SC TO-I/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

(RULE 14d-100)

(Amendment No. 2)

TENDER OFFER STATEMENT UNDER

SECTION 14(d)(1) OR 13(e)(1)

OF THE SECURITIES EXCHANGE ACT OF 1934

HCA INC.

(Name of Subject Company (Issuer))

HCA INC.

(Names of Filing Person (Offeror))

Common Stock, par value $.01 per share

(Title of Class of Securities)

404119109

(CUSIP Number of Class of Securities)

John M. Franck II

Vice President and Corporate Secretary

HCA Inc.

One Park Plaza

Nashville, Tennessee 37203

(615) 344-9551

(Name, Address and Telephone Number of Person

Authorized to Receive Notices and Communications on Behalf of Filing Persons)

Copies to:

James H. Cheek, III
J. Allen Overby
Bass, Berry & Sims PLC
315 Deaderick Street, Suite 2700
Nashville, Tennessee 37238
(615) 742-6200 Morton A. Pierce
Jack S. Bodner
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
(212) 259-8000

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$2,501,000,000	$316,876.70

*  Estimated for purposes of calculating the amount of the filing fee only. The amount assumes the purchase of a total of 61,000,000 shares of the outstanding common stock, par value $0.01 per share, at a price per share of $41.00 in cash.

**  The amount of the filing fee equals $126.70 per $1 million of the transaction value and is estimated in accordance with Rule 0-11 under the Securities Exchange Act of 1934.

x  Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: $316,876.70	Filing Party: HCA Inc.
Form or Registration No.: Schedule TO	Date Filed: October 13, 2004

o  Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

      Check the appropriate boxes below to designate any transactions to which the statement relates:

           o third-party tender offer subject to Rule 14d-1.

           x issuer tender offer subject to Rule 13e-4.

           o going-private transaction subject to Rule 13e-3.

           o amendment to Schedule 13D under Rule 13d-2.

      Check the following box if the filing is a final amendment reporting the results of the tender offer: o

SCHEDULE TO

      This Amendment No. 2 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO (as amended, the “Schedule TO”) filed by HCA Inc., a Delaware corporation (“HCA” or the “Company”), on October 13, 2004 pursuant to Rule 13e-4 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with its offer to purchase for cash up to 61,000,000 shares of its Common Stock, par value $0.01 per share (the “Common Stock”), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated October 13, 2004 (the “Offer to Purchase”), and in the related Letter of Transmittal, copies of which are attached to the Schedule TO as Exhibits (a)(l)(A) and (a)(l)(B), respectively (which, together with any supplements or amendments thereto, collectively constitute the “Offer”).

      The information in the Offer, including all schedules and annexes thereto, which were previously filed with the Schedule TO, is hereby expressly incorporated herein by reference into this Amendment, except that such information is hereby amended and supplemented to the extent specifically provided herein.

Item 12. Exhibits.

      Item 12 of the Schedule TO is hereby amended by adding the following exhibits:

(a)(5)(F)	Press Release dated October 22, 2004 (included as Exhibit 99.1 to the Company’s Current Report on Form 8-K dated October 22, 2004, and incorporated herein by reference).
(a)(5)(G)	Transcript of Conference Call on October 22, 2004.
(a)(5)(H)	Revised Transcript of Conference Call on October 13, 2004.
(b)(5)	Amendment Letter, dated as of October 21, 2004, to $2.25 Billion Senior Credit Facilities Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc. and JPMorgan Chase Bank.
(b)(6)	Amendment Letter, dated as of October 21, 2004, to $1.5 Billion Senior Credit Facility Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Arrangers, JPMorgan Chase Bank and Merrill Lynch Capital Corporation as Agents.

SIGNATURE

      After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

HCA INC.

By:  /s/ R. MILTON JOHNSON

Name:     R. Milton Johnson

Title: Executive Vice President and Chief

Financial Officer

Dated: October 22, 2004

EXHIBIT INDEX

Exhibit
No.		Description
	(a)(1)(A)	Offer to Purchase, dated October 13, 2004.*
	(a)(1)(B)	Letter of Transmittal (including Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9).*
	(a)(1)(C)	Notice of Guaranteed Delivery.*
	(a)(1)(D)	Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
	(a)(1)(E)	Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.*
	(a)(1)(F)	Form of Letter to Participants in the Amended and Restated HCA Employee Stock Purchase Plan.*
	(a)(1)(G)	Form of Letter to Participants in the HCA 401(k) Plan.*
	(a)(5)(A)	Press Release dated October 13, 2004, announcing the Offer.*
	(a)(5)(B)	Press Release dated October 13, 2004, announcing HCA’s preliminary third quarter results.*
	(a)(5)(C)	Form of Summary Advertisement.*
	(a)(5)(D)	Letter to Shareholders.*
	(a)(5)(E)	Transcript of Conference Call on October 13, 2004.**
	(a)(5)(F)	Press Release dated October 22, 2004 (included as Exhibit 99.1 to the Company’s Current Report on Form 8-K dated October 22, 2004, and incorporated herein by reference).
	(a)(5)(G)	Transcript of Conference Call on October 22, 2004.
	(a)(5)(H)	Revised Transcript of Conference Call on October 13, 2004.
	(b)(1)	$2.25 Billion Senior Credit Facilities Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc. and JPMorgan Chase Bank.*
	(b)(2)	$1.5 Billion Senior Credit Facility Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Arrangers, JPMorgan Chase Bank and Merrill Lynch Capital Corporation as Agents.*
	(b)(3)	$2.5 Billion Credit Agreement, dated April 30, 2001, among the Company, The Several Banks and Other Financial Institutions (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, and incorporated herein by reference).
	(b)(4)	First Amendment to the April 2001 $2.5 Billion Credit Agreement dated as of October 14, 2003 (filed as Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and incorporated herein by reference).
	(b)(5)	Amendment Letter, dated as of October 21, 2004, to $2.25 Billion Senior Credit Facilities Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc. and JPMorgan Chase Bank.
	(b)(6)	Amendment Letter, dated as of October 21, 2004, to $1.5 Billion Senior Credit Facility Commitment Letter, dated October 12, 2004, by and among the Company, J.P. Morgan Securities Inc., Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Arrangers, JPMorgan Chase Bank and Merrill Lynch Capital Corporation as Agents.
	(d)(1)	Columbia Hospital Corporation Stock Option Plan (filed as Exhibit 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).
	(d)(2)	Amended and Restated Columbia/HCA Healthcare Corporation 1992 Stock and Incentive Plan (filed as Exhibit 10.7(b) to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, and incorporated herein by reference).
	(d)(3)	First Amendment to Amended and Restated Columbia/HCA Healthcare Corporation 1992 Stock and Incentive Plan (filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference).

Exhibit
No.		Description
	(d)(4)	Columbia Hospital Corporation Outside Directors Nonqualified Stock Option Plan (filed as Exhibit 28.1 to the Company’s Registration Statement on Form S-8 (File No. 33-55272), and incorporated herein by reference).
	(d)(5)	HCA-Hospital Corporation of America 1989 Nonqualified Stock Option Plan, as amended through December 16, 1991 (filed as Exhibit 10(g) to HCA-Hospital Corporation of America’s Registration Statement on Form S-1 (File No. 33-44906), and incorporated herein by reference).
	(d)(6)	HCA-Hospital Corporation of America Nonqualified Initial Option Plan (filed as Exhibit 4.6 to the Company’s Registration Statement on Form S-3 (File No. 33-52379), and incorporated herein by reference).
	(d)(7)	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).
	(d)(8)	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 incorporated herein by reference).
	(d)(9)	Columbia/HCA Healthcare Corporation Outside Directors Stock and Incentive Compensation Plan, as amended and restated (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference).
	(d)(10)	First Amendment to the Columbia/HCA Healthcare Corporation Outside Directors Stock and Incentive Compensation Plan, as amended and restated September 23, 1999, dated as of May 25, 2000 (filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, and incorporated herein by reference).
	(d)(11)	HCA Inc. Amended and Restated Management Stock Purchase Plan (filed as Exhibit C to the Company’s Proxy Statement for the Annual Meeting of Stockholders on May 27, 2004, and incorporated herein by reference).
	(d)(12)	Amended and Restated HCA Employee Stock Purchase Plan.*
	(d)(13)	HCA Directors’ 2004 Compensation/Fees Policy adopted July 24, 2003 (filed as Exhibit 10.24 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and incorporated herein by reference).
	(d)(14)	Columbia/HCA Healthcare Corporation 2000 Equity Incentive Plan (filed as Exhibit A to the Company’s Proxy Statement for the Annual Meeting of Shareholders on May 25, 2000, and incorporated herein by reference).
	(d)(15)	HCA Inc. 2003 Performance Equity Incentive Program (filed as Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, and incorporated herein by reference).
	(d)(16)	HCA Inc. 2004 Performance Excellence Program (filed as Exhibit 10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference).
	(d)(17)	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).
	(d)(18)	Registration Rights Agreement, dated as of June 28, 2001, between the Company and Canadian Investments LLC, a Delaware limited liability Company (filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-3 (File No. 333-67040), and incorporated herein by reference).

  * Previously filed on Schedule TO on October 13, 2004.

**  Previously filed on Amendment No. 1 to Schedule TO on October 13, 2004.

EX-99.A.5.G 2 g91373a2exv99waw5wg.htm EX-99.A.5.G TRANSCRIPT OF CONFERENCE CALL ON 10/22/04

Exhibit (a)(5)(G)

Transcript of Conference Call on October 22, 2004

CORPORATE PARTICIPANTS

Victor Campbell
HCA Inc. — SVP

Jack Bovender
HCA Inc. — Chairman, CEO

Milton Johnson
HCA Inc. — CFO

Bill Rutherford
HCA Inc. — CFO — Eastern Group

David Anderson
HCA Inc. — SVP, Finance and Treasurer

Beverly Wallace
HCA Inc. — President — Financial Services Group

Charlie Evans
HCA Inc. — President — Eastern Group

Richard Braken
HCA Inc. — President, COO

Mark Kimbrough
HCA Inc. — VP, Investor Relations

Sam Hazen
HCA Inc. — President — Western Group

CONFERENCE CALL PARTICIPANTS

Lori Price
J.P.Morgan — Analyst

Alex for Kevin Berg
CSFB — Analyst

Darren Lehrich
Piper Jaffray — Analyst

AJ Rice
Merrill Lynch — Analyst

Ellen Wilson
Sanford Bernstein — Analyst

Joseph Chiarelli
Oppenheimer — Analyst

Sheryl Skolnick
Fulcrum Global Partners — Analyst

Jeff Allen (ph)
Silver Crest Asset Management — Analyst

Oxana Butler (ph)
Smith Barney — Analyst

Gavin Martin (ph)
CSFB — Analyst

Ken Weakley
UBS — Analyst

Kemp Dolliver
SG Cowen & Co — Analyst

Todd Korsair (ph)
Bear Stearns — Analyst

Adam Feinstein
Lehman Brothers — Analyst

Gary Taylor
Banc of America — Analyst

Rachel Golder (ph)
Goldman Sachs — Analyst

Gary Lieberman
Morgan Stanley — Analyst

David Dempsey
Avondale Partners — Analyst

PRESENTATION

Operator

Good day, everyone, and welcome to the HCA third-quarter conference call. As a reminder, today’s call is being recorded. At this time for opening remarks and introductions I’d like to turn the call over to the Senior Vice President, Mr. Vic Campbell. Please go ahead, sir.

Victor Campbell - HCA Inc.— SVP

Good morning, (inaudible-technical difficulties)

Unidentified

— with me this morning are Jack Bovender, Richard Braken, Milton Johnson, Mark Kimbrough, and many of the other senior officers of the Company to assist during the Q&A.

Victor Campbell - HCA Inc.— SVP

I want to remind you that today’s call will contain some forward-looking statements based on current management expectations. All statements regarding our third quarter, are subject to — I’m sorry, no, they’re not subject to finalization

any more. They are final. Numerous risks and uncertainties and other factors may cause actual results to differ materially from those expressed in any of forward-looking statements. These factors are listed in our press release and in our SEC filings. Many of the factors that will determine our future results are beyond the ability of the Company to control or predict. In light of uncertainties inherent in forward-looking statements here you should not place undue reliance on the statements. They do reflect our views as of today and we undertake no obligation to revise or update any forward-looking statements or provide additional forward-looking statements as a result of new information. With that brief comment let me turn the call over to Jack Bovender.

Jack Bovender - HCA Inc.— Chairman, CEO

Good morning, everyone. As promised in our prerelease last week, our team here has spent the intervening time analyzing in great depth all of our operating indicators and our financial data for the third quarter. We’ve also had the opportunity since then to talk with many of you and read your reports so we know where your attention has been focused and this morning we’re going to focus our attention to those concerns.

We’ll have only one speaker this morning. That will be Milton Johnson, and he will focus on net revenue per adjusted admission and bad debts and those trends, which as I alluded to seem to be the issues that you are grappling with the most right now. We’re going to save most of our time this morning for question and answers, as Vic said we have almost all of our senior management team here today. We’ve got Beverly Wallace who will deal with questions relative to bad debt, and net revenue per adjusted admission trends along with others. We also have Samuel Hazen, our Western group President with us, and Charlie Evans our Eastern group President, to answer specific questions you might have about operations in those areas. We have Marilyn Tavenner, who is the head of the outpatient group, and Richard Bracken, our Chief Operating Officer, so we’ll spend most of our time on questions and answers.

With that, I’ll turn it over to Milton to talk about net revenue per adjusted admission and bad debts in more detail.

Milton Johnson - HCA Inc.— CFO

Thank you, Jack, and as Jack said, I’ll just focus this morning on bad debt expense and our decrease in our reported net revenue per adjusted admission. First, let me turn to net revenue per equivalent admission, we believe that net revenue per equivalent admission was adversely impacted by two main issues. A significant moderation in the growth rate of uninsured revenue per equivalent admissions, and to a much lesser extent a decrease in managed care revenue per equivalent admission. Reported net revenue per equivalent admission growth was 4.7% in the third quarter, an unfavorable comparison to the recent trend of 5.6% to 5.8%. But it’s essential to understand why this ratio has moderated. The decline related to the uninsured we view as favorable.

The portion of the decrease which is attributable to changes in the managed care book is unfavorable. But we believe the change is primarily related to less acuity in the quarter for managed care.

Next let me detail for you the rate and volume trends impacting uninsured net revenue. Uninsured net revenue per equivalent admission increased 6.9% in the quarter compared to the third quarter last year. The growth rate for the first six months of 2004 was approximately 20%. On a sequential basis, uninsured net revenue per equivalent admission was down approximately 7% from the second quarter, and 12.5% from the first quarter this year. We’re very pleased to see this moderation in uninsured rate, both on a year-over-year basis as well as on a sequential basis. The favorable trends in uninsured net revenue per equivalent admission, is a result of a 10% drop in average length of stay and a 0.6% decline in case mix index. In comparison for the first six months of 2004, the uninsured case mix index was up approximately 3.6% over the same period of 2003.

Now turning to the uninsured volume component of revenue, uninsured same facility admission growth was 7.2% this quarter, compared to the third quarter of 2003. The lowest rate of quarterly growth we’ve experienced in several quarters. As a comparison, the growth rate for the first six months of 2004 was approximately 14.5%. Uninsured ER visits grew 11.4% this quarter over the third quarter of 2003, once again the growth rate for the first six months of 2004 was approximately 17.5%. Only time will establish whether these favorable metrics will continue.

But we are hopeful that the data reflects the results of our action plans the Company has recently initiated to mitigate escalating bad debt.

Moving to managed care net revenue. Managed net revenue per equivalent admission increased 6.6% compared to last year’s third quarter. Recently we have been experiencing approximately 8 to 8.5% growth per equivalent admission for managed care on a cash basis. We believe the lack of any acuity growth in managed care is the most significant factor affecting managed care equivalent admission growth.

The managed care case mix index was flat this quarter over last year’s third quarter. Managed care case mix index was up 3.6% and 3% in the first and second quarter respectively, compared to the same periods last year. Consistent with a flat case mix index, incremental stop loss payments were flat for the same period last year. Additionally, we did see a decrease in admissions from higher reimbursement commercial plans during the quarter, but we believe it did not materially impact managed care net revenue per equivalent admission growth, relative to the run rate for the first six months of 2004.

Now moving to bad debt expense, bad debt expense was $688 million, or 11.9% of net revenue for the quarter, compared to $566 million or 10.3% of net revenue last year. Also another trend retracted bad debt and charity as a percent of net revenue, which was 15.2% in the quarter. Considering the positive trends in uninsured admissions and uninsured net revenue per equivalent admission that I discussed earlier, it would be reasonable to expect to see a moderation in bad debt expense compared to recent quarters, however, the effect of the quarterly hindsight analysis offset the positive uninsured trends. The hindsight analysis indicated that our uncollected (voted) percentage for self-pay accounts increased by approximately 200 basis points, which resulted in an approximate $55 million increase in bad debt expense.

Several factors contributed to this increase. one factor was no increase in (charity) reductions this quarter compared to the last year’s third quarter. Also remember that the hindsight determines the disposition of accounts that were carried in our books approximately one year ago. Increasing uninsured account balances a year ago are a factor affecting the uncollectability percentage.

In recent quarters we have improved our point-of-service collections which are primarily copay and deductibles. During the third quarter we increased point-of-service collections by 53%, to $48.3 million compared to $31.5 million last year. Considering our improving point-of-service collection trends, and if our most recent data points for uninsured length of stay and uninsured admission growth continues it may portend an improving bad debt expense in future periods. Of course, time will tell whether these recent improvements in uninsured metrics will continue.

In closing, I have a couple other comments. First, cash flow from operations was $1.056 billion, the highest we’ve generated in recent years compared to $285 million in last year’s third quarter. You may recall last year’s cash flow from operations was net of a settlement to the government of $680 million, normalizing cash flow to adjust for the after tax effects of the government payment, cash flow from operations would have been $781 million last year.

Cash collected as percent of adjusted net revenue was 103.4% in the quarter. We see this as an indication of the quality of our revenue recognition.

In conclusion, although other operating expense improved 50 basis points in the third quarter compared to last year, the other operating expense line item includes approximately $18 million of costs net of insurance associated with repairs and other miscellaneous expenses associated with the hurricanes in Florida. With that, I’ll turn the call back over to Vic.

Victor Campbell - HCA Inc.— SVP

Milton, thank you. I know we were brief in our comments, but those appear to be the questions that Mark has been hearing from most of you over the last week so with that, Lisa, if you’d come back on, we’d like to open for questions and we would like to encourage everyone to hold your questions to one at a time.

QUESTION AND ANSWER

Operator

Thank you, sir. (OPERATOR INSTRUCTIONS) We would like to ask that you limit yourself to one question. You should not use speaker phones. Please lift handset if you are asking a question. We’ll pause for just a moment. We will take our first question from Lori Price, J.P. Morgan.

Lori Price - J.P.Morgan — Analyst

Okay. Thank you. You did a nice job in the release of breaking out the performance in Florida in September as it relates to the impact of hurricanes on both revenues and admission results. I was wondering if you could tell us what impact the Florida storms had on your corporate-wide bad debt ratio. Or, in other words, what would your bad debt ratios look like X the uniquely high bad debts in Florida?

Victor Campbell - HCA Inc.— SVP

Lori, just a minute. We’ll see if we’ve got the —

Milton Johnson - HCA Inc.— CFO

I know it’s higher, Lori. Trying to find the — let’s see. Good question, Lori.

Lori Price - J.P.Morgan — Analyst

Thanks.

Victor Campbell - HCA Inc.— SVP

Give us a second.

Milton Johnson - HCA Inc.— CFO

Here it is.

Victor Campbell - HCA Inc.— SVP

We found the data right here.

Milton Johnson - HCA Inc.— CFO

For the quarter, — okay. We are excluding for the month of September. Then excluding Florida, the bad debt on a percent of net would have been 11% for the Company excluding Florida for the month of September.

Victor Campbell - HCA Inc.— SVP

Bill Rutherford, Chief Financial Officer, East, do you want fill us in, do you want to talk at all about the uninsured and the impact in Florida, you or Charlie.

Bill Rutherford - HCA Inc.— CFO — Eastern Group

I would say that really we have not yet seen the storm impacting the uninsured trends. The Florida uninsured trends we saw in the third quarter were really consistent with trends we had experienced all year. What we may see going forward is yet unclear. But as far as the third quarter, we didn’t see that really materially impacted that we could attribute directly to the storms.

Milton Johnson - HCA Inc.— CFO

Thanks, Bill.

Lori Price - J.P.Morgan — Analyst

Thank you.

Victor Campbell - HCA Inc.— SVP

Thanks, Lori.

Operator

We’ll take the next question from Kevin Berg, CSFB.

Alex for Kevin Berg - CSFB — Analyst

This is Alex in for Kevin. Just one question for you guys. Given that one of the purposes of your buy-back is to communicate your confidence and long term prospect of the business, I think investors would find it helpful to see what assumptions your positive outlook is based on, specifically what are you expecting in the next several years in terms of volumes, pricing and margins? What I’m trying to get to here, if you’re buying back stock because you think the market is mispricing it, what do you think people are missing?

Victor Campbell - HCA Inc.— SVP

Kevin thank you, or Alex, thank you, you may have been been on speaker phone because you were coming in & out, Jack, did you get the gist of the question?

Jack Bovender - HCA Inc.— Chairman, CEO

I think I did. I think you’re correct in your assessment, that the reason we believe this is a good time to buy-back shares of our stock is that looking forward into the future as we assess what we think long term trends are, that we continue to be positive about our Company. We continue to believe that our long-term outlook in volume growth is about somewhere around 1.9 to 2% admission growth. We believe that our efforts on the outpatient side will yield results.

And as I think I said during the prerelease call, simply a situation in where at the price our stock has been trading at over the last few weeks, we could buy back these wonderful assets at about a 6.4 multiple of cash compared to what some BC firms and other companies in our space are buying assets for around 9, or sometimes 10 times cash flow.

So we believe this is one of those opportunities and I’ve spoken on many of these calls in the past and in meetings and presentations, that we would use stock buyback in an opportunistic manner when we thought it was in the best interest of our long-term shareholders. And that’s the situation that we believe we find ourselves in right now. The basic equation in this — and I think I talked about this at some length on the prerelease — is that we believe and our Board believes at this time, that this is the absolute best use of our enormous cash flow in order to return value to the shareholder. And so that’s what drives us and what motivates us now.

Victor Campbell - HCA Inc.— SVP

Alex, thank you.

Operator

We’ll take the next question today from Darren Lehrich of Piper Jaffray.

Darren Lehrich - Piper Jaffray — Analyst

Good morning, everyone. On leverage, could you just give us a sense as to when and how you expect to get back to more normalized leverage levels and could asset sales be part of that process?

Victor Campbell - HCA Inc.— SVP

David Anderson, do you want to address that?

David Anderson - HCA Inc.— SVP, Finance and Treasurer

We would estimate that we can return to credit statistics in the — let’s call it the low 50s, between 50 and 55% in approximately two years.

Darren Lehrich - Piper Jaffray — Analyst

Okay. And as far as asset sales go, is that on the table at all in order to accelerate that?

Jack Bovender - HCA Inc.— Chairman, CEO

This is, this is Jack. The model that is inherent in what David just gave you does not assume asset sales. We’ve talked in the past that we are always looking at our portfolio of assets and pruning the tree when it seems right to do so. So we will continue to look at our book of assets, and if it makes sense to do that we will do that, but it is not necessary to drive us into the low 50s or mid-50s as David has just outlined. That’s done purely on, our model is done purely on operations.

Darren Lehrich - Piper Jaffray — Analyst

Darren, Thank you.

Operator

Our next question today comes from A.J. Rice, Merrill Lynch.

AJ Rice - Merrill Lynch — Analyst

Hello, everybody. I would just get one clarification on Milt’s comments and then ask the question. Am I hearing you right when you’re saying that basically you guys have reviewed in the last week, and you no longer really think that the driver of the pressure on that revenue per adjusted admission on the managed care was the shift to plan to pay less. It was basically just acuity? Is that the message that we should take away?

Milton Johnson - HCA Inc.— CFO

Milton, A. J., this is Milton. Yes, it is. Upon further analysis, you know, we had flat acuity in the managed care book, and we’ve been seeing, you know, 3.5%, 3% to 3.5% type of growth in acuity in that book. And we didn’t have it this quarter, and we believe that’s the main contributing factor to the managed care net revenue per adjusted admission growth moderation. We have been seeing as we said, some shift in the book, but from further analysis we believe that impacted the growth rate much, much less than the acuity.

AJ Rice - Merrill Lynch — Analyst

Just your point of service comment about you know, you’re collecting better today and sort of tracking that on accounts a year ago. As you get through the year at some point your up front collection activity did start to improve. What’s the lag before we start to see that having a favorable impact on your look-back provision? Is this the first quarter that that’s had a positive impact, so we have to wait a year before the look back turns favorable, or is there some reason to believe it will turn favorable more quickly?

Milton Johnson - HCA Inc.— CFO

This is Milton. Hindsight is a one year look back. Approximately one year ago you’re looking at receivables, and then tracking them through for the past year to determine their collectibility. What we do with our hindsight, is each quarter we drop off the oldest quarter and bring in the newer quarter, so it will be phased in over time but over the next, you know, six months, nine months, certainly a year, we will start seeing any improvement in our — from our efforts that we’ve initiated will start showing up in the hindsight, and so what other — what other factors will also be included in that hindsight analysis? We can’t predict right now but certainly if we’re making improvements today in our collectibility that will show up incrementally over the next year.

AJ Rice - Merrill Lynch — Analyst

Is that the first quarter that that collectibility has improved or that one aspect, or has it improved for a quarter or two more.

Milton Johnson - HCA Inc.— CFO

It’s been improving incrementally over the past few quarters that we’ve been focused on our action plans in the bad debt area. Again this quarter the 53% increase is probably a more significant increase, but it has been improving over recent quarters.

AJ Rice - Merrill Lynch — Analyst

All right. Thanks a lot.

Victor Campbell - HCA Inc.— SVP

Beverly, do you want to add to that?

Beverly Wallace - HCA Inc.— President — Financial Services Group

A J., if you look at the last quarters that we’ve be talked about, we’ve been improving those front end collections over the last several quarters. We implemented our minimum deposit requirements in June of this year. And that is what has really kicked in to what I would call the significant quarter-over-quarter improvement. So we’ve seen improvement, but it’s gotten much better with the minimum deposit requirement.

AJ Rice - Merrill Lynch — Analyst

All right. Great.

Victor Campbell - HCA Inc.— SVP

Thanks, Beverly. Thanks, A.J.

Operator

Ellen Wilson of Sanford Bernstein has the next question.

Ellen Wilson - Sanford Bernstein — Analyst

I was wondering if you could drill down a little bit on the managed side, with case mix basically flat when it had been up, what changed this quarter from what you found so far, you know, what managed care doing differently. Is it planned design change or is it completely random?

Victor Campbell - HCA Inc. — SVP

Anybody want to take a shot at that start. Beverly.

Beverly Wallace - HCA Inc. — President — Financial Services Group

This is Beverly. You know, we talk about the case mix and it’s basically one data point for this quarter. But it is what had the impact on the net revenue. If you look at it it’s more in our medical/surgical cases where the acuity was down, and I think most importantly what Milton said, was the incremental net revenue of our stop loss payments were flat year-over-year. So that’s where we saw the impact.

Victor Campbell - HCA Inc. — SVP

Charlie Evans, President of the East do you want to make a comment?

Charlie Evans - HCA Inc. — President — Eastern Group

I think the additional thought from the East is the effect in Florida. There was no doubt that during this quarter the length of stay impact with our managed care book was very real. Clearly the medical versus surgical mix was affecting all of that and driving down the factor.

Victor Campbell - HCA Inc. — SVP

Thanks, Charlie. Thanks, Ellen.

Ellen Wilson - Sanford Bernstein — Analyst

Thanks.

Operator

Joseph Chiarelli, Oppenheimer has the next question.

Joseph Chiarelli - Oppenheimer — Analyst

First I’d like to get a clarification on that last question. In your press release you indicated that your surgery centers in Florida were down substantially in the month of September. I believe it was 13.2% for the same period last year. Did that affect the acuity mix for managed care? Or have you excluded that from this discussion?

Milton Johnson - HCA Inc. — CFO

Yeah, this is Milton. Where we’re seeing most of the acuity impact is really in the neonate, CV surgery, cardiology, oncology and general surgery, so those higher acuity services is where we’re seeing most of the change.

Joseph Chiarelli - Oppenheimer — Analyst

So that would not be in the South (pitch in) surgery decline in the month of September?

Victor Campbell - HCA Inc. — SVP

That’s correct, Joe, because the case mix as I’m looking around is an inpatient statistic, it would not pick up the outpatient.

Joseph Chiarelli - Oppenheimer — Analyst

My real question was in the past you’ve talk about and in your press release that the snowbirds, that you’ve allowed for the snowbirds in your guidance for 2005. If you could just give us some guidance as to how much of the snowbird business accounts for particularly the first quarter so that we can get a better read as to what we can expect proceed perspectively? Thanks.

Victor Campbell - HCA Inc. — SVP

Thanks. Charlie and Bill, do you want to take a talk at that?

Charlie Evans - HCA Inc. — President — Eastern Group

Well, needless to say, this is the — this is the most difficult estimate in terms of what we might reasonably expect and, frankly, there’s been a variety of opinions relative to what this effect might be. So we — at this point we have just set a very wide range of expectations. And Bill, I think the number that we that we have in that estimate is approximately 40 million dollars but I’d say that is a center point of a very wide range of potential impact because we just don’t know at this point.

Richard Braken - HCA Inc. — President, COO

Joe, this is Richard. What one of the things that we did do in this process to try to estimate it, is we went hospital by hospital, market by market in the state of Florida. And we then went through a process where we weighted the amount of damage that was done to each hospital, the amount of damage that might be in the community in the collateral infrastructure, as well as how much each of these communities are dependent upon seasonal visitors for their general population and hospital demand. So we went through every hospital, every market and we assigned some weights to it and we said well if this volume doesn’t come back for one quarter or two quarters or what’s the probability. So we weighted it all throughout the Florida book to come up with those estimates and so if we think these are our best estimates at this point in time, if the seasonal traffic is better-than-expected, then our estimates will be probably a little bit heavy. If the seasonal traffic is less than we projected then of course, it’ll add to our costs going forward.

Joseph Chiarelli - Oppenheimer — Analyst

Do the snowbirds have a different percentage of bad debts versus everyone else?

Victor Campbell - HCA Inc. — SVP

Alright, Joe, we are going to let you have this one. You snuck through.

Joseph Chiarelli - Oppenheimer — Analyst

It’s all related, Vic.

Victor Campbell - HCA Inc. — SVP

We old guys, we’re nice to each other. Snowbirds, more bad debt, Bill?

Beverly Wallace - HCA Inc. — President — Financial Services Group

I’ll take it. This is Beverly. The snowbirds are typically your Medicare population. And then some families with children over the breaks in the season and they’re typically your insured population.

Victor Campbell - HCA Inc. — SVP

Thank you, Joe.

Operator

Our next question today comes from Sheryl Skolnick, Fulcrum Global Partners.

Sheryl Skolnick - Fulcrum Global Partners — Analyst

Good morning. I’m going to ask a question about your charity care if I may. I know, you mentioned that it was flat and I’m curious as to why that might be the case when your uninsured while the rate of increase certainly moderated it was nevertheless still up. So I’m very curious if you can give us a sense of whether you’re satisfied with the performance of the charity care programs that you’ve implemented and what you might be able to be doing about that, and whether your triage programs in the emergency rooms do you believe are contributing to some of part of the slow down in the uninsured admissions and therefore the charity care that you do.

Victor Campbell - HCA Inc. — SVP

Beverly, do you want to address that?

Beverly Wallace - HCA Inc. — President — Financial Services Group

Hi, Sheryl, this is Beverly.

Sheryl Skolnick - Fulcrum Global Partners — Analyst

Hi.

Beverly Wallace - HCA Inc. — President — Financial Services Group

The beginning of this quarter we did loosen our requirements for the non-Medicare population for the charity care. And we are still seeing just a 50% run rate of the return of application. I did try to look at the account balance size of this population, because it really is your uninsured population that our case management is focused on, both on the in-stay and the ER, but I can’t drive in to that number, but I would have to assume it’s the same since it’s the same population.

Victor Campbell - HCA Inc. — SVP

Is there a correlation to our movement getting more people into Medicaid that’s impacting. Talk a little bit more about that.

Beverly Wallace - HCA Inc. — President — Financial Services Group

We are driving more of our patients into Medicaid. Qualifying more for applications and the application process. That could be impacting that number too, so we look at our Medicaid, our uninsured and our charity population, sort of underneath one limb.

Victor Campbell - HCA Inc. — SVP

Okay?

Sheryl Skolnick - Fulcrum Global Partners — Analyst

Okay. Thank you.

Operator

Jeff Allen of Silver Crest Asset management has the next question.

Jeff Allen - Silver Crest Asset Management — Analyst

Hi, good morning. You gave us the impact of the hindsight analysis on the bad debt number. $55 million. I’m just wondering if you could tell us what that number has been for the past few quarters?

Victor Campbell - HCA Inc. — SVP

Milton, do you want to address that?

Milton Johnson - HCA Inc. — CFO

Sure, sure. The most recent run rates for that, we’ve been about say approximately 150 basis points changing, and it’s about 200 basis points this time, so it did increase this quarter. One of the reasons for that when you look at the information is this lack of charity care increase. That had an adverse impact in the quarter with respect to that calculation. But it’s about, it’s probably about, I’d say about 50 basis points higher movement this quarter than we’ve been seeing.

Jeff Allen - Silver Crest Asset Management — Analyst

So, in other words, that $55 million is — it’s not reflecting, you know, the inflow of patients in the September quarter. It’s for previous quarters then?

Milton Johnson - HCA Inc. — CFO

Well, yeah. The collect or uncollectability percentage is determined based on the accounts that existed again about a year ago. We apply that uncollectability factor though to our current balances of self-pay account receivable, so you pick up the volume and rate of any changes in your revenue on a current basis, and what the hindsight does is really a valuation change of the total book of accounts receivable that you’re carrying at this point in time.

Jeff Allen - Silver Crest Asset Management — Analyst

Got you.

Bill Rutherford - HCA Inc. — CFO — Eastern Group

Balance sheet.

Milton Johnson - HCA Inc. — CFO

Yeah, it’s a truing up of the balance sheet, the valuation of the balance sheet in the AR is what the hindsight does.

Jeff Allen - Silver Crest Asset Management — Analyst

One more question if I may. Just wondering sort of qualitatively, how much did the quarter reflect all of the various bad debt initiatives that you guys are undertaking and that you outlined at the investor day, you know, for example, you said that up-front collections of cash were $48 million, it seems like it’s still a pretty small number on an absolute basis. How much further impact can we expect?

Victor Campbell - HCA Inc.— SVP

Beverly, do you want to address that?

Beverly Wallace - HCA Inc.— President — Financial Services Group

Sure. We are about 80% complete implementing our action plan that we shared with you, and that 20% is just on pieces and parts where it doesn’t make sense to implement at hospitals, because their level of uninsured is not to the same degree as other hospitals. When you look at our percent collection of our zero to 30 bucket on copays and deductibles, we’re collecting now on our front end processes about 28% of what we believe dollars available are. And I think that’s reflective of our minimum deposit requirement. So we continue to see improvement in that area, and I think that will just prove out over time.

The case management programs, I did visit two of our divisions to look in depth at what they were doing. And they are having a positive impact on length of stay, which Milton shared with you. They’re having a positive impact on utilization of resources, which we call resource consumption. That also drives down the accounts balance of the bill. So I think we are seeing traction with our plans but here again, we started this process the beginning of June with this heightened work around this area, and it will prove out over time.

Jeff Allen - Silver Crest Asset Management — Analyst

Okay. That 28% copay collection number that you cited, you know, can that get to 100% or that’s probably not realistic to get to 100% but, you know, where can that number get to?

Beverly Wallace - HCA Inc.— President — Financial Services Group

It’s hard to predict. It’s not realistic to think it’ll get to 100% because that’s asking an awful lot of our patients before they get services. We’ll just keep driving that number upwards.

Victor Campbell - HCA Inc.— SVP

Jeff, thank you.

Operator

Oxana Butler, Smith Barney is up next.

Oxana Butler - Smith Barney — Analyst

Yes, thank you. Just to clarify, I might have misunderstood are you saying that you’re 80% complete in terms of implementing all the initiatives on the managed care copay collection efforts?

Beverly Wallace - HCA Inc.— President — Financial Services Group

No, we’re 80% complete on the total action plan, which included the case management piece, the front end collection piece, the minimum deposit and the emergency room after acuity was determined with respect to the EMTALA guidelines.

Milton Johnson - HCA Inc.— CFO

And Beverly, just to clarify, when you say 80% complete, you’re 80% complete in rolling out the action plan. Rolling it out. We dont’t have 80% of the results?

Beverly Wallace - HCA Inc.— President — Financial Services Group

No, no, rolling it out. Every hospital implementing all of the pieces and parts of the plan.

Oxana Butler - Smith Barney — Analyst

Right so in terms of your expectation for how much improvement we can expect to see going forward, then is the conclusion that there’s much more improvement yet to come or how should we interpret that?

Beverly Wallace - HCA Inc.— President — Financial Services Group

I don’t think I can give you a interpretation of that.

Milton Johnson - HCA Inc.— CFO

We would hope to see improvement. We’re I guess we’re not going to quantify it, Oxana. It’s a fair question but we’ve got an action plan out there that clearly we wouldn’t put out there unless we think we would have some material improvement in the process.

Oxana Butler - Smith Barney — Analyst

In terms of the charity care implementation, I understand that’s been pushed back a little bit. Can you just give us a little bit of color on that front?

Beverly Wallace - HCA Inc.— President — Financial Services Group

Sure. This is Beverly again. We have asked some more questions of CMS on what we want to roll out, and we are pending a response from them. We hope to get that sometime during the fourth quarter so we can roll that out beginning in January.

Oxana Butler - Smith Barney — Analyst

Okay. And the clarifications in terms of what the —

Beverly Wallace - HCA Inc.— President — Financial Services Group

Indigency requirements.

Oxana Butler - Smith Barney — Analyst

Okay. Thank you.

Victor Campbell - HCA Inc.— SVP

Thanks, Oxana.

Operator

Next we’ll hear from Gavin Martin, CSFB.

Gavin Martin - CSFB — Analyst

Thank you. Quick question. I was looking at the concerns over healthcare in general in terms of lawsuits. I want to confirm that your Company is not subject to any investigations or reviews by any of these peripheral lawsuits going on in the insurance industry?

Victor Campbell - HCA Inc.— SVP

Milton, do you want to address that?

Milton Johnson - HCA Inc.— CFO

No, we’re not. Any material, you know, litigation or pending litigation would be disclosed in our 10-Q filing and as you may have seen it’s been reduced greatly over the years.

Gavin Martin - CSFB — Analyst

Thanks very much.

Victor Campbell - HCA Inc.— SVP

Thanks.

Operator

And Ken Weakley of UBS is up next.

Ken Weakley - UBS — Analyst

Thanks, good morning, everyone. One implication of some of the pricing numbers that you gave out, I mean we know your revenue per adjusted admission is up 4.5, and you talked about the uninsured pricing and the managed care pricing being up I guess average of 6.8 but that would imply of course that the other buckets of revenue are seeing price increases of maybe 2 to 2.5, can you walk us through Medicare and Medicaid and other, and give us a sense on what the pricing sense is making. Especially in terms of the case mix issues discussed. Are you seeing that on the Medicare book of business as well?

Victor Campbell - HCA Inc.— SVP

Milton, do you want to address that?

Milton Johnson - HCA Inc.— CFO

Sure. For the quarter our pricing for the Medicare book is approximately about 3% approximately.

Ken Weakley - UBS — Analyst

Okay.

Milton Johnson - HCA Inc.— CFO

And we’re not seeing the issues there. On the Medicaid book it looks like it’s up about somewhere around three to 3 to 3.5 range and although it’s been relatively flat in recent times, as Beverly mentioned we’ve made an effort to try to qualify especially more of the larger self-pay accounts into Medicaid, and some of that may be showing up here as an increase in the Medicaid prices.

Ken Weakley - UBS — Analyst

Okay. Thank you.

Victor Campbell - HCA Inc.— SVP

Thanks, Ken.

Operator

The next question today comes from Kemp Dolliver, SG Cowen and company.

Kemp Dolliver - SG Cowen & Co — Analyst

Hi, thanks, and good morning. Question on the hindsight lookback. If you drop this into two buckets, with regard to the uninsured patients and then copays and deductibles. Could you give us a any changes in the collectability assumptions that were in place a year ago versus the ones you used to get to the $55 million.

Victor Campbell - HCA Inc.— SVP

We’re having lots of feedback so I don’t know, I don’t think it’s coming out of here but —

Kemp Dolliver - SG Cowen & Co — Analyst

I can try again.

Victor Campbell - HCA Inc.— SVP

Let’s try without speaker phones if we can and Lisa, if we’ve got a problem let me know, make sure we’re hearing everything.

Kemp Dolliver - SG Cowen & Co — Analyst

Hopefully this is better.

Victor Campbell - HCA Inc.— SVP

Yeah, that is, thanks, Kemp.

Kemp Dolliver - SG Cowen & Co — Analyst

Sure. The question in short version is on the hindsight adjustment, what was the change in assumptions for current experience versus a year ago, when you look at collectability of the uninsured book, and then the collectability of the copays and deductibles.

Victor Campbell - HCA Inc.— SVP

Milton.

Milton Johnson - HCA Inc.— CFO

With the hindsight analysis that we do, does not segregate the write-offs of the accounts by payer class, it’s a global hindsight analysis, it looks at the total book of receivables and the total write-off, and so we don’t have the data to segregate well, what’s changing in the hindsight analysis, what’s changing in the true uninsured versus copay and deductibles.

Jack Bovender - HCA Inc. — Chairman, CEO

Tell them on the uninsured what did happen from last year to this year for the deterioration.

Milton Johnson - HCA Inc. — CFO

What Jack is referring to is, as we’re improving our collection of copay and deductibles. It does result in a higher portion of the total self-pay patient due accounts, being a higher percentage attributable to the uninsured, which could have some negative impact on the overall uncollectability factor of the AR.

Victor Campbell - HCA Inc. — SVP

Good, thank you, Kemp.

Kemp Dolliver - SG Cowen & Co — Analyst

Thank you.

Operator

Once again we do ask that you do not use a speaker phone for audio purposes. We’ll go next to Todd Korsair, Bear Stearns.

Todd Korsair - Bear Stearns — Analyst

I just wondering if you could address if the Company continues to be valued at the equity at levels similar to those we’ve seen recently following the buyback, would you guys consider another debt financed buyback in the future, that be 2005 or beyond?

Victor Campbell - HCA Inc. — SVP

Jack, do you want to talk about that?

Jack Bovender - HCA Inc. — Chairman, CEO

Sure, I’ll reiterate what I’ve said in the past. We’ll be very opportunistic on using our cash on stock buyback programs. If we look at a situation in any particular point in time, and think it makes sense to use our cash flows or to lever up more in order to be able to purchase more stock, we will do that but that is a decision made at a point in time reflective of what’s going on in the market with our shares, relative to what we think the true value of this Company is.

Todd Korsair - Bear Stearns — Analyst

Is there a target leverage level that you guys would not go beyond, or is that pretty much subject to where the equity will be valued at?

Jack Bovender - HCA Inc. — Chairman, CEO

Well, think that’s always a point in time question and we can’t look into 2005, and say what we would be willing to lever the Company up to, in order to be able to purchase shares. You know, a lot of it has to do with the relative interest rates at any particular point in time, and again what we think is the inherent value of the Company versus where what it’s selling at. So to predict what we’ll do in 2005 is just not able to do that. We won’t know, we have no idea obviously what is going on in the market or the economy at that particular point in time, so it’s impossible to make that prediction, but I think we’ve got a track record that shows that we’re willing to use that as a vehicle for increasing shareholder value when we think it’s appropriate.

Todd Korsair - Bear Stearns — Analyst

Understood. Thank you very much.

Jack Bovender - HCA Inc. — Chairman, CEO

All right.

Victor Campbell - HCA Inc. — SVP

Thanks, Todd.

Operator

Next we’ll hear from Adam Feinstein, Lehman Brothers.

Adam Feinstein - Lehman Brothers — Analyst

Okay. Thank you. Good morning, everyone. I have one question and then just want to get some clarity on something

else here also. First I wanted to get some details about stop loss payments, and carve out to managed care contracts. Beverly mentioned that stop loss payments were flat in the quarter. I wanted to get some more clarity to make sure I was understanding what’s going on there, and secondly what’s the difference between the same store calculation and the consolidated calculation in the quarter? You guys didn’t buy anything over the past year so I just wanted to find out what the difference was, thank you.

Victor Campbell - HCA Inc. — SVP

Okay. Beverly, you want to talk about stop loss and carve outs?

Beverly Wallace - HCA Inc. — President — Financial Services Group

Sure. As you know both stop loss and carve outs are an integral part of our managed care contracts that we negotiate with the payers. Nothing has changed with that respect, we’re still getting the carve outs and the stop loss. What changed in the quarter was our growth in year-over-year stop loss payments, and that reflects incremental payment. When I say incremental payment that is additional reimbursement above what we would have gotten on that patient had they not kicked over into the stop loss. That piece was flat, and we believe that is driven by that change in acuity.

Victor Campbell - HCA Inc. — SVP

Thank you. Milton, did you understand the second question.

Milton Johnson - HCA Inc. — CFO

Yes, I think the question was what’s the difference between same store and reported, since we really haven’t, you know, got a lot of acquisition activity or whatever. A couple things. We have the hospital that was closed in Florida, gulf coast, for a period of time from the hurricanes was removed from same store, and we have a few new hospitals that also could be making some of the differences. But actually the differences between same store and reported are very small this quarter.

Adam Feinstein - Lehman Brothers — Analyst

Thank you.

Victor Campbell - HCA Inc. — SVP

Thanks, Adam. I hope you feel better. You don’t sound good.

Adam Feinstein - Lehman Brothers — Analyst

Maybe I’ll be in a hospital soon.

Jack Bovender - HCA Inc. — Chairman, CEO

You don’t —

Victor Campbell - HCA Inc. — SVP

You know you need to come south.

Adam Feinstein - Lehman Brothers — Analyst

Thank you.

Victor Campbell - HCA Inc. — SVP

Next question.

Operator

We’ll take the next question today from Gary Taylor, Banc of America.

Gary Taylor - Banc of America — Analyst

Hey, good morning. I have a question for Milton on bad debt. And he had indicated that if the current trends continued, it was possible to see some improvement on bad debt and my question is: when you say improvement do you mean less increase or do you actually mean a decline in the percentage, and what percentage is in your assumptions, in your 05 guidance.

Victor Campbell - HCA Inc. — SVP

That’s a good question. Milton.

Milton Johnson - HCA Inc. — CFO

The improvement would be a moderation in the growth rate of bad debt expense, not an actual decline in terms of dollars of the expense because, you know, we’re still seeing growth in the balances. It’s just a smaller growth rate. So we wouldn’t expect the actual amount to decline. And we — in the model, you know, we really haven’t publicly given guidance on our bad debt going forward as a percent of net. Our guidance at this point is just on the EPS range.

Victor Campbell - HCA Inc. — SVP

Thanks, Milton. and Gary.

Operator

Our next question today comes from Rachel Golder, Goldman, Sachs.

Rachel Golder - Goldman Sachs — Analyst

Yes, thank you. Two quick questions. One I apologize if I missed the first one. Could you talk about in your uncollectibles what proportion of that is from copays and deductibles and what that trend has been over time? And then the second question I know you have bank facilities committed to fund the share repurchase. Talk about any plans you might have for terming that out in the bond market?

Victor Campbell - HCA Inc. — SVP

All right. Milton or Beverly, do you want to address the copay deductible or do you have an answer?

Milton Johnson - HCA Inc. — CFO

You know, I believe and again I don’t have this exact number in front of me, but I’m thinking it’s probably about 25% has kind of been the run rate. And so, you know, I’m not aware that it’s been a big variation in that — in the run rate but I don’t really don’t have that direct information in front of me at this point.

Mark Kimbrough - HCA Inc. — VP, Investor Relations

This is Mark. If you look at the component of AR on the balance sheet right now, about two-thirds of the self-pay or uninsured AR relates to the true uninsured, where about a third of that relates to copays and deductibles, and the growth rates primarily have been in the true uninsured, not in the deductible and copay piece of AR.

Victor Campbell - HCA Inc. — SVP

Thanks, Mark. David, do you want to address the question on.

David Anderson - HCA Inc. — SVP, Finance and Treasurer

Sure, Vic. At the conclusion of the tender period, we will take steps to then term out or go to the public bond market and finance between 1 billion to 1.5 billion dollars in that market, to take out that facility provided by Merrill Lynch and J.P. Morgan.

Rachel Golder - Goldman Sachs — Analyst

Thank you. And if I could just follow up. Are the copays and deductibles particular targets for you to try and increase your collection effort on since clearly they apply to people who have insurance should be valuing their insurance and probably are also employed?

Victor Campbell - HCA Inc. — SVP

Beverly.

Beverly Wallace - HCA Inc. — President — Financial Services Group

This is Beverly and, yes, that is definitely the major focus of our action plan is collecting those copays and deductibles, either on the front end or before they go to primary collection.

Victor Campbell - HCA Inc. — SVP

Thanks Bev, next question.

Operator

Our next question will be from Gary Lieberman, Morgan Stanley.

Gary Lieberman - Morgan Stanley — Analyst

Good morning. You noted this strength in cash flow in the quarter and it would seem exceedingly strong given the relative weakness in the operating results. Can you talk about if there were any one-time items that came through in the quarter?

Victor Campbell - HCA Inc.— SVP

Milton.

Milton Johnson - HCA Inc.— CFO

No, Gary. On the working capital change I believe accrued expenses went up a little bit related to some timing of some tax payments. That was probably around a $100 million, $150 million, but that’s — there’s really no one-time issues in there.

Victor Campbell - HCA Inc.— SVP

Richard, you wanted to make a point.

Richard Braken - HCA Inc.— President, COO

Yeah. The overall expense levels of the company were really very well managed during the quarter. I noted some of the notes that came out over the last week, you know, about labor costs and, of course, while we have a lot of movement in the net revenue number, obviously SW&B as a percent of net revenue, is moving arithmetically and you have to look at other statistics to get a real feel of what’s happened in our labor. If we look at SW&B per adjusted admission, volume based and really adjust for the problematic Florida market for the month of September, our increase was 5.6%. I mean that’s down sequentially from the previous quarter. It’s down sequentially from the prior year third quarter. So labor, aside from the storm, was very well managed. Additionally, if you look — and obviously bad debt is a cost of business to us right now — but if you look at our total operating cash operating expenses, that is our total operating expenses adjusted for bad debt, once again, we are at some of the lowest levels of increase we’ve had in recent quarters at about 5.8% compared to 6% in the prior year.

Once again, if we adjust the cost of the storms on that ratio, we’re down to 5.1%. And this is, this is really in rather low territory for us over, really not only the last year but really over the last several years, so we think operations are really quite tight, running well. The hurricane does create some noise, but to the earlier question this morning, we think that’s going to obviously position us well, as volume continues to grow in the out years.

Gary Lieberman - Morgan Stanley — Analyst

If I can just follow up for a second. But I guess looking at cash flow from operations, it is without doing the numbers, it’s got to be at the highest percent of EBITDA in probably a lot of quarters. So is there any case to be made that perhaps on the expense side, you all may be a little bit too conservative or I’m just trying to figure out what the difference is here versus previous quarters.

Milton Johnson - HCA Inc.— CFO

Yeah. You know, Gary, this is Milton. And you’re right. I mean, this cash as a percent of EBITDA, I haven’t done the math but I know just by looking at the numbers, it’s going to be one of the highest percentages that we’ve posted. But there’s really, you know, nothing that I, stands out to me other than just again, we’ve had just good cash flow. Of course, as you know we’re adding back the increase in the provisions for doubtful accounts, which obviously is having some impact there. But no, there’s nothing of any one-time event that really stands out in the quarter.

Victor Campbell - HCA Inc.— SVP

Thanks, Gary.

Gary Lieberman - Morgan Stanley — Analyst

Thanks a lot.

Operator

David Dempsey, Avondale Partners is up next.

David Dempsey - Avondale Partners — Analyst

Good morning guys.

Victor Campbell - HCA Inc. — SVP

Good morning, David.

David Dempsey - Avondale Partners — Analyst

Minority interest jumped up quite a bit in the quarter and I’m wondering if there’s certain markets, certain opportunities where you’re working with minority partners, that have caused that number to move up.

Victor Campbell - HCA Inc. — SVP

Milton or Don, any comment on that?

Milton Johnson - HCA Inc. — CFO

You’re talking about the minority interest expense being up?

David Dempsey - Avondale Partners — Analyst

Right.

Milton Johnson - HCA Inc. — CFO

No, I was thinking it may have been something related to the last year. I’m looking at the (SAM)— or anyone else if there’s anything comes to mind in the operations there,

Victor Campbell - HCA Inc. — SVP

There’s numbers $46 million, 34 last.

Sam Hazen - HCA Inc. — President — Western Group

The performance of the partnerships in the western group were generally consistent with the rest of the Company and there was no dramatic change. I do think we had a minor adjustment in the third quarter last year that artificially deflated that number and that’s why the comparisons on a year-over-year basis are not as consistent as one would expect.

Milton Johnson - HCA — CFO

That’s what I was trying to recall. I thought it was something in last year’s number as opposed to something in this year’s run rate.

Victor Campbell - HCA Inc. — SVP

Thanks, David.

David Dempsey — Avondale Partners — Analyst

All right.

Operator

We do have one question remaining in the queue, it comes from Ken Weakley from UBS.

Victor Campbell - HCA Inc. — SVP

We’ll finish with you, Ken.

Ken Weakley - UBS — Analyst

I just wanted to follow up on the acuity question. As I look at supply costs were up despite the flatness in the case mix on managed care. I was wondering how, I mean the 3% variance seems pretty significant. Has that happened in that past before? Have you seen this type of volatility or do you believe this is a modestly unusual event.

Victor Campbell - HCA Inc. — SVP

I’m looking around. Jim, do you have any comments on supply cost or Jim Fitzgerald or Richard, do you want to comment on acuity.

Richard Braken - HCA Inc. — President, COO

I mean, it’s hard to get your hands around what’s happening with acuity with one data point like we have right now.

Ken Weakley - UBS — Analyst

Right.

Richard Braken - HCA Inc. — President, COO

So it’d be just guessing at this point in time. We did have a pretty good surgical volume overall for the quarter. But I think Ken, before we can give you anything more firm on that we need to see a little more data, to make any real cogent analysis.

Ken Weakley - UBS — Analyst

Are you having to fine tune your charge master? I’m wondering if that’s what’s driving stop loss. Stop loss being flat off years is more tied to charges than it is for acuity. Is there pressure from managed care to maybe fine tune certain cases in terms of gross charges, and is that having some ancillary effect on pricing?

Richard Braken - HCA Inc. — President, COO

I think we’ve moderated our overall charge master increases over the last year. To the extent that would affect it.

Ken Weakley - UBS — Analyst

That hasn’t accelerated or changed recently?

Richard Braken - HCA Inc. — President, COO

No.

Ken Weakley - UBS — Analyst

With like a new contract, a big —

Richard Braken - HCA Inc. — President, COO

No. Nothing like that.

Ken Weakley - UBS — Analyst

Okay.

Beverly Wallace - HCA Inc. — President — Financial Services Group

Our stop loss threshold has gone up minimally since ‘03, so we’ve kept our threshold pretty consistent. I think it’s just the number of cases. We’ve had an increase in cases that have triggered it, but the illness level of those cases that have triggered it have have been less than what we saw in the past.

Ken Weakley - UBS — Analyst

Okay.

Victor Campbell - HCA Inc. — SVP

All right, Beverly, Ken, thank you very much. With that we will close this morning’s call, and we’re available to talk to you if you want to give us a call here. Thank you very much.

Operator

And a that does conclude today’s conference. We we would like to thank you all for your participation. Have a great day, and you may now disconnect.

EX-99.A.5.G

TRANSCRIPT OF CONFERENCE CALL ON 10/22/04

EX-99.A.5.H

Exhibit(a)(5)(H)

     THIS EXHIBIT (a)(5)(H) AMENDS AND RESTATES AND REPLACES EXHIBIT (a)(5)(E) PREVIOUSLY FILED ON AMENDMENT NO. 1 TO SCHEDULE TO FILED ON OCTOBER 13, 2004. THIS REVISED TRANSCRIPT WAS FILED TO CORRECT A TYPOGRAPHICAL ERROR IN THE PREVIOUSLY FILED TRANSCRIPT.

Transcript of Conference Call on October 13, 2004

CORPORATE PARTICIPANTS

Vic Campbell
HCA Inc. — SVP

Jack Bovender
HCA Inc. — Chairman, CEO

Richard Bracken
HCA Inc. — President, COO

Beverly Wallace
HCA Inc. — President of Financial Services

Milton Johnson
HCA Inc. — CFO

David Anderson
HCA Inc. — SVP-Finance, Treasurer

CONFERENCE CALL PARTICIPANTS

Lori Price
J.P. Morgan — Analyst

Kevin Burg
Credit Suisse First Boston — Analyst

Gary Lieberman
Morgan Stanley — Analyst

Diandra Parks
Citigroup Asset Management — Analyst

A.J. Rice
Merrill Lynch — Analyst

John Ransom
Raymond James — Analyst

Adam Feinstein
Lehman Brothers — Analyst

Gary Taylor
Banc of America Securities — Analyst

David Dempsey
Avondale Partners Llc — Analyst

Kemp Dolliver
SG Cowen — Analyst

PRESENTATION

Operator

Good day, everyone, and welcome to the HCA third-quarter preview conference call. Today’s call is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to the Senior Vice President, Mr. Vic Campbell. Please go ahead, sir.

Vic Campbell - HCA Inc. — SVP

Thank you and good morning, everyone. With me this morning, Jack Bovender, our Chairman and CEO; Richard Bracken, our President and Chief Operating Officer; Milton Johnson, the Chief Financial Officer; of course, Mark Kimbrough, VP, Investor Relations; and then we have a number of the other senior operating folks within the Company and financial folks within the Company to assist on the call.

The purpose of today’s call is to address the two press releases that we issued this morning. The first release was a preview of our preliminary third-quarter results. The second separate release announced our offer to repurchase up to $2.5 billion of HCA stock. As we noted in our release, we plan to officially release our third-quarter earnings and issue our financial results next Friday morning, October the 22nd. We will hold another conference call that morning to really talk about the quarter in detail, and as you will hear from Richard, Jack and others and Milton that there are still a number of things that we need to sort out between now and next week. We may not answer all your questions as well as we can next week.

You should also be aware that our complete tender offer documents are available to all of you through the SEC’s website or from our information agent, Georgeson Shareholder Communications. All tender offer documents are expected to be mailed to shareholders today, and we urge shareholders and everyone to read these materials carefully prior to making any decisions with respect to the tender offer.

Finally, let me remind all of you that today’s call will contain some forward-looking statements based on current management expectations. Our statements regarding the third quarter in essence are forward-looking, as our results to date are estimates and subject to finalization over the next week or so. Numerous risks and uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statement. And we list these factors in our press release and encourage you to look at them closely — I won’t read them all. But they are there and they should be taken seriously. Also, in our SEC filings we provide cautions.

Many of the factors that will determine our future results are beyond the ability of the Company to control or predict, and in light of the significant uncertainties inherent in

forward-looking statements here and in our documents, you should not place undue reliance on those statements; they are our views as of today. And we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise.

With that, I will turn the call over to Jack Bovender.

Jack Bovender - HCA Inc. — Chairman, CEO

Thank you, Vic, and good morning, everyone. This morning, the Company provided a preview of results for the third quarter ended September 30, and also announced the Company’s Board has approved a $2.5 billion share repurchase in the form of a modified Dutch auction tender.

We have just closed our books for September, so as Vic said, we don’t have the level of detail normally provided in our full earnings releases. However, we will try and provide whatever information we have available to us this morning.

In a moment, Richard will discuss the operational results for the third quarter and the impact of the unprecedented four hurricanes on our Florida facilities. But I would like to say a few words regarding the devastation by Hurricanes Charley, Frances, Ivan and Jeanne. As I stated this morning in our release, we are thankful to all our employees and volunteers who have helped to maintain health-care services in their communities devastated by the horrific storms. Personal and professional lives have been changed, property damaged or in some cases destroyed, and families uprooted from their homes with their daily lives completely turned upside down. No words can adequately express our admiration for their efforts or our appreciation for all they have done.

In virtually all markets that sustained damage due to the storms, we have construction crews on the ground working to repair the storm damage. This process will continue over the course of the next couple of months. At this point, all hospitals are up and running. Gulf Coast Hospital, the hardest hit by Hurricane Charley, reopened on Monday, October the 11th. Richard will walk you through all of the work that his operations team and Milton’s financial team have underway to assess the impact of the storms in the third quarter as well as future periods.

I would like to spend the balance of my time this morning on our announced Dutch auction tender offer to repurchase up to $2.5 billion of HCA common stock. We are offering to purchase up to 61 million shares of HCA stock at a price not greater than $41 per share nor less than $35 per share. The tender offer is consistent with the Company’s commitment to enhancing short shareholder value and reflects our confidence in the long-term future of HCA.

The tender offer represents an opportunity for the Company to deliver value to those shareholders who elected to tender their shares, while at the same time increasing the proportional ownership of nontendering shareholders in HCA. We believe the Company possesses the financial strength to successfully complete the tender offer and the related borrowings while still fully funding future investments in our existing hospitals.

Let me provide some background on this decision. During the past months, management, with the assistance of outside advisers, undertook a review of the Company’s strategic plan; more specifically, its use of cash flows from operations for, among other, things capital expenditures, acquisitions, debt repayment, dividends, and share repurchases, along with a variety of other alternatives for using the Company’s financial resources. Based upon this review, a decision was made by the Board to increase the Company’s financial leverage to fund the tender offer. We believe this is a prudent use of the Company’s financial resources and an effective means of providing value to our shareholders.

Also this morning we are providing updated earnings guidance for 2004’s fourth quarter. We believe earnings will approximate 52 to 57 cents per diluted share, which includes an anticipated negative impact on earnings from the residual effects of the hurricanes of approximately $15 million pretax, or 2 cents per share. For the full year 2004, we now believe earnings will range from $2.40 to $2.45 per diluted share, which includes approximately 7 cents of adverse earnings effects of the hurricanes in the third and fourth quarters, along with the 2-cent San Jose asset impairment charge.

Our newly issued 2005 guidance is a range of $2.75 to $2.90 per diluted share. Included in the guidance for 2005 is an estimated 14 cents to 21 (ph) cents per diluted share benefit from the $2.5 billion share repurchase, reflecting reduced shares outstanding, partially offset by increased interest cost. The benefit to earnings from the share repurchase will vary depending upon the final results of the tender offer.

As noted in this morning’s release, 2005 guidance assumes some ongoing adverse impact from the recent hurricanes. We are hopeful that our Florida markets will return to normal

quickly, but the impact of the hurricanes on future periods is very difficult to predict. With that, I would like to turn it over to Richard Bracken to discuss operations for the quarter.

Richard Bracken - HCA Inc. — President, COO

Thank you, and good morning to all. As Jack mentioned a moment ago, late Sunday evening we concluded the closing of our September and third-quarter financial statements. Since we’ve only had two days with this data, there is a fair amount of analysis that we have not yet had time to complete or receive the necessary scrutiny and verification as required by Sarbanes-Oxley.

However, this morning we did want to provide you as much information as possible concerning our anticipated quarterly operating results, our best estimates relative to the impact of the storms, as well as any other observations that we might have on other underlying run rate issues. Our full analysis will be available next week during our quarterly earnings call.

While I do plan on spending a fair amount of time detailing the financial impact of the storms on third-quarter operations, let me start by commenting on the overall operating performance for the Company. Despite the storms, the third quarter was a difficult one. Same-store admissions for the Company grew 0.9 percent. While this is up sequentially from the growth rate of the second quarter of 0.4 percent and prior year’s third quarter of 0.2 percent, it still reflects a rather volatile monthly performance.

Same-store admissions growth rates for July, August and September were -1 percent, 3.6 percent and 0.3 percent, respectively. And while the storms in the Florida markets clearly traded much heartache and havoc during the last two weeks of August and most of the month of September, it’s fair to say they did not significantly influence the Company’s reported growth rate for inpatient admissions. Excluding Florida’s September operations from the Company’s third-quarter results, same facility admissions increased 1 percent, only a slight positive variance.

The storms’ most significant effect from a volume perspective was experience in demand for outpatient businesses, and we believe they impacted these outpatient statistics positively as well as negatively. For example, as reported, emergency department volume for the entire Company for the third quarter was 1.9 percent, but dropped to 1.5 percent if we exclude emergency department volumes for August and September in the Florida markets. Obviously, while emergency department volumes were slow during the actual hours of the hurricanes, after the hurricanes passed, emergency department volumes swelled. This could be expected, as physician offices and other health-care providers were (technical difficulty) routine care. In this case, the storms had the effect of increasing ED volumes.

Overall growth rates for surgical volumes, both inpatient and outpatient, for the quarter were positive and improved to 1.2 percent compared to -1.5 percent in prior year’s third quarter. Inpatient surgical volume increased by 1.9 percent compared to 0.1 percent in the prior year’s third quarter. Outpatient surgical volumes grew 0.7 percent, up from the prior year’s third quarter of - -2.5 percent, even considering the effect of the storms.

If this growth rate is adjusted to exclude Florida’s September operations, the Company’s outpatient surgical growth rate would double to 1.7 percent, and this is in line with recent trends. It’s easy to understand why the hurricanes would negatively impact patient demand in this service.

In general, one of the most significant issues affecting the Company in the third quarter from a financial perspective was the slower rate of growth of our net revenue per adjusted admission. As reported, net revenue per adjusted admission increased 4.7 percent for the quarter, down sequentially from the second quarter of 5.6 percent and from the prior year’s third quarter of 7.1 percent. Adjusting for the storms in the Florida markets for the month of September makes no material difference in this number.

At this point, we believe net revenue per adjusted admission was negatively impacted by a decreasing reimbursement from our managed care portfolio due to a decreased number of managed care patients, some shift to a lower-paying product within the managed care book, as well as movement of some uninsured patients into Medicaid. This latter reason, while definitely having the effect of decreasing net revenue per unit, over the long run should be a positive development for the Company.

Additionally on a positive note, our uninsured admissions increased only 7.2 percent, while uninsured and emergency room department visits increased 11.4 percent. Both of these reflect the slowest rate of growth we have experienced since the third quarter of 2003.

Our provision for bad debts during the quarter was 11.9 percent of revenue compared to 11.3 percent in the last quarter of 2004. We believe this increase in bad debt is due to a deterioration in collectibility. Although increasing, it is not a surprise and can be attributed to some basic mathematics. As we become more successful in collecting patient copays and deductibles, the composition of the Company’s self-paid receivables is becoming more heavily weighted toward the lowest percentage reimbursed, the true uninsured.

Cash collections were quite strong for the quarter. Cash collected as a percentage of adjusted daily revenue was 103.4 percent and year to date was 102.3 percent. Point of service collections, or sometimes referred to as upfront cash collections, increased 53 percent over prior year third quarter. Days Sales Outstanding was 47 for the third quarter of 2004 versus 49 for the third quarter of 2003.

From an expense perspective, most indicators were in line with recent trends and our expectations. Most notably, labor cost, despite some added costs due to the storms, fared reasonably well. Salaries, wages, and benefits expressed as a percentage of net revenue for the quarter were 40.6 percent, slightly up from prior year. Productivity levels were managed quite well during the storms in fluctuating volume periods, and we continue to experience consistent year-over-year comparison in average hourly rates and continued reductions in contract labor.

Supply costs, while up over prior year, have been consistent with the trends we’ve shared with you in recent quarters. Third quarter supply costs were 16.7 percent of net revenue, essentially the same as the second quarter.

On balance, I think the quarter can be summed up as one with modest but slightly improving inpatient volume; growth in outpatient volume, except in the Florida markets during the storm period; favorable increases in surgical volumes; slowing net revenue per unit increases; strong cash collections; and generally, acceptable expense management.

As noted in our release this morning, we are recording 5 cents of cost associated with storm damage. In our release, we have tried to provide a fair amount of detail about how the storm affected our hospitals, so I will not reiterate that detailed information now. But as a general comment, all of our Florida hospitals and surgery centers encountered some disruptions due to the hurricanes. And Florida, as you know, is a very important state for HCA.

Please recall in Florida we operate 40 hospitals and 28 freestanding surgery centers, which represent over 20 percent of our hospitals and over one-third of all surgery centers in the company. Additionally, these facilities routinely produce about one-quarter of the Company’s revenue, about 28 percent of our admissions and emergency room visits, and about a quarter of our surgical case load. The four storms caused patient evacuations, cancellations of inpatient and outpatient surgeries, reduced patient length of stays, physician office closures, increased cost due to repairs and maintenance, increased labor cost and significant property damage at our hospitals.

To capture these costs, we established a comprehensive and careful process to estimate property damage, business interruption, and the benefits expected of our insurance coverage. Building and equipment repair estimates were provided by both insurance adjusters and contractors, who were on-site and then reconciled.

Business interruption estimates were based on comparing actual earnings, adjusted for any direct cost due to the storms, recorded post-hurricane impact, to the most recent earnings run rate. The difference was attributed to business interruption. Of course, all estimates were reviewed by the appropriate division in Group Operations as well as our insurance and accounting personnel. In short, we feel our cost estimates were derived by a careful process and had multiple levels of review and oversight.

As a final comment and as I mentioned earlier, over the next week we will continue to analyze the quarter and should be in a better position to comment on specific market dynamics and trends. With that, Vic, back to you.

Vic Campbell - HCA Inc. — SVP

Richard, thank you. Kelsey (ph), if we could get you to come back on and we will start the Q&A. I would ask you, and I know Kelsey will encourage you, limit your questions please to one. We have a lot of people on the call today and we’d like to give everyone an opportunity to ask one question. Thank you.

QUESTION AND ANSWER

Operator

(OPERATOR INSTRUCTIONS) Lori Price with J.P. Morgan.

Lori Price - J.P. Morgan — Analyst

This question is for Jack. I was wondering — you’ve offered some good reasons as to why your bad debt ratio continues to stay high and even rise. But at the end of the day, your ratio has been well above virtually all of your peers now three quarters in a row and it looks like this will be the fourth. I know that there are differences in your markets versus peers and so on, but I’m wondering if you’re allowing at this point for the possibility that your bad debts are being influenced by more than just macro factors.

And what I’m wondering in particular is do you believe at this point that there is a possibility that the regionalization of your collection efforts has created less local accountability on collections. And alternatively, do you believe that you may be attracting a disproportionate share of uninsureds or nonpaid patients because of your generous charity and discounted benefits? Thanks.

Jack Bovender - HCA Inc. — Chairman, CEO

Let me — this is Jack, I will make the initial comments and then Beverly is here, who runs our PASs, and she can give you a better flavor for it. First of all, you know that we are very diligent and I think reasonably conservative in how we account for our bad debts. We, as you know, do a quarterly hindsight review. I don’t know that there is any other company or any other not-for-profit hospital in the country that goes to that extent to true up its receivables on a quarterly basis. So I think you’ve got to add to this mix how diligent I believe we are in trying to be as accurate as possible in estimating our bad debt expense on a quarterly basis. So we start that as number one in this mix.

The issue about our PASs having consolidated into 10 regional centers instead of running individual business offices, I think we have covered in the past. There is absolutely no doubt in any of our minds that the effect of PASs has been to mitigate, in fact, the bad debt problem. We believe our situation would be much worse, particularly when it comes to upfront collections, as well as to the balances in insurance accounts, if it were not for our PASs. So we don’t believe that our PASs have had a negative effect on our bad debt expense; in fact, we are absolutely convinced that the situation would be significantly worse if it were not for that.

Our generous bad debt or our generous charity policy is really responding to what we are seeing. When people don’t have the resources, then it is more appropriate to recognize that upfront and deal with it instead of trying to harass people that really don’t have the ability to pay. Our policy is that if people have the ability to pay and are simply putting us behind their cell phone contracts and payments, or their cable TV, then we are going to pursue that vigorously. But when people don’t have the resources, then we want to treat that appropriately as charity care.

We don’t have any evidence in any of our markets that people are flooding to us from the Catholic or Baptist hospitals simply because they perceive us as more generous in our treatment. But we monitor that and if we see those trends, we would certainly make that known.

I’d like to ask Beverly maybe to respond, and particularly if Beverly would talk about our work with McKenzie (ph) over the past six months and reviewing our processes and their comments about our processes versus what they see in the rest of the hospital industry.

Beverly Wallace - HCA Inc. — President of Financial Services

Good morning, Lori. We had McKenzie come in and do a very deep dive into our patient account service centers that are mainly focused on collecting our insurance receivables, and then our national patient account service centers, which are focused on collecting our self-pay receivables. As they completed that deep dive, they came away with a couple of points. One, our patient account service centers are best in class. They have not seen anything in the industry, and quite frankly outside the industry, with this type of portfolio that exceeds the performance of what we’re doing in our patient account service centers.

On our national patient account service center, they said it was probably best in class for the industry, but not world-class based on other financial institutions. They did have some recommendations on trying to enhance the collectibility of these true self-pay accounts, on the copays and deductibles. They said that we needed to probably focus more intently on the front end on those dollars, which you saw coming out in multiple descriptions in earlier releases.

We have improved our funding collections or our point-of-service collections, as Richard mentioned, 53 percent over the prior year. We have grown it significantly over the years that the hospitals have been rolling into the PASs.

Having said that, we always feel there is room for improvement and we are very focused on that. I think from that perspective, I think we are trying to cover all the bases and assure everybody that we are making every collection effort possible on this portfolio.

Vic Campbell - HCA Inc. — SVP

Milton, any last thing we need to move (ph)?

Milton Johnson - HCA Inc. — CFO

Sure, just very quickly, I think it is the market dynamics relative to our peers and our payer mix. I mean, again, as Richard said, Days — NAR (ph) down to 47 versus 49 a year ago. Our bad debt came in at 11.9. We were looking at it actually around 11.4. It came in about 14 to $15 million higher than our expectation, and the reason it consumes the higher portion of our net revenue had to do with lower net revenue in the period than we expected. And also, our charity care was flat this quarter versus a year ago, which also put additional pressure on the bad debt line this quarter.

Vic Campbell- HCA Inc.- SVP

Lori, thank you. Next question.

Operator

Kevin Burg with CS First Boston.

Kevin Burg- Credit Suisse First Boston — Analyst

Can you talk a little about the pricing environment out there? You mentioned that, obviously, in your press release as part of the reason for the weakness in terms of revenue (indiscernible) admission. I guess specifically, you mentioned, I think, the movement towards Medicaid should be beneficial versus uninsured. But could (ph) you talk about the mix issue with regard to managed care and what you are seeing there and how you perceive pricing to be in ‘05 and ‘06?

Vic Campbell- HCA Inc.- SVP

Kevin, thank you. Richard, Milton, you want to tag team it?

Richard Bracken- HCA Inc.- President, COO

Let me just start and maybe I can turn it over to Milton in a moment here. Obviously, we will provide some more details on this component of the quarter next week. But some trends that we had been seeing I mentioned briefly in my comments. And that is we are seen within the managed care book some movement to lower reimbursed products. When we (technical difficulty) — as we have quoted what we think the managed care rates are going to be next year, these are in fact the contracted rates. But obviously, that doesn’t fully capture any movement within the managed care book, and we have seen in a couple of markets some movement (technical difficulty) to lower reimbursed products. So I think that’s putting some downward pressure.

The fact that we have a slowing rate of uninsured patients obviously drives that net revenue per unit down as well. At the end of the day, that’s a good thing. Of course, uninsured goes in at a much higher rate than a managed care or any other payer. But when that number goes down, it does have the effect of putting downward pressure on that ratio.

And another thing that’s happening is, as you pointed out and as I commented on, we are being more successful, we believe, in moving some of the uninsured to a Medicaid payer. A lot of our effort is getting them qualified for Medicaid, and of course that puts some downward pressure as well on the ratio.

As we look forward, obviously the mix in the managed care business in our overall pricing is very important to us. The managed care book is the most profitable payer line for us, and so as we think about our rates going forward, obviously we are concerned about this movement within the book as well.

But I think for now that is probably our best look at the issues. If you’re comparing to prior year, obviously, the outliers coming out of the number and a slowing charge master increases has also put some downward pressure on it. Milton.

Milton Johnson- HCA Inc.- CFO

The only thing I will add to that is if you look at the monthly breakdown of our net revenue per adjusted admission on a reported basis, again for the quarter, 4.7 percent on a reported basis, July was 6.5 percent, August was 2.3 percent, and then September back to 5.2 percent. So you can see the month of

August is the period that really put some pressure on that (indiscernible) for the quarter.

Vic Campbell- HCA Inc.- SVP

Kevin, thank you.

Operator

Gary Lieberman with Morgan Stanley.

Gary Lieberman- Morgan Stanley- Analyst

I was hoping to maybe reconcile some of the data points you gave on the bad debt with the net income, what the net outcome of the increase as a percent of revenue. Richard, a second ago you just said that the lower net revenue should — would also help the bad debt and then all the data points you gave previously on the cash collections, on the uninsured admins coming down to 7.2 percent would all kind of lead me to the conclusion that bad debt should have moderated or at the very least stayed flat from last quarter. So could you just help us out with what’s really driving the increase there?

Vic Campbell- HCA Inc.- SVP

Gary, thank you. Milton, do you want to address that?

Milton Johnson- HCA Inc.- CFO

Gary, you are right on your analysis. Some of the staff (ph) and information that Richard covered would have resulted in improved — or moderation of the growth rate of bad debt. But we did have a hindsight adjustment this quarter, repricing, of course, the balance sheet as a result of that. Ad I think as mentioned, some of the reason is were doing a better job of collecting the copay and deductibles, leaving us with more of the uninsured AR in our self-pay mix, and that is putting some pressure on the collectibility factor. And that came in again in September and resulted in us having to record a higher bad debt. We had expected, of course, to have some adjustment based on the recent trends, but that number did come in a little bit higher than we expected for the quarter as well.

Vic Campbell- HCA Inc.- SVP

Thanks, Gary.

Operator

Diandra Parks (ph) with Citigroup Asset Management.

Diandra Parks- Citigroup Asset Management- Analyst

During your last quarter’s conference call, I asked a question on where you wanted to be in terms of your debt rating. David Anderson actually replied, stating that, quote, basically we have not changed our goal to continue to be investment grade and are hopeful that our friends at one particular rating agency will talk to us about that issue. It’s been the same thing over the last couple of years — our goal is to be somewhere between 50 and 55 percent.

Now, can you maybe reconcile that comment with enhancing shareholder value, especially bondholder value? And have you talked to the rating agencies and do you foresee maintaining investment grade, with adding $2.5 billion of debt to your balance sheet?

Vic Campbell- HCA Inc.- SVP

Thank you. I think, Jack, you want to comment, and then David as well.

Jack Bovender- HCA Inc.- Chairman, CEO

Yes, you are correct in what we have stated as our goal as far as debt to cap. But we have also said all along and been very plain about this, and any time we’ve discussed this, that when the market opportunities were such that we thought it was prudent for us to repurchase our own shares and it was in the best interest of our shareholders to do so, that we would be opportunistic in doing that. As we looked at the best uses of cash flow, as we went through our strategic planning process in August and September, it was very apparent to us that it was in the best interest of our shareholders to use our cash flow, given what interest rates are now, to leverage up our balance sheet somewhat reasonably and to use that to purchase what we think is in the best interest of our shareholders, which is our own shares.

That doesn’t mean we don’t have the ultimate ambition to get to those levels. But again, I want to reiterate that this

management team has said and will continue to say that we will be opportunistic in the way we use leverage, the way we use our cash flows in the interest of our shareholders. David.

David Anderson- HCA Inc.- SVP-Finance, Treasurer

Jack has already gone through the reasons why we decided to do this business transaction. Obviously, our leverage is going to increase, but the balance sheet in my judgment will remain strong, as does our cash flow. It is our intent to use our cash flow to repay debt. And hopefully we can repay debt to get back to investment grade statistics. In terms of both Standard & Poor’s and Moody’s and also Fitch, we have provided them with the information that you would expect us to and have had numerous conversations with them. I’m not at liberty to front (indiscernible) what the rating agencies are going to do; that’s not correct. But I think you can expect that they may downgrade our credit rating.

Vic Campbell- HCA Inc.- SVP

Thank you very much. Next question.

Operator

A.J. Rice with Merrill Lynch.

A.J. Rice- Merrill Lynch- Analyst

I just wanted to ask about the ‘05 guidance and some of the basic assumptions underlying that. You have referred a couple times to the fact that there are some hurricane lingering effect. Can you maybe quantify that? And also indicate whether you are assuming any change in current trend with respect to bad debts, admissions, or even commercial pricing trends?

Vic Campbell- HCA Inc.- SVP

A.J., thank you. Milton, you want to take a shot there?

Milton Johnson- HCA Inc.- CFO

A.J., we are expecting to have some residual effect in ‘05 from the hurricanes. It’s difficult to estimate that number with any certainty. There will be physician disruption; there is overall economic disruption in certain markets; seasonal residents in where we have our patient base that we typically have as we go through the fourth quarter and some of the first quarter of next year. It’s very difficult to predict that. But we have assumed that we would have approximately a $40 million negative impact on ‘05 from the residual effects of the hurricanes.

Vic Campbell- HCA Inc.- SVP

Any of the other general comments you want to make about bad debt assumption (multiple speakers) what have you. I know we can’t — we are not going to be specific on any of those, but just any general comments (multiple speakers)?

Milton Johnson- HCA Inc.- CFO

I think that when you look at ‘05, our net revenue would be —looking at the benefits of the Medicare rate increase, we are estimating at about a 4 percent overall Medicare rate increase, and of course that is factored into the model. No major changes in the managed care assumptions into ‘05; again, we have been getting consistent pricing increases around 7 percent.

I think bad debts, we are not assuming any major reversal there. Some moderation in the growth rate, obviously, as the numbers get bigger. Our charge master (ph) assumption is high single digits, so that will help with that as well. So that is pretty much the major components of the model.

Vic Campbell- HCA Inc.- SVP

Richard, do you want to comment?

Richard Bracken- HCA Inc.- President, COO

Just a couple things. From a volume perspective, A.J., we are looking at a conservative volume projection for next year, generally in the line of what we experienced this year. We do expect to be able to positively impact the supply costs. We have a lot of activities underway right now that should perhaps provide a little improvement in our supply costs going forward.

Vic Campbell- HCA Inc.- SVP

Thanks, A.J.

Operator

John Ransom with Raymond James.

John Ransom- Raymond James- Analyst

Just trying to parse the revenue dynamics a little bit. Could you talk about perhaps share growth in managed care revenue per adjusted admit versus your expectations, and talk a little bit more about this shift to lower-priced products and what exactly that means. Thanks.

Vic Campbell- HCA Inc.- SVP

John, thank you. Milton.

Milton Johnson- HCA Inc.- CFO

Sure. For the quarter, our managed care net revenue per adjusted admission is approximately 6.6 percent up. That is probably a couple hundred basis points below the run rate that we’ve seen. And when we refer to the book moving to lower-paying plans, what that means is in certain markets — and this trend has been occurring, but we are seeing continued effects of it — is we are seeing some of the lower-paying plans gaining market share. And so that is what’s happening. Although we are getting our 7 percent pricing increases overall in managed care, we are seeing enrollees transition in certain markets to lower-paying plans.

Vic Campbell- HCA Inc.- SVP

Thanks, John, Milton.

Operator

Neal Goldner with State Street Global.

Vic Campbell- HCA Inc.- SVP

You there, Neal?

Operator

Sir, your line is open. Please go ahead with your question. Hearing no response, we will move on to Adam Feinstein with Lehman Brothers.

Adam Feinstein- Lehman Brothers- Analyst

Good morning, everyone. My question is a bigger picture question and I guess maybe for Jack. But if anyone has any point of view, that would be great. As we think about long-term growth for HCA, and obviously this has been a challenging year for the industry with bad debt, but going back here and looking, you guys earned about $2.68 in 2002. And if we look at the ‘05 guidance, excluding the impact from the share buyback, again we get about $2.65; so implies flat earnings over that time period.

With that, how do we think about long-term growth. I know last year about this time you guys had done that study and gave some update in terms of long-term growth, but just wanted to get some updated point of view there. And then just want to know what you guys were thinking about in terms of outlier payments, as well, for 2005, with the outlier threshold moving higher, is that embedded in other guidance? Thank you.

Jack Bovender- HCA Inc.- Chairman, CEO

I’ll start out and maybe Richard or others here might join in it. Going back to 2002, as you rightfully point out, we’ve seen a relatively flat picture; not the kind of growth that we would have hoped for. But I would also point out that we have had to climb over a lot of negative things, not the least of them being the significant reduction in outlier payments. And we could go through a litany of others, including the significant impact of the uninsured over the last couple of years.

But if you ask me to generally look out into the future, I would say that I am reasonably optimistic about the future prospects of this Company. I guess that is kind of affirmed in the fact that we believe that purchasing $2.5 billion worth of our own stock right now is the right decision for the future well-being of this Company and for its long-term shareholders. I don’t know if anyone else wants to add anything to that.

Unidentified Company Representative

On more of a global comment, we do like where our hospitals are located. Despite some of the more difficult macros, we like being — we think we have the best group of hospital assets that we really have (ph) ever had in the history of this Company. They are generally in growing population centers in America. They are well-capitalized and well-positioned in terms of market share in their various markets.

So, over the long view, obviously I concur wholeheartedly with Jack that our system is well-positioned. Health care in America obviously has a lot of big issues affecting it in terms of reimbursement and the reliance on federal and state dollars that can and does affect our performance in a very major way. But given what we know right now and what we see right now on our overall position in the industry and the overall strength of the industry, we think we are reasonably positioned.

Vic Campbell- HCA Inc.- SVP

Milton, another— ?

Milton Johnson- HCA Inc.- CFO

Just with respect to your outlier question, Adam, it is factored into our guidance. The outlier change last year cost us $12 million a month in net revenue. Looking at the new outlier rules and the change in thresholds, it will probably be accretive 3 to $4 million a month starting in the fourth quarter.

Vic Campbell- HCA Inc.- SVP

That is the one number when we start comping to 2002, and you know that, and everyone, if you look at that $120 million or so outliers cost us in this year. And obviously, if you readjust it for ‘02, you’d be looking at something substantially different. In that 4 percent guidance that we gave you on Medicare would include outlier and the other factors — all the payments there.

Operator

Gary Taylor with Banc of America.

Gary Taylor- Banc of America Securities- Analyst

Good morning. I wanted to go back to the share repurchase a little bit and just understand, Jack, sort of the thought process behind the investment. I mean, it’s $4 billion now you have committed over the last two years to buying back shares of your own stock. I guess the question is, we used to hear a lot about some of the capital projects and even some of the acquisitions where hurdle rates on returns were close to 20 percent, and the earnings yield on the stock now is in the single digits.

So I’m just trying to understand is there no time horizon where you look out and see that there are better returns to be earned by either preserving your firepower or investing in the business through the downturn. I’m trying to understand why the return on buying the stock makes this the best decision for the Company. Certainly, I know in the near-term it helps to support the stock price when you are lowering estimates. But I want to understand just how you look at the return on capital and why this $4 billion is the best use.

Jack Bovender- HCA Inc.- Chairman, CEO

That is a very good question and it may take me three or four minutes to answer it. I’ll try to be brief, but it gets right into the process of strategic planning. One of the things that, as we’ve said, we do every year as part of our process is to ask ourselves what is the best possible use of the enormous free cash flow in this Company that is in the interest of the shareholders going forward. And there is essentially five different ways or five different things to look at in doing this process.

The first one, of course, is capital expenditure. What do we do, what should we spend to keep the facilities modern and up-to-date and to make sure that they are at the cutting edge of medical technology? Inside our model that this repurchase is predicated upon is a continuance of $1.6 billion of internal capital expenditure each year, so we are not proposing to reduce that because we think that would be the wrong thing for long-term growth inside this Company.

The second obvious thing to look at is acquisitions. As we look out into the future, the next couple of years, what are the acquisition opportunities. Quite frankly, if I can be very simpleminded in this, it is a little hard for us to be in the chase for acquisitions that are going for 8, 9, 10 times cash flow when our Company essentially is selling at 6.4 percent times cash flow. And put in another way, buying these wonderful

assets that we have at 6.4 times cash flow makes a lot more sense than going out and buying somebody else’s possibly marginal hospitals at 8, 9, or 10 times cash flow.

Third thing, obviously, is dividends. We did, as you know, significantly increase dividends the first of this year. As we looked at models going forward, that’s a flexibility we wanted to keep in any model, buying back stock or acquisitions or any other uses. And we believe we have kept that flexibility and we will continue the first of each year to look at our situation and the Board will make a decision about what it will do relative to dividends increases or maintaining the dividend. The model assumes at the bottom level that we will maintain our dividend, and it certainly permits increases as the Board feels its appropriate to do so.

And then of course the fourth thing, other than share repurchase, that you could do is reduce debt. And we, quite frankly, don’t feel that’s in the best interest of our shareholders over the next two or three years, given the remarkably low interest rates that we can borrow money at now.

So by process of elimination and comparing all of the possible uses, it’s very apparent to us that a very substantial share repurchase program was in the best interest of the shareholders at this point in time.

Vic Campbell- HCA Inc.- SVP

Jack and Gary, thank you.

Operator

David Dempsey with Avondale Partners.

David Dempsey- Avondale Partners Llc- Analyst

Good morning. Going back to the managed care shift. I guess you mentioned something about market specific. I guess the question would be are their concerns that these issues could spread to other markets, and in the markets that you have a concern about, what are the expectations going forward? The shift to the lower plans, does that potentially impact bad debt for the future by creating more self-pay revenue?

And then when you look at the plans changing into 2005, obviously we’ve seen changes each of the last couple of years, in terms of people moving more money to the employee, are there concerns that we could see volumes impacted again by some massive health plan changes that could impact your expectations for future volume growth?

Vic Campbell- HCA Inc.- SVP

David, thank you. Probably have Beverly Wallace address that. Obviously, a lot of the details related to third quarter numbers, we will have more commentary on this next Friday. Beverly, do you want to make a few comments at this point?

Beverly Wallace- HCA Inc.- President of Financial Services

Sure. What we’re seeing is some of our rental network type PPO arrangements are having a difficult time competing with what we call the Big Five, the Blues in the markets that we serve, United, Aetna, CIGNA. And so we see the Blues, United, Aetna, CIGNA and Humana gaining, whereas these rental network PPOs are starting to lose. Obviously, that is where we were able to get a higher level of reimbursement.

Our managed care contracting strategy is still very strong and we are seeing between 7 and 8 percent and we are about 60 percent complete for ‘05. So we feel pretty comfortable with that.

Shift of copays and deductibles, I think the industry will see a shift and it could have an impact on volume. But I think the structure that we have put in place on our point-of-service collections will serve us well in those areas.

Vic Campbell- HCA Inc.- SVP

Beverly, thank you. We’ve got time for about one more question.

Operator

Kemp Dolliver with SG Cowen & Company.

Kemp Dolliver- SG Cowen- Analyst

Thanks. Could you give his some color — and I understand it may be difficult — with regard to how some of the costs from the storms flow through the income statement. It is showing up mainly in labor and other. Also, I acknowledge there is probably some compression of your operating leverage, given some disruption in outpatient.

Vic Campbell- HCA Inc.- SVP

Thanks, Kemp. Milton, you want to go first there?

Milton Johnson- HCA Inc.- CFO

Kemp, I think you described it pretty well. There is some incremental increase in labor cost associated with the hurricane effect, but most of the cost you will find in other operating expenses. Repairs and maintenance, for example, as you would imagine, is significantly above any expected run rate we typically would have. So that’s where you’ll find most of the cost impact of the hurricane, is other operating cost.

Vic Campbell- HCA Inc.- SVP

Kemp, thank you. I want to thank everyone for being on the call. Mark and I will be around today, and obviously going forward, we look forward to hearing from you. Again, encourage you to get the tender documents, take a look at them, for the data that is contained there. Thank you very much.

Operator

Thank you, Mr. Campbell. That does conclude today’s conference. On behalf of HCA, I would like to thank you for your participation. You may now disconnect.

EX-99.B.5

EXHIBIT (b)(5)

(JPMORGAN LOGO)

October 21, 2004

$2,250,000,000 Senior Credit Facilities

Amendment Letter

HCA Inc.
One Park Plaza
Nashville, Tennessee 37203

Attention: David G. Anderson Senior Vice President, Finance & Treasurer

Gentlemen:

     Reference is made to the Commitment Letter dated October 12, 2004 (including the Term Sheet attached thereto, the “Commitment Letter”) between us and you, regarding the $1,750,000,000 revolving credit facility and $500,000,000 term loan facility described therein. Capitalized terms used but not defined herein are used with the meanings assigned to them in the Commitment Letter.

     We have agreed that the Commitment Letter is hereby amended by replacing the Term Sheet attached thereto as Exhibit A with the Statement of Terms and Conditions attached hereto as Exhibit A (the “Revised Term Sheet”). All references to the “Term Sheet” contained in the Commitment Letter and in any related documents hereafter shall be deemed to refer to the Revised Term Sheet. Except as amended hereby, the Commitment Letter shall continue in full force and effect in all respects and is hereby ratified and confirmed.

-2-

HCA Inc.

     Please confirm that the foregoing is our mutual understanding by signing and returning to us an executed counterpart of this Amendment Letter.

Very truly yours,

J.P. MORGAN SECURITIES INC.
By:	/s/ Andrew T. Brode Name: Andrew T. Brode Title: Vice President

JPMORGAN CHASE BANK
By:	/s/ Dawn Leelum Name: Dawn Leelum Title: Vice President

Accepted and agreed to as of
the date first above written:

HCA INC.

By: /s/ Keith M. Giger
Name: Keith M. Giger
Title: Vice President - Finance

(JPMORGAN LOGO)

EXHIBIT A

HCA INC.

$2,250,000,000 SENIOR CREDIT FACILITIES

Statement of Terms and Conditions

BORROWER:	HCA Inc., a Delaware corporation (the “Borrower”).
AMOUNT AND TYPE OF FACILITIES:	Five-year revolving credit facility (the “Revolving Facility”) in the amount of $1,750,000,000.
	Five-year term loan facility (the “Term Loan Facility”; together with the Revolving Facility, the “Facilities”) in an aggregate principal amount of $500,000,000. The Term Loan Facility shall be repayable in 16 consecutive quarterly installments, commencing on March 31, 2006 and ending on the date that is five years after the Closing Date, in an aggregate amount for each 12-month period set forth below equal to the amount set forth opposite such period (with installments during each such period being equal in amount):

Period	Principal Amount
Year 1		—
Year 2	$	50,000,000
Year 3	$	75,000,000
Year 4	$	125,000,000
Year 5	$	250,000,000

PURPOSE:	For refinancing the existing outstandings under the Credit Agreement (the “Existing Credit Agreement”), dated as of April 30, 2001, among the Borrower, the Banks (as defined therein), the Co-Agents (as defined therein), the Senior Managing Agents (as defined therein), the Managing Agents (as defined therein), the Lead Managers (as defined therein) and the Agent (as defined therein), and for general corporate purposes (including but not limited to the redemption or purchase of outstanding securities of the Borrower).
SOLE ADVISOR, LEAD ARRANGER AND BOOKRUNNER:	JPMorgan Securities Inc. (“JPMorgan”)
ADMINISTRATIVE AGENT:	JPMorgan Chase Bank (“JPMCB”).

3

2

LENDERS:	A syndicate of banks and other financial institutions including JPMCB, arranged by JPMorgan (collectively, the “Lenders”).
AVAILABILITY:	The proceeds of the Term Loan Facility will be advanced in a single drawing on the Closing Date. The Revolving Facility shall be available on a revolving basis during the period commencing on the Closing Date and ending on the fifth anniversary thereof (the “Revolving Termination Date”).
LETTERS OF CREDIT:	A portion of the Revolving Facility not in excess of $250,000,000 shall be available for the issuance of letters of credit (the “Letters of Credit”) by JPMCB (in such capacity, the “Issuing Lender”). No Letter of Credit shall have an expiration date after the earlier of (a) one year after the date of issuance and (b) five business days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year tenor may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (b) above).
	Drawings under any Letter of Credit shall be reimbursed by the Borrower (whether with its own funds or with the proceeds of Revolving Loans) on the next succeeding business day following notice to the Borrower of such drawing. To the extent that the Borrower does not so reimburse the Issuing Lender, the Lenders under the Revolving Facility shall be irrevocably and unconditionally obligated to reimburse the Issuing Lender on a pro rata basis.
COMPETITIVE LOANS:	The Borrower shall have the option to request that the Lenders bid for loans (“Competitive Loans”) bearing interest at a stated rate or a margin over the eurodollar rate, with specified maturities ranging from 7 to 360 days. Each Lender shall have the right, but not the obligation, to submit bids at its discretion. The Borrower, by notice given four business days in advance in the case of eurodollar rate bids and one business day in advance in the case of stated rate bids, shall specify the proposed date of borrowing, the interest period, the amount of the Competitive Loan and the maturity date thereof, the interest rate basis to be used by the Lenders in bidding and such other terms as the Borrower may specify. The Agent shall advise the Lenders of the terms of the Borrower’s notice, and, subject to acceptance by the Borrower, bids shall be allocated to each Lender in ascending order from the lowest bid to the highest bid acceptable to the Borrower. While Competitive Loans are outstanding, the available commitments under the Revolving Facility shall be reduced by the aggregate amount of such outstanding Competitive Loans.

3

FEES AND INTEREST RATES:	As set forth on Annex I.
NOTICE OF BORROWING:	The Borrower must provide notice to the Agent prior to any proposed borrowing under the Facilities as follows:
	Eurodollar Loans: three business days ABR Loans: same business day
OPTIONAL PREPAYMENTS:	ABR Loans may be prepaid at any time without penalty. Eurodollar Loans may be prepaid on the last day of the relevant interest period or at any time, subject to “breakage cost” reimbursement. Partial prepayments of Loans shall be in minimum amounts of $5,000,000 or a whole multiple of $1,000,000 in excess thereof.
RESERVE REQUIREMENTS; YIELD PROTECTION:	The rate quoted as Eurodollar Rate will be grossed-up for the maximum reserve requirements then in effect for eurocurrency liabilities. In addition, the definitive financing agreement will contain customary provisions relating to increased costs, capital adequacy protection, withholding and other taxes and illegality. Such provisions will be substantially similar to those set forth in the Existing Credit Agreement.
REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT; AFFIRMATIVE AND NEGATIVE COVENANTS; EVENTS OF DEFAULT:	Substantially similar to those set forth in the Existing Credit Agreement except that the ratio of consolidated total debt to consolidated total capitalization will be 75% from the Closing Date until March 30, 2006, 70% from March 31, 2006 until March 30, 2007 and 65% from March 31, 2007 and thereafter.
CONDITIONS PRECEDENT	The availability of the Facilities will be conditioned upon conditions substantially similar to those in the Existing Credit Agreement and satisfaction of the following conditions precedent as of the Closing Date:

(a) The Administrative Agent shall have received evidence reasonably satisfactory to the Administrative Agent that the Existing Credit Agreement shall have been terminated (other than any outstanding letters of credit which will roll over into the new facility); and

4

(b) A minimum long-term unsecured debt rating for the Borrower from S&P and Moody’s of at least BB+ and Ba2, respectively (with a stable outlook).

ASSIGNMENTS AND PARTICIPATIONS:	The Borrower may not assign its rights or obligations under the Facilities without the prior written consent of the Lenders.
	The Lenders shall be permitted to sell participations in loans, notes and commitments; provided that, such Lender’s obligations under the Facilities shall remain unchanged. Participations shall be subject to further qualifications substantially similar to those in the Existing Credit Agreement.
	The Lenders shall be permitted to assign all or any part of their respective rights or obligations (or Notes, if applicable) under the facilities; provided that, in the case of an assignment to a bank which is not a Lender or an affiliate of a Lender, such assignment is subject to the consent of both the Borrower (unless an Event of Default has occurred and is continuing) and the Agent (which consent shall not be unreasonably withheld); and provided further that, in the case of assignment to bank which is not a Lender or an affiliate of a Lender, (i) such assignment is subject to a minimum amount of $2,500,000 or such lesser amount as may be agreed upon by the Borrower and the Agent and (ii) the transferor Lender shall retain a minimum Commitment after giving effect to such assignment of $5,000,000 or such lesser amount as may be agreed upon by the Borrower and the Agent. Assignees will have all the rights and obligations of the assignor Lender. Each assignment will be subject to the payment of a service fee payable by the assignee and/or the assignor to the Agent. The voting rights for participants will be limited to changes in amount, tenor and rate.
EXPENSES:	All reasonable legal, syndication, and out-of-pocket expenses of JPMorgan, JPMCB and their counsel, Simpson Thacher & Bartlett LLP, are for the account of the Borrower.
CLOSING DATE:	The date on which the definitive agreements have been executed and delivered and the proceeds of the Term Loan Facility have been advanced to or for the account of the Borrower, which is expected to be not later than November 19, 2004.
GOVERNING LAW:	State of New York.

ANNEX I

INTEREST AND CERTAIN FEES

Interest Rate Options:	The Borrower may elect that the Loans (other than Competitive Loans) comprising each borrowing bear interest at a rate per annum equal to (i) the ABR plus the Applicable Margin or (ii) the Eurodollar Rate plus the Applicable Margin.
	As used herein:
	“ABR” means the highest of (i) the rate of interest publicly announced by JPMCB as its prime rate in effect at its principal office in New York City (the “Prime Rate”), (ii) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the federal funds effective rate from time to time plus 0.5%.
	“Applicable Margin” means a percentage determined in accordance with the pricing grid attached hereto as Annex I-A.
	“Eurodollar Rate” means the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits for a period equal to one, two, three or six months (as selected by the Borrower) (or nine or twelve months with the consent of the Lenders) appearing on Page 3750 of the Telerate screen.
Interest Payment Dates:	In the case of Loans bearing interest based upon the ABR (“ABR Loans”), quarterly in arrears.
	In the case of Loans bearing interest based upon the Eurodollar Rate (“Eurodollar Loans”), on the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
Facility Fees:	The Borrower shall pay a facility fee calculated at a rate per annum determined in accordance with the pricing grid attached hereto as Annex I-A on the average daily total Revolving Facility, payable quarterly in arrears.
Letter of Credit Fees:	The Borrower shall pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurodollar Loans under the Revolving Facility on the face amount of each such Letter of Credit. Such fee shall be shared ratably among the

	Lenders participating in the Revolving Facility and shall be payable quarterly in arrears.
	A fronting fee equal to 0.125% per annum on the face amount of each Letter of Credit shall be payable quarterly in arrears to the Issuing Lender for its own account. In addition, customary administrative, issuance, amendment, payment and negotiation charges shall be payable to the Issuing Lender for its own account.
Default Rate:	At any time when the Borrower is in default in the payment of any amount of principal due under the Facilities, any such amount shall bear interest at 2% above the rate otherwise applicable thereto. Any overdue interest or other amount payable shall bear interest at 2% above the rate applicable to ABR Loans, in each case from the date of such non-payment until paid in full.
Rate and Fee Basis:	All per annum rates shall be calculated on the basis of a year of 360 days (or 365/366 days, in the case of ABR Loans the interest rate on which is then based on the Prime Rate) for actual days elapsed.

ANNEX I-A

PRICING GRID

Revolving Facility

	Level I			Level II			Level III			Level IV			Level V
Applicable Margin:
ABR Loans		0.000	%		0.000	%		0.000	%		0.000	%		0.000	%
Eurodollar Loans		0.400	%		0.500	%		0.600	%		0.800	%		1.000	%
Applicable Margin for Facility Fee:		0.100	%		0.125	%		0.150	%		0.200	%		0.250	%

Term Loan Facility

	Level I			Level II			Level III			Level IV			Level V
Applicable Margin:
ABR Loans		0.000	%		0.000	%		0.000	%		0.000	%		0.250	%
Eurodollar Loans		0.500	%		0.625	%		0.750	%		1.000	%		1.250	%

     The Applicable Margin shall not be less than that for Level IV or, if Level V otherwise would be applicable, then that for Level V, for the period beginning on the Closing Date and ending on the date that is six months after the Closing Date.

     Level I Period: any period during which the publicly announced ratings by S&P and Moody’s of the then current senior unsecured, non-credit enhanced, long-term indebtedness of the Borrower that has been publicly issued are BBB+ or better and Baa1 or better, respectively.

     Level II Period: any period during which the publicly announced ratings by S&P and Moody’s of the then current senior unsecured, non-credit enhanced, long-term indebtedness of the Borrower that has been publicly issued are BBB and Baa2, respectively.

     Level III Period: any period during which the publicly announced ratings by S&P and Moody’s of the then current senior unsecured, non-credit enhanced, long-term indebtedness of the Borrower that has been publicly issued are BBB- and Baa3, respectively.

     Level IV Period: any period during which the publicly announced ratings by S&P and Moody’s of the then current senior unsecured, non-credit enhanced, long-term indebtedness of the Borrower that has been publicly issued are BB+ and Ba1, respectively.

     Level V Period: any period during which the publicly announced ratings by S&P and Moody’s of the then current senior unsecured, non-credit enhanced, long-term indebtedness of

     the Borrower that has been publicly issued is equal to or below BB or unrated and equal to or below Ba2 or unrated, as the case may be.

     provided, that if on any day the ratings by S&P and Moody’s do not coincide for any rating category and the Level differential is (x) one level, then the higher rating will be the applicable Level; (y) two or more levels, the Level that is one level higher than the lowest rating will be the applicable Level.

EX-99.B.6

EXHIBIT (b)(6)

J.P. MORGAN SECURITIES INC.
JPMORGAN CHASE BANK
270 Park Avenue
New York, New York 10017 MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
MERRILL LYNCH CAPITAL CORPORATION
4 World Financial Center
New York, New York 10080

October 21, 2004

$1,500,000,000 Senior Credit Facility

Amendment Letter

HCA Inc.
One Park Plaza
Nashville, Tennessee 37203

Attention: David G. Anderson
Senior Vice President, Finance & Treasurer

     Gentlemen:

     Reference is made to the Commitment Letter dated October 12, 2004 (including the Term Sheet attached thereto, the “Commitment Letter”) between us and you, regarding the $1,500,000,000 term loan facility described therein. Capitalized terms used but not defined herein are used with the meanings assigned to them in the Commitment Letter.

     We have agreed that the Commitment Letter is hereby amended by replacing the Term Sheet attached thereto as Exhibit A with the Statement of Terms and Conditions attached hereto as Exhibit A (the “Revised Term Sheet”). All references to the “Term Sheet” contained in the Commitment Letter and in any related documents hereafter shall be deemed to refer to the Revised Term Sheet. Except as amended hereby, the Commitment Letter shall continue in full force and effect in all respects and is hereby ratified and confirmed.

- 2 -

HCA Inc.

     Please confirm that the foregoing is our mutual understanding by signing and returning to us an executed counterpart of this Amendment Letter.

Very truly yours,       J.P. MORGAN SECURITIES INC.
By:	/s/ Andrew T. Brode Name: Andrew T. Brode Title: Vice President

JPMORGAN CHASE BANK
By:	/s/ Dawn Leelum Name: Dawn Leelum Title: Vice President

MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:	/s/ Sarang Gadkari Name: Sarang Gadkari Title: Director

MERRILL LYNCH CAPITAL CORPORATION
By:	/s/ Sarang Gadkari Name: Sarang Gadkari Title: Director

Accepted and agreed to as of
the date first above written:

HCA INC.

By: /s/ Keith M. Giger
Name: Keith M. Giger
Title: Vice President - Finance

EXHIBIT A

HCA INC.

$1,500,000,000 SENIOR CREDIT FACILITY

Statement of Terms and Conditions

BORROWER:	HCA Inc., a Delaware corporation (the “Borrower”).
AMOUNT AND TYPE OF FACILITY:	Six-month term loan facility (the “Term Loan Facility”) in an aggregate principal amount of up to $1,500,000,000. The Term Loan Facility shall be repayable in full and will end on the date that is six months after the Closing Date (as defined below).
PURPOSE:	For financing a share repurchase of up to $2,501,000,000 of the Borrower’s outstanding shares in a tender offer (the “Tender Offer”) and related fees, costs and expenses.
JOINT LEAD ARRANGERS AND JOINT BOOKRUNNERS:	JPMorgan Securities Inc. (“JPMorgan”) and Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated (collectively, “ML”; and together with JPMorgan, the “Arrangers”).
ADMINISTRATIVE AGENT:	JPMorgan Chase Bank (“JPMCB”).
SYNDICATION AGENT:	Merrill Lynch Capital Corporation (“Merrill”).
LENDERS:	A syndicate of banks and other financial institutions including JPMCB and Merrill, arranged by the Arrangers in consultation with the Borrower (collectively, the “Lenders”).
AVAILABILITY:	The proceeds of the Term Loan Facility will be advanced in a single drawing on the Closing Date.
FEES AND INTEREST RATES:	As set forth on Annex I.
OPTIONAL PREPAYMENTS:	ABR Loans may be prepaid at any time without penalty. Eurodollar Loans may be prepaid on the last day of the relevant interest period or at any time, subject to “breakage cost” reimbursement.

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MANDATORY PREPAYMENTS:	Mandatory prepayments customary in bridge facilities including, upon (i) issuance of debt or equity in the capital markets, subject to certain exceptions to be agreed upon and (ii) asset sales in an amount to be agreed upon.
RESERVE REQUIREMENTS; YIELD PROTECTION:	The rate quoted as Eurodollar Rate will be grossed-up for the maximum reserve requirements then in effect for eurocurrency liabilities. In addition, the definitive financing agreement will contain customary provisions relating to increased costs, capital adequacy protection, withholding and other taxes and illegality. Such provisions will be substantially similar to those set forth in the Credit Agreement, dated as of April 30, 2001 (the “Existing Credit Agreement”).
REPRESENTATIONS AND WARRANTIES; CONDITIONS PRECEDENT; AFFIRMATIVE AND NEGATIVE COVENANTS; EVENTS OF DEFAULT:	Substantially similar to those set forth in the Existing Credit Agreement, except that the ratio of consolidated total debt to consolidated total capitalization will correspond to the ratio amount for the $2,250,000,000 of senior credit facilities described below.
CONDITIONS PRECEDENT	The availability of the Term Loan Facility will be conditioned upon conditions substantially similar to those in the Existing Credit Agreement and satisfaction of the following conditions precedent as of the Closing Date (as defined below):

(a)	The Borrower shall have accepted for purchase, shares that have been tendered to it pursuant to the Tender Offer, substantially in accordance with the draft of the Offer to Purchase, dated October ___, 2004;
(b)	Execution and delivery of definitive financing agreements and related documentation for the contemplated $2,250,000,000 of senior credit facilities that will, among other things, refinance the credit facilities provided pursuant to the Existing Credit Agreement;
(c)	The Administrative Agent shall have received evidence reasonably satisfactory to the

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	Administrative Agent that the Existing Credit Agreement shall have been terminated (other than any outstanding letters of credit which will roll over into the new facility) (provided, however, that as an alternative to conditions (b) and (c), the Borrower is permitted to amend its Existing Credit Agreement in a mutually satisfactory manner); and
(d)	A minimum long-term unsecured debt rating from S&P and Moody’s of at least BB+ and Ba2, respectively (with a stable outlook).

ASSIGNMENTS AND PARTICIPATIONS:	The Borrower may not assign its rights or obligations under the Term Loan Facility without the prior written consent of the Lenders.
	The Lenders shall be permitted to sell participations in loans, notes and commitments; provided that, such Lender’s obligations under the Term Loan Facility shall remain unchanged. Participations shall be subject to further qualifications substantially similar to those in the Existing Credit Agreement.
	The Lenders shall be permitted to assign all or any part of their respective rights or obligations (or Notes, if applicable) under the Term Loan Facility; provided that, in the case of an assignment to a bank which is not a Lender or an affiliate of a Lender, such assignment is subject to the consent of both the Borrower (unless an Event of Default has occurred and is continuing) and the Agent (which consent shall not be unreasonably withheld); and provided further that, in the case of assignment to bank which is not a Lender or an affiliate of a Lender, (i) such assignment is subject to a minimum amount of $2,500,000 or such lesser amount as may be agreed upon by the Borrower and the Agent and (ii) the transferor Lender shall retain a minimum Commitment after giving effect to such assignment of $5,000,000 or such lesser amount as may be agreed upon by the Borrower and the Agent. Assignees will have all the rights and obligations of the assignor Lender. Each assignment will be subject to the payment of a service fee payable by the assignee and/or the assignor to the Agent. The voting rights for participants will be limited to changes in amount, tenor and rate.
EXPENSES:	All reasonable legal, syndication, and out-of-pocket expenses of JPMorgan, JPMCB, ML and Merrill and their counsel,

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	Simpson Thacher & Bartlett LLP, are for the account of the Borrower.
CLOSING DATE:	The date on which the definitive agreements have been executed and delivered and the proceeds of the Term Loan Facility have been advanced to or for the account of the Borrower, which is expected to be not later than November 19, 2004.
GOVERNING LAW:	State of New York.

ANNEX I

INTEREST AND CERTAIN FEES

Interest Rate Options:	The Borrower may elect that the Loans comprising each borrowing bear interest at a rate per annum equal to (i) the ABR plus the Applicable Margin or (ii) the Eurodollar Rate plus the Applicable Margin.
	As used herein:
	“ABR” means the highest of (i) the rate of interest publicly announced by JPMCB as its prime rate in effect at its principal office in New York City (the “Prime Rate”), (ii) the secondary market rate for three-month certificates of deposit (adjusted for statutory reserve requirements) plus 1% and (iii) the federal funds effective rate from time to time plus 0.5%.
	“Applicable Margin” for the term loans, the rates per annum corresponding to the applicable margins for Eurodollar Loans and for ABR Loans, respectively, pursuant to the term loan facility constituting a part of the $2,250,000,000 of senior credit facilities described above, as such margins are in effect on the Closing Date.
	“Eurodollar Rate” means the rate (adjusted for statutory reserve requirements for eurocurrency liabilities) for eurodollar deposits for a period equal to one, two, three or six months (as selected by the Borrower) appearing on Page 3750 of the Telerate screen.
Interest Payment Dates:	In the case of Loans bearing interest based upon the ABR (“ABR Loans”), quarterly in arrears.
	In the case of Loans bearing interest based upon the Eurodollar Rate (“Eurodollar Loans”), on the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.
Default Rate:	At any time when the Borrower is in default in the payment of any amount of principal due under the Term Loan Facility, any such amount shall bear interest at 2% above the rate otherwise applicable thereto. Any overdue interest or other amount payable shall bear interest at 2% above the rate applicable to ABR Loans, in each case from the date of such non-payment until paid in full.

Rate and Fee Basis: All per annum rates shall be calculated on the basis of a year of 360 days (or 365/366 days, in the case of ABR Loans the interest rate on which is then based on the Prime Rate) for actual days elapsed.