Q3 2022 HCA Healthcare Inc Earnings Call
Recall, the third quarter of 2021 was the most intense surge we saw with the Delta variant and it's significantly influenced our business, making it difficult to compare.
We believe the second quarter in the third quarter of this year provide us with the most sustained period yet for us to judge our business generally the financial results in the third quarter were in line with our internal expectations.
As compared to the second quarter, our revenue production was consistent with overall volumes payer mix and acuity generally stable. These results were generated with capacity constraints in certain situations caused by ongoing labor market challenges in.
In the quarter, we continued to invest significantly in our workforce, including the opening of one more Galen College of nursing campus.
These investments produced improvement in retention more new hires and reduced contract labor expenses.
Overall operating margins were solid and were a positive reflection on the disciplined execution by our teams.
I want to thank them for their enduring commitment to our patients and our facilities. We continue to be impressed by their resolve and dedication. These attributes were once again put to the test with hurricane Ian Fortunately no patient or employee was harmed during the storm and with the help of our partners all facilities with.
Exceptional one are fully operational.
In the face of disasters weather, a pandemic or a hurricane the people of HCA healthcare continue to shine.
Normally on this call we attempt to provide you with some early perspectives on the upcoming year.
Currently we have reasonable insights into certain aspects of our business such as demand, which we believe will grow around 1% to 2% next year.
We also expect payer mix and acuity to remain stable.
However, with respect to inflation, we are less certain.
We have responded to these unprecedented inflationary and macroeconomic pressures and we will continue to respond with our workforce initiatives and our financial resiliency program, but it is too early to judge the effectiveness of our response as these forces and the related governmental responses continue to evolve in <unk>.
Packed various categories of our costs.
Therefore, we will refrain from providing the typical early outlook for 2023 until we finish our planning process in early January but then we will have seen another three months of performance to assess the overall environment as well as our response to it.
I'll close with this we continue our work to position the company for long term success and sustained stakeholder in shareholder value. Our strategic plan is designed to optimize the networks. We have built over the years by resourcing them with better technology, and analytics, new and innovative care models and Ah ha.
<unk> trained workforce, we believe these efforts position us well to grow and effectively leverage our deployed capital, but more importantly, they position us better to deliver on our mission and provide higher quality care to our patients in a more efficient manner now let me turn the call over to bill. Thank you.
Thank you and good morning, everyone. Let me provide some additional comments on the quarter as Sam mentioned our results in the third quarter were in line with our expectations. Adjusted EBITDA was two nine O 2 billion adjusted EBITDA margin was 19, 4% and diluted earnings per share was $3 93.
<unk>, excluding losses on sale of facilities or <unk> or.
Our same facility volume levels in the third quarter were generally consistent with our second quarter levels or volume trends compared to the prior year reflect the COVID-19 surge we experienced in the prior year. For example, our same facility admissions were down one 5% when compared to the prior year Covid admissions were.
Down almost 60% this quarter compared to third quarter of last year and they represented almost 13% of admissions in Q3 of last year versus 5% of admissions in third quarter of this year.
Non COVID-19 admissions increased six 9% in the quarter as compared to the prior year and were up two 7% year to date.
Acuity and payer mix levels were generally consistent with second quarter levels, as well and led to comparable revenue per equivalent admission between the second and third quarter.
As mentioned in our release, we recorded approximately $266 million in revenue and $125 million of expenses related to the Florida direct attainment program during the quarter approval for this program was received in September from CMS for the annual period ending September 32.
22.
In addition, we estimate the impact of hurricane in which made landfall on the West Coast of Florida on September 28 was approximately $35 million in the quarter.
Our labor costs were generally in line with our expectations, we made market based wage adjustments, our employee workforce and we're able to absorb much of this with a 19% reduction in contract labor as compared to the second quarter.
Supply cost trends remain stable, both sequentially and when compared to the prior year.
Other operating expenses increased sequentially from the second quarter, but this is mostly due to the Florida DPP expenses and some increases in professional fees and utility costs.
We remain focused on our resiliency programs that are we've spoken to in past calls and overall our teams are doing a great job responding to the inflationary market dynamics, while also identifying efficiency opportunities.
Let me transition to discuss cash flow and balance sheet metrics, which continue to be a strength for HCA healthcare.
Our cash flow from operations was $3 2 billion in the quarter and capital spending was 113 billion.
We completed approximately $700 million of share repurchases during the quarter and just under five 5 billion year to date.
Our debt to adjusted EBITDA ratio was just above the low end of our stated leverage range and we had approximately $3 9 billion of available liquidity at the end of the quarter.
Lastly, I will mention in a full year of 2022 guidance remains unchanged. So with that let me turn the call back over to Sam for some quick comments before we go to Q&A, Yes, one thing I wanted to share are the themes that we.
Believe or takeaways from our quarter and sort of the normal business trends that we were judging between the second and third quarter and these themes are as follows.
Again, we think our top line metrics are stable and normal seasonality patterns are beginning to show themselves number two we are making progress on our human resource agenda. Our engagement levels are up and so we're encouraged by that number three inflation is real it's a pressure.
Point.
But we're working our way through it with our resiliency agenda and other initiatives and then fourth is that long term growth prospects. We believe exist across our portfolio. So those themes. We think are important to our judgment of the third quarter as compared to the second quarter and as we look to push forward on into next.
Year and the years thereafter, so with that Frank I'll turn it over to you for questions. Thank you Sam as a reminder, please limit yourself to one question. So that we may get to as many as possible in the queue an opportunity to ask question. Dennis you May now give instructions to those who would like to ask a question.
Thank you if you would like to ask a question simply press Star then the number one on your telephone keypad. Once again, if you'd like to ask a question. Please press star one.
And your first question today comes from the line of a J Rice with credit Suisse. Please go ahead.
Hi, everybody. Thanks for the question.
One maybe technical point are you commenting on hurricane and the impact in the early part of the fourth quarter and then the broader question is around your surgery volumes.
Clearly showed good trends in patient versus a year ago outpatient.
Consistent with what you've shown year to date.
I'm, assuming that some of that relates to what was happening last year with the delta charge, but can you give us some flavor for where you're at inpatient outpatient and are we sort of back to a normal environment. There. It sounds like you think you might see a step up in the fourth quarter. This firm.
Seasonal pattern, but any comments there.
Well a J this is Sam.
I'll, let bill comment on the first question around Hurricane Ian and the fourth quarter. I mean, we had two facility let me backup on hurricane and just to give everybody. Some perspective, we did.
Evacuated I think it was four hospitals in the Tampa St. Pete area. When we believe the store was going to hit further north when the storm.
Ultimately moved south on US we were able to move.
The move out our most critically ill patients out of two hospitals in those two hospitals were hit pretty hard in Charlotte County, one of those hospitals.
Suffered pretty significant damage and we were able to get aspects of it opened already are emergency room is back open one of our med search floors is back open and we think will be fully operational by the end of the year, our teams and West, Florida Division and really North, Florida did an incredible job.
They are responding to a really impactful hurricane so that influenced our results in the third quarter. Our volumes were down obviously in the West, Florida Division and the North, Florida Division, which oversees Orlando.
So we had a lot of preparation and.
Our management in advance of the storm. So it had a modest impact on our volumes with respect to seasonality.
We do believe that normal seasonal patterns are starting to exist and that typically yields more activity in the fourth quarter on outpatient surgery and the third quarter. So we're anticipating that yes.
And we are seeing a normal pattern, we think on other aspects of our business with respect to surgeries car.
Cardiac procedures, and so forth and so that gives us some ability to judge where we are and what initiatives are working I think it's important to understand that our capacity constraints in the third quarter were real and some of that was the typical challenges we've had over the last two and a half years and managing capacity.
But we believe.
That we can continue to open more capacity as we move through the last part of this year and on into next year, but in the quarter. We declined in many instances because we werent able to accommodate the patients approximately one to one 5% of our total admissions.
Because of capacity constraints, so we need to resolve those again the progress that we're making on our HR agenda that we believe is going to help us.
Maintain sufficient capacity to take care of the patients who need our services. So we will continue to push on those agenda and we're encouraged though by the the progress that we're making.
Your next question is from the line of <unk> Chickering with Deutsche Bank. Please go ahead.
Yes. Good morning, guys. Thanks for taking my question here.
Understand that you don't want against our 2020 guidance at this point, but can you help to quantify a couple of things.
Top line growth next year, you talked about a one 2% demand what do you expect the pricing to be any color managed care pricing increases in 'twenty, three which is only going to know on the cost side equation. What are you seeing for full time inflation.
In the fourth quarter. This year I think that evolves next year any color on sort of how new grads coming out of nursing schools.
Decrease is contract labor and then any sort of thoughts around non labor inflation next year that you can give us color on thanks, so much.
Well. This is bill let me try I mean, I think Sam gave you comments on our thinking about top line.
And really the uncertainty remains around inflationary trends and that's what we're looking to take the balance of the year, coupled with our experience of Florida to get some informed judgment as we go into 2023, so it's a bit too early to provide too. Many details. We're pleased with the continuation of the labor agenda, we're pleased with the continuation of <unk>.
Duction to contract Labor and we're just going to have to judge the overall inflationary environment as we go into 2023, we thank our teams and our resiliency efforts are good countermeasures to that but thats what were taken a little bit more time to kind of be able to judge that in and we will give you a full commentary in January I think just to add.
Point to the third quarter.
As compared to the second quarter.
Our salary wages and benefit cost per hour were flat with the second quarter.
That was.
Partially due to.
20% reduction in contract expenses.
And at the same time our normal.
Wage timing for adjustments for our employees happens in the third quarter and so we were able to absorb that.
With with the management of our contract labor expenses.
So that was encouraging that that's the first quarter.
While we have seen.
Stabilization in our labor cost per hour when you mix all components of our our labor costs.
We will continue to.
Hopefully make some strides in that area and in moderate some of the pressures that exist in the labor market as we continue to execute on our recruitment agenda, our retention agenda.
Our capacity management and so forth.
Alright, thanks, so much.
Yes.
Your next question is from the lineup and Heinz with Mizuho Securities. Please go ahead.
Hi, good morning.
On your volume guidance for next year is 1% to 2% I believe that's a little lower than historically.
2% to 3%.
Let's talk about that and maybe what procedures.
Went back why do you feel like it's not going to be a normal year since COVID-19 admissions, while they still exist.
This debate.
I think for this is Sam.
I think the one to two.
Is a little bit lower than maybe historical trends because we will have some COVID-19 admission activity in 'twenty two that we don't think will be as much in 'twenty three so if you normalize for COVID-19.
It's sort of in the zone of what our historical trends have been.
Think outpatient activity will be a little stronger than inpatient activity as it has been historically, but we do see with the strong markets that we have.
And with the investments that we're making in our network.
We should be able to achieve those normal trends.
When you normalize for some of the Covid activity, which we don't anticipate at the same level next year. So that's part of the explanation there is still a little bit of the.
The influence there from Covid.
Okay. Thanks.
Yeah.
Your next question is from the line of Justin Lake with Wolfe Research. Please go ahead.
Thanks wanted to ask a couple of questions Bob too.
92, so first.
Youre update you didn't update guidance I assume that means that.
And it remains intact, just curious given where three quarters through where you think within that guidance range you might end up and then in the third quarter.
Covid admissions were fluctuating pretty good was hoping you might be able to give us a revenue per admission number ex COVID-19. Just so we could see where the growth is doing X that big swing in cobot. Thanks a lot.
Yes, Justin this is bill August on guidance first yes, we are maintaining our previous guidance, which does accommodate a wider range of outcomes.
<unk> typically have at this point in the year, but given the uncertainties in the environment that we've talked about we think it's appropriate at this time, we will just continue to manage our way through through the balance of the year.
Relative to <unk>.
Non COVID-19 revenue for adjusted admission we saw growth in both.
Overall as well.
Managed care and if you bear with me for a minute.
The exact number so yes, we were up about two points on revenue per adjusted admission.
On the non COVID-19 for the quarter.
And and build that would strip out the Florida revenues as well.
Yes, it was.
Yes.
Perfect. Thanks, guys.
Your next question is from the line of Gary Taylor with Cowen. Please go ahead.
Okay.
Hi, good morning.
Two quick ones. The first is when we think about some of the.
Headwinds for 2003 that you've talked about before the Texas out of periods some of the COVID-19 reimbursement et cetera.
Does the Florida DTP.
That constitute a headwind for 2003 or is that a program thats it.
You would expect to continue such that the annual numbers. The same and then my second question is.
I hear your comments on.
Inflation and obviously, we look at the pretty good labor performance this quarter and.
Supply cost per adjusted patient day actually down year over year. So are you signaling that there is a new inflection point in inflation that you are.
Concerned about for 'twenty, three and is that in the labor or is that in other operating so it's utilities insurance and that sort of thing.
Yeah, Hey, Gary This is bill let me address the Florida <unk>, we are not anticipating that to be a headwind next year that is an annual program have received annual approval. So we arent subject to approval, but as you might recall, we recorded some amounts in the fourth quarter of last year and with this amount we would at this point.
Anticipating that program will continue.
And it's material for next year, but we'll continue to evaluate.
And Gary This is Sam on inflation, we're not really signaling anything we're just suggesting that we want to go three more months and understand the progress that we hope to make with our labor agenda.
And some of our other efforts and that will give us hopefully non 10 months' worth of normal run of business again, we haven't had them for three years and in that will help inform where we think the market is where we think our initiatives are and how that's positioning us for 'twenty three and we'll give you more specificity at that particular point in time.
On the different cost categories, and inflationary pressures that exist within each of those.
Yeah.
Okay.
Your next question is from the line of Andrew Mok with UBS. Please go ahead.
Hi, good morning, I understand you're not commenting on 2023 at this point, but can you help us understand the level of nonrecurring benefits in 2020 to bridge to a proper 2022 baseline. Thanks.
Well I mean, we've talked publicly before around the Texas out of period amounts that we recorded earlier in the year that related to last year that was approximately $150 million and then we size the various COVID-19 support payments. We received this year then we don't anticipate to continue around 300.
And so those would be the two areas, we've talked about before and others, There's always pluses and minuses 340, <unk> out there, but those are the two.
I would highlight at this point.
Okay.
Great. Thanks.
Yes.
Your next question is from the line of with Mayo with <unk> Securities. Please go ahead.
Thanks.
I wanted to go back to contract labor for a minute I appreciate.
The disclosure that it declined 19% can you maybe frame that as a percentage of that <unk> in the third quarter. It's also maybe what the exit rate is and it also bill your comment on market based wage adjustments is there any any way to maybe quantify that on an FTE basis or a per hour basis, just to put into perspective.
<unk> the level of inflation that youre seeing and how different that is maybe from the beginning of the year. Thanks.
Yes on the contract labor as a percent of SW B. It was about seven 2% for the quarter and Thats pretty much close to our accelerated as you say for the quarter. So thats good improvement.
Roughly speaking half of that was through continued reduction of the average hourly rate absolute reduction of utilization of contract labor. So we're very pleased pleased with those trends going forward.
Typically where this is Sam we give our.
Wage increases in the third quarter.
There is a little bit market to market, but that's when the lion's share of our.
Increases go through and we've been a little bit active throughout the last year or so.
<unk> targeted market adjustments here and there throughout the year, but we felt we needed to be a little bit more significance.
The composite is.
A little north of 4% if you look at third quarter to the second quarter as far as average hourly rate increases for our employee.
Employed forces.
That's just third quarter, the second quarter, and we were able to absorb that inside of our contract labor.
Expense.
Expense management and yielded.
Again labor cost as a composite flat with the third quarter.
Compared to the second quarter, we still are running with a lot more nurses and contract labor than we did in 2019. So we have room to go. We believe we are obviously have to execute on our human resource agenda to make that happen and we've invested heavily in our recruitment capabilities in <unk>.
Done a wonderful job of improving our recruitment processing and really creating a better applicant experience as well as a better management experience for our management teams out there, we have very intentional retention efforts, including compensation and benefits and flexible scheduling and so forth and all.
Order to improve retention and we're seeing progress there our engagement.
Our results just came in very positive. So we're really encouraged by our abilities to capitalize on.
Modifying our workforce over time.
That can change we understand that but at this particular juncture thats, where we are.
Okay. Thanks.
Your next question is from the line of Ben Hendrix with RBC capital markets. Please go ahead.
Hey, thanks.
One of your competitor your competitor noted.
An increase in clinicians out on quarantine this quarter and clearly the EDA.
And impact on agency labor.
And you seem to have managed obviously agency labor much better and I'm wondering what you saw in terms of staff quarantine rates and this quarter versus prior and how are you able to manage that and if you saw any scheduling delays on the outpatient electives.
Relative.
Changing quarantine rates.
Yes.
Uh huh.
This is Sam thank you for that question.
I don't know of any quarantine issues that we experienced in the third quarter of this year, obviously last year with the Delta variant, we had a number of our staff who were out on quarantine, but this year that has not surfaced as an issue for us across our divisions.
I mean I'm sure there were some people.
People, who experienced some COVID-19.
Our workforce, but it wasn't a significant piece of.
The issue for us.
Okay.
Okay.
Your next question is from the line of Lance Wilkes with Bernstein. Please go ahead.
Yes, Keith could you talk a little bit about.
Right and negotiations with managed care, what progress Youre seeing on that and maybe if you can give some context on the market environment, if you're seeing any smaller hospitals that are terming contracts or in fact turned any contracts.
Well, we've mentioned in the past that we felt the.
Inflationary pressures that we are incurring on our cost structure are being received reasonably well by the payer community and that has in fact happened we closed.
Some additional contracts in the third quarter of this year and they were generally in the target of where we had indicated previously that we expected our new contracts to land and that was somewhere in the mid single digits. So we are making progress with respect to our our renegotiations.
As I mentioned, we were already partially negotiated for 2023.
And we are.
<unk> continued to add to that negotiation.
And contract completion rate.
As we move through the third quarter, so were encouraged by.
Renegotiations that have occurred and we are about 70% contracted for 2023 and about 45% contracted for 2024, and we're seeing elevated.
Escalators by comparison to our historical trends on our commercial contract book as it relates to our competitors there is always pockets.
<unk> of negotiations, where theres terminations and so forth.
We have not had to terminate any contracts in any significant fashion, we've been able to reach.
Agreements that work for us and work for the payers and we will continue to.
I'll hopefully be able to make that happen. We are working with the payers with respect to making sure that our accounts receivables are handled timely and appropriately with respect to denials and so forth and we are.
We are incorporating that into our discussions in a way that we think will be productive for us and hopefully productive for the payers.
Great. Thanks.
Our next question is from the line of Brian <unk> with Jefferies. Please go ahead.
Hey, good morning, guys.
I appreciate you guys, providing some insight into next year's volume expectations, but as we stare down a recession here I mean, how are you thinking about the resilience of the business you guys did fairly well during the last recession, but just some thoughts on that and maybe your thoughts on any differences this time around versus 7% in 2000.
12.
Well I think the most material difference and I mentioned this on the last earning.
Earnings call we had.
Is that the affordable care Act and the exchange community provides a potential safety net that heretofore in previous recession recessionary cycles, we didn't have and.
That for US we believe it's a positive.
As it relates to the other aspects of our business.
Demand.
For health care services tends to lag the rest of the economy and we tend to see.
Demand in the <unk>.
The earlier part of a recessionary cycle sort of hold and that was when people were under Cobra benefits and so forth.
And then it would fade over time, but with the affordable Care Act and the support that the exchanges provide we're not sure how to gauge that at this particular juncture because its a new dynamic, but we believe it to be a favorable dynamic.
That would be where we are at this particular point with <unk>.
Judging the future impact of a recessionary cycle I think our teams are working.
Two with our resiliency agenda and other efforts to.
Anticipate.
Where they can anticipate and make adjustments where they can to put us in the best position to be successful. We think our balance sheet is strong and that should create opportunities for us to invest in certain situations and hopefully gain market share.
You look at our markets as a whole our Florida, Texas Nashville Vegas. These are fairly strong durable economies. We believe it may be a little stronger than the nation as a whole so that can hopefully add some support as we go into a recessionary cycle potentially.
In the future.
Thank you.
Your next question is from the line of Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thanks.
I guess this.
Somewhat of a question about how we should be thinking about.
Volume normalization.
You guys are about 2019, but youre, probably 4% to 7% below where you would have thought if you were to go to 3% every year of 2019 and it looks like you're still talking about that.
Growth rates being below average again next year.
How are you thinking it sounds like Youre, saying, you think that demand in your markets is durable, but it still feels like you're getting farther and farther away from that trend line in the near term. So can you help us frame, how we should be thinking about that.
Labor that is.
The gating factor to getting back there or are there other things and how how long is if that timeline is the right way to think about it I guess play that or not but if it is the way to think about it how are you thinking about what has to happen to get back to that trend line.
Yes.
Let me make a couple of comments I do think there is an imbalance between supply of health care and demand for health care right now primarily because of some of the labor constraints and people are being.
Pushed out they are being held up.
Again transfers are not happening as we had anticipated. So there is some influence to that.
Anecdotally, we've heard from some of our physicians that their clinic practices are starting to recover in ways that maybe earlier in the year they didn't.
Recover so that's encouraging to us at some level obviously.
Obviously during the comparison of 2019 to the day.
Our total joint business migrated.
Now fairly significantly to outpatient activity.
When you look at 2019 on the outpatient side against the third quarter of 2022, we think our outpatient activity has grown five or 6% over that time period, our inpatient activity is down a little bit most of which is explained by the total <unk>.
<unk> movement.
Or so.
We were asking ourselves when you think about it.
That business go away or not so I think when you look at our non COVID-19 admission activity, which year to date has grown 3%.
And grown a little bit more even in the commercial business and has actually sequentially growing third quarter second quarter that gives us.
<unk> that we're moving closer to the historical trend.
Again, we have a little bit of Covid influenced this year, because we had activity in the first quarter and a little bit of activity.
This quarter, but when we look at non COVID-19 by itself.
We're encouraged by what we're seeing ER visits have rebounded and shown a great deal of resiliency. So we.
We think it's migrating closer to the historical trend or not.
But would you say then that the.
The hip knee move out is something that's unusual or I mean, there is always a shift to outpatient.
Yeah.
Yes, there are always has some elements of it I think that was the more pronounced one that we've seen in a long time.
Okay, great. Thanks Youre.
Youre welcome.
Your next question is from the line of Scott Fidel with Stephens. Please go ahead.
Hi, Thanks.
Question just around obviously you another one of the sort of uncertain swing factors for 2023 is just around the public health emergency and.
Whether that gets finally pulled back or not.
Can you just remind us for HCA again, just what the key impacts or benefits that you've been seeing from the phe would be and how that would factor into your thinking for next year. If we do ultimately see the public health emergency go away at clearly return Redetermination and Medicaid is probably the biggest item but.
Just any others as well would be helpful. Opex, yes.
Yes, Scott. This is bill I think the primary was COVID-19 add on to the DRG payments that we've spoken about.
Given the Kogan with volume has kind of moderated that hasnt been material for us. So thats area. There as you said the next area probably more significant.
If it does occur when it does expire what the Medicaid redetermination process will occur by various states.
<unk>.
Evaluated that we've got I think good planning exercise environment. So those would be the two I think consequences are effects in the phe is not material on the <unk> add on at this point and we will prepare ourselves to go through Medicaid Redetermination.
Okay.
Your next question is from the line of Jason <unk> with Citi. Please go ahead.
Okay.
Great. Thanks, and good morning, just just related to fourth quarter. I guess, you know COVID-19 has trended higher so far this year than perhaps your previous expectations, but can you help on how youre thinking about COVID-19 activity for fourth quarter, and if you're thinking that that will accelerate versus this quarter and then.
Also just what your expectations are for flu trends, maybe just some guidance for <unk> and how we should think about what an elevated flu environment would mean for this year, maybe just in context of the current labor backdrop versus historical flu seasons. Thanks.
Yes, I will start with Covid volumes, we don't have specific fourth quarter projections as I said in my comments, we ran about 5% of our admissions in the third quarter. We ran about three in a second so Mike.
Interest is somewhere between those areas might be an area, we see in the fourth quarter on there in terms of flu volumes again, we haven't made any specific projections for flu, but clearly we are paying attention to the flu volumes that are out there and the anticipation that it might be a busy flu season, but I don't think that necessarily changes the trajectory of our.
Fourth quarter compared to what we previously thought.
Yeah.
Your next question is from the line of John Ransom with Raymond James. Please go ahead.
Hey, good morning.
I'm, just thinking about sequential labor trends from <unk> to <unk> I heard you say you gave the 5%.
Update on thank you.
<unk> look flattish if you account for maybe continued reduction in temp labor or if you had a plateau in that 7% ish range that you've talked about.
Yeah.
Well.
I think John it's something we're going to have to see that the contract labor levels. We feel good about not only the progress we've made this year.
We're hovering around 9% in the early part in terms of contract labor percent SW be down to seven we think we can stay in that range for the balance of the year.
And so yes, I think we feel generally positive about the labor environment. We're in too early to call. Specifically about is a flat is there some growth, but I think we think can hold the majority of the contract labor trends some incremental improvement with the utilization as we can continue to see recruitment and retention improve.
So again I think we'll just have to see how it turns out but we're feeling positive about the labor agenda at this point.
Thank you.
Sure.
Your next question is from the line of Joshua Raskin with Nephron Research. Please go ahead.
Alright, Thanks, and good morning, I was wondering bill if you could give us an update on your returns that youre seeing on your capital expenditures, maybe how you're thinking about spend into 2023, and maybe related to capital anything we should read into the lower share repurchases in the last quarter here.
No.
No I don't think Theres anything you should read into that in terms of capital returns we continue to see.
Good projects to deploy capital we continue to believe we will our total capital spending this year will hover around $4 2 billion were in the planning stages for next year, but our anticipated stays materially in that range and I think that is an indication of the opportunities. We continue to see to put capital to work.
What will be a growing demand in both inpatient capacity as well as some outpatient and program development and again I think with the cash profile of HCA, we got a pretty balanced allocation of capital the balance sheets are in great position I think our share repurchase program. This year will hover around $7 billion for the full year. So.
Again, I think it's strong allocation of capital were intended to drive reasonable returns going forward.
And Bill I think you've said in the past something around north of 15% total total return on capex, including maintenance and growth is that is that still the right range and you guys still still generating sort of mid teens returns on those capex projects.
Yes, I mean, obviously each project varies but when I step off to look at our overall return on invested capital. We're in the high teens. So we're encouraged by the net effect of all of our investment decisions.
Thanks, Jim.
Yes.
Your next question is from the line of Jamie <unk> with Goldman Sachs. Please go ahead.
Hey, good morning, guys I wanted to see if you could talk about length of stay it's still quite elevated versus 2019.
What are the key bottlenecks youre facing both on in patient throughput as well as discharged do you think those loans go away over the course of 2023 and what does that mean in terms of your capacity expansion and also managing cost.
Per patient day or per admission basis.
I think one thing this is Sam that's important to understand our length of stay is up over 2019, but our case mix is up even more so when you look at our length of stay on the case mix adjusted basis, it's actually down.
So thats encouraging that we have opportunities.
We have significant opportunities, we believe with better case management protocol.
Better use of technology better partnerships with sub acute providers.
Our own providers in that space to really improve the throughput in our facilities. Just this past week actually we had an update on our case management agenda, and we continue to be encouraged by.
The progress incrementally that they're making and we think as we move on into 2023.
That will continue that is a key part of our capacity management and labor management as well. So it's got a lot of efficiencies connected to it.
But we have significantly increased our case mix over 2019, and thats influenced our length of stay somewhat as well.
But.
I believe our overall program, which is a key ingredient to our resiliency effort is in fact, adding value and we'll continue to add value for our patients as well as for the efficiency and the throughput within our facilities.
Okay.
Your next question is from the line of Calvin Sterne Agee with Jpmorgan. Please go ahead.
Yeah, Hi, Thanks for squeezing me in.
Thank you noted the impact that capacity had on volumes in the quarter. Just curious I guess, one if you think that's going to be relatively consistent going into the fourth quarter.
And then it looks like same store ER visits picked up a bit sequentially.
I'm just curious are you starting to see some more episodic care start to bounce back in that setting and has there been any shift in the payer mix youre seeing there. Thanks.
While we will still have some capacity constraints in the fourth quarter I am hopeful that we.
We will relieve some of it with our recruitment agenda and the fact that we're adding more head count in opening beds.
<unk> also as I just mentioned our case management efforts will create capacity for us as well.
So, but I do anticipate us having some closures here and there with respect to being able to take new patients at certain times. It just unfortunately happens at this at this particular point and it happened pre pandemic, but on a much.
Lower <unk>.
Level than it is today.
As it relates to the ER, we've been impressed by how resilient our emergency room services are.
We continue to work on our operations and our throughput within our emergency room. So we can take care of people as they deserve to be taken care of we've added capacity with our our overall platform of emergency room offerings.
Inside of our hospitals as well as some of our freestanding facilities and that's been important to our outreach in that area. We believe fundamentally that the emergency room is a key ingredient to the health care system overall and it provides a very important 24, seven 365 capability for our communities.
And so we're.
We're still.
Investing as I mentioned in our emergency rooms, and very selective ways in order to make sure that we have the right supply available for what we believe to be growing demand.
Okay.
Your next question is from the line of Stephen Baxter with Wells Fargo. Please go ahead.
Hi, Thanks, I wanted to ask about the mix of outpatient revenue in the quarter. It looks like that stepped down a bit more than you might've expected at a typical year.
What do we think about the key drivers of that I guess what.
Does it look like Q2 might have benefited from some pent up demand and it doesn't sound like it based on your comment, but any impacted fly from outpatient surgeries moving back to inpatient at least maybe compared to earlier in the year. Thank you.
No I don't think Theres anything structurally I think outpatient of revenue last year was busy during the delta.
The Delta Serge.
When inpatient capacity was being managed to constrain our potential we saw more activity in outpatient of second quarter last year, but in terms of sequential trends, we don't see anything structurally different going on.
Q3, and Q2 on an outpatient dreams.
And today's final question comes from the line of Sarah James with Barclays. Please go ahead.
Hey, Thanks for squeezing me in.
Hum.
With two acuity mix in 'twenty two from some of the relativity falling off.
Related to consumer reactions, either COVID-19 or the economy.
And what would that do to.
Revenue per admission.
Normalizing.
And then just a quick clarification earlier, you mentioned that.
24 payer contract.
Labor cost escalators can you clarify is that static or dynamic because I think some of that Keith you're talking about.
Yes, Mike escalators coming in to reflect labor cost fluctuation.
Yeah.
This is Sam I'll answer the last question most of our in flavors are static we do have some contracts that have.
Core doors, or if you want to call that or dynamic components to it with respect to inflation. So most of our 24 will be more of a static inflator that we negotiate on the front end.
And so that's how.
Most of our contracts are structured.
Yes in terms of the case mix and we've seen some growth in our non Covid case mix trends. We've been case mix has been stable for us. So we haven't noticed any remarkable decline in AR and the Cobra business, obviously, COVID-19 ran a higher case mix and our non <unk>.
Benefactor, but when.
When you look at basic trends or the acuity levels have been.
<unk> been stable, mostly between Q3 and Q2. So we're reading that is it is a fairly positive indicator.
Okay. So there's not a falloff of low acuity non COVID-19.
Just from either.
They're worried about the economy or Covid panic.
No no no we're not seeing anything of that trend at this stage.
Thank you.
Thank you.
Yeah.
And at this time there are no further questions. Please continue with any closing remarks.
Dennis Thank you so much for your help today and thanks to everyone for joining us on the call Hope you have a wonderful weekend I'm around this afternoon, if I can answer any additional questions. Thank you very much.
This concludes the HCA healthcare third quarter 2022 earnings conference call. Thank you for your participation you may now disconnect.
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Yeah.