HCA Healthcare Inc

Previous wording

This quarterly report on Form 10-Q includes certain disclosures that contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments, expected inflationary pressures, expected labor costs and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) changes in or related to general economic conditions nationally and regionally in our markets, including inflation and economic and business conditions (and the impact thereof on the economy, financial markets and banking industry); changes in revenues due to declining patient volumes; changes in payer mix (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions (including as a result of geopolitical disruptions); and the impact of potential federal government shutdowns, (2) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (3) the impact of current and future federal and state health reform initiatives and possible changes to other federal, state or local laws and regulations affecting the health care industry, including, but not limited to, proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions and those required under the Pay-As-You-Go Act of 2010 as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (6) the ability to achieve operating and financial targets, attain expected levels of patient volumes and revenues, and control the costs of providing services, (7) possible chang…

Excerpt shortened here; the source contains the full paragraph.

Current wording

This quarterly report on Form 10-Q includes certain disclosures that contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments, expected inflationary pressures, expected labor costs, expected hurricane-related expenses and losses of revenues and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) changes in or related to general economic conditions nationally and regionally in our markets, including inflation and economic and business conditions (and the impact thereof on the economy, financial markets and banking industry); changes in revenues due to declining patient volumes; changes in payer mix (including increases in uninsured and underinsured patients); potential increased expenses related to labor, supply chain or other expenditures; workforce disruptions; supply shortages and disruptions (including as a result of geopolitical disruptions); and the impact of potential federal government shutdowns, (2) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (3) the impact of current and future federal and state health reform initiatives and possible changes to other federal, state or local laws and regulations affecting the health care industry, including, but not limited to, proposals to expand coverage of federally-funded insurance programs as an alternative to private insurance or establish a single-payer system (such reforms often referred to as “Medicare for All”), and the expiration of enhanced subsidies for individuals eligible to purchase insurance coverage through federal and state-based health insurance marketplaces, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions and those required under the Pay-As-You-Go Act of 2010 as a result of the federal budget deficit impact of the American Rescue Plan Act of 2021, and the potential for future deficit reduction legislation that may alter these spending reductions, which include cuts to Medicare payments, or create additional spending reductions, (5) increases in the amount and risk of collectability of uninsured accounts and deductibles and…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

During the quarter ended June 30, 2024, consolidated admissions increased 6.0% and same facility admissions increased 5.8% compared to the quarter ended June 30, 2023. Surgeries declined 0.3% on a consolidated basis and 0.5% on a same facility basis during the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. Emergency department visits increased 5.3% on a consolidated basis and 5.5% on a same facility basis during the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. Consolidated and same facility uninsured admissions increased 4.0% and 3.5%, respectively, for the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023.

Current wording

During the quarter ended September 30, 2024, consolidated admissions and same facility admissions both increased 4.5% compared to the quarter ended September 30, 2023. Surgeries declined 0.8% on both a consolidated basis and on a same facility basis during the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Emergency department visits increased 4.4% on a consolidated basis and 4.6% on a same facility basis during the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023. Consolidated and same facility uninsured admissions declined 1.6% and 1.8%, respectively, for the quarter ended September 30, 2024, compared to the quarter ended September 30, 2023.

Previous wording

Cash flows from operating activities declined $504 million, from $2.475 billion for the second quarter of 2023 to $1.971 billion for the second quarter of 2024. The decline in cash provided by operating activities was primarily related to negative changes in working capital items of $824 million, mainly from an increase in accounts receivable and a decrease in accounts payable, and an increase of $232 million in income tax payments, partially offset by an increase in net income of $265 million, excluding gain on sales of facilities.

Current wording

Cash flows from operating activities increased $1.036 billion, from $2.479 billion for the third quarter of 2023 to $3.515 billion for the third quarter of 2024. The increase in cash provided by operating activities was primarily related to positive changes in working capital items of $859 million, mainly from a decline in accounts receivable, and an increase in net income of $285 million, excluding the non-cash impact of gains and losses on sales of facilities and depreciation and amortization, partially offset by an increase of $190 million in income tax payments.

Previous wording

Revenues increased 10.3% from $15.861 billion in the second quarter of 2023 to $17.492 billion in the second quarter of 2024. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured and other discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for non-elective care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and six months ended June 30, 2024 and 2023 are summarized in the following table (dollars in millions):

Current wording

Revenues increased 7.9% from $16.213 billion in the third quarter of 2023 to $17.487 billion in the third quarter of 2024. Our revenues are based upon the estimated amounts we expect to be entitled to receive from patients and third-party payers. Estimates of contractual adjustments under managed care and commercial insurance plans are based upon the payment terms specified in the related contractual agreements. Revenues related to uninsured patients and uninsured copayment and deductible amounts for patients who have health care coverage may have discounts applied (uninsured and other discounts). We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record self-pay revenues at the estimated amounts we expect to collect. Patients treated at our hospitals for non-elective care, who have income at or below 400% of the federal poverty level, are eligible for charity care. Because we do not pursue collection of amounts determined to qualify as charity care, they are not reported in revenues. Our revenues by primary third-party payer classification and other (including uninsured patients) for the quarters and nine months ended September 30, 2024 and 2023 are summarized in the following table (dollars in millions):

Previous wording

Consolidated and same facility revenue per equivalent admission increased 4.1% and 4.4%, respectively, in the second quarter of 2024, compared to the second quarter of 2023. Consolidated and same facility equivalent admissions increased 6.0% and 5.2%, respectively, in the second quarter of 2024, compared to the second quarter of 2023. Consolidated and same facility outpatient surgeries declined 1.8% and 2.1%, respectively, in the second quarter of 2024, compared to the second quarter of 2023. Consolidated and same facility inpatient surgeries both increased 2.6% in the second quarter of 2024, compared to the second quarter of 2023. Consolidated and same facility emergency department visits increased 5.3% and 5.5%, respectively, in the second quarter of 2024, compared to the second quarter of 2023.

Current wording

Consolidated and same facility revenue per equivalent admission increased 2.8% and 2.5%, respectively, in the third quarter of 2024, compared to the third quarter of 2023. Consolidated and same facility equivalent admissions increased 5.0% and 4.5%, respectively, in the third quarter of 2024, compared to the third quarter of 2023. Consolidated and same facility outpatient surgeries both declined 2.0%, in the third quarter of 2024, compared to the third quarter of 2023. Consolidated and same facility inpatient surgeries increased 1.7% and 1.6%, respectively, in the third quarter of 2024, compared to the third quarter of 2023. Consolidated and same facility emergency department visits increased 4.4% and 4.6%, respectively, in the third quarter of 2024, compared to the third quarter of 2023.

Previous wording

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters and six months ended June 30, 2024 and 2023 follows (dollars in millions):

Current wording

To quantify the total impact of the trends related to uninsured patient accounts, we believe it is beneficial to view total uncompensated care, which is comprised of charity care, uninsured discounts and implicit price concessions. A summary of the estimated cost of total uncompensated care for the quarters and nine months ended September 30, 2024 and 2023 follows (dollars in millions):

Previous wording

Same facility uninsured admissions increased 3.5% in the second quarter of 2024 compared to the second quarter of 2023. Same facility uninsured admissions increased 2.4% in the first quarter of 2024 compared to the first quarter of 2023. Same facility uninsured admissions in 2023, compared to 2022, increased 3.2% in the fourth quarter, increased 3.3% in the third quarter, declined 6.6% in the second quarter and declined 1.1% in the first quarter.

Current wording

Same facility uninsured admissions in 2024, compared to 2023, declined 1.8% in the third quarter, increased 3.5% in the second quarter and increased 2.4% in the first quarter. Same facility uninsured admissions in 2023, compared to 2022, increased 3.2% in the fourth quarter, increased 3.3% in the third quarter, declined 6.6% in the second quarter and declined 1.1% in the first quarter.

Previous wording

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and six months ended June 30, 2024 and 2023 are set forth in the following table.

Current wording

The approximate percentages of our admissions related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers and the uninsured for the quarters and nine months ended September 30, 2024 and 2023 are set forth in the following table.

Previous wording

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and six months ended June 30, 2024 and 2023 are set forth in the following table.

Current wording

The approximate percentages of our inpatient revenues related to Medicare, managed Medicare, Medicaid, managed Medicaid, managed care and insurers for the quarters and nine months ended September 30, 2024 and 2023 are set forth in the following table.

Previous wording

At June 30, 2024, we had 98 hospitals in the states of Texas and Florida. During the quarter ended June 30, 2024, 59% of our admissions and 51% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 73% of our uninsured admissions during the quarter ended June 30, 2024.

Current wording

At September 30, 2024, we had 98 hospitals in the states of Texas and Florida. During the quarter ended September 30, 2024, 59% of our admissions and 51% of our revenues were generated by these hospitals. Uninsured admissions in Texas and Florida represented 74% of our uninsured admissions during the quarter ended September 30, 2024.

Previous wording

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. Some state Medicaid programs use, or have applied to use, waivers granted by the Centers for Medicare & Medicaid Services (“CMS”) to implement Medicaid expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. We receive supplemental payments in several states. We are aware these supplemental payment programs are regularly reviewed by certain government agencies and some states have made requests to CMS to modify their existing supplemental payment programs. In May 2024, CMS issued a final rule related to Medicaid managed care programs that addresses access, financing and quality within these programs. This final rule addresses aspects of state directed program arrangements with new and updated requirements to ensure a more consistent and transparent approach for participating states. The various elements of the rule take effect between issuance and early 2028. It is possible that these developments, reviews and requests will result in the restructuring of or other significant changes to supplemental payment programs. We are unable to estimate the financial impact that program structure modifications and other program changes, if any, may have on our results of operations.

Current wording

We receive a significant portion of our revenues from government health programs, principally Medicare and Medicaid, which are highly regulated and subject to frequent and substantial changes. Some state Medicaid programs use, or have applied to use, waivers granted by the Centers for Medicare & Medicaid Services (“CMS”) to implement Medicaid expansion, impose different eligibility or enrollment restrictions, or otherwise implement programs that vary from federal standards. We receive supplemental payments in several states. These supplemental payment programs are regularly reviewed by certain government agencies, and some states have made requests to CMS to modify their existing supplemental payment programs. In May 2024, CMS issued a final rule related to Medicaid managed care programs that addresses access, financing and quality within these programs. This final rule addresses aspects of state directed program arrangements with new and updated requirements to ensure a more consistent and transparent approach for participating states. The various elements of the rule take effect between issuance and early 2028. It is possible that these developments, reviews and requests will result in the restructuring of or other significant changes to supplemental payment programs. We are unable to estimate the financial impact that program structure modifications and other program changes, if any, may have on our results of operations.

Previous wording

The following is a comparative summary of results of operations for the quarters and six months ended June 30, 2024 and 2023 (dollars in millions):

Current wording

The following is a comparative summary of results of operations for the quarters and nine months ended September 30, 2024 and 2023 (dollars in millions):

Previous wording

Salaries and benefits, as a percentage of revenues, were 43.9% in the second quarter of 2024 and 45.9% in the second quarter of 2023. Salaries and benefits were favorably impacted by a 25.7% decline in contract labor during the second quarter of 2024, compared to the second quarter of 2023. Salaries and benefits per equivalent admission declined 0.3% in the second quarter of 2024, compared to the second quarter of 2023. Same facility salaries and benefits per full time equivalent increased 2.2% for the second quarter of 2024, compared to the second quarter of 2023. We continue to utilize certain contract, overtime and other premium rate labor costs to support our clinical staff and patients. While these costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

Current wording

Salaries and benefits, as a percentage of revenues, were 45.0% in the third quarter of 2024 and 46.6% in the third quarter of 2023. Salaries and benefits were favorably impacted by a 17.8% decline in contract labor during the third quarter of 2024, compared to the third quarter of 2023. Salaries and benefits per equivalent admission declined 0.9% in the third quarter of 2024, compared to the third quarter of 2023. Same facility salaries and benefits per full time equivalent increased 1.1% for the third quarter of 2024, compared to the third quarter of 2023. We continue to utilize certain contract, overtime and other premium rate labor costs to support our clinical staff and patients. While these costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

Previous wording

Supplies, as a percentage of revenues, were 15.1% in the second quarter of 2024 and 15.6% in the second quarter of 2023. Supply costs per equivalent admission increased 0.3% in the second quarter of 2024, compared to the second quarter of 2023. Supply costs per equivalent admission increased 3.4% for medical devices and 0.9% for general medical and surgical items and declined 6.8% for pharmacy supplies in the second quarter of 2024, compared to the second quarter of 2023.

Current wording

Supplies, as a percentage of revenues, were 15.2% in the third quarter of 2024 and 14.9% in the third quarter of 2023. Supply costs per equivalent admission increased 4.8% in the third quarter of 2024, compared to the third quarter of 2023. Supply costs per equivalent admission increased 6.8% for medical devices, 1.6% for pharmacy supplies and 4.4% for general medical and surgical items in the third quarter of 2024, compared to the third quarter of 2023.

Previous wording

Other operating expenses, as a percentage of revenues, were 20.7% in the second quarter of 2024 and 19.2% in the second quarter of 2023. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. The 1.5% increase in other operating expenses, as a percentage of revenues, for the second quarter of 2024, compared to the second quarter of 2023, was primarily related to increased costs for professional fees and state provider fees in certain states. We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in the future. Provisions for losses related to professional liability risks were $156 million and $144 million for the second quarters of 2024 and 2023, respectively.

Current wording

Other operating expenses, as a percentage of revenues, were 21.2% in the third quarter of 2024 and 20.8% in the third quarter of 2023. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. The 0.4% increase in other operating expenses, as a percentage of revenues, for the third quarter of 2024, compared to the third quarter of 2023, was primarily related to increased costs for professional fees and state provider fees in certain states, in addition to higher repairs and maintenance expense related to the response to Hurricane Helene at impacted hospitals, primarily in North Carolina. We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in the future. Provisions for losses related to professional liability risks were $157 million and $145 million for the third quarters of 2024 and 2023, respectively.

Previous wording

Depreciation and amortization increased $56 million, from $763 million in the second quarter of 2023 to $819 million in the second quarter of 2024. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Current wording

Depreciation and amortization increased $73 million, from $769 million in the third quarter of 2023 to $842 million in the third quarter of 2024. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Previous wording

Interest expense was $506 million in the second quarter of 2024 and $485 million in the second quarter of 2023. Our average debt balance was $40.292 billion for the second quarter of 2024, compared to $38.790 billion for the second quarter of 2023. The average effective interest rate for our debt was 5.1% and 5.0%, respectively, for the quarters ended June 30, 2024 and 2023.

Current wording

Interest expense was $515 million in the third quarter of 2024 and $483 million in the third quarter of 2023. Our average debt balance was $41.846 billion for the third quarter of 2024, compared to $38.881 billion for the third quarter of 2023. The average effective interest rate for our debt was 4.9% for both of the quarters ended September 30, 2024 and 2023.

Previous wording

During the second quarters of 2024 and 2023, we recorded gains on sales of facilities of $12 million and $1 million, respectively.

Current wording

During the third quarters of 2024 and 2023, we recorded losses on sales of facilities of $4 million and gains on sales of facilities of $2 million, respectively.

Previous wording

The effective tax rates were 27.4% and 24.9% for the second quarters of 2024 and 2023, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. The increase in the effective tax rate for the second quarter of 2024 is related primarily to adjustments to our liability for unrecognized tax benefits.

Current wording

The effective tax rates were 25.0% and 24.8% for the third quarters of 2024 and 2023, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships.

Previous wording

Six Months Ended June 30, 2024 and 2023 (continued)

Current wording

Quarters Ended September 30, 2024 and 2023 (continued)

Previous wording

Net income attributable to noncontrolling interests increased from $219 million for the second quarter of 2023 to $226 million for the second quarter of 2024.

Current wording

Net income attributable to noncontrolling interests increased from $196 million for the third quarter of 2023 to $212 million for the third quarter of 2024.

Previous wording

Revenues increased to $34.831 billion in the first six months of 2024 from $31.452 billion in the first six months of 2023. Net income attributable to HCA Healthcare, Inc. totaled $3.052 billion, or $11.47 per diluted share, for the six months ended June 30, 2024, compared to $2.556 billion, or $9.14 per diluted share, for the six months ended June 30, 2023. Results for the first six months of 2024 and 2023 include gains on sales of facilities of $213 million, or $0.61 per diluted share, and losses on sales of facilities of $14 million, or $0.08 per diluted share, respectively. Our provision for income taxes for the first six months of 2024 and 2023 included tax benefits of $79 million, or $0.30 per diluted share, and $85 million, or $0.30 per diluted share, respectively, related to employee equity award settlements. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 266.044 million shares for the six months ended June 30, 2024 and 279.573 million shares for the six months ended June 30, 2023. During 2023 and the first six months of 2024, we repurchased 14.465 million shares and 8.111 million shares, respectively, of our common stock.

Current wording

Revenues increased to $52.318 billion in the first nine months of 2024 from $47.665 billion in the first nine months of 2023. Net income attributable to HCA Healthcare, Inc. totaled $4.322 billion, or $16.37 per diluted share, for the nine months ended September 30, 2024, compared to $3.635 billion, or $13.07 per diluted share, for the nine months ended September 30, 2023. Results for the first nine months of 2024 and 2023 include gains on sales of facilities of $209 million, or $0.61 per diluted share, and losses on sales of facilities of $12 million, or $0.07 per diluted share, respectively. Our provision for income taxes for the first nine months of 2024 and 2023 included tax benefits of $93 million, or $0.35 per diluted share, and $89 million, or $0.32 per diluted share, respectively, related to employee equity award settlements. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 263.987 million shares for the nine months ended September 30, 2024 and 278.173 million shares for the nine months ended September 30, 2023. During 2023 and the first nine months of 2024, we repurchased 14.465 million shares and 13.059 million shares, respectively, of our common stock.

Previous wording

Revenues increased 10.3% on a consolidated basis and 9.9% on a same facility basis for the quarter ended June 30, 2024, compared to the quarter ended June 30, 2023. The increase in consolidated revenues can be primarily attributed to the combined impact of a 4.1% increase in revenue per equivalent admission and a 6.0% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 4.4% increase in same facility revenue per equivalent admission and a 5.2% increase in same facility equivalent admissions.

Current wording

Revenues increased 9.8% on a consolidated basis and 8.6% on a same facility basis for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase in consolidated revenues can be primarily attributed to the combined impact of a 3.6% increase in revenue per equivalent admission and a 6.0% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 3.5% increase in same facility revenue per equivalent admission and a 4.9% increase in same facility equivalent admissions.

Previous wording

Salaries and benefits, as a percentage of revenues, were 44.2% in the first six months of 2024 and 45.7% in the first six months of 2023. Salaries and benefits were favorably impacted by a 23.7% decline in contract labor during the six months ended June 30, 2024, compared to the six months ended June 30, 2023. Salaries and benefits per equivalent admission increased 0.6% in the first six months of 2024, compared to the first six months of 2023. Same facility salaries and benefits per full time equivalent increased 1.9% for the first six months of 2024, compared to the first six months of 2023. We continue to utilize certain contract, overtime and other premium rate labor costs to support our clinical staff and patients. While these costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

Current wording

Salaries and benefits, as a percentage of revenues, were 44.4% in the first nine months of 2024 and 46.0% in the first nine months of 2023. Salaries and benefits were favorably impacted by a 21.9% decline in contract labor during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. Salaries and benefits per equivalent admission increased 0.1% in the first nine months of 2024, compared to the first nine months of 2023. Same facility salaries and benefits per full time equivalent increased 1.7% for the first nine months of 2024, compared to the first nine months of 2023. We continue to utilize certain contract, overtime and other premium rate labor costs to support our clinical staff and patients. While these costs have declined compared to the prior year period, future costs may be affected by labor market conditions and other factors.

Previous wording

Supplies, as a percentage of revenues, were 15.2% in the first six months of 2024 and 15.6% in the first six months of 2023. Supply costs per equivalent admission increased 1.6% in the first six months of 2024, compared to the first six months of 2023. Supply costs per equivalent admission increased 3.1% for medical devices and 2.3% for general medical and surgical items and declined 3.9% for pharmacy supplies in the first six months of 2024, compared to the first six months of 2023.

Current wording

Supplies, as a percentage of revenues, were 15.2% in the first nine months of 2024 and 15.4% in the first nine months of 2023. Supply costs per equivalent admission increased 2.7% in the first nine months of 2024, compared to the first nine months of 2023. Supply costs per equivalent admission increased 4.3% for medical devices and 3.0% for general medical and surgical items and declined 2.1% for pharmacy supplies in the first nine months of 2024, compared to the first nine months of 2023.

Previous wording

Other operating expenses, as a percentage of revenues, were 20.8% in the first six months of 2024 and 18.8% in the first six months of 2023. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. The 2.0% increase in other operating expenses, as a percentage of revenues, for the first six months of 2024, compared to the first six months of 2023, was primarily related to increased costs for professional fees and state provider fees in certain states. We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in the future. Provisions for losses related to professional liability risks were $312 million and $288 million for the first six months of 2024 and 2023, respectively.

Current wording

Other operating expenses, as a percentage of revenues, were 21.0% in the first nine months of 2024 and 19.5% in the first nine months of 2023. Other operating expenses is primarily comprised of contract services, professional fees, repairs and maintenance, rents and leases, utilities, insurance (including professional liability insurance) and nonincome taxes. The 1.5% increase in other operating expenses, as a percentage of revenues, for the first nine months of 2024, compared to the first nine months of 2023, was primarily related to increased costs for professional fees and state provider fees in certain states. We have seen inflation have a negative impact on certain of these expenses and expect inflationary pressures will continue to impact operating expenses in the future. Provisions for losses related to professional liability risks were $469 million and $433 million for the first nine months of 2024 and 2023, respectively.

Previous wording

Equity in losses of affiliates was $2 million and $25 million in the first six months of 2024 and 2023, respectively.

Current wording

Equity in earnings of affiliates was $13 million and equity in losses of affiliates was $6 million in the first nine months of 2024 and 2023, respectively.

Previous wording

Depreciation and amortization increased $95 million, from $1.519 billion in the first six months of 2023 to $1.614 billion in the first six months of 2024. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Current wording

Depreciation and amortization increased $168 million, from $2.288 billion in the first nine months of 2023 to $2.456 billion in the first nine months of 2024. The increase in depreciation relates primarily to capital expenditures at our existing facilities.

Previous wording

Interest expense was $1.018 billion in the first six months of 2024 and $964 million in the first six months of 2023. Our average debt balance was $40.359 billion for the first six months of 2024 compared to $38.622 billion for the first six months of 2023. The average effective interest rate for our debt was 5.1% and 5.0%, respectively, for the six months ended June 30, 2024 and 2023.

Current wording

Interest expense was $1.533 billion in the first nine months of 2024 and $1.447 billion in the first nine months of 2023. Our average debt balance was $40.901 billion for the first nine months of 2024 compared to $38.695 billion for the first nine months of 2023. The average effective interest rate for our debt was 5.0% for both of the nine months ended September 30, 2024 and 2023.

Previous wording

During the first six months of 2024 and 2023, we recorded gains on sales of facilities of $213 million and losses on sales of facilities of $14 million, respectively. The gain for 2024 was primarily related to the sale of a hospital facility in California.

Current wording

During the first nine months of 2024 and 2023, we recorded gains on sales of facilities of $209 million and losses on sales of facilities of $12 million, respectively. The gain for 2024 was primarily related to the sale of a hospital facility in California.

Previous wording

The effective tax rates were 24.6% and 23.3% for the first six months of 2024 and 2023, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. Our provisions for income taxes for the first six months of 2024 and 2023 included tax benefits of $79 million and $85 million, respectively, related to employee equity award settlements.

Current wording

The effective tax rates were 24.7% and 23.7% for the first nine months of 2024 and 2023, respectively. The effective tax rate computations exclude net income attributable to noncontrolling interests as it relates to consolidated partnerships. The increase in the effective tax rate for the first nine months of 2024 is related primarily to adjustments to our liability for unrecognized tax benefits. Our provisions for income taxes for the first nine months of 2024 and 2023 included tax benefits of $93 million and $89 million, respectively, related to employee equity award settlements.

Previous wording

Net income attributable to noncontrolling interests increased from $399 million for the first six months of 2023 to $437 million for the first six months 2024. The increase in net income attributable to noncontrolling interests related primarily to the operations of one of our Texas markets.

Current wording

Net income attributable to noncontrolling interests increased from $595 million for the first nine months of 2023 to $649 million for the first nine months 2024. The increase in net income attributable to noncontrolling interests related primarily to the operations of one of our Texas markets.

Previous wording

Cash provided by operating activities totaled $4.440 billion for the first six months of 2024 compared to $4.278 billion for the first six months of 2023. The $162 million increase in cash provided by operating activities, for the first six months of 2024 compared to the first six months of 2023, related primarily to an increase in net income of $443 million, excluding the non-cash impact of losses and gains on sale of facilities and depreciation and amortization, offset by negative changes in working capital items of $312 million, mainly from an increase in accounts receivable, and an increase in income tax payments. The combination of interest payments and net income tax payments in the first six months of 2024 and 2023 totaled $1.942 billion and $1.698 billion, respectively. Working capital totaled $872 million at June 30, 2024 and $2.272 billion at December 31, 2023 (decline was primarily due to the $2.150 billion increase in long-term debt due within one year).

Current wording

Cash provided by operating activities totaled $7.955 billion for the first nine months of 2024 compared to $6.757 billion for the first nine months of 2023. The $1.198 billion increase in cash provided by operating activities, for the first nine months of 2024 compared to the first nine months of 2023, related primarily to an increase in net income of $798 million, excluding the non-cash impact of gains and losses on sales of facilities, depreciation and amortization and share-based compensation, and positive changes in working capital items of $547 million, mainly from a decline in inventories and other assets, partially offset by an increase in income tax payments of $416 million. The combination of interest payments and net income tax payments in the first nine months of 2024 and 2023 totaled $2.891 billion and $2.530 billion, respectively. Working capital totaled $1.762 billion at September 30, 2024 and $2.272 billion at December 31, 2023 (decline was primarily due to the $2.258 billion increase in long-term debt due within one year, offset by a $1.953 billion increase in cash and cash equivalents).

Previous wording

Cash used in investing activities was $2.235 billion in the first six months of 2024 compared to $2.408 billion in the first six months of 2023. Excluding acquisitions, capital expenditures were $2.399 billion in the first six months of 2024 and $2.438 billion in the first six months of 2023. Planned capital expenditures are expected to approximate between $5.1 billion and $5.3 billion in 2024. At June 30, 2024, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $4.6 billion. We expect to finance capital expenditures with internally generated and borrowed funds.

Current wording

Cash used in investing activities was $3.587 billion in the first nine months of 2024 compared to $3.720 billion in the first nine months of 2023. Excluding acquisitions, capital expenditures were $3.590 billion in the first nine months of 2024 and $3.585 billion in the first nine months of 2023. Planned capital expenditures are expected to approximate $5 billion in 2024. At September 30, 2024, there were projects under construction which had estimated additional costs to complete and equip over the next five years of approximately $4.7 billion. We expect to finance capital expenditures with internally generated and borrowed funds.

Previous wording

Cash used in financing activities totaled $2.309 billion in the first six months of 2024, compared to $1.923 billion in the first six months of 2023. During the first six months of 2024, net cash flows used in financing activities included a net increase of $1.184 billion in our indebtedness, payment of dividends of $356 million, repurchase of common stock of $2.547 billion and distributions to noncontrolling interests of $338 million. During the first six months of 2023, net cash flows used in financing activities included a net increase of $770 million in our indebtedness, payment of dividends of $339 million, repurchase of common stock of $1.761 billion and distributions to noncontrolling interests of $342 million.

Current wording

Cash used in financing activities totaled $2.419 billion in the first nine months of 2024, compared to $3.055 billion in the first nine months of 2023. During the first nine months of 2024, net cash flows used in financing activities included a net increase of $3.269 billion in our indebtedness, payment of dividends of $525 million, repurchase of common stock of $4.342 billion and distributions to noncontrolling interests of $530 million. During the first nine months of 2023, net cash flows used in financing activities included a net increase of $1.109 billion in our indebtedness, payment of dividends of $501 million, repurchase of common stock of $2.901 billion and distributions to noncontrolling interests of $497 million.

Previous wording

During February 2024, we issued $4.500 billion aggregate principal amount of senior notes comprised of (i) $1.000 billion aggregate principal amount of 5.450% senior notes due 2031, (ii) $1.300 billion aggregate principal amount of 5.600% senior notes due 2034, (iii) $1.500 billion aggregate principal amount of 6.000% senior notes due 2054 and (iv) $700 million aggregate principal amount of 6.100% senior notes due 2064. We used the net proceeds to repay borrowings under our asset-based revolving credit facility and for general corporate purposes. During March 2024, we repaid all of the $2.000 billion aggregate principal amount of 5.000% senior notes due 2024 at maturity.

Current wording

During February 2024, we issued $4.500 billion aggregate principal amount of senior notes comprised of (i) $1.000 billion aggregate principal amount of 5.450% senior notes due 2031 (the “Existing 2031 Notes”), (ii) $1.300 billion aggregate principal amount of 5.600% senior notes due 2034, (iii) $1.500 billion aggregate principal amount of 6.000% senior notes due 2054 and (iv) $700 million aggregate principal amount of 6.100% senior notes due 2064. We used the net proceeds to repay borrowings under our asset-based revolving credit facility and for general corporate purposes. During March 2024, we repaid all of the $2.000 billion aggregate principal amount of 5.000% senior notes due 2024 at maturity.

Previous wording

We have significant debt service requirements. Our debt totaled $40.880 billion at June 30, 2024. Our interest expense was $1.018 billion for the first six months of 2024 and $964 million for the first six months of 2023.

Current wording

We have significant debt service requirements. Our debt totaled $42.965 billion at September 30, 2024. Our interest expense was $1.533 billion for the first nine months of 2024 and $1.447 billion for the first nine months of 2023.

Previous wording

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.137 billion and $7.267 billion available as of June 30, 2024 and July 22, 2024, respectively) and anticipated access to public and private debt markets.

Current wording

In addition to cash flows from operations, available sources of capital include amounts available under our senior secured credit facilities ($7.986 billion available as of both September 30, 2024 and October 28, 2024) and anticipated access to public and private debt markets.

Previous wording

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $587 million and $564 million at June 30, 2024 and December 31, 2023, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $105 million and $121 million at June 30, 2024 and December 31, 2023, respectively. Our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Additionally, the insurance subsidiary has entered into reinsurance contracts providing reimbursement for a certain portion of losses in excess of self-insured retentions. Net reserves for the self-insured professional liability risks retained were $1.959 billion and $1.926 billion at June 30, 2024 and December 31, 2023, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $543 million. We estimate that approximately $508 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

Current wording

Investments of our insurance subsidiaries, held to maintain statutory equity levels and to provide liquidity to pay claims, totaled $648 million and $564 million at September 30, 2024 and December 31, 2023, respectively. An insurance subsidiary maintained net reserves for professional liability risks of $120 million and $121 million at September 30, 2024 and December 31, 2023, respectively. Our facilities are insured by our insurance subsidiary for losses up to $80 million per occurrence; however, this coverage is generally subject, in most cases, to a $15 million per occurrence self-insured retention. Additionally, the insurance subsidiary has entered into reinsurance contracts providing reimbursement for a certain portion of losses in excess of self-insured retentions. Net reserves for the self-insured professional liability risks retained were $1.980 billion and $1.926 billion at September 30, 2024 and December 31, 2023, respectively. Claims payments, net of reinsurance recoveries, during the next 12 months are expected to approximate $547 million. We estimate that approximately $517 million of the expected net claim payments during the next 12 months will relate to claims subject to the self-insured retention.

Previous wording

We are exposed to market risk related to changes in market values of securities. The investment securities held by our insurance subsidiaries were recorded at $587 million at June 30, 2024. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At June 30, 2024, we had unrealized losses of $31 million on the insurance subsidiaries’ investments.

Current wording

We are exposed to market risk related to changes in market values of securities. The investment securities held by our insurance subsidiaries were recorded at $648 million at September 30, 2024. These investments are carried at fair value, with changes in unrealized gains and losses that are not credit-related being recorded as adjustments to other comprehensive income. At September 30, 2024, we had unrealized losses of $18 million on the insurance subsidiaries’ investments.