Jack O. Bovender

1

• Jack O. Bovender
• Chairman CEO

2
Health Care Market Outlook Strong
National Health Care Spending 1990 2010
U.S. Healthcare Expenditures ( Billions)
12.0
13.4
13.3
14.8
15.4
15.9
16.4
17.1
National Health Care Expenditures as a Share of
Total GDP
Will the U.S. economy shift 2.3 of GDP to health
care services over the next seven years?
Source U.S. Centers for Medicare and Medicaid
ServicesNational Health Expenditure Projections,
2003
3
Inpatient Admissions and Outpatient Visits 1980
- 2002
Inpatient Admissions
Outpatient Visits (millions)
Admissions (millions)
Outpatient Visits
Source AHA Annual Survey, 1980 - 2002
4
HCA Annual Environmental ReviewKey Findings and
Actions, October 2003

• HCAs core business strategy is sound. The
  Companys focus will continue to be on
  market-leading positions in large, fast-growing
  urban communities.
• To compete more effectively in the outpatient
  area, the Company will establish a senior level
  operational unit focused on outpatient services.
  HCA anticipates making strategic acquisitions in
  outpatient services. (Marilyn Tavenner,
  President Outpatient Services, effective January
  1, 2004)
• The Company intends to reduce capital
  expenditures from approximately 2 billion in
  2003, to approximately 1.8 billion in 2004
  (excluding acquisitions).
• HCA anticipates lowering its target ratio of
  debt-to-total capitalization from 55 to the low
  50s by mid-to-late 2005.

5
HCA Annual Environmental ReviewKey Findings and
Actions, October 2003

• The Companys current 1.5 billion share
  repurchase program will be completed in a
  judicious manner, as dictated by market
  conditions.
• HCAs Senior Management and Board of Directors
  are evaluating a change to the Companys existing
  dividend policy and expected to announce any
  changes in the Companys existing dividend policy
  in the first quarter of 2004. (New quarterly
  dividend of 0.13 per share to be paid June 1,
  2004).
• The company has revised its long-term earnings
  per share growth target after 2004 (rebasing for
  outlier reductions and higher bad debts) from
  mid-teens to low-double digits.

6
Strong Cash Flow Trends Provide Opportunities
Net Cash Provided by Operating Activities Dollars
in Millions
Capital Reinvestment
Balance Sheet
Share Repurchase Program
New Dividend Policy
Excluding settlements with government agencies
and investigation related costs.
7
HCA Capital Expenditures
Billions
2000 1.2
2001 1.4
2002 1.7
2003 1.8
2004E 1.8
Expansions
Open Heart,
Imaging Cardiology, Oncology, etc.
54 Facilities with
Surgery and/or ICU/CCU expansions
Four New Facilities 378 Beds
1,565 New Beds
Distribution of Capital Dollars 2002 and Beyond
8
Opportunities Of Having Strong Cash Flow
Share repurchase program
42.19/share
35.76/share
YTD 20041
7.3 Billion 244 Million Shares 38 of
outstanding shares Average Price 30.03
422M 10.0M Shares
45.53/share
2003
1.1B 31.1M Shares
2002
36.88/share
282M 6.2M Shares
706M 19.2M Shares
2001
28.65/share
2000
1.3B 43.5M Shares
24.61/share
1.4B 55.6M Shares
1999
22.68/share
930M 41M Shares
1998
33.59/share
1997
1.3B 37.9M Shares
1 2004 purchases through 5-6-04
2 Includes other activities affecting share
balance (stock option exercises, restricted
grants, and ESPP activity).
9
Our Commitment To
our Mission Values
the Care and Safety of Our Patients
Ethics and Compliance
Diversity
Transparency of Earnings
Reinvestment in Our Facilities
Enhancing Shareholder Value
10
The Genesis of the Bad Debt/Charity Care Issue
HCA is in 14 of the 20 highest uninsured states,
with 72 of its hospitals in those states
17.0
13.1
13.1
22.2
21.2
15.9
National Average 15.2 1
19.3
19.2
18.1
15.1
15.4
15.4
16.4
23.5
20.3
14.6
23.5
HCA Weighted Average 22.6 2
16.7
19.7
29.7
25.6
22.8
22.2
gt20 Uninsured
15-20 Uninsured
lt15 Uninsured
1 U.S. Census Bureau Health Insurance
Coverage in the United States 2002. 2 Kaiser
Commission Health Ins. Coverage of Nonelderly
Adults 2001-2002.
11
Bad Debt, Charity Care, and Accounts Receivable
Management
Milton JohnsonSenior Vice President
ControllerJoe SteakleySenior Vice President -
Internal Audit Beverly WallacePresident
Financial Services Group
12
Milton JohnsonSenior Vice President Controller
2
13
Bad Debts CharityQuarterly Trending
Bad Debts Charity
912
837
795
786
1B
610
587
567
514
491
0
Charity
Bad Debts
Bad Debts/Net Revenue
3
14
Origination of Bad Debt Expense
Source of Bad Debt Expense1
Uninsured Patients

75-80
Co-Pay Deductibles

20-25
1. Management estimate for 12 month period
ending 3/31/2004.
4
15
Uninsured Volume Same Facility - Percent Change
from Prior Year
Uninsured Admissions
Three quarters of stabilization
13.7 vs. PY
11.5 vs. PY
7.2 vs. PY
7.5 vs. PY
2.4 vs. PY
Two quarters of stabilization
Uninsured/Charity ER Visits
(In Thousands)
19.9 vs. PY
9.4 vs. PY
17.9 vs. PY
5.1 vs. PY
3.2 vs. PY
Source QMIRS/CASEMIX . Same facility based on
current same facility definition for all quarters.
5
16
Uninsured/Charity Volume Same Facility - Percent
of Total
Uninsured/Charity Admissions
(Percent of Total)
Uninsured/Charity ER Visits
(Percent of Total)
Source CASEMIX. Same facility based on current
same facility definition for all quarters.
6
17
Uninsured Revenues Consolidated - Percent Change
from Prior Year
Uninsured Net Revenue
(In Millions)
38.4 vs. PY
32.3 vs. PY
20.1 vs. PY
3.2 vs. PY
1.6 vs. PY
7
18
Uninsured Revenues Consolidated - Percent of Total
Uninsured Net Revenue
(Percent of Total)
8
19
Self-Pay Accounts Receivable Balance Sheet
Analysis
3/31/04 Total Self-Pay A/R 3,209
Approximately two-thirds Uninsured and one-third
co-pay deductibles A/R
Q1/03-Q1/04 Chg. Increase in Self-Pay
A/R1 550
Approximately 75 of increase is from uninsured
accounts and 25 from co-pay deductibles.
1 Hospital Only
9
20
Unreserved Self-Pay Accounts Receivable(Dollars
in Millions)
10
21
Accounts Receivable IndicatorsCash Collections
Adj. Net Revenue / Days in A/R
2003
2004
2002
Cash Collections Adjusted Net Revenue
Days in Accounts Receivable
11
22
Change in Hospital Accounting PolicyBad Debts
Move to reserving a percentage of Uninsured and
Co-insurance accounts receivable, and unbilled
uninsured revenue during the period.
Each hospitals uncollectability percentage will
be updated quarterly based on the hindsight
analysis results.
Aggregate uncollectability percentage will
decrease due to inclusion of unbilled uninsured
revenue in base.
To be fully implemented in 2Q 2004
12
23
Joe SteakleySenior Vice President - Internal
Audit
13
24
Scope of Quarterly Hindsight Project

• Hindsight now performed quarterly
• Over 2,000 hours per quarter to complete
• Each Hindsight Project
• Test approx. 130 hospitals
• Sample comprising 90-95 of the Companys
  Hospital billed patient A/R and Net Revenue
• The resulting Day Metric applied to 163 hospitals
• Remaining 27 of 190 Hospitals
• HealthONE 6
• Recent Acquisitions/New Facilities 13
• International 8

14
25
Hindsight Theory
Best Predictor of Current Allowance is Past
Results
January 31, January
31, 2003 2004
15
26
1/31/03 - Hindsight Date
2/1/03 lt- Hindsight Period -gt 1/31/04
A/R gt 1 yr
Bad Debt Charity Write-Offs
Recoveries
Collected or Contractual
Source 134 hindsight hospitals reviewed 1Q 2004
16
27
Hindsight Allowance Calculation
(in millions)
(BC)
Source 134 hindsight hospitals reviewed 1Q 2004.
17
28
Conversion of Hindsight Allowance to a Day Metric
Hindsight Allow. expressed as a Day Metric
110 days Hindsight Allow. as a Percent of
1/31/03 Total A/R 39.4 Hindsight Allow. as a
Percent of 1/31/03 Self Pay A/R 89.4
18
29
Roll Forward of 110 Day Metric to 3/31/04
Consolidated A/R Agings to Determine the
Recommended Allowance
Recommended Allowance based on a 110-day Day
Metric 2,710 Recommended
Allowance based on 89.4 of 3/31/04 Self Pay A/R
2,701
19
30
Recorded Allowance as a of Self Pay A/R
20
31
1Q 2004 Allowance Adjustment
(in millions)
21
32
New Hospital Allowance Methodology
(in millions)
22
33
Beverly WallacePresident Financial Services
Group
23
34
Uninsured admissions are relatively small
opportunities exist for non-emergent admissions
Admissions 403,664 ?2.5
Non-Emergency 193,662 48
Emergency 210,002 52
48
52
Medicare 103,820
Uninsured 13,313 74
Managed/ Medicaid 92,869
Medicare 62,554
Uninsured 4,631 26
Managed/ Medicaid 126,477
74
26
Net Change 1Q03-04
Net Change 1Q03-04
?
?
?
?
?
?
?
?
1st Quarter 2004 Eastern Western Groups
24
35
ER has the highest volume of uninsured requires
intervention
ER Visits 1,235,641 ?2.3
ER Visits 1,025,639
Admitted 210,002
17
83
Medicare 103,820
Uninsured 13,313
Managed/ Medicaid 92,869
Medicare 109,235
Uninsured 231,436 95
Managed/ Medicaid 684,968
95
5
Net Change 1Q03-04
Net Change 1Q03-04
?
?
?
?
?
?
?
?
1st Quarter 2004 Eastern Western Groups
25
36
Net Income Improvement Opportunity Similar
Between Co-Pay/Deductible and Uninsured Accounts
2003
Co-pay Deductibles Bad Debt
Charity/Uninsured Bad Debt
600 Million
2.4 Billion
(Carried at Gross)
Cost to Charge Ratio Full Absorption
25-30
(Carried at Net)
600-720 Million
Cost to HCA
26
37
Origination of Bad Debt Expense
How System is Accessed
75-80 Uninsured Patients
20-25 Co-Pay Deductibles

• ?1Q 01 vs. 1Q 04 front-
• end collections ?93,
• percent collected ?53,
• co-pays/deductibles
• ? 25
• ? Intensify collections at
• discharge and post
• discharge
• Minimum front-end
• deposit requirements

27
38
Bad Debt Action Plan

• ? Patient Financial
• Management Committee
• ? In-house case management
• ? Concurrent financial
• counseling
• ? Standard discharge
• process

• Follow-up care
• criteria established.

• Screen all potential
• non-emergent
• patients by
• qualified medical
• personnel
• Once stabilized or
• deemed
• non-emergent,
• proceed
• with collection effort
• ? Mandatory ER case
• management

• Executive
• Management
• approval must be
• obtained
• ? Minimum deposit
• standards
• ? Enhanced front-end
• collection goals

28
39
Net Revenue ImpactUnderpayment Recoveries /
Overturned Denials
29
40
Cost to Collect
Black line indicates Baseline cost
30
41
Focused Area of Opportunities

• Improve front-end collections
  (co-pay/deductibles)
• Simplify charity process
• Case management (ER
  Inpatient)
• Non-emergent screening (ER
  Inpatient)

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43

• Richard M. Bracken
• President Chief Operating Officer

44

• Patient Volumes
• Outpatient Services
• Managed Care Pricing
• Labor Management
• Kansas City

2
45
Q1 2004Inpatient Volumes
Improved From Recent Trends

Admissions
1999
2000
2001
2002
2003
2004
Admissions (000s) ? from PY
Admissions (000s)
Same Facility Admissions in Thousands
3
46
Admissions growth rates vary by market
Average Chg. 2.5 1
Admissions Change
Total Admissions Determine Bubble Size
Admissions Change
1 Same Facility 2 Denver is a non-consolidating
JV Market
Volume Variance by Market 1st Quarter Same
Market
4
47
Q1 2004Top 15 Markets Performing Above
Company Average
Average Chg. 2.5 1
Top 15 Markets in Admissions Growth 11,860/ 5.9
vs. PY
Top 15 Markets represent 49 of Total Company
Admissions
Total Admissions Determine Bubble Size
1 Same Facility 2 Denver is a non-consolidating
JV Market
Volume Variance by Market 1st Quarter Same
Market
5
48
Q1 2004Bottom 15 Markets Performing
Below Company Average
Bottom 15 Markets represent 25 of Total Company
Admissions
Average Chg. 2.5 1
200
100
-
(100)
(200)
(300)
Admissions Change
(400)
(500)
Bottom 15 Markets in Admissions
Growth -2,773/ -2.6 vs. PY
(600)
Total Admissions Determine Bubble Size
(700)
(800)
(900)
-14
-12
-10
-8
-6
-4
-2
0
2
4
Admissions Change
1 Same Facility
Volume Variance by Market 1Q 04 vs. PY Same
Facility
6
49
Q1 2004Big Earners Had Strong Admissions
Growth
Dallas/ Ft. Worth
Denver
Top 15 Earnings markets (69 of Companys
earnings1) grew 3.52. (Company Avg. 2.5)
Tampa Bay
Houston
Richmond
Nashville
San Antonio
U.K.
S. Carolina
Panhandle
Dade
1 Includes Denver A non-consolidating JV
Market 2 Same facility Q1 04 vs. Prior Year
Utah
Jacksonville
N. Cent. Fla.
Las Vegas
7
50
Capital Placed in Service by Year
(Dollars in Millions)
8
51
Capital Investment Strategy Supports Improved
Admissions Growth
Average Chg. 2.5 1
Same Market
970M in Major Projects completed in 16 Markets
1st Quarter Admissions Change
Total Admissions Determine Bubble Size
1st Quarter Admissions Change
1 Same Facility 2 Denver is a non-consolidating
JV Market
Markets with Major Project Completions 2Q03-4Q03
9
52
Q1 2004Some Rebound In Inpatient
Surgeries
Inpatient Surgeries
1999
2000
2001
2002
2003
2004
Inpatient Surgeries
Inpatient Surgeries - Change from Prior Year
Same Facility Surgeries in Thousands
10
53
Q1 2004Outpatient trends show slight recovery
Outpatient Surgeries
2001
2002
2003
2004
Hospital Based
Outpatient Surgeries
ASC Based
Same Facility
11
54
Q1 2004Outpatient trends show slight recovery
Outpatient Surgeries
2001
2002
2003
2004
Outpatient Surgeries - Change from Prior Year
HOSPITAL BASED
ASC BASED
Same Facility Percent Change from Prior Year
12
55
Outpatient Diagnostic Services

2002
2003
2004
CT Scan
MRI
Cardiac Cath
Same Facility Percent Change from Prior Year
13
56
HCA Patient Volume Key Observations

• Despite improved Q1, too soon to declare recovery
• Admission growth rates vary widely by market
• Hospitals comprising majority of revenue base
  (58 of Revenues) performing better than Company
  averages (Excluding Houston)
• Uninsured had modest impact on patient growth
  rates in Q1
• Capital investment strategy supports improved
  admissions growth
• Surgical trends improved Q1 04

14
57
Outpatient Services
15
58
Outpatient Services comprised of three business
lines
2003 of HCA Net Revenue
As a of Outpatient Surgeries
70
Hospital Based
Outpatient Surgeries
15.3
ASC Based
30
16
59
Delivered in Two Distinct Locations

• Hospital Based
• Service/convenience strategy i.e. improved
  access, dedicated parking, shortened registration
  process and extended hours of scheduling.
• Physician service/preference strategy i.e. same
  day appointments, rapid report turn around, block
  OR scheduling, integrated patient scheduling, and
  on-line clinical reports.
• Competitive managed care pricing

17
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Delivered in Two Distinct Locations

• Freestanding Surgery Centers (ASCs)
• 76 Centers Operational
• 11 new centers coming on line over next 12 months
• 8 additional projects in various stages of
  development (12-18 month horizon)
• 25 other projects currently under review
• Dedicated division based development teams
  (increase pipeline)
• Recruiting surgical specialties (offer ownership
  opportunities as a component of recruitment
  package)
• Adding capacity to existing ASCs
• Modifying equity model/re-syndication as
  appropriate
• Reserving space in new MOBs for outpatient units

18
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Delivered in Two Distinct Locations

• Freestanding Imaging Centers
• 10-15 sites in planning and expected to come on
  line over the next 12 months
• 16 sites under review or with letters of intent
  for acquisition / joint venture
• Investing capital in freestanding imaging,
  cardiac cath and radiation oncology centers
  (includes ownership opportunities for physicians)
• Acquisition strategy more likely in mature
  markets such as Florida and Texas
• Build strategy more likely in less mature
  markets such as Colorado, Virginia, Georgia, and
  South Carolina
• Developing full-service models (oncology,
  cardiology, orthopedics) as opposed to single
  modality centers (minimizes risk due to
  reimbursement changes or exclusion from
  contracts)

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Managed Care Pricing
20
63
2004 Managed Care Contracting
6,844 Facility Level Active Contracts
2005 Contract Pricing Timeline
1Q04
2Q04
3Q04
4Q04
Pre-2004
2005 Cumulative
Anticipated Completion Dates
Net Revenue per Adjusted Admission Managed Care
Other Discounted
11.1
9.9
83 of 2004 and 42 of 2005 contracts completed.
21
64
Operating Expenses
22
65
Bad Debt Impact on Operating Expenses per
Adjusted Admission

2001
2002
2003
2004
Operating Expenses/AA Percent Change from Prior
Year
Same Facility Percent Change from Prior Year
23
66
Labor costs Favorable Trends Continue
67
Controlling premium labor
As a Percent of Salaries
Contract Labor
Per Adjusted Patient Day
(2nd Qtr. Actual)
(3rd Qtr. Actual)
(4th Qtr. Actual)
(1st Qtr. Actual)
35/APD
32/APD
41/APD
28/APD
24/APD
22/APD
Contract Labor/APD
15 vs. Q1
25 vs. Q1
29 vs. 03 Q1
33 vs. Q1
Consolidated
25
Eastern and Western Consolidated Operations
68
while employee satisfaction at record levels
Turnover Rate
Satisfaction Score
26
69
Supply costs driven by new technology
2001
2002
2003
2004
Supplies/AA Change from Prior Year

• HCA Initiatives
• Fully Implemented Shared Services Model.
• Created GPO now the 3rd largest group
  purchasing organization nationally.
• Division based procurement limited the number of
  vendors for high volume implants.
• Supply Management Action Teams hospital level
  program focused on supply utilization.

27
Same Facility Change from PY
70
Sharpen the Organizational Agenda

• Clinical Initiatives
• ED efficiency/wait time
• OR utilization
• ICU effectiveness
• Perinatal training
• Nosocomial Infections

28
71
Market Update Kansas City
Market Summary Highlights

• IT Systems deployed
• Managed Care Contract renewal complete 04
  average increase 9
• Reduced Salaries Wages 30M or 562 FTEs (190
  were overhead infrastructure)
• Won unionization attempt at Research Med Center
  (largest facility)

• New management structure in place
• Admission run rate stabilizes turns positive in
  first 12 months
• 71M in capital expenditures in 1st year (450M
  committed)
• Re-opened Trauma Services and Heart Program in
  Market
• Recruited 19 new physicians

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73

• Frank Houser, M.D.
• Corporate Medical Director Senior Vice
  President, Quality

74
Electronic Medication Administration Record(eMAR)

• Serious Preventable Adverse Drug Events occur in
  2 of all hospital admissions and result in
  increased costs through extended length of stays,
  increased resource use, and greater malpractice
  costs.
• eMAR is proving very effective in reducing
  medication errors in HCA hospitals by at least
  one-third.
• eMAR is better patient care that saves money.

2
75
Electronic Provider Order Management(ePOM)

• 34 hospitals have applied to pilot the ePOM
  software that our physicians helped develop with
  Meditech. Ten will be selected.
• The software will provide significant competitive
  advantage to our hospitals beginning in 2005.
• The combination of eMAR and ePOM will
  dramatically reduce Medication Errors and
  Preventable Adverse Drug Events in HCA hospitals.

3
76
Quality Outcomes
Data Source HCA Data CHOIS Natl Comparative
Data - Solucient
CABG DRG 106, 107, or 109
4
77
Cardiovascular

• HCA Cardiovascular Centers of Excellence internal
  recognition program developed in conjunction with
  our physician panel to begin in fourth quarter.

5
78
Perinatal

• All 3,800 Labor and Delivery nurses in the HCA
  system are AHWONN certified in the interpretation
  of fetal monitoring.
• Better OB outcomes mean increased C-Sections,
  less VBACs, and less forceps and vacuum
  extractions.
• The frequency of OB malpractice claims at HCA
  have significantly decreased.
• Another competitive advantage for HCA hospitals.

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79
Acute Med/Surg without CV Surgery
7
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