HCA Healthcare, Inc. (HCA)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This quarterly report on Form 10-Q includes certain disclosures that contain “forward-looking statements” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments, expected inflationary pressures, expected labor costs and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) changes in or related to general economic or business conditions nationally and regionally in our markets, including inflation, and the impact of trade policies, including changes in, or the imposition of, tariffs and/or trade barriers; changes in revenues resulting from declining patient volumes; changes in payer mix (including increases in uninsured and underinsured patients); potential increased expenses related to labor, pharmaceuticals, supply chain or other expenditures; workforce disruptions; supply and pharmaceutical shortages and disruptions (including as a result of tariffs or geopolitical disruptions); and the impact of federal government shutdowns, holds on or cancellations of congressionally authorized spending and interruptions in the distribution of governmental funds, (2) the impact of current and future health care public policy developments and the implementation of new, and possible changes to existing, federal, state or local laws and regulations affecting health care spending or the health care industry, including the expiration at the end of 2025 of enhanced premium tax credits (“EPTCs”) for eligible individuals purchasing insurance coverage through federal and state-based health insurance exchanges (the “Exchanges”), changes in the structure and administration of, and funding for, federal and state agencies and programs, effects of the 2025 Federal Budget Act (the “FBA”) and efforts to address health care affordability, (3) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and the potential for future deficit or other spending reduction legislation that may alter current spending reductions, which include cuts to Medicare payments, or impose additional spending reductions, (5) the ability to achieve operating and financial targets, develop and execute resiliency plans to offset to the extent possible impacts from the FBA, the expiration of EPTCs and tariffs, attain expected levels of patient volumes and revenues and service mix, and control the costs of providing services, (6) the impact of reductions or other changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs and state directed payment (“SDP”) arrangements, any of which may negatively impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (7) the results of our efforts to use technology and resilience initiatives, including artificial intelligence and machine learning, to drive efficiencies, better outcomes and an enhanced patient experience, (8) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (9) personnel-related capacity constraints, increases in wages and the ability to attract, utilize and retain qualified management and other personnel, including affiliated physicians, nurses and medical and technical support personnel, (10) the highly competitive nature of the health care business, (11) changes in service mix, revenue mix and service volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (12) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (13) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (14) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (15) changes in accounting practices, (16) the emergence of and effects related to pandemics, epidemics and outbreaks of infectious diseases or other public health crises, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving or failure to receive payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) the impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of actual and potential cybersecurity incidents or security breaches involving us or our vendors and other third parties, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, including Hurricanes Milton and Helene, physical risks from changing global weather patterns or similar events beyond our control on our assets and activities and the communities we serve, (25) changes in U.S. federal, state, or foreign tax laws, interpretations of tax laws by taxing authorities, other standard setting bodies or judicial decisions, (26) changes to, and the timing and amount of future approvals (if any) of, state Medicaid directed and supplemental payments and (27) other risk factors described in our annual report on Form 10-K for the year ended December 31, 2025 and our other filings with the Securities and Exchange Commission. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Second Quarter 2026 Operations Summary

Revenues increased to $20.230 billion in the second quarter of 2026 from $18.605 billion in the second quarter of 2025. Net income attributable to HCA Healthcare, Inc. totaled $1.699 billion, or $7.62 per diluted share, for the quarter ended June 30, 2026, compared to $1.653 billion, or $6.83 per diluted share, for the quarter ended June 30, 2025. Second quarter results for 2026 and 2025 include gains on sales of facilities of $10 million, or $0.03 per diluted share, and losses on sales of facilities of $3 million, or $0.01 per diluted share, respectively. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 222.828 million shares for the quarter ended June 30, 2026 and 241.911 million shares for the quarter ended June 30, 2025. During 2025 and the first six months of 2026, we repurchased 26.739 million shares and 7.909 million shares, respectively, of our common stock.

Revenues increased 8.7% on a consolidated basis and 9.3% on a same facility basis for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. The increase in consolidated revenues can be primarily attributed to the combined impact of a 6.0% increase in revenue per equivalent admission and a 2.6% increase in equivalent admissions. The same facility revenues increase primarily resulted from the combined impact of a 6.4% increase in same facility revenue per equivalent admission and a 2.7% increase in same facility equivalent admissions. The second quarter of 2026 includes incremental revenues of $1.372 billion and other operating expenses of $829 million related to the Florida directed payment program for the time period October 1, 2024 through June 30, 2026, to reflect the impact of the state directed payment program approved during the quarter by the Centers for Medicare & Medicaid Services (“CMS”). Of those amounts, approximately $980 million of incremental revenues and $557 million of other operating expenses related to periods prior to 2026. During the second quarter of 2026, we recognized approximately $400 million of incremental net benefit from Medicaid supplemental payment programs, including the state of Florida program.

During the quarter ended June 30, 2026, consolidated admissions increased 2.4% and same facility admissions increased 2.5% compared to the quarter ended June 30, 2025. Inpatient surgical volumes declined 2.3% on both a consolidated basis and a same facility basis during the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. Outpatient surgical volumes declined 4.4% on a consolidated basis and 3.4% on a same facility basis during the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. Emergency department visits increased 3.5% on a consolidated basis and 3.6% on a same facility basis during the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. Consolidated and same facility uninsured admissions increased 23.3% and 23.4%, respectively, for the quarter ended June 30, 2026, compared to the quarter ended June 30, 2025. Uninsured admissions increased for the second quarter and first six months of 2026 reflecting impacts from the expiration of the EPTCs at the end of 2025 and administrative reforms, as well as a decline in Medicaid conversions. The second quarter increase in uninsured admissions includes the impact of attrition related to Exchange volumes from the first quarter that occurred during the second quarter.

Cash flows from operating activities declined $1.875 billion, from $4.210 billion for the second quarter of 2025 to $2.335 billion for the second quarter of 2026. The decline in cash provided by operating activities was primarily related to unfavorable working capital changes of $1.413 billion, including an increase in accounts receivable primarily related to Medicaid state directed and supplemental payment programs, as well as an increase in income taxes paid of $594 million related to the 2025 Internal Revenue Service (“IRS”) deferral of quarterly estimated income tax payments for Tennessee-based taxpayers until the fourth quarter of 2025, partially offset by a $28 million increase in net income, excluding the non-cash impact of losses and gains on sales of facilities.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Results of Operation

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The accompanying consolidated financial statements present certain information with respect to the financial position, results of operations and cash flows of HCA Healthcare, Inc. which should be read in conjunction with the following discussion and analysis. The terms “HCA,” “Company,” “we,” “our,” or “us,” as used herein, refer to HCA Healthcare, Inc. and its affiliates. The term “affiliates” means direct and indirect subsidiaries of HCA Healthcare, Inc. and partnerships and joint ventures in which such subsidiaries are partners.

Forward-Looking Statements

This annual report on Form 10-K includes certain disclosures that contain “forward-looking statements,” within the meaning of the federal securities laws, which involve risks and uncertainties. Forward-looking statements include statements regarding expected capital expenditures, expected dividends, expected share repurchases, expected net claim payments, expected inflationary pressures and all other statements that do not relate solely to historical or current facts, and can be identified by the use of words like “may,” “believe,” “will,” “expect,” “project,” “estimate,” “anticipate,” “plan,” “initiative” or “continue.” These forward-looking statements are based on our current plans and expectations and are subject to a number of known and unknown uncertainties and risks, many of which are beyond our control, which could significantly affect current plans and expectations and our future financial position and results of operations. These factors include, but are not limited to, (1) changes in or related to general economic or business conditions nationally and regionally in our markets, including inflation and the impact of trade policies, including changes in, or the imposition of, tariffs and/or trade barriers; changes in revenues resulting from declining patient volumes; changes in payer mix (including increases in uninsured and underinsured patients); potential increased expenses related to labor, pharmaceuticals, supply chain or other expenditures; workforce disruptions; supply and pharmaceutical shortages and disruptions (including as a result of tariffs or geopolitical disruptions); and the impact of federal government shutdowns, holds on or cancellations of congressionally authorized spending and interruptions in the distribution of governmental funds, (2) the impact of current and future health care public policy developments and the implementation of new, and possible changes to existing, federal, state or local laws and regulations affecting the health care industry, including the expiration at the end of 2025 of enhanced premium tax credits (“EPTCs”) for eligible individuals purchasing insurance coverage through federal and state-based health insurance marketplaces, changes in the structure and administration of, and funding for, federal and state agencies and programs, and effects of the 2025 Federal Budget Act (the “FBA”), (3) the impact of our significant indebtedness and the ability to refinance such indebtedness on acceptable terms, (4) the effects related to the implementation of sequestration spending reductions required under the Budget Control Act of 2011, related legislation extending these reductions, and the potential for future deficit or other spending reduction legislation that may alter current spending reductions, which include cuts to Medicare payments, or impose additional spending reductions, (5) the ability to achieve operating and financial targets, develop and execute resiliency plans to offset to the extent possible impacts from the FBA, the expiration of EPTCs and tariffs, attain expected levels of patient volumes and revenues, and control the costs of providing services, (6) possible reductions or other changes in Medicare, Medicaid and other state programs, including Medicaid supplemental payment programs, Medicaid waiver programs and state directed payment arrangements, any of which may negatively impact reimbursements to health care providers and insurers and the size of the uninsured or underinsured population, (7) the results of our efforts to use technology and resilience initiatives, including artificial intelligence and machine learning, to drive efficiencies, better outcomes and an enhanced patient experience, (8) increases in the amount and risk of collectability of uninsured accounts and deductibles and copayment amounts for insured accounts, (9) personnel-related capacity constraints, increases in wages and the ability to attract, utilize and retain qualified management and other personnel, including affiliated physicians, nurses and medical and technical support personnel, (10) the highly competitive nature of the health care business, (11) changes in service mix, revenue mix and service volumes, including potential declines in the population covered under third-party payer agreements, the ability to enter into and renew third-party payer provider agreements on acceptable terms and the impact of consumer-driven health plans and physician utilization trends and practices, (12) the efforts of health insurers, health care providers, large employer groups and others to contain health care costs, (13) the outcome of our continuing efforts to monitor, maintain and comply with appropriate laws, regulations, policies and procedures, (14) the availability and terms of capital to fund the expansion of our business and improvements to our existing facilities, (15) changes in accounting practices, (16) the emergence of and effects related to pandemics, epidemics and outbreaks of infectious diseases or other public health crises, (17) future divestitures which may result in charges and possible impairments of long-lived assets, (18) changes in business strategy or development plans, (19) delays in receiving payments for services provided, (20) the outcome of pending and any future tax audits, disputes and litigation associated with our tax positions, (21) the impact of known and unknown government investigations, litigation and other claims that may be made against us, (22) the impact of actual and potential cybersecurity incidents or security breaches involving us or our vendors and other third parties, (23) our ongoing ability to demonstrate meaningful use of certified electronic health record technology and the impact of interoperability requirements, (24) the impact of natural disasters, such as hurricanes and floods, including Hurricanes Milton and Helene, physical risks from changing global weather patterns or similar events beyond our control on our assets and activities and the communities we serve, (25) changes in U.S. federal, state, or foreign tax laws, interpretations of tax laws by taxing authorities, other standard setting bodies or judicial decisions, (26) changes to, and the timing and amount of future approvals (if any) of, state Medicaid directed and supplemental payments and (27) other risk factors described in this annual report on Form 10-K. As a consequence, current plans, anticipated actions and future financial position and results of operations may differ from those expressed in any forward-looking statements made by or on behalf of HCA. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this report, which forward-looking statements reflect management’s views only as of the date of this report. We undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise.

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HCA HEALTHCARE, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (Continued)

2025 Operations Summary

Net income attributable to HCA Healthcare, Inc. totaled $6.784 billion, or $28.33 per diluted share, for 2025, compared to $5.760 billion, or $22.00 per diluted share, for 2024. The 2025 and 2024 results include gains on sales of facilities of $37 million, or $0.12 per diluted share, and $14 million, or $0.04 per diluted share, respectively. The 2024 results also include additional expenses and losses of revenues estimated at approximately $250 million, or $0.73 per diluted share, related to Hurricanes Helene and Milton, which impacted our facilities in North Carolina and certain facilities in Florida. Our provisions for income taxes for 2025 and 2024 include tax benefits of $61 million, or $0.25 per diluted share, and $102 million, or $0.39 per diluted share, respectively, related to employee equity award settlements. All “per diluted share” disclosures are based upon amounts net of the applicable income taxes. Shares used for diluted earnings per share were 239.495 million shares and 261.806 million shares for the years ended December 31, 2025 and 2024, respectively. During 2025 and 2024, we repurchased 26.739 million and 17.798 million shares, respectively, of our common stock.

Revenues increased to $75.600 billion for 2025 from $70.603 billion for 2024. Revenues increased 7.1% and 6.6%, respectively, on a consolidated basis and on a same facility basis for 2025, compared to 2024. The consolidated revenues increase can be primarily attributed to the combined impact of a 2.9% increase in equivalent admissions and a 4.0% increase in revenue per equivalent admission. The same facility revenues increase resulted primarily from the combined impact of a 2.4% increase in equivalent admissions and a 4.1% increase in revenue per equivalent admission. Our revenues from Medicaid state directed and supplemental payment programs totaled approximately $6.2 billion and $5.5 billion in 2025 and 2024, respectively.

During 2025, consolidated admissions increased 2.7% and same facility admissions increased 2.3%, compared to 2024. Inpatient surgical volumes increased 0.9% on a consolidated basis and 0.4% on a same facility basis during 2025, compared to 2024. Outpatient surgical volumes declined 0.2% on a consolidated basis and 0.5% on a same facility basis during 2025, compared to 2024. Emergency room visits increased 1.6% on a consolidated basis and 1.8% on a same facility basis during 2025, compared to 2024.

The estimated cost of total uncompensated care increased $239 million for 2025, compared to 2024. Consolidated and same facility uninsured admissions increased 1.9% and 1.2%, respectively, and consolidated and same facility uninsured emergency room visits each declined 0.6% for 2025, compared to 2024.

Interest expense totaled $2.248 billion for 2025, compared to $2.061 billion for 2024. The $187 million increase in interest expense for 2025 was primarily due to an increase in the average debt balance.

Cash flows from operating activities increased $2.122 billion, from $10.514 billion for 2024 to $12.636 billion for 2025. The increase in cash flows from operating activities was related primarily to the combined impact of a $1.319 billion increase in net income, excluding gains on sales of facilities and depreciation and amortization, positive changes in working capital of $524 million and a decline in income taxes paid of $104 million.

Business Strategy

We are committed to providing the communities we serve with high quality, convenient and cost-effective health care while growing our business and creating long-term value for our stockholders. We strive to be the health care system of choice in the communities we serve by developing comprehensive networks locally and supporting these networks with enterprise expertise and economies of scale. Our strategy is organized around a framework that seeks to drive sustained growth by delivering operational excellence, attracting exceptional physicians and other health care professionals, developing comprehensive services, creating greater access, and coordinating higher quality care for patients. To achieve these objectives, we align our efforts around the following growth

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