholders in 2022 through $7.0 billion of buybacks and $653 million of dividends, and it declared a $0.60 quarterly dividend for 2023.
- Florida and Texas generated about 50% of revenue, and government programs (Medicare and Medicaid) accounted for 43.6% of revenue, concentrating policy and regional risk.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 17, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $60.23B$58.75B | +2.5% |
| Operating Expenses | $51.65B$48.92B | +5.6% |
| Interest Expense | $1.74B$1.57B | +11.2% |
| Net Income | $5.64B$6.96B | −18.9% |
| EPS (Basic) | $19.43$21.52 | −9.7% |
| EPS (Diluted) | $19.15$21.16 | −9.5% |
| Shares Outstanding (Basic) | 290.35M323.31M | −10.2% |
| Shares Outstanding (Diluted) | 294.67M328.75M | −10.4% |
05—Questions
Frequently Asked Questions
Why did HCA's net income decline in 2022 even though revenue grew?
Net income attributable to HCA fell 18.9% to $5.643 billion, mainly because 2021 included $1.620 billion of gains on facility sales versus $1.301 billion in 2022. Operating costs also rose faster than revenue. Salaries and benefits increased to 46.0% of revenue, other operating expenses rose to 18.5% of revenue from 17.0%, and interest expense increased by $175 million.
How leveraged is HCA, and how is its debt structured?
Total debt was $38.084 billion at year-end 2022, up from $34.579 billion. About $33.3 billion is fixed-rate and roughly $4.8 billion is variable-rate. The average effective interest rate on long-term debt was 4.7%. Senior secured credit facilities are secured by collateral, and the senior notes were released from guarantees and collateral after an investment-grade rating from S&P. Management believes operating cash flow and credit facilities will cover liquidity needs.
What are the main regulatory and reimbursement risks?
Medicare and Medicaid represent a large share of revenue, so changes in payment policy matter. Key items include the BCA sequestration of 2% (with a further PAYGO-related reduction of up to 4% delayed until 2025), Medicaid supplemental payment reviews, the Texas directed payment program expiring August 31, 2023, and site-neutral payment changes. The COVID-19 public health emergency is set to expire May 11, 2023, which may end certain provider relief flexibilities.
How much cash did HCA return to shareholders, and is the dividend secure?
In 2022 HCA repurchased $7.0 billion of common stock and paid $653 million in dividends. Its quarterly dividend was $0.56 per share during 2022 and was raised to $0.60 in January 2023. The company has $1.586 billion of repurchase authority remaining under the January 2022 program, plus a new $3 billion authorization. Management notes that dividends depend on capital availability, debt covenants, and board determinations.
How concentrated is HCA's business geographically, and what are the implications?
Florida and Texas house 91 of 182 hospitals and generated about 50% of 2022 revenue, and 58% of admissions. Uninsured admissions there represented 74% of the company's total. This concentration exposes HCA to state regulatory and Medicaid policy, hurricane risk, and local competition. HCA reorganized into National, American and Atlantic groups effective January 1, 2023, to improve visibility into regional performance.
06—Continue