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HCA Case Presentation

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by

jesse chen

on 5 March 2013

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Transcript of HCA Case Presentation

March 5th, 1982 Pranav D.
Maryam N.
Tyler K.
Louis D.
Jiaxi C. HCA's Current Capital Structure Takeaways Further leverage is the only way to reach growth goal But let's dive deeper... Deleveraged Scenario Additional Leverage Scenario Recommendation Hospital Corporation of America Background 1981 Acquisition of rival Hospital Affiliates International (HAI) and Health Care Corporation added $891M debt
Interest coverage on debt dropped to 2.4x
Leverage level above single A bond rating standards
Increasing interest expense could cause a drop in EPS, first in HCA history Goals and Challenges Sensitivity Analysis Final Thoughts If cost of capital increases by any amount the growth target will be missed
Credit downgrade seems likely with even more leverage Historical Performance Hospital Corp. of America HCA should choose to slowly deleverage
Long term stability > short term growth
Health care industry and financial industry too unstable Long Term Deleveraging Advantages Lower Cost of Debt Less Risky Cash Flows
Maintain A-rating
Better Market Financial Flexibility Regulatory Reform of Health Care
Uncertainty
Cost based to Prospective Reimbursement

Medicare/Medicaid Reimbursement
Costs of service and Capital Costs
Allowable interest expense Delever and Improve ROTC Sell of Excess Assets
Pay off Debt
Higher ROTC
Full transcript