Earnings call transcript: HCA beats Q1 2025 EPS estimates, stock falls

HCA Healthcare reported a strong performance in Q1 2025, with earnings per share (EPS) of $6.45, surpassing analysts’ expectations of $5.78. Revenue also exceeded forecasts, reaching $18.32 billion against a predicted $18.26 billion. The company maintains robust financials with a "GREAT" overall health score of 3.2 on InvestingPro. Despite these positive results, HCA’s stock fell 3.66% in pre-market trading, reflecting investor concerns over broader market trends.

Key Takeaways

• HCA’s Q1 2025 EPS of $6.45 beat the forecast by 11.6%.
• Revenue grew to $18.32 billion, slightly above expectations.
• Stock declined 3.66% in pre-market trading despite strong earnings.
• Inpatient admissions and emergency room visits increased.
• Digital transformation and AI investments are ongoing.

Company Performance

HCA Healthcare demonstrated robust growth in Q1 2025, with a notable increase in inpatient admissions by 2.6% year-over-year and a 4% rise in emergency room visits. The company expanded its facility base by 3.3% and increased inpatient bed capacity by 2%. HCA’s focus on digital transformation and AI applications is expected to enhance operational efficiency and clinical technology development.

Financial Highlights

• Revenue: $18.32 billion, up from $18.26 billion forecasted
• Earnings per share: $6.45, up over 20% year-over-year
• Adjusted EBITDA margin improved by 110 basis points
• Cash flow from operations: $1.65 billion
• Capital expenditures: $991 million
• Share repurchases: $2.5 billion

Earnings vs. Forecast

HCA’s actual EPS of $6.45 exceeded the forecast of $5.78, representing an 11.6% surprise. Revenue also surpassed expectations by $60 million. This beat follows a trend of strong performance in previous quarters, highlighting HCA’s consistent operational efficiency and market positioning.

Market Reaction

Despite the earnings beat, HCA’s stock fell 3.66% in pre-market trading, closing at $341.41. Trading at a P/E ratio of 15.29 and offering a dividend yield of 0.84%, the stock appears undervalued according to InvestingPro’s Fair Value analysis. This decline may reflect broader market concerns rather than company-specific issues, as the stock remains within its 52-week range of $289.98 to $417.14. Discover more undervalued opportunities at Investing.com’s Most Undervalued Stocks.

Outlook & Guidance

HCA reaffirmed its full-year 2025 guidance, anticipating equivalent admissions growth of 3-4%. The company plans to maintain its wage guidance and expects capital expenditures between $5 and $5.2 billion. HCA is monitoring potential policy and tariff impacts that could affect its operations.

Executive Commentary

CEO Sam Hazen emphasized the company’s solid volume growth and commitment to reasonable healthcare reforms. He noted, "We believe we can use our financial strength, mission-oriented culture, and can-do attitude of our people to navigate through this uncertain period."

Risks and Challenges

• Potential impacts of healthcare policy changes
• Macroeconomic pressures and market volatility
• Tariff and regulatory uncertainties
• Competition in key markets
• Dependence on Medicare and managed care contracts

Q&A

During the earnings call, analysts inquired about the potential impacts of healthcare policy changes and HCA’s technology investment strategy. The company addressed trends in Medicare Advantage and clarified expectations for state supplemental payment programs.

Full transcript - HCA Holdings Inc (HCA) Q1 2025:

Conference Operator: Welcome to HCA Healthcare’s First Quarter twenty twenty five 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 Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead, sir.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Good morning, and welcome to everyone on today’s call. With me this morning is our CEO, Sam Hazen and CFO, Mike Marks. Sam and Mike will provide some prepared remarks, and then we’ll take questions. 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 and uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

More information on forward looking statements and these factors are listed in today’s press release and in our various SEC filings. On this morning’s call, we may reference measures such as adjusted EBITDA, which is a non GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA Healthcare Inc. Is included in today’s release. This morning’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. Good morning and thank you for joining the call. The solid fundamentals we have seen in our business over the past several quarters continued into the first quarter of twenty twenty five. This momentum generated strong financial results that were driven by broad based volume growth, improved payer mix and better operating margin. As we look to the rest of the year, we remain encouraged by our performance, the overall backdrop of growing demand for healthcare services and the increased investments we have made across the company to serve our communities better.

The people of HCA Healthcare also continued to deliver for our patients in key non financial metrics, including improved quality outcomes, more efficient emergency room services, which have accelerated time to discharge and increased satisfaction, and finally, inpatient capacity management with reduced length of stay. I want to thank my colleagues for their professionalism, their dedication to our mission, and the great outcomes they produce for our company to start the year. As compared to the prior year, diluted earnings per share as adjusted increased more than 20% in the first quarter to $6.45 Same facility volumes even with the leap year effect were favorable and in line with our expectations. Inpatient admissions grew 2.6% year over year, equivalent admissions grew 2.8%, and emergency room visits increased 4%. Most of our other volume categories, including cardiac procedures and rehab admissions, also had solid growth in the quarter.

Surgical volumes across the company were mixed. Inpatient surgeries were slightly up and outpatient cases were down. Same facilities revenue grew almost 6%. The volume increases I just mentioned, coupled with approximately 3% higher revenue per equivalent admission, drove this growth. We continue to make progress on our cost agenda.

Operating costs across most categories were in line with our expectations and operating margin improved on a year over year basis. As part of our network development plan, we used our capital spending to increase the number of facilities or sites of care by 3.3% to around 2,750, and we added approximately 2% to our inpatient bed capacity. Inpatient occupancy in the quarter was 77% as compared to 75% last year. As we move through the remainder of the year, we will focus on maintaining our operational discipline while continuing to invest appropriately in our strategic agenda. We believe this balanced approach should position the company favorably to meet our objectives.

Before I finish my comments, let me address the current federal policy environment, which I know is top of mind. We are in a very fluid situation. While we have a general sense for the new administration’s stated priorities, we do not have any specifics. It is unclear how these efforts might be carried out and what effects they may have on our business. We are very engaged in advocacy as it relates to health policy.

Our general approach is to support reasonable reforms. However, we do not support reforms that harm coverage for families or individuals, nor do we support policies that compromise the ability for hospitals across the country to care for people in their times of utmost need. I know you would like us to size the potential impacts of health policy risks and now tariff risks, but we are not comfortable with providing estimates at this time. We just do not have enough insight into what might happen. When we gain a better understanding, we will share more information as part of our quarterly earnings process.

As you would expect, we are developing plans in the event we face adverse impacts. Our planning draws from the experiences we had during the COVID-nineteen pandemic and considers both adjustments to operations and how we may utilize the flexibility our cash flow and balance sheet provide us. As part of this planning process, we will maintain a long term horizon and move forward with a sense of calm, steadiness, and confidence. We believe we can use our financial strength, mission oriented culture, and can do attitude of our people to navigate through this uncertain period and deliver the results our our stakeholders deserve. With that, I will turn the call to Mike for more detail on the quarter.

Mike Marks, CFO, HCA Healthcare: Well, you, Sam, and good morning, everyone. We are pleased with the results of the quarter, which highlighted continued momentum in the company and the strength of our operating performance. Sam covered our volume and revenue performance, so let me add a few notes on payer mix. Payer mix remained strong with same facility managed care equivalent admissions up 5.4% compared to the prior year quarter. As expected, Medicaid volumes began to flatten as the redetermination process sunset with a same facility equivalent admission decline of only 1.4% to prior year quarter.

And given the strong enrollment growth in the exchanges, our same facility equivalent exchange admissions increased 22.4% over prior year quarter. Adjusted EBITDA margin improved by 110 basis points compared to the prior year quarter, driven by operating leverage from our volume growth and strong cost management performance in the quarter. Salaries and benefits as a percent of revenue improved 80 basis points, supplies improved 30 basis points, and other operating expenses were basically flat to prior year quarter. Contract labor improved 9.3% from prior year quarter and represented 4.4% of total labor cost in the first quarter of twenty twenty five compared to 5.1% in the first quarter of twenty twenty four. Same facility professional fee costs increased 11% from the prior year quarter and were approximately flat sequentially compared to the fourth quarter of twenty twenty four.

Adjusted EBITDA grew 11.3% over the prior year quarter. You will recall that our guidance assumed the impacts of the twenty twenty four hurricanes would offset each other in 2025 and not produce a tailwind for us. This is what played out in the first quarter. Earnings were flat year over year in our hurricane impacted markets in the first quarter of twenty twenty five compared to the prior year quarter. I want to remind everyone that after considering Medicaid state supplemental payments and related provider taxes, total Medicaid reimbursement does not cover our cost of caring for Medicaid patients.

Considering Medicaid state supplemental payments and related provider taxes in isolation, we saw an $80,000,000 increase in net benefits in the first quarter of twenty twenty five compared to the prior year quarter due primarily to a reconciliation payment and a program accrual. Moving to capital allocation. We continue to deploy a balanced strategy of allocating capital for long term value creation. Cash flow from operations was 1,650,000,000.00 in the quarter. There are a few factors that drove our cash flow from operations down year over year, all of which relate to working capital changes that are timing in nature.

Capital allocation in the first quarter of twenty twenty five included 991,000,000 in capital expenditures, 2,500,000,000.0 in share repurchases, and a hundred and 80,000,000 in dividends. We also paid 227,000,000 for acquisitions with the close of the transactions for Catholic Medical Center in Manchester, New Hampshire and Lehigh Medical Center in the Fort Myers, Florida area. Lastly, we received $161,000,000 in proceeds from the sale of assets, primarily driven by the sale of Regional Medical Center of San Jose. This divestiture was an important component of our portfolio optimization. It was good for the community, and it will be accretive to ACF.

Our debt to adjusted EBITDA leverage remains at the lower half of our stated target range, and we believe our balance sheet is strong and well positioned for the future. As noted in our release, we are reaffirming our guidance ranges for the full year 2025. I will now hand the call back to Frank Voigman for questions.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Thank you, Mike. As a reminder, please limit yourself to one question so that we might give as many as possible in the queue an opportunity to ask a question. Abby, you may now give instructions to those who would like to ask a question.

Conference Operator: Thank If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is star one if you would like to join the queue. And your first question comes from the line of Anne Hines with Mizuho Securities. Your line is open.

Anne Hines, Analyst, Mizuho Securities: Hi, good morning. I know you reiterated guidance, but are there any major changes in assumptions embedded in that reiteration of guidance? And within that, I know you, talked about, Sam, your prepared remarks that surgeries were mixed. Did you expect them kind of flat to down because of the tough compare due to leap year? Or were they actually worse than your expectations?

Thanks.

Mike Marks, CFO, HCA Healthcare: Let’s deal with guidance first, and we’ll talk about, outpatient surgery. And so if I think about, you know, as as Sam noted in the initial commentary, we’re really pleased with the first quarter performance of the company. We continue to see solid volume growth. Revenue was in line with our expectations. And as I noted, we had strong expense management in the quarter.

As noted in our release, we did reaffirm guidance for 2025. You know, it’s first quarter. And, really, at this point in the year, we believe our guidance ranges continue to be appropriate, for where we are. Certainly, as we progress through the year, we will, you know, continue to update you on our subsequent earnings calls. Specifically, the outpatient surgery, you know, we’re really pleased, in the first quarter with our outpatient revenue growth, which, I mean, you take it in total, grew at a rate a bit higher than our inpatient revenue.

Just as a reminder, we really categorize our outpatient revenue into four key categories. Emergency services, outpatient surgery, which include both hospital based and our ambulatory surgery center platform. Ambulatory, things like our physician clinics and our urgent care clinics, and other hospital based services like cardiology, diagnostics, and observation. All four of our outpatient categories had revenue growth over the prior year quarter. On outpatient surgery specifically, we continue to see a slight decline in case volumes driven by lower acuity cases and by Medicaid and self pay.

However, we had good growth in net revenue and earnings in our outpatient surgery business overall, inclusive of both hospital and the ambulatory surgery center categories. I’ll finish and just note that the leap year effect did impact the stated volume declines. If you think about outpatient surgery at a 2.1% same facility decline, on a per business day basis, that’s about a 1% decline.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: And inpatient, Mike, would be up about 1% per business day. So maybe a little softer end than we had expected, but the first quarter is always difficult to predict surgical period because, typically, the fourth quarter is active. And so you’re dealing with respiratory, implications and new deductibles and co pays and so forth. But overall, we had, solid volume, activity across the company, and it was broad based across our service categories. As we mentioned, our cardiac activity on both surgeries and procedures were strong, inpatient and outpatient.

Our rehabilitation, as I mentioned in my prepared comments, were strong up all over 4%, I think, on a same store basis. Behavioral health was down, but behavioral health was down because we had repurposed quite a bit of the supply beds over the years and repurposed those for med surge in many instances. And so that was intentional in in in some facilities. Obstetrics volumes were up slightly, even with the business day decline, and one wouldn’t think that has an influence, but it does. So, overall, we’re we’re pleased with our volumes, and and we’re encouraged by the market share gains that we’re seeing across our company, and we believe we are doing the right things within each of our networks to develop them to meet the needs of the patients and the community.

Anne Hines, Analyst, Mizuho Securities: Great. Thanks for the detail.

Conference Operator: And your next question comes from the line of Pito Chickering with Deutsche Bank. Your line is open.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Hey, good morning guys and thanks for taking my questions and nice job in the quarter. I guess going to, know, I guess, be levered this quarter, you know, pretty extraordinary. You know, the, you know, like, know, the growth you saw year over year, I guess, you know, how do you guys sort get that much levered this quarter, You know? And, you know, going forward, you know, like, do you get that that that that productivity? Are you seeing, turnover increase as you’re sort of getting that level of productivity?

Are you sort of behind the hiring curve? I mean, how should we think about that level of productivity going forward, you know, after such a huge growth? Thanks. Okay. Peter, this is Sam.

I’m I’m not sure I understood that question completely. Let let me speak to the operating leverage, and I think that’s what you’re referring to. I mean, fundamentally, our business is a fixed cost business. We said that over time. And the more volume we can push through the organization, the more operating leverage we create, the more contribution margin that generates, and it helps our overall profitability and margins.

And we have regained, as we mentioned last year, our ability to create operating leverage. That shows up in labor costs. It shows up in some of our other operating expense categories, and we’re able to do that again with a very mindful approach to our expenses. And then at the same time, you know, using more of our asset base to absorb the volumes. With respect to our human resource agenda, we’ve we’ve continued to progress across the company.

Our turnover on both nursing and non nursing is less than it was year over year. Our contract labor utilization is down year over year. Overall engagement, with our most recent engagement surveys with our employees was at a high watermark for us. So we’re very encouraged by what our human resource and operating teams are doing to create an environment where our people can succeed and deliver the outcomes that our patients deserve. We believe, we can continue that, that the labor market in general is stable, and we have initiatives, inside the organization and then outside, if you will, with our Galen School of Nursing and other workforce development initiatives to deliver the people that we need to serve the demand.

The facility side, as I mentioned in my comments, is being satisfied by our capital spending, and we’re adding to our networks, very deliberately on that front. And then we’re using our workforce development, our engagement, and other HR initiatives to deal with the people side of that. So we’re pretty encouraged by all aspects of our operations. Our teams are doing a wonderful job in dealing with the volume and translating that, as I mentioned, to quality outcomes, efficiency, and great place to work for our employees. So with the SBA at this level, I guess, you look 43.6, I guess, since you’ve IPO, we haven’t seen that just low.

As your occupancy keeps on increasing, is it fair to think that this number can keep getting better to your point on the fixed cost leverage? Well, I I think, generally speaking, yes, it can improve as we deliver more volumes on the asset base that we have. And we will continue to use technology. We use our benchmarking and other tools to find ways to create efficiencies. And we feel, you know, that we’re in a pretty good spot and that we can leverage again the fixed cost that we have in our system to drive efficiencies if we can grow the volumes.

Pito Chickering, Analyst, Deutsche Bank: Thanks so much.

Conference Operator: And your next question comes from the line of AJ Rice with UBS. Your line is open.

AJ Rice, Analyst, UBS: Hi, everybody. The revenue per adjusted admission up 2.9%, I think, It was strong especially with surgeries off. Can you parse out a little bit more whether that was year to year improvement in DPP programs, rate updates generally, commercial mix, or anything? And then maybe just broadly commenting on what you’re seeing in contracting with managed care. Is is the debate in Washington having any impact on, the the the discussions with managed care?

Mike Marks, CFO, HCA Healthcare: Hey, AJ. Thanks for the question. This is Mike. When I think about our net revenue per equivalent admissions, you know, the the first thing I would call out is SpaceX. We we continue to have the same payer mix trends, you know, as I noted in my opening comments.

You know, acuity continues to be good, in that regard as well. I think, as I mentioned on the outpatient surgery comment, we we actually had a little more outpatient revenue growth than we did on the inpatient side. And even on outpatient surgery, you know, the the the case decline that we saw was really driven by lower acuity cases. And and from a payer mix perspective, on the outpatient surgery side continues to be driven almost entirely by Medicaid itself. So that payer mix influence is on both the inpatient and the outpatient side.

So generally speaking, I think we’re in, you know, in good shape on net revenue per equivalent admission in the quarter, and we were pleased with the the performance in that way. On on the payer side, and I’ll start, Sam, you please include. But, you know, we’re over 90% contracted for 2025 as you would expect. We’re over 75% contracted for 2026 and call it 25% contracted for 2027 at rates that are really similar to the last couple of years and and, you know, in in in context of our targets. We’re also pleased with our contracting cycle, and our access to lives with payers are really higher than they’ve almost ever been, both on the commercial side and on the exchange side.

So, you know, our work with our payer partners continues our contracting cycles continue to be productive, and I I think we’re off to a good start this year in terms of our net revenue per equivalent in this.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Yeah. And Mike, this is Sam, AJ. I think a couple of points are relevant here. Our inpatient surgeries as a percent of overall admissions was down 50 basis points. That’s not meaningful in the overall revenue equation.

I mean, obviously, we’d rather it be higher than lower, but it’s only down 50 basis points. Our critical care admissions were, yeah, at a really good, position as it relates to total admissions. So I think there are other aspects to acuity and their overall case mix, I think, was, you know, modestly up or, you know so all of that suggests that we still have the acuity within the larger population of our patients. With respect to the managed care contracting, our overall managed care positioning with respect to the contracts that we participate in has improved on a year over year basis. This year, we have two markets where we have added a very important contract to our overall portfolio of participation.

In Denver, we are now a participating provider broadly with Kaiser Health Plan in the Denver, Colorado market. That’s a very encouraging development. And then in Chattanooga, Tennessee, with Blue Cross of Tennessee, we have advanced our position with one of their products. So we’ve improved globally, our overall positioning for access to lives. And that’s played out in our Hicks and Exchange relationships as well.

And then, obviously, with Medicare Advantage, we continue to build capabilities there to support the Medicare Advantage payers as appropriate. So those are two important points, AJ, that I wanna bring up in addition to what Mike said.

AJ Rice, Analyst, UBS: Okay. Great. Thanks a lot.

Conference Operator: And your next question comes from the line of Whit Mayo with Leerink Partners. Your line is open.

Whit Mayo, Analyst, Leerink Partners: Hey. Thanks. Good morning. Just was wondering if you guys have detected any, changes with MA plan behavior denials, any dispute resolution changes, and, any changes on length of stay. Thanks.

Mike Marks, CFO, HCA Healthcare: Hey, Whit. Let me first kinda talk about the Medicare Advantage in context to the kind of the two midnight rule. And as we noted, really, on the fourth quarter call, we really did not see, you know, any additional movement from observation to inpatient status related to the adoption of the two midnight rule as we move through first quarter of twenty twenty five. That was our expectation, and and that’s really what, we saw. Medicare Advantage is now about 57% of our total Medicare admissions.

You know, a couple of notes on on the Medicare Advantage compared to traditional to your question. One would be that, you know, our Medicare Advantage observation mix, is still about 15% higher than our traditional Medicare observation mix, and that’s that’s pretty steady at this point. And, yes, Medicare Advantage continues to run a bit hotter, a little higher on length of stay than traditional Medicare as well. On on dispute resolution and and I’ll go broadly here, just, you know, Medicare Advantage, but, you know, there continues to be activity, as you would expect, in denials, and underpayments broadly with our payer partners. Our efforts that we have invested in over the last couple of years to strengthen our response to that are paying off.

And I would tell you that that is in first quarter that activities like denials and underpayments did not have a material impact on our financial results.

Whit Mayo, Analyst, Leerink Partners: Okay. My second question is I I I know, Mike, you said you’re not prepared to share any views on tariffs at this point, but is there any way to perhaps frame the percentage of supplies that you or HPG are are sourcing from overseas? Just anything would be would be helpful. Thanks.

Mike Marks, CFO, HCA Healthcare: Sure. You know, as Sam said at the beginning, we’re in a really dynamic and fluid environment right now with tariffs. So, you know, until we really have better clarity about the final status, by country, which goods are included or excluded, what the final tariff rates will be, You know, it’s really difficult to size, the impact ACA. You know, as you know and as we talked about on previous calls, our health trust organization has been working on this diligently, and I’m really proud of of our health trust team. And part of that work and I’ll talk about ’25 and then give you a couple of other numbers for context.

You know, for for 2025, part of their work was the ability to secure significant fixed pricing. You know, when you think about, finished goods, so the purchases of supplies of of finished goods, you know, about 70% of our supply expense is contracted with firm pricing for 2025. And just to to give you a sense, that’s upwards of 60% for some of all of 2026. Another point of context that I think is helpful, 75% of our supply expense comes from either The United States, Canada, or Mexico, or from products that currently have broad exemption from tariffs, such as pharmaceuticals. As I noted, HealthTrust continues to work on this.

They’re working on this to continue to secure fixed price contracting. They’re continuing their work around supply chain mapping and risk assessments, and they are also, deep in the middle of rationalizing suppliers and products as needed to deal, with this, this tariff risk environment. Lastly, I would say that, we’re working hand in hand with our partners in our supply chain, our key suppliers, as they continue to work on derisking and diversifying their supply chains and specifically away from China. So I do believe that, our tariff risk for 2025 is manageable, but I’ll reiterate, with to Sam’s opening comment that the environment is extremely fluid, and we are continuing to closely monitor as as as each day goes forward.

Ben Hendrix, Analyst, RBC Capital Markets: Okay. Thanks a lot.

Conference Operator: And your next question comes from the line of Ben Hendrix with RBC Capital Markets. Your line is open.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Hey, thank you very much. I just have a broader labor related question. We’ve heard from providers in the past that recessionary environments generally loosen the nursing labor market. Still seems like there’s a lot of competition. Just based on your observations from the past, how reactive is the labor market to recession expectations?

And is there any change to your wage inflation forecast in this current environment? Thanks. Well, our experiences are different through different recessions. I think, in general, your comment, Ben, is right. And that is that, the labor market tends to ease somewhat during a recessionary cycle, and that can put, some downward pressure on wages.

Now we went through the most intense labor market environment from 2021, ’20 ’20 ’2, and early part of twenty twenty three. So our wage trends have come down from that quite significantly. Will it come down further? Possibly. But it’s way too early to provide any kind of forecast with respect to what a potential recession could do to the labor market.

I think as we sit at this particular point in the year, we believe our guidance around our wages for 2025 will hold and be somewhere close to what we have indicated already.

Sam Hazen, CEO, HCA Healthcare: Thank you.

Conference Operator: And your next question comes from the line of Sarah James with Cantor Fitzgerald. Your line is open.

Sarah James, Analyst, Cantor Fitzgerald: You guys had strong growth from both inpatient and outpatient cardiac surgeries. How are you using your CapEx to support forward growth of that? Can you give us some insight into how you’re thinking about dividing your spend into high acuity versus low acuity or outpatient?

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Well, this is Sam. You know, our capital allocation within our capital spending hasn’t really changed, and I don’t anticipate it’s going to change materially as we push forward here. We have a very significant facility and ambulatory development strategy. Fortunately, the capital requirements for most of those facilities are small by comparison to what it takes to build out inpatient capacity. Today, we have about 6,200,000,000.0 of capital that has been approved and it’s in a construction or development phase that will come online in ’25, ’20 ’6, or the first part of twenty seven.

Those capital dollars go toward inpatient capacity. I think our inpatient capacity with respect to that pipeline is roughly two and a half percent plus greater than what we have today. So a significant portion of that goes toward the inpatient capacity. We have outpatient capacity that includes outpatient facilities, emergency room capacity, cath lab capacity as you spoke to, ambulatory capacity from a surgery standpoint. Those are smaller dollars in the overall scheme of what it takes to build out those type of facilities.

And then obviously, we have a lot of clinical technology that we invest in so that our physicians and patients have the latest access to clinical technologies that can provide a more efficient or a better environment for patient care. I don’t have the exact equipment spend within all of our totals there, but that is a component as well. So that’s largely unchanged. It’s growing because we are running the company at high levels of occupancy. We continue to have a nice pipeline of new projects that we think will make sense beyond the ones that we’ve approved, and it won’t be any material change in sort of the allocation of the dollars within those categories.

Conference Operator: And your next question comes from the line of Brian Tanquilut with Jefferies. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Hey, good morning guys. Maybe Sam I’ll follow-up just to that comment that you made in a different light. So as we think about CapEx spend for the quarter, it was a little lower than typical range like 5.4% revenue. So just curious if there’s anything there we need to be thinking about? And maybe broader capital allocation, good buyback during the quarter, how should we be thinking about pace of repurchases for the year?

Mike Marks, CFO, HCA Healthcare: Thanks. This is Mike. Let me cover the share repurchase first, and then we’ll talk about CapEx a bit. So as you will note or you noted in our first first quarter release, we completed 2,500,000,000.0 of share repurchase in the first quarter, and we anticipate completing a significant portion of the $10,000,000,000 authorization in 2025, you know, obviously, to market conditions and other factors.

On CapEx, you’re right. I mean, we spent $991,000,000 in the quarter, which seemed a little light is to your question. We still believe we’re on track of getting to the to our targeted level of capital spend and anticipate a bit of step up here as we go through the remaining part of the year. So we still think we’re in this 5,000,000,000, maybe as high as 5,200,000,000.0 of CapEx spend in the year. As Sam, indicated, you know, we continue to see a robust pipeline of of really good projects, from our markets.

And so believe that, that level of capital stands appropriate.

Ben Hendrix, Analyst, RBC Capital Markets: Awesome. Thank you.

Conference Operator: And your next question comes from the line of Andrew Mock with Barclays. Your line is open.

Ben Hendrix, Analyst, RBC Capital Markets: Hi, good morning. Hoping you can clarify your hurricane commentary. I think first you noted that hurricane earnings were flat year over year in your impacted markets, but I’m not 100% understand that because you have two markets that were hurricane impaired in Q1 this year that were not impaired at this time last year. And if that’s true, wouldn’t that point to a year over year tailwind for the full year as those markets continue to improve against a more negative impact in the back half of last year? Thanks.

Mike Marks, CFO, HCA Healthcare: Yeah. Thanks, Andrew. This is this is how we think about it. And you’ll recall when we did our 2025 guidance that our guidance assumed that the impacts of the hurricanes would offset each other during the course of 2025 and would not produce a full year tailwind for us. As it relates to first quarter, this is largely what played out.

If you take the earnings growth year over year, from our two main impacted markets in North Carolina division and and West Florida are specifically the Largo Medical Center. Our earnings were were flat year over year. In other words, the the the year over year earnings change was was about negative, about neutral, in those, in those two markets year over year. And and then I would just point you back to our our original guidance for the year as it relates to the full year impact of the hurricanes.

Conference Operator: And your next question comes from the line of Matthew Gillmor with KeyBanc. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Hey, thanks for the question. I wanted to ask about the competitive environment in your markets. So with the ongoing policy and macro uncertainty, do you see health system competitors behaving any differently in terms of their CapEx priorities or investments? Maybe that creates an opportunity for HCA, or is the competitive dynamic not really impacted by the macro at this point?

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: This is, Sam. I would say at this particular point in time, we haven’t seen any, substantial changes in competitors and how they interact in the markets. Now, obviously, if NIH funding continues to be challenging for certain academic medical centers that may influence their behaviors and spending, if there are other policy adjustments that take place that could play out. We do think, you know, with our scale and with our diversification across the the portfolio of markets, you know, that provides a different level of capability than a lot of our local competitors who tend to only be in one particular market. But, you know, our competitors in many instances have solid balance sheets, and we have to be able to anticipate their behaviors and their spending.

And as I mentioned in my comments, we have, in fact, regained growing market share in a large portion of our markets. So we’re very encouraged by the progress we’re making in light of the past spending and practices of our competitors. So if they’re compromised in any fashion going forward, then maybe that presents an opportunity for us to pick up even more market share.

Mike Marks, CFO, HCA Healthcare: Got it. Thank you.

Conference Operator: And your next question comes from the line of Justin Lake with Wolfe Research. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Thanks. Good morning. Just wanted to talk about the exchanges. First, the can you give us the percentage of volumes and revenue in the quarter that came from the exchanges? I apologize if I missed them.

And then bigger bigger picture question, just, you know, some of the academic work out there, guys, indicates that, you know, the if the subsidies do go away, there’s a real potential that a lot of these folks will go back to, commercial based insurance. I’ve seen numbers as high as, you know, almost half the people that lose coverage via the subsidies would go back to the commercial pool. Just curious if you have any view on that, in terms of what could happen there. Thanks.

Mike Marks, CFO, HCA Healthcare: Yeah. Good morning. This is Mike. Specifically on exchanges, let me give you a quick update here. I I think you know this, but 2025 was another year of strong enrollment growth.

In our states, the growth is about 12% over prior year. We’re up at you know, across United States now up to 24,000,000 loss covered. For HCA in the quarter, the exchange volume represented about 8% of equivalent admissions and about 10% of our revenues. So that’s the that’s the update, for the quarter. You know, I I think there’s still a lot of unknowns here about what could happen, if, the the EPTC, the enhanced premium tax credits do sunset and it’s or or not extending their current form or to some revised form.

And so we’re gonna have to wait and see exactly how that plays out, and and we’re really not in a position to comment on estimates related to, you know, how many go back to employee sponsored insurance. Although, you know, I I think we generally agree that there will be some that would go back to employee sponsored insurance. I think there’ll be some that would stay on the exchanges and maybe drop a metal tier. And then others that if these enhanced premium tax credits do sunset, that would lose coverage, and become uninsured. So, you know, we’re not in position yet, until we have a little more clarity around what’s gonna happen, in the legislative environment, Justin, to to to specifically size it or comment on others’ research in this space.

Ben Hendrix, Analyst, RBC Capital Markets: Thanks.

Conference Operator: And your next next question comes from the line of Joanna Gajuk with Bank of America. Your line is open.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare0: Hey, good morning. Thanks so much for taking my question. I guess, maybe first on just clarifying the comment around your DPP benefits. You said it increased year over year by $80,000,000. So can you confirm whether there was anything unusual in there?

Is it as expected, you know, what you had expected in the in the quarter? And do you still expect the full year to be flat to down $250,000,000?

Mike Marks, CFO, HCA Healthcare: Hey, Joanne. This is Mike. So, yes, during the quarter, we recognized approximately $80,000,000 increase in our net benefit year over year. The largest driver of this is really the increase in one state where we received a reconciliation payment and began accruing for that program in q four of last year. So that that was what drove it.

You know, as we’ve talked about, on past calls, the projecting or the the the guidance related to state supplemental payment programs are are really the most difficult thing that we that we predict. And so we we keep those updated for you, when we meet quarterly, obviously, on the calls. I would say now, based on what we know now after our first quarter activity that, we would be thinking about, for a full year ’25 versus ’24, something like 50,000,000 better to a $200,000,000 decline now. So that would be the general update that we would give you on range. As it relates to just kind of a general update on state supplemental payment programs, you know, we continue to generally get a flow of funds on our legacy programs.

I would say that we were encouraged over the last couple of weeks that we’ve seen a couple of approvals by CMS, one in Arizona and one in Nevada that were hopeful. And so, you know, largely, that would be kind of where we are right now on state supplemental payment programs.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare0: I’m sorry. So you said that Arizona and Nevada approved. So is that the reason why you’re thinking PPP payments for the year higher? Or there was just something that happened in q one that this $80,000,000 that makes you feel better about the year?

Mike Marks, CFO, HCA Healthcare: Yeah. I think I think that the the q one outcome was was a bit better than we expected. You know, our expectation was really that the first half of the year would be flat with, you know, potential declines primarily coming in the back half of the year. So, you know, based on this first quarter net benefit, we’re we’re comfortable now kind of sizing or estimating that the supplemental payments would be something like 50,000,000 better for the full year to a $200,000,000 decline. You know, really, that range is largely associated with Tennessee, Joanna, and we first of all, let me just say we did not record anything related to Tennessee in the quarter and that we have not received approval for Tennessee at this point.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare0: Because that was my question. So just to clarify, you you still assume Tennessee benefits in that full year number. Correct?

Mike Marks, CFO, HCA Healthcare: So let let’s take the quarter first. We recorded nothing in Tennessee in the quarter in the first quarter. So the the back half of 2024, the interim, payment was not received. We did not record it, and we have not received approval for the 2025, calendar year program from CMS. The the guidance if you think about this range of guidance from a $50,000,000 improvement to prior year for the full year to a $200,000,000 decline, Largely, that range is associated with whether or not Tennessee gets approved.

And and so that’s how I would context that for you, Joanne.

Conference Operator: And your next question comes from the line of Brian Langston with TD Cowen. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Hi, thanks. I’m wondering just how the surgical schedules and block time utilization is kind of looking and progressing. I’m not trying to get quarterly guidance, but just wondering if we can glean anything, you know, just given potentials for tariffs, recession and just, you know, consumer confidence declining. Wondering if there’s, you know, having any impact on the elective procedural side and patient behavior. Thank you.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: I I don’t this is Sam. I I don’t have, that information in front of us as far as, you know, forward scheduling. We have systems within each of our facilities, where that information is available. We don’t roll that up at the corporate level, so I’m not able to give you that answer at this point. I think, again, in general, we think demand, for health care is going to be there.

Our inpatient surgeries were up on a per business day. So as we normalize calendar effects and we have, you know, sort of comparable calendar dynamics, we expect our our surgical volumes to recover to, you know, levels that we think are in line with market share trends or market share gains that we have expected. So that that’s that’s how we’re thinking about it. And we continue to build our medical staff, which are critically important. As I mentioned, we’re adding facilities where we need to adding technology.

We’ve got a robust workforce development agenda to support our surgical services, and we continue to make inroads into better operations, which are beneficial to our physicians and surgeons and beneficial to our patients. So all that sort of converging on our our viewpoints that surgical demand is reasonable and we can execute underneath that.

Ben Hendrix, Analyst, RBC Capital Markets: Okay. Thanks.

Conference Operator: And your next question comes from the line of Joshua Raskin with Nephron Research. Your line is open.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Hi. Thanks. Good morning. I was hoping you could speak to technology agenda, maybe specifically some investments that you think differentiate HCA on the clinical care side, and I’m gonna assume that AI is a part of that conversation. We we are investing heavily in our our tech agenda.

One of the key initiatives that we have within our strategic plan is advancing technology and applying it broadly to the organization. We set up a a new auction department in our company called the digital transformation and innovation group, and they are leading the charge for us as we push forward on this particular initiative. We have three areas that we think we can benefit our business, using better digital tools, using automation, and using AI. The first categories are administrative functioning. When you think about our Paragon services, our supply chain services, human resource functioning, and so forth, we have, early tools that are being developed and implemented in those areas which are incrementally adding value.

The second category for us is operational. And by that, I mean what goes on in our facilities primarily our hospitals where we can improve staffing and scheduling and create better tools for our management teams, better, tools and insights for our employees as they schedule to meet their needs. Another area in our operational categories is with case management functions, as it relates to link to stay management, as it relates to prior authorizations. All of these things that go into the operations at a facility level, we are deploying tools in those areas. And then the holy grail for us is clinical as you mentioned.

We do have some opportunities there. We’re slowly moving into that space where we can use, again, some digital tools. We can use our data to, to source best practices, and we’re working to create value for our physicians and our caregivers in a way that they have, the advantages that come from those insights. We’re early in that space because it’s very, important that we be accurate. It’s very important that we be compliant and that the tools that we provide truly add value.

And, we’ve got some areas, obstetrics, where we’re working with one of our partners, where we think we can improve the labor, and delivery process with these tools, and we’ve got early signs of success there. But, it’s really early in that particular category. So I’m I’m I’m encouraged about where we are. We continue to find ways, to advance the use of digital tools and technology across the different spectrum of our business. And that I believe is going to be something that we build upon in the years to come.

Great. Thanks.

Conference Operator: And your next question comes from the line of Steven Baxter with Wells Fargo. Your line is open.

Pito Chickering, Analyst, Deutsche Bank: Hi. Thanks. Just another question, kind of the managed care mix. The 5.4 you gave on the managed care volumes, just to make sure, was that inclusive of the exchanges or excluding that? And if it’s been included, then we’d be able to give just a standalone, you know, managed care exchange over for the quarter?

Thank you.

Mike Marks, CFO, HCA Healthcare: Yes. Hi. This is Mike. So the the 5.4% equivalent admission, same facility growth in total managed care does include exchanges. If you would parse those apart, the exchanges were up 22%, and the, kind of core ease, you know, and it’s the same thing obviously as employee sponsored insurance, you know, was, was up about, let’s just call it, just short of half a point, over prior year.

Conference Operator: And your next question comes from the line of John Ransom with Raymond James. Your line is open.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Hey, good morning. I’m going to be the slow child in class, so forgive me. But if we’re just to look at Asheville and Largo, is your new guidance assume that the EBITDA is now flat in ’25 versus ’24?

Mike Marks, CFO, HCA Healthcare: So the the guidance you think about the full year guidance we gave on our fourth quarter twenty four, earnings call, what we indicated is that we thought with the lingering effects of the hurricane that the the earnings year over year earnings impact of the hurricane affected markets would, kind of be flat, would be neutral, and would not produce a tailwind, for the company. As what as our report out here in our first quarter call is is that’s largely what played out. So if you think about the year over year earnings change in West Florida, in the Largo area, compared to the year over year earnings change in North Carolina, this is flat were flat. You know, where they will offset each other, to to large degree, and and that’s that’s our update for the first quarter.

Pito Chickering, Analyst, Deutsche Bank: Okay. I see.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Thank you.

Mike Marks, CFO, HCA Healthcare: Sure.

Conference Operator: And your next question comes from the line of Lance Wilkes with Bernstein. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Great. Thanks. Can you talk a little

AJ Rice, Analyst, UBS: bit about how you’re seeing the downstream impacts from the pressure on the managed care organizations both in the quarter and the outlook going forward for the year? And what I’m thinking about is increased use or not increased use of value based care. Are you seeing any of the changes in deductibles or out of pocket for consumers and some of the products having impacts on bad debt or utilization? And then just a point of clarification, what do you see as far as flu impacts, both to the positive and negative, in the quarter? Thanks.

Mike Marks, CFO, HCA Healthcare: So let me cover, respiratory first, and then, we’ll get to your, payer questions. On respiratory volumes, you you know, I’ll refer you back to fourth quarter where, you know, clearly in fourth quarter twenty four, our our respiratory related volumes were were behind prior year, and we indicated that the respiratory season had a bit of a late start, in in compared to the previous year. So what we saw in first quarter of of twenty five was, you know, they were pretty significantly up over fourth quarter of of twenty four. But when I look at first quarter of twenty five compared to first quarter of twenty four, our respiratory volumes in total were pretty much in line. They were just a tick to prior year, our first quarter twenty four, pretty much in line with prior year levels.

And, you know, you may recall, but but if you go back to that prior year flu season, it started early. So it started kinda at the beginning of fourth quarter of twenty three, and it persisted pretty much through the end of first quarter of twenty four. So that’s the that’s the year over year comp, on the respiratory season. When I think about, the impact on, you know, patient receivables, You know? And you’ll remember from past conversations on this over the years, but we monitor this closely.

And and and what we’re looking at is kind of what happens over time to the patient portion or the patient balance as, you know, the employer benefit plan changes or design changes are made every year. Historically, for our commercial payers, we experienced increases in average patient balances in the mid single digit range on an annual basis. In our recent quarters, we have seen increases a little higher than that, but not material. The the increases certainly have been influenced by growth in health, exchange volumes, which tend to have a slightly higher patient responsibility compared to traditional commercial. On collectability, we generally maintain our historical level of collections on patient balances across either kind of our population.

As it relates to exchanges, the rate of collections on patient balances is a bit lower than the traditional employee sponsored insurance population. But while lower, the exchanges have not had a material impact on the collectability of our patient receivables in the aggregate. So that that’s a bit of an update there on, patient receipt.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: But I think it’s it’s safe to say, Mike, that value based care, co pays, and deductibles are in any fashion disrupting the demand curve. And that’s that’s that’s sort of our overarching view when we look across our markets and we look at what demand trends suggest. We don’t see those items influencing in any material way our thinking around overall demand.

Conference Operator: And your next question comes from the line of Ben Rossi with JPMorgan. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Hey. Good morning. Thanks for taking my question. So for the executive order from the other week, there was a call out on hospital acquisition costs for covered outpatient drugs at HOPDs. It sounds like this would be more geared towards drug administration.

And appreciate the uncertainty here with the broader discussion on Medicare site neutral But just curious how you’re thinking about the initial impact here. Would this encompass more of a lower acuity set of procedures relative to your broader set of outpatient services?

Mike Marks, CFO, HCA Healthcare: Yes. We’re certainly aware of the executive order from the administration on what on potentially our directing agencies to lower drug prices. We’re gonna have to see, you know, the the the draft rules that come out of this. We we believe they’ll be part of a public comment and notice period, and we’re gonna need that additional specificity to be able to kinda comment on what potential impact it could have on HCA.

Ben Hendrix, Analyst, RBC Capital Markets: Got it. Completely understand. Thanks. And

Conference Operator: your final question comes from Craig Hettenbach with Morgan Stanley. Your line is open.

Sam Hazen, CEO, HCA Healthcare: Great. Thank you. Just, Sam, going back to the demand backdrop, can you just talk about the durability of demand, in particular, in light of the equivalent emissions growth target of 3% to 4% this year, kind of how you see that playing out?

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Well, as I’ve just mentioned, I don’t think we, are seeing anything currently that suggests that the demand assumptions that we have are wrong. We looked at the first quarter. If you take the leap year effect in, our adjusted admissions were almost 3.8% up. So that’s a really good metric for us, and we’re encouraged by that year over year growth, as we mentioned. So from a competitive standpoint, we don’t feel like there’s anything happening that’s compromising our ability to gain share.

From sort of a model standpoint, I just mentioned that value based care and other efforts aren’t necessarily negatively influencing demand. And so as we push through the rest of this year, we continue to believe that our our range of assumptions around volumes hold and should materialize unless something dramatic happens. And at this point, we don’t know what that would be.

Sam Hazen, CEO, HCA Healthcare: Understood. Thanks for the color.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Thank you.

Conference Operator: And ladies and gentlemen, that concludes our question and answer session. I will now turn the conference back over to Mr. Frank Morgan for closing remarks.

Frank Morgan, Vice President of Investor Relations, HCA Healthcare: Abby, thank you for your help today, and thanks to everyone for joining our call. Hope you have a good weekend, around, this afternoon if you have any additional questions, to answer any additional questions you might have. Thank you.

Conference Operator: And this concludes today’s call. We thank you for your participation. You may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.