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  • January 2018 (Revised April 2021)
  • Case
  • HBS Case Collection

Capital Allocation at HCA

By: W. Carl Kester and Emily R. McComb
  • Format:Print
  • | Language:English
  • | Pages:23
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Abstract

In early 2017, HCA Holdings, an investor-owned hospital management company, faced a strategically important capital allocation decision. After the exit of its private equity sponsors in 2016, HCA had to determine how best to allocate its substantial annual free cash flows among several competing alternatives. Equity analysts and some mutual fund investors were clamoring for the company to initiate regular quarterly dividends, while some other hedge fund investors were eager to see more share repurchases. Other choices being advocated by various parties included reducing leverage to improve HCA's credit rating to investment grade, spurring growth by initiating a major acquisition program or reinvesting heavily in existing markets to enhance HCA's strong competitive position. These choices had to be made in the face of uncertainty about the future of healthcare regulation and tax policy following the 2016 U.S. presidential election and in the context of its closest publicly traded peers struggling with heavy debt burdens. HCA's capital allocation choices would be crucial to its ability to provide high quality health care to patients, implement its corporate strategy, and deliver value to shareholders.

Keywords

Capital Allocation; Cash Distribution Policy; Dividends; Share Repurchases; Growth Strategy And Execution; Growth Investing; Capital Expenditures; Debt Management; Debt Reduction; Debt Policy; Hospital Management; Investor-owned Hospital Chains; Capital Budgeting; Capital Structure; Cash Flow; Corporate Finance; Decision Choices and Conditions; Health Industry; United States

Citation

Kester, W. Carl, and Emily R. McComb. "Capital Allocation at HCA." Harvard Business School Case 218-039, January 2018. (Revised April 2021.)
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About The Authors

W. Carl Kester

Finance
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Emily R. McComb

Finance
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Related Work

    • January 2018 (Revised April 2021)
    • Faculty Research

    Capital Allocation at HCA

    By: W. Carl Kester and Emily R. McComb
Related Work
  • Capital Allocation at HCA By: W. Carl Kester and Emily R. McComb
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