Q4 2021 HCA Healthcare Inc Earnings Call
Work this past year.
In the fourth quarter, the Covid pandemic once again altered course with micron variant as the Delta variant surge was slowing down at the end of the third quarter with some spillover into the fourth the omicron surge starting to influence our business in early December .
All our teams continued their tremendous response and the effects of the pandemic ever changing conditions were managed well as reflected in our financial results for the fourth quarter, which were solid and in line with our most recent guidance.
In the quarter, our hospitals, providing care to 27000, COVID-19 patients approximately 5% of total admissions.
This level is significantly below the third quarter's 13%.
Since the beginning of the pandemic, we have provided in patient care to over 260000 patients who contracted the virus.
Currently our hospitals continue to treat many patients with COVID-19, Covid related census levels.
We have begun to peak and we anticipate they will decline over the next few weeks.
Same facility revenues grew six 4% in the quarter as compared to prior year.
Inpatient revenue grew 2% and outpatient revenue grew 13%.
Same facility volumes increased on a year over year basis across most major categories with the exception of inpatient surgeries, which were down 1%.
In a challenging labor market our teams adjusted well.
Labor cost created some pressure on margins as compared to last year, but sequentially. There was no significant change in this metric as compared to the third quarter.
Adjusted EBITDA margin for the quarter was strong.
Diluted earnings per share excluding gains on sales of facilities increased 7% to $4 42 in.
In the quarter as we move into 2020 to our overall outlook for the year remains generally consistent with the early perspectives, we provided in last quarter's call.
While certain aspects of our business, including the impact of the pandemic remain difficult to predict we believe the guidance that we're providing today is reasonable.
We also believe that the combination of our.
Disciplined operating culture, plus our growth plan and a strong support from our capital deployment program should help us deliver the results we are forecasting for the year and enhance long term shareholder value.
As I indicated previously we believe demand for healthcare services will be strong in 2022 and comparable to historical growth rates in the 2% to 3% zone with COVID-19 related admissions representing between three 5% of total.
We expect this demand to be supported by a growing economy and more insurance coverage for people through their employer or the exchanges.
We believe HCA healthcare strong and diversified portfolio of markets is differentiated across the industry and presents numerous long term growth opportunities.
Because of this we plan to continue putting in our core strategy of developing our provider networks through our capital spending plan and also through acquisitions when available.
Take care acquisition that we completed at the end of the year in South Florida.
These investments continue to add depth to our networks and convenience for our patients, creating an easier and more cost effective accessibility to our health care systems.
Over the past year, we have increased the ambulatory care sites in our networks about 14%, bringing the total number to approximately 2200.
These sites support that 182 hospitals, we operate today.
We will provide support in the future to the eight new hospitals, we recently announced in various Texas and Florida markets.
We are operating in a difficult labor market over the past year, we have invested in our colleagues with increased pay supplemental bonus programs and additional benefits. These investments coupled with our efforts to improve operational support.
For providing care should help us mitigate some of the <unk> caused by this environment.
These past two years, certainly has been a strain on our people, but through it all they have demonstrated a level of excellence compassion and resilience that has strengthened the company in many ways.
They have accomplished this while simultaneously staying true to our mission and better positioning us for continued success with.
With that I'll turn the call over to Bill for details on the quarter's results are 22 earnings guidance and capital deployment plan. Thank you.
Okay, great. Thank you Sam and good morning, everyone.
I will provide some additional comments on our performance for the year and then discuss our 2022 guidance our cash flow from operations was $2 4 billion as compared to a use of cash of $3 6 billion in the fourth quarter of 2020 in the prior year quarter cash flow was affected by our returning or <unk>.
Early approximately $6 billion of cares Act funding.
For full year 2021 cash flow from operations was just under $9 billion.
Capital spending was $1 2 billion for the quarter and was three 6 billion for the full year 2021.
In addition, we have approximately $4 1 billion.
Billion of approved capital on the pipeline that is scheduled to come online over the next three years.
We completed just over $2 billion of share repurchases during the quarter and $8 2 billion for the full year.
Our debt to EBITDA ratio was two seven times at the end of the third quarter and we had approximately $3 6 billion of available liquidity at the end of the quarter.
For full year 2021, we realized approximately $2 2 billion in.
And proceeds from sale of facilities and health care entities and.
<unk> recognized approximately $1 6 billion in gains on these sales. We also executed on $1 1 billion of acquisitions on healthcare entities during the year.
As noted in our release. This morning, we are providing full year 2022 guidance as follows we expect revenue to range between $60 billion and 62 billion.
We expect net income attributable to HCA healthcare in a range between 555 billion and $5 $83 5 billion.
We expect full year adjusted EBITDA to.
To range between.
12, $5 5 billion and $13 5 billion.
We expect full year diluted EPS to range between $18 40.
In $19 20.
And we expect capital spending to approximate $4 2 billion a year.
So can you provide some additional commentary on our guidance the midpoint of our adjusted EBITDA guidance of $12 8 billion reflects a one 2% increase over our 21 adjusted EBITDA.
2020, we recognized approximately $900 million and Covid support from the DRG at.
<unk> reimbursement for uninsured COVID-19 patients and the impact of the delay sequestration cuts.
We do not have full line of sight into all of these programs for the full year, but we do expect some benefit continuing in our guidance anticipates approximately $150 million of support in 2022.
In addition, our divestitures contributed about $140 million of adjusted EBITDA in 2021.
When you consider these items along with an estimate of about $300 million of incremental costs for serving COVID-19 patients in 2020 one our growth in adjusted EBITDA is consistent with our historical expectations for growth over time of 4% to 6%.
Within our guidance, we expect our same facility admissions to grow approximately 2% to 3%.
Revenue per admission to grow approximately 1%.
We anticipate outpatient revenue to grow in the mid to high single digits.
We anticipate adjusted EBITDA margin to range between 20% and 21% for the full year.
Depreciation is estimated to be about $3 billion and interest expense is projected to be around $1 7 billion.
Finally, our fully diluted shares are expected to be about 303 for the full year cash flow from operations is estimated to range between 9 billion and $9 five.
As also noted in our release this morning, our board of Directors has authorized a new $8 billion share repurchase program and declared an increase in our quarterly dividend from <unk> 48 to 56 per share.
So with that I'll turn the call over to Mark to open it up for Q&A alright. Thank you. Thank you Sam Chris would you provide instructions on the queue for questions and.
Mind, everyone to limit their questions to one please so that we can get as many people on the call as possible.
Yeah.
Okay.
Certainly and as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
First question is from Ann Hynes with Mizuho Securities. Your line is open.
Hi, great good morning.
Just a couple of how are you and just a couple of questions. So when I look at inpatient and outpatient versus 2009, yes, Don roughly 5% deterioration from prior quarters can you tell us what's driving that is it.
I mean, obviously it staffing issue, maybe with China staffing issues versus.
Alright.
People away versus maybe.
Change in patient behavior, and then a quick clarification on your 2022.
Guidance I think you said for 2021, you had about $300 million of incremental costs for Covid can you tell us what that is.
And then guidance for 2022 that would be great. Thanks.
And you were breaking up a little bit.
First question.
We all understood. The first one get faster can you repeat that and push sure. So when I look at inpatient and outpatient.
In Q4 versus Q4, 2019, and with Don roughly by 5%, which is a slight variation from prior quarter.
So can we just get some more color, what's driving that I mean, I know there are staffing issues.
Not able to admit patients daffing issues arent.
Turning patients away because of Covid spikes or is it maybe a change in patient behavior.
If you can provide some color on that that versus 2019.
I think a couple.
High level observations that we.
I believe our.
Indicative of the fourth quarter of 2021 versus the fourth quarter of 2019, obviously, we were carrying over into fourth quarter, a little bit of a delta of area and that was influencing some act in some markets and we think that had.
Some.
Impact on the <unk>.
2019 comparison, the second item would be that overall, we didn't see the same seasonality bump that we typically see in a fourth quarter again, we think that was influenced by the two different surges that were ramping down and ramping up.
And then the third.
Observation would be.
Net on our inpatient activity.
<unk> some migration in inpatient orthopedic surgeries primarily.
Outpatient and that did influence the inpatient staff and propped up the outpatient stat somewhat with respect to surgeries. So those will be the three main drivers I think of the comparisons all in all we did have to manage some capacity in certain situations again of the Covid markets.
And we're hopeful again as we wind down the <unk> area that we can get back to some normal period.
Business again in the 2021 as I've said on our third quarter call. We really haven't had a normal run of what our business trends.
Would be we've had a holiday variance at the end of 2020 carried into 2021, we had the delta area in the Middle we had maybe three to four months, where we could and there was no COVID-19 influence of any significance. So we're making some judgments around those variations, but but that would be the three level.
<unk>.
Observations, we have on the 2019 comparisons.
So on your second question regarding the $3 million $300 million of incremental costs that would be above and beyond what we're anticipating next year. We wanted to highlight the fact that we are seeing some decline in co which support and acknowledged that we would also expect to see some decline of some of that direct incremental costs. So that is above what we would expect.
Okay.
And then <unk>.
Drug related PP&E and some other costs associated with treatment of Covid infections.
Great and congratulations on the retirement Mark Thanks again appreciate it.
Chris.
Our next question is from Kevin Fischbeck with Bank of America. Your line is open.
Great. Thanks.
It seems like.
If you talk a little bit more controversial.
Today than I'm used to it being.
Predominantly around.
Where the margins should be.
Normalizing out to obviously this year you are looking for a lower margins than last year, but it's still nicely up from where 2019 was can you just level set for us.
Where do you think ultimately those margins normalize into 2023 and beyond and to the extent that it's above.
The $19 five in 2019.
Can help us bridge, what has gotten better sustainably.
From where you were pre COVID-19 .
Thanks, Kevin.
Yes, Kevin This is bill I'll make a shot at that so as you heard in our commentary, we expect margins to land between 20 and 21%.
Obviously, as we know and we've talked about during this COVID-19 period of time, especially when you compare it to pre COVID-19 .
Seen a growth in acuity as we've seen people return have higher intensity of services and we've lost a little bit of a lower acuity business. During this period of time and we've enjoyed a favorable payer mix.
Our full employment effort activity in the health insurance exchanges and so we saw obviously significant growth over the past call. It six quarters since the middle of 2020, we expect those trends to remain positive, but maybe not at the same level and thats, helping drive some of the margins that we're seeing currently.
And I think our view is that that coupled with other efforts HCA that we should be able to land within the ranges we provided.
Is that the right long term.
As well.
What we know today.
There's no reason to presume we cant stay in somewhere in that range, but obviously theres a lot of variables to our business and we'll have to.
Advance our perspectives on those when we get those variables.
I will say better understood over the course of this next year and so forth, but that's that's our thinking we've had a number Kevin financial resiliency initiatives and we have ongoing initiatives that we think are positive to margin all things equal but we.
We will have to wait and see how some of these other components of our business develop over the course of 2022.
Okay, great. Thank you Kevin Thank you Kevin appreciate it.
Our next question is from Andrew Mok with UBS Technology Youre line is open.
Hi, Thanks, I just wanted to echo congratulations to Mark on your retirement on the 2022 guide I want to make sure I understand the progression and development of the guide since the <unk> earnings call are you, saying that since <unk> you are now expecting more COVID-19 patients and because government relief only gives us line of sight through April .
You are planning for a significantly higher level of Colgate costs in 2022, but only one quarter of extended government relief.
There is somewhat of a mismatch in COVID-19 costs and Covid relief in 2022.
Thank you Andrew I think our guidance is very consistent with what our third quarter commentary I mean, there was <unk>.
Obviously, a lot of moving parts I think the Covid volume were anticipating now as Sam mentioned between 3% to 5% is consistent with where we thought COVID-19 volume would be when we provided our third quarter. The COVID-19 support programs that we mentioned I think are pretty close to what we.
During that discussion so.
Without talking about the progression of those occurring during the year I think overall our guidance is very consistent with what our commentary on what our belief or at the end of the third quarter.
Got it.
I appreciate it.
Yes.
Our next question is from Justin Lake with Wolfe Research. Your line is open.
Obviously first mark thanks for everything over 20 years enjoy your retirement you'll be missed.
Then for my question perspective.
Maybe you could talk a little bit about the.
Two things right. So one your.
We think <unk> got some.
Some dollars there were some articles out there that you've already got about $250 million from floor.
<unk>.
Extra Medicaid payments can you talk a little bit about that was it recognized in the fourth quarter.
The guidance for 2022, or because you had maybe you havent gotten them yet.
Ignite that yet so that's number one and then number two just in terms of your pricing assumption in terms of revenue per admit.
Is it fair to say then that it would be versus the typical 2% to 3% Youre, saying, one youre, assuming maybe about 1% of that.
You had a kind of a headwind from government dollars that are going to be down materially and then the other 1% is a little bit.
Four 1% maybe.
A little bit.
Payer mix deterioration is that a reasonable way to think about it.
Alright so.
So let me try to address so let me talk about Florida and the other supplemental programs that we have during the quarter.
I know theres been a lot of discussion we are participating in the Florida DPP program and in the fourth quarter, we did recognize a net benefit of approximately $100 million.
Related to that program, we do expect to recognize a similar benefit in the latter half of 2022 as well, but I also want to talk about Texas for a moment I think it's been reported as CMS has not yet approved the Medicaid Brexit payment program and Texas steps to go into effect September one of 'twenty one.
And as a result of this new program not being approved we did not record any revenue anticipated with that this aspect of the waiver program and only four months of the year. So this equated to about $120 million reduction in our waiver revenue in the fourth quarter compared to what we had recognized in the three previous.
<unk>, so have largely offset the impact of the Florida.
And our consolidated results. We believe eventually the Texas program will be worked out and.
Speaker 1: Texas program will be worked out, and we don't anticipate it being a headwind for 2022, but our guidance anticipates that we'll be able to recognize that annual historical level over time, even though it may take some time for the state of Texas and CMS to work that through.
And we don't anticipate it being a headwind for 2022, but your guidance anticipates that we'll be able to recognize.
Annual historical level over time, even though it may take some time for the state of Texas and CMS to work that through.
Speaker 1: The pricing side, you know, our revenue per admit at 1%, you're right, it's a little lower than maybe historically. On there, when you adjust for the COVID, it does add about a point, so I think that's right. And then when you think about our outpatient revenue growth, as I mentioned, we expect to be in the mid to high single digits, and you blend that, I think it would look, you know, relatively consistent when you look at revenue per equivalent admission. So we think it's generally in the range of what our historical trends would.
On the pricing side, a revenue per admit 1% you're right, it's a little a little lower than maybe historically on there when you adjust for the cohort. It does add about a point. So I think thats right and then when you think of our outpatient revenue growth as I mentioned, we expect to be in the mid to high single digits and you blend that I think it would look.
Relatively consistent when you look at revenue per equivalent admission.
So we think it's generally in the range of what our historical trends would indicate.
Okay can I just ask a quick follow up bill on the.
Texas.
In Florida, So the way to think about that for 2022.
You are building in that extra 100, and let's say $30 million for Florida.
As in the 'twenty two guidance and then theoretically you would also have a catch up.
Right from the fourth quarter are those last four months, where there is an extra $130 million. So.
So there's another 200 and lets say $50 million.
Kind of extra dollars that are either out of period or probably may or may not continue.
Florida and Texas in 2022 is that the right way to think about it well just I think in our guidance, we're anticipating annual amount a 12 month in our guidance, we're not anticipating a catch up just given the uncertainty of how that may settle out. So we are going to have to wait to see how that developed in the state of Texas is testing a federal program, we're hoping to.
Get some understanding of that soon so our guidance really reflects an annual amount not necessarily a catch up amount from this year and so we'll just have to wait and see how that how that plays out.
Got it thanks guys.
Thanks, Justin.
Our next question is from a J rice with credit Suisse. Your line is open.
Yes.
Hi, everybody.
Best wishes, Mark I will say, how long we've been interacting but.
Maybe maybe pivot and ask about.
You guys have.
<unk> talked about from time to time with the Covid crisis.
Some of the downstream ability to discharge has been challenging home health.
So whatever.
You've also talked about that may be may be having some impact on your capital deployment priorities.
Can you just give us your updated thoughts as you see delta moderate omicron come.
<unk>.
Are you seeing issues with being able to discharge patients in the timeframe you'd want.
Any updated thoughts on having any of those areas in particular, new or increased capital priorities.
Okay. Thank you a J.
One of the areas that we're focused on and it's connected really to our labor agenda. It's connected to our overall business agenda for 2022 is managing capacity and throughput most effectively.
So case management linked to stay there.
Discharge planning to host acute in other settings is very important to our success ER throughput all of those elements are very important to our ability to manage capacity and then clearly we have to execute on our labor agenda that we have a robust labor agenda to respond to the issues that.
We face on the people side of our equation and.
As it relates to.
The surges.
Discharge planning during this urges has been a little bit more difficult it's been more difficult in the omicron variant because the nursing home environment and even the home care environment has been suffering from.
Employees, who have been infected by the omicron variant and so that's created a little bit of contraction, we think in some markets with overall post acute capacity and that has delayed our ability to execute on our discharge planning process as we ordinarily would.
As it pertains AJ to our capital planning as you know we did acquire.
The homecare and hospice business unit from Brookdale, we have been in the process of.
Integrating that business for our company and the first part of this year has been about integration we sold.
Non overlap components.
Another home care company, and then we've been organizing ourselves around homecare and hospice.
Inside of the markets, where we overlap and so again, we're in the early stages of integration. We're looking for some significant strides on that front in 'twenty. Two. Additionally, we're making significant investments in rehab as we've mentioned on these calls in the past, particularly in Florida, but also in other components of our business and.
We think that will enhance our ability to manage the post acute discharge process a little bit more efficiently.
We also have preferred networks that we've evolved with our bundled payment programs over the years with certain providers in post acute we will continue to leverage and build on those and shifts, allowing us hopefully to maintain.
Efficient discharge planning process. The last thing I would say on that front as well is our case management program is continuing to be advanced and our company.
Implementing technology, we are deploying certain shared services capabilities around utilization review and so forth and we think those.
Initiatives are going to yield benefits for us as it relates to capacity management. So a lot of components to the H eight overall capital spending however to sum it all up here are materially changing from what we previously indicated.
Okay.
Okay great. Thank.
Thank you so much.
Our next question is from Peter Chickering with Deutsche Bank. Your line is open.
Hey, good morning, guys. Thanks for taking my questions I want to Echo everyone's comments Mark. Thank you, it's been a pleasure working with year over years and Frank I look forward to working with you again in the future.
Okay.
So it's a test you guys I'm. That's a single multipart question here. So labor is obviously a big topic. These days. So the first question is how should we model the cadence of earnings in 2022 versus a pre COVID-19 year number two on 3% of revenue growth guidance, you're guiding to 50 basis points of margin compression. Despite this law.
Pressures can you give us any color on where it's obviously benefits tracks in 'twenty two versus 21 any other color on supply in Opex and then finally number three what assumptions are you, making our labor costs sort of throughout the year you have a moderating staying the same levels any color you can give us there.
Thank you.
Let's start with the quarterly cash and obviously, we don't give specific guidance, but I think when you Peter.
The discussion I had around the Texas waiver program and we think that will take some time to settle out potentially even into the second half of the.
And then when we think about flavor.
The current trend is probably more pressured in the first half of the year. We think we can continue to manage through the second half of the year I think it's reasonable to expect that our growth will be weighted in the second half of the year, we expect that.
We've seen the utilization of some of our premium labor, especially around contract labor that we can ease that as we go through the balance of the year as hopefully we.
Get out of a COVID-19 surge environment and that will provide some relief as we progress through the second half of 2022.
On supplies and Opex assumptions are really consistent with our transplant when I look at those two areas as a percentage of revenue they stay pretty close and term.
Variability from period to period, so there's really no major tailwind or headwinds that I would call out on those I think are supply trends in our other operating trends would be consistent with.
What we've seen throughout most of this year.
Okay, great and actually a follow up question on the premium labor can you quantify how much premium labor you guys saw in fourth quarter and what Youre assuming in 2022. Thanks so much.
Well I think it's okay. We did obviously have to utilize higher contract labor.
I think the impact was as much about the cost to procure that contract labor as it was the utilization our contract labor Ftes were up maybe.
10% compared to where we ran in the first quarter, but the cost to procure that contract labor up table is up significantly. So we believe that as the COVID-19 surge, which began to dissipate that the cost per contract labor will be able will be able to manage through that and manage that down. So those are basically the <unk>.
Numbers right now.
Great. Thanks, so much.
It's Peter.
Yes.
Our next question is from Whit Mayo with SBB Leerink. Your line is open.
Hey, Thanks, Best wishes Mark Bill.
Bill My question is when I look at the framework that you've offered up for 2022, and I may be off a point or so here, but if COVID-19 is budgeted to be 3% to 5% of your total admissions. It does seem to imply that non COVID-19 admissions grow maybe somewhere in the high single digit range, but that.
Could be roughly flat versus 2019, so I'm just trying to see if you can put into context that the growth in non COVID-19 and how that's been trending and maybe any color around service lines just to help us bridge that increase and any views on maybe the first quarter could be could be helpful. Thanks.
Thank you.
Yes.
Look at Covid in discrete terms youre, probably not incorrect with with some of your estimations, but I don't think were viewed COVID-19 completely discreet in the sense that.
Some of those patients would still be entering the system, regardless of Covid and that was especially true in the fourth quarter as we looked at some of our COVID-19 patients and such that they were coming in for different reasons and then there were also a COVID-19 positive because many people didn't even know they had COVID-19 . So I think you have to sort of look at it as a bit of a.
Mixed bag, there and that's how we're judging it as well I do believe that there was deferred demand and it still.
Showed itself in the quarter.
Yield some.
Recovery. The first part of 2022, I mean, literally we had surgeons who were closing practices canceling cases, because they themselves contracted the omicron variant. So I think from that standpoint, there is.
The typical COVID-19 impact on volume in the quarter, while we're experiencing a surge, but we believe again that.
Strong job growth across.
Our portfolio of markets.
More people covered by the exchange deferrals some.
Elective.
And transfer closures across our portfolio, all bode well for our ability to recover volume in 2022 again as I mentioned to a J we have to manage capacity, we have to supply that capacity with labor.
And we're working through all of those elements as we speak to put ourselves in the best position to receive that demand, but we're very excited about the prospects for growth across the company as I mentioned in my comments, we're investing in that we've announced as I mentioned eight new hospitals recognize some of the overall growth that.
Just in these markets we've had momentum if you look at our market share at the end of 2019, it was north of 26 and a half it ended.
With the most recent data that we get which is about a year and a half later.
Under 28% so we gained.
Sure during Covid, we've positioned our organization, we believe with our ambulatory network better and when we bumped that up what we're judging to be some demand that's been dislocated by the Covid surges.
Sure.
We feel like our guidance is reasonable.
Okay. Thanks, a lot alright.
Alright. Thanks.
The next question is from Sarah James with Barclays. Your line is open.
Thank you and I Echo the comments Mike.
Much of the wage inflation environment do you think of.
Sure sure sure.
And how we think about the base wage range from nurses and how does that impact your conversations with payers and how you think about capex or capital deployment mix.
Thank you Sarah.
Well it is.
<unk> mission.
The market has been significantly disrupt the labor market that it had been significantly disrupted with COVID-19 , what we see during COVID-19 surges is more opportunities for our nurses and other people's nurses to go into a traveler and get a really outsized rate.
We think as Covid surge is moderate that is going to moderate the overall market to some degree.
We have advanced our pages for our employees, we've advanced some of our benefits we've provided certain shift bonuses throughout the year and that has yielded some.
Increased rate of wage growth for our employee base. We think however, moving into 2022 as we go through the moderation on the contract labor will be able to absorb the wage trends that are built into our employee base over the course of 'twenty, two and land somewhere.
Around 3% three 5%, possibly on a composite basis for our cost per FTE and that we believe is something that we can absorb in our guidance as it relates to our payer contracts, yes, we are talking to them about inflationary pressure.
<unk> and how that will influence future contracting.
At this particular point in time.
Our book of business for <unk>.
2022, its pretty much accomplished in part of 'twenty three are accomplished but we are building in some flexibility to reflect the inflationary pressures that might.
And we will continue to work through those as we work through our our contract portfolio with the different payers, but I think in general they understand the pressures that providers are facing on that front and they have the unique ability to adjust their premiums on an annual basis and most of that most instances and in that <unk> lineup with.
The need for us to get a fair cost increase related to inflation.
Alright, thank you so much.
Our next question is from Scott Fidel with Stephens. Your line is open.
Hi, Thanks, and now I will echo.
Thanks, Marc and best wishes to Frank.
I had a question was interested to get a few more details on the hospitals that you're you've announced that you're going to plan to build an aggregate in Florida and in Texas.
Just specifically interested if you could talk about what the overall related capex would be for those facilities and the the ROIC that you think you can generate on them.
And then also.
Maybe in aggregate sort of net new beds that you would think that you'll be able to add from this eight facilities and when in terms of timing those are expected to come online.
Hi, Scott.
Well I would submit that the eight projects that we've announced.
Is not going to materially change our capital thinking over the next.
Two to three years, we believe we can absorb most of that in.
What will be our budget.
Approximately what we're indicating for for this year.
The situation is this I mean some of these markets are growing significantly Austin. This as everybody probably knows is growing.
In a way that is.
Creating opportunities for us just like it is creating opportunities for others in that community, but with the growth in that market and with the occupancy that we currently run in Austin, Texas as an example at present.
Nice.
Platform for us to expand into some of these growing areas and add to our network. Most of these hospitals will be primary and secondary care type hospitals with basic inpatient services in many outpatient services and then to the extent that these patients.
Patients need deeper more acute care, we obviously have those capabilities.
Our different markets, we have the same situation in Florida with the exception of one hospital that we're building in Fort Myers, which is the new fit for us they.
We're extending into that market because there is a need for more capacity and its proximal to one of our west Florida markets in a way that we think we can create synergies. So I think with respect to returns we have a pattern we built <unk>.
Producing very solid projects Thats reflected in our return on capital overall, and we anticipate that these projects over time will yield the same kind of value that we we've typically generated with with capital programs.
So thats, where we are with them again most of them are going to be 50 to 75 bed starting out theyre not huge hospitals, they're complementary assets that over time, we'll hopefully grow to more acute and more capable facilities with respect to service offerings.
Alright, Thank you Scott.
Our next question is from Gary Taylor with Cowen Your line is open.
Hi, good morning.
Mark Congrats.
Not to make you feel at all but I think HCA has 2 billion in revenue and 1982 started.
You've come a long way.
Sure.
I remember thank you.
Yes.
One clarification and one question I just wanted to clarify the Utah hospitals not yet in the guide.
And then my.
Question, just going back to labor I know you've covered a lot of and I appreciate it but.
Bill on the <unk>, you had talked about contract labor overtime shift differentials and you had said 10% to 12% of Ftes were in those premium categories and I think you I think all three of those were included in the premium category. So I just wanted to get a sense sequentially. If you have that.
Figure if there is a sense that that.
Eased at all yet or we're still waiting to see that.
Yes. This is Phil to answer yes, Utah is not in our guidance. We're still in a regulatory review process. We have not included any of that in our guidance.
Guarding contract labor and premium labor trends, we did see some improvement as we went through the fourth quarter I think the numbers closer to 11% of our nursing hours where contract hours in the fourth quarter. So there's some slight improvement.
Going forward as we think about my earlier commentary we.
Think in the first half of 'twenty, two and we'll continue to see that pressure over time as the year goes on as hopefully COVID-19 dissipates, we'll be able to manage that process down.
Thank you.
Alright, Thanks, Gary.
Our next question is from Jamie <unk> with Goldman Sachs. Your line is open.
Hey, good morning, guys I just wanted to ask one clarification on the.
<unk>.
The Covid DRG herson sequestration for through 2021, if you can give a breakdown of that $900 million and same thing for 2000 $22 million to $150 million.
Youre planning for and then my real question is just around I think we're getting to this question.
But the implied non equivalent volume in 2022, Youre, certainly not implying you get back to trend line.
Maybe back to 2019 level, but really what is the bottleneck to get back to trend line growth discharge capacity labor capacity.
What are the bottleneck that you.
We have to work through to see upside to non coated volumes.
Yes, let me take the first part of the breakdown of the code would support.
Roughly 180 million from the DRG add ons sequestration delay was about $200 million for us in 'twenty, one and then we had a little over $4 million of reimbursement and a little bit of technology at all payments. After that regarding 2002, we know we have some visibility into the sequestration.
Duration being faced and that saves roughly half of the $150 million, we talked about and the recipe and from the other programs.
I think on the capacity side of the equation again.
If you categorize how we're approaching making sure we have adequate capacity and we have to execute on these categories in order to achieve that first is staffing we have to retain the staff. We have we have to recruit new staff and we have to manage that obviously effectively and again, we have a number of.
Initiatives in place.
To deal with that and I'm encouraged by our hiring we've advanced our recruiting agenda, we've got improvements in certain categories with turnover and again getting through Covid searches will be helpful.
The second thing we're working on that we're calling new models of care, we're exploring and experimenting with different approaches to staffing models that allow our nurses to be supported by different approaches creating more capacity if you will.
For our nurse population in a way that delivers the patient outcomes, we want and recognize that some of the market choose and then the final piece is what I had mentioned previously around throughput and capacity management and again case management piece of that telemedicine inside of our hospitals as a piece of that load balancing across all.
All of our.
Bed capacity market is a piece of that so we have a lot of elements technology also factors into that and how we are using some new technology solutions to help us in throughput management. So those are the areas that we're focused on.
And I've got confidence in our teams and our abilities to execute around these categories and deliver the capacity that we're going to need in order to take care of the demand that's going to be in the communities.
Alright. Thanks.
Okay.
Our next question is from Jason <unk> with Citi. Your line is open.
Great Hey, Fellows. Thanks for taking my question I guess, just on the payer mix side can you help flush out volume growth in the quarter by payer cohort and how youre thinking about 2022 in context of that 2% to 3% overall volume growth embedded in guidance I guess.
You suggested stability in payer mix for 'twenty. Two I was just wondering how youre thinking about the impact of any potential Medicaid with verification activity and especially the pickup in marketplace enrollment in your bigger states I think particularly in Texas. So any help there would be great. Thanks.
Yes, I mean in the quarter. We saw continued favorable payer mix our managed care book for the quarter was up about two 6%.
Yes.
Compared to our overall emissions became favorable.
That was.
Partly driven if not mostly driven by the health insurance exchange volume, we continue to see that we've talked about good enrollment going into that is as we go forward and to me too.
In my comments I think we're expecting that our acuity and payer mix should continue to be positive trends, maybe not at the same pace. We've seen over this past several quarters, but we expect some continued positive growth on that relative to the Medicaid piece, we've seen some pluses and minuses of Medicaid Medicaid growth is up a little.
<unk> than our average in terms of expectations for next year I think it would be mostly consistent with what our recent trends with them.
I'm not so sure what else was tagged on his question.
Yes.
Alright, thank you so much.
Yes.
Our next question is from Brian <unk> with Jefferies. Your line is open.
Hey, good morning, guys and Mark Thanks, again for all the help over the years.
I guess, Dan My question in your prepared remarks, you talked about how.
You saw the migration of inpatient ortho to outpatient so I'm just wondering how youre thinking about the strategizing around that and how that plays out going forward and maybe any color you can share on the difference in economics, maybe on an EBITDA basis apples to apples for procedures inpatient versus outpatient.
So our total orthopedic volume surgical volumes were up.
When you look at inpatient and outpatient in total.
We have a physician alignment strategy with our orthopedic community that we think is yielding value continue to iterate on that.
To respond to some of the the.
We will need from one market to the other the second piece of our strategy is around our outpatient elements in how we manage our surgical space into hospitals for Alpha and cases, and then also in our ambulatory surgery centers, where we have orthopedic partners. So we have a multi pronged approach to orthopedics just like we.
Do with most.
Service lines and it involves our.
Quality agenda.
Our service agenda, our facility agenda, and then our physicians and so we have the same dynamic with <unk>.
Orthopedics.
<unk>.
The reimbursement per case is obviously less in an outpatient environment than it is in an in patient, but I think the important thing about HCA healthcare is we have such a diversification of services and no one service provider.
Its proportionate amount of revenue or profit for the company. So when there is migration from one setting to the other it doesn't necessarily change the overall.
The equation for the company and.
We're seeing with orthopedics today, it's migrating we've had other service lines over the years migrate from inpatient to outpatient and we've been able to manage through that and actually create market share momentum around that transition and we are.
We're believing that we have the right approach here with orthopedics as well.
Okay. Thank you.
Yes.
Our next question is from Calvin Sterne <unk> with JP Morgan Your line is open.
Hey, Good morning, just wanted to circle back to some of the Medicaid comments you made.
Yes, specifically related to re determinations.
I just want to understand whats assumed in your guys' guidance with respect to the resumption of Medicaid Redetermination.
And whether or not you think that has a discernible impact on your numbers are particularly in the back half. Thanks.
Okay clear when you say redetermination as we talked about the supplemental programs re determinations.
About eligibility.
Determination.
Don't think theres any.
Sure it'll assumptions in terms of changes of that into our expectations going forward. We haven't I haven't heard any discussion of that impact in our Medicaid volume projections going forward. So I would tell you that I think for next year, it's built on our historical trends remaining pretty consistent.
Alright, Thanks Kelvin.
Chris We got time for two questions. Please.
Okay.
Our next question is from Joshua Raskin with Nephron Research your line is open.
Great. Thanks for fitting me in and congrats Mark and welcome Frank as well on the Labor front Im curious if youre seeing competition for clinical labor, specifically physicians nurses et cetera, right, that's mostly coming from.
Other hospitals, competing hospitals or maybe staffing situations or are there trends where individuals clinical labor is going to other areas other sites or maybe even leaving healthcare because we continue to see that and media reports and then maybe just a comment on Galen and the impact that that's having on how that may be a competitive advantage for <unk>.
CA.
Well I think all of the above on labor I mean, there is clearly competition for labor not just in clinical labor, but non nickel labor to the service side of our.
Agenda, we have competitive dynamics on that labor front as well so we're no different than any other industry when it when it comes to that.
I think again, we have advanced our recruitment very significantly and we're recruiting.
Significant numbers of nurses, we had retention efforts that I think are going to pay off.
<unk> transportation that I mentioned.
And capacity management all of that is connected to <unk>.
Staffing solution for our company.
And we're competing very aggressively in this space just like we compete for physicians just like we compete for patients and so forth. So I'm confident in our competitive abilities on this particular agenda.
<unk> is off to a great start we acquired it and we're limited to when we could start our expansions. We started our expansion of this past year I think we have 12, new schools in the pipeline, maybe six or eight of them have actually opened.
One in Austin and one in Nash for both the fastest ramp up of new enrollment in the history of Galen.
Oh told me. So we're very excited about the prospects it will take us time to graduate these nurses, but we expect to have 12.
18, new schools over the next two to three years and that should yield.
A number of new students for us we will integrate those students into our facilities in ways that hopefully secure.
And employment opportunity for them in an HCA facility when they graduate we anticipate tripling the number of graduates over what they currently produce by 2026, which.
Yield a reasonable growth in number of nurses in the communities that again, hopefully we can retain into our facilities. We believe our faculty will be supported by HCA.
Leadership, and then the external programs that we'll use for students in the Galen school will be integrated into HCA procedure systems, and so forth and we do think that creates.
Some advantage in securing these great what's into our facilities.
Alright, thanks, guys.
Our final question is from Ben Hendrix with RBC capital markets. Your line is open.
Hey, Thanks, guys for squeezing me in at the end and congratulations to both Mark and Frank.
I think most of my questions have been answered and you've touched on this but just kind of get back to your inpatient care delivery efforts and then length of stay management. This is all a consistent theme we've heard from your competitors certainly tenant has talked about this in community as well.
But I just wanted to get a little bit more color on what you think is your key differentiators, where there'll be your scale your approach.
And kind of what might give.
The competitive advantage in that endeavor, and then and then follow on to that kind of what inning are we and how much more room to run do we have on on getting efficiency out of out of specifically that care delivery alright. Thanks Brent.
Yes.
No.
What the other companies are necessarily saying about this particular agenda I think what we're trying to do is make sure. We're using technology, we have training and visibility into the processes that make a difference in case management and then were ultimately using our capacity broadly across the.
The markets to support better throughput and overall capacity management and then as we've.
Advanced our capabilities in post acute with our own acquisitions and development as well as relationships with others and I think the combination of all of those elements create an opportunity for us to gain more efficiencies through our case management programs overall and we think.
Also that will help us with our receivables and our management of denials and so forth with the Payors and there is some yield on that front as well. So we're pretty excited about the developments in this area how much more advantage, we are than others I can't really speak to that.
Alright, Chris.
That concludes the question answer session I'll turn the call over to Mr. Hagan for any closing remarks.
Yes, well. Thank you. Thank you again for participating on our call and I wanted to take this moment to thank mark for his 39 years of service Eni. Both at work 39 years with the I'm not sure why he is retiring.
Nonetheless.
<unk> had a wonderful career and represented our company incredibly well with our shareholders and others and I want to thank you for that and again welcome Frank to the team for I'm going to do a wonderful job as well so mark <unk>.
Congratulations.
I appreciate it.
I wanted to say a few things to them.
Finishing up our final earnings call I wanted to thank Sam and Bill and all the others I've known and worked alongside these past 39 plus years.
Truly enjoyed working with everyone here at HCA.
And all of you listening on the call today.
Also want to thank Dr. <unk> for his vision and creating HCA.
And Vic Campbell for his years of mentoring and friendship.
To me over the past decades for Inc, and I will be here to answer any further questions. You might have following this call so feel free to give us some shouts afternoon or.
Thank you so much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating and you may now disconnect.
Okay.
Yeah.