HCA Healthcare, Inc. Q1 FY2025 earnings call

• Solid fundamentals continued into Q1 2025 with broad-based volume growth, improved payer mix, and better operating margin.
• Non-financial metrics improved: better quality outcomes, more efficient ER with accelerated time to discharge, increased satisfaction, and better inpatient capacity managed with reduced length of stay.
• Capital spending was used to increase facilities and beds as part of the network development plan.
• Engaged in advocacy regarding federal health policy, but no specific estimates on policy/risk impacts provided yet due to fluid situation.

In the first quarter of 2025, HCA Healthcare saw solid financial performance. Diluted earnings per share as adjusted increased more than 20% to $6.45. Volume growth included inpatient admissions up 2.6% year over year, equivalent admissions up 2.8%, and emergency room visits up 4%. Same facility revenue grew almost 6%. Payer mix was strong with managed care equivalent admission up 5.4% year over year, Medicaid equivalent admission down 1.4%, and exchange equivalent admission up 22.4%. Adjusted EBITDA grew 11.3% over the prior year quarter, with a 110 basis point improvement in adjusted EBITDA margin. Capital spending led to an increase in facilities by about 3.3% to around 2,750 and inpatient bed capacity by about 2%, with inpatient occupancy at 77% compared to 75% last year. Revenue contribution was broad-based across various volume categories including cardiac procedures, rehab admissions, etc.

• Reaffirmed full-year 2025 guidance ranges.
• First quarter results aligned with guidance, with hurricane impacts offset as per initial guidance assumptions.
• Earnings in hurricane-impacted markets were flat year over year in Q1 2025 as per guidance expectations.

• Policy uncertainties, particularly related to health policy and tariffs.
• Medicaid reimbursement does not cover the cost of caring for Medicaid patients, but there was an $80 million increase in net benefits in Q1 2025 due to Medicaid state supplemental payments and related provider tax.
• Tariff risks with supply chain: 70% of supply expense contracted for fixed pricing in 2025, 75% of supply expense from US, Canada, Mexico or exempt products, but continuing to monitor and work on supply chain management.

Q: Ann Hynes asked about whether there were major changes in assumptions embedded in the guidance reiteration and about surgical volumes being worse than expected.

A: Mike Marks and Sam Hazen responded that guidance for 2025 remains appropriate, outpatient surgery had revenue growth with case volume decline driven by lower acuity cases and Medicaid, and inpatient surgical volumes were up on a per business day basis.

Q: Pito Chickering asked about leverage and occupancy.

A: Sam Hazen responded that operating leverage can improve with more volumes on the asset base, labor market is stable with HR initiatives, and facility side is being satisfied by capital spending.

Q: AJ Rice asked about revenue per adjusted admission breakdown and managed care contracting impact.

A: Mike Marks and Sam Hazen responded on payer mix influences, outpatient revenue growth, and positive managed care contracting developments like in Denver and Chattanooga.

Q: Whit Mayo asked about MA plan behavior and tariffs.

A: Mike Marks responded on Medicare Advantage observation mix, dispute resolution, and supply chain tariff management.

Q: Ben Hendrix asked about labor market and wage inflation.

A: Sam Hazen responded that labor market tends to ease in recession, wage trends have come down, and guidance on wages for 2025 holds.

Q: Sarah James asked about CapEx and share repurchase.

A: Mike Marks responded on share repurchase completion and CapEx on track with planned levels.

Q: Andrew Mok asked about hurricane commentary.

A: Mike Marks responded that hurricane impacts offset as per guidance assumptions.

Q: Matthew Gillmor asked about competitive environment.

A: Sam Hazen responded that no substantial changes in competitors' behaviors seen yet, but HCA has scale and market share gains.

Q: Justin Lake asked about exchanges volumes and impact of subsidy sunset.

A: Mike Marks responded on exchange volume and revenue percentages, and uncertainty on subsidy sunset impacts.

Q: Joanna Gajuk asked about DPP benefits.

A: Mike Marks responded on $80 million increase in net benefits due to state payments, and update on state supplemental payment program guidance.

Q: Ryan Langston asked about surgical schedules.

A: Sam Hazen responded that corporate doesn't roll up forward scheduling info, but expects reasonable surgical demand.

Q: Joshua Raskin asked about technology agenda.

A: Sam Hazen responded on Digital Transformation and Innovation Group working on administrative, operational, and clinical technology initiatives.

Q: Stephen Baxter asked about managed care mix.

A: Mike Marks responded on managed care mix details including exchanges.

Q: John Ransom asked about guidance and hurricanes.

A: Mike Marks responded on hurricane impacts offsetting as per guidance.

Q: Lance Wilkes asked about managed care downstream impacts and flu.

A: Mike Marks and Sam Hazen responded on respiratory volumes and patient receivables impacts.

Q: Ben Rossi asked about executive order on acquisition costs.

A: Mike Marks responded on uncertainty due to executive order and need for draft rules.

Q: Craig Hettenbach asked about demand durability.

A: Sam Hazen responded that demand assumptions hold with first quarter growth and no dramatic impacts seen.