Q1 2022 HCA Healthcare Inc Earnings Call
Driving at <unk>.
Total revenues grew six 9% compared to the first quarter of 2021.
Same facility inpatient revenues grew five 4% and same facility outpatient revenues grew 10, 6% Bill will provide more color on our revenues in his comments.
I realized that our bottom line financial results were not what we expected, but these top line metrics were positive.
Diluted earnings per share excluding gains on sales of facilities were $4 12.
Which was down <unk> <unk> from the prior year.
In the quarter, we experienced higher levels of contract labor expenses than planned.
As compared to the fourth quarter, we saw modest improvements in certain contract labor metrics. We expect expect further improvements in the remainder of the year as we align the workforce appropriately by reducing both the utilization of contract labor and the associated hourly rates for these contracts.
In some situations the challenges in the labor market also constrained our capacity preventing us from delivering hospital services to certain patients.
By the end of the quarter, we were able to overcome some of these capacity constraints and for the most part our transfer centers, we're able to operate normally and move more patients to the proper setting in our networks.
It is important to understand we are doing what we absolutely have to do to take care of our patients and we will always do that this past quarter. Our teams continued to show up and deliver on our promise to provide high quality care to patients who need our services I want to thank them for their commitment and hard work.
Work during these challenging times.
We do however have numerous initiatives underway around retention recruitment capacity management and new care models that we believe will help offset some of these labor pressures. However, we now believe improvement in our labor costs will be slower than originally anticipated.
This factor primarily influenced our revised outlook for 2022.
We will continue to invest in our people and our relationships and inner networks. We believe these investments are appropriate and should help us address the long term opportunities for growth that exist in our markets.
At the end of the quarter, we had approximately 2500 facilities or sites of care and HCA healthcare networks. This represents a 15% increase over last year.
Recently, we published our annual impact report for 2021, which highlights the tremendous impact our colleagues had on the patients and communities. We serve you can find the details on our website.
Before I turn the call over to Bill Let me end my comments with this.
Over the past few years, we have demonstrated an ability to adjust effectively to whatever our realities are and I am confident we will do it again.
With that I'll turn the call over to Bill. Thank you.
Okay. Thank you Sam and good morning, everyone.
I will provide some additional comments on our performance for the quarter then our den address our 2022 updated guidance first let me provide a little more commentary on our revenues in the quarter. We are encouraged with certain trends we saw in our non COVID-19 activity during the quarter.
Same facility non Covid admissions grew two 2% versus the prior year and our non Covid revenue per admission grew two 4% as a result of maintaining our acuity levels and a slightly favorable payer mix as compared to the prior year.
Within our Covid activity, our same facility Covid admissions were slightly above last year and represented approximately 10% of our total emissions, but we did see lower acuity and intensity with the omicron variance this year.
Covid inpatient revenue per admission was down approximately 15% from the first quarter of last year.
Which resulted in approximately $150 million less co with revenue this year as compared to the first quarter of last year.
Let me transition to discuss some cash flow and balance sheet metrics our.
Our cash flow from operations was 134 5 billion as compared to $2 billion in the first quarter of 2021.
We did pay 344 million of deferred payroll taxes from 2020 during this quarter, representing 50% of the total amount deferred.
Capital spending was $860 million as compared to $650 million in the prior year period, and we completed just over $2 1 billion of share repurchases during the quarter.
Our debt to adjusted EBITDA ratio at the end of the quarter was slightly below the low end of our target range and we had just under seven 9 billion of available liquidity at the end of the quarter.
We plan to use approximately $2 6 billion of this amount to redeem our 2023 bonds in the second quarter.
Finally, I will mention as noted in our release. This morning during March of this year CMS approved the directed payment portion of the Texas waiver program.
As a result, we recognized $385 million of revenue and $160 million of additional provider tax assessments related to this portion of the program from the period September one 'twenty one through March 31 2022.
Of these amounts approximately $244 million on the revenue and $90 million of the provider tax assessments related to the September through December of 'twenty one period.
As noted in our release. This morning, we are adjusting our full year 2022 guidance as follows.
We expect revenues to range between $59 5 billion and $61 5 billion.
We expect net income attributable to HCA healthcare to range between $4 95 billion and $5 three 4 billion.
We expect full year adjusted EBITDA to range between $11 8 billion and $12 4 billion.
We expect full year diluted earnings per share to range between $16 40.
And $17 60.
And we expect capital spending to remain at $4 2 billion for the year.
So let me provide some additional commentary on our adjusted guidance in three primary areas that we have considered first our cost of labor was higher than anticipated in the first quarter, primarily due to the utilization and cost of contract labor.
We now believe the disruption of the labor market and the pressure. This places on labor cost inflation will be slower to moderate than we originally anticipated.
Second as I previously discussed we saw reduced acuity and revenue from <unk> COVID-19 patients in the quarter and this lower acuity has been factored into our guidance as well and lastly, we made assumption around increased inflationary pressures and expect that to have greater impact on us going forward.
Including for professional fees energy procurement costs utilities and other purchase services.
So let me close with a brief discussion on some of the initiatives we have underway to respond to these current market dynamics.
We've spoken in the past of our resiliency efforts, which now include three main focus areas.
First is around staffing and capacity as Sam mentioned in his comments, we have teams working on and focused on multiple work streams. In this category. These work streams and around investing in and enhancing employee recruitment and retention efforts and enhancing capacity management through new case management models and technology solutions. In addition, we.
Exploring new delivery models through our care transformation initiatives. All of these are focused on supporting our care teams and easing some of the current labor pressures.
Second we have our original resiliency programs that are continuing many of these are advanced and efficiencies through our next generation of shared services. Examples of these include a consolidation and alignment of laboratory operations facility management, environmental and food and nutrition support areas and then the third major effort underway.
<unk> is an initiative around advancing our capability to benchmark key performance metrics across the organization. This is intended to identify variation and opportunity to share best practices across several areas such as supply utilization provider support costs discretionary spending and other similar cost area.
Many of these were factored into our original planning assumptions and we remain focused on these efforts to help offset some of the contract labor and inflationary cost pressures we are experiencing.
So with that I'll turn the call over to Frank to open it up for Q&A.
Thank you Bill as a reminder, please limit yourself to one question. So that we might give us as many possible in Q an opportunity to ask a question.
You may now give instructions to those who would like to ask a question.
Thank you.
If you would like to ask a question press star followed by the number one on your telephone keypad. If he would like to withdraw your question again, just press star one.
Your first question today comes from the line of a J Rice with credit Suisse. Your line is now open.
Thanks, Hi, everyone.
Maybe just to try to drill down a little bit more on.
No within the range you've changed your outlook for EBITDA by about <unk>.
$650 million at the high end $750 million.
Low and.
There's a lot of moving parts in the first quarter with what's happening with Texas supplemental.
Supplemental payments.
Can you tell us how much of that adjustment was due to what you saw in the first quarter and how much is your changing in your thinking for the rest of the year and particularly maybe just drill down on the labor.
Comments about maybe what you were thinking before versus what you're thinking today in terms of use of contract labor rates and so forth if theres anything that can be shared there.
Yes, a J. This is bill let me give that a shot so.
As we're looking forward and trying to take what we saw in the first quarter to make some assumptions and revision of our assumptions going forward, let's talk about the three areas first as I mentioned the pressure on the labor cost what were seeing is its higher than we originally plan, it's primarily related to the use of contract labor.
We're also adjusting our base wages to be responsive to the market as well.
I would think about it our original plan was to kind of manage our overall cost per FTE somewhere between a three and three 5% level. What we saw in the first quarter as our cost per FTE was about one 5% higher than we expected. So as we forecast this going forward for the balance of the year. It can have a $4 million to $500 million impact So we factor that.
That into our guidance the second areas regarding the <unk>, the less acuity and revenue not only that we saw in the first quarter, but to the extent that we continue to see some COVID-19 at a reduced level than what we saw in the first quarter. We factor that in and then lastly, as I mentioned, just some inflationary increases above what we originally anticipated.
So I think the way I would characterize it approximately two thirds of our revision I would apply to kind of our wage and inflationary cost pressures and a third of that due to the revenue acuity primarily to the COVID-19 patients.
Okay. Thanks, a lot.
And the next question.
Your next question comes from the line of Peter Chickering with Deutsche Bank. Your line is now open.
Hey, good morning, guys, taking my questions embedded on the guidance reduction can you walk us through the contract labor.
<unk> of nursing hours.
Fourth quarter and the first quarter.
How you assume that rolls off throughout the year and then the same question on on the the rates for contract labor and just because.
Stocks had a big move today any chance you guys can give us sort of a range for how we should be modeling to EBITDA.
Yes.
<unk> that I think we've talked about on our fourth quarter call our contract labor as a percent of nursing hours was around 11%.
And first quarter was about that level too we were 11 four specifically in the fourth quarter about 11 six in the second quarter.
Our experienced an elevated cost per hour of that contract labor, principally we believe related to the Covid surges. Our plans going forward are to continue to reduce the utilization of that contract labor essentially moderate the average hourly rate that we're having to spend for that contract labor but.
We think that moderation will be slower than we originally anticipated. So that's what's baked into our assumptions and it's basically influence with what we saw in the fourth quarter. Yes, Let me let me add to that Peter This is Sam I think as we have gone through two years of up and down periods with surges short.
Cycle normal period surges, another short cycle, nor normal period, we saw in the surges and acceleration in both turnover and the use of contract labor as I mentioned on my prepared comments, we do what we got to do to take care of our patients.
What we are.
Anticipating is no more significant surge is as we move through the rest of this year.
That gives us some.
The opportunity and some level of confidence that we can moderate the use of contract labor and some of our other initiatives should provide support recruitment.
Of our retention efforts and so forth given us an opportunity to wean ourselves off the high levels of contract labor and we saw that in the short cycles to assortment agree, but we never were able to sustain it simply because it was just that a short cycle. So as we go through the rest of this year, we think the cycle will.
Longer with respect to those surge and that will give us an opportunity to gain some traction.
With some of these initiatives our teams are working diligently across the facilities to make this happen and again I'm confident just as we've done in the past that we can make these adjustments over time.
And get us to where we need to be.
Okay next question.
Your next question comes from the line of Justin Lake with Wolfe Research. Your line is open.
Thanks. Good morning, first just a quick follow up on Peter's question can you give us a number as to where you expect to end the year on contract labor as a percentage and just to confirm does that fit in the operating expense or other operating because that was the line item, but it looks like it was a bit off and then my actual question.
If you take a step back right there was a huge improvement in margin.
During COVID-19 .
It looked like they take a step back here I'm just curious do you think this is.
Stable margin or a sustainable EBITDA level, but kind of thinking about jumping off for next year or do you think some of those improvements could help you close the gap versus where you were when you guided the year originally.
Hey, Justin This is bill let me start with the first part of that without giving a specific numbers you've heard us talk about we expect to decrease the utilization.
Look before Covid.
We will be hovering around 9% to 10% of ours I don't know exactly there's so many uncertainties, but we expect it to sequentially improve going forward that does come through the <unk> line not the other operating you did mentioned any other offering that was primarily influenced with the provider tax assessments.
In my prepared remarks.
This is Sam.
Just with respect to the margins in the first quarter I think the margins in the first quarter were clearly pressured as we've indicated here with somewhat unprecedented levels of course.
On the labor side.
Again, those costs were driven in some respects by the surge that we were reacting to.
And that pressured them in a very significant way I do believe.
Over time, we can recover some of that lost margin as we continue to appropriately align our workforce with more permanent workforce or more efficient workforce coming from the contract labor category.
Setting a target we don't necessarily have a target.
Contract Labor, obviously in 2019, we were maybe half of what we're running today somewhere in that zone I don't know if that's realistic.
In the short run, but I am hopeful in the intermediate run with the number of initiatives that we have plus our Galen College of nursing expansion program that we can start to get back to.
Those kind of levels, but I do think the first quarter was uniquely pressured from a margin standpoint simply because of the elevated levels of contract labor and the cost thereof.
Okay next question.
Your next question comes from the line of Kevin Fischbeck with Bank of America. Your line is open.
Great. Thanks, just one maybe follow up on that question. There I think last quarter, you were talking about something like a 20% to 21% margin kind of ultimately being sustainable is that the right way to think about it or have some of these things.
And it sounds like for the most part.
About recapturing margin Youre talking about.
Cost savings is there anything on the rate side.
As part of that equation and if so.
Does that take a couple of years to play out or is that something that we can think about more normalized margins as soon as next year. Thanks.
Both Kevin if you look at our guidance I think it would imply close to those 20% margin levels. Obviously, we've had to adjust some of our thinking given kind of these inflationary cost pressures that we're seeing so we're doing everything we can to operate the company as efficiently as possible Theres a lot of variables that we know go into margin.
Volume acuity payer mix continuing to manage our cost structure appropriately so.
I would use that 19% to 20% level in the short run and over time, we're going to continue to find ways to continue to operate efficiently.
On the payer contract.
We are having more discussions obviously the payers understand the inflationary pressures that providers have.
And there is early discussions it doesn't change our revenue mix in the 2022 period, because we're <unk>.
Largely contracted for 2022, but as we move into 2023 and 2024 cabin, we have opportunities to utilize our payer contracts to get some relief.
The inflationary pressures and as we further our discussions with those commercial payers.
Optimistic that we can gain some.
Escalators that are more in line with the inflationary pressures of today versus the inflationary pressures over the past.
Okay next question.
Your next question comes from the line of Whitney <unk> with SBB Securities. Your line is open.
Okay.
Hey, Thanks Bill.
What are you assuming in your algorithm this year for that guidance around Covid and non Covid. I think you were assuming non COVID-19 was going to be I don't know, 2% to 3% of the total how has that shifted and is there anything that you can share on.
How non COVID-19 , either inpatient or outpatient or anything is tracking through April that might just give us a sense of the run rate. Thanks.
Can't say April with at this point, but we said in our prepared remarks <unk> was up two 2% and that was really in February and March and February and March we were seeing four 5% to 5% potentially in those levels. So again thats why I said, we're encouraged by those trends.
Don't think really what we saw in the fourth quarter really in broad terms affect our volume outlook, we still see good volume demand in the marketplace. So.
Originally we said, 2% to 3% volume growth co would still be in between that maybe 3% to 5% of our total emissions and I think right now I think thats, mostly in line with our current expectations.
Okay next question.
Your next question comes from the line of Ben Hendrix with RBC capital markets. Your line is open.
Hi.
Real quick follow up on that.
Comment you made just a second ago, Sam about improving efficiency of contract labor, we've always kind of characterized this as.
Kind of the labor backdrop as the contract being the transitory piece and wage inflation being more permanent is that can we read that kind of improving efficiency comment is may be your expectation that contract labor utilization at higher rates as more of a permanent construct now going forward in the labor market.
Well I think it's higher than it was in 2019 I don't think.
It will be higher than it was in the fourth quarter or the first quarter I think rates will naturally come down as the surge as subside and ads.
Workforces aligned with more permanent staff.
And so forth and.
So we are dealing in the first quarter in the fourth quarter and a little bit in the third quarter as well.
Very high cost per hour for contract labor and we do not believe that is sustainable and so we are anticipating improvements in that Additionally, I think we will see reductions in the number of contract labor personnel that we use again as our initial.
<unk> gain traction we've invested heavily in our recruiting function and really improve the candidate experience inside of that we have some improving retention efforts efforts and compensation programs that we think are going to support that component of our.
Set of initiatives. So all of that leads us to believe that we can get the cost per FTE down from where it was in the fourth quarter.
And the first quarter and so that's our thinking.
Okay. Thank you Ben next question.
Your next question comes from the line of Ann Hynes with Mizuho. Your line is open.
Hi, good morning.
Can you tell us when I look at inpatient admissions and adjusted admissions versus 2019.
Still down about 3% can you tell us what's embedded in guidance for 2022 versus the 2019 base baseline transients.
Hey, Dan This is bill so as I mentioned before we still believe we will end up seeing 2% to 3% admissions for the full year 'twenty two.
You are right we are down a little on 19 I'd have to take a moment to see what that represents about 1% is what I think that would be our 'twenty one number versus the baseline 19 would be down about 1%, Yes, let me color that in a little bit more bill if I may please.
I think a couple of things when it comes to our same store 2019 versus our same store 2021, our uninsured volumes are down 11%.
From 2019, so that's a very significant point the second point I would say is we've had a fairly significant shift of orthopedic total joint surgeries go from inpatient to outpatient from 2019 to 2022 again that put pressure on the admissions our surgeries were actually.
Over 2019, and then again with our emergency room visits if you look at the categories that are the paying categories were slightly up but our uninsured activities were way down. So I think you've got to look at the components of the business.
And understand the different components and so the mix slightly better.
Shift inpatient to outpatient, which we've talked about over the last couple of years and that influences. The 2022 to 2019 comparisons.
Okay. Thank you and next question.
Your next question comes from the line of Gary Taylor with Cowen Your line is open.
Hey, good morning wanted to think about.
Seasonality of revenue and EBITDA.
If you can here do we go.
Go back to sort of pre Covid and think about first quarter fourth quarter EBITDA.
Always being higher or do we think about J&J and some of the other device companies have said.
All time high cancellations in January things really started improving in March and April and obviously, you've got some anticipation that labor costs could ease a bit sequentially. So.
Are we back to normal EBITDA seasonality, yet or has the year still more complex and can you help us at all.
I think a couple of things Gary Thank you for that question.
The seasonality we talked about this in the fourth quarter call was really difficult for us to discern because again, we were weaning ourselves off the Delta variance and then ramping up on the Omicron Varian I think.
The seasonality again with our volume is a bit uncertain to us right now.
Is this could be a more normal period on seasonality for volume in 2022 than any that we've had over the last two years obviously.
But the seasonality on our costs as we've indicated I think youre going to be different and they're going to be different because we're at a high watermark on labor cost per FTE in the first quarter.
And typically.
Our costs would go up seasonally but we think as we work through the initiatives and the alignment of our workforce, we will have a different pattern to our cost in 2022 than what we've had in previous years and then hopefully 2023 gets back to normal. So that's that's how we are.
Thinking about it obviously there is still.
Much to come here.
For us to understand.
In fact, if that does play out, but that's our thinking at this point thank.
Thank you Gary next question.
Your next question comes from the line of Brian <unk> with.
With Jefferies. Your line is open hey.
Good morning, Tim just to follow up some questions on labor rates.
One question. We're getting asked is why now you guys have done a great job managing through labor over the last year and a half and maybe any color you can share on what youre thinking in terms of turnover on your Perm nurses and then I guess for for build a follow up to that as you called out acuity of the drivers of the revenue guidance cut but as we pull.
Back on temp staff is there going to be an impact on labor or on.
On volumes that we should be thinking about thanks.
Okay.
So the first half of last year, our costs were not in what I call an elevated.
State from a labor and we mentioned this on our third quarter call. We also mentioned it again on the fourth quarter call.
Now we're mentioning it on the first quarter costs were working ourselves out of some comparisons number one but our cost of labor.
We're dramatically disrupted in the Delta variant for a couple of reasons, one we jumped our sensors.
From the second quarter to the third quarter by eight 5%, we had record census levels in the company in the third quarter.
Not for the third quarter, but forever and and that forced us to respond to those patients in an appropriate way.
The market the labor market was being tremendously impacted during the summer of 2021, and we had to use more contract labor at that time than we had in previous periods, while Thats continued.
Into the fourth quarter and into the.
First quarter again, we think some of that is influenced.
Significantly by the surges.
That's part of what we occurred as bill alluded to it the Delta variant was the most intense revenue patient population that we had so the third quarter covered a lot of that cost because the revenue intensity of the delta patients was quite high.
The fourth quarter had a blend of delta and omicron. It still was higher than the first quarter and some of the labor costs really haven't changed per FTE.
In three quarters.
Considering that to be a good thing and I'm also considering it to be the opportunity because we are using too much contract labor and it's still at elevated outsized rates and so our.
Rate trend has continued in the quarter to be reduced I think our contract labor cost per hour in the first quarter was down 5% from the fourth quarter and within the quarter within the first quarter. It was better each month month over month again, it gives us some confidence that.
The assumptions, we're making for the remainder of the year are reasonable.
So that's part of why it doesn't look like we.
Managed through it in historical ways our productivity.
Is at all.
Very efficient level when it comes to employees per patient so.
We're managing on that front as well as we possibly can and as again, we get these other underlying initiatives into a normal period, hopefully have no COVID-19 surges, we're going to gain ground on the pressure that we've experienced over the past three quarters.
Okay.
Thank you Brian you had a follow up question to say I think Sam mentioned in his comments there there is always the potential where the labor pressures could affect your volume what we have seen that is in COVID-19 surges as we manage through transfers again I think as Sam alluded in his comments at the end of the quarter were really back to normal levels.
But we're continuing to manage through that dynamic.
Okay. Thank you next question.
Your next question comes from the line of Scott Fidel with Stephens. Your line is now open.
Hi, Thanks.
So we just had the Medicare PPS proposed for 2023, and certainly had a couple of different moving pieces in that so I thought it'd be helpful. If you can give us.
The gross versus net.
Projections for your rates.
From that proposal and then just more broadly how you feel about that.
Factoring in this inflationary pressure and ultimately if you think that CMS will start to factor that in.
More accurately as we look out maybe to FY 'twenty four and beyond thanks.
Yes, Scott. This is bill I mean, obviously, we're still assessing that but I think on first blush, we thought kind of the gross increase we saw would be hovering just under 2% and.
And that's pretty consistent with what we've seen but I think to your point it does get netted out when we see the delay in the sequestration cuts out there. So we'll still assess that so it may move it closer to flat net net all in but we're seeing at the top line just under 2% growth on that and so we'll see how the final rule comes out.
As we go through comments, yes, and then forward years typically it takes.
A little bit for the wage index to be adjusted to reflect what's going on in the industry. So I think as 'twenty, one and 'twenty two start to get baked into the formula.
For inflation around the wage index as of the hospital industry will start to influence the reimbursement in slightly different ways.
Thank you for the question Scott next question.
Your next question comes from the line of Andrew Mok with UBS. Your line is now open.
Hi, Good morning, just wanted to follow up on the revenue commentary can you take us through the components of the lower revenue guidance in more detail, maybe help bucket the $500 million decline between volume acuity mix and are there any other government related item that you would call out in that revenue decline.
Yes, Andrew This is bill I would tell you it's principally related to the drop in the Covid acuity that I've mentioned in my comments, we are estimated to be approximately $150 million in the quarter.
So what obviously was higher at 10% of our admissions than we expect in the full year, but if you run that out I would say the vast majority of that revenue decline would be due to the lower acuity that we're seeing with the omicron variant and expect to see going forward and outside of that.
As no other really major item that I would call out just the ebb and flow of kind of normal volume patterns.
Thank you next question.
Your next question comes from the line of Stephen Baxter with Wells Fargo. Your line is open.
Yeah, Hi, Thanks, just wanted to ask another one on the labor markets I'm sure part of your process around this issue involves a great degree of competitive intelligence about what's going on in your markets. I was hoping you could share with us about what youre seeing from your local market competitors and whether their strategies around.
Contract labor or employee labor force or even maybe potentially put it sort of lines on pause or maybe exacerbated.
Pressures, you're feeling I guess big picture do you think they are being as disciplined as you are and if not how should we think about the longer term implications as well. Thank you.
So from a competitive standpoint, obviously, our wage programs have to be competitive and.
And that means different things in different circumstances, and we have made adjustments.
To our compensation program is really starting back in the third quarter of 'twenty, one to respond to some of the market dynamics, we continue to be very fluid.
In that particular area of our business in responding to.
The difference.
Circumstances from one market to the other I would say that.
Okay.
We think we're in a pretty good spot we haven't seen any unusual maneuvers broadly we are fortunate again to have competitors that tend to be only local and in one market or two markets at the most so we don't see sort of patterns that permeate all 40.
Three markets for HCA healthcare and so that's a positive on that front, but we havent seen anything unique yet from the.
Competitive landscape with contract labor and so forth, but I've got to believe that they are.
<unk> many of the same challenges as we do and I believe over time, we've been able to.
Use our operating discipline and use our systems use the learnings that we have across the company to create advantage for us and I believe we will continue to do that.
Thank you Steven next question.
Your next question comes from the line of Joshua Raskin with National Research. Your line is open.
Hi, Thanks. Good morning appreciate you taking the question quick.
Quick follow up on contract Labor, how long are those typical contracts in place and then my real question is are you having any issues with discharge is post acute discharge is that impacting length of stay driving up costs.
Obviously, the same DRG the same payment.
Yes, Josh Bill typically those contracts range around 13 weeks so.
It takes times to adjust but given the size of our always flown flowing through our system on there.
And relative to post acute discharge planning I would say, yes, I think thats part of our case management initiatives that I spoke to.
And my prepared comments, I think that supply and demand dynamics in post acute whether it be skilled nursing or are other post acute settings from time to time can cause a backup in our discharges and that's why we're trying to advance and utilize some technologies advance a common organizational structure around case ma'am.
So we can continue to focus on that and improve that I'd like to stay when patients are ready to go home and there is a appropriate levels of discharges, but that is a dynamic out there. There is no doubt about it but I think we are focusing a lot of effort and energy and resources to try to continue to improve in that area.
Thank you Josh next question.
Your next question comes from the line of Jason <unk> with.
<unk> with Citi. Your line is now open.
Okay.
Great. Thanks, I just wanted to go back to your comments around the initiatives for retention recruitment capacity management and new care models can you just help in terms of what is different with these initiatives today, maybe compared to perhaps how you utilize these initiatives back in <unk> 'twenty. One one later I was picking up is it just more intensity there or are you leveraging <unk>.
The levers that maybe weren't considered a preview utilize that back then and then if possible can you help quantify the offset of these programs or initiatives related to the 4% to $500 million net pressure regarding the higher wages and costs with the revised guidance. Thanks.
Yeah, I'll start and let Sam kick in I think it's a mix of both.
Escalating existing initiatives new ones, one I'll give you. An example, Sam mentioned this earlier around recruitment we've.
<unk> investment in recruiter significantly.
And thats been.
Really intentional effort same around retention.
Putting common retention strategies across the organization on there and then the case management that I mentioned in my comments, we recently approved an effort to really.
Line organizationally around our case management strategies, and we're investing in new technologies to give us better predictive assessments of patients' needs of discharge. So it's a combination of accelerating and emphasizing existing efforts as well as implementing new ones and it kind of touches all basis, if you will between recruitment.
Retention capacity management and new care models as you know can we can we bring new support staff to support the care teams, whether it be through patient care tax through patient safety attendance in our lives. So we've got a number of initiatives to try to just as I said in my comments, we continue to support the team and it is those pressures I would say in our <unk>.
<unk>.
Our original guidance, we had already factored in.
Some impact of those and we're going to continue to focus on those to try to I think counter some of the market pressures that we're seeing.
Okay. Thank you for the question next caller.
Your next question comes from the line of Jamie Paris with Goldman Sachs. Your line is now open.
Hey, good morning, guys.
Question on volumes.
Last year, the timing of the company believes its pretty similar to what it looked like this year.
Nice acceleration in <unk> last year.
Volumes across the board what are you seeing now in terms of volumes and last year's experience a good proxy for how we should think be thinking about the acceleration into <unk> and then just one quick follow up can you guys give us.
What percent of your managed care contracts are in place for 2023.
So.
February and March.
Which we're obviously.
Post omicron Serge behaved similarly to the holiday surge that occurred at the end of 2020 and on into the first part of 2021.
Again, we had solid non COVID-19 admission growth in February and March as Bill alluded to in the mid single digits. So we're encouraged by that there's nothing to suggest.
That the pattern will be different but again.
We're learning obviously as we go through these patterns and we're hopeful that we won't have any more surges and we'll be able to judge.
Some of these patterns more effectively with respect to our payer contracts, where about 50% contracted for 2023.
And about 30% contracted for 2024 again.
Those capacities in each of those years give us opportunities to adjust some of the inflationary expectations to the realities that we have today.
Thanks for the question next question.
Your next question comes from the line of Sarah James with Barclays. Your line is now open.
Thank you.
<unk> been talking about the majority of the pressure being on temp labor, but I was hoping you could unpack that a little bit are you talking about two third one third temp labor to kind of the longer tail items like wage inflation in bonuses or more exchange split and you guys have a unique position.
In nursing school. So are you seeing any shift in Westfield Sydney are selecting and how is that influencing your strategy.
I don't know Bill if we have the split right in front of me to be able to answer. The first question, but let me let me speak to the second question and we can get back to you on that first question with a little bit more specificity.
If we can.
Yeah.
It's still early for us with the Gateway College of nursing programs and expansions.
Just looking at some of the new schools that we've opened Austin, Texas Nashville, Tennessee.
Parts of South Carolina, the enrollment in a couple of those situations is record level enrollment in nursing program in the Galen College of nursing, So we've seen a really robust.
<unk> enrollment that gives us confidence we also believe.
That we have an opportunity to integrate those students into our organization to support current.
Needs as well as hopefully create synergy as they graduate the program and want to come to work for HCA healthcare so.
Really encouraged by the prospects, but again thats more.
Intermediate run kind of again, although there'll be some short run with nurse external and rotations and so forth that we can utilize hopefully effectively to support current day needs but.
The initial enrollment in a number of these new schools put suggest that there is still a reasonable supply of students who want to go into nursing school.
Maybe circle back.
I think you'll have an answer to your second well no I don't have an answer to share we will have to get back with you I think our overall labor market is a combination of the temporary labor and some of the base wage inflation I can't split of 40 <unk> exactly what we will get back with you on that but it's a combination of both.
Okay.
Yes.
Go ahead, and just to clarify then.
Cool.
Trying to understand like the structural shift that's going on at your Gratulate in years.
One.
Thank you Sir.
<unk> versus <unk>.
If youre seeing I guess, Chuck shelf and there.
Graduating learners.
Okay.
No we're not.
Okay. Thank you for the question Sarah next question.
Your next question comes from the line of Matt Borsch with BMO capital markets. Your line is now open.
Thanks for squeezing me in.
Question off topic for the quarter, but.
There has.
Been following that closely but theres been obviously ongoing.
Dialog around <unk>.
Compliance with the price transparency regulations, and I know theres a lot of complexity to the implementation, but can you just address where from your standpoint, you are with that.
What.
When you would expect to get if not already Q2 full compliance on that.
Yes.
Well I was going to say, we believe we are compliant with the CMS rules, which are tremendously complex and.
In many ways difficult to implement because of the variation that exists from one commercial contract to another and from one market to another so we have.
Through our internal process.
Established.
A program that we believe and CMS is validated in certain circumstances.
Is compliant and we continue to try to refine.
Those.
Presentations.
In ways that again satisfy CMS is evolving interpretation as well as our ability to.
Adjust some of our postings to meet the evolving.
Requirements.
Okay, Yes.
Thank you very much I'll turn it back over to Emma.
Your last question today comes from the line of Ben Hendrix with RBC capital markets. Your line is now open.
Hey, guys. Thank you very much for squeezing me in for a quick follow up just to get to that one third of the guide down that's related to <unk>.
The lower acuity on Covid volume is there any way to give us an idea of the margin differential between a lower acuity patient you've seen through omicron versus COVID-19 patients historically, and then versus a non COVID-19 inpatient admission.
No I think we'd have to follow up offline on that I don't have any specifics in front of me of the specific margins, but but I do know when we have the acuity dropped like we did the revenue does flow through pretty much down to margin, but I don't have exact percentages that I can share with you between these built these various variance that we've seen.
<unk>.
Okay, I think Thats got it down.
Yeah.
That concludes today's question and answer session.
Alright, Thank you everyone.
Yes.
This concludes today's conference call. Thank you for attending you may now disconnect.
Okay.