Jon Foster
HCA HealthcareAbout Jon Foster
Jon M. Foster is Executive Vice President and Chief Operating Officer of HCA Healthcare, responsible for enterprise operations and execution. He has 24 years of credited service under HCA’s Supplemental Executive Retirement Plan (SERP), indicating deep institutional experience and tenure at the company . Company performance during 2024 featured 8.7% revenue growth to $70.603B, operating cash flow of $10.514B, and net income of $5.760B ($22.00 diluted EPS), with a 10% dividend increase to $2.64 per share; adjusted EBITDA rose to $13.882B from $12.726B in 2023, and a $100 investment in 2020 was worth $211.12 by 2024, reflecting strong TSR over the period .
Fixed Compensation
| Item | 2023 | 2024 | 2025 (effective 2/1) |
|---|---|---|---|
| Base Salary ($) | $1,000,000 | $1,020,000 | $1,045,500 |
Performance Compensation
Annual Incentive (PEP) – Design and 2024 Outcome
| Metric | Weight | Target Structure | 2024 Payout Factor | Resulting Payout vs Salary |
|---|---|---|---|---|
| EBITDA | 80% | Company EBITDA as defined by PEP | 200.00% | |
| Quality & Care | 20% | HAIs/sepsis, risk‑adjusted mortality/complications, patient experience vs benchmarks | 175.65% | |
| Aggregate | — | — | 195.13% of Target | 243.91% of base salary |
| Individual PEP Details (2024) | Value |
|---|---|
| Target Bonus (% of Salary) | 125% |
| Actual Cash Bonus Paid | $2,487,908 |
| Target Bonus $ | $1,275,000 (1.25 × $1,020,000) |
Long-Term Incentives – 2024 Grants
| Instrument | Grant Date | Quantity | Pricing/Term | Vesting | Grant Date Fair Value |
|---|---|---|---|---|---|
| Stock Appreciation Rights (SARs) | 1/31/2024 | 20,634 | $304.90 base; 10‑year term | 25% annually on each of the first four anniversaries | $2,110,035 |
| Performance Share Units (PSUs) | 1/31/2024 | 7,144 target | 3‑yr cumulative EPS (2024–2026); 0–200% payout; threshold 90%, target 100%, max 110% | Cliff after FY2026 upon Committee determination | $2,178,206 |
Historical Performance Vesting (context)
| PSU Cohort | Target Granted | Actual Vested | Payout % | Notes |
|---|---|---|---|---|
| 2022 PSUs (FY2022–2024) | 5,300 | 2,750 | 51.9% (based on cumulative adjusted EPS at 93.6% of target) | Demonstrates performance sensitivity to EPS construct |
Equity Ownership & Alignment
Beneficial Ownership and Guideline Status
| Holder | Shares Beneficially Owned | Notes |
|---|---|---|
| Jon M. Foster | 290,080 | Includes 122,913 shares issuable upon exercise of SARs within 60 days; “*” indicates <1% of shares outstanding |
- Stock Ownership Guidelines: NEOs must hold equity ≥3× salary; calculation includes in‑the‑money value of vested SARs; 75% of vested net shares must be retained until compliance. As of 12/31/2024, all NEOs except Mr. McAlevey exceeded guidelines; Foster exceeds the guideline .
- Hedging/Pledging: Executives are prohibited from hedging HCA stock and from pledging shares as loan collateral, supporting alignment with shareholders .
Outstanding Equity (12/31/2024)
| Grant (SARs) | Exercise Price | Exercisable | Unexercisable | Expiration |
|---|---|---|---|---|
| 2019 SARs | $139.06 | 29,330 | — | 1/30/2029 |
| 2020 SARs | $145.24 | 35,880 | — | 1/29/2030 |
| 2021 SARs | $173.12 | 20,392 | 6,798 | 2/3/2031 |
| 2022 SARs | $236.61 | 9,010 | 9,010 | 1/28/2032 |
| 2023 SARs | $253.30 | 5,920 | 17,760 | 1/30/2033 |
| 2024 SARs | $304.90 | — | 20,634 | 1/31/2034 |
| Totals | — | 100,532 | 54,202 | — |
| Unvested PSUs (12/31/2024) | Count | Market Value (at $300.15/sh) |
|---|---|---|
| 2023 PSUs (FY2023–2025) | 7,848 | $2,355,577 |
| 2024 PSUs (FY2024–2026) | 7,144 | $2,144,272 |
| Total | 14,992 | $4,499,849 |
Recent Exercises/Vesting (2024)
| Action | Shares | Value Realized |
|---|---|---|
| SARs exercised (net‑settled) | 76,065 exercised; 33,905 net shares realized | $18,760,138 |
| PSU vesting | 16,320 shares vested; 10,370 net shares realized | $5,035,536 |
Employment Terms
Severance & Change‑of‑Control
| Scenario (as of 12/31/2024) | Cash Severance | Pro‑Rata/Most Recent PEP | Unvested Equity | SERP | Retirement Plans | Health & Welfare | Other |
|---|---|---|---|---|---|---|---|
| Retirement | — | $2,487,908 | $3,838,486 (meets “Retirement” under awards) | $17,358,156 | $845,970 | — | $141,231 accrued vacation |
| Involuntary Without Cause | $2,040,000 (24× salary months) | $2,487,908 | $3,838,486 | $18,116,660 | $845,970 | $29,548 (18 mos COBRA) | $141,231 |
| For Cause | — | — | — | $17,358,156 | $845,970 | — | $141,231 |
| Good Reason | $2,040,000 | $2,487,908 | $3,838,486 | $18,116,660 | $845,970 | $29,548 | $141,231 |
| Disability | — | $2,487,908 | $3,838,486 | $17,358,156 | $845,970 | — | $1,044,658 disability income; $141,231 vacation |
| Death | — | $2,487,908 | $3,838,486 | $15,263,536 | $845,970 | — | $1,020,000 life insurance; $141,231 vacation |
| Change in Control | — | $2,487,908 | — (see equity plan CIC treatment below) | — | — | — | — |
- Executive Severance Policy for non-CEO NEOs (Foster): 24 months base salary lump sum, pro‑rata PEP, and 18 months COBRA cost upon involuntary termination without cause or resignation for Good Reason; Good Reason includes material pay cut, material diminution of duties, or >35‑mile relocation (with notice/cure) .
- Equity under CIC: double‑trigger acceleration. If assumed/substituted, PSUs convert to time‑based at target with acceleration upon qualifying termination; if not assumed, unvested time‑based awards vest and PSUs vest at target upon CIC; 10‑year max term; no repricing; no excise tax gross‑ups .
- Clawbacks: Dodd‑Frank/NYSE‑compliant recoupment policy; PEP has additional discretionary clawback for restatements/inaccuracies/bad faith actions .
- Hedging/Pledging: prohibited for executives .
- Non‑compete/forfeiture: If a NEO renders services to another healthcare organization within five years following retirement/termination, further payments are forfeited and prior payments may be repayable (Committee may waive) .
Retirement & Deferred Compensation
| Plan | Participation/Status | 2024 Amounts/Values |
|---|---|---|
| SERP (frozen to new entrants) | Foster is 100% vested; normal retirement eligible; 24 credited years; accrual rate 2.4% | Present value: $18,024,363; no payments in 2024 |
| HCA 401(k) match | Eligible | $10,350 company match |
| Restoration Plan | Eligible (accounts maintained; accruals may apply per eligibility rules) | $66,073 company accrual |
Perquisites (2024)
| Perquisite | Amount |
|---|---|
| Dividend equivalents on vested 2022 PSUs | $20,025 |
| Matching charitable contributions | $6,000 |
| Other perqs (e.g., aircraft) | No personal aircraft cost reported for Foster in 2024 |
Compensation Structure Analysis
- Mix and performance alignment: For 2024, Foster’s total direct pay blended significant at‑risk components: target annual bonus 125% of salary tied 80% to EBITDA and 20% to quality/patient experience; realized PEP payout was 195.13% of target, reflecting strong financial and care metrics execution . Long‑term incentives split between time‑vested SARs (25%/yr) and three‑year EPS‑based PSUs with 0–200% payout curves, directly linking realized pay to sustained EPS performance; 2022 PSUs paid at 51.9%, demonstrating downside sensitivity .
- Vesting cadence and selling pressure: 2024 SARs vest 25% annually through 2028; multiple legacy SAR tranches continue vesting, with 100,532 SARs already exercisable and 54,202 unexercisable at 12/31/24. Foster exercised 76,065 SARs in 2024 (value realized $18.76M), suggesting ongoing monetization capacity as tranches vest—potentially a modest periodic supply overhang if exercises are net‑settled/sold .
- Retention: Substantial unvested equity (14,992 PSUs; 54,202 unexercisable SARs) plus a large vested SERP balance ($18.0M PV) and a 5‑year post‑separation non‑compete/forfeiture construct together indicate strong retention hooks and lower near‑term flight risk .
- Governance safeguards: No hedging/pledging; robust clawback; minimum vesting; double‑trigger CIC; no excise tax gross‑ups; say‑on‑pay program oversight by independent committee and Semler Brossy as advisor .
Risk Indicators & Red Flags
- Section 16(a) administrative lapse: Company reports one late Form 4 for Foster (gift on May 15, 2024; filed Nov 18, 2024) due to administrative error—immaterial but noted .
- Equity plan design: No repricing; minimum 12‑month vesting (limited 5% carve‑out); CIC payouts target‑level PSUs—limits windfall optics .
- Hedging/pledging prohibited; no tax gross‑ups (except relocation) .
Investment Implications
- Pay‑for‑performance is tight: Annual bonuses are driven by EBITDA and quality metrics; long‑term PSU payouts hinge on multi‑year EPS, with downside realized in 2022‑2024 PSU vesting (51.9%). As a COO levered to operations, compensation outcomes appear sensitive to volume/mix, cost control, quality, and EPS growth, aligning incentives with margin/throughput execution .
- Retention risk appears low: High SERP PV ($18.0M), unvested PSUs, and unvested SARs plus the five‑year non‑compete/forfeiture create meaningful “golden handcuffs.” Investors can underwrite continuity in operations leadership barring idiosyncratic events .
- Selling pressure watchlist: Ongoing SAR vesting (and periodic exercises like the 2024 $18.76M value realized) can create episodic stock supply, particularly around scheduled vest dates; monitor Form 4s and quarter‑end windows .
- Governance quality supportive: Double‑trigger CIC, no hedging/pledging, clawbacks, and no excise tax gross‑ups reduce shareholder‑unfriendly risk; ownership guidelines and retention requirements further align interests .
Note: HCA’s 2024 company results included 8.7% revenue growth to $70.603B, $10.514B operating cash flow, and adjusted EBITDA of $13.882B (vs $12.726B in 2023); multi‑year TSR value stood at $211.12 for a $100 initial investment, underscoring the linkage between incentive constructs and value creation during the period .