Q4 2024 HCA Healthcare Inc Earnings Call
Jeannie: More information on forward looking statements and these factors are listed in today's press release and in our various SEC filings.
Jeannie: On this morning's call we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure.
Speaker Change: A table, providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA Healthcare Inc. Is included in today's release. This mornings 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 Alright, Thank you Frank and good morning to everybody.
Sam Alright: The company finished the year with strong business fundamentals that were consistent with the previous quarters. This year.
Sam Alright: And for Health care services remained strong.
Sam Alright: Operations were in good order and stable and the company continued to see favorable investment opportunities.
Sam Alright: These fundamentals represent a good starting point as we enter 2025.
Sam Alright: Our teams have done a fantastic job and Remediated, a number of facilities in North Carolina, Georgia, and Florida that were impacted by the two major hurricanes, we experienced a few months ago.
Sam Alright: All of these facilities, including mission hospital in Nashville.
Sam Alright: The community's recovery efforts continue and Largo hospital in our West, Florida Division resume normal operations in the quarter.
Sam Alright: Okay.
Sam Alright: As we end 2020 for the first half of this decade has been another period of long term growth for the company. We have seen the operational improvements across key performance indicators and we have delivered increased value for our shareholders.
Sam Alright: These accomplishments position us well for the future I am grateful to our colleagues who made this happen.
Sam Alright: We believe the HCA way of combining our high quality local health networks with the capabilities of a national system consistently produces better patient outcomes drives.
Sam Alright: Drives greater innovation and efficiency and yield stronger financial results.
While gratified with these accomplishments.
Sam Alright: We will maintain our pursuits to improve outcomes further for our stakeholders.
Sam Alright: We believe the strength of our cash flow and balance sheet position.
Sam Alright: Positioned as well for investing further in our networks to increase access expand capacity and enhance clinical capabilities. They also allow significant investments in our people to improve training, while also creating career growth at our company.
Sam Alright: And finally, this financial strength creates opportunities to deliver value to our shareholders by effectively allocating capital to generate favorable returns.
Sam Alright: Diluted earnings per share as adjusted increased five 4% in the fourth quarter as compared to the prior year.
Sam Alright: These results included the effects of the two major hurricanes in the quarter, we estimate the financial impact from increased costs and loss revenue equated to approximately <unk> 60 per share.
Sam Alright: This was in line with the estimation, we provided on our previous earnings call.
Sam Alright: Revenue growth was approximately 6%.
Sam Alright: Demand payer mix and acuity continue to be strong across most service categories and markets.
Sam Alright: On a same facility basis inpatient admissions and equivalent admissions grew 3% emergency room visits increased two 4% inpatient surgeries were up two 8%.
Sam Alright: Outpatient surgery cases, while down one 3% again due to the strong payer mix and service mix, we had solid revenue growth in this service line.
Sam Alright: And lastly, rehab obstetrics and cardiac procedure volumes continued to be strong operating.
Sam Alright: Operating costs were well managed by our teams and remained in line with our expectations.
Sam Alright: Before I close you will see that our earnings guidance for 2025 aligns with the preliminary outlook, we provided on our prior call and with that I'll turn the call to Mike for details.
Mike: Thank you Sam and good morning, everyone I will provide additional comments on the quarter and year and then discuss our 2025 guidance regarding the fourth quarter. We are pleased with results of the quarter, which demonstrates the excellence of our teams in responding to challenges and still producing solid results.
Speaker Change: Sam noted, we estimate that the adverse hurricane impact in fourth quarter of 2024 was approximately $200 million or <unk> 60 per diluted shares in line with our expectations.
Speaker Change: These estimates do not include any insurance recoveries the company may receive in the future.
Speaker Change: Considering the hurricane impact we had good topline growth Sam.
Speaker Change: <unk> reviewed the volume information for the quarter.
Speaker Change: Our volume in the quarter was adversely impacted by both the hurricane impact and a depressed respiratory season compared to the fourth quarter of 2023.
Speaker Change: Same facility net revenue per equivalent admissions increased two 9% over prior year in line with our expectations.
Speaker Change: Consistent with our trends all year.
Speaker Change: <unk> remained strong in the fourth quarter of 2024 with same facility managed care admissions up nine 2% compared to the prior year quarter.
Speaker Change: While our operations performed well in the quarter adjusted EBITA margin declined 60 basis points compared to the prior year quarter.
Speaker Change: This decline is primarily related to the impact of the Hurricanes on our Largo Hospital in Tampa, and the North Carolina Division.
Speaker Change: Which had a 100 basis point unfavorable impact on adjusted EBITDA margin in the quarter.
Additionally expenses related to these hurricanes, including repair cost for our Largo Hospital drove the increase in other operating expenses as a percent of revenue and half of the supply increase.
Speaker Change: Adjusted EBITDA in the quarter grew two 6% compared to the prior year quarter, which reflects the impact of the hurricanes.
Speaker Change: Diluted earnings per share as adjusted in the fourth quarter grew five 4% over the prior year quarter also reflecting the impact of the hurricanes.
Speaker Change: Let me briefly highlight our full year results for 2024.
Speaker Change: We had strong topline growth of eight 7% with revenue per equivalent admission of three 2%.
Speaker Change: And equivalent admissions growing four 5%, we posted a 10 basis point improvement in adjusted EBITDA margin for the year.
Speaker Change: Adjusted EBITDA increased 9% over prior year and diluted earnings per share increased 15, 5% over the prior year.
Speaker Change: We estimate that the loss revenue and additional expenses from the Hurricanes adversely impacted full year 2020 for about $250 million.
Speaker Change: Our <unk> 73 per diluted share.
Speaker Change: Our full year incremental net benefit from supplemental payment programs was approximately 400 million.
Speaker Change: With fourth quarter being the lowest incremental net benefit of the year.
This is an increase from the $100 million to $200 million incremental net benefit we expected.
Speaker Change: Largely due to onetime payments and higher than expected program payments in a few states.
Speaker Change: When we consider the $250 million unfavorable hurricane impact.
Speaker Change: Prior year $145 million payer settlement.
Speaker Change: And the incremental net Medicaid supplemental program benefit in the year.
Speaker Change: We are very pleased with the core operating performance of the company in 2024.
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 $2 6 billion in the quarter and $10 5 billion for the year. This represents an 11% increase in operating cash flow in 2024 over prior year.
Speaker Change: Indicative of great work by our operating and administrative teams.
Speaker Change: Yes.
Speaker Change: Capital expenditures totaled $1, two 9 billion in the quarter and $4 9 billion in the year.
Speaker Change: And we paid $1 7 billion for repurchases of our outstanding shares during the quarter and $6 billion in the year.
Speaker Change: We paid $165 million in dividends for the quarter and $690 million for the year.
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: As a result, we are lowering our targeted leverage ratio from our current three to four times to 275 to 375 times.
Speaker Change: We believe this new range fits our profile and our anticipated use of leverage as a company, assuming no significant transactions or extra ordinary events.
Speaker Change: So with that let me speak to our 2025 guidance for a moment.
As noted in our guidance. This morning, we are providing full year 2025 guidance as follows.
Speaker Change: We expect revenues to range between $72 8 billion and $75 8 billion we.
Speaker Change: We expect net income attributable to HCA healthcare to range between $5 85 billion and $6 two 9 billion.
Speaker Change: We expect adjusted EBITDA to range between $14 3 billion and $15 1 billion.
Speaker Change: We expect diluted earnings per share to range between $24 five and $25 85.
Speaker Change: We expect capital spending to be approximately $5 billion to $5 2 billion.
Speaker Change: Our guidance assumes a growth in equivalent admissions between three and 4% and net revenue per equivalent admission between 2% and 3%.
Speaker Change: Regarding the effects of the 2024 Hurricanes on our earnings guidance for 2025, we expect a year over year increase in adjusted EBITDA from the reopening of larger.
Speaker Change: And a year over year decline in the North Carolina Division as our current assumptions in this market, we'll have lingering effects of hurricane Helene throughout much of 2025.
Speaker Change: The increase in Largo the decline in North Carolina are expected to offset and are not expected to produce a tailwind for us in 2025.
Speaker Change: Regarding Medicaid supplemental payment programs as we've said in these past. These programs are complex variable in timing and do not fully cover our cost to treat Medicare patients.
Based on current assumptions when we aggregate the impact of all of our supplemental payment programs our guidance contemplate the net effect of Medicaid supplemental payment programs to range from being flat to 2024 to a $250 million headwind driven.
Speaker Change: Driven by one time payments received in a few states in 2024.
Speaker Change: The new Tennessee program is considered in this range.
Speaker Change: We expect full year margins to be consistent with 2024 and cash flow from operations to range from $10 75 billion to 11, two 5 billion.
Speaker Change: As noted in our release this morning, our board of Directors has authorized a new $10 billion share repurchase program and we anticipate completing a significant portion in 2025 subject to market conditions and other factors.
Frank: In addition, our board declared an increase in our quarterly dividend from <unk> 66 to 72 per share and with that I will turn the call over to Frank for questions.
Frank: Thank you Mike as a reminder, please limit yourself to one question so that we might get as many as possible in the queue an opportunity to ask the question. Janine you may now give instructions to those who would like to ask a question.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session.
Speaker Change: If you have a question Kenny Star followed by the number one on your question on front you will hear from him.
Speaker Change: Sure.
Speaker Change: You wish to withdraw any press star followed by the number one if you are using a speaker phone. Please lift the handset before pressing on one.
Speaker Change: One moment. Please for your first question.
Speaker Change: Our first question comes from the line of Peter Takeaways from Deutsche Bank. Please go ahead.
Speaker Change: A.
Speaker Change: Good morning, guys and thanks for taking my questions I guess.
Speaker Change: This question will be on Medicaid supplemental and Thats, what to understand a little bit.
Speaker Change: One where we were in 2024 and its been bouncing around a little bit.
Speaker Change: So on the third quarter since the fourth quarter does that number change was that $40 million that you came in on the year I guess, you sort of bridge, where you were on the last time, you guided us into where it is now and then for 2000 2005 can you just sort of you can make sure that we bridge or where we are in 2004 to five.
Speaker Change: On Watson, our low end and high end of guidance for for Medicaid payments. Thank you.
Mike: Peter This is Mike.
Mike: Yes. So if you think about the net incremental benefit from our supplemental payment programs for the full year 2024, it's about $400 million.
Mike: As I noted in my comments fourth quarter was the lowest incremental net benefit of the four quarters in the year you may recall from our second quarter. The second quarter of 24 was the highest benefit at $125 million.
So that's kind of how it spread out it is the driver was really largely related to one time payments.
Mike: That came in in a few states and a couple of our state programs that came in a little more favorably than we expected. So that's where we landed and then as you start thinking about 2025 as I noted in my guidance.
Mike: When we consider the all of the various programs, noting the complexity and the variability in the moving parts.
Mike: We are projecting and estimating that our net effect of supplemental payment programs will range between flat to 2024 to upwards of $250 million headwind.
Mike: That is inclusive.
Mike: <unk>.
Mike: Pretty wide range of estimation related to the new tenancy program. So that's that's how it kind of.
Mike: Went through the year and Thats the basis of our projections for 25 or so so Mike actually just all I guess for 2024 are you, saying its 400 million.
Mike: <unk> was 125 and lowest in <unk> I guess can you just give us just a quarterly benefit because.
Mike: $40 million with to Q1, 'twenty five that team does not that high versus.
Mike: The rest of the quarter.
Mike: Any color on sort of how that flows through the whole to all year.
Mike: Well I mean, I think you can take Q to <unk> 125 at the high Watermark and then obviously first and third quarter would be a little bit higher in fourth quarter would be the lowest I mean thats. The thats. The best I can give you in terms of the flow through the year.
Mike: Alright, thanks, so much.
Speaker Change: Thank you. Our next question comes from the line of AJ Rice from UBS. Please go ahead.
Hi, everybody.
Speaker Change: It sounds like the.
Speaker Change: MAA.
Speaker Change: Managed care or Medicare rather.
Speaker Change: Same store admissions were strong I wonder because there was so much.
Speaker Change: Stay in the quarter around <unk> did you.
Speaker Change: Where you add in your pricing for 'twenty.
Speaker Change: 26, any anything new or different you are seeing in terms of.
Speaker Change: Utilization review denial rates anything along those lines.
Speaker Change: So.
Speaker Change: Hey, Jay this is Mike in terms of our contracting we are 80% contracted for 25.
Speaker Change: 60% contracted for 2006, and I think it's 20% contracted for 2007.
Still.
Speaker Change: On top of our range estimates or targets in terms of pricing.
Speaker Change: And as I think about denouncing underpayments.
Speaker Change: Clearly a lot of activity, but we put a lot of effort over the last couple of two or three years and really beefing up our capabilities in managing through the day now an underpayment process I would say when we think about not only fourth quarter, but the full year of 24, we are not seeing do not growth into now as being a material.
Speaker Change: Impact for the company at this point.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you. Our next question comes from the line of Mike Mayo from Leerink Partners. Please go ahead.
Speaker Change: Sure.
Mike Mayo: Hey, Thanks, Good morning, I just wanted to hear maybe some of the internal initiatives that may be moving to the forefront. This year I feel like you guys have been talking a lot about throughput ear optimization for a while case mix linked to stay all that anything on the backend with discharge management anything around length of stay and bottlenecks that you might be seeing around post acute.
Speaker Change: Thanks.
So.
Speaker Change: Case management inpatient throughput has been.
Speaker Change: A really strong initiative for us over the last couple of years with we even mentioned it in the Investor Day Conference last year.
Speaker Change: Our work continues and continues to strengthen.
Specifically when I think about that going forward into 2025, we have a number of initiatives within our case management infrastructure focused on improving the post acute care placement and discharge process and I might say, even especially with our Medicare advantage payers.
Speaker Change: And that work continues and its important but.
Speaker Change: If I kind of take stock of where we are today our length of stay performance in the year has been solid and we are we're forecasting another good year for length of stay management as we head into 2025 and.
Mike Mayo: And let me add to that Mike.
I mean, we have a number of initiatives that are.
Speaker Change: Yes progressing across the company and when you think about our network development initiatives. We continue to add facilities, you'll see that we've got more facilities at the end of this year than we did last year, so our our capital as well as some incremental acquisitions in some key markets is allowing us to expand.
Speaker Change: And the reach of our networks that showcasing itself and growing market share.
Speaker Change: What we're seeing in our market share data is really encouraging and lends itself to sort of continued opportunities in that particular initiatives. In addition to the case management operational initiatives that Mike was talking about we've had tremendous success with our emergency room operational improvement.
Speaker Change: Plan, as well and Thats yielded throughput improvements patient satisfaction improvements and growth, allowing us again to extend the reach of that channel and meet the needs of the community in an effective way and again as we push into 2025, we will see more emergency room.
Speaker Change: Bed supply inside of our networks as a result of the investments that we're making and then the ability to use those beds productively with our ER revitalization program, we're carrying the elements.
Speaker Change: Of success from that program to our operating rooms, we have an operating room optimization initiative that we think it's going to be very beneficial to our surgeons is off and also our patients and it mirrors a lot of the efforts and the progress we've seen with our emergency room and this involves.
Speaker Change: Turnaround time.
<unk> other elements of our efficiency thats important to our physician partners as well as our patients and then finally I will say that our labor agenda continues to improve this past year I'm really proud of our accomplishments as a company our employee engagement.
Speaker Change: Rodley across all colleagues and especially inside of nursing is at an all time high for the company.
Speaker Change: That has allowed us to reduce turnover and really improve.
Speaker Change: The capabilities of our facilities with having continuity in staffing are more competent workforce.
Speaker Change: The necessary capacity to really meet the demand. So we are at.
Speaker Change: A number of what I call winning plays that are beneficial to the organization responsive to the communities and really position our company for success as we push forward, we've talked about our longer term initiatives are longer term initiatives are geared toward.
But technology and using technology, where at our journey, we're already seeing early signs of success with how AI can improve aspects of our organization administratively.
Speaker Change: Operationally inside of our facilities and we think clinically as well so that's a very exciting agenda and I know others speak of AI, but within the processes that exist for us as a health care provider, we see a lot of potential to drive better quality greater efficiencies and even better manner.
Speaker Change: None of our business and so those those things continue.
Speaker Change: I think our capital allocation as another important initiative for the company. We are investing heavily back into the business, we'll invest somewhere between five and $5 2 billion. This year and then we've got the ability to use the cash flow and our balance sheet to deliver even more value through shareholder programs.
Speaker Change: That Mike alluded to earlier so all of these combined we believe to create value value for our patients.
Speaker Change: Value for our employees and value for our shareholders.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Bob <unk> from RBC capital markets. Please go ahead.
Speaker Change: Great. Thank you very much after another strong year of state exchange enrollment growth just wanted to get your thoughts on how you see commercial mix progressing and how how enrollment fared for you guys in your opinion, how it's going to impact, our Florida, and Texas and then any thoughts broadly on.
Speaker Change: The fate of the enhanced subsidies under the new administration any efforts you've made.
Speaker Change: Lobbyists or whatever.
Speaker Change: In that regard thank you.
Speaker Change: Alright, Thanks Ben.
Speaker Change: Clearly the enrollment inside the exchanges continue to strengthen.
Speaker Change: Think it's somewhere around $25 million at this particular juncture. So it's up 12% to 15% I think over 24, and we're seeing consistent growth across a number of HCA states. So that's a positive we believe it's a positive outcome for families.
Speaker Change: Creates greater access to care it improves outcomes. So all of that as a backdrop. We think politically is a positive and presents an opportunity for the Trump administration, we believe two <unk>.
Speaker Change: Sustain.
Speaker Change: Ensure that families have coverage.
Speaker Change: They have affordability and they have the opportunity to achieve positive outcomes further.
Speaker Change: For for themselves and really for their family so.
Speaker Change: We don't have any current insights into where this is going all we know at this particular juncture is that they are due to expire at the end of next year, we think the backdrop of growth the backdrop of satisfaction within the enrollment is a positive.
Speaker Change: And we see opportunities to work with the Trump administration defined a pathway forward to continue.
Speaker Change: Continue what's been a very positive community benefit we believe with the exchanges, we have a very robust agenda to partner with other organizations to.
Speaker Change: Work within our coalition to support advocacy here to achieve the outcome that we think makes sense for.
Speaker Change: For the different communities that we serve so it's too early for us to call anything on that but we are active in the process as you would expect.
Speaker Change: And in terms of your question about payer mix and where it landed healthcare exchanges now represents seven 5% of our equivalent admissions in 2024 and about 9% of our revenues.
Speaker Change: Thank you very much.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Anne claims from Mizuho Securities. Please go ahead.
Anne Claims: Great. Thank you I just wanted to ask about the Medicare two minute well how much impact do you think that had an inpatient admissions in 2024 and do you think it will continue to be a benefit I think last earnings call you gave a stat.
Speaker Change: That detailed the.
Anne Claims: The difference between Medicare.
Anne Claims: Vantage observation versus traditional Medicare fee for service can you remind us of what that stat is and do you think over time, you can close that gap.
Anne Claims: And that'd be great. Thank you.
Anne Claims: Yeah.
Hey, this is Mike so in terms of the impact if I if I look at kind of the movement from observation inpatient status consistent with the Medicare advantage two midnight rule for the full year 2024, and we estimate that it was equivalent to approximately 50 basis points of our overall admission growth.
Anne Claims: I would say that that's remained pretty consistent over the four quarters. So I don't think that it's going to be.
Anne Claims: You'll see much more movement as you go.
Anne Claims: End of 2025.
Anne Claims: As to the comparison.
Anne Claims: Medicare advantage observation mix to traditional I would note that Medicare advantage, Oxford nation.
Anne Claims: As a percentage of total to opt to ENN is approximately 20% higher than traditional Medicare.
Anne Claims: But I don't suspect.
At this rate that we're going to see material changes at.
Anne Claims: At this point, we're really focused on.
Anne Claims: Collecting on that revenue and working through the denial and appeal processes associated with with the Medicare advantage program I don't think Youll see a material change in kind of the volume trends that we've seen so far this year as we added 25.
Anne Claims: Yeah.
Anne Claims: Yeah.
Anne Claims: Yeah.
Anne Claims: Yeah.
Thank you. Our next question comes from the line of Andrew Mok from Barclays. Please go home.
Andrew Mok: Hi, Good morning, hoping you could spike out the performance of mission hospital in the quarter and help us understand what impact that had on same store volumes in the quarter and the pace of recovery throughout 2025, including any explicit EBITDA assumptions around hurricanes in the guidance.
Okay.
Andrew Mok: Let me let me just talk about volumes overall, Andrew as we think about fourth quarter.
Andrew Mok: It's 3% and our same facility admissions and equivalent admissions growth to prior year in the quarter first thing I might mention is it was a little bit of a tougher comparison to fourth quarter of 'twenty, three which had strong growth.
Andrew Mok: We did experience I mentioned this overall and again I'm speaking overall, not just related to North Carolina Division, but overall, we did experience a depressed respiratory season and fourth quarter of 2004 compared to fourth quarter of 'twenty three.
Andrew Mok: Our estimate is that this depressed respiratory season had about a one point drag on same facility admission growth to prior year and about a two point drag on same facility emergency emergency room visits growth to prior year.
Andrew Mok: Overall as a company the hurricanes as well had an impact on volume growth.
Andrew Mok: Primarily in October, but for the whole for the whole quarter.
Andrew Mok: Our estimates are somewhere between 20, and 40 basis points of drag on volume in the quarter related to hurricanes.
Andrew Mok: And that's directly attributable I'd also mentioned that you know in the month of October if you look at the rest of the state of Florida. There was there was clearly some some lingering effects as they kind of recovered and then we saw good recovery in November and December so.
Andrew Mok: That's kind of a tale of the tape on volume in the quarter.
Andrew Mok: Okay.
Andrew Mok: Yeah.
Speaker Change: And was there any explicit EBITDA assumption for hurricanes in the guidance.
Andrew Mok: Yes. So if you go back to my comments Andrew.
Andrew Mok: The way that we are guiding for hurricane impact into 2025 is is this that if you think about let's start with Largo dealing with larger hospital, we do expect a year over year increase in adjusted EBITDA from the reopening at Largo.
Andrew Mok: And a year over year decline in the North Carolina Division as our current assumption is this market, we'll have lingering effects of the hurricane throughout much of 2025, the guidance really contemplates that the increase in Largo and the decline in North Carolina are expected to offset and are not expected to produce a tailwind for us in 2025.
Andrew Mok: So that's the way to think about that.
Andrew Mok: Hurricanes and their impact into 2025.
Andrew Mok: Yeah.
Great. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Joanna <unk> from Bank of America. Please go ahead.
Speaker Change: Hey, good morning, Thank you for taking my question.
Speaker Change: So I guess.
Speaker Change: On a somewhat related question I guess on the cost side of things. So thanks for the color on the impact from the hurricane in the quarter.
Speaker Change: Thank you for the other Opex line.
Speaker Change: So I wanted to ask about professional fees.
Speaker Change: Talking about this for quite some time, but you know what.
Speaker Change: What was that you highlighted the higher than expected professional fees.
Speaker Change: Danielle into 25, so can you talk about what you're seeing there what do you assume in your guidance, we heard maybe radiologists that the next group of doctors are asking for Hyatt <unk>. So that's what you're seeing and also can you help us maybe also size deadline in Europe.
Speaker Change: The Opex line. Thank you.
Speaker Change: Okay.
Speaker Change: So professional fees are about 24% of other operating expenses. So that's how you would size it.
And as we've mentioned in the last several calls our operating teams have continued to work diligently to address the subsea pressure from the hospital based physician group component of our business.
Speaker Change: And as we've noted as we've gone through the year, we have been the cost curve on professional fees as we move through 'twenty four really due to these efforts.
Speaker Change: So as I think about.
Speaker Change: The guidance into 2025, I would I would say it like this.
Speaker Change: We expect the cost pressures related to physician cost to moderate a bit further in 'twenty five, but there's still going to be higher than just normal inflationary cost trends.
Speaker Change: That's how you would think about that flow too.
Speaker Change: The next year, maybe a double click on radiology.
Speaker Change: When youre looking at our hospital based physician categories, clearly the emergency room and hospital medicine segments have moved more fully through the business challenges that we see in this segment, you really especially given the significant work HCA has done with the acquisition and integration of Alaska.
Speaker Change: As it relates to radiology, we did see pressure as we've gone through 2024, and we expect that to continue into 2025.
Speaker Change: But keep in mind that radiology is at much lower portion of our hospital based physician subsidies.
Speaker Change: I'll just finish with this is that our teams have focused efforts.
Speaker Change: Between both our operating teams and our physician management teams focused on addressing radiology and and we do not expect it to be a material impact in 'twenty five.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Matthew <unk> from Keybanc. Please go ahead.
Matthew: Hey, Thanks for the question.
Speaker Change: Wanted to see if there is any commentary on the California wildfires I know you've got a couple of facilities and the la area, but any impact there to call out or is it just not big enough at the consolidated level to make a real difference.
Speaker Change: This is Sam, but we had no impact at our southern California hospitals as a result of the fires. We did have one of our facilities in Ventura County.
You know on notice so to speak in the sense that there was a cat as far I think it was that was in Ventura County, the Palisades far did not reach through the valley into Ventura County, but we were on high alert and we have a fire mitigation.
Speaker Change: [noise] tactics and that particular hospital due to its location and so forth and we continue to evolve that just like we do with Hurricanes and making sure that we can protect our patients and protect our colleagues and protect the asset.
Speaker Change: And we're Iterating if you will on our plan there to advance it even further and Riverside, California, there's been some fires in the proximity that have produced some smoke issues in the community, but no issue whatsoever on our facility there.
Speaker Change: So.
Speaker Change: We're fortunate that's a horrible event as everybody knows but we were on the other side of the canyon with our facility in thousand Oaks.
Speaker Change: Got it thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of Brian. Thank you that's from Jefferies. Please go ahead.
Speaker Change: Good morning, everyone. This is meghan hold on for Brian as we think about Q1 EBITDA are there any moving pieces, including some seasonality or nonrecurring items that we should be considering and then just a quick clarifying question on the supplemental payments.
Speaker Change: Refer to the new Tennessee program does that mean it was approved recently.
Speaker Change: Let me handle the second one first.
Speaker Change: So in the Tennessee program, we have been notified of approval of a partial year and so we have we.
Speaker Change: We see an approval that would in effect cover July one of 24 through December 31 24.
Speaker Change: And then they are transitioning that to a calendar year program beginning in 'twenty five the 2025 calendar year program, which is new has not been approved and so.
Speaker Change: The new administration will be addressing that so that's the status of the new Tennessee program.
Speaker Change: We don't give.
Speaker Change: Quarter by quarter guidance so.
Speaker Change: Our normal advisors just to follow our historical season seasonal trends.
Speaker Change: And we would stick with that so the 25 guidance is for the full year of 2025.
Speaker Change: Thank you.
Thank you. Our next question comes from the line of Justin Lake from Wolfe Research. Please go ahead.
Speaker Change: Alright, Thanks, it's Anna on for Justin have you guys attempted to size the potential impact of site neutral payments and if so does that alter your strategy at all surrounding your outpatient ASC footprint and can you tell us where also the same store revenue.
Speaker Change: Revenue growth was in the quarter.
Speaker Change: Okay.
So on site neutral.
Speaker Change: Let's start with just stating the obvious we're against <unk>.
Speaker Change: Program implementations that would cut Medicare hospital outpatient reimbursement, nor do we think that programmatically that it makes sense to pay the same rate for a hospital.
Speaker Change: Are you surgery, but you could use all of our service that operates on a 24 by seven basis with full capabilities physicians of staff and equipment.
If you would compare that for example to our surgery centers, who do.
Speaker Change: Generally operate eight to four Monday through Friday.
And do much less complex work the idea of paying the same rate for those.
Speaker Change: Not seem to make a lot of sense to us.
Speaker Change: As it relates to sizing the potential impact we have not seen a deal yet that would give us enough information to estimate the potential impact.
Speaker Change: Past as you've seen various proposals and discussions around this there's been a range of <unk>.
Speaker Change: Procedures being considered for Medicare site neutral.
Speaker Change: On one end of the range would be proposals around hospital based physician clinic visits and outpatient infusion facilities at that end of the range HCA would not be materially impacted.
Speaker Change: Given how we structure, our physician clinics and other draft proposals, we've seen certain outpatient surgical procedures being considered for cuts to hospital outpatient reimbursement.
Speaker Change: We would expect that those would have a bit more notable impact to HCA, but like a lot of these.
Speaker Change: Health care policy debates theyre going.
Speaker Change: Through the government right now we continue to monitor them closely as I'm sure you do.
Speaker Change: And we'll be we'll be tracking.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: And Mike I don't.
Speaker Change: See that any site neutral policy per se will.
Speaker Change: For us or cause us to rethink our strategy around building out our outpatient networks, we believe.
Speaker Change: We are.
Speaker Change: Finding opportunities to extend the reach of our.
Networks into new communities again make it more convenient and more efficient for the patient and then fully integrate that particular field.
Speaker Change: Facility into the larger hospital centric health system is.
Speaker Change: As part and parcel to our network development strategy. So I don't see any changes to that as a result of a Medicare site neutral provision if one were to.
Speaker Change: Be implemented.
Speaker Change: To your question around the growth in ASC revenues, it's about right at 5%, 6% growth over prior year.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Scott Fidel from Stephens. Please go ahead.
Speaker Change: Hi, Thanks, Good morning wanted to stick on on the policy side and was curious just understanding it's clearly still very early but.
Speaker Change: You've done any type of preliminary analysis around trumps tariff proposal. Then if you think there could be any net effect or economic impact from that and then also from some of the recent executive orders that he is already dead.
Speaker Change: Tossing out at a brisk rate as it relates to.
Speaker Change: Foreign.
Speaker Change: Workers and then an immigrant's et cetera, just curious if you think any of those may have an effect on either the labor or demand environment. Thanks a lot.
Speaker Change: Yeah on tariffs are held trust a group purchasing organization has been working on tariff mitigation strategies for many years.
Speaker Change: Including <unk>.
Speaker Change: Actions like fixed price contracting supply chain mapping and risk assessments now.
Speaker Change: Lot of work on sourcing.
Speaker Change: Many of our key suppliers have been working on de risking and diversifying their supply chains over the median over the last many years really kind of especially away from China.
Speaker Change: Like you we are closely monitoring the announcements on tariffs from the new administration, including which countries are targeted the rate of tariffs being implemented and potential tariff exclusions for healthcare related items.
Speaker Change: I would note that for 2025, we have about 70% of our supplies being contracted with firm pricing.
Speaker Change: As it relates to kind of sizing it we need more specific information on the details of these tariff policies as noted.
Speaker Change: And we're going to need that before we can produce additional.
Speaker Change: Estimates of impact.
Speaker Change: On the on the other related items, we're tracking those carefully.
Speaker Change: All of you are.
Speaker Change: We don't.
Speaker Change: Higher undocumented workers.
Speaker Change: And so the impact would be more on supply and demand for labor and those skills mixes and we're tracking it like you are in but no no special insider note that we can give you at this point.
Speaker Change: Okay.
Sarah James: Thank you. Our next question comes from the line of Sarah James from Cantor.
Speaker Change: Please go ahead.
Sarah James: Thank you.
Speaker Change: One of the clear Pearl Jam the bridge on the equivalent of muscle Grant's on the phone will help to the quarter correct.
Sarah James: Sounds like you're I'm Carl.
Speaker Change: Most of them are either offset each other.
Sarah James: EBITDAR, but what have been called on.
Sarah James: And then we're calculating 27 some alignment.
Sarah James: I'm not sure if we're seeing any pull forward of Cristina <unk> from consumers.
Concerned about expanded property overall Robertson about and then just the rest about so is that just conservatism.
Sarah James: Back to the more or is there anything.
Sarah James: Yeah.
Sarah James: I bet Rajeev.
Sarah James: Okay.
Sarah James: So when I think about.
Sarah James: Our 25 guidance on volume and so we're.
Sarah James: We're projecting a 3% to 4% growth in equivalent admissions for 25 and as you've noted we ran higher than that through September year to date call. It a 5% growth in in fourth quarter was a little bit more in line with that at a 3% growth.
Although as I noted on an earlier question, we did see in fourth quarter, a bit of impact with depressed flu season, sorry, respiratory season, and a little bit.
Sarah James: In fourth quarter related to Hurricanes.
Sarah James: As our bridge our volume into 25, I mean, I might note a couple of things one would be.
Sarah James: Probably the big one is just the health care exchanges, we had big enrollment growth.
Sarah James: 2020 for call it 30% and we had big volume growth in 2024 44, 45% growth in exchange volume in 2024, as we look at enrollment.
Sarah James: Into 2025 on the health care exchanges, we're seeing call. It 13, 14, and 15% growth in enrollment in our states for.
Sarah James: 2025, and so we do expect that they.
Sarah James: There'll be less volume growth and 25 related to health care exchanges than we saw in 'twenty four and Thats one of the big drivers of the pullback there.
Sarah James: I mentioned earlier that we had a an admission benefit related to the Medicare advantage two midnight rule in 'twenty for that I don't think repeats in 'twenty five.
Sarah James: So.
Sarah James: And then the other thing would be the Medicaid redetermination process that it was down this year I think it flattens out next year. So.
Sarah James: All in we're still forecasting what we think to be.
Sarah James: Strong demand for healthcare services and 25.
Sarah James: 3% to 4% growth is still above our long term guide of 2% to 3%.
Sarah James: And feels rational as we think about the balance of 2025 compared to where we landed in 'twenty four.
Sarah James: Thank you.
Our next question comes from the line of Jamie Paris from Goldman Sachs. Please go ahead.
Hey, Thank you good morning.
Sarah James: Just on M&A you guys have had a couple of smaller transactions that recently I wanted to see what you are seeing just in terms of market activity, how youre thinking about the portfolio overall, including adding scale in existing markets or go into new markets and just the <unk>.
Sarah James: <unk> you guys.
Sarah James: So on the deal front in 2025.
Sarah James: Yeah.
Sarah James: So our primary growth.
Sarah James: And capacity is going to be through our capital spending in I'll call. It organic measures, where we add beds supply we add outpatient facilities as we mentioned.
Sarah James: Those are a central element to our network development strategies and have proven to be very successful and have proven to be very productive from a capital return standpoint, we have as you've mentioned added.
Sarah James: When we can to our existing networks, we bought outpatient businesses, we've complemented our our hospital networks with rural facilities and surgical facilities, and so forth and that will continue.
Sarah James: <unk> ended 2025, we don't necessarily have.
Sarah James: Any significant items to point to at this particular juncture. However, we do have a new hospital acquisition that we are expecting to close in the first quarter in Manchester New Hampshire.
Sarah James: It will add to and round out our new Hampshire network by and give us a fee.
Sarah James: Fairly broader.
Sarah James: And more productive we think overall southern New Hampshire network, we're excited about that.
Sarah James: But.
Sarah James: Most of our investments are going to go toward oncologist organic system development will have to wait and see if the market starts to shift and more inorganic growth opportunities develop but at this particular point, we're not anticipating anything material.
Speaker Change: Okay. Thank you.
Sarah James: Okay.
Speaker Change: Our next question comes from the line of Ryan Lynch from <unk>. Please go ahead.
Ryan Lynch: Hi, Thanks.
Ryan Lynch: Same store inpatient surgical growth looked pretty strong in the quarter can you maybe just give us a sense on the types of procedures that was driving that and outpatient surgical again was down I think the last couple of quarters. You've said that was mostly in the Medicaid and uninsured categories, maybe I missed it in your commentary, but I'm just wondering if that's still the case. Thank you.
Ryan Lynch: Okay.
Sam Alright: So this is Sam on.
Sam Alright: The inpatient side, we did see a very solid growth in the quarter fairly broad based again I think our diversified.
Sam Alright: Array of service offerings allows us to move through cycles, and then also have less risk with the programs that we have but we saw strong neurosciences. We saw strong orthopedics we saw.
Sam Alright: Solid general surgery and vascular so it was really broad based on the inpatient side on the outpatient side again, it's driven largely by Medicaid declines which were down 10%.
Sam Alright: Our shoal and exchange volumes were up a little over 1% cell.
Sam Alright: Self pay was down so that's why we indicated that our revenue growth and our profitability growth within our outpatient surgeries are category was up.
Sam Alright: Again in the quarter and for the year because of the mix and the payer mix.
Sam Alright: And that's added to.
Sam Alright: More capacity for those type of cases, so were not <unk>.
Sam Alright: Concerned about the outpatient surgery activity in the company when we look underneath the hood.
Sam Alright: Okay.
Speaker Change: Alright, Steve Baxter from Wells Fargo. Please go ahead.
Speaker Change: Hi, Thanks for the question I'm, just trying to understand some of the moving parts in the quarter, a little bit better I mean, it looks like broadly you met expectations in the quarter, but the Medicaid supplemental benefit on a full year basis is now I think $200 million larger than what you discussed on the third quarter call and Hurricanes I think came in at maybe when.
Speaker Change: The guidance range that you previously provided I think what people are trying to square those moving parts and whether that's the right way to think about it or that the miss on interpretation of how to look at the quarter. Thank you.
Mike Mayo: Sure Hi, this is Mike.
Mike Mayo: The way I would frame fourth quarter.
Mike Mayo: As you kind of think through the moving parts here. The first is we've mentioned would be the hurricane impact as noted.
Mike Mayo: In terms of the supplemental payment benefits.
Mike Mayo: Think our description of the fourth quarter, having the lowest portion of the net benefit in <unk> payments for the year as a kind of a good way to think about that component.
Mike Mayo: And then a couple of other things I might mention when you're when you're thinking about our fourth quarter of 24 earnings growth or adjusted EBITDA growth would be one the fourth quarter of 2023 was very strong. So it was a little bit of a tougher comparison in fourth quarter of this year to last year.
Mike Mayo: And then the second thing just to keep in mind and this is somewhat related to the depressed respiratory season is that our mission growth in the quarter was eight 3% versus if you think about more akin to 5%.
Mike Mayo: September year to date of 24, so those are some thoughts I might mention.
Mike Mayo: If you look at that.
Mike Mayo: Gross growth rate. It we do believe it's consistent from a launching point as we think about the midpoint of our 2025 guidance range as well. So we're pleased with the quarter and felt like.
Mike Mayo: Given everything the company was dealing with in the fourth quarter of 2024. It was it was a good quarter.
Mike Mayo: Thanks, and just to clarify the Tennessee portion of the 2020 for payment recognized in the fourth quarter or is that in the 2025 guidance now thank you.
Mike Mayo: It was not recognized in fourth quarter of 24, it'll be 25.
Mike Mayo: Okay.
Mike Mayo: Yeah.
Mike Mayo: Okay.
Mike Mayo: Josh.
Mike Mayo: Please go.
Mike Mayo: Uh huh.
Mike Mayo: Hi, Thanks, good morning.
Speaker Change: Could you speak a little bit more to the ASC performance in the quarter, maybe more specifics on rate versus volume underneath that 5% to 6% revenue growth that you talked about and then more broadly how you think about the opportunity and I'm specifically interested are there any markets, where you've got significant inpatient.
Mike Mayo: Acute care share, but may be not there on the ASC side yet.
Speaker Change: Okay.
Speaker Change: So, let's kind of start with the numbers, we're at 124 surgery centers now.
Speaker Change: In my previous comment I mentioned that the net revenue was up 5% to 6% in the quarter. The case volumes were down 1% in the quarter.
Speaker Change: We feel good about our ambulatory surgery Center network. They are an important part of our overall network in the markets, we serve and it'll be it'll continue to be a part of our network development and optimization work as we go through into 'twenty, five and beyond as part of that work Sam I don't know if I'm sitting here.
Speaker Change: It is sort of canvassing across the company and thinking about the number of surgery centers vis vis the number of hospitals that we have and we do have a few market for a variety of reasons that don't have you know.
Speaker Change: Sort of on the average number of facilities per hospital, we've talked about you know on average we have roughly 14 outpatient facilities, including ASC clinics urgent care and so forth per hospital. That's an average yeah, we havent submarkets because theres no search.
I forget a need in some markets, where we can move much more quickly and aggressively to build out our outpatient network in some markets like in Georgia, where they have restrictive C O N. It limits our ability to execute.
Speaker Change: Strategy is the same in Virginia, and North Carolina. So you have some differences because of those dynamics, where we have sort of control over our own destiny. If you will we're fairly consistent with.
Speaker Change: A large outpatient network, including <unk> per hospital, so I'm really struggling to point to a particular market, where we feel like we are.
Out of position if you will in this space, Mike talked about 125 ambulatory surgery centers, we probably have another 20 or 25.
Speaker Change: Geos centers that we don't even include in our number and Thats part of our larger outpatient network. Those continue to grow incrementally also so.
Speaker Change: Think the limitation for us it's mostly regulatory.
Speaker Change: And we have to work our way through that as you would expect.
Speaker Change: Through that administrative process.
Speaker Change: Helpful. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: Great. Thanks, a lot could.
Speaker Change: Could you talk a little bit about the.
Speaker Change: The progress on labor and labor agenda, you've been making in particular talking to the peso hirings.
Speaker Change: In like nurses and support staff in 'twenty, four and what the guidance is what's implied in 25, maybe a little commentary on wage inflation and then if you could just give a little background on what's the total exposure in the supplemental programs. These days and what would be the margin Medicaid without those programs. Obviously those are the central but.
Speaker Change: Can I get to an appropriate margin level there. Thanks.
Speaker Change: Yes.
Speaker Change: Let's cover labor one.
Speaker Change: I think a good way to measure it.
Speaker Change: The progress we've been making is kind of looking at our use of premium labor contract labor.
Speaker Change: And contract Labor continues to improve and it was down 8% or so for the quarter to prior year, our contract labor as a percentage of <unk> was it was down to four 6% four 5% in the <unk>.
Speaker Change: In the quarter.
Speaker Change: And it really represents I think a lot of really good work that our teams have done both in terms of improving the retention and reducing the turnover rates that we've seen over the last couple of years coming out of the pandemic.
Speaker Change: And a lot of good work on workforce development.
Speaker Change: Including targeted hiring.
Speaker Change: Our workforce development plan is robust we've talked in the past about that.
Speaker Change: We're continuing to add Galen oncologists and nurses in our key markets, we're continuing to see increases enrollment.
Speaker Change: <unk> and Galen and we have a robust.
Speaker Change: Academic Medicine plan, where we go out and work with other nursing schools really across our markets.
Speaker Change: And we're really large higher graduate nurses, so I think overall.
Speaker Change: The labor agenda is gone and progressed really well in terms of wages in fourth quarter or the wages were stable and wage inflation was stable and our guidance really contemplates. If you think about our margin guidance really contemplates a steady operating environment as we head into 2025.
Including overall wage inflation being what I think is stable and rational so we're in a good spot on labor.
Speaker Change: On Medicaid.
Speaker Change: I'll mention I'll just mention this it when you take.
Speaker Change: Total Medicaid reimbursement, including the effects of supplemental payment programs Medicaid, we're still short of covering the cost of care around Medicaid.
Speaker Change: These programs are important and they are important to the industry and not just HCA, but the wide range of not for profit and public hospitals across across America. So.
Speaker Change: That's where I'll leave on margins for Medicaid.
Speaker Change: Yeah.
Speaker Change: Great. Thanks.
Speaker Change: Jeanine, maybe time for one more we're right at the top of the hour.
Speaker Change: Thank you. Our next question comes from the line of Bam Rosie from Jpmorgan. Please go ahead.
Bam Rosie: Good morning, Thanks for squeezing me in here for one last one so through 2025 Capex guide at about $5 1 billion I think historically you've waited that's it.
Speaker Change: Growth between.
Bam Rosie: Maintenance and growth Capex.
Bam Rosie: That's what the hurricane recovery in fine shape in this prioritization in the near term right.
Bam Rosie: All up their considerations like that.
I think that's a fair number that hurricane is not changing our capital spending.
Mike Mayo: The dynamics in North Carolina, really werent around physical plant Destructions community destruction are our hospitals, mostly were on higher levels than the community as a whole. So we didnt experience. It in Largo, where we dealt with that that was mostly repair cost as Mike mentioned in his commentary.
Mike Mayo: So our capital spending is really a consistent and it's geared toward our network development, it's geared towards making sure we have the clinical capabilities and the environment necessary to deliver high quality care. So that will continue.
Mike Mayo: Okay.
Mike Mayo: Got it thank you.
Mike Mayo: <unk>.
Mike Mayo: Okay Janine.
Speaker Change: That concludes our Q&A session I'd now like to turn the call a little bit about the Santa Clara.
Mike Mayo: Closing remarks.
Speaker Change: Jeanine and thanks for your help today and thanks to everyone for joining the call.
Speaker Change: We around this afternoon, if we can answer any additional questions. Thank you.
Speaker Change: That concludes our conference call for today, you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Why.