Q2 2023 HCA Healthcare Inc Earnings Call
Good morning, and welcome to every one of today's call with me. This morning, as our CEO Sam Hazan in CFO Bill Rodford, Sam the Bill will provide some prepared remarks, and then we will take questions before I turn the call over to say I'm looking around at everyone that shoe today's call contain any forward looking statements, they're based on management's current expectations.
Numerous risks uncertainties and other factors may cause actual results to differ materially from those that might be expressed today more information on forward looking statements and these factors are listed in today's press release and in our various SEC filings on this morning's call. We may reference measures such as adjusted EBITDA, which is a non-GAAP financial <unk>.
<unk> a table, providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA is included in today's press release. This morning's call is being recorded in a replay of the call will be available later today with that and then I'll turn the call over to Sam.
Good morning, Thank you for joining the call the.
The company produced solid earnings in the second quarter. These results reflected continued strong demand for services unhealthy operating margins across most areas of our business, we maintain the operational momentum that we experienced over the past three quarters we've.
We believe this strength should continue into the second half of the year.
Accordingly, we updated our earnings guidance for 2023 to reflect this outlook.
Against the difficult comparison to the second quarter of 2022 diluted earnings per share increased so $4.29.
Same facility volumes across the company, we're strong admissions grew 2.2% year over year <unk>.
In patients surgery has increased 1.8%.
Same facility equivalent of admissions increased 3.7%. This growth was driven by emergency room visits, which grew 3.7% and outpatient surgeries, which grew 3.3%.
Other outpatient categories also grew including outpatient cardiology procedures with increased 5%.
The growth in volumes was broad based across the company's divisions and diversified within most service lines.
Additionally volumes were supported by strong acuity growth of 1.6% in a favorable payer mix from commercial adjusted admissions growth of 5%.
These factors drove an increase in same facility revenue of 6.3% as compared to the prior year.
And the quarter, we continued to invest in our people and as a result, we saw improvements across virtually all key labour metrics.
Turnover continued to decline for nurses and trend it at an annualized rate of 17%.
Nurse hiring remains strong in the quarter and for the year has increased by 9% as compared to last year.
These positive results help reduce contract labor costs, 20% compared to the second quarter of last year.
During the quarter, we improved available bed capacity.
Instances, where we could not accept patients from other hospitals decline and represented 0.8% of total admissions down from 1.5% in the first quarter.
We believe that significant investments, we are making it our networks our people and our technology agenda will provide us with the necessary resources to improve our services and provide even higher quality care to our patients.
As we look to the future we remain encouraged by both the backdrop of strong demand that we expect in our markets and our overall competitive positioning within them.
HVA healthcare will continue to use its disciplined operating culture to execute our strategic and capital allocation plans.
I want to thank our colleagues for their dedication and there are overall effectiveness.
So let me close with this I want to speak to a recent event that we take very seriously on July 10th we announced that we had recently discovered that a list of certain information with respect to some of our patients was made available by an unknown an unauthorized party on an online forum.
We have confirmed that the list does not include clinical information.
Payment information or other sensitive information like passwords driver's license or social security numbers.
Our forensic investigation is ongoing but this event appears to be a theft from an external storage location that was exclusively use to format E mail messages.
We are in the process of notifying all affected patients in accordance with our legal and regulatory obligations.
Not unexpectedly we have been named as a defendant in multiple class action lawsuits.
This incident has not caused any disruption to our day to day operations, nor do we believe it will materially impact our business or financial results.
HCA healthcare believes the privacy of its patience is a vital part of its mission and remains committed to maintaining the security of their personal information with that I'll turn the call to bill for more details on the quarter's results great. Thank you say good morning, everyone will provide some additional comments on performance for the quarter <unk>.
<unk> net revenue increased 7% to 15.86 billion from $14.82 billion in the prior year period. This will be driven by 4% growth in equivalent emissions and 2.9% increase in revenue per equivalent to Michigan.
We remain pleased with their teams management of operating costs, even with the backdrop as inflation.
Our consolidated adjusted EBITDA margin was 19.3% in the quarter.
During the quarter, we completed our transaction to acquire a majority stake in the Velazco dishwasher and we're now consolidating the operations of this nature.
This reduced our consolidated margins approximately 30 basis points and the quarter we.
We believe this transaction normally mitigates business risks with the envision bankruptcy proceedings, but will also further support alignment between on hospital based physicians and on hospital care teams on improving quality patient satisfaction and deficiencies.
When you consider this transaction and 145 million payers settlement, we recognize last quarter on adjusted EBITDA margins have remained consistent between the first and second quarters.
So let me speak to some cash flow and capital allocation metrics as they remain a key part of our long term growth and value creation strategies for cash flow from operations increased $845 million in the quarter from $1.63 billion in the prior year to 2.4 75 billion this year.
Capital spending was used over $1.2 billion, we paying $164 million in dividends and repurchase 915 million overstock during the quarter.
Our debt to adjusted EBITDA leverage ratio remains near the low end of our stated leverage range of three to four times.
As noted in a released this morning, we are updating our full year 2000 twenty-three guidance as follows we.
We expect revenues to range between $63.25 billion and 64.75 billion.
We expect net income attributable to HCA healthcare to range between $4.9 billion in 525 5 billion.
We expect full year adjusted EBITDA to range between $12.3 billion and 12.8 billion.
We expect full year diluted earnings per share to range between $17.70 an $18.90.
And we expect capital spending to approximate four $7 billion during the year.
So with that I'll turn the call over to Frank and open it up for <unk>.
Thank you Bill as a reminder, please limit yourself to one question so that we might get as many as possible in the queue and opportunity to ask a question Bailey you may know give instruction to those who would like to ask a question.
In order to ask a question. Please press star and a number one on your telephone keypad.
I think our first question comes from.
Right that credit please.
Hi, everybody.
Maybe just I know Sam his prepared remarks that performance was solid across divisions I wondered there's been some discussion this quarter about.
Florida, and Texas had come back early.
Joy strong by them now the rest of the countries rebounding I wonder if you'd comment on that there was also discussion from some of the managed care guys about particularly seeing strength and Medicare Medicare advantage and some pent up demand being on bleach. There I wondered if you would comment on whether you're seeing any of that.
As well.
Alright, Thank you a J O as I mentioned in my comments are volume growth was broad based across our divisions. I think we had 13 out of 16.
Divisions in the company that had admission growth and adjusted admission growth.
We clearly have some divisions that don't perform the same pretty much every every quarter, but it was a fairly broad based across our top line matrix admissions adjusted emissions payer mix improvements and so forth so a fairly consistent performance.
We did have a couple of divisions.
That struggled but one was isolated in Florida. The other one was isolated more out west in the Midwest.
And so for the most part we were really pleased with the overall performance that we had across the geography company and it's interesting I was looking at something yesterday, we have <unk>.
From from an admission standpoint.
Almost <unk>.
72% of our hospitals have greater than 2% admission growth for the year and this includes a little bit of pressure from Covid and the first part.
Of the year from a comparison standpoint, we have a very significant performance from the surgery standpoint, as well we're almost up.
50 per cent of our hospitals have and patient surgery growth above 2%. So.
So really consistent portfolio performance.
It speaks to the strength of our markets I think the competitive positioning of our facilities and then the ongoing network development and physician development.
That we have is part of our core strategy.
Okay, alright, thanks, a lot.
And next question comes from the line.
R B C capital markets.
Hi, Thank you with regard to your updated guidance can you provide some more color on what you're assuming for S. W. B supplies and other operating expense, particularly professional fees through the second half versus what you've seen thus far this year and then anything can call out that would alter typical cadence to the second half. Thanks.
Yeah. This is bill let me start I'll take our updated guidance reflection of what we're reserving observing in the market our year to date performance, which contained.
Just in the growth opportunities I think net net and when I think about the margin profile of the company. During the first half of the second half of the year, we'd expect a.
Margin profile to be slightly better.
In the second half of of the year I'll take off showering wages and benefits as a percent of revenue will run mostly where the running here to day same with supplies, we have seen a little pressure on the professional fees.
And we don't think that same pressure will exists in the balance of the year, but we'll be able to manage through them.
Thank you.
Okay.
The next question comes from Whitney Leerink partners.
Hey, Thanks. Good morning, maybe it's just a question around labor I think I heard to say bill that contract labor improve maybe 20% year over year, then it changed much throughout the quarter, just trying to get a sense of maybe the the exit right and expectations for the the second half of the year. Thanks.
Yeah, I mean, we're pleased with labor environment, We did mentioned our contract labor sound, 20% versus the prior year, it's improved as well sequentially between Q2 and Q1.
Are hiring metrics are up turnover is down and I think that pertains good things for us going through the balance of the year.
We mentioned before our contract labor costs pursuing over S. W. B was under seven I think it was 6.8% in the quarter. So again I think we're pleased with that especially as we go through the summer months silver hires get through kind of their orientation process and that we get into the balance of the year. We would expect some continued improvement.
Okay. Thanks.
The next question comes from Gary came out with Kelly.
<unk>. Thanks for taking a call just two quick ones Ooh Ooh, So I don't I I might've missed it but I know off any kind of run through some of the managed care.
Frank admission.
Just a <unk> a few of those horse and then with that can I just wanted to make sure I understood on me.
Envision joint venture I think we were thinking that was maybe roughly $250 million of revenue, but to all the expenses Lion S. W. M. D line is that where.
Reside down to kind of a roughly EBITDA breakeven.
Yeah, let me start that some of our managed care I think as we mentioned the sandwich in your comments really favorable payer mix, our managed care admissions rough over 4% in the quarter adjusted emissions were 5% I think we mentioned that our prepared comments emergency.
<unk> visits managed care were up 9.8% in the quarter and again good acuity of case mix grow. So we're really pleased with the payer mix that we're seeing in that showed itself in the commercial trends relative to the velazco joint venture.
Your numbers are really close about 70% to 75% of the revenue is NSW b and the rest rest as in other operating and you're right. It's basically a breakeven proposition a little north of $220 million of revenue that we had in the quarter as we consolidated that.
Okay. Thank you.
Mmm.
And your next question will come from Justin.
Marriage.
Thanks question on the pricing of a quarter, so with with stronger acuity strong.
And strong payer mix.
Maybe can you remind us is there anything in the second quarter that I might have slip yet drove the place where I would have expected it to be a little bit better given that given those mixed items and strong commercial pricing and then bill can you just give us what you expect in the back half of the year for volumes with that Okay got it.
Thanks.
Yeah, just enough of specific will call out I mean, obviously, when we do year over year comparisons Covid was still an impact for us we had roughly $40 million a covert support payments last year that you'll have this year are COVID-19 emissions were 3% of total last year roughly one so that's still influencing a little bit.
On the revenue line on our volume projections for the balance of the year I think it will be largely consistent where we've seen thus far our year to date admissions same facility or about 3.3% I would think for the full year, we have around 3% as well for the balance of the year are adjusted emissions year to date her.
Five 6% I would think by the time, we finished full year still 5% to 6% adjusted and emission saw I think the volume Transway would expect in the second half of the year be.
Pretty consistent with what we've seen in the first half of the year.
Thanks.
And the next question will confirm that Peter.
Each my bank.
Good morning, guys fixing my question I might have to look at the implied revenue raised an EBITDA raise it back half of the year I'm trying to understand the flow through of how much revenue wages should flow through into EBITDA upside so.
So how's the tracking certain 2023 versus or pre COVID-19 ears.
Well when I think about that when I look at the race, it's based on where we perform them in our view.
Of of the position going forward, we do expect continued improvement in the labor market, but as I said I think as a percent of revenue we hold.
The margin profile overall for the second half of the year will be slightly better than a module profile. We saw in the first half of the year and that all in all contributed to the guidance Reyes.
Mind, you we've raised our guys almost the mid point of our even our guidance roughly $450 million from where we were return the calendar. So I think all that's reflective and in our considerations right now yeah.
Let me add that.
A point here I think it's a relevant point, obviously, we dealt with a fairly unprecedented labor market over the last three years or so and we do believe is bill indicated earlier. It's moderating. We've also dealt with sort of an unprecedented hospital base physician dynamic at a macro level and if you just take a snapshot.
<unk>, where we are six months into this year versus where we were pre pandemic with neither of these macro forces were in place we've actually increased our margins by comparison to 2019. So I think it's sort of a testament to the ability of the company to adjust operationally to dynamics and continue to move forward with our strap.
<unk> as we've mentioned before we think are competitive positioning has improved compared to where we were pre pandemic. Our market share is is also improved during that time period. So we continue to believe that the company has the wherewithal to adjust to these factors continue to move ahead at a very positive way and generate the results that we will.
All one.
Great. Thanks, so much.
And your next question came from and how <unk> how great.
[noise] Thanks, good morning.
Early but do you have any observations observations on how Medicaid determination uhm, it's impacting your business I know when you think of states, Texas.
It sounds like it's been a little bit messy. So any early observations and can you remind us if you have anything for Medicare determination.
And do you think this process and that's gonna be in a all positive or negative for HCA. Thanks.
Thanks for that it's a good question and you're right. It is still early and we've got.
Pretty organized approach to.
Not only continue to watch the market, but respond to it on there. So we haven't seen any negative or any material impact on this today, we think what we're seeing many of the patient you are receiving determination that there are some opportunity to continue to get them re enrolled in Medicaid some of them are more technical.
<unk>, <unk> and complete an application or or some some other aspect of that so our teams are trying to identify those individuals as best they can assist them and gain a coverage, which remain encouraged by many of the studies that the people who are being re determine off will qualify either for cover.
<unk> and an employer sponsored plan or qualify for coverage in the health insurance market place and so we'll continue to watch that.
Unfolds Butler, but not no impact right now nothing in our guidance is is assumed for Medicaid return determination. We believe over the long run you know there could be some positive transferring this but we'll just have to wait to see how that plays out.
And the next question comes fan, Kevin such Bank Bank of.
Task.
Great. Thanks wanted to maybe make it a little bit more to kind of how you're thinking about the volume growth.
In the back half of the year I guess.
When you think about encouraging relatively similar in the back half of the first half I guess the way we have been thinking about it any way with that.
Last year it felt like it's Covid spike at the beginning of the year, and then became less and less of an issue that volume just started to kind of normal lives in the back half of the year. So that maybe the carpet would be a little bit more difficult uhm as you got into the queue for the grocery might slow. So I just want to think about how you were thinking about you know.
Volume growth and where you are versus maybe longterm trend lines and things like that I <unk>, how do you put that into context about you know.
This is where the growth will continue in the back half of the year.
Cabinets, Sam <unk>, Let me, let me give you this or are the backdrop, we think of what exists for us with respect to volume and this is more of a general commentary I'll, let bill sort of reconcile the back half of the year or two the first half of the year with numbers I I'm not sure I can do that at this particular point in time.
As we said before and we continue to believe this we feel that within our markets. There's unique attribute that are driving solid demand for health care services.
Population growth continues to be strong in Texas, and Florida, and Utah, Nevada, South Carolina pretty much Tennessee's across the board, we're experiencing population growth within our market. The second point is we're investing very significantly in our strategy and our <unk>.
Physician within these communities. So that we can respond to our patient needs put our facilities in the best position to grow and we think that's going to help us sustain market share growth as we move forward. What we're saying is that our overall volume assumptions are supported by acuity acuity has <unk>.
Maintained some of that strategic some of that I think is the dynamics that exists within the markets.
And then the second support mechanism that's in place.
View. This positively is the payer mix dynamic we have seen throughout the first half of the year commercial admissions outpace our total admissions again, we think that's reflective of a strong Ah.
Economy and job up physician that a lot of people have in our communities as well as the exchanges and so we think those will continue on into the last half of this year and and we're optimistic that those will continue on into the future at least in the near term. So you can.
Maybe try to recollect all I'll, just say I mean, when we think about projecting going for we tried to take all of those factors into consideration the Sam mentioned and we're we're seeing here today for mind you. When we originally said our guys. We anticipated one to two per cent admission growth mid single digit outpatient grow so thats still hovered around 2% to 3% equivalent emission growth.
Was our expectation and given the fact that we're seeing north of three per cent admission growth and and you know 5.5% adjusted in Michigan, That's in form and our position next for the balance of the year. So I still think around three is a good number for the full year now based on the first six months of the year where contain.
To see good outpatient revenue growth and so that should support is 5% to 6% equivalent emission expectation for the full year, Yeah, and bill if I could add one thing you know with respect to our investment and our networks. We have at this particular juncture the largest pipeline projects that are.
<unk>, including are outpatient development components, which are very robust as well as other inpatient.
<unk> and facility needs there so our pipeline.
From an organic standpoint as far as capital that we will see you hit the market in.
<unk> 23, 24 early 25 is more robust than we've seen in pretty much recent years.
Alright, great. Thanks.
Okay next question comes from Brian Tankful.
<unk>.
Hey, Good morning Guide Bill you touched on the impact of envision B at 30 basis point dragging I know there's some.
A lot of noise happening with American business partners and stuff.
Physician staff.
Let me think about that drag is their opportunity to bring that up or is that like a more structural thing where you've had to bring in.
To bring in capabilities for physician stomach excellent.
Yeah. This is Sam let me, let me start with that Bill can tolerate here as I mentioned the backdrop in the hospital base physician space has been very difficult.
Over the past few years because of multiple factors and for us in the short run we have had to respond to these difficulties to maintain capacity and service availability and so forth and so we did what we had to do to make sure that our business continued to move forward appropriately and for the most part we've overcome these.
Gushers and been able to grow and we've increased our earnings expectations for the year in the face of some of these challenges as Bill mentioned, we don't anticipate the same level of increases and pressures in the last half of the year, Although we'll have some but it's not going nearly be what we've experienced in the first part we don't think.
We do believe with the Velazco operations, we now have a platform that gives us a potential to respond better to these type of challenges and possibly integrate hospital based physicians into our hospital operations, even more effectively producing better clinical performance efficiency and even.
And growth, we think and so Ah and I'll say this again I said it earlier, yeah, we have a pattern of responding to different kind of operational challenges whatever they happen to be we've we've had labor as I mentioned, we've had physician costs are currently.
We've had uninsured in the past and we've tended to overcome them in the short run sometimes they can create a an individual pressure, but I think the scale of HCA. The resources that we have and the ability to execute allows us to move through some of these pressures over time and get what we want.
<unk>.
Right now.
Your next question comes from Lance Welch Lucky Smith Frankie.
Great. Thanks.
A strategic question for Ya and digital health in in a I'm just interested in the initiatives you're kind of putting in place through the organization at this point, where you're maybe investing on the venture capital side here in longterm. What you see is the opportunity for this whether it's you know potentially reduce compensation or an ability to explore.
<unk> volume.
Cross the footprint.
This is Sam we we we have a growing digital agenda in our company and I'm very excited about what the prospects are for us around that we are investing in a new political system, which we think is going to allow us to move information to.
To the cloud more efficiently in a matter of fact move standard datasets ended a cloud. So that we can then use big data, even more effectively and infused that back into the care process. We will couple are digital agenda with something we're calling care transformation innovation.
And inside of that we believe we have opportunities to improve care processes eliminate a lot of the variation that exists today in our company create.
Better quality and at the same time more efficiencies artificial intelligence, we believe will play a huge part in that it's way early for us to know exactly what that will be and how that will influence our agenda, but we're encouraged about the prospects for it we are partnering with some very sophisticated.
Companies to help us push through this in ways that I think will accelerate our agenda and inform it with more expertise than what we have internally. So we're excited about what this can yield for us as we push into our next lifecycle, if you will and and we will will wait to see what art.
Official intelligence in fact can do but we view it as a positive.
Potential for us in a very significant way.
Great. Thanks.
And the next question comes from and your Mark the T B S.
Hi, Good morning, I, just wanted to follow up on the pricing discussion maybe from a different angle revenue per outpatient equivalent it looked like it was a down about one per cent and a quarter, which seems to be weighing on strong inpatient pricing up 6% can you help us understand the pricing of mixed trends across your outpatient platform that are causing that unit.
Revenue metric to blend down this year. Thanks.
Well I say, we're pleased with the outpatient growth that we're seeing if you look at the overall outpatient growth and we will have its.
Expectations was mid single digits, well north of that in the quarter on a year to date basis you know.
There's always a little bit of a mix issue that occurs our emergency rooms volume was up 3.7%, which we're a law degree outpatient or outpatient surgical growth was up 3.3% in the quarter. So I think those are really good stats on the on the outpatient revenue per unit.
There's always a blend between surgical emergency room, a diagnostic but I would say overall very pleased with the outpatient overall.
Growth that we are soon.
Yeah, and and they will just yeah. The second quarter overall outpatient revenue growth was actually up over the first quarter. So we are seeing some accelerates there's a lot of moving parts of the bill just alluded to the outpatient revenue between physician clinics urgent care all the way up to.
Outpatient cardiology procedures, which tend to be our highest reimburse type of procedures and so the mix of that can influence the outpatient we tend to look at it in the aggregate and for the most part are aggregate revenue growth has been stronger in the second quarter than it was in the first quarter and then within a sort of the pricing.
Elements.
We continue to get the targeted price increases that we won and both are inpatient and outpatient businesses. So it's more to build points sort of the mix and the mixture of all of the different components in a way that.
Has produced solid growth for us.
Alright, thank you.
The next question comes from Calvin stomach like J P. Morgan.
Hi, Good morning, I wanted to ask about the commercial rates cycle last court. He said you guys about two thirds of the way through 2024 and about a quarter of the way through 2025 and.
Can you give us an update on the progress and how those repercussions are evolving.
Yeah.
Yeah.
Evolving pretty consistent as we just mentioned were continue to see rates and kind of that mid single digit level.
Far as contracted for 24, I think we're a little north of 70% for 24, now and I think our efforts continue.
Think our relationships with our major payers continued to be strong and we're pleased with the progress we're making in that area.
And the next question comes from Scott Stevens.
Alright, Thanks, I'm interested just as against the backdrop, where the managed care payers are seen the higher medical cost trends. This year, whether you are seeing any any changes in behaviors when interfacing with them from a prior authorization or utilization management type perspective or are things pretty consist.
There and then just a quick follow up just just on the slight raised in the Capex is is that just related to the the general broad based investments that day I'm just talked about or are there any specific projects that you would cite around the update to the Capex Skype. Thanks.
Yeah make sure I take both of those things because we may we mentioned in the past.
As you think about authorization and medical necessity reviews.
Those activities have picked up again as you know during the Covid period of time, those at east a little bit, but we still see a lot of friction. If you will as you go through that effort, we work with our payers to try to resolve those appropriately make sure that we defend our positions were necessary, but there is a level of activity.
Both us and the payers have to devote to try to smooth through that process, but we tend to be able to work our way through it on the Capex I'll take it simply reflective of the opportunities we see in the market to continue to deploy capital for growth fortunate we continue to see really strong cash flow.
To be able to support that Capex and again I think it's a reflective of the growth opportunities we see in the market.
And Bill as we mentioned on the last call. We have acquired some land for future expansion in some of these fast growing markets that we serve and that's put some upward pressure on our capital spending, but we believe those are long term good decisions for us.
The next question comes from Jason Castro I Love it.
Yeah, great. Thanks for taking my question I, just wanted to ask a little bit more on the labor front, you know I'm thinking about all the efforts and programs you put in place contributing to the better turnover in hiring trends I guess it is there a way to help frame what anything you're in.
As it relates to these efforts you know where do you like to see some of the outputs on turnover attention kind of move too or any other thoughts on the labor front and instructions there. Thanks.
Yes. This is Sam. Thank you for that question as I mentioned, we have invested very heavily in our people agenda over the past few years, we've increased our capacity within our recruiting function and a recruiting efforts are yielding strong hiring and we believe that will continue.
On into the latter half of the year, our retention efforts with respect to responding to our employees need so that they.
Have the necessary resources and tools to be effective in their day to day jobs, we're getting better at that that's helping turnover turnover is approaching pre pandemic levels, especially in the nursing your area.
A few points.
Above pre pandemic, but if you annualize the second quarter turnover it would suggest less than that so we're encouraged by that and we do believe we have opportunities to continue improvement in that area with contract labor as Bill mentioned, we expect to see improvements.
As we move through the last half of the year and then I'm very excited about our workforce development initiatives, we continue to invest.
Heavily in Gaelic college of nursing they are expanding.
Each quarter, it seems into new markets, and establishing new relationships and new opportunities for people and for our company and there were also investing in our what we're calling our centers for clinical advanced mode, which is our ongoing clinical education for people. So that they can upscale their their capabilities and confidence seeds and put them in a position.
<unk> to either deliver better care or grow in their own individual career. So what ending are we and we're in the middle innings and some of the areas and so we will wait to see how the latter half of the of the year plays out but all in all.
I think tremendous results were.
We're very competitive we believed across the organization with our compensation and benefit programs and and as I mentioned earlier, we have been able to navigate through these.
These difficult periods and maintain margins I think our labor costs again, if you just look at 2019 as a proxy or labor costs in 2023 or below as a percent of revenue 2019, and again that's in a very in the face of a very difficult labor market.
Great. Thank you.
The next question comes from Jamie Paris.
Hey, Thank you. Good morning can you comment on seasonality expectations for the third quarter anything beyond normal seasonality from a headwind are tailwind perspective that we should be thinking about and I think normally revenues down slightly in EBITDA.
<unk> died down maybe mid single digits the high single digits.
Is that the right way to be thinking about the third quarter and anything in July that's informing that and then I think there was an earlier question on backlog at May not have been fully entitled over here about on that as well. Thank you.
We mentioned.
At the end of.
The fourth quarter that we were starting to see normal seasonality patterns materialize and we've seen that so far through the first half of this year and we think that will continue on into.
The second half of this year the third quarter is not as strong as the fourth quarter. The fourth quarter is always the strongest quarter of the year for us given the outpatient activity and deductibles and so forth and so we think the third and fourth quarter will be similar in patterns to pre pandemic seasonality.
And that's what's reflected in our guidance.
And the next question will confirm the Stevens allocate your line is open.
Oh, great. Thanks, good morning, everybody.
So I guess, that's a follow up to just some of these prior questions on the labor and commercial rate updates and there was some conjecture for HCA that the company didn't have quite as many commercial payer contracts up for renewal for fiscal twenty-three to capture some better rates for elevated labor costs, which had more coming up for renewal in 24, you know that the noise levels kind of died down.
Somewhat ear and may twenty-three on overall labor cause pressure versus certainly your purse is 12 15 months ago. I guess the question is do you still have confidence that potentially capture.
That's why it's on the better than average commercial rate updates for fiscal 24 Labour pressure, maybe still being the key variable within those discussions or those can be a little bit tougher now given that some of the pressure of some side I just want to get your kind of way to stars around that thanks.
Well. This is Sam Bill indicated that were 70% contracted out 24 around are targeted.
Escalation.
Objective.
Labor costs as you mentioned are moderating some yes, they're still inflationary pressures underneath it.
As as one would expect that we add physician cost pressures with respect to pro fees and you know our belief is.
That will have to be paid for by someone and so that will become a factor in our thinking and our justification for appropriate price increases. So our costs are not just one category. We have multiple categories. As you can see on the income statement and all of that factors into our considerations when we're negotiating.
And the next question will come from Joshua Raskin with my friend Research.
Hi, Thanks, Sir good morning were there any meaningful differences in the payer mix on the outpatient side, you know an obvious focus on Medicare and specifically Medicare advantage volumes and are you seeing anything in the Medicare market that would support higher levels of demand and we saw last quarter or the quarter before anything that you feel like it's a blessing.
Yeah, Joshua and I look at Canada admissions versus adjusted emissions between the pair categories are comparable you know our Medicare adjusted emissions were up 5% are managed care adjusted emissions were up 5% as we mentioned earlier.
Fueled by emergency room grow so so I think the trends are pretty comparable among among the pair categories were and that's strengthening payer mix. That's I think positive dreams for us so nothing else underneath the outpatient area that I would distinguish other than we continue to see good <unk>.
Or shall EUR traffic.
Our commercial outpatient was Ah.
Pushing close to 4% as well so again I think they're pretty comparable.
The the general trends, we're seeing them I would say bill just put a little bit of color on the outpatient or commercial outpatient revenue growth is clearly outpacing our Medicare outpatient revenue growth some of the adjusted admissions are influenced by some of the.
The calculations, if you will but we are seeing a really solid commercial outpatient revenue growth again influenced by the E. R influenced spot surgeries, which are represented.
Roughly 50 to 55 per cent commercial so good growth there and all of that yields.
Solid commercial revenue growth.
Alright. Thanks.
No further questions at this time Mister Frank Martin I turn the call back.
Thank you so much for your help today, thanks, everyone for joining our call I Hope I Hope you have a wonderful rest of your week and I'm around this afternoon. If we can answer any questions you might have thank.
Thank you very much have a great day.
This concludes today's conference call you may now disconnect.
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