FOOL CONFERENCE CALL SYNOPSIS*
By Debora Tidwell (MF Debit)

Columbia/HCA Healthcare Corp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: COL)") else Response.Write("(NYSE: COL)") end if %>
One Park Plaza
Nashville, TN 37203
(615) 327-9551
http://www.columbia.net/

UNION CITY, CA (February 17, 1997)/FOOLWIRE/ --- Columbia/HCA released fourth quarter and fiscal 1996 results on February 12th. This is the best year the company had since it was started 9.5 years ago. All of their strategic plans started last year are coming to fruition. They had another very consistent, strong quarter. They had over 40 million patient visits last year. They take care of almost 125,000 patients a day now. They are clearly focused on four things: measuring and improving outcomes, measuring and improving patient satisfaction, doing everything they can not to waste health care dollars, and always remember that they are in the patient care delivery business and are taking care of patients every day.

QUALITY FOCUS. Right now and over the last couple years has been very price driven and they think that is going to continue. Where they think it is going to head is on the quality side. They have had a very big focus on that. Last year they had 57 more Columbia Hospitals that received the Joint Commission Accreditation with Commendation which is the highest rating. This now gives them 124 hospitals with commendation. The national average for receiving commendation is less than 10%, close to 8.5%, but 36% of Columbia hospitals have that Accreditation with Commendation. It's a big deal to them and they put a lot of focus in and they feel it is a way that they are differentiating themselves from their competition.

FINANCIAL HIGHLIGHTS. They had reported earnings for the year of $19.9 billion, up 13%. If they had included their 50/50 equity joint ventures, their revenues would have increased by 19% to $21.4 billion. Probably the most impressive statistic is their same facility admissions were up 5% in the fourth quarter and 4% for the year. This is in an industry that has not seen any significant growth in admissions. At some points admissions are trending down. Their same facility net revenues were up 10% in the fourth quarter and for the full year and their outpatient revenues grew 16%. Looking at their fourth quarter numbers, 39% of their revenues are outpatient revenues. Adding that to $2 billion in revenues from Value Health, they are clearly becoming a very comprehensive provider, not just an inpatient healthcare provider. On the cost side, they achieved a 170 basis point improvement in their same facility operating margin in the fourth quarter. Their same facility margins increased 150 basis points. So, they have had very good growth and it is clearly focused on growing revenues and not wasting dollars. All of the things they are trying to do from a marketing and sales standpoint have clearly worked.

INVESTMENTS IN EXPANSION. They are continuing to reinvest dollars into their system. They spent $2.3 billion through acquisitions and internal capital expenditures last year. They added 200 home health care locations, 30 skilled nursing units, 14 psychiatric units (they now have over 140 separate psychiatric units across the country), 24 rehab units, and 7 new surgery centers. They have acquired or joint-ventured 27 hospitals, which makes it their second-best year not including the publicly owned acquisitions like HCA, etc. They constructed 1 new hospital and started 12 new hospitals. They sold 11 hospitals and will consolidate 7 hospitals in their marketplace to improve quality and reduce costs.

ACQUISITIONS OVERVIEW. In 1995 they added 40 hospital acquisitions and joint-ventures, so some people think that the fact they only did 27 last year means they had a bad year. It was a very good year. Some of the transactions they got started have taken a little longer to close but what they are seeing is an additional pickup this year. Clearly with the changes with Medicare, Medicaid, and managed care, they are going to see many more acquisitions going forward. Some of the things they could have accomplished last year they passed on because the prices were high and they elected to build rather than buy. In the month of January they announced four new acquisitions but they think they have something like 18 acquisitions in the pipeline that they have announced.

TAX-EXEMPT TAKEOVERS SCRUTINIZED MORE CLOSELY. There is increased attorneys general scrutiny of the sales of tax exempt hospitals to publicly owned companies like Columbia. Columbia thinks that short term, that will slow down and make some of their transactions take a little longer to close, but the positive is significant increased scrutiny of tax exempt transactions which means that if a tax exempt is going to be sold, it is going to be sold to the best buyer, there's not going to be an un-level playing field. If Columbia has a better price and there are other parameters that are important to that board, they are going to do business with Columbia rather than a tax exempt because they know they are going to be scrutinized by the attorney general which historically they weren't. Columbia looks at the increased scrutiny and accountability very positively and they believe over time it will move more transactions to them rather than the other way.

NEW BUILDINGS. They have 12 hospitals they are building right now. What they are starting to see in some markets is that it is less expensive to build. On top of that, they can build facilities that are more directed to exactly what patients need today and eliminate some of the back-office functions at these facilities to reduce their costs. Down the road, they have a 10-20 year horizon and they feel it is going to be important to continue to construct what a patient is going to want. Ten years from now the patient is going to want reduced costs and better quality and they are not going to want to pay for physical plants that are unnecessary.

BALANCE SHEET. Their year-end debt-to-capital is 42.5% which is Columbia's strongest position ever. They reduced their total debt last year by $400 million. Interest coverage [EBITDA divided by interest expense] was 8.7 times in 1996 which is up from 8.1 in 1995.

MARKETING CAMPAIGN. They had a lot of areas they pushed on last year and all those areas had significant success. Their branding campaign has gone extremely well. Their name awareness is up significantly. In some markets they have had four- and five-fold increases in their name awareness. One of their goals internally is that they have to become and always have to focus on being the best operating company in the healthcare business. But, at the same time, if you look at great companies, they are known because they have great products or services, but they are also great marketers. So they have had significant focus on being the best marketers. So, whether it is the One Source magazine that now goes to 5 million households, their presence on the Internet that had 390,000 hits last week, their 1-800-COLUMBIA telephone number that will have over 600,000 calls minimum this year, all of these things are having an impact. For the One Source magazine, they are able to track whether people who get the magazine show up in a Columbia facility for care within a certain period of time after they receive it. So, all these things have a very good payback.

NATIONAL ADVERTISING AND OTHER MARKETING PROGRAMS. Their national advertising campaign is another part of it. In Houston, their unaided awareness before the national advertising campaign was less than 5%. After the campaign, their unaided awareness was about 40%. And, that is a community where they have 13% admissions growth. There are a lot of things coming together simultaneously. People are requesting to be included in health plans and those health plans are putting Columbia hospitals in them, and then they sign contracts, so all these things benefits. Their Senior Friends organization that offers health screens and services for seniors is also growing very rapidly. Building their sales team has worked very well. They have national sales account managers and have much more focus on sales at their local levels. Their product line development is going very well. Physician practice management is going very well.

PROVIDER SPONSORED NETWORKS. They are very interested in national legislation for provider sponsored networks. They think it is going to give them an opportunity to contract directly to take care of Medicare recipients and they think it is a big positive and think it will happen this year in Congress.

OUTCOME MEASUREMENT INFORMATION USED TO IMPROVE QUALITY. Their focus on outcomes and sharing outcome information internally to constantly improve is working. They have a system that gives their facilities monthly feedback on what their outcomes are and ranks them with their other facilities. Looking at the history of Columbia, they think probably one of the best things they have had is a willingness to measure what they do and rank their facilities and each other to see how they can improve. This forces them to share ideas. Their focus on best inventory practices is working out very well. It increases their ability to change faster and faster as they find best practices across their company. Their focus this last year on planning not for 1997 but for the next 5 years and what they have to do over the next 5 years to improve and be successful is also working.

BUILDING WHAT CUSTOMERS WANT. Their focus over the next 3 years is on finding out what their customers want. They want to find out what their customers want and make sure they are building the systems to deliver what they want. They are clearly focused on the inpatient side of having the right facilities in the right locations. They are clearly focused on the outpatient side having the right facilities in the right locations which means they will continue to expand their surgery centers, they will continue to expand their diagnostic centers, continue to expand urgent care centers, continue to expand in each city what their patients are demanding. The outpatient side of the business is growing as a percentage of revenues and will probably exceed 50% of revenues soon. The demand for outpatient services is growing very rapidly and much of the acquisition activity last year focused on home health care and the outpatient segment of the business.

BROADEN OFFERINGS AND IMPROVE INFORMATION SHARING. On top of that, they will slowly try to broaden what they offer to people as they have done over the last 3 years in the pharmacy side with their mail order pharmacy business. They also will look at what HMOs are interested in. They have a significant commitment to information systems. Last year they spent approximately $200 million to continue to expand their information systems across their company. In 1997 they will spend more than that and will get it to a point to where you can track patients across their entire delivery system and they can share that with insurance companies, if need be with the government, and they believe that is a significant strategic advantage that no one else in this industry is doing and probably no one else in the industry can afford to do.

NOT JUST INPATIENT SERVICES FOCUS. They are not focusing on just being in the inpatient business. They are seeing what patients want and are finding a way to provide it to them. They believe there is a significant benefit to having a full continuum from the inpatient, to surgery centers, to rehab, to skilled nursing, to home health. That way, they have the incentive to direct patients to the most efficient place, the least costly place, and the highest quality place to get healthcare. They think over time that will dramatically change their business. For patients, it will be exactly what they want.

ADVANTAGES OF COLUMBIA'S INFORMATION. Also, if you think about the fact that Columbia provides over 7% of the cardiovascular surgery capabilities in the US today and think about the results they are receiving from their facilities from one location to the next, they are able to take that knowledge and transfer all those good things they are doing to more of their faciltiies. They think that is going to be very attractive to insurance companies and HMOs as well as the Federal Government. Columbia things they are all going to be looking at the results orientation Columbia has as a company and the demands they are going to be putting on their facilities to continue to improve the quality and results they get.

THE VALUE HEALTH TRANSACTION. The Value Health transaction is proceeding. They hope to close early in the second quarter. It is very synergistic. It is going to help Columbia improve their service to employers and to insurers. It is complementary with what they are already doing with regard to the mail order pharmacies, pharmacy benefits manager, the network products they have in behavioral and workmen's comp in general medical, all complement what Columbia is doing. They think Value Health Sciences will help them as they work through finding the right patient protocols to improve the quality and reduce the cost of healthcare. The transaction is accretive to earnings and they think it fits with their long-term strategy of building a very integrated delivery system.

MEDICARE. They were in Washington early last week. There was no big surprise in Clinton's proposed budget. The PPS increase is probably better than what a lot of people expected. They think probably the biggest positive again is their ability to work under provider sponsored networks to contract to take care of Medicare recipients. They think that is going to give them a significant leg up over the next 10 years as they expand the company.

OPERATIONAL OVERVIEW. From an operational standpoint, 1996 represented a year where they didn't go through a major, very large transaction, where they brought a total company in and tried to integrate it into their operations. This provided them with some operational stability that gave them a chance to continue with the things they believe are important in instituting their IS systems and just making headway with regards to the culture of the company versus the culture of the other companies going forward. It represented their one year anniversary in April of 1996 with their acquisition of Health Trust. So, things went very smoothly. The statistics and all the other indicators within the company today show that 1996 was a progressive year for them.

BREAKDOWN OF PATIENT VISIT INFORMATION. Taking the 40 million patient visits that came into their facilities in 1996 and breaking it out a little further, 14 million of those visits came from home health (in which Columbia is the largest provider in the US today), 5.4 million visits came from their emergency rooms, nearly 2 million were surgeries (with over 25,000 open heart surgeries which makes Columbia the #1 provider of cardiovascular services in the US). They also had over 100,000 heart catheritizations. They are 5% of the orthopedic market in the US. They are the largest provider of opthamology services and oncology services in the US. In addition to that, they will probably be delivering somewhere around 250,000 babies in 1997 within their system. The numbers are enormous and it gives them an opportunity to take the best practices they have in any one of those facilities and share that information with all of their other facilities. In 1996 they put the infrastructure in place so they can do the sharing of information. In 1997 they will reap the benefits of that.

MARKET SHARE GAINS. Their market share gains in 1996 were also incredible and outstanding. Their same hospital admissions were up 4% for the year. Their 5% admission growth in the fourth quarter is their best quarterly increase dating back to the first quarter of 1995 (with a note that the first quarter is generally Columbia's strongest quarter). Their national advertising campaign began in August, so they believe they are reaping some of the benefits of that. What is more significant though, is that their 5% growth in the first quarter of 1995 was during a period when total hospital admissions were only up 3%, so again they are outpacing what is going on in the industry today. While the national admission results for the last four quarters are not yet available, Columbia believes they are likely to show a continuation of the approximately 1% decline during the last 3 quarters of 1996.

MARKET SAME FACILITY GAINS. What is even more impressive is to look at some of Columbia's division or market same facility admission growth in 1996. El Paso, their most mature market, is up 21%. Southwest Florida is up 13%. Houston is up 13%. New Orleans is up 11% and South Florida is up 9%. They saw explosive growth in their outpatient services in 1996, leading to 10% growth in their same facility net revenues. A few divisions that really excelled here in the net revenue growth are Atlanta, which was up 14%; South Texas or the Corpus Christi area was up 13%; New England was up 13%; Tampa, North Florida, Dallas/Ft. Worth, and their Utah market were all up 12%. From a cost perspective, they had their best year ever as well.

SAME FACILITY FINANCIAL RESULTS. Their same facility EBITDA margin improved by 170 basis points in the fourth quarter and 150 basis points for the year. Looking at the full year, productivity improved 110 basis points. They continue to find ways to improve the operational excellence and, again, it gets back to the best demonstrated practices that they are seeing from one organization being implemented into the others. Supply improvements improved by 110 basis points. Uncompensated care was up about 30 basis points and other operating expenses rose 30 basis points at the same-facility level. In the fourth quarter they actually did better on productivity and other operating expenses, about the same on supplies, and not as well on uncompensated care which really rose for two reasons -- the facilities that represent the 27 accquisitions made last year are not running at the level that they will in the upcoming year and are dragging the percentages down a little bit, and the IS conversions they have gone through in their facilities (they have put in 45 patient accounting conversions) and that is impacting their system a little bit.

MANAGED CARE. One area they made a lot of progress in in 1996 was working with managed care. As mentioned in previous calls, they signed a record number of managed care contracts in this last year. in the fourth quarter, 33% of their admissions came from managed care. This is up from 30% in the fourth quarter of 1995. They truly believe this is happening because their people are focused on it. They are out making calls and discussing what Columbia's capabilities are. In addition, Columbia's strategy is to be as comprehensive as they need to be and to be full-service to their provider networks and this is providing them the opportunity to come and sit down with one organization and sign contracts.

COST CONTAINMENT. They continue to drive their costs down market by market with supplies, with the 7 hospital consolidations they had in 1996. They also did some administrative services consolidations. They are partnering with companies like Mariott and GE and all those things are having an impact on their ability to continue to push volume in their facilities. Likewise they are partnering with many of the health maintenance organizations out there -- like Sierra in Las Vegas. They opened their new hospital in Las Vegas in February last year and the facility exceeded their expectations substantially. In fact, they are not only gaining market share around that facility, but they have gained market share in that community as well. Also they have been partnering with Foundation in Utah and Humana in Alabama. For the most part, some of this has come because they just organize themselves better to sell their services and serve their HMOs as customers. They have directors of managed care in each of their markets. They have hired a gentleman named Steve Simpson from Johnson & Johnson to help them in their sales efforts to give them a more sales orientation to the people and the customers they are taking care of every day. A variety of the senior managers in the company continue to make regular calls to the HMOs and some of the other insurance companies that are out there.

LOUISIANA. In Louisiana, Columbia is the only state-wide network. Their same-facility admissions are up 5%. In New Orleans alone, their same facility admissions are up 11%. In central Louisiana, same facility admissions are up 9%, home care visits are up 16%, revenues are up 15%, and earnings are up 20%. They signed 106 managed care contracts, 30 of which were exclusive. They developed 7 physician hospital organizations. Eight of their eight facilities surveyed received Joint Commission Accreditation with Commendation. The highest patient satisfaction in the company comes out of that market, second with employees, and second with physicians. They reduced a number of positions through the market and did some internal hospital consolidations as well.

GEORGIA. In Georgia, in their Atlanta market, same facility revenues are up about 13% and earnings are up approximately 25%. Their operating margins are up about 220 basis points. Through acquisitions, they became the largest home care provider in the state of Georgia. Their dietary program with one of their partners, Marriott, is saving them about $2.5 million per year. Significant new contracts with Aetna in Atlanta covering 300,000 lives has really been a big plus for them and they believe that is going to continue in 1997. In December, they felt very confident in this market and announced they are going to build an $78 million replacement facility for their Columbia West Paces Medical Center which will become the Atlanta flagship facility for them.

JOINT VENTURE MARKETS. In Denver in their 50/50 joint venture with Health One that was developed in October of 1995, their 1996 admissions are up 6% in this market. Net revenues are up 10% and earnings are up over 50%.

SAN JOSE, CALIFORNIA. In San Jose, they have told people about the fantastic results they have received. It is a four-hospital system in San Jose California, the Good Samaritan system. They closed on that transaction in January 1996. Prior to their acquisition, the EBITDA was a little less than $4 million. In 1996 they hit about $45 million of EBITDA. So, the management team there have executed the strategy excellently and provided the kind of leadership necessary to make those kind of changes take place. In that market, their uncompensated and charity care is actually up over the prior year.

INTERNATIONAL MARKETS. Columbia has the top 4 private hospitals in London. On top of that, they have one of the top private hospitals in Geneva. They have discussions going on in 7 or 8 different countries. They have brought in an international CFO who has good international experience and his longest tenure was with PepsiCo. They see significant opportunities to grow. It is interesting, overseas they are more well known for their quality than they are in the United States today. They will become better known in the States for that. So, they are very receptive overseas. If they want a US healthcare system to come into a particular country, they want Columbia, they don't talk to anyone else, they talk to Columbia because of their quality. And, they also look at Columbia's track record of consistent growth year after year in the US and they believe Columbia will do the same thing internationally. They see a lot of opportunities.

DISEASE MANAGEMENT. With what they do with disease management in the US, they are already seeing that they attract a lot of patients from overseas through their Spanish One Source edition and through their Internet site using their disease management focus. One of the opportunities with Value Health is the Value Health Sciences division that has been doing a significant amount of work in that area. Columbia thinks that disease management will blend very nicely with their product lines they are looking at -- diabetes, cardiovascular, oncology, etc. They believe over time this will mesh together and the will figure out protocols and the best ways to provide information. Just looking at the statistics and amount of care they are giving to patients every day, they are the leader in the US in taking care of those patients. And, it gets back to the information they have about those activities. They have a great deal of information about how drugs can be utillized in particular areas in specific cases and what impact they are having, as an example, and as they accumulate that information they believe they will have a database that is going to provide them with information that will help them provide better results for patients going forward.

SUMMARY. They think 1996 was an incredible year for them. They are excited about what is going to take place in 1997. They think the infrastructure they have managerially is in place and intact. Their plans are set for 1997 and they believe they can continue to grow at the 15% earnings per share that they have promised in the past.

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