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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
Mark One:
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Ended December 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EX-
CHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition Period from to .
COMMISSION FILE NUMBER 1-11239
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COLUMBIA/HCA HEALTHCARE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 75-2497104
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
ONE PARK PLAZA
NASHVILLE, TENNESSEE 37203
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, Including Area Code: (615) 327-9551
Securities Registered Pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, $.01 Par Value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Reg-
istrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information state-
ments incorporated by reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [_]
As of March 15, 1996, there were outstanding 433,354,931 shares of the Reg-
istrant's Common Stock and 14,000,000 shares of the Registrant's Nonvoting
Common Stock. As of March 15, 1996 the aggregate market value of the Common
Stock held by non-affiliates was approximately $22,866,000,000. For purposes
of the foregoing calculation only, the Registrant's directors, executive offi-
cers, and The Columbia/HCA Healthcare Corporation Stock Bonus Plan have been
deemed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1995 Annual Report to Stockholders for the year
ended December 31, 1995 are incorporated by reference into Parts I, II and IV.
Portions of the Registrant's definitive Proxy Statement for its 1996 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
The Exhibit Index is on page 29.
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INDEX
PAGE
REFERENCE
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PART I
Item 1. Business.......................................... 1
Item 2. Properties........................................ 19
Item 3. Legal Proceedings................................. 20
Submission of Matters to a Vote of Security
Item 4. Holders........................................... 22
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters...................... 22
Item 6. Selected Financial Data........................... 22
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 22
Item 8. Financial Statements and Supplementary Data....... 22
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 22
PART III
Directors and Executive Officers of the
Item 10. Registrant........................................ 22
Item 11. Executive Compensation............................ 22
Security Ownership of Certain Beneficial Owners
Item 12. and Management.................................... 23
Item 13. Certain Relationships and Related Transactions.... 23
PART IV
Exhibits, Financial Statement Schedules and
Item 14. Reports on Form 8-K............................... 23
PART I
ITEM 1. BUSINESS.
GENERAL
Columbia/HCA Healthcare Corporation is one of the largest health care serv-
ices companies in the United States. At December 31, 1995, the Company oper-
ated 313 general, acute care hospitals and 25 psychiatric hospitals in 32
states and two foreign countries. The Company is a partner in several 50/50
joint ventures that own and operate 19 hospitals and 3 outpatient surgery cen-
ters, which are accounted for using the equity method. Such facilities are in-
cluded in the hospitals operated totals, but are not consolidated for finan-
cial statement purposes and for purposes of reporting certain operating sta-
tistics. In addition, as part of its comprehensive health care networks, the
Company operates facilities that provide a broad range of outpatient and an-
cillary services. At December 31, 1995, the Company operated more than 130
outpatient surgery centers and 200 home health agencies. The term the "Compa-
ny" as used herein refers to Columbia/HCA Healthcare Corporation and its di-
rect and indirect subsidiaries and affiliated partnerships, unless otherwise
stated or indicated by context.
The Company's primary objective is to provide to the markets it serves a
comprehensive array of quality health care services in the most cost effective
manner possible. The Company's general, acute care hospitals usually provide a
full range of services commonly available in hospitals to accommodate such
medical specialties as internal medicine, general surgery, cardiology, oncolo-
gy, neurosurgery, orthopedics and obstetrics, as well as diagnostic and emer-
gency services. Outpatient and ancillary health care services are provided by
the Company's general, acute care hospitals as well as at freestanding facili-
ties operated by the Company including outpatient surgery and diagnostic cen-
ters, rehabilitation facilities, home health care agencies and other facili-
ties. In addition, the Company operates psychiatric hospitals which generally
provide a full range of mental health care services in inpatient, partial hos-
pitalization and outpatient settings.
On April 24, 1995, the Company acquired Healthtrust, Inc.--The Hospital Com-
pany ("Healthtrust") pursuant to a merger transaction accounted for as a pool-
ing of interests (the "Healthtrust Merger"). Healthtrust began operations
through the acquisition of a group of hospitals and related assets (the
"Healthtrust Formation") from Hospital Corporation of America (the predecessor
to HCA) in September 1987. On May 5, 1994, Healthtrust acquired EPIC Holdings,
Inc. ("EPIC") in a transaction accounted for as a purchase (the "EPIC Merg-
er"). On September 16, 1994, the Company acquired Medical Care America, Inc.
("MCA") in a transaction accounted for as a purchase (the "MCA Merger"). On
February 10, 1994, the Company acquired HCA-Hospital Corporation of America
("HCA") pursuant to a merger transaction accounted for as a pooling of inter-
ests (the "HCA Merger"). Effective September 1, 1993, the Company acquired Ga-
len Health Care, Inc. ("Galen") pursuant to a merger transaction accounted for
as a pooling of interests (the "Galen Merger"). Galen began operations as an
independent publicly held corporation upon the distribution of all of its com-
mon stock (the "Spinoff") by its then 100% owner, Humana Inc. ("Humana"), on
March 1, 1993.
The Company, through various predecessor entities, began operations on July
1, 1988. The Company was incorporated in Nevada in January 1990 and reincorpo-
rated in Delaware in September 1993. The Company's principal executive offices
are located at One Park Plaza, Nashville, Tennessee 37203, and its telephone
number at such address is (615) 327-9551.
BUSINESS STRATEGY
The Company's strategy is to become a significant, comprehensive provider of
quality health care services in targeted markets. The Company pursues its
strategy by acquiring the health care facilities necessary to develop a com-
prehensive health care network with wide geographic presence throughout the
market. Typically, the Company enters a market by acquiring one or more
1
mid- to large-size general, acute care hospitals (over 150 licensed beds),
which have either desirable physical plants or ones which can be upgraded on
an economically feasible basis. The Company then upgrades equipment and facil-
ities and adds new services to increase the attractiveness of the hospital to
local physicians and patient populations. The Company typically develops a
network by acquiring additional health care facilities including additional
general, acute care hospitals, psychiatric hospitals and outpatient facilities
such as surgery centers, diagnostic centers, physical therapy centers and
other treatment or wellness facilities including home health care agencies. By
developing a comprehensive health care network in a local market, the Company
achieves greater visibility and is better able to attract physicians and pa-
tients by offering a full range of services in the entire market area. The
Company is also able to reduce operating costs by sharing certain services
among several facilities in the same market and is better positioned to work
with health maintenance organizations ("HMOs"), preferred provider organiza-
tions ("PPOs") and employers.
Upon acquisition of a facility, the Company hires experienced executives to
manage its operations and decentralizes operational decision making to the lo-
cal level, while providing local physicians and managers the opportunity to
purchase equity interests in the operations through a partnership or corporate
structure. Management believes the Company's strategy of co-ownership of its
facilities with physicians and management produces significant operational ad-
vantages. Physicians who have an ownership interest in a facility take a more
active role in recruiting other physicians and in improving efficiency by con-
taining costs and making more rational capital expenditure decisions, and of-
ten are more active supporters of operations and medical staff quality assur-
ance activities, as they have a direct personal interest in the success and
reputation of the facility. Moreover, because the Company's facilities are co-
owned with and operated by prominent members of the local medical community,
both community support for the facilities and the Company's ability to recruit
physicians to the facilities are enhanced. In addition, by providing local
managers of its facilities the opportunity to purchase equity interests in
such facilities, the Company creates incentives on the part of its local man-
agers to operate their facilities successfully with a long-term perspective.
HEALTH CARE FACILITIES
The Company currently owns, manages or operates hospitals, ambulatory sur-
gery centers, diagnostic centers, cardiac rehabilitation centers, physical
therapy centers, radiation oncology centers, comprehensive outpatient rehabil-
itation centers and home health care agencies and programs.
The Company currently operates 313 general, acute care hospitals with 62,936
licensed beds. Most of the Company's general, acute care hospitals provide
medical and surgical services, including inpatient care, intensive and cardiac
care, diagnostic services and emergency services. The general, acute care hos-
pitals also provide outpatient services such as outpatient surgery, laborato-
ry, radiology, respiratory therapy, cardiology and physical therapy. A local
advisory board, which usually includes members of the hospital's medical
staff, generally makes recommendations concerning the medical, professional
and ethical practices at each hospital and monitors such practices. However,
the hospital is ultimately responsible for ensuring that these practices con-
form to established standards. When the Company acquires a hospital, it estab-
lishes quality assurance programs to support and monitor quality of care stan-
dards and to meet accreditation and regulatory requirements. Patient care
evaluations and other quality of care assessment activities are monitored on a
continuing basis.
Like most hospitals, the Company's hospitals do not engage in extensive med-
ical research and medical education programs. However, some of the Company's
hospitals have an affiliation with medical schools, including the clinical ro-
tation of medical students.
2
The Company currently operates 25 psychiatric hospitals with 2,866 licensed
beds. The Company's psychiatric hospitals provide therapeutic programs tai-
lored to child psychiatric, adolescent psychiatric, adult psychiatric, adoles-
cent alcohol or drug abuse and adult alcohol or drug abuse patients. The hos-
pitals use the treatment team concept whereby the admitting physician, team
psychologist, social workers, nurses, therapists and counselors coordinate
each phase of therapy. Services provided by this team include crisis interven-
tion, individual psychotherapy, group and family therapy, social services,
chemical dependency counseling, behavioral modification and physical medicine.
Family aftercare plans are actively promoted from the time of admission,
through hospitalization and after discharge. An aftercare plan measures each
patient's post-program progress and utilizes one or more self-help groups.
Program procedures are designed to ensure that quality standards are achieved
and maintained. Certain of the Company's general, acute care hospitals also
have a limited number of licensed psychiatric beds.
Other outpatient or related health care services operated by the Company in-
clude ambulatory surgery centers, diagnostic centers, outpatient physical
therapy/rehabilitation centers, outpatient radiation therapy centers, cardiac
rehabilitation centers, skilled nursing services and home health/infusion
services. These outpatient and related services are an integral component of
the Company's strategy to develop a comprehensive health care network in each
of its target markets. The Company currently operates more than 130 outpatient
surgery centers and 200 home health agencies (nearly all of which are hospi-
tal-based).
In addition to providing capital resources, the Company makes available a
variety of management services to its health care facilities, most signifi-
cantly: national supply and equipment purchasing and leasing contracts; finan-
cial policies; accounting, financial and clinical systems; governmental reim-
bursement assistance; construction planning and coordination; information sys-
tems; legal; personnel management; and internal audit.
SOURCES OF REVENUE
Hospital revenues depend upon inpatient occupancy levels, the extent to
which ancillary services and therapy programs are ordered by physicians and
provided to patients, the volume of outpatient procedures and the charges or
negotiated payment rates for such services. Charges and reimbursement rates
for inpatient routine services vary significantly depending on the type of
service (e.g., medical/surgical, intensive care or psychiatric) and the geo-
graphic location of the hospital. The Company has experienced an increase in
the percentage of patient revenues attributable to outpatient services. This
increase is primarily the result of advances in technology (which allow more
services to be provided on an outpatient basis), acquisitions of additional
outpatient facilities and increased pressures from Medicare, Medicaid, HMOs,
PPOs, employers and insurers to reduce hospital stays and provide services,
where possible, on a less expensive outpatient basis.
The Company receives payment for patient services from the federal govern-
ment primarily under the Medicare program, state governments under their re-
spective Medicaid programs, HMOs, PPOs and other private insurers and directly
from patients. The approximate percentages of patient revenues of the
Company's facilities from such sources during the periods specified below were
as follows:
YEARS ENDED DECEMBER 31,
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1995 1994 1993
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Medicare...................................... 36% 35% 34%
Medicaid...................................... 6 6 6
Other sources................................. 58 59 60
-------- -------- --------
Total......................................... 100% 100% 100%
======== ======== ========
3
Medicare is a federal program that provides certain hospital and medical in-
surance benefits to persons age 65 and over, some disabled persons and persons
with end-stage renal disease. Medicaid is a federal-state program administered
by the states which provides hospital benefits to qualifying individuals who
are unable to afford care. Substantially all of the Company's hospitals are
certified as providers of Medicare and Medicaid services. Amounts received un-
der the Medicare and Medicaid programs are generally significantly less than
the hospital's customary charges for the services provided.
To attract additional volume, most of the Company's hospitals offer dis-
counts from established charges to certain large group purchasers of health
care services, including Blue Cross, other private insurance companies, em-
ployers, HMOs, PPOs and other managed care plans. Blue Cross is a private
health care program that funds hospital benefits through independent plans
that vary in each state. These discount programs limit the Company's ability
to increase charges in response to increasing costs. See "Competition." Pa-
tients are generally not responsible for any difference between customary hos-
pital charges and amounts reimbursed for such services under Medicare, Medic-
aid, some Blue Cross plans, HMOs or PPOs, but are responsible to the extent of
any exclusions, deductibles or co-insurance features of their coverage. The
amount of such exclusions, deductibles and co-insurance has generally been in-
creasing each year. Collection of amounts due from individuals is typically
more difficult than from governmental or business payors.
Medicare
Under the Medicare program the Company receives reimbursement under a pro-
spective payment system ("PPS") for the routine and ancillary operating costs
of most Medicare inpatient hospital services. Psychiatric, long-term care, re-
habilitation, pediatric and certain designated cancer research hospitals, as
well as psychiatric or rehabilitation units that are distinct parts of a hos-
pital, are currently exempt from PPS and are reimbursed on a cost based sys-
tem, subject to certain cost caps. It is uncertain what impact, if any, the
federal efforts to reform the health care system or balance the federal budget
will have on the current method of Medicare reimbursement.
Under PPS, fixed payment amounts per inpatient discharge were established
based on the patient's assigned diagnosis related group ("DRG"). DRG's clas-
sify patients' treatments for illnesses according to the estimated intensity
of hospital resources necessary to furnish care for each principal diagnosis.
DRG rates have been established for each individual hospital participating in
the Medicare program and are based upon a statistically normal distribution of
severity. Patients falling well outside the normal distribution are afforded
additional payments and defined as "outliers." Under PPS, hospitals may retain
payments in excess of costs but must absorb costs in excess of such payments;
therefore, hospitals are encouraged to operate more efficiently.
DRG rates are updated and recalibrated periodically and have been affected
by several recent federal enactments. The index used by the Health Care Fi-
nancing Administration ("HCFA") to adjust the DRG rates gives consideration to
the inflation experienced by hospitals in purchasing goods and services ("mar-
ket basket"). However, for several years the percentage increases to the DRG
rates have been lower than the percentage increases in the costs of goods and
services purchased by hospitals. The market basket is adjusted each federal
fiscal year ("FY") which begins on October 1. The market basket for FY 1993
was 4.1%, FY 1994 was 4.3%, FY 1995 was 3.6% and for FY 1996 is 3.5%.
The Omnibus Budget Reconciliation Act of 1993 ("OBRA-93") extended the re-
duction enacted by the Omnibus Budget Reconciliation Act of 1990 ("OBRA-90")
in the Medicare DRG payments to healthcare providers through 1997. A substan-
tial number of the Company's hospitals are classified as urban hospitals for
reimbursement purposes. The net updates of DRG rates for large urban and other
urban hospitals are established as follows: FY 1994 and FY 1995 market basket
4
minus 2.5%; FY 1996 market basket minus 2%; and FY 1997 market basket minus
0.5%. Management cannot predict how future adjustments by Congress and HCFA
will affect the profitability of the Company's health care facilities.
The provisions of OBRA-90 required the Secretary (the "Secretary") of the
Department of Health and Human Services ("HHS") to develop a proposal for a
PPS for all hospital-based outpatient services and inpatient psychiatric care.
The Secretary's report, which was due on September 1, 1991, was submitted to
Congress on March 17, 1995. The Secretary's report recommends a phase-in of
PPS for outpatient services with prospective payment rates being established
initially for surgical and radiological services and other diagnostic proce-
dures that account for almost half of hospital outpatient Medicare charges.
Other groups of outpatient services would be brought under PPS as appropriate
methodologies are developed. The report also addressed changes to beneficiary
coinsurance and the computation of coinsurance under the current blended pay-
ment method. Implementation of the Secretary's proposals would require Con-
gress to enact legislation. The Company is unable to assess whether such leg-
islation, if any, will be enacted in connection with changes to Medicare reim-
bursement of hospital outpatient services. Until such time as the Secretary
has implemented a PPS for all hospital-based outpatient services, OBRA-90 di-
rects that payments for the reasonable cost of outpatient hospital services
(other than for capital related costs) be reimbursed at 94.2% of such reason-
able costs for cost reporting periods falling within FY 1991 through FY 1995.
OBRA-93 extended this reduction through FY 1998.
Subsequent to September 30, 1991 and through FY 1992, capital related pay-
ments for inpatient hospital services were made at the rate of 90% of reason-
able capital costs. The PPS capital costs reimbursement applies an estimated
national average of FY 1989 Medicare capital costs per patient discharge up-
dated to FY 1992 by the estimated increase in Medicare capital costs per dis-
charge (the "Federal Rate"). Capital PPS is applicable to cost reports begin-
ning on or after October 1, 1991. Under capital PPS reimbursement a 10 year
transition period has been established. A hospital is paid under one of the
following two different payment methodologies during this transition period:
(i) hospitals with a hospital-specific rate (the rate established for a hospi-
tal based on the cost report ending on or before December 31, 1990) below the
Federal Rate would be paid on a fully prospective payment methodology and (ii)
hospitals with a hospital-specific rate above the Federal Rate would be paid
based on a hold-harmless payment methodology or 100% of the Federal Rate
whichever results in a higher payment. A hospital is paid under one methodol-
ogy throughout the entire transition. After the transition period, all hospi-
tals would be paid the Federal Rate.
The impact of PPS capital reimbursement in the first two years has not been
material to Medicare capital reimbursement. The hospital-specific rates for FY
1994 decreased 2.16%. The established Federal Rate for FY 1994 was reduced by
9.33% to $378 per patient discharge and for FY 1995 was reduced by 0.4% to
$377 per patient discharge. The hospital-specific rate for FY 1996 increased
18.6%. The Federal Rate for FY 1996 increased 21.2% to $457 per patient dis-
charge. These increases were primarily the result of the expiration of a bud-
get neutrality provision of OBRA-90 that limited payments to 90% of payments
estimated to have been made on a reasonable cost basis during the fiscal year.
Legislation passed by Congress and vetoed by the President would have resulted
in a reduction of capital payment rates for FY 1996.
Medicaid
Most state Medicaid payments are made under a prospective payment system or
under programs which negotiate payment levels with individual hospitals. Med-
icaid reimbursement is generally substantially less than a hospital's cost of
services. Medicaid is currently funded approximately 50% by the states and ap-
proximately 50% by the federal government. The federal government and many
states are currently considering significant reductions in the level of Medic-
aid funding while at the same time expanding Medicaid benefits, which could
adversely affect future levels of Medicaid reimbursement received by the
Company's hospitals.
5
On November 27, 1991, Congress enacted the Medicaid Voluntary Contribution
and Provider-Specific Tax Amendments of 1991 (the "Medicaid Amendments"),
which limit the amount of voluntary contributions and provider-specific taxes
that can be used by states to fund Medicaid and require the use of broad-based
taxes for such funding. As a result of enactment of the Medicaid Amendments,
certain states in which the Company operates have adopted broad-based provider
taxes to fund their Medicaid programs. To date, the impact upon the Company of
these new taxes has not been materially adverse. However, the Company is un-
able to predict whether any additional broad-based provider taxes will be
adopted by the states in which it operates and, accordingly, is unable to as-
sess the effect thereof on its results of operations or financial position.
Annual Cost Reports
The Company's annual cost reports which are required under the Medicare and
Medicaid programs are subject to audit which may result in adjustments to the
amounts ultimately determined to be due the Company under these reimbursement
programs. These audits often require several years to reach the final determi-
nation of amounts earned under the programs. Providers also have rights of ap-
peal, and the Company is currently contesting certain issues raised in audits
of prior years' reports. Management believes that adequate provision has been
made in its financial statements for any material retroactive adjustments that
might result from all of such audits and that final resolution of all of these
issues will not have a material adverse effect upon the Company's results of
operations or financial position. Since the inception of the Medicare prospec-
tive payment system in 1983, the amount of reimbursement to the Company's gen-
eral, acute care hospitals potentially affected by audit adjustments has sub-
stantially diminished.
Commercial Insurance
The Company's hospitals provide services to individuals covered by private
health care insurance. Private insurance carriers either reimburse their pol-
icy holders or make direct payments to the Company's hospitals based upon the
particular hospital's established charges and the particular coverage provided
in the insurance policy. Blue Cross is a health care financing program that
provides its subscribers with hospital benefits through independent organiza-
tions that vary from state to state. The Company's hospitals are paid directly
by local Blue Cross organizations on the basis agreed to by each hospital and
Blue Cross by a written contract.
Recently, several commercial insurers have undertaken efforts to limit the
costs of hospital services by adopting prospective payment or DRG based sys-
tems. To the extent such efforts are successful, and to the extent that the
insurers' systems fail to reimburse hospitals for the costs of providing serv-
ices to their beneficiaries, such efforts may have a negative impact on the
operating results of the Company's hospitals.
HOSPITAL UTILIZATION
The Company believes that the two most important factors relating to the
overall utilization of a hospital are the quality and market position of the
hospital and the number and quality of physicians providing patient care
within the facility. Generally, the Company believes that the ability of a
hospital to be a market leader is determined by its breadth of services, level
of technology, emphasis on quality of care and convenience for patients and
physicians. Other factors which impact utilization include the growth in local
population, local economic conditions and market penetration of managed care
programs.
The following table sets forth certain operating statistics for hospitals
owned and operated by the Company for each of the most recent five years.
Medical/surgical hospital operations are subject to certain seasonal fluctua-
tions, including decreases in patient utilization during holiday pe-
6
riods and increases in the cold weather months. Psychiatric hospital opera-
tions are also subject to certain seasonal fluctuations, including decreases
in patient occupancy during the summer months and holiday periods.
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1995(E) 1994 1993 1992 1991
--------- --------- --------- --------- ---------
Number of hospitals (a). 319 311 274 281 301
Weighted average
licensed beds (b)...... 61,617 57,517 53,247 51,955 54,072
Admissions (c).......... 1,774,800 1,565,500 1,451,000 1,448,000 1,486,200
Average length of stay
(days)................. 5.3 5.6 5.8 6.0 6.3
Average daily census.... 25,917 23,841 22,973 23,569 25,816
Occupancy rate (d)...... 42% 41% 43% 45% 48%
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(a) End of period.
(b) Weighted average licensed beds is defined as the number of licensed beds
after giving effect to the length of time the beds have been licensed dur-
ing the period.
(c) Admissions represent the number of patients admitted for inpatient treat-
ment.
(d) Occupancy rates are calculated by dividing average daily census by
weighted average licensed beds.
(e) This does not include 19 facilities that are not consolidated for finan-
cial reporting purposes.
Beginning in 1983, hospitals began experiencing significant shifts from in-
patient to outpatient care as well as decreases in average lengths of inpa-
tient stay, primarily as a result of hospital payment changes by Medicare, in-
surance carriers and self-insured employers. These changes generally encour-
aged the utilization of outpatient, rather than inpatient, services whenever
possible, and shortened lengths of stay for inpatient care. Another factor af-
fecting hospital utilization levels is improved treatment protocols as a re-
sult of medical technology and pharmacological advances.
COMPETITION
Generally, other hospitals in the local markets served by most of the
Company's hospitals provide services that are offered by the Company's hospi-
tals. Additionally, in the past several years, the number of free-standing
outpatient surgery and diagnostic centers in the geographic areas in which the
Company operates has increased significantly. As a result, most of the
Company's hospitals operate in an increasingly competitive environment. The
rates charged by the Company's hospitals are intended to be competitive with
those charged by other local hospitals for similar services. In some cases,
competing hospitals are more established than the Company's hospitals. Also,
some competing hospitals are owned by tax-supported government agencies and
many others by tax-exempt corporations which may be supported by endowments
and charitable contributions and which are exempt from sales, property and in-
come taxes. Such exemptions and support are not available to the Company's
hospitals. In addition, in certain localities served by the Company there are
large teaching hospitals which provide highly specialized facilities, equip-
ment and services which may not be available at most of the Company's hospi-
tals. Psychiatric hospitals frequently attract patients from areas outside
their immediate locale and, therefore, the Company's psychiatric hospitals
compete with both local and regional hospitals, including the psychiatric
units of general, acute care hospitals.
The Company believes that its hospitals compete within local markets on the
basis of many factors, including the quality of care, ability to attract and
retain quality physicians, location, breadth of services, technology offered
and prices charged. The competition among hospitals and other health care
providers has intensified in recent years as hospital occupancy rates have de-
clined. The Company's strategies are designed, and management believes that
its hospitals are positioned, to be competitive under these changing circum-
stances.
7
One of the most significant factors in the competitive position of a hospi-
tal is the number and quality of physicians affiliated with the hospital. Al-
though physicians may at any time terminate their affiliation with a hospital
operated by the Company, the Company seeks to retain physicians of varied spe-
cialties on its hospitals' medical staffs and to attract other qualified phy-
sicians. The Company believes that physicians refer patients to a hospital
primarily on the basis of the quality of services it renders to patients and
physicians, the quality of other physicians on the medical staff, the location
of the hospital and the quality of the hospital's facilities, equipment and
employees. Accordingly, the Company strives to maintain high ethical and pro-
fessional standards and quality facilities, equipment, employees and services
for physicians and their patients.
Another major factor in the competitive position of a hospital is its man-
agement's ability to negotiate service contracts with purchasers of group
health care services. HMOs and PPOs attempt to direct and control the use of
hospital services through managed care programs and to obtain discounts from
hospitals' established charges. In addition, employers and traditional health
insurers are increasingly interested in containing costs through negotiations
with hospitals for managed care programs and discounts from established
charges. Generally, hospitals compete for service contracts with group health
care service purchasers on the basis of price, market reputation, geographic
location, quality and range of services, quality of the medical staff and con-
venience. The importance of obtaining contracts with managed care organiza-
tions varies from market to market depending on the market strength of such
organizations.
State certificate of need ("CON") laws, which place limitations on a hospi-
tal's ability to expand hospital services and add new equipment, may also have
the effect of restricting competition. The application process for approval of
covered services, facilities, changes in operations and capital expenditures
is, therefore, highly competitive. In those states which have no CON laws or
which set relatively high levels of expenditures before they become reviewable
by state authorities, competition in the form of new services, facilities and
capital spending is more prevalent. The Company has not experienced, and does
not expect to experience, any material adverse effects from state CON require-
ments or from the imposition, elimination or relaxation of such requirements.
See "Regulation and Other Factors."
The Company, and the health care industry as a whole, face the challenge of
continuing to provide quality patient care while dealing with rising costs,
strong competition for patients and a general reduction of reimbursement rates
by both private and government payors. As both private and government payors
reduce the scope of what may be reimbursed and reduce reimbursement levels for
what is covered, federal and state efforts to reform the United States health
care system may further impact reimbursement rates. Changes in medical tech-
nology, existing and future legislation, regulations and interpretations and
competitive contracting for provider services by private and government payors
may require changes in the Company's facilities, equipment, personnel, rates
and/or services in the future.
The hospital industry and the Company's hospitals continue to have signifi-
cant unused capacity, and, thus, there is substantial competition for pa-
tients. Inpatient utilization, average lengths of stay and average occupancy
rates continue to be negatively affected by payor-required pre- admission au-
thorization, utilization review and by payor pressure to maximize outpatient
and alternative health care delivery services for less acutely ill patients.
Increased competition, admissions constraints and payor pressures are expected
to continue. To meet these challenges, the Company has expanded many of its
hospitals' facilities to include outpatient centers, offers discounts to pri-
vate payor groups, enters into capitation contracts in some service areas, up-
grades facilities and equipment and offers new programs and services.
8
REGULATION AND OTHER FACTORS
Licensure, Certification and Accreditation
Health care facility construction and operation is subject to federal, state
and local regulations relating to the adequacy of medical care, equipment,
personnel, operating policies and procedures, fire prevention, rate-setting
and compliance with building codes and environmental protection laws. Facili-
ties are subject to periodic inspection by governmental and other authorities
to assure continued compliance with the various standards necessary for li-
censing and accreditation. All of the Company's health care facilities are
properly licensed under appropriate state laws. Substantially all of the
Company's general, acute care hospitals are certified under the Medicare pro-
gram or are accredited by the Joint Commission on Accreditation of Health Care
Organizations ("Joint Commission"), the effect of which is to permit the fa-
cilities to participate in the Medicare and Medicaid programs. Certain of the
Company's psychiatric hospitals do not participate in these programs. Should
any facility lose its Joint Commission accreditation, or otherwise lose its
certification under the Medicare program, the facility would be unable to re-
ceive reimbursement from the Medicare and Medicaid programs. Management be-
lieves that the Company's facilities are in substantial compliance with cur-
rent applicable federal, state, local and independent review body regulations
and standards. The requirements for licensure, certification and accreditation
are subject to change and, in order to remain qualified, it may be necessary
for the Company to effect changes in its facilities, equipment, personnel and
services.
Certificates of Need
The construction of new facilities, the acquisition of existing facilities,
and the addition of new beds or services may be subject to review by state
regulatory agencies under a CON program. The Company operates hospitals in
some states that require approval under a CON program. Such laws generally re-
quire appropriate state agency determination of public need and approval prior
to the addition of beds or services or certain other capital expenditures.
Failure to obtain necessary state approval can result in the inability to ex-
pand facilities, complete an acquisition or change ownership. Further, viola-
tion may result in the imposition of civil or, in some cases, criminal sanc-
tions, the denial of Medicare or Medicaid reimbursement or the revocation of a
facility's license.
State Rate Review
Some states in which the Company owns hospitals have adopted legislation
mandating rate or budget review for hospitals or have adopted taxes on hospi-
tal revenues, assessments or licensure fees to fund indigent health care
within the state.
In Florida, a budget review process and limitations on net revenue increases
per admission have been in effect with respect to the Company's hospitals
since January 1, 1986. The increase in hospital net revenues per admission is
limited to an annually-determined percentage increase in costs that Florida
hospitals pay for goods and services plus a statutory 2%, plus additional
amounts which recognize the effect of patient days related to Medicare, Medic-
aid and uncompensated charity care. This law limits the ability of Florida
hospitals to increase rates to maintain operating margins. The Company owned
55 hospitals aggregating 13,378 beds in Florida as of December 31, 1995.
In the aggregate, state rate or budget review and indigent tax provisions
have not materially adversely affected the Company's results of operations.
The Company is unable to predict whether any additional state rate or budget
review or indigent tax provisions will be adopted and, accordingly, is unable
to assess the effect thereof on its results of operations or financial condi-
tion.
9
Utilization Review
Federal law contains numerous provisions designed to ensure that services
rendered by hospitals to Medicare and Medicaid patients meet professionally
recognized standards, are medically necessary and that claims for reimburse-
ment are properly filed. These provisions include a requirement that a sam-
pling of admissions of Medicare and Medicaid patients must be reviewed by peer
review organizations ("PROs"), which review the appropriateness of Medicare
and Medicaid patient admissions and discharges, the quality of care provided,
the validity of DRG classifications and the appropriateness of cases of ex-
traordinary length of stay or cost. PROs may deny payment for services provid-
ed, may assess fines and also have the authority to recommend to HHS that a
provider which is in substantial noncompliance with the standards of the PRO
be excluded from participating in the Medicare program. Utilization review is
also a requirement of most non- governmental managed care organizations.
Medicare Regulations and Fraud and Abuse
Participation in the Medicare program is heavily regulated by federal stat-
ute and regulation. If a hospital provider fails substantially to comply with
the numerous conditions of participation in the Medicare program or performs
certain prohibited acts (e.g., (i) making false claims to Medicare for serv-
ices not rendered or misrepresenting actual services rendered in order to ob-
tain higher reimbursement; (ii) paying remuneration for Medicare referrals (so
called "fraud and abuse" which is prohibited by the "anti-kickback" provisions
of the Social Security Act); (iii) failing to stabilize all individuals who
come to its emergency room who have an "emergency medical condition," whether
or not any such individual is eligible for Medicare; (iv) transferring any
stabilized patient to another health care facility before such other facility
has agreed to the transfer of such patient, while such other facility does not
have sufficient room and staff to treat the patient, without the patient's
emergency department medical records, or without appropriate life support
equipment; and (v) transferring any unstabilized patient except those trans-
ferred at the patient's request or with physician certification that the medi-
cal risks from the transfer are less harmful than continued treatment at the
transferring facility), such hospital's participation in the Medicare program
may be terminated or civil or criminal penalties may be imposed upon such hos-
pital under certain provisions of the Social Security Act.
Moreover, HHS and the courts have interpreted the "fraud and abuse" anti-
kickback provisions of the Social Security Act (presently codified in Section
1128B(b) of the Social Security Act, hereinafter the "Antifraud Amendments")
broadly to include the intentional offer, payment, solicitation or receipt of
anything of value if one purpose of the payment is to induce the referral of
Medicare business. Health care providers generally are concerned that many
relatively innocuous, or even beneficial, commercial arrangements with their
physicians may technically violate this strict interpretation of the Antifraud
Amendments.
In 1976 Congress established the Office of Inspector General ("OIG") at HHS
to identify and eliminate fraud, abuse and waste in HHS programs and to pro-
mote efficiency and economy in HHS departmental operations. The OIG carries
out this mission through a nationwide program of audits, investigations and
inspections. In order to provide guidance to health care providers on ways to
engage in legitimate business practices and avoid scrutiny under the fraud and
abuse statute, the OIG has from time to time issued "fraud alerts" identifying
features of transactions, which, if present, may indicate that the transaction
violates the fraud and abuse law. In May 1992, the OIG issued a special fraud
alert regarding hospital incentives to physicians. The alert identified the
following incentive arrangements as potential violations of the statute: (a)
payment of any sort of incentive by the hospital each time a physician refers
a patient to the hospital, (b) the use of free or significantly discounted of-
fice space or equipment (in facilities usually located close to the hospital),
(c) provision of free or significantly discounted billing, nursing or other
staff services, (d) free training for a physician's office staff in areas such
as management techniques,
10
CPT coding and laboratory techniques, (e) guarantees which provide that, if
the physician's income fails to reach a predetermined level, the hospital will
supplement the remainder up to a certain amount, (f) low-interest or interest-
free loans, or loans which may be forgiven if a physician refers patients (or
some number of patients) to the hospital, (g) payment of the costs of a physi-
cian's travel and expenses for conferences, (h) coverage on the hospital's
group health insurance plans at an inappropriately low cost to the physician
and (i) payment for services (which may include consultations at the hospital)
which require few, if any, substantive duties by the physician, or payment for
services in excess of the fair market value of services rendered. In this
fraud alert the OIG encouraged persons having information about hospitals who
offer the above types of incentives to physicians to report such information
to the OIG.
In addition, on July 29, 1991, the OIG issued final regulations outlining
certain "safe harbor" practices, which, although potentially capable of induc-
ing prohibited referrals of business under Medicare or state health programs,
would not be subject to enforcement action under the Social Security Act. The
practices covered by the regulations include certain physician joint venture
transactions, rental of space and equipment, personal services and management
contracts, sales of physician practices, referral services, warranties, dis-
counts, payments to employees, group purchasing organizations and waivers of
beneficiary deductibles and co-payments. Additional proposed safe harbors are
expected to be published in the near future by the OIG, including a safe har-
bor regulation for physician recruitment. Certain of the Company's current ar-
rangements with physicians, including joint ventures, do not qualify for the
current safe harbor exemptions and, as a result, such arrangements risk scru-
tiny by the OIG and may be subject to enforcement action. The failure of these
arrangements to satisfy all of the conditions of the applicable safe harbor
criteria does not mean that the arrangements are illegal. Nevertheless, cer-
tain of the Company's current financial arrangements with physicians, includ-
ing joint ventures, and the Company's future development of joint ventures and
other financial arrangements with physicians, could be adversely affected by
the failure of such arrangements to comply with the safe harbor regulations,
or the future adoption of other legislation or regulation in these areas.
Effective January 1, 1991, Section 1877 of the Social Security Act (commonly
known as "Stark I") prohibited referrals of Medicare and Medicaid patients to
clinical laboratories with which a referring physician has a financial rela-
tionship. OBRA-93 included certain amendments to Section 1877 (such amendments
commonly known as "Stark II") which substantially broadened the scope of pro-
hibited physician self-referrals to include referrals by physicians to enti-
ties with which the physician has a financial relationship and which provide
certain "designated health services" which are reimbursable by Medicare or
Medicaid. "Designated health services" include not only the clinical labora-
tory services which were the only such services covered by Stark I, but also,
among other things, physical and occupational therapy services, radiology
services, durable medical equipment, home health, and inpatient and outpatient
hospital services. Sanctions for violating Stark I or II include civil money
penalties up to $15,000 per prohibited service provided, assessments equal to
200% of the dollar value of each such service provided and exclusion from the
Medicare and Medicaid programs. Stark II contains certain exceptions to the
self-referral prohibition, including an exception if the physician has an own-
ership interest in the entire hospital. Stark II became effective January 1,
1995 and contemplates the promulgation of regulations implementing the new
provisions. The Company cannot predict the final form that such regulations
will take or the effect that Stark II or the regulations to be promulgated
thereunder will have on the Company.
The Social Security Act also imposes criminal and civil penalties for making
false claims to Medicare and Medicaid for services not rendered or for misrep-
resenting actual services rendered in order to obtain higher reimbursement.
Like the Antifraud Amendments, this statute is very broad. Careful and accu-
rate coding of claims for reimbursement must be performed to avoid liability
under the false claims statutes.
11
The OIG has requested information regarding the Company's procedures for
preparing Medicare cost reports. The Company is cooperating with the OIG and
has provided various information in order to explain the Company's practices.
Management believes that any claims in this regard, if asserted, would not
have a material adverse effect on the Company's financial position or results
of operations.
Certain of the Company's current financial arrangements with physicians, in-
cluding joint ventures, and the Company's future development of joint ventures
and other financial arrangements with physicians, could be adversely affected
by the failure of such arrangements to comply with the Antifraud Amendments,
Section 1877, current state laws or other legislation or regulation in these
areas adopted in the future. The Company is unable to predict the effect of
such regulations or whether other legislation or regulations at the federal or
state level in any of these areas will be adopted, what form such legislation
or regulations may take or their impact on the Company. The Company is contin-
uing to enter into new financial arrangements with physicians and other prov-
iders in a manner structured to comply in all material respects with these
laws. There can be no assurance, however, that (i) governmental officials
charged with the responsibility for enforcing these laws will not assert that
the Company is in violation thereof or (ii) such statutes will ultimately be
interpreted by the courts in a manner consistent with the Company's interpre-
tation.
The federal Medicaid regulations also prohibit fraudulent and abusive prac-
tices and authorize the exclusion from such program of providers in violation
of such regulations.
State Legislation
Some of the states in which the Company operates have laws that prohibit
corporations and other entities from employing physicians and practicing medi-
cine for a profit or that prohibit certain direct and indirect payments or
fee-splitting arrangements between health care providers that are designed to
induce or encourage the referral of patients to, or the recommendation of,
particular providers for medical products and services. In addition, some
states restrict certain business relationships between physicians and pharma-
cies. Possible sanctions for violation of these restrictions include loss of
licensure and civil and criminal penalties. These statutes vary from state to
state, are often vague and have seldom been interpreted by the courts or regu-
latory agencies. Although the Company exercises care in an effort to structure
its arrangements with health care providers to comply with the relevant state
statutes, and although management believes that the Company is in compliance
with these laws, there can be no assurance that (i) governmental officials
charged with responsibility for enforcing these laws will not assert that the
Company or certain transactions in which it is involved are in violation of
such laws and (ii) such state laws will ultimately be interpreted by the
courts in a manner consistent with the practices of the Company.
Health Care Reform
Health care, as one of the largest industries in the United States, contin-
ues to attract much legislative interest and public attention. In recent
years, an increasing number of legislative proposals have been introduced or
proposed in Congress and in some state legislatures that would effect major
changes in the health care system, either nationally or at the state level.
Among the proposals under consideration are cost controls on hospitals, insur-
ance market reforms to increase the availability of group health insurance to
small businesses, requirements that all businesses offer health insurance cov-
erage to their employees and the creation of a single government health insur-
ance plan that would cover all citizens. The costs of certain proposals would
be funded in significant part by reductions in payments by governmental pro-
grams, including Medicare and Medicaid, to health care providers such as hos-
pitals. There can be no assurance that future health care legislation or other
changes in the administration or interpretation of governmental health
12
care programs will not have a material adverse effect on the Company's busi-
ness, financial condition or results of operations.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local statutes and or-
dinances regulating the discharge of materials into the environment. Manage-
ment does not believe that the Company will be required to expend any material
amounts in order to comply with these laws and regulations or that compliance
will materially affect its capital expenditures, earnings or competitive posi-
tion.
INSURANCE
As is typical in the health care industry, the Company is subject to claims
and legal actions by patients in the ordinary course of business. Through a
wholly-owned insurance subsidiary, the Company insures a substantial portion
of its general and professional liability risks. The Company's health care fa-
cilities are insured by the insurance subsidiary for losses of up to $25 mil-
lion per occurrence. The Company also maintains general and professional lia-
bility insurance with unrelated commercial carriers for losses in excess of
amounts insured by its insurance subsidiary.
The Company and its insurance subsidiary maintain allowances for loss for
professional and general liability risks which totalled $1.2 billion at Decem-
ber 31, 1995. Management considers such allowances, which are based on actua-
rially determined estimates, to be adequate for such liability risks. Any
losses incurred in excess of the established allowances for loss will be re-
flected as a charge to earnings of the Company. Any losses incurred in excess
of amounts funded and maintained with commercial excess liability insurance
carriers will be funded from the Company's working capital. While the
Company's cash flow has been adequate to provide for alleged and unforeseen
liability claims in the past, there can be no assurance that such amounts will
continue to be adequate. If payments for general and professional liabilities
exceed anticipated losses, the results of operations and financial condition
of the Company could be adversely affected.
EMPLOYEES AND MEDICAL STAFFS
At December 31, 1995, the Company had approximately 240,000 employees, in-
cluding approximately 77,000 part-time employees. Employees at 14 hospitals
are represented by various labor unions. The Company considers its employee
relations to be satisfactory. While the Company's hospitals experience union
organizational activity from time to time, the Company does not expect such
efforts to materially affect its future operations. The Company's hospitals,
like most hospitals, have experienced labor costs rising faster than the gen-
eral inflation rate. In recent years, the Company generally has not experi-
enced material difficulty in recruiting and retaining employees, including
nurses and professional staff members, primarily as a result of staff reten-
tion programs and general economic conditions. There can be no assurance as to
future availability and cost of qualified medical personnel.
The Company's hospitals are staffed by licensed physicians who have been ad-
mitted to the medical staff of individual hospitals. With limited exceptions,
physicians generally are not employees of the Company's hospitals. However,
some physicians provide services in the Company's hospitals under contracts,
which generally describe a term of service, provide and establish the duties
and obligations of such physicians, require the maintenance of certain perfor-
mance criteria and fix compensation for such services. Any licensed physician
may apply to be admitted to the medical staff of any of the Company's hospi-
tals, but admission to the staff must be approved by the hospital's medical
staff and the appropriate governing board of the hospital in accordance with
established credentialling criteria. Members of the medical staffs of the
Company's hospitals often also serve on the medical staffs of other hospitals,
and may terminate their affiliation with a hospital at any time.
13
PENDING HCA TAX LITIGATION; SPINOFF TAX RULING
As a result of examinations by the Internal Revenue Service (the "IRS") of
HCA's federal income tax returns, HCA received statutory notices of deficiency
for the years 1981 through 1988. HCA has filed petitions in the U.S. Tax Court
opposing these claimed deficiencies. Additionally, the IRS completed its exam-
ination for the years 1989 and 1990 and has issued proposed adjustments, which
HCA has protested. In the aggregate, the IRS is claiming additional taxes and
interest of approximately $600 million. Management of the Company is of the
opinion that HCA has properly reported its income and paid its taxes in accor-
dance with applicable laws and in accordance with agreements established with
the IRS during previous examinations. In management's opinion, the final out-
come from the IRS's examinations of prior years' income taxes will not have a
material adverse effect on the results of operations, financial position or
liquidity of the Company. If all or the majority of the positions of the IRS
are upheld, however, the financial position, results of operations and liquid-
ity of the Company could be materially adversely affected. Management believes
that any cash payments necessary as a result of such final outcome would be
funded with cash from operations and, if necessary, with amounts available un-
der the Company's revolving credit or other borrowing facilities.
Certain actions or events both in and beyond the control of the Company
could render the Spinoff or certain related transactions taxable. In connec-
tion with the Spinoff, Humana received rulings from the IRS to the effect,
among other things, that the Spinoff was tax-free under Section 355 of the In-
ternal Revenue Code of 1986, as amended (the "Code"). Prior to the Galen Merg-
er, Galen received a supplemental tax ruling that the Galen Merger would not
alter such tax rulings. Although generally binding on the IRS, each of the tax
rulings and the supplemental tax ruling is subject to the accuracy of certain
factual representations and assumptions contained in the ruling requests made
by Humana and Galen. While the Company is not aware of any facts or circum-
stances which would cause such representations and assumptions to be inaccu-
rate, there can be no assurances in this regard. Each of Galen and Humana
would be liable for the full amount of any tax if the Spinoff were held tax-
able, although as between Galen and Humana, Galen would be liable for approxi-
mately 61% of that tax under a Tax Sharing and Indemnification Agreement en-
tered into in connection with the Spinoff (unless the Spinoff became taxable
by reason of actions or events deemed to be in the control of Galen, in which
event Galen would be responsible for 100% of such tax).
ERISA MATTERS
In connection with the Healthtrust Formation in 1987, Healthtrust's Employee
Stock Ownership Plan (the "ESOP") purchased approximately 50.9 million shares
of Healthtrust common stock for $810 million. The purchase price was based on
the determination of the committee administering the ESOP (the "ESOP Commit-
tee") as to the fair market value of such shares at that time. Based on such
determination, and subject to limitations contained in the Code, Healthtrust
has claimed income tax deductions for contributions to the ESOP for the years
to which such contributions relate. Contributions to the ESOP were used by the
ESOP to pay interest and principal on the loans owed to Healthtrust. These
payments were in turn used by Healthtrust to pay interest and principal on the
ESOP term loans under a Healthtrust bank credit agreement and certain other
indebtedness related to the ESOP. As a result, Healthtrust was effectively
able to obtain a deduction for principal, as well as interest payments, on
ESOP related borrowings. If the ESOP Committee's determination of fair market
value was incorrect, Healthtrust's contribution to the ESOP may not be fully
deductible, which could have a material adverse effect on the Company.
It was intended that qualified holders of the ESOP term loans and the other
indebtedness incurred in connection with the ESOP be entitled to exclude from
taxable income 50% of the interest received on such indebtedness. In addition,
the loans to the ESOP and the purchase of
14
Healthtrust common stock by the ESOP were intended to qualify for exemption
from the "prohibited transaction" rules under the Code and the Employee Re-
tirement Income Security Act of 1974, as amended ("ERISA"), which rules gener-
ally prohibit sale and loan transactions between an employer and a qualified
retirement plan. The 50% interest exclusion and the prohibited transaction ex-
emption were available only if the plan was designed to invest primarily in
"employer securities". It is likely that if Healthtrust and HCA were deemed to
have been members of the same "controlled group of corporations" for purposes
of the relevant section in the Code or ERISA, the stock of HCA, and not
Healthtrust's common stock, would have been "employer securities" for these
purposes. Healthtrust and HCA concluded that they were not in the same "con-
trolled group of corporations" (as defined in Section 409(l) of the Code). If,
notwithstanding such conclusion, HCA's common stock were deemed to have been
"employer securities" for such purposes, there could be severe adverse conse-
quences to Healthtrust, including violation of the prohibited transaction
rules discussed above (which could subject Healthtrust or other disqualified
persons with respect to the ESOP to an excise tax and could require that cer-
tain corrective action be taken) and retroactive increases in the rate of in-
terest payable on certain of Healthtrust's previously outstanding ESOP related
indebtedness as a result of the loss of the 50% interest exclusion. In addi-
tion, the 50% interest exclusion and the prohibited transaction exemption were
available only if the price paid by the ESOP reflected the fair market value
of the employer securities as determined in good faith by the plan fiducia-
ries. Accordingly, if the ESOP Committee's determination of fair market value
was incorrect, the 50% interest exclusion might not have been fully available
and Healthtrust or other disqualified persons may have committed prohibited
transactions, either of which events could have a material adverse effect on
the Company.
The purchase of EPIC common stock by the EPIC Employee Stock Ownership Plan
(the "EPIC ESOP") in connection with EPIC's acquisition (the "EPIC Formation")
of its facilities from American Medical International, Inc. ("AMI") in 1988
was structured in a manner similar to the purchase of Healthtrust common stock
by the ESOP in connection with the Healthtrust Formation and was intended to
(i) qualify for exemption from the "prohibited transaction" rules of the Code
and ERISA, (ii) permit EPIC to deduct for federal income tax purposes its con-
tributions to the EPIC ESOP used to pay principal and interest on loans made
by EPIC to the EPIC ESOP and (iii) permit qualified holders of indebtedness
incurred in connection with the EPIC ESOP to benefit from the 50% interest ex-
clusion provision referred to above. Exemption from the prohibited transaction
rules and the availability of the ESOP related benefits described above de-
pends on (i) the amount the EPIC ESOP paid for EPIC common stock not having
exceeded the fair market value of that EPIC common stock, (ii) the EPIC common
stock being "employer securities" and (iii) compliance with the other relevant
provisions of the Code and ERISA. If (i) the EPIC ESOP paid an amount in ex-
cess of fair market value for the EPIC common stock, (ii) the EPIC common
stock were to fail to qualify as "employer securities" or (iii) the EPIC ESOP
were to fail to comply with the other relevant provisions of the Code or
ERISA, such events could have a material adverse effect on the Company.
15
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of March 28, 1996, were as follows:
NAME AGE POSITION(S)
---- --- -----------
R. Clayton McWhorter.... 62 Chairman of the Board
Thomas F. Frist, Jr.,
M.D.................... 57 Vice Chairman of the Board
Richard L. Scott........ 43 President and Chief Executive Officer
David T. Vandewater..... 45 Chief Operating Officer
Stephen T. Braun........ 40 Senior Vice President and General Counsel
Victor L. Campbell...... 49 Senior Vice President
Richard E. Chapman...... 47 Senior Vice President--Information Systems
David C. Colby.......... 42 Senior Vice President and Treasurer
Kenneth C. Donahey...... 45 Senior Vice President and Controller
W. Leon Drennan......... 40 Senior Vice President--Internal Audit
Samuel A. Greco......... 44 Senior Vice President--Operations Finance
Neil D. Hemphill........ 42 Senior Vice President--Human Resources/Administration
Jamie E. Hopping........ 42 President--Western Group
Daniel J. Moen.......... 44 President--Columbia Sponsored Network Group
Joseph D. Moore......... 49 Senior Vice President--Development
Lindy B. Richardson..... 49 Senior Vice President--Marketing/Public Affairs
Richard A. Schweinhart.. 46 Senior Vice President--Columbia Sponsored Networks
James D. Shelton........ 42 President--Central Group
Donald E. Steen......... 49 President--International Group
David R. White.......... 48 President--Mid-America Group
R. Clayton McWhorter has served as Chairman of the Board of the Company
since April 1995. Mr. McWhorter was Chairman and Chief Executive Officer of
Healthtrust from 1987 to April 1995 and was President of Healthtrust from 1991
to April 1995. Mr. McWhorter served as President and Chief Operating Officer
of Hospital Corporation of America (HCA's predecessor) from 1985 to 1987, and
as a Director of Hospital Corporation of America from 1983 to 1987.
Thomas F. Frist, Jr., M.D. has served as Vice Chairman of the Board of the
Company since April 1995. From February 1994 to April 1995, he was Chairman of
the Board of the Company. Dr. Frist was Chairman of the Board, President and
Chief Executive Officer of HCA-Hospital Corporation of America ("HCA") from
1988 to February 1994. Dr. Frist, a founder of the predecessor of HCA, was
previously Chairman and Chief Executive Officer of such predecessor from Au-
gust 1985 until September 1987.
Richard L. Scott has served as President, Chief Executive Officer and a di-
rector of the Company since September 1993. Mr. Scott was Chairman, Chief Ex-
ecutive Officer and a director of the Company or its predecessors from July
1988 to September 1993. Mr. Scott is also a director of Banc One Corporation.
David T. Vandewater has served as Chief Operating Officer of the Company
since September 1993. Mr. Vandewater was President of the Company from Febru-
ary 1991 to September 1993 and served as its Executive Vice President from May
1990 until February 1991. From July 1988 until February 1990, Mr. Vandewater
was an Executive Vice President and Chief Operating Officer of Republic Health
Corporation (presently called OrNda Healthcorp).
Stephen T. Braun has served as Senior Vice President and General Counsel of
the Company since September 1993. Mr. Braun served as Vice President and Gen-
eral Counsel of the Company
16
from October 1991 until September 1993. From July 1987 to October 1991, Mr.
Braun practiced law with the law firm of Doherty, Rumble & Butler, Profes-
sional Association, Saint Paul, Minnesota.
Victor L. Campbell has served as Senior Vice President of the Company since
February 1994. For more than five years prior to that time, Mr. Campbell
served as HCA's Vice President for Investor, Corporate, and Government Rela-
tions. Mr. Campbell is currently a director of the Federation of American
Health Systems and the American Hospital Association.
Richard E. Chapman has served as Senior Vice President--Information Systems
of the Company since February 1995. Mr. Chapman served as Vice President--In-
formation Systems for Columbia from September 1993 until February 1995. Mr.
Chapman also served as Vice President--Information Systems for both Galen and
Humana from 1988 until September 1993.
David C. Colby has served as Senior Vice President and Treasurer of the Com-
pany since February 1994. Mr. Colby served as Chief Financial Officer of the
Company or its predecessors from July 1988 until April 1995. Mr. Colby was
elected Treasurer of the Company in November 1991.
Kenneth C. Donahey has served as Senior Vice President and Controller of the
Company since April 1995. Prior to that time, Mr. Donahey served as Senior
Vice President and Controller of Healthtrust from April 1993 to April 1995.
Mr. Donahey also served as Vice President and Controller of Healthtrust from
1987 to 1993.
W. Leon Drennan has served as Senior Vice President--Internal Audit of the
Company since February 1995. From February 1994 to January 1995, Mr. Drennan
served as Vice President of the Company. Mr. Drennan served as Vice Presi-
dent--Internal Audit for HCA from 1987 until 1994.
Samuel A. Greco has served as Senior Vice President--Operations Finance of
the Company since July 1992. Mr. Greco served as Senior Vice President of Fi-
nance--South Florida Division of the Company from November 1990 to July 1992.
Mr. Greco was Chief Financial Officer of University Hospital, Tamarac, Flori-
da, which is owned and operated by the Company, from January 1990 to November
1990.
Neil D. Hemphill has served as Senior Vice President--Human Resources of the
Company since February 1994. Mr. Hemphill served as Vice President--Human Re-
sources of the Company from June 1992 to February 1994. Mr. Hemphill was a Di-
rector of Human Resources of Republic Health Corporation (presently called
OrNda Healthcorp) from January 1985 to June 1992.
Jamie E. Hopping has served as President--Western Group of the Company since
January 1996. From January 1993, Ms. Hopping was Chief Operating Officer of
the Company's South Florida Division and in February 1994 was named President
of the South Florida Division. From 1990 to 1993, Ms. Hopping was Chief Execu-
tive Officer of Deering Hospital in South Florida.
Daniel J. Moen has served as President--Columbia Sponsored Network Group
since March 1996, and served as President of the Company's Florida Group from
February 1994 until March 1996. Mr. Moen was President of the Company's South
Florida Division from October 1991 until February 1994. From 1989 until Sep-
tember 1991, he served as Vice President, South Florida Market for Humana Inc.
Joesph D. Moore has served as Senior Vice President--Development of the Com-
pany since February 1994. Mr. Moore was Senior Vice President--Finance and De-
velopment of HCA from January 1993 to February 1994. Mr. Moore was Senior Vice
President--Development of HCA from April 1992 until January 1993 and Vice
President--Development of HCA from 1980 until April 1992.
17
Lindy B. Richardson has served as Senior Vice President--Marketing/Public
Affairs of the Company since February 1994. Ms. Richardson served as Vice
President--Marketing/Public Affairs of the Company from September 1993 to Feb-
ruary 1994. Ms. Richardson served as Director of Marketing/Public Affairs for
both Galen and Humana from 1988 to September 1993.
Richard A. Schweinhart has served as Senior Vice President--Columbia Spon-
sored Networks of the Company since March 1996. From April 1995 until March
1996, Mr. Schweinhart served as Senior Vice President--Nonhospital Operations,
and from September 1993 until April 1995 as Senior Vice President--Finance of
the Company. Mr. Schweinhart served as Senior Vice President--Finance for both
Galen and Humana from November 1991 to September 1993. Mr. Schweinhart also
served as Vice President--Finance of Humana from 1988 until November 1991.
James D. Shelton has served as President--Central Group of the Company since
June 1994. From May 1993 to June 1994, Mr. Shelton was employed by National
Medical Enterprises, Inc. ("NME") (presently called Tenet Healthcare Corpora-
tion) as Executive Vice President of the Central Division. Mr. Shelton served
as Senior Vice President of Operations for NME from August 1986 until May
1993.
Donald E. Steen has served as President--International Group of the Company
since November 1995. From September 1994 until November 1995, Mr. Steen served
as President--Western Group of the Company. Mr. Steen was formerly President
and Chief Executive Officer of Medical Care America from September 1992 until
September 1994 and President, Chief Executive Officer of Medical Care Interna-
tional from September 1981 to September 1992.
David R. White joined the Company in March 1994 and has served as Presi-
dent--National Group of the Company since June 1995. Before this period, he
served as Executive Vice President and Chief Operating Officer with Community
Health Systems, Inc. for eight years.
18
ITEM 2. PROPERTIES.
The following table lists, by state, the number of hospitals owned, managed
or operated by the Company as of December 31, 1995:
LICENSED
STATE HOSPITALS BEDS
----- --------- --------
Alabama................................................ 8 1,218
Alaska................................................. 1 238
Arizona................................................ 5 777
Arkansas............................................... 3 554
California............................................. 13 1,755
Colorado............................................... 10 2,324
Delaware............................................... 1 74
Florida................................................ 55 13,378
Georgia................................................ 19 3,207
Idaho.................................................. 2 436
Illinois............................................... 9 2,964
Indiana................................................ 2 466
Kansas................................................. 3 1,260
Kentucky............................................... 14 2,946
Louisiana.............................................. 22 3,413
Mississippi............................................ 2 264
Missouri............................................... 3 786
Nevada................................................. 1 688
New Hampshire.......................................... 3 295
New Mexico............................................. 2 381
North Carolina......................................... 7 980
Ohio................................................... 3 1,168
Oklahoma............................................... 7 1,131
Oregon................................................. 2 198
South Carolina......................................... 5 903
Tennessee.............................................. 28 4,372
Texas.................................................. 69 13,318
Utah................................................... 10 1,277
Virginia............................................... 15 3,155
Washington............................................. 1 110
West Virginia.......................................... 6 909
Wyoming................................................ 1 70
INTERNATIONAL
-------------
Switzerland............................................ 1 185
United Kingdom......................................... 5 602
--- ------
338 65,802
=== ======
In addition to the hospitals listed in the above table, the Company operates
more than 135 outpatient surgery centers. The Company also operates medical
office buildings in conjunction with its hospitals. These office buildings are
primarily occupied by physicians who practice at the Company's hospitals.
19
The Company owns and maintains its headquarters in approximately 400,000
square feet of space in four office buildings in Nashville, Tennessee.
The Company's headquarters, hospitals and other facilities are suitable for
their respective uses and are, in general, adequate for the Company's present
needs.
ITEM 3. LEGAL PROCEEDINGS.
The Company is currently, and from time to time, subject to claims and suits
arising in the ordinary course of business, including claims for personal in-
juries or for wrongful restriction of, or interference with, physicians' staff
privileges. In certain of these actions the claimants have asked for punitive
damages against the Company, which are usually not covered by insurance. In
the opinion of management, the ultimate resolution of any of these pending
claims and legal proceedings will not have a material adverse effect on the
Company's results of operations or financial position.
A class action styled Mary Forsyth et al. v. Humana Inc. et al., Case #CV-S-
89-249-PMP (L.R.L.), was filed on March 29, 1989, in the United States Dis-
trict Court for the District of Nevada (the "Forsyth" case). On August 12,
1991, a Second Amended Complaint was filed in the Forsyth case which signifi-
cantly increased the amount of damages claimed by the plaintiffs in previously
filed complaints. The claimed damages increased from $10 million to
$84,520,143 in connection with a count which alleges a violation of the Em-
ployee Retirement Income Security Act (the "ERISA Count"); from $10 million to
$181,034,570 (before trebling) in connection with an alleged violation of the
Sherman Anti-Trust Act (the "Anti-Trust Count"); and from $10 million to
$181,034,570 (before trebling) for an alleged violation of the Racketeer In-
fluenced and Corrupt Organization Act (the "RICO Count"). In late March 1992,
as part of the discovery process, the plaintiffs provided information in re-
gard to their calculation of damages which indicates they are seeking recovery
of $49,440,000 of damages plus approximately $15,396,000 of interest in the
ERISA Count and $103,562,165 of damages (before trebling) plus approximately
$31,800,000 of interest in the RICO Count. Specific amounts were not readily
apparent for the Anti-Trust Count but it appears the plaintiffs believe their
claimed damages in the Anti-Trust Count would be similar to those in the RICO
Count. The ERISA Count, which is being asserted by the Co-Payer Class, claims
that Humana Inc. ("Humana") violated a fiduciary duty in connection with (i)
the calculation of co-insurance payments required under policies issued by
Humana's insurance subsidiary ("Humana Insurance") for insureds who were
treated at Sunrise Hospital in Las Vegas (now owned by the Company), and (ii)
payments to the hospital by Humana Insurance. The Anti-Trust Count, which is
being asserted by the Premium Payer Class, alleges that Sunrise Hospital has
monopolized or has attempted to monopolize the for-profit, acute care hospital
services market in Clark County, Nevada, and that Humana Insurance engaged in
predatory pricing in connection with the sale of insurance policies to members
of such class. The plaintiffs have also indicated damages with respect to the
Co-Payer Class. The RICO Count, which is being asserted by both the Premium
Payer and Co-Payer Classes, alleges fraud in connection with (i) the sale of
insurance policies to members of the Premium Payer Class and (ii) the calcula-
tion of the co-insurance payments. On June 22, 1992, defendants filed a Motion
for Summary Judgment on all three counts of the Complaint. On July 21, 1993,
Summary Judgment was entered in favor of defendants on all counts, although
the Court allowed the Co-Payer Class to file a Third Amended Complaint. On Au-
gust 24, 1993, the plaintiffs filed a Third Amended Complaint against Humana
Insurance, seeking to recover at least $2,000,000, plus interest, which repre-
sents the difference between their co-insurance payments and what the payments
would have been if calculated based on the discounted payments made by Humana
Insurance to Sunrise Hospital. The plaintiffs filed a Motion for Summary Judg-
ment on the Third Amended Complaint on November 10, 1993. The Court granted
the plaintiff's Motion for Summary Judgment on June 3, 1994. The plaintiffs
have
20
appealed the grant of defendants Motion for Summary Judgment on the RICO Count
and the Anti-Trust Count. The matter was argued before the Ninth Circuit Court
of Appeals on December 4, 1995. There has been no ruling as of the date here-
of. Pursuant to an Assumption of Liabilities and Indemnification Agreement en-
tered into in connection with the Spinoff, Humana assumed approximately 39%
and Galen assumed approximately 61% of all liabilities, costs and expenses
arising out of certain identified legal proceedings and claims, including the
Forsyth case.
A class action, In re Medical Care America, Inc. Securities Litigation, is
pending in the United States District Court for the Northern District of Tex-
as, Dallas Division (Civil Action No. 3-92-CV-1996-R). A class has been certi-
fied by the Court consisting of all persons who owned securities of Medical
Care America, Inc. ("MCA") at the close of trading on September 24, 1992 and
who acquired those securities either in purchases in the open market following
the September 9, 1992 merger of Medical Care International, Inc. ("MCI") and
Critical Care America, Inc. ("CCA") forming MCA or through exchange of their
securities in said companies pursuant to the merger, and who allegedly sus-
tained damages as a result of such purchases, subject to certain exclusions
(the "Class Members"). The named defendants include MCA, MCI, CCA as well as
certain officers and/or directors of MCA, MCI or CCA. The plaintiffs seek to
recover damages sustained by Class Members as a result of alleged violations
by the defendants of Section 11 of the Securities Act of 1933, as amended, and
Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule
10b-5 promulgated thereunder. In addition, the complaint asserts claims under
the state law of Texas which have not been certified for class treatment at
the present time, without prejudice to any party's rights regarding certifica-
tion of such claims in the future. The complaint alleges a course of conduct
in which the defendants knowingly or recklessly failed to state material in-
formation and released false and misleading information to the investing pub-
lic, regarding the earnings, profitability and business prospects of MCA and
of MCI and CCA prior to their merger. The plaintiffs allege that, as a result
of this false and misleading information, the market price of MCA securities
was artificially inflated throughout the class period. The plaintiffs further
allege that, upon the dissemination on September 25, 1992 of the true facts
concerning MCA's earnings, profitability and business prospects, the market
price of MCA common stock dropped precipitously, resulting in a significant
market loss of over $1 billion, and causing damages to plaintiffs and the
other Class Members. The litigation has been tentatively settled for $60 mil-
lion. The settlement is subject to the approval of the Court as well as a ma-
jority of the Class Members.
A lawsuit captioned United States of America ex rel. James Thompson v.
Columbia/HCA Healthcare Corporation et al., was filed on March 10, 1995 in the
United States District Court for the Southern District of Texas, Corpus
Christi Division (Civil Action No. C-95-110). The lawsuit is a qui tam action
brought by a private party (or "relator") on behalf of the United States of
America. The relator claims that the defendants (the Company and certain sub-
sidiaries and affiliated partnerships) engaged in a widespread strategy to pay
physicians money for referrals and engaged in other conduct to induce refer-
rals, such as: (i) offering physicians equity interests in hospitals; (ii) of-
fering loans to physicians; (iii) paying money under the guise of "consulta-
tion fees" to physicians to guarantee their capital investment; (iv) paying
consultation fees, rent or other monies to physicians; (v) providing free or
reduced rate rents for office space; (vi) providing free or reduced-rate vaca-
tions and trips; (viii) providing income guarantees; and (ix) granting physi-
cians exclusive rights to perform procedures in particular fields of practice.
The lawsuit is premised on alleged violations of the False Claims Act, 31
U.S.C. (S)3729 et seq. The complaint seeks damages of three times the amount
of all Medicare claims (involving false claims) presented by the defendants to
the federal government, a civil penalty of not less than $5,000 nor more than
$10,000 for each such Medicare or Medicaid claim, attorneys' fees and costs.
Although expressly permitted to do so, the United States has thus far declined
to intervene in the case and assume prosecution of the claims asserted by the
relator. The defendants filed a Motion to Dismiss the Second Amended Complaint
on November 29, 1995. Discovery has been stayed pending a ruling
21
on the motion. The Company believes that the allegations in the complaint are
without merit and intends to pursue the defense of this action vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required by this item is set forth in the Company's 1995 An-
nual Report to Stockholders under the heading "Stock Information and Divi-
dends," which information is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is set forth in the Company's 1995 An-
nual Report to Stockholders under the heading "Selected Financial Data," which
information is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The information required by this item is set forth in the Company's 1995 An-
nual Report to Stockholders under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations," which information
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is set forth on pages 16 through 39 in
the Company's 1995 Annual Report to Stockholders, which information is incor-
porated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is set forth under the heading "Elec-
tion of Directors" in the definitive proxy materials of the Company to be
filed in connection with its 1996 Annual Meeting of Stockholders, except for
the information regarding executive officers of the Company, which is con-
tained in Item 1 of Part I of this Annual Report on Form 10-K. The information
required by this Item contained in such definitive proxy materials is incorpo-
rated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is set forth under the heading "Execu-
tive Compensation" in the definitive proxy materials of the Company to be
filed in connection with its 1996 Annual Meeting of Stockholders, which infor-
mation is incorporated herein by reference.
22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is set forth under the heading "Prin-
cipal Stockholders" in the definitive proxy materials of the Company to be
filed in connection with its 1996 Annual Meeting of Stockholders, which infor-
mation is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is set forth under the heading "Cer-
tain Transactions" in the definitive proxy materials of the Company to be
filed in connection with its 1996 Annual Meeting of Stockholders, which infor-
mation is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of the report:
1. Financial Statements
The consolidated financial statements to be included in Part II,
Item 8, are incorporated by reference to the Company's 1995 An-
nual Report to Stockholders (See Exhibit 13).
2. List of Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993 is included in Page S-1
of this Annual Report on Form 10-K. All other schedules are
omitted because the required information is not present or not
present in material amounts.
3. List of Exhibits
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3(a) to the Company's Current Report on Form 8-K dated
February 11, 1994, and incorporated herein by reference).
3.2(a) By-laws of the Company (filed as Exhibit 2.2 to the Company's
Registration Statement on Form 8-A dated August 31, 1993, and
incorporated herein by reference).
3.2(b) Amendment to By-laws of the Company (filed as Exhibit 3(b).1 to
the Company's Current Report on Form 8-K dated February 11,
1994, and incorporated herein by reference).
4.1 Specimen Certificate for shares of Common Stock, par value $.01
per share, of the Company (filed as Exhibit 4.1 to the Company's
Form SE to Form 10-K for the fiscal year ended December 31,
1993, and incorporated herein by reference).
4.2 Columbia Hospital Corporation 9% Subordinated Mandatory Convert-
ible Note Due June 30, 1999 (filed as Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, and incorporated herein by reference).
4.3 Registration Rights Agreement between the Company and The 1818
Fund, L.P. dated March 18, 1991 (filed as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, and incorporated herein by reference).
4.4 Securities Purchase Agreement by and between the Company and The
1818 Fund, L.P. dated as of March 18, 1991 (filed as Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated herein by reference).
23
4.5 Warrant to purchase shares of Common Stock, par value $.01 per
share, of the Company (filed as Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990, and incorporated herein by reference).
4.6 Registration Rights Agreement dated as of March 16, 1989, by and
among HCA- Hospital Corporation of America and the persons
listed on the signature pages thereto (filed as Exhibit (g)(24)
to Amendment No. 3 to the Schedule 13E-3 filed by HCA-Hospital
Corporation of America, Hospital Corporation of America and The
HCA Profit Sharing Plan on March 22, 1989, and incorporated
herein by reference).
4.7 Assignment and Assumption Agreement dated as of February 10,
1994, between HCA-Hospital Corporation of America and the Com-
pany relating to the Registration Rights Agreement, as amended
(filed as Exhibit 4.7 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993, and incorporated
herein by reference).
4.8 Amended and Restated Rights Agreement dated February 10, 1994
between the Company and Mid-America Bank of Louisville and Trust
Company (filed as Exhibit 4.8 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, and in-
corporated herein by reference).
4.9(a) $1 Billion Credit Agreement dated as of February 10, 1994 (the
"364 Day Agreement"), among the Company, the Several Banks and
Other Financial Institutions, and Chemical Bank as Agent and as
CAF Loan Agent (filed as Exhibit 4.9 to the Company's Annual Re-
port on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated herein by reference).
4.9(b) Agreement and Amendment to the 364 Day Agreement dated as of
September 26, 1994 (filed as Exhibit 4.9 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
4.9(c) Agreement and Amendment to the 364 Day Agreement dated as of
February 28, 1996 (which Agreement and Amendment is filed here-
with).
4.10(a) $2 Billion Credit Agreement dated as of February 10, 1994 (the
"Credit Facility"), among the Company, the Several Banks and
Other Financial Institutions, and Chemical Bank as Agent and as
CAF Loan Agent (filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated herein by reference).
4.10(b) Agreement and Amendment to the Credit Facility dated as of Sep-
tember 26, 1994 (filed as Exhibit 4.10 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
4.10(c) Agreement and Amendment to the Credit Facility dated as of Feb-
ruary 28, 1996 (which Agreement and Amendment is filed here-
with).
4.11 Indenture dated as of December 15, 1993 between the Company and
The First National Bank of Chicago, as Trustee (filed as Exhibit
4.11 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, and incorporated herein by refer-
ence).
10.1 Agreement and Plan of Merger among the Company, COL Acquisition
Corporation and Healthtrust, Inc.--The Hospital Company dated as
of October 4, 1994 (filed as Exhibit 2 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
10.2 Agreement and Plan of Merger among the Company, CHOS Acquisition
Corporation and HCA-Hospital Corporation of America dated as of
October 2, 1993 (filed as Exhibit 2 to the Company's Registra-
tion Statement on Form S-4 (File No. 33-50735), and incorporated
herein by reference).
24
10.3 Agreement and Plan of Merger between Galen Health Care, Inc. and
the Company dated as of June 10, 1993 (filed as Exhibit 2 to the
Company's Registration Statement on Form S-4 (File No. 33-
49773), and incorporated herein by reference).
10.4 Agreement and Plan of Merger among Hospital Corporation of Amer-
ica, HCA- Hospital Corporation of America and TF Acquisition,
Inc. dated November 21, 1988 plus a list identifying the con-
tents of all omitted exhibits to the Agreement and Plan of
Merger plus an agreement of Hospital Corporation of America to
furnish supplementally to the Securities and Exchange Commission
upon request a copy of all omitted exhibits (filed as Exhibit 2
to Hospital Corporation of America's Current Report on Form 8-K
dated November 21, 1988, and incorporated herein by reference).
10.5 Amendment No. 1 to Agreement and Plan of Merger dated as of Feb-
ruary 7, 1989, among Hospital Corporation of America, HCA-Hospi-
tal Corporation of America and TF Acquisition, Inc. (filed as
Exhibit 2(b) to Hospital Corporation of America's Annual Report
on Form 10-K for the year ended December 31, 1988, and incorpo-
rated herein by reference).
10.6 Columbia Hospital Corporation Stock Option Plan (filed as Ex-
hibit 10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference).*
10.7 Columbia Hospital Corporation 1992 Stock and Incentive Plan
(filed as Exhibit 10.14 to the Company's Registration Statement
on Form S-1 (Reg. No. 33-48886), and incorporated herein by ref-
erence).*
10.8 Columbia Hospital Corporation Outside Directors Nonqualified
Stock Option Plan (filed as Exhibit 28.1 to the Company's Regis-
tration Statement on Form S-8 (File No. 33-55272), and incorpo-
rated herein by reference).*
10.9 HCA-Hospital Corporation of America 1989 Nonqualified Stock Op-
tion Plan, as amended through December 16, 1991 (filed as Ex-
hibit 10(g) to HCA-Hospital Corporation of America's Registra-
tion Statement on Form S-1 (File No. 33-44906), and incorporated
herein by reference).*
10.10 Form of Stock Option Agreement under the HCA-Hospital Corpora-
tion of America 1989 Nonqualified Stock Option Plan (filed as
Exhibit 10(j) to HCA-Hospital Corporation of America's Annual
Report on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).*
10.11 HCA-Hospital Corporation of America Nonqualified Initial Option
Plan (filed as Exhibit 4.6 to the Company's Registration State-
ment on Form S-3 (File No. 33-52379), and incorporated herein by
reference).*
10.12 Termination Agreement between the Company and Carl F. Pollard
dated December 16, 1993 (filed as Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993, and incorporated herein by reference).*
10.13 Form of Indemnity Agreement with certain officers and directors
(filed as Exhibit 10(kk) to Galen Health Care, Inc.'s Registra-
tion Statement on Form 10, as amended, and incorporated herein
by reference).
10.14 Form of Severance Pay Agreement between Galen Health Care, Inc.
and certain executives (filed as Exhibit 10(jj) to Galen Health
Care, Inc.'s Registration Statement on Form 10, as amended, and
incorporated herein by reference).*
10.15 Form of Severance Agreement between HCA-Hospital Corporation of
America and certain executives dated as of November 1, 1993
(filed as Exhibit 10.15 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and incorpo-
rated herein by reference).*
25
10.16 Assumption Agreement among the Company, CHOS Acquisition Corpo-
ration and HCA-Hospital Corporation of America dated as of Feb-
ruary 10, 1994, relating to the Severance Agreements (filed as
Exhibit 10.16 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein
by reference).*
10.17 Form of Severance Pay Agreement between the Company and certain
executives dated as of June 10, 1993 (filed as Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated herein by reference).*
10.18 Form of Galen Health Care, Inc. 1993 Adjustment Plan (filed as
Exhibit 4.15 to the Company's Registration Statement on Form S-8
(File No. 33-50147), and incorporated herein by reference).*
10.19 Columbia/HCA Healthcare Corporation Annual Incentive Plan (filed
as Exhibit 10.19 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein
by reference).*
10.20 Columbia/HCA Healthcare Corporation Directors' Retirement Policy
(filed as Exhibit 10.20 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and incorpo-
rated herein by reference).*
10.21 HCA-Hospital Corporation of America 1992 Stock Compensation Plan
(filed as Exhibit 10(t) to HCA-Hospital Corporation of America's
Registration Statement on Form S-1 (File No. 33-44906), and in-
corporated herein by reference).*
10.22 Columbia/HCA Healthcare Corporation 1995 Management Stock Pur-
chase Plan (which plan is filed herewith).*
10.23 Employment Agreement, dated November 15, 1993 by and between
Medical Care America, Inc. and Donald E. Steen (which agreement
is filed herewith).*
10.24 Employment Agreement, dated April 24, 1995 by and between the
Company and R. Clayton McWhorter (which agreement is filed here-
with).*
11 Statement re Computation of Earnings Per Common and Common
Equivalent Share.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the 1995 Annual Report to Stockholders of the Compa-
21 ny.
List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Sr. Judith Ann Karam, CSA.
27 Financial Data Schedule.
- --------
* Management compensatory plan or arrangement.
(b) Reports on Form 8-K.
DATE OF CURRENT
REPORT ITEM(S) REPORTED
--------------- ----------------
November 24, 1995 Form of 7.19% Debenture due 2015 and 7.50% Debenture due
2095 issued by the Company
December 8, 1995 Form of 7.05% Debenture due 2027 issued by the Company
26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Ex-
change Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 29, 1996
COLUMBIA/HCA HEALTHCARE CORPORATION
/s/ Richard L. Scott
By: _________________________________
RICHARD L. SCOTT PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, this re-
port has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ R. Clayton McWhorter Chairman of the March 29, 1996
- ------------------------------------- Board
R. CLAYTON MCWHORTER
/s/ Thomas F. Frist, Jr., M.D. Vice Chairman of the March 29, 1996
- ------------------------------------- Board
THOMAS F. FRIST, JR., M.D.
/s/ Richard L. Scott President, Chief March 29, 1996
- ------------------------------------- Executive Officer
RICHARD L. SCOTT and Director
/s/ David C. Colby Senior Vice March 29, 1996
- ------------------------------------- President and
DAVID C. COLBY Treasurer
(Principal
Financial Officer)
/s/ Kenneth C. Donahey Senior Vice March 29, 1996
- ------------------------------------- President and
KENNETH C. DONAHEY Controller
(Principal
Accounting Officer)
/s/ Magdalena Averhoff, M.D. Director March 29, 1996
- -------------------------------------
MAGDALENA AVERHOFF, M.D.
27
SIGNATURE TITLE DATE
/s/ Charles J. Kane Director March 29, 1996
- -------------------------------------
CHARLES J. KANE
/s/ John W. Landrum Director March 29, 1996
- -------------------------------------
JOHN W. LANDRUM
/s/ T. Michael Long Director March 29, 1996
- -------------------------------------
T. MICHAEL LONG
/s/ Donald S. MacNaughton Director March 29, 1996
- -------------------------------------
DONALD S. MACNAUGHTON
Director
- -------------------------------------
RODMAN W. MOORHEAD III
/s/ Carl E. Reichardt Director March 29, 1996
- -------------------------------------
CARL E. REICHARDT
/s/ Frank S. Royal, M.D. Director March 29, 1996
- -------------------------------------
FRANK S. ROYAL, M.D.
Director
- -------------------------------------
Director
ROBERT D. WALTER
- -------------------------------------
WILLIAM T. YOUNG
28
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ------- -----------
1. Financial Statements
The consolidated financial statements to be included in Part II,
Item 8, are incorporated by reference to the Company's 1995 An-
nual Report to Stockholders (See Exhibit 13).
2. List of Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts for the years
ended December 31, 1995, 1994 and 1993 is included in Page S-1
of this Annual Report on Form 10-K. All other schedules are
omitted because the required information is not present or not
present in material amounts.
3. List of Exhibits
3.1 Restated Certificate of Incorporation of the Company (filed as
Exhibit 3(a) to the Company's Current Report on Form 8-K dated
February 11, 1994, and incorporated herein by reference).
3.2(a) By-laws of the Company (filed as Exhibit 2.2 to the Company's
Registration Statement on Form 8-A dated August 31, 1993, and
incorporated herein by reference).
3.2(b) Amendment to By-laws of the Company (filed as Exhibit 3(b).1 to
the Company's Current Report on Form 8-K dated February 11,
1994, and incorporated herein by reference).
4.1 Specimen Certificate for shares of Common Stock, par value $.01
per share, of the Company (filed as Exhibit 4.1 to the Company's
Form SE to Form 10-K for the fiscal year ended December 31,
1993, and incorporated herein by reference).
4.2 Columbia Hospital Corporation 9% Subordinated Mandatory Convert-
ible Note Due June 30, 1999 (filed as Exhibit 4.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, and incorporated herein by reference).
4.3 Registration Rights Agreement between the Company and The 1818
Fund, L.P. dated March 18, 1991 (filed as Exhibit 4.5 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1990, and incorporated herein by reference).
4.4 Securities Purchase Agreement by and between the Company and The
1818 Fund, L.P. dated as of March 18, 1991 (filed as Exhibit 4.6
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1990, and incorporated herein by reference).
4.5 Warrant to purchase shares of Common Stock, par value $.01 per
share, of the Company (filed as Exhibit 4.7 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1990, and incorporated herein by reference).
4.6 Registration Rights Agreement dated as of March 16, 1989, by and
among HCA- Hospital Corporation of America and the persons
listed on the signature pages thereto (filed as Exhibit (g)(24)
to Amendment No. 3 to the Schedule 13E-3 filed by HCA-Hospital
Corporation of America, Hospital Corporation of America and The
HCA Profit Sharing Plan on March 22, 1989, and incorporated
herein by reference).
29
EXHIBIT
NO. DESCRIPTION
- ------- -----------
4.7 Assignment and Assumption Agreement dated as of February 10,
1994, between HCA-Hospital Corporation of America and the Com-
pany relating to the Registration Rights Agreement, as amended
(filed as Exhibit 4.7 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993, and incorporated
herein by reference).
4.8 Amended and Restated Rights Agreement dated February 10, 1994
between the Company and Mid-America Bank of Louisville and Trust
Company (filed as Exhibit 4.8 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, and in-
corporated herein by reference).
4.9(a) $1 Billion Credit Agreement dated as of February 10, 1994 (the
"364 Day Agreement"), among the Company, the Several Banks and
Other Financial Institutions, and Chemical Bank as Agent and as
CAF Loan Agent (filed as Exhibit 4.9 to the Company's Annual Re-
port on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated herein by reference).
4.9(b) Agreement and Amendment to the 364 Day Agreement dated as of
September 26, 1994 (filed as Exhibit 4.9 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
4.9(c) Agreement and Amendment to the 364 Day Agreement dated as of
February 28, 1996 (which Agreement and Amendment is filed here-
with).
4.10(a) $2 Billion Credit Agreement dated as of February 10, 1994 (the
"Credit Facility"), among the Company, the Several Banks and
Other Financial Institutions, and Chemical Bank as Agent and as
CAF Loan Agent (filed as Exhibit 4.10 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993,
and incorporated herein by reference).
4.10(b) Agreement and Amendment to the Credit Facility dated as of Sep-
tember 26, 1994 (filed as Exhibit 4.10 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
4.10(c) Agreement and Amendment to the Credit Facility dated as of Feb-
ruary 28, 1996 (which Agreement and Amendment is filed here-
with).
4.11 Indenture dated as of December 15, 1993 between the Company and
The First National Bank of Chicago, as Trustee (filed as Exhibit
4.11 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993, and incorporated herein by refer-
ence).
10.1 Agreement and Plan of Merger among the Company, COL Acquisition
Corporation and Healthtrust, Inc.--The Hospital Company dated as
of October 4, 1994 (filed as Exhibit 2 to the Company's Regis-
tration Statement on Form S-4 (File No. 33-56803), and incorpo-
rated herein by reference).
10.2 Agreement and Plan of Merger among the Company, CHOS Acquisition
Corporation and HCA-Hospital Corporation of America dated as of
October 2, 1993 (filed as Exhibit 2 to the Company's Registra-
tion Statement on Form S-4 (File No. 33-50735), and incorporated
herein by reference).
10.3 Agreement and Plan of Merger between Galen Health Care, Inc. and
the Company dated as of June 10, 1993 (filed as Exhibit 2 to the
Company's Registration Statement on Form S-4 (File No. 33-
49773), and incorporated herein by reference).
30
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.4 Agreement and Plan of Merger among Hospital Corporation of Amer-
ica, HCA- Hospital Corporation of America and TF Acquisition,
Inc. dated November 21, 1988 plus a list identifying the con-
tents of all omitted exhibits to the Agreement and Plan of
Merger plus an agreement of Hospital Corporation of America to
furnish supplementally to the Securities and Exchange Commission
upon request a copy of all omitted exhibits (filed as Exhibit 2
to Hospital Corporation of America's Current Report on Form 8-K
dated November 21, 1988, and incorporated herein by reference).
10.5 Amendment No. 1 to Agreement and Plan of Merger dated as of Feb-
ruary 7, 1989, among Hospital Corporation of America, HCA-Hospi-
tal Corporation of America and TF Acquisition, Inc. (filed as
Exhibit 2(b) to Hospital Corporation of America's Annual Report
on Form 10-K for the year ended December 31, 1988, and incorpo-
rated herein by reference).
10.6 Columbia Hospital Corporation Stock Option Plan (filed as Ex-
hibit 10.13 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990, and incorporated herein by
reference).*
10.7 Columbia Hospital Corporation 1992 Stock and Incentive Plan
(filed as Exhibit 10.14 to the Company's Registration Statement
on Form S-1 (Reg. No. 33-48886), and incorporated herein by ref-
erence).*
10.8 Columbia Hospital Corporation Outside Directors Nonqualified
Stock Option Plan (filed as Exhibit 28.1 to the Company's Regis-
tration Statement on Form S-8 (File No. 33-55272), and incorpo-
rated herein by reference).*
10.9 HCA-Hospital Corporation of America 1989 Nonqualified Stock Op-
tion Plan, as amended through December 16, 1991 (filed as Ex-
hibit 10(g) to HCA-Hospital Corporation of America's Registra-
tion Statement on Form S-1 (File No. 33-44906), and incorporated
herein by reference).*
10.10 Form of Stock Option Agreement under the HCA-Hospital Corpora-
tion of America 1989 Nonqualified Stock Option Plan (filed as
Exhibit 10(j) to HCA-Hospital Corporation of America's Annual
Report on Form 10-K for the year ended December 31, 1989, and
incorporated herein by reference).*
10.11 HCA-Hospital Corporation of America Nonqualified Initial Option
Plan (filed as Exhibit 4.6 to the Company's Registration State-
ment on Form S-3 (File No. 33-52379), and incorporated herein by
reference).*
10.12 Termination Agreement between the Company and Carl F. Pollard
dated December 16, 1993 (filed as Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1993, and incorporated herein by reference).*
10.13 Form of Indemnity Agreement with certain officers and directors
(filed as Exhibit 10(kk) to Galen Health Care, Inc.'s Registra-
tion Statement on Form 10, as amended, and incorporated herein
by reference).
10.14 Form of Severance Pay Agreement between Galen Health Care, Inc.
and certain executives (filed as Exhibit 10(jj) to Galen Health
Care, Inc.'s Registration Statement on Form 10, as amended, and
incorporated herein by reference).*
10.15 Form of Severance Agreement between HCA-Hospital Corporation of
America and certain executives dated as of November 1, 1993
(filed as Exhibit 10.15 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and incorpo-
rated herein by reference).*
31
EXHIBIT
NO. DESCRIPTION
- ------- -----------
10.16 Assumption Agreement among the Company, CHOS Acquisition Corpo-
ration and HCA-Hospital Corporation of America dated as of Feb-
ruary 10, 1994, relating to the Severance Agreements (filed as
Exhibit 10.16 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein
by reference).*
10.17 Form of Severance Pay Agreement between the Company and certain
executives dated as of June 10, 1993 (filed as Exhibit 10.17 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, and incorporated herein by reference).*
10.18 Form of Galen Health Care, Inc. 1993 Adjustment Plan (filed as
Exhibit 4.15 to the Company's Registration Statement on Form S-8
(File No. 33-50147), and incorporated herein by reference).*
10.19 Columbia/HCA Healthcare Corporation Annual Incentive Plan (filed
as Exhibit 10.19 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein
by reference).*
10.20 Columbia/HCA Healthcare Corporation Directors' Retirement Policy
(filed as Exhibit 10.20 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, and incorpo-
rated herein by reference).*
10.21 HCA-Hospital Corporation of America 1992 Stock Compensation Plan
(filed as Exhibit 10(t) to HCA-Hospital Corporation of America's
Registration Statement on Form S-1 (File No. 33-44906), and in-
corporated herein by reference).*
10.22 Columbia/HCA Healthcare Corporation 1995 Management Stock Pur-
chase Plan (which plan is filed herewith).*
10.23 Employment Agreement, dated November 15, 1993 by and between
Medical Care America, Inc. and Donald E. Steen (which agreement
is filed herewith).*
10.24 Employment Agreement, dated April 24, 1995 by and between the
Company and R. Clayton McWhorter (which agreement is filed here-
with).*
11 Statement re Computation of Earnings Per Common and Common
Equivalent Share.
12 Statement re Computation of Ratio of Earnings to Fixed Charges.
13 Portions of the 1995 Annual Report to Stockholders of the Compa-
21 ny.
List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Sr. Judith Ann Karam, CSA.
27 Financial Data Schedule.
- --------
* Management compensatory plan or arrangement.
32
COLUMBIA/HCA HEALTHCARE CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN MILLIONS)
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND DEDUCTIONS AT END
OF PERIOD EXPENSES OR PAYMENTS OF PERIOD
---------- ---------- ----------- ---------
Allowances for doubtful accounts:
Year ended December 31, 1993..... $583 $699 $(645) $637
Year ended December 31, 1994..... 637 853 (706) 784
Year ended December 31, 1995..... 784 998 (881) 901
S-1