Q3 2024 HCA Healthcare Inc Earnings Call
Unknown Executive: Hello, welcome to the HCA Healthcare third quarter 2024 earnings conference. Today's call is being At this time, for opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Please go ahead.
Hello, and welcome to the HCA healthcare third quarter 2024 earnings Conference call. Today's call is being recorded at this time for opening remarks, and introductions I would like to turn the call over to the Vice President of Investor Relations. Mr. Frank Morgan. Please go ahead Sir.
Frank Morgan: Good morning and welcome to everyone on today's call. With me this morning is our CEO Sam Hazen and CFO Mike Marks.
Frank Morgan: Good morning, and welcome to everyone on today's call with me. This morning is our CEO, Sam Hazen and CFO, Mike box, Sam and Mike will provide some prepared remarks, and then we will take questions, but before I turn the call over to Sam Let me remind everyone that should today's call contain any forward looking statements that are based on management's current expectations.
Frank Morgan: Sam and Mike will provide some prepared remarks and then we'll take questions.
Frank Morgan: Before I turn the call over to Sam, let me remind everyone that should 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 files.
Frank Morgan: Numerous risks uncertainties and other factors may cause actual results to differ materially.
Frank Morgan: 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.
Frank Morgan: On this morning's call, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA Shareholder Inc. is included in today's review.
Frank Morgan: On this morning's call we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure a table, providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA shareholders is included in today's release.
Frank Morgan: This morning's call is being recorded and a replay of the call will be available later today.
Speaker Change: Today's call is being recorded and a replay of the call will be available later today with that I'll now turn the call over to Sam.
Sam Hazen: With that, I'll now turn the call over to Sam. All right, good morning to everybody. Before we get to the financial results for the quarter, I want to share the heroic efforts by our people as they recently responded to, in less than two weeks, two major hurricanes that impacted some of our communities and facilities. Over the years, HCA Healthcare has developed industry-leading enterprise capabilities to support our hospitals during disasters. We have used learnings from past experiences, conducted extensive training, and built strong partnerships with key vendors to create a systematic approach to preparing for and responding to major events like hurricanes.
Sam Hazen: Good morning to everybody before we get to the financial results for the quarter I want to share the heroic efforts of our people as they recently responded to in less than two weeks two major hurricanes that impacted some of our communities and facilities.
Speaker Change: Over the years HCA healthcare.
Speaker Change: <unk> industry, leading enterprise capabilities to support our hospitals during disasters.
Have use learnings from past experiences conducted extensive training and built strong partnerships with key vendors to create a systematic approach to preparing for and responding to major events like Hurricanes. These resources were put to use for our teams with outstanding results over these past.
Sam Hazen: These resources were put to use by our teams with outstanding results over these past few weeks as enough hospitals were in the path of these storms. But what's even more impressive is the unwavering dedication, remarkable bravery, and outstanding leadership demonstrated by the people in our company who worked throughout these storms, and in many instances, multiple days without rest to ensure our patients and colleagues were safe. Leveraging corporate capabilities effectively to support committed people in our facilities is fundamentally our formula for success. We call it the HCA way. It works well in normal times, it worked well in the pandemic, and now it has proven itself again in each hurricane.
Speaker Change: A few weeks as hospitals were in the path of these storms, but what's even more impressive is the unwavering dedication remarkable bravery and outstanding leadership demonstrated by the people in our company who worked throughout these storms and in many instances multiple days without risk.
Speaker Change: To ensure our patients and colleagues were safe.
Speaker Change: Leveraging corporate capabilities effectively to support committed people in our facilities is fundamentally our formula for success, we call. It the HCA way it works well in normal times it worked well in the pandemic and now it has proven itself again in these hurricanes.
Sam Hazen: A few of our communities were significantly impacted by these storms. This is especially evident in the Asheville area and parts of Tampa St. Pete. Given the basic infrastructure role we play in our communities and the duty we have to be there for them in each situation, we have not veered from doing the right thing. I'm humbled by the determination and teamwork of HCA people. I'm honored to be associated with them and I'm proud of how they continually show up in difficult circumstances and deliver tremendously positive outcomes for our patients, each other, and their communities. They truly demonstrate that they are, above all else, committed to the care and improvement of human life and I want to thank them for what they do to make this company great.
Speaker Change: A few of our communities were significantly impacted by these storms. This is especially evident in the Asheville area and parts of Tampa St. Pete.
Speaker Change: Given the basic infrastructure role, we play in our communities and the duty we have to be there for them in these situations, we have not veered from doing the right thing.
Speaker Change: I am humbled by the determination and team work of HCA people.
Speaker Change: <unk> to be associated with them and I am proud of how they continually show up in difficult circumstances, and deliver tremendously positive outcomes for our patients each other and their communities. They truly demonstrate that they are above all else committed to the care and improvement of human life and <unk>.
Speaker Change: I want to thank them for what they do to make this company great.
Sam Hazen: Now to the quarter's results. Like the first half of the year, the results for the third quarter were strong and reflected solid revenue growth and margin improvement. Diluted earnings per share as adjusted increased 25% to $4.90. These results include an estimated impact of $0.15 per share from lost revenue and additional expenses caused by Hurricane Ida. While the rest of our hospitals and outpatient facilities in the path of the storms are fully operational, we have two hospitals that continue to deal with the after effects of the storm. First, HCA Mission Hospital, which is the only hospital in the Asheville area, was affected by Hurricane Helene, and it has continued to operate and provide high-quality patient care even with significant city infrastructure in disrepair, and that's primarily water.
Speaker Change: Now to the quarter's results I'd like to first half of the year. The results for the third quarter were strong and reflected solid revenue growth and margin improvement.
Speaker Change: Diluted earnings per share as adjusted increased 25% to $4 90.
Speaker Change: These results include an estimated impact of <unk> 15 per share from lost revenue and additional expenses caused by her.
Speaker Change: While the rest of our hospitals and outpatient facilities and the path of the storms are fully operational we have two hospitals that continue to deal with the after effects of the storms.
Speaker Change: First HCA mission Hospital, which is the only hospital in the Asheville area was affected by Hurricane Helene.
Speaker Change: It has continued to operate and provide high quality patient care, even with significant city infrastructure in disrepair and Thats primarily water.
Sam Hazen: As a consequence of this storm, we anticipate incurring significant expenses and lost revenue related to these issues throughout the remainder of the year. We also expect some continued, but we think manageable, impact into 2025. As it pertains to Hurricane Milton, which hit Florida in October, our HCA Florida-Largo Hospital was flooded. It is currently closed because of damage to the building's infrastructure. We anticipate significant repair expenses will be incurred at this hospital during the fourth quarter, in addition to losing revenue. Our teams, however, are working around the clock to reopen it in late December. HCA Healthcare has numerous examples from past hurricanes where our hospitals have recovered from major storms and become more productive than pre-storm performance.
Speaker Change: As a consequence of this storm, we anticipate incurring significant expenses and lost revenue related to these issues throughout the remainder of the year. We also expect some continued but we think manageable impact into 2025.
Speaker Change: As it pertains to Hurricane Milton, which hit Florida in October our HCA, Florida Largo House Hospital was flooded. It is currently closed because of damage to the buildings infrastructure.
Speaker Change: We anticipate significant repair expenses will be incurred at this hospital during the fourth quarter in.
Speaker Change: In addition to losing revenue our teams however are working around the clock to reopen it in late December.
Speaker Change: HCA healthcare has numerous examples from past Hurricanes, where are our hospitals have recovered from major storms and become more productive than pre storm performance.
Sam Hazen: I believe we can produce similar results with these two hospitals in time as we move beyond the after effects of these most recent storms. During the quarter, volume growth across our markets and service lines, while modestly affected by Hurricane Helene, was strong and broad-based. On a same facilities basis, inpatient admissions grew 4.5% as compared to the prior year. Adjusted admissions also grew 4.5%. Emergency room visits increased 4.6%. Inpatient surgeries were up 1.6%. Other volume categories including cardiac procedures, inpatient rehab admissions, and obstetric volumes had solid growth. Outpatient surgery was the only major service category that declined.
Speaker Change: I'll leave we can produce similar results with these two hospitals in time as we move beyond the after effects of these most recent storms.
Speaker Change: During the quarter volume growth across our markets and service lines, while modestly affected by Hurricane Helane was strong and broad base.
Speaker Change: On a same facility basis inpatient admissions grew four 5% as compared to the prior year adjusted.
Speaker Change: Admissions also grew four 5%.
Speaker Change: Emergency room visits increased four 6%.
Speaker Change: In patient surgeries were up one 6%.
Speaker Change: Other volume categories, including cardiac procedures and patient rehab admissions and obstetric volumes had solid growth.
Speaker Change: Outpatient surgery was the only major service category that decline it.
Sam Hazen: It was down two percent. However, the revenue in this service line increased 5% because of acuity and payer mix. payer mix across other service lines and acuity within inpatient services improved in the quarter. These factors help generate same facility's revenue growth of 7.1%. We continue to believe the investments we are making in our network development agenda drive value for our patients and the organization. By the end of this year, we expect to have added approximately 600 inpatient beds and 100 new outpatient facilities, bringing our total sites of care to over 2,600. Currently, the company has around $6 billion of projects under development.
Speaker Change: It was down 2% sour.
Speaker Change: However, the revenue in this service line increased 5% because of acuity and payer mix.
Speaker Change: Payer mix across other service lines and acuity within inpatient services improved in the quarter.
These factors helped generate same facilities revenue growth of seven 1%.
Speaker Change: We continue to believe the investments we are making in our network development agenda drive value for our patients and the organization.
Speaker Change: By the end of this year, we expect to have added approximately 600 inpatient beds and 100, new outpatient facilities, bringing our total sites of care to over 26 hundreds.
Speaker Change: Currently the company has around $6 billion of projects under development These investments, which should come online over the next few years will add more capacity and create greater access across our networks, allowing us to meet the growing demand for health care services, we anticipate and are more.
Sam Hazen: These investments, which should come online over the next few years, will add more capacity and create greater access across our networks, allowing us to meet the growing demand for healthcare services we anticipate in our market.
Speaker Change: <unk>.
Sam Hazen: Before I turn the call to Mike, I want to close with a few early thoughts on 2025. Our planning process, which includes continuing assessments of the hurricane-related impact, has not been completed, so I will caveat my comments with the fact that it is always difficult to predict with certainty the various components of our business, and these preliminary views may change. With respect to volume growth, we went into this year believing that growth would exceed our long-term demand assumptions of 2% to 3% and throughout the year as we look to 2025, we assume volume growth will continue at elevated levels in the range of 3% to 4% for the year.
Speaker Change: Before I turn the call to Mike I want to close with a few early thoughts on 2025.
Speaker Change: Our planning process, which includes continuing assessments of the hurricane related impact has not been completed so I'll caveat my comments with the fact that it is always difficult to predict with certainty the various components of our business in these preliminary views may change.
Speaker Change: With respect to volume.
Speaker Change: We went into this year, believing that growth would exceed our long term demand assumptions of 2% to 3% and throughout the year as.
Speaker Change: As we look to 2025, we assumed volume growth will continue at elevated levels.
Speaker Change: The range of 3% to 4% for the year.
Sam Hazen: With respect to our earnings outlook for next year, we believe that the strong volume growth assumption, coupled with an anticipated mostly stable operating environment, should generate earnings growth near or slightly above the upper end of our long-term target ranges for both diluted earnings per share and adjusted EBITDA. As usual, in January, we will provide you with our guidance for 2025.
Speaker Change: With respect to our earnings outlook for next year.
Speaker Change: The strong volume growth assumption, coupled with an anticipated mostly stable operating environment should generate earnings growth near or slightly above the upper end of our long term target ranges for both diluted earnings per share and adjusted EBITDA.
Speaker Change: As usual in January we will provide you with our guidance for 2025 and with that I'll turn the call to Mike.
Frank Morgan: And with that, I'll turn the call to Mike.
Mike Marks: Thank you, Sam. And good morning, everyone. We were pleased with the third quarter. We produced good volume growth and margins, especially when considering the impact of the hurricane.
Thank you Sam and good morning, everyone. We are pleased with the third quarter, we produced good volume growth and margins, especially when considering the impacts of the hurricanes.
Mike Marks: I'll start with a few details of the two storms that impacted us recently. Hurricane Helene made landfall in the Big Bend area of Florida on September 26 and impacted our communities and operations in Florida, Georgia, and North Carolina. We had 29 hospitals in the path of the storm which had to prepare and respond. And financially, we've seen a loss of revenue and incurred additional expenses during the preparation during storm and the response phase. As an example, we are expecting to spend at least $13 million on water supply to Mission Hospital and our other healthcare facilities related to Hurricane Helene through the month of October.
Mike Box: I will start with a few details of the two storms that impacted us recent.
Mike Box: Hurricane Helane made landfall in the Big Bend area of Florida on September 26 and impacted.
Mike Box: Our communities and operations in Florida, Georgia, and North Carolina.
Mike Box: We had 29 hospitals in the path of the storm, which had to prepare and respond.
Mike Box: And financially we have seen a loss of revenue and incurred additional expenses during the preparation during storm and the response phases.
As an example, we are expecting to spend at least $13 million on water supply to mission hospital and our other health care facilities related to hurricane Helene through the month of October and.
Mike Marks: and City Potable Water Supply is not projected to be re-established at Mission Hospital for several more weeks. As Sam noted, we estimate that Hurricane Eileen impacted the third quarter by $50 million or 15 cents per diluted share.
Mike Box: And city potable water supply is not projected to be reestablished admission hospital for several more weeks.
Speaker Change: As Sam noted, we estimate that hurricane Aline impacted the third quarter by $50 million or <unk> 15 per diluted share.
Mike Marks: Hurricane Milton hit the west coast of Florida just south of Sarasota on October 9th and impacted a large portion of the Florida peninsula. We had over 34 hospitals in the path of this storm that had to prepare and respond, including HCA Florida Largo Hospital, which is still under repair. As we think about the ongoing impacts of both major hurricanes, we anticipate additional expenses and loss of revenue will be approximately $200 million to $300 million, or $0.60 to $0.90 per diluted share, during the fourth quarter of 2024. This impact relates primarily to our hospitals in North Carolina and our Largo Hospital in Florida.
Speaker Change: Hurricane Milton hit the West Coast of Florida, just south of Sarasota on October nine and.
Speaker Change: And impacted large a large portion of the Florida Peninsula.
Speaker Change: We had over 34 hospitals in the path of this storm and that had to prepare and respond.
Speaker Change: Including HCA, Florida, Largo Hospital, which is still under repair.
Speaker Change: As we think about the ongoing impacts of both major Hurricanes, we anticipate additional expenses and it will also revenue will be approximately $200 million to $300 million.
Or 60 to 90 per diluted share during the fourth quarter of 2024.
This impact relates primarily to our hospitals in North Carolina, and our Largo Hospital in Florida.
Mike Marks: These estimates do not include any insurance recoveries the company may receive in the future.
Speaker Change: These estimates do not include any insurance recoveries the company may receive in the future.
Mike Marks: I would like to add my appreciation to our care teams and all of the HCA colleagues who provided support during these storms. And my concern and prayers for the communities and the people impacted as we collectively recover and respond. It is a true honor to work with our colleagues and our physicians and to serve these communities.
I would like to add my appreciation to our care teams and all of the HCA colleagues, who provided support during these storms and my concern and prayers for the communities and the people impacted as we collectively recover and respond.
Speaker Change: It is a true honor to work with our colleagues and our physicians and to serve these communities.
Mike Marks: Now let me transition to our 2024 guidance. As noted in our release, we reaffirmed our 2024 estimated guidance range. Giving the ongoing impact of the two major hurricanes on the remainder of the year, we estimate that the results are likely to be in the lower half of the ranges provided.
Now, let me transition to our 2024 guidance as noted in our release, we reaffirmed our 2020 for estimated guidance ranges.
Speaker Change: Given the ongoing impact of the two major hurricanes on the remainder of the year, we estimate that the results are likely to be in the lower half of the ranges provided.
Mike Marks: Now to the results for the quarter. SAM reviewed our strong volumes, which resulted in revenue growth of 7.9% in the quarter over prior year. So I will focus on operating costs. Adjusted EBITDA margin in the quarter improved 90 basis points over prior year. Labor costs as a percent of revenue improved 160 basis points from the prior year. We continue to see good results on contract labor, which improved 18% from the prior year and represented 4.6% of total labor. Supply cost is a percent of revenue, increased 30 basis points over the prior year, but we're relatively consistent sequentially.
Speaker Change: Now to the results for the quarter same reviewed our strong volumes, which resulted in revenue growth of seven 9% in the quarter over prior year. So I will focus on operating costs in the quarter.
Adjusted EBITDA margin in the quarter improved 90 basis points over prior year.
Speaker Change: Labor cost as a percent of revenue improved 160 basis points from the prior year. We continue to see good results from contract labor, which improved 18% from the prior year and represented four 6% of total labor cost.
Speaker Change: Supply cost as a percent of revenue increased 30 basis points over the prior year, but were relatively consistent sequentially.
Mike Marks: Other operating costs as a percent of revenue increased 40 basis points over the prior year. Professional fee cost growth over prior year moderated to 10% and was flat sequentially to the second quarter. We had expense growth associated with Medicaid supplemental payment programs, and we had increased repair and maintenance costs related to hurricane loss. Medicaid Supplemental Payment Programs provided a modest benefit to our third quarter 24 overall.
Speaker Change: Other operating cost as a percent of revenue increased 40 basis points over the prior year professional fee costs growth over prior year moderated to 10% and was flat sequentially to the second quarter.
We had expense growth associated with Medicaid supplemental payment programs, and we had increased repair and maintenance costs related to hurricane Helene.
Speaker Change: Medicaid supplemental payment programs provided a modest benefit to our third quarter 2000 and for overall results.
Mike Marks: So a lot of movement parts in the quarter, but this was a solid quarter with over 13% growth in adjusted EBITDA driven by strong core operating performance across our portfolio of markets.
Speaker Change: So a lot of moving parts in the quarter, but this was a solid quarter with over 13% growth in adjusted EBITDA driven by strong core operating performance across our portfolio of markets.
Mike Marks: Moving to capital allocation. We continue to deploy a balanced strategy of allocating capital for long term value creation. Cash flow from operations was $3.5 billion in the quarter. Capital expenditures totaled $1.19 billion, and we repurchased $1.79 billion of our outstanding shares during the quarter. We also paid $169 million in dividends. Our debt to adjusted EBITDA leverage remains at the low end of our stated guidance range and we believe we are well positioned from a balance sheet perspective. Finally, as noted in our release, we now estimate capital expenditures for 2024 to be approximately $5 billion.
Speaker Change: Moving to capital allocation, we continue to deploy a balanced strategy of allocating capital for long term value creation.
Speaker Change: Cash flow from operations was $3 5 billion in the quarter capital expenditures totaled $1, one 9 billion and we repurchased $1 $79 billion of our outstanding shares during the quarter. We also paid $169 million in dividends.
Speaker Change: Our debt to adjusted EBITDA leverage remains at the low end of our stated guidance range and we believe we are well positioned from a balance sheet perspective.
Speaker Change: Finally as noted in our release, we now estimate capital expenditures for 2024 to be approximately $5 billion.
Frank Morgan: This lower estimate is due primarily to the timing of capital projects, and we continue to see good opportunities for investing in our With that, Frank, I will turn over the call to you for questions.
This lower estimate is due primarily to the timing of capital projects and we continue to see good opportunities for investing in our business with that Frank I'll turn over the call to you for questions.
Frank Morgan: Thank you, Mike.
Unknown Executive: As a reminder, please limit yourself to one question, so we might have as many as possible in the queue an opportunity to ask a question. Jeremy, you may now give instructions to those who would like to ask questions. Perfect. Thank you so much. If you'd like to ask a question today, please press star followed by the number one on your. If you would like to remove yourself from the queue, again, just press...
Frank Morgan: Thank you Mike as a reminder, please limit yourself to one question is safety.
Speaker Change: As possible in the queue an opportunity to ask the question. Jeremy you May now give instructions to those who like to ask a question.
Jeremy: Perfect. Thank you. So much you would like to ask a question today. Please press star followed by the number one on your telephone keypad.
Jeremy: To limit yourself from the queue again, just press star one.
A.J. Rice: All right, first question comes from the line of A.J. Rice from Credit Suisse. Please go ahead. Thanks. Hi, everybody. Just maybe one point of clarification and then a question. So, on the outlook comments for 25, if we take the midpoint of your 24 guidance, 14 billion, and take 250 to 350 million of hurricane impact off of that, and then grow at the high end of your 4 to 6% range, we'd come up with something like 14.6 billion for 25. And then we layer in hurricane recovery on top of that. I just want to make sure we're all walking away with the right framework.
Speaker Change: First question comes from the line of AJ Rice from Credit Suisse. Please go ahead.
Speaker Change: Thank you everybody.
Speaker Change: Just maybe one point of clarification.
AJ Rice: A clarification and then a question so on the outlook comments for 2005.
AJ Rice: Take the midpoint of your 24 guidance of $14 billion in take.
$250 million to $350 million of hurricane impact off of that and then grow at the high end of your 4% to 6% range, we come up with a stabilized 14th.
AJ Rice: For 2000, and then we layer in hurricane recovery on top of that I, just want to make sure. We're all walking away with the right framework is that what you're saying and then my broader question just throw that out would be on your volume strength.
A.J. Rice: Is that what you're saying?
A.J. Rice: And then my broader question, just to throw that out would be on your volume strength. is you now have anniversary of the pickup in volume post pandemic we saw last year. Are there particular areas of service lines that are remaining strong that are worth calling out even as your anniversary? What was strong trends last year? Thanks, AJ.
AJ Rice: Is.
You've anniversaried the pick up in volume post pandemic. We saw last year are there particular areas of service lines that are remaining strong that are worth calling out and as you anniversary strong trends last year.
Mike Marks: This is Mike. As it relates to our 2025 commentary, let me say this, you know, we generally believe that the ongoing effects of the hurricanes in 2025, which we, as Sam said, we think are manageable, will be primarily in North Carolina, as we expect our Tampa facility to be operational by the end of 2025. And we took these storms and the potential lingering effects into 2025 into account when we set this being near or slightly above the upper end of our long-term growth range.
Mike Box: Thanks, a J this is Mike.
Mike Box: As it relates to our 2025 commentary, let me say this we generally believe that the ongoing effects of the Hurricanes in 2025, which leaves as Sam said, we think are manageable and will be primarily in North Carolina as we expect our Tampa facility to be operational by the end of 2024, and we took these storms and the <unk>.
Tension lingering effects into 2025.
Mike Box: Into account when we set this being near or slightly above the upper end of our long term growth range.
Mike Marks: As Sam noted as well, we will give much more context and details on our 25 formal guidance in January. As it relates to volume, you know, the only thing I might point, you know, in addition to the point that you made relative to, you know, strong volume pickups in the last part of last year, is that sequentially from Q2 to Q3 of 2024, we increased same facility admissions by 1.4%, and that sequential increase is in line with our past sequential trend. So that's our sense of volume.
Mike Box: As Sam noted as well, we will get much more context and details on our 25 formal guidance in January.
Mike Box: As it relates to volume the only thing I might point.
Mike Box: In addition to the point that you made relative to.
Mike Box: Strong volume pickups in last part of last year is that sequentially from Q2 to Q3 of 2024, we increased same facility admissions by one 4%.
Speaker Change: And that sequential increase is in line with our past sequential trend. So that's our sense of volume, yes, and let me add to that.
Sam Hazen: Yeah, and let me add to that, AJ. I think, you know, broadly, most of our service categories are growing really well. And we think, you know, the emergency room continues to be a very important solution for people in our communities. And it continues to grow and we continue to invest in it and we continue to improve our patient outcomes with our ER optimization agenda. We continue to see good strength in our cardiac business broadly across the organization. And as I said, across the geography of the company, we've had broad-based growth as well with very few challenges, if you will, across the important markets of our company.
I think broadly.
Speaker Change: Most of our service categories.
Speaker Change: Our growing.
Speaker Change: Really well and we think.
The emergency room continues to be a very important solution for people in our communities.
And it continues to grow and we continue to invest in it and we continue to improve our patient outcomes with our ER optimization agenda, we continue to see.
Speaker Change: Good strength in our cardiac business broadly across the organization and as I've said.
Speaker Change: The geography of the company.
Had broad based growth as well with very few.
Challenges if you will.
Speaker Change: Across the important markets of our company.
Speaker Change: Okay.
Ben Hendrix: Our next question comes from the line of Ben Hendrix from RBC Capital. Please go ahead. Thank you very much. A lot of discussion this earnings season around claim denial activity. I was wondering if you could touch on denial trends broadly and then related to two midnight claims specifically. Back in July, you noted that you were just beginning to see adjudication of two midnight related claims from early in the year.
Speaker Change: Our next question comes from the line of Ben Hendrix from RBC Capital. Please go ahead.
Ben Hendrix: Thank you very much a lot of discussion this earning season around claims denial activity I was wondering if you could touch on denial trends broadly and then related to two midnight claims specifically back in July you noted that you were just beginning to see adjudication of two midnight related claims from.
Ben Hendrix: As we approach year end, can you offer any observations on the adjudication activity you're seeing around two midnight and is there anything informing your view of when we may see behavioral changes among payers and how they process those short stay admissions? Thank you. Good morning, Ben. Thank you.
Ben Hendrix: Early in the year as we approach year end can you offer any observations on the adjudication activity youre seeing around two midnight and is there anything informing your view of when we may see behavioral changes among payers and how they process those short stay admissions. Thank you.
Speaker Change: Good morning, Ben. Thank you, let me talk about denials generally first and then we'll pivot to midnight impact in the quarter.
Ben Hendrix: Let me talk about denials generally first, and then we'll pivot to midnight impact in the quarter. You know, Ben, as we noted in our investor day, we have been working diligently on denial mitigation strategies through our integrated revenue cycle over the past several years. We certainly have seen payers ramp up the intensity level of their denial activities over the past several years. But given our focus and investment in these areas, we've been able to moderate the rate of growth and denial write-offs this year from prior year. So denials were not a material impact to HCA in third quarter of 2020.
Speaker Change: Vantage, we noted in our Investor day, we have been working diligently on denial mitigation strategies through our integrated revenue cycle over the past several years.
Speaker Change: We certainly have seen payers ramp up the intensity level of Baird and all activities over the past several years, but given our focus and investment in these areas, we've been able to moderate the rate of growth in denials write offs. This year from prior year. So denials were not a material impact on HCA in third quarter of 2024.
Ben Hendrix: A quick update on the Medicare Advantage 2 Midnight rule adoption. Our same facility total Medicare admissions increased 5.3 percent in the quarter. Traditional Medicare admits were basically flat. Medicare Advantage admissions were up 11 percent and we attribute approximately 2 percent of that 11 percent growth in Medicare Advantage admissions coming from the two midnight rule impacts. This is equivalent to approximately 50 basis points of our overall admission growth and has remained consistent over the years. over the year. As we continue, as I think about the denial impact to your question on the two midnight rule, we do continue to see a modest reduction in the prior authorization denial trends for accounts with two midnights or greater compared to prior year so far in 2024.
Speaker Change: A quick update on the Medicare to Medicare advantage, two midnight rule adoption.
Speaker Change: Our same facility total Medicare admissions increased five 3% in the quarter traditional.
Speaker Change: Traditional Medicare admits were basically flat Medicare advantage admissions were up 11% and we attribute approximately 2% of that 11% growth.
Speaker Change: In Medicare advantage admissions coming from the two midnight rule impact. This is equivalent to approximately 50 basis points of our overall admission growth and has remained consistent over the years.
Speaker Change: Over the year.
Speaker Change: As we continue.
Speaker Change: Think about the denial impact to your question on the two midnight rule, we do continue to see a modest reduction in the prior authorization to now trends for accounts with two midnight or greater compared to prior year. So far in 2024.
Ben Hendrix: But we still have way too many denials, and we have a few large Medicare Advantage payers that are significant outliers driving For context, let me highlight a couple of the comparisons of Medicare Advantage to traditional Medicare. Medicare Advantage now represents 58% of total Medicare volume. The mix of observation to inpatients with Medicare Advantage is still significantly higher than traditional Medicare. Even now, nine months past the implementation of the two-midnight rule. Lastly, the Medicare Advantage CMI-adjusted length-of-stay ratio is approximately 10% higher than traditional Medicare, driven by payer-driven discharge. These drive cost burdens to providers.
Speaker Change: But we still have way too many denials and we have a few large Medicare advantage payers that are significant outliers driving these denials.
Speaker Change: For context, let me highlight a couple of the comparisons of Medicare advantage to traditional Medicare.
Speaker Change: Medicare advantage now represents 58% of total Medicare volume.
The mix of observation to inpatients with Medicare advantage is still significantly higher than traditional Medicare.
Speaker Change: Even now nine months past the implementation of the of the two midnight rule.
Speaker Change: Lastly, the Medicare advantage CMI adjusted length of stay ratio is approximately 10% higher than traditional Medicare driven by payer driven discharged lives. These drive cost burdens to providers. So as we're working with our Medicare advantage payers are really trying to address two things we're trying to address this denial.
Ben Hendrix: So, as we're working with our Medicare Advantage payers, we're really trying to address two things. We're trying to address this denial burden and the cost burden. And so, as you think about the adjudication process, we are starting to get through the first quarters denials all the way through the adjudication process. And now, we are pursuing those through dispute resolution. As we've talked about before, dispute resolution can take a year to two years to fully complete. And so, we are going to have to continue to pursue that strategy as we move. Thanks for the color.
Speaker Change: Burton and the cost burden.
Speaker Change: And so if you think about the adjudication process, we are starting to get through that first quarter's denials through the <unk> all the way through the adjudication process and now we are pursuing those through dispute resolution as we've talked about before dispute resolution can take a year to two years to fully complete and so.
Speaker Change: We are going to have to continue to pursue that strategy as we move forward.
Speaker Change: Thanks for the color.
Ann Hynes: Our next question comes from the line of Sam Hynes from Mizzou Health. Please go ahead.
Speaker Change: Our next question comes from the line of Sam <unk> from Mizuho. Please go ahead.
Ann Hynes: Hi, this is Ann. Thank you. I guess part of my question you just addressed when I think about pricing assumptions for 2025, when I think ahead, I'm assuming it might be a tough compare because you have this two midnight rule this year, you also had a nice shift from Medicaid to commercial next year and have some incremental So when we think of pricing next year, maybe in your initial guide, what do you have for maybe a benefit for continued shift to this observation to inpatient status on the Medicare Advantage side, and maybe any incremental DPPs that you have included in your initial guide, because I know some states are working behind the scenes to get more programs approved.
Speaker Change: Hi, This is Ann thank you.
Speaker Change: I guess part of my question you just addressed.
Speaker Change: I think about pricing assumptions for 2025, and I think ahead I'm, assuming it might be a tough compare because you have.
Speaker Change: Two midnight rule.
Speaker Change: Gary You also had a nice shirt from Medicaid to commercial next year and have some incremental DPP. So when we think of pricing next year, maybe in your initial guide what do you have maybe a better benefit for a continued.
Speaker Change: Jeff to this observation to inpatient status on the Medicare advantage side, and maybe any incremental <unk> that you have included in your initial guide because I know some states are working behind the scenes to get more programs.
Speaker Change: Thank you.
Mike Marks: And let me say this, it's a little early to give a lot of details around 2025. And we'll as we finish our planning process. in a January call will give you, you know, all of those details. I would say this, though, largely, I think our cash net revenue per adjusted emission, we're planning on somewhere between two to three percent growth in 2025, and that's our early look at that at that metric. In terms of payer contracting, I don't know if this is exactly where you're going, but I'll go ahead and give you the update that we're now 80% complete in 2025, 54% complete for 2026, and just short of 20% complete for 2027.
Speaker Change: Hi, Ann.
Speaker Change: Let me say this is a little early to give a lot of details around 2025, and as we finish our planning process.
Speaker Change: And in January call, we'll give you all of those details I would say this though largely I think our cash net revenue per adjusted admission were planning on somewhere between 2% to 3% growth.
Speaker Change: In 2025, and Thats, our as our early look at that at that metric.
Speaker Change: In terms of payer contracting I don't know if this is exactly where youre going but I'll go ahead and give you the update that we're now 80% complete in 2025.
54% complete for 2026, and just short of 20% complete for 2027, and we're still tracking in that mid single digit update. So that's a quick update on the commercial side.
Mike Marks: And we're still tracking in that mid single digit update. So that's it.
Mike Marks: That's a quick update on the commercial.
Speaker Change: Yeah.
Speaker Change: Okay.
Peter Chickering: Our next question comes from the line of Peter Chickering from Deutsche Bank. Please go ahead. Hey, thanks for taking my question.
Speaker Change: Our next question comes from the line of Tito <unk> from Deutsche Bank. Please go ahead.
Speaker Change: Thanks for taking my questions. So tagging on there are two questions from here on on pricing next year do you assume any <unk> in.
Mike Marks: Sir, tagging on there are two questions here on on pricing next year. Do you assume any GDPs in that guidance range that you gave us for next year's? And as you think about labor and OPEX, I guess, what do you guys assume for labor and OPEX within that guide for next year? Thanks.
Speaker Change: In that.
Speaker Change: <unk> range that you gave us for next years.
Speaker Change: As you think about our labor and Opex I guess, what are you guys assuming for labor and Opex within that guide for next year. Thanks, So much.
Okay.
Mike Marks: So, yeah, I would repeat that really we'll be getting into the details of our margin profile assumptions for 2025 when we have our January call, still in the middle of our planning process, a little early to be getting into those details now for third quarter. And so let me just stay there related to that. I'm happy to give you a quick waiver update, though, for third quarter. And so I'll do that here. You know, as we've noted before, Medicaid has historically been our most challenging payer, other than patients without insurance. The growth in the Medicaid supplemental payment programs across our states over the past several years have helped.
Speaker Change: So, yes, I would repeat that really will be getting into the details of our margin profile assumptions for 2025, when we have our January call still in the middle of our planning process, a little early to be getting into those details now for third quarter.
Speaker Change: And so let me just stay there related to that.
Speaker Change: I'm happy to give you a quick waiver update though for third quarter and so I'll do that here.
Speaker Change: As we've noted before Medicaid has historically been our most challenging payor other than patients without insurance the growth in the Medicaid supplemental payment programs across our states over the past several years have helped but these programs are complex and variable from quarter to quarter and when taken together with historical Medicare reimbursement are still short.
Mike Marks: But these programs are complex and variable from quarter to quarter. And when taken together with historical Medicare reimbursement are still short of covering the cost to treat Medicaid. This quarter really illustrates the complexity and variability of these programs. As noted in my comments, Medicaid supplemental payment programs produced a modest benefit in the quarter versus prior year. This modest benefit was generally the net effect of a reduction from the Florida program, given our change to accruing, as offset by receiving the North Carolina benefit in third quarter of 24 versus fourth quarter of last year. and then the new Nevada program that kicked in this year.
Speaker Change: Of covering the cost to treat Medicaid patients. This.
Speaker Change: This quarter really illustrates the complexity and variability of these programs.
Speaker Change: As noted in my comments Medicaid supplemental payment programs produced a modest benefit in the quarter versus prior year.
Speaker Change: This modest benefit was generally the net effect of a reduction from the Florida program, given our change to accruing as offset by receiving the North Carolina benefit in third quarter of <unk> 24 versus fourth quarter of last year.
Speaker Change: And then the new Nevada program that kicked in this year.
Mike Marks: We still project that we will have $100-$200 million tailwind from Medicaid Supplemental Payment Programs in 2024 to prior year, but would now lean to the higher end of that range.
Speaker Change: We still project that we will have $100 million to $200 million tailwind from Medicaid supplemental payment programs in 2024 of the prior year, but would now lean to the higher end of that range.
Sam Hazen: Mike, let me just add something. Peto, I think, as I mentioned in my comments, that we anticipate a stable operating environment for 2025, that suggests demand sort of in the zone, as we talked about, which is better than our long term assumptions around demand. Mike just spoke to our pricing and reimbursement environment being generally consistent and sort of programmed for 2025. And then with respect to our costs, we do think, you know, inflationary trends are generally consistent with what we've seen on the labor side for 2024, and we have a reasonable, assumptions around the rest of our costs to be somewhat stable and in line with, you know, sort of 2024.
Speaker Change: Mike Let me just add something.
Speaker Change: <unk>.
Mike Box: As I mentioned in my comments that we anticipate a stable operating environment for 2025.
Mike Box: That suggest demand sort of in the zone as we've talked about which is better than our long term assumptions around demand, Mike just spoke to our pricing and reimbursement environment being generally consistent.
Mike Box: And sort of program for 2025, and then with respect to our costs, we do think.
Mike Box: Inflationary trends are generally consistent with what we've seen on the labor side for 2024, and we have a reasonable.
Mike Box: Assumptions around the rest of our cost to be somewhat stable and in line with.
Sam Hazen: Now, we're putting a finer point on that as we finish the year and land on a few things. So that's how we're characterizing a stable operating environment.
Mike Box: 2024, and now we're putting a finer point on that as we finished the year and land on a few things. So that's how we're characterizing as stable operating environment.
Unknown Executive: Great. Thanks so much, guys.
Speaker Change: Great. Thanks, so much guys.
Andrew Mok: Our next question comes from the line of Andrew Mok from Barclays, please go ahead. Hi, good morning. Looks like there was a deceleration in inpatient revenue per admission from 6.5% in the first half of the year, which was very strong, to about half of that in the third quarter. I just want to understand the underlying drivers there between acuity, mix, and rate. Thanks.
Speaker Change: Our next question comes from the line of Andrew Mok from Barclays. Please go ahead.
Andrew Mok: Hi, good morning, it looks like there was a deceleration in inpatient revenue per admission from six 5% in the first half of the year, which is very strong to about half of that in the third quarter I just want to understand the underlying drivers there between acuity mix and rate. Thanks.
Speaker Change: Okay.
Andrew Mok: So when I think about the NRA growth rate in third quarter versus kind of year-to-date or the first half of the year, as you know, really all of the decline in the growth rate is driven by state supplemental programs. We had growth in Medicaid Supplemental Program revenues in third quarter of 24 to prior year, but well below the growth rate in the first half of 2024 to prior year. Consistent with the first two quarters of 2024, we had good growth in acuity and strong payer mix.
Speaker Change: So when I think about the NRA growth rate in third quarter versus kind of year to date or the first half of the year. As you note really all of the decline in the growth rate is driven by state supplemental programs.
Speaker Change: We had growth in Medicaid supplemental program revenues in third quarter of 24 of the prior year, but well below the growth rate in the first half of 2024 of the prior year consistent with the first two quarters of 2024, we had good growth in acuity and strong payer mix in the quarter.
Speaker Change: Yeah.
Speaker Change: Okay.
Joanna Gajuk: Great, thanks for the call. Our next question comes from the line of Joanna Gajuk from Bank of America. Please go ahead. Hi, good morning. Thanks so much for taking the question here. So maybe I guess on the payer mix a little bit additional question here in terms of the exchange volumes and then Medicaid volumes in the quarter. I guess you gave us Medicare. So also commercial volume growth in the quarter.
Speaker Change: Great. Thanks for the color.
Speaker Change: Our next question comes into line with Joanna <unk> from Bank of America. Please go ahead.
Speaker Change: Hi, good morning, Thanks, so much for taking my question here.
Speaker Change: Maybe I guess, the payer mix a little bit.
Speaker Change: Question here in terms of that change.
Speaker Change: And then Medicaid volumes in the quarter.
I guess you gave us.
Speaker Change: On Medicare So also cholesterol volume growth in the quarter. So maybe I can kind of give.
Joanna Gajuk: So maybe I can kind of give us additional data points on the payer mix and the volume growth in the quarter by payer. Sure, good morning. So I'm going to use equivalent emission growth in third quarter of 24 to prior year, same facility. And so let's run down the Medicare up 5% on equivalent emissions, Medicaid down eight and a half percent on equivalent emissions.
Speaker Change: Steven.
Speaker Change: Additionally, Pam.
Speaker Change: Payments volume growth in the quarter by payer. Thank you.
Speaker Change: Sure. Good morning, so I'm going to use equivalent admission growth in the third quarter of 2004 to prior year same facility and so let's run down.
Speaker Change: Medicare up 5% on equivalent admissions Medicaid down eight 5% an equivalent admissions.
Austin Gerlach: Managed care volume excluding exchanges up just short of 4%, the exchange volume was at 43% growth, same facility to prior year, and then uninsured volumes were up 7.2%, so that equates to that total of 4.5% growth in equivalent emissions in the Our next question comes from the line of Austin Gerlach from Wolf Research. Please go ahead.
Speaker Change: Managed care volume excluding exchanges just short of 4% the exchange volume was at 43% growth same facility to prior year and in uninsured volumes were up seven 2%. So that equates to that total of four 5% growth in equivalent admissions in the quarter.
Speaker Change: Yeah.
Speaker Change: Our next question comes from the line of Austin <unk> from Wolfe Research. Please go ahead.
Austin Gerlach: Wow, that's a name from the past.
Speaker Change: Wow, that's a name from the past.
Justin Lake: This is Justin Lake from Wolf. Thanks. wanted to ask about The long-term debt and your leverage and how you're thinking about that going into next year. Looks like you're kind of ending the year around three times.
Speaker Change: This is Justin Lake from Wolfe. Thanks.
Speaker Change: The.
Justin Lake: I wanted to ask you about.
Justin Lake: The long term debt.
Justin Lake: Your leverage and how youre thinking about that going into next year. It looks like youre kind of ending the year around three times and then.
Justin Lake: And then I apologize. I know I missed a little bit of the beginning of the fall, but I know you got asked about the hurricane impact in there, but anything that I might have missed in terms of how you're thinking about the hurricane and the potential that reoccurs next year within your guidance or your six percent. How are you thinking about that $300 million?
Justin Lake: I apologize I know I missed a little bit of the.
Justin Lake: Of the beginning of the call, but I know you got asked about the hurricane impact in there, but anything you quite.
Justin Lake: Quite a bit in terms of.
Justin Lake: How you're thinking about the hurricane.
Justin Lake: Reoccurs next year within your guidance or your high <unk>, 6%.
Justin Lake: How are you thinking about that $300 billion okay.
Mike Marks: Great, Justin. So, as it relates to cash flow, we had a really strong quarter in third quarter of 24, we did end right at the lower end of the range on our leverage target, and we've talked about this before, but every year at this time, as part of our planning and budgeting process, we're working with our finance investment committee and doing an evaluation of financial policies, and we'll announce any changes to those if there are any on our first quarter. So, we're still in the middle of that planning process related to those kinds of financial policies, but we are at the bottom of that leverage ratio.
Justin Lake: Great.
Justin Lake: And so as it relates to cash flow, we had a really strong quarter in third quarter of 24.
Justin Lake: We did right at the lower end of the range on our leverage target.
Justin Lake: We've talked about this before but every year at this time as part of our planning and budgeting process. We are working.
Justin Lake: With our finance investment committee and doing an evaluation of financial policies and will announce any any changes to those if there are any on our first quarter call. So we're still in the middle of that planning process related to those kinds of financial policies, but we are at the bottom of that leverage ratio.
Mike Marks: And, you know, what we articulated related to the 2025 in hurricanes is just that, you know, we generally believe that the ongoing effects of the hurricanes in 2025, which we think are going to be manageable, are primarily in our North Carolina market, as our Tampa facility will be operational by the end of the year. We did take that into account, Justin, when we crafted our early look comments at being near or slightly above the upper end of our long-term growth ranges.
What we articulated are related to the 2025.
Justin Lake: Hurricanes is just that.
Justin Lake: We generally believe that the ongoing effects of the Hurricanes in 2025, which we think are going to be manageable are primarily in our north Carolina market as our Tampa facility will be operational by the end of the year, we did take that into account Justin when we when we crafted our early look comments at being near <unk>.
Justin Lake: Or slightly above the upper end of our long term growth ranges and as always we will give you a lot more details and context around our 25 look when we do formal guidance update in January.
Mike Marks: And, as always, we'll give you a lot more details and context around our 2025 look when we do formal guidance update in January.
Mike Marks: Thanks.
Justin Lake: Thanks.
Justin Lake: Yeah.
Brian Turklett: Our next question comes from Brian Turklett from Jeffries, please go ahead. Good morning, Mike and Sam, as I think about the work that you're doing in the communities and disruption, how are you thinking about insurance claims or insurance reimbursement that then maybe, Mike, just any color you can share on the change to the CapEx guidance? So on insurance, and we noted this in our release, the impact that we've noted related to fourth quarter and third quarter did not include any estimate related to insurance recoveries at this point. You know, it's still early. We're working through that now.
Our next question comes from Brian <unk> from Jefferies. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: Hey, Mike and Sam as I think about the work that you're doing in the community and the disruption how are you.
Speaker Change: Thinking about insurance claims.
Speaker Change: <unk> reimbursement.
Speaker Change: And then maybe Mike just any color you can share on the change to the Capex guidance.
Speaker Change: Sure.
Speaker Change: When you write that down and so on on insurance.
Speaker Change: Yes, and we noted this in our release the impacts that we've noted related to fourth quarter and third quarter did not include any estimate related to insurance recoveries.
Speaker Change: At this point, it's still early we're working through that now.
Mike Marks: We do anticipate having insured losses related to these hurricanes. It's a little early yet, and we're really not in a position to provide an estimate either to the timing of a potential recovery or the amount, but we do believe that there will be a claim for sure given the size of these storms. Related to the change in CapEx, it's really just the timing of capital projects. You know, these are especially the bigger projects, as you know, take a long time, and the timing can flow a little bit up and down, but there's no implication there.
Speaker Change: We do anticipate having insured losses related to these hurricanes.
It's a little early yet and we're really not in a position to provide an estimate either to the timing of a potential recovery or the amount, but we do believe that there will be a claim for sure given the size of these storms.
Speaker Change: Related to the change in Capex is really just the timing of capital projects. These are.
Speaker Change: Especially the bigger projects as you know our take a long time and the timing can flow a little bit up and down.
Speaker Change: But theres no theres no implication there we're still seeing.
Mike Marks: We're still seeing a lot of really good opportunities to invest in our business, and so I would just articulate the slight decrease in what we think we're going to spend this year on CapEx being related more to timing.
A lot of really good opportunities to invest in our business.
Speaker Change: So I would just articulate the slight decrease in what we think we're going to spend this year on capex being related more to timing.
Unknown Executive: All right. Thank you.
Speaker Change: Alright, thank you.
Whit Mayo: Our next question comes from Whit Mayo from SVP Securities. Please go ahead. Hey, thanks. Sam, you've had a big focus on the AI and technology investment. Just wondering if there's anything you'd like to add to that? New learnings and the efficiencies that you guys are seeing from those investors. maybe around labor management or other areas that you can share that you find encouraging that would be helpful.
Our next question comes from Whit Mayo from <unk> Securities. Please go ahead.
Speaker Change: Yeah.
Hey, thanks.
<unk> had a big focus on the AI and the technology investments just wondering if there's any new learnings any efficiencies that you guys are seeing from those investments.
Speaker Change: It may be around labor management or other areas that you can share that you find incur.
Encouraging that'd be helpful. Thanks.
Sam Hazen: So we, yesterday, actually, presented our full plan on our digital agenda and how we are approaching advancing technology, and in particular, AI, into the company's business over the next five to seven years, and we see many opportunities to improve our administrative functioning, our operational management of our business, and then, ultimately, the clinical outcomes for our patients, and so we're early in that journey. We do have some areas where we're seeing promising results as it relates to using technology and, in particular, artificial intelligence more effectively. Some of that is in our scheduling capabilities, where we've been able to improve the tools that our managers can use with more precise demand forecasting, better allocation of our workforce to meet the patient demands and such, so that's encouraging and giving us a little bit of confidence.
Speaker Change: So we yesterday actually presented our full plan on our digital agenda.
Speaker Change: And how we are approaching advancing technology and in particular AI into the company's business over the next five to seven years and we see.
Speaker Change: Many opportunities to improve our administrative functioning are operational.
Speaker Change: Management of our business and then ultimately the clinical outcomes for our patients and so we're early in that journey. We do have some areas, where we are seeing promising results as it relates to using technology in particular artificial intelligence.
Speaker Change: More effectively some of that is in our scheduling capabilities.
Speaker Change: Where we've been able to improve the tools that our managers can use.
Speaker Change: With more precise demand forecasting better allocation of our workforce to meet patient demands and such.
Speaker Change: So that's encouraging and give us, giving us a little bit of confidence.
Sam Hazen: We have aspects of artificial intelligence embedded into our revenue cycle, as Mike mentioned, to manage the receivables performance and the revenue performance of the company more effectively and mitigate some of the denial pressures and so forth, so those are early-stage initiatives that are yielding positive results for us. They're not material yet, but we do see a growing set of initiatives. We're organizing around the agenda. We're going to be resourcing it even more as we push into the next few years, and we expect to get incremental improvements in 2025 and 2026 and on into the rest of this decade as we mature our efforts on this particular front.
Speaker Change: Have aspects of artificial intelligence embedded into our revenue cycle as Mike mentioned to manage the receivables performance and the revenue performance of the company more effectively and mitigate some of the <unk> pressures and so forth. So those are early stage.
<unk>.
<unk> that are yielding positive results for us, they're not material yet, but we do see a growing set of initiatives. We're organizing around the agenda, we're going to be resourcing. It even more as we push into the next few years and we expect to get.
Speaker Change: Incremental improvements and 25% in 2006 and on in to the rest of this decade as we mature our efforts on this particular front I mean, it's our view that we're at an inflection point.
Sam Hazen: I mean, it's our view that we're at an inflection point. HEA healthcare historically has performed at high levels across all elements of our business, I believe. Obviously, our growth has been good. Our margin performance has been good. Our clinical outcomes and quality performance to date is better than it was in 2019, so pre-pandemic, so now we've improved our overall quality, and then with respect to our constituency engagements, employees, physicians, and even community, we've advanced that, so we're at this incredible inflection point because of these tools, and in our business, we see a lot of application, and so we're very excited about the potential that this particular agenda presents for our company.
Speaker Change: Healthcare historically has performed at high levels across all elements of our business I believe obviously our growth has been good our margin performance has been good our clinical outcomes and quality performance to date is better than it was in 2019, so pre pandemic to now.
Speaker Change: Now we've improved our overall quality and then with respect to our constituency engagements employees physicians and even community. We've advanced that so we're at this incredible inflection point because of these tools and in our business, we see a lot of application and so we're very excited about the potential.
Speaker Change: That this particular agenda presents for our company.
Speaker Change: Thanks.
Speaker Change: Okay.
Stephen Baxter: Our next question comes from Stephen Baxter from Wells Fargo, please go ahead. Hey, thanks for the question. I just wanted to ask about the volume growth assumption for next year. Is it three or 4%? If I was looking back at last quarter, I think you suggested the exchange is potentially worth as much as maybe 200 or 250 basis points of your growth this year. Just trying to understand how you're thinking about, you know, some of these unusual coverage dynamics in the exchanges. And I guess for Medicaid, you know, that's a headwind this year. Does it keep declining?
Speaker Change: Our next question comes from Stephen Baxter from Wells Fargo. Please go ahead.
Stephen Baxter: Hey, Thanks for the question I just wanted to ask about the volume growth assumption for next year that the three or 4%. If I was looking back at last quarter. I think you suggested the exchange and potentially are worth as much as it maybe 300 or 250 basis points of your growth. This year, okay understand how youre thinking about some of these unusual coverage dynamics in the exchanges.
Stephen Baxter: The Medicaid yet that's a headwind this year does it does it keep declining and as you think about next year that stabilized, which I understand is more macro driven dynamic.
Stephen Baxter: If you think about, you know, next year, is that stabilized?
Stephen Baxter: Just trying to understand some of these more like macro driven dynamics inside your Yeah, great question. You know, largely, I think exchange enrollment will moderate next year, you know, maybe in the eight to 10% growth in enrollment is the best estimates we have versus in our states this year, you know, enrollment growth was over 30%. So that's one factor. Certainly, I do think that Medicaid volumes will flatten out a bit in 25 versus 24, as we kind of sunset through the Medicaid redetermination process. So, you know, largely, I would say those are the two biggest dynamics.
Stephen Baxter: Thanks.
Yeah, Great question, largely I think exchange enrollment will moderate next year, maybe in the 8% to 10% growth in enrollment as the best estimates we have versus in our states. This year enrollment growth was over 30%. So that's one factor certainly I do think that Medicaid volumes will flatten out a bit and $25.
Stephen Baxter: 24, as we kind of sunset through the Medicaid redetermination process. So.
Largely I would say those are the two biggest dynamics.
Stephen Baxter: I think the net effect of that will will be generally stable payer mix as we move from 2024 to 2025.
Stephen Baxter: I think the net effect of that will will be generally stable payer mix as we move from 2024 to 2025.
Scott Fidel: Our next question comes from Scott Fidel from Stevens. Please go ahead. Hi, thanks. Good morning.
Speaker Change: Our next.
Speaker Change: <unk> comes from Scott Fidel from Stephens. Please go ahead.
Speaker Change: Hi, Thanks, Good morning interested if you can update us on the contracting environment with Medicare advantage plans just separate from the two midnight rule.
Scott Fidel: I'm interested if you can update us on the contracting environment with Medicare Advantage plans, just separate from the two-midnight rule dynamic and sort of how those trends have been playing out as some of the MA plans, or a lot of them have been experiencing a lot of pressure on their rates and margins as well.
Speaker Change: Rule dynamic and sort.
How those trends have been playing out as some of the MA plans are a lot of them have been experiencing a lot of pressure on on their rates and margins as well and then just a quick follow up just around the 25 <unk>.
Mike Marks: And then just a quick follow-up, just around the 25 preliminary outlook, understanding it's only early, would there be any view on any impact on the cadence of EBITDA just around the impact from the hurricanes and the timing of recovering from that? Thanks.
Speaker Change: <unk> outlook understanding it's only <unk>.
Speaker Change: Would there be any view on the impact on the cadence of EBITDA just around the impact from the hurricanes and the timing of recovering from that thanks.
Speaker Change: Okay.
Mike Marks: Let me cover the contracting piece, and then we'll jump to your second question. You know, generally speaking, we're largely contracted across the major Medicare Advantage payers. And as we've done our normal kind of set of renewals in 2024, we've been able to come to agreement with our payer partners in the Medicare Advantage space. That is our intention to continue to do that. You know, we continue to work with our Medicare Advantage payer partners to work through the challenges that they have and that we have as a provider in their contracted network. So, but in terms of contracting, I would say that we are fairly consistent with where we've been in the past, which is largely contracted.
Speaker Change: Let me cover the contracting piece and then we'll jump to your second question generally speaking, we're largely contracted across the major Medicare advantage payers and as we've done our normal kind of set of renewals in 2024, we've been able to come to agree.
Speaker Change: <unk> with our payer partners and the Medicaid Medicare advantage space.
Speaker Change: That is our intention to continue to do that.
Speaker Change: We continue to work with our Medicare advantage payer partners to work through the challenges that they have and that we have as a provider.
Speaker Change: And they're in their contracted network, so but in terms of contracting I would say that we are fairly consistent with where we've been in the past, which is largely contracted and we've been able to secure renewals as we've gone through our 2020 for renewal cycle.
Mike Marks: And we've been able to secure renewals as we've gone through our 2024 renewal cycle.
Mike Marks: In terms of cadence of EBITDA, again, I think it's a little early to get into trying to think about earnings by quarter in 2025 at this point, so I'll push that answer to when we come together in January.
Speaker Change: In terms of cadence of EBITDA again, I think it's a little early to get into trying to to think about earnings by quarter in 2025 at this point so I'll.
Speaker Change: I'll push that answer to when we come together in January.
Okay.
Ryan Langston: Our next question comes from Ryan Langston, please go ahead. Hi, good morning. I mean, hurricanes are just kind of a fact of life in the southern states, typically not as You did see some effects a couple.
Speaker Change: Our next question comes from Brian <unk>. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: I mean hurricanes or just kind of a fact of life in the southern states typically not as severe courses. This year, but you did see some effects of couple of years ago.
Ryan Langston: I don't think you'd be overly reactive to this, but does this maybe cycle of hurricane activity do anything to affect sort of long term strategy on capital allocation, M&A in terms of building? maybe look outside of those geographies. Thanks.
Speaker Change: I don't think you'd be overly reacted to this but does this maybe cycle of hurricane activity do anything to affect sort of long term strategy on capital allocation M&A in terms of building buying facilities and maybe look outside of those geographies, even if only maybe somewhat incrementally.
Sam Hazen: This is Sam. I think the short answer to that is no. We have seen our facilities, as I mentioned in my comments, recover. I'll just give you an example. Hurricane Ian, which affected our hospital in Port Charlotte, HCA Fawcett Hospital a couple of years ago, that hospital was actually repaired. Hardened, if you will, the hurricanes. And we're actually performing at a higher level than we were pre-Hurricane Ian. Hurricane Michael, which hit Panama City, Florida, also has been repaired significantly and hardened some as well. Obviously, a hurricane could hit it again and damage it, but that hospital is performing at a higher level than it was pre-storm.
Sam Hazen: This is Sam.
Speaker Change: I think the short answer to that is.
Speaker Change: No.
We have seen.
Sam Hazen: Our facilities as I mentioned in my comments recover I'll just give you an example.
Speaker Change: Hurricane, Ian which affected our hospital in Port Charlotte Faucet.
Speaker Change: Fossett Hospital, a couple of years ago that hospital.
Speaker Change: It was actually.
Speaker Change: Repaired.
Speaker Change: Heartened, if you will to hurricanes and we're actually performing at a higher level than we were pre hurricane and hurricane, Michael which hit Panama City, Florida.
Speaker Change: <unk> also has been.
Speaker Change: Repaired insignificantly and hardened some as well, obviously, a hurricane could hit it again and damage it but that hospital is performing at a higher level than it was pre storm hurricane Harvey, which hit Houston, a number of years ago and was a significant flood event as a result, our Houston system.
Sam Hazen: Hurricane Harvey, which hit Houston a number of years ago and was a significant flood event, as a result, our Houston system has recovered and is also exceeding pre-Harvey performance as well. So we still believe that the state of Florida, the Gulf Coast of Texas and so forth, are very significant opportunities for our company. We invest, we believe, wisely in those communities. We harden our facilities as much as we possibly can. But they are, in fact, a way of life.
Speaker Change: Has recovered and is also exceeding.
Speaker Change: Pre Harvey performance as well so we still believe that the state of Florida.
Speaker Change: The Gulf Coast of Texas, and so forth are very significant opportunities for our company. We invest we believe wisely in those communities, we harden our facilities as much as we possibly can but they are in fact, a way of life I will tell you this year.
Sam Hazen: I will tell you, this year, and I had experience, personal experience with Katrina, is very similar to the effects of Katrina. I mean, Hurricane Helene was a Category 4 storm. And if you would have asked me what two communities were most impacted, I would have never said in 100 years, Augusta, Georgia, and Asheville, North Carolina. And so we dealt with an unprecedented storm. And again, HCA, we showed the power of the company, I think, but more importantly, the power of its people to respond to that. And I think we're going to be stronger as a result of it in those markets.
Speaker Change: And I had experienced personal experience with Katrina.
Speaker Change: Very similar to the effects of Katrina Hurricanes Elaine.
Speaker Change: It was a category four storm and if you would've asked me what two communities were most impacted I would've never sat in 100 years Augusta, Georgia in Asheville, North Carolina, and so we dealt with an unprecedented storm.
Speaker Change: And again HCA, we showed the power of the company I think but more importantly, the power of its people to respond to that and I think we're going to be stronger as a result of it in those markets. We believe that our portfolio of communities that we serve are very well.
Sam Hazen: We believe that our portfolio of communities that we serve are very well positioned for long-term growth, as we've indicated. We understand the risk associated with hurricane and such. That's why we built the capabilities that we've got. And we think we're diversified enough across those communities to deal with that particular risk.
<unk> for long term growth as we've indicated we understand the risk associated with hurricane.
And such that's why we built the capabilities that we've got and we think we're diversified enough across those.
Speaker Change: Communities to deal with that particular risk.
Speaker Change: Yeah.
Unknown Executive: Okay, thank you.
Speaker Change: Okay. Thank you.
Sarah James: Our next question comes from the line of Sarah James from Cantor Fitzgerald. Please go ahead. Thank you. Outpatient surgical trend remained negative despite a lower comp. In your 4Q and 25 guide, do you assume that stabilizes or turns positive? What's driving that pressure?
Our next question comes from the line of Sarah James from Cantor Fitzgerald. Please go ahead.
Sarah James: Thank you.
Speaker Change: Patient surgical trend remained negative despite a lower comp in your <unk>.
Speaker Change: <unk> and 'twenty five guide do you assume that stabilizes or turn positive.
Speaker Change: What's driving that pressure and then just a quick clarification on the business interruption insurance comment that you made what level of insurance do you carry.
Sarah James: And then just a quick clarification on the business interruption insurance comment that you made, what level of insurance do you carry? So on outpatient surgery, as we indicated, nothing's changed from the trends we've seen this year. The declines have been focused almost entirely in Medicaid and uninsured. That's why our revenue per surgical case has been up 7%. We've seen acuity growth, and we've also seen payer mix improvement in our outpatient surgery. The profitability of our outpatient surgery service is better as a result. So on the headline, volume is down. On the bottom line, profits are up with respect to outpatient surgery.
So on outpatient surgery, as we indicated nothing's changed from the trends we've seen this year the.
Speaker Change: The declines have been focused almost entirely and Medicaid and uninsured. That's why our revenue per surgical cases been up 7%, we've seen acuity growth and we've also seen.
Speaker Change: Payer mix improvement in our outpatient surgery, the profitability of our outpatient surgery service is better as a result, so on the headline volume is down on the bottom line profits are up with respect to outpatient surgery. So we're <unk>.
Sarah James: So we're comfortable with that outcome. As it relates to next year, we don't anticipate any significant changes at this particular juncture. We believe our overall volume guidance includes the different categories that we've got. Our efforts on outpatient surgery continue to advance. We're advancing the number of surgery centers that we have in our company through greenfield development as well as some targeted acquisitions. And we continue to improve the operations of our hospital-based outpatient surgery centers, providing better environments for our physicians and better care environments for our patients.
Speaker Change: Comparable with that outcome.
Speaker Change: As it relates to next year.
Speaker Change: We don't anticipate any significant changes at this particular.
Speaker Change: Juncture, we believe our overall volume guidance includes.
Speaker Change: The the different categories that we've got.
Speaker Change: Our efforts on outpatient surgery continue to advance we are advancing in the number of surgery centers that we have in our company through Greenfield development as well as some targeted acquisitions and we continue to improve the operations of our hospital based outpatient surgery.
Speaker Change: Centers.
Speaker Change: Providing better environments for our physicians and better care environments for our patients.
Sarah James: And on your insurance question, you know, we certainly have business interruption coverage as part of our property insurance program, but at this time, we're really not in position to provide estimates related to either the timing or the potential recovery under those insurance policies or the limits thereof. So that's where we are now.
And on your insurance question.
Speaker Change: We certainly have business interruption coverage as part of our property insurance program, but at this time, we're really not in position to provide estimates related to either the timing or the potential recovery under those insurance policies or the limits thereof, So thats, where we are now.
Speaker Change: Okay.
John Ransom: Our next question comes from the line of John Ransom, please go ahead. Hey, good morning. Just kind of backing up.
Speaker Change: Our next question comes from the line of John Ransom. Please go ahead.
John Ransom: Hey, good morning.
John Ransom: I'm trying to think about things that we worried about five years ago that we don't talk about anymore. And one thing that comes to mind is value based care and all that stuff. And I'm just curious, your commercial contracts in particular, I know they're fee for service, but what kind of kickers do you get in 2024 for things like hospital acquired infections, readmissions, other quality metrics? What kind of kickers are you getting now versus then? Have they grown? And what are some examples of that? Thanks.
John Ransom: Backing up I'm trying to think about things that we worried about five years ago that we don't want to talk about anymore. One thing that comes to mind is value based care and all that stuff and I'm. Just curious your commercial contracts in particular I know their fee for service, so what kind of kickers that you get.
John Ransom: In 2024 for things like hospital acquired infections Readmissions other quality metrics, what kind of Kickers that you are getting now versus then they grown and what are some examples of that.
John Ransom: Okay.
Sam Hazen: John, this is Sam. Those are, you know, very incremental inside of our overall revenue contracts with payers. And I won't say they're de minimis, but they're not material to the overall escalators that we have or the overall revenue equation inside of those contracts. We have some contracts that have modest provisions around those. But when you aggregate it for the company as a whole, it's a very small component of the escalators that we get. I mean, we are committed at our core to providing better care to our patients. And that's part and parcel to why our quality outcomes, as I mentioned, are better than they were in 2019.
Sam Hazen: Jon This is Sam.
Sam Hazen: Those are very.
Sam Hazen: Incremental.
Sam Hazen: Inside of our overall revenue contracts with payers and.
Sam Hazen: I won't say they're de Minimis.
Sam Hazen: But theyre not material.
The material to the overall escalators that we have or the overall revenue equation inside of those contracts. We have some contracts that have modest provisions around those but when you aggregated for the company as a whole it's a very small component.
Sam Hazen: The escalators that we get.
Sam Hazen: I mean, we are committed at our core to providing better care to our patients and thats part and parcel to why our quality outcomes as I mentioned are better than they were in 2019, and we have a robust agenda across the organization to improve the outcomes for our patients including some.
Sam Hazen: And we have a robust agenda across the organization to improve the outcomes for our patients, including some of the service metrics that you referenced there. So that's sort of core to how we approach it. And it's embedded, I think, in the offering of HCA facilities to payers and their members. And that's allowed us, we believe, to get to a point where we contract on a pretty consistent cycle. We've actually advanced the number of commercial contracts this year that we participate in with two major contract signings, Kaiser in Denver, and then Blue Cross of Tennessee in Chattanooga.
Sam Hazen: This.
Sam Hazen: <unk>.
Sam Hazen: Yeah.
Sam Hazen: The service metrics that you referenced there so thats sort of core to how we approach it and it's embedded I think in the offering of HCA facilities to payers and their members and that's allowed US we believe to <unk>.
Get to a point, where we contract on a pretty consistent cycle, we've actually advanced the number of commercial contracts. This year that we participate in with two major contract.
Sam Hazen: <unk>.
Sam Hazen: Our signings Kaiser in Denver, and then Bluecross, Tennessee, and Chattanooga. So we have very few commercial contracts across the country now where we don't participate it's less than a handful and and we think Thats a result of our access capabilities with our outpatient.
Sam Hazen: So we have very few commercial contracts across the country now where we don't participate. It's less than a handful. And we think that's a result of our access capabilities with our outpatient platform, as well as our quality and comprehensive service offerings that we provided back in our facility.
Sam Hazen: Platform as well as our quality.
Sam Hazen: And comprehensive service offerings that we provide it back in our facilities.
John Ransom: If I if I could just tag on, when you define quality, I know that's an amorphous concept to some people, what's the data set that you use? And how is that? I'll ring off now. Thank you.
Speaker Change: If I could just tag on when you define quality I know that the amorphous concept to some people what's the dataset that you use and how has that changed.
Speaker Change: Alright, thank you.
Sam Hazen: I don't know that we have enough time on this call, John, to talk about the data set that we have around quality. We have an increasing data set around quality. We have better insights into it as an organization. It includes everything from complications to mortality to hospital-acquired infections to length of stay to specific service line metrics for cardiovascular care, for bone marrow transplant, for ER processing, as I mentioned before, I can go on and on about it. We have a very integrated quality agenda with our leadership corporately and with our hospital teams, and all of that comes together in an advanced state for us as an organization.
I mean, I don't know that we have enough time on this call John to talk about the data set that we have around quality I mean, we have.
Speaker Change: And increasing data set around quality, we have better insights into it as an organization. It includes everything from complications to mortality to hospital acquired infections to length of stay to a specific service line metrics for cardiovascular care for bone marrow transplant for.
For ER processing as I mentioned before I mean, I can go on and on about it.
Speaker Change: We have a very integrated quality agenda, with our leadership Corporately and with our hospital teams.
Speaker Change: And all of that comes together in an advanced state for us as an organization as we think about AI and the question that wed asked earlier, we see that as the next frontier, allowing us to get even better at it.
Sam Hazen: As we think about AI and the question that Witt asked earlier, we see that as the next frontier, allowing us to get even better at it, more efficient, and more transparent. So it's really a fairly comprehensive program that we've continued to grow simply because our service offerings are more complex. Our ability to use our quality to attract physicians and patients and be more responsive to our communities is just sort of core to what we do day in and day out.
Speaker Change: More efficient and more transparent.
Speaker Change: So it's really.
Speaker Change: A fairly comprehensive program that we've continued to grow simply because our service offerings are more complex.
Speaker Change: Our ability to use our quality to attract physicians and patients and be more responsive to our communities is just.
Speaker Change: Sort of core to what we do day in and day out.
Speaker Change: Yeah.
Lance Wilkes: Our next question comes from the line of Lance Wilkes from Bernstein. Please go ahead. Great.
Speaker Change: Our next question comes from the line of Lance Wilkes from Bernstein. Please go ahead.
Mike Marks: Can you talk a little bit about some of the improvements you've been seeing in your wage and compensation expense ratio? In particular, what sort of wage inflation you're seeing currently in your contracting with nurses, et cetera? What your growth rates are looking like there?
Speaker Change: Great.
Can you talk a little bit about.
Lance Wilkes: Some of the improvements you've been seeing your wage and compensation expense ratio in particular, what sort of.
Lance Wilkes: Wage inflation Youre seeing currently in your contracting with nurses et cetera. So your growth rates are looking like there and then maybe just a quick clean up if you could just talk a little bit of bad debt impacts youre seeing as a result of.
Mike Marks: And then maybe just a quick cleanup, if you could just talk a little about bad debt impacts you're seeing as a result of Medicaid redetermination, that'd be great too. Thanks. So, you know, generally speaking, as we've come through this year, you know, the wage rates that we're seeing across our markets are generally pretty stable. You know, I think we've remarked before somewhere between the two and a half, three and a half percent range is about kind of what we're seeing. And, you know, that if I think about for next year, as Sam mentioned, you know, that we're anticipating and planning for a fairly stable operating environment, including wage inflation.
Lance Wilkes: Medicaid Redetermination that'd be great too thanks.
Speaker Change: So generally speaking as we've as we've come through this year.
Speaker Change: The wage rates that we're seeing across our markets are generally pretty stable I think we remarked before somewhere between the 253, 5% range is about kind of what we're seeing.
If I think about for next year as Sam mentioned.
Speaker Change: We're anticipating and planning for a fairly stable operating environment, including wage inflation, so that would be the wage part of that on bad debt impacts as we noted I would use just the volume as an example, but.
Mike Marks: So that would be the wage part of that.
Mike Marks: On bad debt impacts, you know, as we noted, I would use just the volume as an example. But, you know, if you think about the uninsured volume growth for equivalent admissions in the quarter at about seven percent, we give you a sense of that. But in terms of bad debt or uninsured costs, you know, it's pretty stable. And, you know, we're we don't anticipate significant changes to the stability as we go into next year.
If you think about the uninsured volume growth for equivalent admissions in the quarter at about 7%. We gave you a sense of.
Speaker Change: But in terms of bad debt or.
Speaker Change: On insured cost it's pretty stable.
Speaker Change: We don't anticipate significant changes to the stability as we go into next year.
Greg Hettenbach: Great. Our next question comes from the line of Greg Hettenbach from Morgan Stanley. Please go ahead. Thanks, Mike, can you touch on just the resiliency program of 600 to 800 million savings? Just how are you thinking about that in 2025 and beyond from a timing perspective?
Speaker Change: Great. Thanks.
Speaker Change: Our next question comes from the line of Greg Greg heading back from Morgan Stanley. Please go ahead.
Greg Greg: Thanks, Mike can you touch on just the resiliency program of $600 million to $800 million savings, just how you're thinking about that in 2025 and beyond from a timing perspective.
Mike Marks: Good question. As I think about resiliency, you know, we continue to see good output from the results of our work around our resiliency program. You know, a few points of that would be, one, the length of stay agenda or case management agenda, where, you know, this year we've seen about a one and a half percent reduction in our length of stay this year, which has been very helpful as we've managed both our labor and our capacity as we've gone through this year and accommodated additional volume growth. Labor management, which we've just talked about as we've gone here through, you know, the third quarter, our resiliency actions have allowed us to show margin improvement in labor and can really kind of contribute to, as we think about 25 and beyond, using this resiliency program to help fund and support the investments that we're making in our tech and innovation programs and still allow us to produce good returns, you know, to our global set of stakeholders.
Speaker Change: Yeah. Good question as I think about resiliency.
Speaker Change: We continue to see good output from the results of our work around our resiliency program.
Speaker Change: A few points of that would be one delinked stage in their case management agenda, where this year, we've seen about one 5% reduction in our linked to stay this year, which has been very helpful. As we've managed both our labor and our capacity as we've gone through this year and accommodated additional vol.
<unk> growth.
Speaker Change: Labor management, which we've just talked about as we gone here through the.
Speaker Change: The third quarter, our resiliency actions have allowed us to show margin improvement in labor and in it.
Speaker Change: Really kind of contributes to as we think about 'twenty five and beyond using this resiliency program to help fund and support the investments that we're making in our tech and innovation programs and still allow us to produce good returns.
Speaker Change: Our global set of stakeholders. So generally speaking I would say we're on track.
Mike Marks: So generally speaking, I'd say we're on track. And as we noted in Investor Day, you know, the next two or three years here are going to be largely using our resiliency program to pay for tech and innovation investments. And then as we kind of move deeper into the decade, you know, to support our margins and deal with the challenges that may come. But I'm pleased with the current status and the trajectory of our overall resiliency program.
Speaker Change: And as we noted at Investor Day.
Speaker Change: The next two or three years youre going to be largely using our resiliency program to pay for tech and innovation investments and then as we kind of move deeper into the decade.
Speaker Change: To support our margins and deal with the challenges that may come but I'm pleased with.
The current status and the trajectory of our overall resiliency program and that would be a status update that I would give for now.
Mike Marks: And that would be a status update that I would give for now.
Mike Marks: And then just a quick follow-up on professional fees leveling off on a sequential basis. Do you expect that to be stable in 2025 as well? Well, you know, it's, again, a little early to be given that level of detail for 25. Clearly, we are pleased and encouraged with the work that our operating and our physician services teams have been doing to deal with the pressures, and really specifically in the hospital-based physician world. You know, as you kind of walk through the quarters this year, you know, our first quarter grew 20% to prior year, our second quarter grew 13% to prior year, and now in third quarter, we're down to 10.
Speaker Change: Got it and then just a quick follow up on professional fees leveling off on a sequential basis do you expect that to be stable in 2025 as well.
Speaker Change: Well again, a little early to be giving that level of detail for 25, clearly we are pleased and encouraged with the work that our operating in our physician services teams have been doing to to deal with the pressures.
Speaker Change: And really specifically in the hospital based physician world.
Speaker Change: Walk through the quarters. This year, our first quarter grew 20% to prior year, our second quarter grew 13% to prior year and now in third quarter were down to 10, and we were able to keep that growth fairly sequential from second to third quarter I do think given what we're seeing in the results of our work that.
Mike Marks: And we were able to keep that growth, you know, fairly sequential from second to third quarter. I do think, given what we're seeing in the results of our work, that, you know, that's part of Sam's comment for next year of a stable operating environment. And so I think that I would, for now, until we get to January, I would largely articulate the PROFI environment in that same context.
Speaker Change: That's part of Sam's comment for next year of a stable operating environment and so I think that I would for now until we get to January I would largely articulate.
Speaker Change: The protein environment in that same concept.
Jamie Perse: Our next question comes from the line of Jamie Perse from Goldman Sachs. Please go ahead. Hey, thank you. Good morning. I was just looking for a Valesco update. What's the status of losses in the third quarter? Where are you in turning around that enterprise and getting improved pricing there? And just what are your latest thoughts on timing of when you can get that to break even or potentially profitable?
Speaker Change: Our next question comes from the line of Jami Paris from Goldman Sachs. Please go ahead.
Hey, Thank you good morning.
Jami Paris: Just looking for a velazco update what's the status of losses in the third quarter, where are you in turning around that enterprise and in getting improved pricing there and just what are your latest thoughts on timing of when you can get that to breakeven or potentially profitable. Thank you.
Sam Hazen: Thank This is Sam. On Valesco, we're pleased with the integration that's happened this year. We were able to assimilate, as we've mentioned before, 5,500 physicians from that particular group into HCA management systems and so forth. Our objectives with Valesco are to get it to an appropriate level of financial performance. This year, we are, in fact, on our plan, maybe slightly ahead of it, but it's not material to the company as a whole.
Sam Hazen: This is Sam.
Speaker Change: <unk>, we're pleased with the integration that's happened this year, we were able to assimilate as we've mentioned before.
Speaker Change: 5500 physicians from that particular group into HCA management systems.
Speaker Change: And so forth.
Speaker Change: Our objectives with velazco.
Speaker Change: Or to get it to an appropriate level of financial performance. This year. We are in fact on our plan.
Speaker Change: Maybe slightly ahead of it but it's not material to the company as a whole our long term objectives with velazco are to create an internal capability.
Sam Hazen: Our long-term objectives with Valesco are to create an internal capability with this particular physician group that basically turns this into a strategic asset. And by that, I mean we have the ability to improve our clinical outcomes and quality results for our patients because we have a physician group that is fully integrated as an employee base inside of HCA. We can build more rigor, more routines, more standards in how we do clinical processing. The second thing we think we can accomplish in our journey to make it a strategic asset is to improve efficiency, embed these physicians more into how we manage our emergency rooms, how we execute on our case management agenda, and so forth.
Speaker Change: With this particular physician group that.
Speaker Change: That basically it turns this into a strategic asset and by that I mean, we have the ability to improve our clinical outcomes and quality results for our patients because we have a physician group that is fully integrated as an employee base inside of HCA, we can build more rigor.
Speaker Change: The more routine some more standards and how we do clinical processing. The second thing. We think we can accomplish in our journey to make it a strategic asset as to improve efficiency embed. These physicians more into how we manage our emergency rooms, how we execute on our case management agenda and so forth.
Sam Hazen: And then thirdly, we think we can leverage this group. and help us with our tech agenda, to help us with our growth agenda by building relationships with referring physicians and help us with outreach. So those aspects of value creation that we see with Valesco far exceed sort of the financial performance inside the group. We continue to improve our reimbursement with the payers as it relates to hospital-based physicians, but these other elements provide more value, we think, globally to the organization and will be part and parcel to our core initiatives.
Speaker Change: And then thirdly, we think we can leverage this group.
Speaker Change: And help us with our tech agenda to help us with our growth agenda by building relationships with referring physicians and help us with outreach so those aspects of.
Speaker Change: Value creation that we see with velazco far exceed sort of the the financial performance inside the group.
Speaker Change: We continue to improve our reimbursement with the payers as it relates to hospital based physicians, but these other elements provide more value, we think globally to the organization and will be part and parcel to our core initiatives.
Unknown Executive: Okay, Jeremy, we'll take one more question. All right, perfect.
Speaker Change: Okay, Jeremy will take one more question.
Alright, perfect. Our last question comes from the line of Joshua Raskin from Nephron. Please go ahead.
Joshua Raskin: Our last question comes from the line of Joshua Raskin from Nefron. Please go ahead. Hi, thanks. Good morning. So I heard Medicaid adjusted admissions were down 8.5% in the quarter. It's actually not as big as the decline in total Medicaid lives in the market.
Joshua Raskin: Hi, Thanks, Good morning, So I heard Medicaid adjusted admissions were down eight 5% in the quarter, that's actually not as big as the decline in total Medicaid lives in the market. So I'm curious if these additional states up payments and sort of broad increases to Medicaid funding is impacted strategy around sir.
Joshua Raskin: So I'm curious if these additional state sub payments and sort of, you know, broad increases to Medicaid funding is impacted strategy around serving Medicaid patients. Are you thinking differently about capacity or, you know, service lines to, to Medicaid specifically?
Medicaid patients are you thinking differently about capacity or service lines too.
Joshua Raskin: Medicaid specifically.
Sam Hazen: Josh, this is Sam. Actually, no, the contrary. We are finding opportunities to improve offerings for Medicaid beneficiaries through some of our outpatient development in certain markets. The supplemental payment programs that Mike has alluded to over the past have created reimbursement in some situations where it makes it easier for us to invest in services and capabilities that help the Medicaid beneficiaries and produce better environments for them to get care. So, I don't see that anything has changed our core thinking around how we provide available services to that particular beneficiary, and we'll continue to evaluate that. I think for HCA as a whole, 17-18% of our adjusted admissions are Medicaid, so it's a large piece of our organization.
Speaker Change: Hi, Josh as Sam actually no to the contrary, we are finding opportunities to improve offerings for Medicaid beneficiaries through some of our outpatient development in certain markets.
Speaker Change: The supplemental payment programs that Mike has alluded to over the past have created reimbursement in some situations, where it makes it easier for us to invest in services and capabilities that help the Medicaid beneficiaries.
Speaker Change: And produce better environments for them to get care. So I don't I don't see that anything has changed our core thinking around how we provide available services to that particular.
Speaker Change: Beneficiary and we will continue to evaluate that I think for HCA as a whole at 17% 18% of of our.
Speaker Change: Adjusted admissions are Medicaid so it's a large piece of our organization. The decline. This year is really centered around redetermination, mostly not funding from one state to the other it was through that process of redetermination that some of the business moved.
Sam Hazen: The decline this year is really centered around redeterminations mostly, not funding from one state to the other. It was through that process of redetermination that some of the business moved amongst the payer classes, as we've indicated, over the year. That will slow down because we don't have a redetermination process next year, and we will continue to evaluate how to use our investments to properly allocate to meet the needs of our communities broadly, and in some cases, specifically for Medicaid.
Speaker Change: The payor classes as we've indicated over the year.
That will slow down because we don't have a redetermination process next year, and we will continue to evaluate how to use our investments too.
Speaker Change: Properly allocate to meet the needs of our communities broadly and in some cases, specifically for Medicaid.
Speaker Change: Yeah.
Frank Morgan: All right, that is all the questions in the queue, so I'll turn it back over to Mr. Frank Morgan for closing remarks. Jeremy, thank you for your help today and thanks to everyone for joining our call. Hope you have a great weekend.
Speaker Change: Alright that is all the questions in the queue. So I'll turn it back over to Mr. Frank Morgan for closing remarks.
Frank Morgan: Jeremy Thank you for your help today and thanks to everyone for joining our call I Hope you have a great weekend I'm around this afternoon. If I can answer additional questions you might have a good day.
Frank Morgan: I'm around this afternoon if I answer additional questions you might have. Good day.
Unknown Executive: That does conclude today's conference. Have a pleasant day.
Speaker Change: That does conclude today's conference have a pleasant day everyone.
Speaker Change: Why.