HCA Healthcare at KeyBanc Forum: Strategic Growth Amid Challenges

On Wednesday, 19 March 2025, HCA Healthcare (NYSE: HCA) participated in the KeyBanc Annual Health Care Forum 2025. The discussion highlighted the company’s strategic growth initiatives and the challenges it faces in the current policy landscape. HCA’s focus on expanding its market presence and investing in technology was evident, alongside its proactive response to policy uncertainties.

Key Takeaways

• HCA Healthcare is guiding for a 6% EBITDA growth in 2025.
• The company plans to invest $5 billion to $5.2 billion in capital investments in 2025.
• HCA is expanding its inpatient and outpatient facilities, adding 600 inpatient beds annually.
• Technology advancements include the Meditech Expanse system and AI-driven tools like Tiffany.
• Advocacy efforts focus on policy challenges, including Medicaid funding and tax credits.

Financial Results

HCA Healthcare reported a 9% EBITDA growth last year and is projecting a 6% increase for 2025. The company allocates 45% to 55% of its operating cash flow to capital investments, translating to $5 billion to $5.2 billion this year. HCA has increased its market share from 23% to 27% over the past decade and aims for 29% by 2029-2030.

Operational Updates

HCA Healthcare continues to expand its capacity by adding approximately 600 inpatient beds annually and aims to develop 20 outpatient sites per hospital over the next decade. The company is also advancing its technology deployment, with the Meditech Expanse system expected to be 20% complete by the end of the year. The AI-driven scheduling tool, Tiffany, is currently in use at 50 hospitals and will expand to 80 next month.

Future Outlook

Looking ahead, HCA Healthcare is focused on achieving its 6% EBITDA growth target for 2025. The company is actively advocating for policy changes that support its operations, such as enhanced premium tax credits and Medicaid funding. HCA’s resiliency agenda is designed to navigate potential funding reductions, emphasizing efficiency and adaptability.

Q&A Highlights

During the conference, CFO Mike Marks emphasized the importance of operating in fast-growing markets and leveraging scale for strategic growth. He highlighted the role of data in digital transformation and HCA’s commitment to advocacy and resiliency planning in response to policy challenges.

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - KeyBanc Annual Health Care Forum 2025:

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Well hello, I think we’re ready to get started. This is the HCA Healthcare presentation. My name is Matthew Gilmore and I lead Healthcare Services Research Coverage at KeyBank. Joining me on screen is HCA’s CFO, Mike Marks and VP of Investor Relations, Frank Morgan. As most of you know, HCA is one of the country’s leading providers of healthcare services encompassing 190 hospitals and approximately 2,400 ambulatory sites of care across 20 states and in The UK.

HCA is distinguished by a number of things, but one of the main ways is by the depth of its local market hospital networks that are concentrated in faster growing markets. This will be a fireside chat format, so I’ll be leading Q and A. We do, want to have your participation, so if there’s questions from the audience, there’s a dialogue box to submit those and we’ll get them addressed. So with that, Mike and Frank, welcome and thanks for being here.

Mike Marks, CFO, HCA Healthcare: Good morning, good afternoon, good afternoon.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: So I, you know, I’ve been trying to start these conversations at a, you know, somewhat higher level before we, you know, dig into some of the financials and some of the policy questions that I know are are top of mind. But but Mike, I thought we might sort of start off with the areas where HCA is particularly distinguished and I know you compete against really tough nonprofits in your local markets, but I just thought you might kind of give a quick overview in terms of, you know, how the company is distinguished sort of locally relative to the, relative to the competitive set. And then we’ll kind of get into a State of the Union from there.

Mike Marks, CFO, HCA Healthcare: Sure. When I think about our 43 markets, and you mentioned this in our opening, but we’re in markets that grow faster than the national averages with strong economies and frankly, good coverage environments. If you think about kind of the managed care, the employee sponsored insurance, the healthcare exchanges, and that’s helpful as a healthcare system. So we always say kind of where you operate is almost as important as how you operate. And we’re blessed with these 43 markets to have really solid positions in fast growing strong economic markets.

We’re generally either number one or number two in market share in the markets we’re in. We’re relevant. We’re relevant in terms of patient care in the communities. We’re relevant to payers. We’re relevant to suppliers.

And frankly, in the competition for physicians and nurses, it’s important to be relevant. And so we believe that the strength of our markets is one of the key characteristics of our success. We really combine that with the idea of operating at scale. And so the ability to kind of leverage a growth plan, a strategic plan, and fund that plan through strong capital investments and provide really strong corporate support that really helps our local markets be better than they would be if they were a stand alone system. And we do that with our shared service platforms, we do that with our balance sheet and funding capital investments, and we do that with a lot of corporate support departments in functional areas that provide operating support to our facility.

So it’s this combination of really strong local markets where we have relevance and strength coupled with scaled corporate solutions and support that help these local markets be better than they would be otherwise. And and I think that’s really the the the success of HCA strategically.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: And that’s translated into a really durable sort of EBITDA growth outlook that you have had out there four to 6% growth. You know, last year was a lot stronger than that at 9%. But I thought you might just provide some comments in terms of, you know, what are some of the areas that have been driving strength in the in the EBITDA growth in the most recent periods.

Mike Marks, CFO, HCA Healthcare: Sure. I mean, I think it clearly starts with volume. You know, if you go back to kind of the decade ending 2023, you know, we’ve had this long track record of growing our equivalent admissions 2% to 3% per year. As you just noted, really 2024 and 2023 to a degree as well, really was strong. And I think there’s a host of reasons for the strength in volume that we’ve seen in the last couple of years.

The first is back to the markets and we’ve seen really strong population growth and growth in demand for healthcare services at a really strong level. I think our capital investment program where we’re building out this network of facilities around our hospitals in the markets has allowed us to really do two things. One, it has allowed us to add capacity to service this elevated demand in a way that has been really competitive for us. And then number two, it’s allowed us to continue to build out our network of outpatient facilities, really meet the patients where they are in the marketplace. And that’s allowed us to take share.

So growing demand and capturing that demand, increasing your competitive position and then increasing market share combined has really allowed us to grow volume at an elevated way. And we thought it was durable enough to guide 2025 a little bit above our long term guide as well at 3% to 4%. You couple that with our net revenue per equivalent admission agenda, our pricing area, We’ve had good, steady and consistent pricing growth, both on with our commercial payers and with governmental payers. We’ve had a long standing tradition of investing in our service lines to both deepen our service lines and broaden our service lines in the market. This has led to acuity growth, which has really helped our net revenue rate continue to grow as well.

And then we’ve been blessed really in the last couple of years and going into ’25 as well with really good payer mix. And I think one element of that payer mix that speaks to demand growth as well is the healthcare exchanges. And we just had a significant growth in healthcare exchange enrollment in 2024, over 30% in our markets. And then in 2025, it came in even better than we thought. I mean, we kind of came into ’twenty five thinking that healthcare exchange enrollment would be maybe 8% to 10% increase and ended up being closer to 13% to 15% increase.

So the coverage environment has been really strong and that’s helped our payer mix. And then you couple the top line growth that we’ve been able to produce with strong expense management. So if you look at the margin profile of the company, we’ve had good margin performance, good expense management. Some of that is coming off the pandemic and really being able to capture the things like staffing stability, wage stability. And then our general financial resiliency action plan has allowed us to really perform well on margin.

So at the end of that has been, as you noted in 2024, really strong EBITDA growth. And then if you think about 2025 guidance, we’ve got it really at the top end of our long term rates on EBITDA guidance right at 6%. So yeah, those would be the drivers as I see it, Matthew, on our ability to produce EBITDA growth.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Yeah. It’s been remarkable in terms of just the durability of the volume growth and, you know, clearly a lot of there’s some environmental stuff, but there’s also a lot of company specific drivers as well. On those lines, I did I did wanna ask about, Asheville. I know that was impacted last year by hurricanes, which, you know, who who would have thought Asheville, North Carolina would see a big hurricane impact. And I, you know, I thought I heard you all make some encouraging comments in the last kind of week or two about how that market has has bounced back.

But if if you could provide a little bit of context in terms of, you know, the impact on that market. And then I know it’s early days here, but just any update in terms of what you’re seeing, with with the recovery in that market either, you know, local to Asheville or just, you know, beyond that in terms of that community you serve.

Mike Marks, CFO, HCA Healthcare: Sure. And let me, for context, just remind the audience, you know, if I think about 2025 and and the lingering effects of the hurricane, our guidance really contemplated two major factors for EBITDA growth. One would be that the recovery in our Tampa market, and specifically the reopening of the hospitals called Largo Medical Center that got damaged during the hurricane. It was actually shut down for about fifty three days while it was getting repaired. We do believe that the Tampa market will recover in 2025 and that would show a year over year earnings growth in ’25 versus ’24 in Tampa.

And we think that that will largely offset the lingering effects in the community of the hurricane in Western North Carolina. We have a fairly large system in Western North Carolina. Our biggest hospital is Mission Hospital in Asheville. That area did sustain, you know, really significant impacts from the hurricane, more in terms of the community impact. If you think about, you know, the flooding and the rainfall in that area, even wind damage was pretty significant.

And so we do see and we’re encouraged by a good recovery so far in that market. But I do think that the lingering effects will show themselves through the balance of this year, and we’re watching it carefully. You know, the thing that I think about as hospitals and markets like this recover are things like payer mix, and things like demand in elective surgeries and elective cases while the population recovers and the community recovers. So we’re there. We never lost our operations during the hurricane.

So it’s really going to be how fast the community recovers and how fast both demand and payer mix recovers in that market. And we’ll watch it as we go through the year. But we are encouraged that the recovery is it seems to be on track.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Got it. Okay. Well, I wanted to hit on some strategy questions. You know, externally, you at least divine some of the key strategic priorities in terms of, you know, how you allocate capital, particularly back into your local markets, your labor agenda, and your technology agenda. So I wanted to get into, you know, some of those, topics with you.

You know, the HCA invests a lot back in your local markets if if I was doing the math correctly and and, you know, Frank can certainly correct me if I was wrong, but I think over the past ten years, you’ve some done something like $40,000,000,000 back into your local markets, which is just, you know, really impressive number. Would you mind level setting for us just in terms of, you know, where does that money go? How do you prioritize projects? And then ultimately, what’s the benefit to the patients and the relevancy that creates with the payer community?

Mike Marks, CFO, HCA Healthcare: Sure. So we have a target of in the zone of 45% to 55% annually of our operating cash flow to use as investments in capital back into our markets to really drive organic growth. And as you know, we’re more of an organic growth oriented company, at least historically and certainly as you head into 2025. If you think about that capital spend, and I’ll use ’25 as an example, we’re targeting between $5,000,000,000 and $5,200,000,000 of capital investments in 2025. It’s roughly half, maybe 40% to 45% of that capital is more what you would think of as routine or maintenance capital.

And so you every year, you know, like like you can imagine, you have to do things like, replacing roofs and boilers and chillers and air handlers and medical equipment and beds. And then renovation of your properties is really important as well so that you maintain good curb appeal and maintain competitive assets and facilities for your patients and frankly for the physicians as well. And so that’s 40% to 45% of the total capital spend every year you would put in that bucket of routine and maintenance. There’s an annual IT related capital spend that’s a component. And then another, call it 40%, forty five % is growth capital.

And on the growth capital, we really break it into what you would think of as inpatient acute investments to add capacity into our facilities. We’re averaging roughly 600 beds a year in new inpatient capacity, mostly by adding expansions on existing campuses. Although we do open a new hospital from time to time as well and have a list of de novo hospitals that we are studying and that we have funded over the last several years. And then we couple that with outpatient investments. And so if you think about new freestanding emergency rooms, surgery centers, urgent care clinics, physician clinics and the like, we have a goal of expanding the outpatient sites of care between now and call it over the next decade to 20 to one.

So 20 outpatient sites of care per hospital, you know, as we kind of go through the next decade. And so that’s also a component of how we use our capital is to really fund capacity on the inpatient side and then network expansion on the outpatient side. I would only other mention that the inpatient capital spend tends to be more intense, right? So it uses more of the dollars just because adding floors and bed floors to towers in new hospitals is more expensive than adding outpatient facilities. So you get you get a little bit more production at a lower per project cost on the outpatient side.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: And maybe a hard question to to answer precisely, but even a qualitative comment would be great. You know, coming out of COVID and you guys have been able to sustain, you know, that level of reinvestment back in the local markets. Any sort of acceleration and the separation in terms of maybe your local competitors, did that feel different at all today than than pre COVID or, you know, sort of hard hard to tell and we’ll just sort of point to the market share numbers that that you guys give us?

Mike Marks, CFO, HCA Healthcare: Well, I think I think it’s really and and we would measure that with market share. Right? So as as as we noted in investor day at the end of twenty twenty three, we’ve increased our market share and our markets during that decade at that point from like 23% to 27%. We have a goal of taking our market share from 27% to call it 29% by 02/1930. And we feel like we’re on track with that goal and that demonstrates really the two components of how we drive growth.

The first is this idea of the capital investments and reinvesting back into our markets. And that’s really coupled with the HCA strategic plan. Things like building out our service lines and adding our network optimizers and really kind of reaching out into the outreach markets with services and with network optimizers like transfer centers, like transportation capabilities and the like. I think the capital investments coupled with the HCA strategic plan and frankly, our ability to execute, I think, jointly have allowed us to capture the demand growth in the marketplace and then stay on track with our market share gains. You mentioned this earlier, Matthew, but all of our markets are a little different, but we generally are in urban and suburban fast growing markets.

And, you know, our we have good competitors, who also invest capital into their market. So it’s not just an arms race on capital, it’s that coupled with the execution capabilities of of our plan and our approach that I think, has allowed us to maintain our competitiveness.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Got it. Why don’t we talk about one of those execution areas, which is on the on the labor agenda? And it, you know, feels like things have pretty well stabilized here, particularly relative to where we were in ’22 and in ’23. But if you could sort of update us in terms of what you’re seeing or what you have been seeing from a wage growth and from a contract labor standpoint. And and I’d also love for you to hit on kinda Galen and the progress you’ve made there and the the long term potential that, has come from that deal.

Mike Marks, CFO, HCA Healthcare: Yeah. Absolutely. So, yes, it it definitely has stabilized a bit. If you go back to the height of COVID, call it maybe first quarter of twenty twenty two, we were upwards of almost ten percent of our SWB coming from contract labor. And so as we finished the year last year, we were down to the 4.5%, four point six %.

So we basically cut it in half during that two year run, which really reflects the marketplace, right? The contract labor rates have come way down during that time period and frankly, just the supply and demand. So there’s we’ve been able to kind of recapture the supply of the clinical workforce, and the demand for premium labor for travelers has moderated during this time period, as you noted. And definitely wage inflation has moderated. No, there was a lot of wage inflation during that period.

If you think about 2020 to call it the end of twenty twenty two, it was a pretty inflationary environment with labor as so many nurses and other clinical staff left the marketplace and all of this wage pressure and the like took hold. But I also want to kind of tell the story of our workforce development plan. Over this last four years, we’ve done a number of things to put ourselves in a better position. It really starts with retention. And we have company wide put a lot of focus and effort in retaining our staff and reducing the turnover levels of staff at all levels of management.

And that focus of high impact practices and detailed and granular execution of our retention plans has paid off. I mean, our retention levels are back to almost right at pre pandemic levels, which is great. And then we’ve also added and invested heavily in recruiting, so that we can be competitive for employees as we need to backfill our openings. And that recruiting agenda really kind of fits two or three components, and one of which is Galen that you mentioned. But one, you have to be competitive for experienced hires.

And so we have really tried to make sure we have the right recruiters, the right onboarding capabilities, the right preceptors in our hospitals, and have really a comprehensive plan to take new recruits into a hospital and get them onboarded and trained and ready for work, the best that we can. The second thing would be our overall approach to new grads. In addition to Galen, we have a long track record of working with not only nursing schools throughout our marketplaces, but other educational institution that graduate clinical labor. And this focus on these academic institutions and being a great clinical partner for them and capturing their graduates and giving their graduates a great place to work is a really important part of this story. And then the third part, as you mentioned, is Galen.

When we acquired Galen, it had four campuses. We’re up to about 22 campuses. We will have, as you kind of get through the end of the decade, 28, 20 nine campuses of Galen throughout our system. We’re at about 22,000 students enrolled now. And again, as you get to the end of the decade, it’ll probably be closer to 30,000 students.

And so it’s a big part of our success plan in being able to attract and retain new graduate nurses, for our hospitals and trying to create this integrated experience where they have a great experience in nursing school. They can do their clinical rotations and their preceptorships in the HC Hospital. And then we try to provide a great opportunity for them to come to work at HCA. And I think over time, it has given us the ability on the supply side of labor to deal with challenging environments. And I think it’s also been a great community investment.

I mean, if you think about one of the biggest challenges American healthcare faces is there’s way more people every year who want to go to nursing school than historically there’s been nursing education spots available. And so us working as a system with other nursing schools to add spots so that students who want to become nurses have the ability to go to nursing school is a key part of this strategy. And I think it’s good for HCA, it’s good for the students, and it’s really good for our communities as well.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Yeah. It’s a great it’s a great point in that, you know, it’s also just a great example of the, you know, the scale that you guys bring to some of these issues. I did wanna hit on technology and then we’ll we’ll get into some of the policy things that are really top of mind. But, you know, there there’s sort of two areas that I wanted to ask about on technology. One is the, you know, the meditech upgrade that’s occurring right now and the digital transformation efforts, particularly around the the Tiffany, tool that you you guys have talked about in terms of improving staffing.

But, you know, maybe just first on Meditech, if you could update us sort of where you are with the Expanse rollout and, you know, what’s the benefit to the company from, you know, having that in place across the company?

Mike Marks, CFO, HCA Healthcare: Sure. So we’ll we’ll be about 20% done by the end of this year. We’ll have it pretty well done by the end of twenty twenty eight. So that’s a bit of the rollout schedule. In terms of the company and and why I think Expanse is the right fit for us.

I mean, first, it’s it’s it was built cloud native in the Google Cloud, and and, you know, our clinical data does reside in the in the clinical cloud. So, you know, having a cloud native EMR where your clinical data and the EMR data is co located in the Google Cloud in our instance is a powerful thing. And it allows us to have one version of Meditech in effect that allows us to kind of drive to standards. If you just think about having a 90 hospitals over time on the same system in the cloud with the ability to maintain standards and then use those standards to really drive data standardization and normalization, it really sets us up to allow for our digital agenda. There’s nothing more important for AI machine learning than data.

And so if you just think about 44,000,000 patient encounters and being able to kind of create a cloud environment where that data is standardized and consistent, that is a powerful accelerant to an organization’s ability to use that data for digital transformation. And so that is one of the key elements of Meditech for us. And largely, the rollout, I think, is going really well. So now I’ll switch to Tiffany. I’m happy to take any additional questions on Expanse.

Tiffany is an early example of a digital product that we’re building that’s part of our digital transformation strategy. And we have an organization in the company called Digital Transformation and Innovation. DT and I has really three pillars of work that we are focused on, generally related to AI, machine learning and automation. The first area is really clinical, which is the holy grail for HCA. And over time, you’re gonna see us working to use big data and digital transformation products to really provide better care, more consistent care, safer care, in a way that I think will be great for doctors and nurses, and take the the the massive amount of data and bring artificial intelligence in to help human intelligence to find patterns in that data and provide really strong decision support to our clinical teams over time in our clinical domain.

The second area is operations and Tiffany really fits in operations. And if you just think about, call it 10,000,000 ER visits, 2,500,000 admissions a year in our system, just the operational process of admission, taking care of patients, getting through the continuum of care and getting a patient ready for discharge, the amount of opportunity to leverage AI machine learning to make our operations more effective and more efficient are really immense. Tempehny is a great example of this. Tempehny is our scheduling and staffing tool that uses machine learning to really do first, a really good job of volume forecasting so that we can forecast the demand on a shift and department basis for each of our hospitals so that we can schedule against a much more accurately forecasted demand. And then second, create a much more balanced and robust schedule so that we have the right care team in place for the demand or the patient load that’s going to be in that unit.

And that the ability to use big data tools for that will lead to more effective schedules and schedules that our employees over time, we believe, will find preferences and will find that they are they have the right team around them to take care of patients. They get their scheduled preferences. And then we get a really balanced schedule that will help us over time on expense management as well. So Tiffany right now is in 50 hospitals, will be at 80 here in about next month. The rollout is going well and will largely be complete by the end of twenty twenty six.

And it’s our first kind of foray into a rollout of a digital product. We’re learning a lot, but we’re very encouraged about what we’re seeing.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: That’s great. It seems like something that really kind of doubles down on some of the resiliency that just is inherent in the, in the business. Why don’t we try to spend the last ten minutes on policy? I’m sure you’ve been sort of talking all day about some of these topics. I thought we might sort of start off sort of higher level in terms of, you know, there’s just uncertainty around obviously what’s gonna happen and investors obviously worried that there’ll be some form of reductions in, you know, health care care funding, whether that comes through Medicaid or exchanges or accommodation thereof.

I thought we might just start off with, you know, how are you guys sort of potentially planning for that and how might the industry react? You’ve, you know, the industry’s maybe got some, pattern recognition with, you know, how they were how to respond to COVID. But just just in terms of environmentally, how how you guys are sort of thinking about the the posture you should be in and and what we might see with the industry writ large if there’s some prep funding on, if there’s some pressure on on funding and whatever format they take.

Mike Marks, CFO, HCA Healthcare: Sure. So, I mean, first, the the first responsibility of the company is advocacy. And so we are spending a lot of time both federally and in our key states to advocate for the key policy, continuations that we want to see. It really starts for us with the enhanced premium tax credits on the exchanges. And we believe that these are essential for working families.

We believe that you know, they really fit in the tax credit mindset of the Republican Party and of President Trump. And so we are very hopeful and we’re pushing hard to, you know, to advocate for the extension of the enhanced premium tax credits on the exchanges. And we think it’s really good for working families. There’s almost 25,000,000 people in America now who, you know, get their health care coverage on the Affordable Care Act exchanges. And if you think about where those lives are located, a lot of those lives are located in Republican dominated states that did not expand Medicaid.

And so, you know, we think from a public policy standpoint midterm on things as essential to, you know, the common worker as access to health coverage is an area that deserves to be, to be advocated for that these enhanced premium tax credits get extended. So that’s the first thing we’re doing. We have a very strong advocacy model as well for Medicaid broadly as an essential reimbursement and coverage dynamic for a ton of people across America, including a lot of folks in our key states. And so advocacy is a big part of what we’re doing, as you can imagine. And then second part, and we’ve been working on this for a while, is just getting ready to do everything we can from a resiliency standpoint to manage our way through challenges.

You noted this when you mentioned COVID, but we have a long track record of this. I mean, you can talk about our response to COVID, you can think about our response in 02/2008 to the financial crisis. You know, HCA, because we operate at scale, because we have really strong capabilities, if you think about our shared service enterprises, if you think about our hospitals and our management teams, to weather storms and to navigate through challenges. And we’re working hard through our resiliency agenda to make sure that we’re ready and to offset, you know, all that we can depending on what happens here. And so it’s really the combination, Matthew, of doing everything we can to advocate for these federal health policies and programs.

We think they’re essential. And then second would be to get ready for whatever comes and get ready to navigate those challenges. The third thing I would say, and you mentioned this, but I think it’s important to note, is that the kind of changes that we’re talking about here, especially if they end up being substantive, are going to impact not just HCA. They’re going to impact the whole industry. And this industry of hospital systems, over 80% of hospitals are not for profit or government owned hospitals.

And if you look at the where they’re operating on margins, their ability to withstand really substantive cuts is tough. And so we do believe that there’s a bit of a safety net and an understanding in Washington and in The States that there needs to be some protection for hospitals. They’re an essential community asset, and the rest of the industry would mightily struggle with really substantive reimbursement cuts or coverage losses. We would too, but we can navigate it. We’ve got the balance sheet, we’ve got the margin profile, and we have the capabilities to try to navigate those kinds of challenges.

We’ve done it before. And and certainly, the the rest of the industry will will do everything they can. But I do think it’s a different landscape.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Yeah. No. It’s you brought up some great points. And, you know, I think one of the things we learned through COVID is that, you know, health hospitals from particular are, you know, they are sort of essential infrastructure to The US. And then certainly the efficiency you guys bring is really kind of important to keep in mind.

But certainly, I would think kind of give you a substantial advantage no matter what comes down the pipe. But why don’t I ask, you know, one follow-up on, you know, supplemental payments and provider taxes. This, you know, this has been sort of a top of mind issue, I think. But maybe just mechanically, if you’re willing to sort of entertain this question in terms of if, like the safe harbor threshold went from six to five, is that just a proportional sort of reduction or is it is it so kind of I appreciate your comments about sort of how complicated it is state by state, program by program, but just as folks externally are trying to weigh the risks of different proposals. If we get some change in the in the safe harbor threshold, sort of how would we think about the the implications?

If you had any comments, that’d be great.

Mike Marks, CFO, HCA Healthcare: Sure. I mean, I I think the the way to think about this is is as you noted, you know, we have 18 of our 20 states that have programs. Most of our states have multiple programs. And really, if you think about the constructs of those, it’s a little bit like Baskin Robbins. I mean, there’s a bunch of different flavors of how these programs are funded and then how these programs are allocated in terms of funding.

And so it’s not proportionate to say that you would have an exact proportionate percentage decline if you went from 6x to 5x, for example, on the provider tax cap. It’s way more complicated than that. So what we try to do is just articulate broadly on an annual basis what they’re worth to us. And then as you know, every quarter as we kind of go through a year, we’re going to keep everyone updated on DPPs. We’re watching all this just like you guys are.

There’s so many different points of communications that you see out there is we’re not going to be in a position to try to answer each potential item. It’s just not it’s not productive. As soon as we had answered one question, there would be a different communication coming out of Washington that would change it. So we’re watching it just like you are. You know kind of roughly what the, this the Medicaid supplemental payments mean to HCA, and and we’re all just like you guys.

We’re just gonna have to wait and see what comes out of this. Now, again, I think it’s important to always take this in context of Medicaid. You know, supplemental payments are not separate from Medicaid. They’re just part of Medicaid. And I always try to remind people that when you look at Medicaid historically, it has been significantly underfunded.

And so even over the last several years, as states have tried to enhance Medicaid through, say, supplemental payment programs, even as we finish 2024, you know, our revenues are still short of the total cost of care for Medicaid. And these supplemental payment programs, you know, just two more comments and then I know you have other questions. But one, remember that providers fund a big chunk of the supplemental payment programs. And so we have expenses that we record in other operating expenses that are a funding component to draw down these funds. And so the provider community is a big funder of the exchanges, which of the sorry, the state supplemental payment programs, which, by the way, the states like.

You know, that’s that’s helpful. So, you know, that’s number one. And then number two, when I think about the rest of the industry, Medicaid in total and then state supplemental payment programs as an enhancement to the base Medicaid program, this is a really essential part of supporting hospitals all throughout America these days. So it’s another example of where, you know, the risk to the industry of really substantive Medicaid reform or Medicaid reimbursement reductions is pretty significant. And so, you know, we would weather those storms, but but again, the rest of the industry would deal with some pretty big challenges.

State supplemental payment programs are really important to hospitals across America.

Matthew Gilmore, Lead Healthcare Services Research Coverage, KeyBank: Yeah. Well, I I appreciate that perspective. Well, I think unfortunately we’re out of time. We could go on. I had a softball for Frank, but they’ll have to wait for another day.

But Frank and Mike, we really do appreciate you guys spending the day with us. And thanks for the update.

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