Q3 2021 HCA Healthcare Inc Earnings Call
At 11% in the fourth quarter of last year.
Our teams provided record levels of inpatient care during the quarter, which drove revenue growth of 15% as compared to the prior year. Inpatient revenue grew 18% and outpatient revenue grew 11%. As compared to prior year and also 2019 same facility volumes increased across all major categories with the exception of inpatient surgery.
Inpatient revenue grew 18% and outpatient revenue grew 11%.
As.
Year to prior year and also 2019 same facility volumes increased across all major categories with the exception of inpatient surgery.
Surgery volumes were constrained because capacity was used for treating COVID-19 patients. This growth was supported by a better payer mix of commercial business. Adjusted EBITDA margin was strong at over 21%. Diluted earnings per share excluding gains on sales of facilities increased to $4 and 57 cents.
As compared to this.
Adjusted EBITDA margin was strong at over 21%.
Diluted earnings per share excluding gains on sales of facilities increased to $4 57.
Which is a notable increase over the prior year. Even considering that last year's third quarter included the $1.72 per share effect of the reversal of the government stimulus income, which as you may recall resulted from our decision to return or repay early approximately $6 billion of governmental assistance we received from the cares Act.
Even considering that last year's third quarter include.
Included the $1 72 per share effect of the reversal of the government stimulus income, which as you may recall resulted from our decision to return or repay early approximately $6 billion.
Of governmental assistance, we received from the cares Act.
Once again our colleagues and physicians delivered for our patients and for our communities. I am tremendously proud of their dedication and service to others and I want to thank them for their great work. As we look to the remainder of 2021, we have raised our annual earnings guidance again to reflect the strong performance of the company. Now, let me transition to some early and general perspectives on the upcoming year. Just like in 2020, we are providing some preliminary thoughts in the midst of a very fluid environment, which obviously makes it challenging given the uncertainties that continue to exist with the pandemic.
Colleagues and physicians delivered for our patients and for our communities I am tremendously proud of their dedication and service to others and I want to thank them for their great work.
As we look to the remainder of 2021, we have raised our annual earnings guidance again to reflect the strong performance of the company.
Now, let me transition to some early and general perspectives on the upcoming year.
Just like in 2020, we are providing some preliminary thoughts in the midst of a very fluid environment, which obviously makes it challenging given the uncertainties that continue to exist with the pandemic we.
We plan to provide more details with our annual guidance in January after we complete our planning process for 2022. By that time, we hope to have a few more months of results that are more indicative of a normal operating environment that is a non-COVID-19 surge environment to analyze and give you a better indication of our business. Overall we believe demand will return to historical trends for us with volumes growing across most categories in the 2% to 3% zone.
More details with our annual guidance in January after we complete our planning process for 2022.
That time, we hope to have a few more months of results that are more indicative of a normal operating environment that is a non COVID-19 surge environment to analyze and give you a better indication of our business.
For all we believe demand will return to historical trends for us with volumes growing across most categories in the 2% to 3% zone.
As part of this growth, we expect to treat COVID-19 patients throughout 2022. We estimate that approximately 3% to 5% of our total admissions will be COVID-19 related.
We estimate that approximately 3% to 5% of our total admissions.
<unk> will be COVID-19 related.
We believe our business will be supported by a strong payer mix as a result of stable enrollment in the health insurance exchanges and good job growth across our markets.
We are also assuming patient acuity continues at high levels. We do expect certain pandemic related governmental reimbursement programs, either will not continue or will continue but at significantly reduced amounts next year.
We do expect.
<unk> certain pandemic related governmental reimbursement programs, either will not continue or will continue but at significantly reduced amounts next year.
However, we anticipate the reduction of these revenues will be partially offset by certain costs we incurred in treating COVID-19 patients. Clearly we are operating in a challenging labor environment, which we expect to cause some cost pressures, but at this point in time, we anticipate being able to manage through these challenges along with other inflationary cost pressures.
Clearly we are on.
Operating in a challenging labor environment, which we expect to cause some cost pressures, but at this point in time, we anticipate being able to manage through these challenges along with other inflationary cost pressures.
In sum, these assumptions lead us to believe that adjusted EBITDA for 2022 will show modest growth over this year's estimated results.
To growth over this year's estimated results.
Again, we are providing early perspectives and expectations and they could change. The past two years have been a remarkable period for HCA healthcare, we have demonstrated a high level of resiliency and resolved while at the same time staying true to emissions.
The past two years have been a remarkable period for HCA healthcare, we have demonstrated a high level of resiliency and resolved while at the same time staying.
Moderate emission occur.
Across many dimensions of our business, we have improved. We have improved our operational and organizational capabilities, which should allow us to provide higher quality care to our patients. I also believe we will emerge on the backside of this event stronger financially and better positioned competitively to grow and drive value for our stakeholders, we are investing aggressively in our operating model, which is to develop a comprehensive and conveniently located local network, coupled with and supported by an enterprise-level system with unique scale and system-level capabilities.
We have improved our operational and organizational capabilities, which should allow us to provide higher quality care to our patients.
So believe we will emerge on the backside of this event stronger financially and better positioned competitively to grow.
True to our value for our stakeholders, we are investing aggressively in our operating model, which is to develop a comprehensive and conveniently located local network, coupled with and supported by an enterprise level system with unique scale and system level capabilities. We.
We believe this model creates and drive advantage drives market share gains and produces better outcomes for our stakeholders with that I'll turn the call over to Bill. Thank you great. Great. Thank you Sam and good morning, everyone.
And drive advantage drives market share gains and produces better outcomes for our stakeholders with that I'll turn the call over to bill. Thank you great.
Great. Thank you Sam and good morning, everyone.
I will discuss our cash flow and capital allocation activity during the quarter, then review our updated 2021 guidance. Our cash flow from operations was $2.28 billion as compared to $2.7 billion in the third quarter of 2020. In the prior year we had received approximately $300 million of stimulus income and deferred approximately $200 million of payroll taxes. Capital spending for the quarter was $889 million. We have approximately $3.9 billion of approved capital in the pipeline that are scheduled to come online between now and the end of 2023. We completed just over $2.3 billion of share repurchases during the quarter. We have approximately $2.7 billion remaining on our authorization.
Competitive our cash flow from operations was $2 $2 8 billion as compared to $2 7 billion in the third quarter of 2020 in the prior year. We had received approximately $300 million of stimulus income and deferred approximately $200 million of payroll taxes.
Capital spending for the quarter was $889 million.
We have approximately $3 9 billion of approved capital in the pipeline that are scheduled to come online between now and the end of 2023.
We completed just over $2 3 billion of share repurchases during the quarter.
We have approximately $2 seven.
And remaining on our authorization.
And we anticipate completing approximately $8 billion of share repurchases for full year 2021. Our debt to EBITDA ratio was 2.55 times at the end of the third quarter. Which is the lowest it has been in over 15 years. We had approximately $5.9 billion of available liquidity at the end of the quarter.
Our debt to EBITDA ratio was 255 times at the end of the third quarter.
Which is the lowest it has been.
When built over 15 years.
We had approximately $5 9 billion of available liquidity at the end of the quarter.
Also during the quarter, we recorded about $1 billion gain on sale of facilities related to the sale of four hospitals in Georgia, and other health care entity investments. We anticipate we will generate approximately $1.5 billion of after tax proceeds from our announced divestitures. As noted in our release this morning, we are updating our full-year 2021 guidance as follows. We now expect revenues to range between $58.7 billion and $59.3 billion.
We anticipate.
Okay, we will generate approximately $1 5 billion of.
Of after tax proceeds from our announced divestitures.
As noted in our release. This morning, we are updating our full year 2021 guidance as follows.
We now expect revenues to range between $58 7 billion.
<unk> $59 3 billion.
We expect full year adjusted EBITDA to range between $12.5 billion and $12.8 billion. We expect full year diluted earnings per share to range between $17.20 and $17.80. And our capital spending target remains at approximately $3.7 billion. As I conclude my remarks, I think it's important to reflect on the financial condition of the company as we have navigated the past 20 months of this pandemic. The financial resiliency of HCA healthcare has been on full display during this time our organization has emerged stronger today than before we entered this pandemic. With our leverage ratio well below the low end of our stated range of three times, our available liquidity and our continued strong cash flow generation, we are well-positioned as we evaluate capital allocation opportunities heading in to our planning cycle for 2022.
We expect full year diluted earnings per share to range between $17 27.
$17 80 and.
And our capital spending target remains at approximately $3.
And for 1 billion.
As I conclude my remarks, I think it's important to reflect on the financial condition of the company as we have navigated the past 20 months of this pandemic.
Financial resiliency of HCA healthcare has been on full display during this time our organization has emerged stronger today than before we entered this.
This pandemic.
With our leverage ratio well below the low end of our stated range of three times, our available liquidity and our continued strong cash flow generation, we are well positioned as we evaluate capital allocation opportunities heading in to our planning cycle for 2022.
We are focused and committed to delivering long term value for all of our stakeholders. We look forward to sharing more information with you about our outlook and our year end call. So with that I'll turn the call over to Mark to open it up for Q&A alright, Thanks, Sam. Thank Bill Chris Wood. Would you give instructions on getting into the queue for questions. Please. Certainly at this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster again star one to ask a question. I'd like to remind everyone also to try to keep your questions to one so that would try to get as many people in the queue as possible. Our first question is from Kevin Fischbeck with Bank of America. Your line is open. Great.
We are focused and committed to delivering long term value for all of our stakeholders. We look forward to sharing more information with you about our outlook and our year end call. So with that I'll turn the call over to Mark to open it up for Q&A alright, Thanks, Sam. Thank Bill Chris Wood. Would you give instructions on getting into the queue for questions. Please. Certainly at this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster again star one to ask a question. I'd like to remind everyone also to try to keep your questions to one so that would try to get as many people in the queue as possible. Our first question is from Kevin Fischbeck with Bank of America. Your line is open. Great.
Focus and committed to delivering long term value for all of our stakeholders. We look forward to sharing more information with you about our outlook and our year end call. So with that I'll turn the call over to Mark to open it up for Q&A alright, Thanks, Sam Thank Bill Chris Wood.
Would you give instructions on.
Getting into the queue for questions. Please.
Certainly at this time, if you'd like to ask a question. Please press Star then the number one on your telephone keypad and we'll pause for just a moment to compile the Q&A roster again star one to ask a question.
I'd like to remind everyone also to try to keep your questions. <unk> to one so that would.
<unk> to one so that would.
Try to get as many people in the queue as possible.
Yes.
Our first question is from Kevin Fischbeck with Bank of America. Your line is open.
Great.
Alright, and then as a quick clarification. Main question. Did you say that that two times of volume growth in total and across most service lines it sounds like Covid volume might actually be down next year. So I just wanted to make sure I was hearing that right. But then the main question is really about labor costs.
Main question.
Did you say that that takes.
Volume growth in total and across most service lines it sounds like.
Covid volume might actually be down next year. So I just wanted to make sure I was hearing that right. But then but then the main question is really about labor costs.
It does seem like maybe it was higher than we thought this quarter and then Q4 it looks like the margins, maybe a little bit more than we thought. A bit more color on how you're managing labor. And what kind of pressure you're seeing there today. I couldn't hear what he said the first question was the volume when we drove 2% to 3% on the volume. Was that all inclusive or just across service lines certain service lines. Because we've got Covid. Right so. Let me say my core business up quarterly. Quarterly up two to three.
Color on how Youre managing labor.
And what kind of pressure youre seeing there today.
I couldn't hear what he said the first question was the volume when we drove 2% to 3% on the volume.
Was that all inclusive across service lines certain service lines.
Because we've got Covid.
Right so.
Let me say my core business up quarterly.
Quarterly up two to three.
Yeah.
We expect COVID-19 volumes to be down as I said, we are anticipating 3% to 5% of our total admissions will be COVID-19 related next year, it's about 9% I think for this year. So that we do expect some decline in COVID-19 related and we hope that happens for our communities and so forth and so when we estimate at this particular point in time, we're expecting composite volumes across the company as a whole to be up in the 2% to 3% zone. Over 2020 and over 2019 is really what it boils down to. Labor? Yeah, on labor, let me speak to labor, obviously in the third quarter, we were dealing with a very intense COVID-19 serge with very sick patients and it was putting a significant strain on our communities and our facilities and so forth and we did what we absolutely had to do as a moral imperative to take care of people and that required us to support that volume and that level of acuity with labor and our labor cost did step up in the third quarter. We used premium pay where we needed to, we used different levels of shift bonuses and overtime, where we needed to but that was not a question to us, we had a lot of people to take care of and we took care of them appropriately and we still produced
Estimate.
<unk> at this particular point in time, we're expecting composite volumes across the company as a whole to be up in the 2% to 3% zone.
Over 2020 and over 2019 is really what it boils down to.
With labor.
Yes on Labor, let me speak to labor, obviously in the third quarter, we were dealing with a very intense COVID-19.
Serge with very.
Sick patients and it was putting a significant strain on our communities and our facilities and so forth and we did what we absolutely had to do as a moral imperative to take care of people and that required us to.
Support that volume and that level of acuity with.
Labor and our labor cost did step up in the third quarter, we used premium pay where we needed to we use different levels of shift bonuses and overtime, where we needed to but that was not a question to us we had a lot of people to take care of and we took care of them appropriately and we still produced.
a very good outcome for the company with margins at over 21% in the third quarter and actually producing record EBITDA levels. So labor going forward, we have a multi pronged strategy for managing it starts with expanding our school of nursing, which we think is going to produce a great pipeline of our graduate nurses for our company.
a very good outcome for the company with margins at over 21% in the third quarter and actually producing record EBITDA levels. So labor going forward, we have a multi pronged strategy for managing it starts with expanding our school of nursing, which we think is going to produce a great pipeline of our graduate nurses for our company.
Expanding our school of nursing, which we think is going to.
To produce a great pipeline of.
Our graduate nurses for our company.
We anticipate approximately three times the number of graduates coming out of the Galen school of nursing over the next few years compared to what we do today. The second thing we're working on is recruitment and retention and we've added tremendous amount of resources to our recruitment functions. We've advanced our benefits in many areas and we're trying to create an environment, where our nurses can accomplish what they need to do with our patients and ultimately have an environment, where they can be tremendously successful. And discharging their responsibilities to our patients.
Our recruitment functions.
<unk> advanced our benefits in many areas and we're trying to create an environment, where our nurses can accomplish what they need to do with our patients and ultimately have an environment, where they can be tremendously successful.
And a discharge their responsibilities to our patients.
And at the same time more productive and doing just nursing care as opposed to non-nursing care. The last thing we're working on that we're very excited about his care transformation. We think we have opportunities with technology and with new models of care and different levels of support that can change the paradigm and how we deliver care on our floors in our hospitals and we think the combination of all three of these things put us in a position where we can manage through the environment that we're facing right now. Obviously, there's some unknowns we're going to have to work our way through those as they present themselves, but we're pretty confident that the company is in a reasonable position to manage through the labor environment.
Care on our floors in our hospitals and we think the combination of all three of these things put us in a position where we can manage through the environment that we're facing right. Now obviously, there's some unknown we're going to have to work our way through those as they present themselves, but we're pretty confident that the company is in a reasonable.
Well positioned to manage through the labor environment.
Kevin Thank you. Chris next question, please. The next question is from Ann Hynes with Mizuho Securities. Your line is open. Hi, good morning. I just want to know how volume tracked by payer mix is commercial still outperforming Medicare and Medicaid and what your expectations are for 2022, when it comes to payer mix. And just one follow up on your comment about inpatient surgeries being down if you look at the chart you provided in the press release, they were down 11.2% versus 2019.
Chris next question please.
Okay.
The next question is from Ann Hynes with Mizuho Securities. Your line is open.
Hi, good morning.
I just want to know how volume tracked by.
Payer mix is commercial still outperforming Medicare and Medicaid and what your expectations are for 2022, when it comes to payer mix and just one follow up on your comment about inpatient surgeries being down if you look at the chart you provided in the press release, they were down 11, 2% versus 2019.
<unk> do you think that's all COVID-19 related or is there something else happening sequentially. Thanks.
Alright, let me start with the payer mix, our payer mix I think as Sam alluded to in his comments remained favorable with our managed care and others growing probably 12 months to 14% over the prior year, our Medicare showed growth, but not quite at.
That level, we were 2% to 3% on Medicare, but whether we look at 2019 very very similar trends. So we continue to expect favorable payer mix trends going forward.
And with respect to labor, our labor surgery in the third quarter.
As I mentioned in my comments, we constrained surgery out of need for.
Yeah.
Patient care requirements. So we used our surgical staff in many instances to support COVID-19 patients across our facilities number one we had to use physical space and our recovery rooms at times to take care of people and so from that standpoint, we did reduce elective care during the.
The quarter at many of our hospitals and we reduced transfers in that typically result in surgeries of some sort in many instances, we do think that that volume will recover as it recovered in previous periods, where we had to do the same thing second quarter to first quarter. As an example, so we anticipate recovery.
<unk> in that and and so from that standpoint, we are working our way through a reopening surgery capacity across the company in an appropriate fashion and.
We really don't see any structural issues with our surgical activity across the company.
Thank you Ann Thanks.
Chris.
The next question is from Brian <unk> with Jefferies. Your line is open.
Hey, good morning.
Congrats too.
See you guys in the quarter I guess my question as it relates to the guidance.
It's sort of unusual for you to see a sequential decline in.
EBITDA from Q3 to Q4, which is what's implied.
By the midpoint of the 2020 on guidance. So just wondering if that's just conservatism and then as I think about the 22 commentary, 2% to 3% volume. How are you thinking just about margin trend with labor in the background here should we expect flat margins to translate to kind of like a two to.
The EBITDA growth rate as well.
Brian Yes, Brian let me start with our fourth quarter guidance.
We think our range provides some level of growth we recognize at the mid point of done there's still a lot of variables that play we will continue to manage the company. The best we can to continue to drive growth.
Had very few.
Normal months to project from but again I think our range is appropriate at this level is it's roughly a $350 million raise at the midpoint compared to our previous guidance. So so again I think it's appropriate from from how we read it right now.
Margin I think you guys also about the margins well theres going be a lot of variables set.
Planning to margins for next year as we conclude our planning we'll talk to you further about those but I think we have a history to continue to drive reasonable margins going forward and thats, our expectation to be able to continue to do that.
Alright, Brian Thank you.
Our next question is from Justin Lake with Wolfe.
Search your line is open.
Thanks, a couple of things here just one wanted to clarify when you given that historically you know the typical EBITDA growth as a company is in the mid single digits.
When you say modest is it fair to take lower single digits, there kind of as a jump off.
All free for 2022, and then my question's on Labor can you give us a little color on two things one any any kind of help on the maybe the dollar amount and the percentage kind of temporary labor.
Travel labor that you're kind of running I don't given it's such high cost it would be great on the revenue side.
Or I should say the cost side as well and then can you walk us through kind of how your labor costs are run through the year in terms of maybe what percentage.
Your labor kind of gets repriced to get their increases quarterly because I know, it's not all just one one thanks.
You snuck three questions in on one call Bubba.
Justin This is bill let me, let me start with kind of 'twenty two.
Our intention was to provide some broad commentary not really ready to go into lot of details, but as we've mentioned throughout the course of the year. We know we've received some COVID-19 support from the.
DRG add on payments or <unk> payments for uninsured COVID-19 payments as well as.
Delay of sequestration cuts.
These programs they are concerned about $625 million year to date, they could reach close to $750, $800 million for the full year. We don't have full line of sight now on what to expect for these programs going forward.
We'll hope to have some clearer assessment of these as we complete our planning process, but for now we're not really expecting those to continue to benefit going into 2022. However, we also have some COVID-19 related costs. This year that we don't expect to continue going forward supply related costs cost of screeners and ally so our broad.
And now as we should reasonably expect to be able to generate our historical growth rate of 5% to 6%. After netting out these amounts and that is what the result will result in some modest growth year over year on an as reported basis. So that was kind of our broad thinking right now we'll firm that up.
As we go through our planning cycle, but that was the attention of our commentary to show that we still see some growth going forward in 2022. With respect to labor again, we used whatever labor, we could find to take care of record sensus. That the company was experiencing with the Delta variant serge. So we used contract labor overtime again bonuses for our full time staff whatever it took to staff to the patient load that we had and that resulted in about 10% to 12% of our FTES being in those premium pay category.
With respect to labor again, we used whatever labor, we could find to take care of record sensus.
That the company was.
<unk> with the Delta variant Serge So we used contract labor overtime again bonuses for our full time staff whatever it took to staff to the patient load that we had and that resulted in about 10% to 12% of our ftes being in those premium pay category.
That obviously trends down naturally as we have a less COVID-19 census, we've had that pattern in the fourth quarter of last year. The first quarter of this year and we expect that pattern to continue.
<unk>.
As it relates to the wage rates and the changes that we have they vary across the company generally speaking they are in mostly in the second quarter and third quarter. So that's part of the natural trend that we see inside of our labor costs as we move through the course of the year.
The company generally speaking they are in mostly in the second quarter and third quarter. So thats part of the natural trend that we see inside of our labor costs as we move through the course of the year.
One thing and Bill was alluding to this. Typically we have fourth quarter seasonality that generates more activity in the fourth quarter than we have in the third quarter. We don't have a baseline third quarter to judge seasonality right now and that's part of the challenge that we've got but I think the company has proven that it can manage in a search very effectively and produce really solid margins and then in the reboot like we did in the second quarter manage through that transition in a very effective way. So I fully anticipate that our teams will be able to navigate through the back part of the third quarter ended the fourth quarter and on into next year and hopefully a reboot mode in a way that ultimately produces success for the company.
Typically we have fourth quarter seasonality that generates more.
More activity in the fourth quarter than we have in the third quarter.
Don't have a baseline third quarter to judge seasonality right now and that's part of the challenge that we've got but I think the company has proven that it can manage in a search very effectively and produce really solid margins and then in.
Like we did in the second quarter manage through that transition in a very effective way. So I fully anticipate that our teams will be able to navigate through.
The back part of the third quarter ended the fourth quarter and on into next year and hopefully a reboot mode in a way that ultimately produces success.
For the company.
Just and thank you for the question.
The next question is from Scott Fidel with Stephens. Your line is open.
Hi, Thanks, good morning.
Interested if you could talk a bit about what youre seeing in Medicaid volumes and just been interesting to it seems like Medicaid volumes have continued to trend relatively low in terms of the overall mix, even though Medicaid enrollments are just up so much.
Re trend relatively low in terms of the overall mix, even though Medicaid enrollments are just up so much.
Because of the especially the redetermination. So just interested in your perspective on what you're thinking around that aspect in terms of the lower Medicaid volumes relative to the increases in Medicaid enrollment growth.
The increases in Medicaid enrollment growth.
Great. Thanks, Scott Scott I'll try we did see Medicaid growth when I look at 'twenty, one versus 'twenty of almost 9% I don't have at my fingertips, what Medicaid enrollment has done in our states.
So I don't have that as a relative base, but we have seen.
Medicaid growth.
In this quarter at least year to date were tracking at about 7%. So perhaps that does track with enrollment going forward as well.
Thanks Scott.
The next question is from Ralph Giacobbe. Your line is open.
Hello.
Can you hear me?
Hey, Rob. Hey, good morning, Thanks, I appreciate it I guess first.
You gave and I know you want to sort of hold off on full guidance, but you gave us the volume up to the 3%, hoping you can give some sense on how you see the pricing stat developing next year and then specifically just on the acuity mix.
You know obviously another strong quarter there is there any way to.
Exclude COVID-19 out and give us a sense of what that is sort of either your year over year relative to 2019. Thanks.
Thank you.
Well as I said this is Sam.
We do anticipate that acuity levels will.
A strong.
As we move forward into 2022.
Our COVID-19 or non COVID-19 acuity levels for the year have been up compared to 2019, and so we have seen a natural lift in acuity part of that is strategic part of that is some migration into outpatient.
He will be here that is just sort of the environment that we're in we believe so we anticipate that acuity levels will remain strong. I don't know that we've assigned a metric to it at this particular point in time, but if you look at our COVID-19 activity for the year as a whole it is up compared to 2019.
Is it is it is just sort of the environment that we're in we believe so we anticipate that acuity levels will remain strong I don't know that we've assigned a metric to it at this particular point in time, but if you look at our non COVID-19 activity for the year as a whole it is up compared to 2019.
And part and so we anticipate that at this particular juncture continuing into <unk>.
2022.
Alright, Thank you Ralph.
Our next question is from Frank Morgan with RBC capital markets. Your line is open.
Good morning, just curious.
<unk> on the surgery side any additional color you could provide to us on a on a regional basis between in an outpatient in freestanding.
Surgical volumes and where you saw the biggest impact for Covid.
Yes.
Well, our inpatient surgeries were the only metric again.
Curious I mentioned in my comments that were down for the quarter and Thats, because we used a lot of the space that was necessary for.
Covid patients or outpatient activity was up it was up 7%, it was up more than our freestanding ASC and it wasn't our hospitals, but both were up.
<unk> is our app.
When you look at it against 2019, I think again, we had growth with the exception of inpatient surgeries freight in that. Again as a direct correlation to the fact that we needed that space for Covid in patients.
Again as a direct correlation to the fact that we needed that space for Covid in patients.
<unk>.
In order to manage our capacity.
From both staffing at a bed standpoint.
Got you and just in the just from a geographic standpoint on the outpatient side did you notice any more of an effect than say, the Texas and Florida markets say in outpatient because of Covid.
I don't I don't.
Have all of it in front of me, obviously, Florida and Texas.
We're very intent.
<unk> for us with the Delta variant and so it's reasonable to assume that Thats, where we had more pressure in those those markets than we did in other parts of the country.
But.
That would be my reaction to that question right.
Alright, Brian. Thank you so much thank you.
Our next question is from.
Peter Chickering with Deutsche Bank. Your line is open.
Good morning, guys have been taking my questions for your 2022 revenue commentary you talked about.
The Chi Chi.
Acuity procedures, continuing just curious sort of what is fueling that what areas are driving that is it is a cardio recovering orthopedics et cetera, and then as I think about 'twenty two and beyond just a question for you.
Once you get over sort of the.
The noise from Covid.
Does your long term EBITDA growth.
You've laid out in the past is it sort of continue from these levels once we get through the noise of 21 2020. Thanks so much.
Alright, Thanks Peter.
Our belief is that demand for health care services is still strong and we think it's going to be one 5% to 2%.
But when you look out into the intermediate run and so forth and we think for HCA, we have a differentiated portfolio of markets and we have strong economies underneath that differentiated portfolio, where population growth job growth and so forth.
As existent and then we've had this pattern.
<unk> and.
And we think this pattern can continue of market share gains and as we look at where we are today versus where we were heading into 2020, we think we've improved our overall positioning competitively with up broader networks.
More physicians better clinical outcomes.
Pattern and so forth and we will continue to resource our model and we think that model still has growth embedded in it because of these factors and we're not ready to give.
Any any particular guidance as it relates to out years, but we do think the companies.
<unk> approach.
Can still yield.
Successful return for our shareholders.
Yes.
Alright, thank you.
The next question is from Whit Mayo with SBB Leerink. Your line is open.
Okay. Thanks.
Is that sort of reflect.
On commentary a year ago, Sam you referenced a lot of.
I guess, we'll call it emerging pop up growth opportunities I sort of think the ability to align closer to certain medical groups comes to mind. It might just be helpful to hear how some of these opportunities have evolved over the last 18 months and maybe I mean, this in the context of market share shifts et cetera, but just any high level observations or thoughts would be helpful. Thanks, alright. Thank you.
<unk> back 18 months and maybe I mean, this in the context of market share shifts et cetera, but just any any high level observations or thoughts would be helpful. Thanks, alright. Thank you.
Well, let me let me start with the fact that our most recent market share data that we have which is late last year of 2020 or first part of this year.
The latter at exact period showed a set of high watermarks, we picked up market share in 2020 without look at just sort of what happened in that year. So I'll start with that. Additionally, we have added to our networks. We have added in some cases, a few hospitals here in there whether it's new hospitals that have opened.
I don't remember or we've had small acquisitions of hospitals to round out our network offering but in particular on the outpatient side we've added a reasonable number of new facilities, whether it's new origin care center platform through freestanding emergency rooms, some ambulatory surgery and then we've added to our physician a platform over the last 18 months, some of which has been development of existing practices in our communities, but also new practice acquisitions that have added to our offerings. I think our outpatient facility capabilities up to about 2200 outpatient facilities at the end of 2019.
Reasonable number of new facilities, whether it's.
New origin care center platform through freestanding emergency rooms, some ambulatory surgery and then we've added to our physician.
Open platform over the last 18 months, some of which has been development of existing practices in our communities, but also new practice acquisitions that have added to our offerings I think our outpatient facility capabilities up to about 2200 outpatient facilities at the.
It was just a little north of 2000, so we continue to add capabilities and convenience for our patients again, creating a broader network offering in these communities. We have done some acquisitions our pipeline.
As it relates to outpatients acquisitions is strong. Also, our development pipeline of new outpatient facilities is robust and we fueled that with investment and then as Bill indicated we have a strong pipeline of projects that will come online in 2022 and 2023.
Acquisitions is strong.
Also our development pipeline of new outpatient facilities is robust and we fueled that with investment and then as Bill indicated we have a strong pipeline of projects that will come online in 2022 and 2023.
That are connected to both our hospital platform as well as our outpatient platform. So we see again the model. The flywheel. If you will of HCA continuing to produce solid results and deliver value to our patients and value to our shareholders.
Thank you Whit.
The next question.
Is from Lance Wilkes with Bernstein. Your line is open.
Yeah, I just wanted to follow up on the capital deployment theme, if you could talk.
A little bit about.
What you are looking at as far as.
Enterprise assets that sit atop.
The local markets and in particular earlier in the year.
You were talking about the flywheel concept and looking at digital or virtual assets or other sorts of assets that might feed into it was just interesting. If you have any evolution in thought as to what youre going to be focused on there and then if theres any progress reports on that thanks.
Thank you Lance.
We do.
You see complementary opportunities to use.
Digital capabilities more effectively in our company as Ive mentioned on previous calls advancing technology in our organization as a tremendous opportunity to improve care support our physicians and nurses with decision making.
Capabilities as well as.
More safe environment, we also see with that.
More consistency and transparency, which we believe can produce more efficiencies as we go through it. So we've got a number of initiatives that are connected to that. In addition to that component, we are using telemedicine to support outreach to our patient population and meet them, where they want to be and then we see opportunities for telemedicine to support what goes on inside of our facilities and preserve better care for our patients by helping our physicians and our nurses.
More efficiencies as we go through it so we've got a number of initiatives that are connected to that in addition to that.
<unk>, we are using telemedicine to support outreach to our patient population and meet them, where they want to be and then we see opportunities for telemedicine to support what goes on inside of our facilities and preserve better care for our patients by helping our physicians and our nurses with.
That really.
With really extended capabilities that can come from tele medicine inside the walls of our hospitals. So those areas are progressing, they're showing early signs of value in some instances and then when they connect with our care transformation agenda, which is being led by one of our physicians and his team.
We're very excited about what that potentially yields in the form of better care.
More efficient care.
So forth. So we have a number of initiatives underway theyre not completely implemented across the company. Because we are still studying what are the best approaches, but we're pretty excited about what this agenda can do for our organization.
Alright, Thank you Lance.
The next question is from Jamie <unk> with Goldman Sachs. Your line is open.
Hey, good morning, guys. Thanks for the question.
Early in the pandemic you outlined a couple of different phases. The cost opportunities that you were thinking about how are those tracking and how much more of the base cost structure can you optimize.
<unk> is enough to offset the incremental wage pressure that you're dealing with and other inflationary pressures out there yes.
Yes. This is bill thanks for the question as we've talked about before we have resiliency efforts underway. We started last year. Those efforts continue we have some of those efforts that are implemented and we're realizing the benefits now and.
Although some of those efforts that.
Still in the early stages of implementation that will provide benefit going to the future. We do expect some of those areas to help offset some of the inflationary increases we might see these efforts.
Centered around utilizing our scale, where we have the ability to consolidate and standardize.
We have options that may be distributed right now. They are also looking at some structural changes in terms of how we support our field based operations. So we have a number of efforts underway some of them arent.
Completion stages and the benefits are being realized as we speak and some of them still are in the early stages that will provide benefit.
Going forward. So it's an important part of our activity level right. Now we have teams focused on a variety of efforts and we have a certain governance structure in place to make sure that they get executed timely. So they will continue going forward.
Alright, Thank you Jared thank you.
The next question is from a J rice.
<unk> Suisse. Your line is open.
Thanks, Hi, everybody and Mark I don't know if were going to have you on the fourth quarter call. So I just would say.
Congratulations on your retirement and best wishes.
Sure.
I wanted to ask about the capital deployment a little further obviously this year you did 6 billion <unk>.
One six.
$6 billion of share repurchases, when you think about capital deployment going forward.
What kind of pace do you think is reasonable for that and I know you've already announced the salt Lake City deal.
So on the side of coming out of the pandemic hospital assets or other more significant assets that might be available.
Can you talk about that pipeline and specifically with Salt Lake? When you made your comments Bill about next year's growth I'm, assuming until that deal closes you're not incorporating that in your commentary my understanding is about $90 million to $100 million of EBITDA.
Yeah, AJ you are correct, we are not incorporating anything into that into our commentary at this point in time. In terms of capital allocation, let me step back and talk a little broadly about that as I mentioned in my comments, we are in a very strong position as we approach our capital allocation decisions for next year, given our cash flow generation to balance sheet position and liquidity we're carrying.
Can you just point in time.
In terms of capital allocation, let me step back and talk a little broadly about that as I mentioned in my comments, we are in a very strong position as we approach our capital allocation decisions for next year, given our cash flow generation to balance sheet position and liquidity we're carrying.
As we've described it in the past, we're really focused on what I describe as a balanced approach to capital with our first priority is evaluating opportunities to deploy capital in our markets to capture growth through our internal capital program, we haven't finalized on that range, yet, but I would anticipate will increase commensurate with the opportunities.
Opportunity.
We mentioned in our guidance it should be somewhere around $3.7 billion this year, maybe a little below that. Prior to the pandemic, we were at $4 to $4.2 billion and so we're evaluating where that should settle for next year, but we think that will be an important part of the continuing our growth.
After that it's a matter of how best to utilize our free cash flow to drive value. A dividend program and share repurchase program.
A dividend program and share repurchase program.
We expect to continue to be an important part of our overall capital allocation process, we haven't finalized that but we have ample capital capacity.
To give due consideration to both of those programs and I would expect them to be part of our balanced portfolio of capital going forward.
Alright, Thank you AJ.
The next question is from John Ransom with Raymond James Your line is open.
Good morning, I'll add my best.
Best wishes to Mr. Kimbro.
And I'll leave and yet we haven't got them.
For a little while but yes.
Yes.
Yeah, I guess I'm thinking I'm thinking a blocking or ballroom dancing something I think you need to take up the netcentric hobby.
That's right.
Bodies.
Just thinking about fourth quarter and can you know in conjunction with your guidance I mean your labor costs.
Talk about it a lot, but they jumped up about 11% after kind of hanging in and the $640 million range for three quarters. If we think about the fourth quarter. It let's say COVID-19.
About 11% after kind of hanging in and the $640 million range for three quarters. If if we think about the fourth quarter. It let's say COVID-19.
Hey, Ross from.
Drops by five 6% and so some of that pressure comes off isn't.
Isn't it reasonable to think that the labor costs.
Get a little bit of a breather sequentially just relative to less acute pressure from what we saw at the Delta wave at the peak in say August.
Yes, John this is.
Covid just bill I think as Sam mentioned in his earlier commentary we.
This quarter was affected by having in gaining the flavor. It any way we could to support the volume we were seeing in this COVID-19 does subside, we expect those premium programs that we implemented.
During the quarter to subside.
Whether it would be.
<unk> of the contract labor.
<unk>.
Looking at the over time as well as some of these bonus shift differentials that we have to pay so we do expect that too to come down relative to where we had in third quarter, but we understand there is still pressure in the labor market. So we will just have to see where that settles out for the fourth quarter.
Just as a follow up so I think about flat sequential revenue and less acute pressure from labor wouldn't that imply EBITDA.
Going up sequentially not being flat.
I understand that question as we said before historically, we see some seasonality we don't know what the seasonality change will be.
We think our range provides the opportunity for us to grow at the top end of that so again I think just given given the environment. We're seeing we were prudent in our range and that's what we're going with at this point.
Okay. Thank you John.
John Thanks, so much.
The next question is from Joshua Raskin.
With Nephron research your line is open.
Hi, Thanks, and good morning, I'm going to I'm going to hold my comments and Marc and I guess for another 90 days to wait until we get them for the <unk>.
My question is on the value based care from the perspective that HCA is the largest hospital operator in the country one of the largest employers of physicians in the country. So do.
We look at this movement, you know and it doesn't feel like it's being felt much at the at the facility level, but do you think there are opportunities for HCA on the hospital side to benefit from value based care contracts and then how do you think about opportunities for your physician base, because I know, there's a ton of conversation around enabling.
<unk> providers at this point.
But we have certain aspects of value based care embedded in obviously Medicare reimbursement in some of our commercial contracts, we have aspect of value based care component.
Part as part of our reimbursed.
Bling hirschmann methodologies, so that will continue.
I think into the future is it accelerating in our facility structures no.
Out of our physician platform, we do see opportunities to continue to push further into value based care again in that particular platform.
Remember in our company we have.
Aspects of our value based care they vary a little bit from one market to the other depending on the circumstances and the demographics and payer dynamics in those markets. So we do see it growing more in the physician platform than on the facility side I would submit.
Submit.
But.
I think if you pull up and you look at our relationships across the organization in the payer environment, they're very strong.
85% contracted for 2022, we're about 50% contracted for 2023 on terms that work for both organizations. They continue.
Form you a lot of the structure thats already in place and we evolve as we renew with what's going on in the marketplace.
In most commercial contracts in just about every market, where we do business in and most Medicare advantage relationships as well so that's a key.
Of our approach and that's why it's important for our model within each of the markets to be comprehensive both in outpatient offerings convenient for the patients and then having different price points for the payers, but ultimately creating a full system.
That can offer solutions.
Portland, we adjust those solutions to fit the situation with each payer and some of that again can be value based some of it can be a different approaches to other reimbursement terms, but we think.
We're striking the right balance in how we approach that.
Josh Thanks.
Our next question is from.
Eric Taylor with Cowen Your line is open.
Hey, good morning, guys. Congrats on the quarter I know it was a very difficult one to manage through.
The Street Tilly's immediately looking for the next data point, maybe not enough credit given.
So good job on the quarter.
I wanted to ask.
I wanted to ask I think Thats, primarily goes to bill.
When we look at.
Where your margins were trending a few years pre pandemic.
A couple of hundred basis points.
I think your guidance for next year inherently assumes margins come back.
To some degree.
And we understand all the factors that have been driving the higher occupancy the better mix the higher acuity.
Despite the COVID-19 costs, despite the labor costs et cetera, but bill I feel like a year or so ago. You did talk about some opportunities to take some real sort of permanent efficiencies.
Of the cost structure and just wanted to get your thoughts now as we sort of head into 'twenty, two and beyond should investors think that margins. Ultimately just go right back to the low 19th are there. Good reasons structurally to think that maybe you can sustain somewhere in the middle.
Well again one.
It is a very good question.
Sure we are focused on driving as much efficiency as we can throughout the organization and I think we have a pretty good track record of doing that you are right. If you go prepaying demick, we were hovering 19% margins. There are a couple of quarters would be 'twenty, we've step changed that some of that is due to the mix and acuity.
<unk> on there our focus will be to continue to drive margins. We have been supported by a couple of those COVID-19 support programs that I spoke about we fully anticipate once we account for those that we should maintain and find some incremental growth to margins going forward.
And all of our efforts, including our.
Our resiliency plans in our day to day management is to continue to drive efficiencies utilize the scale of the organization to bring benefits. So.
Do believe that once we get into a normalized kind of post COVID-19 surge environment and we compare our current margins to where they were pre pandemic youll see some elevation in there.
Thank you Gary.
When you look at the Gary This is Sam when you look at the.
<unk> third quarter of 2019.
We we.
We cleared.
Almost what I call 36%.
EBITDA clearance in other words our margins.
<unk> 2021 against 2019 were to ask what the average margin was in 2019.
And so obviously.
It's significant compared to the same period then.
We do see.
Some structural pieces that bill was alluding.
<unk> too.
Obviously, there is a potential of inflation that we have to figure out exactly what the implications of that are and we think some of our strategies will mitigate it but we have been able to reposition the profitability of the company and we're pushing to try to sustain those gains as much as we possibly can.
Yes.
Chris. The next question is from Andrew Mok with UBS financial your line is open.
Hi, Good morning, first one clarification and then I'll get to my question Bill earlier, I think you said, 5% to 6% core EBITDA growth off of the earnings base ex government aid if so it sounds like you actually.
Expect accelerating growth in 2022 compared to the long term growth target of 4% to 6% is that fair.
Well.
We've had long term four to six I think if you look at our actual historical we'd be more in that five to six so again, we're in early stages and the intent was to give you some broad commentary versus specifics.
On there so that was how the commentary was structured.
Got it and then just a follow up on the de Novo deployment I think you have at least 20% to 30 de Novo is underway between ambulatory surgery and in patient rehab can you give us a sense for the cadence of when those facilities come online in the expected profit ramp at those facilities over the next 18.
<unk>.
I don't have I mean, we have we have a pipeline of urgent care that I know is coming online in 'twenty two 'twenty three again through acquisition or de Novo development.
We have maybe 10 or 12 ambulatory surgery centers, some of which come online in the fourth quarter. Some.
Most.
Come online in 2022 of that particular component and then we have some other outpatient facilities that maybe <unk>.
<unk> 15 or so.
In those categories come online in 'twenty, two with another 15 or so in 'twenty. Three so we have a lot in different categories coming online and Thats part of.
The container.
Continued addition to our 2200 outpatient facilities.
And so I don't have the earnings.
Expectations around those.
Or a composite on each all of them in total.
But we do have a pretty active development.
Those are those are comparable.
Implementers and there is a natural ramp.
As well and for the most part.
We're really bullish on the prospects for those outpatient facilities.
Yes.
Great. Thanks.
Thank you Andrew.
There are no further questions at this time I'll turn the.
Over to Mr. Kimberly for any closing remarks, alright, Chris. Thank you so much for your help today.
Thanks, everyone for joining our call hope you have a wonderful weekend I'm around this afternoon, if I can answering additional questions you might have take care.
Okay.
Ladies and gentlemen, this concludes today's conference.
The call. Thank you for participating and you may now disconnect.
[music].
Call It <unk>.
Yes.