The call begins with an introduction, highlighting the presence of CEO Sam Hazen and CFO Mike Marks, who will provide prepared remarks before addressing questions. There's a reminder about the possibility of forward-looking statements and reference to non-GAAP measures like adjusted EBITDA, with additional details available in the press release and SEC filings. Sam Hazen then discusses HCA Healthcare's strong financial performance in the first quarter of 2025, which was driven by increased volume, an improved payer mix, and better operating margins. He expresses confidence in future performance due to growing demand for healthcare services and ongoing company investments. Additionally, HCA Healthcare has made progress in non-financial areas, such as quality outcomes, emergency room efficiency, patient satisfaction, and managing inpatient capacity with shorter stays.

The paragraph highlights the company's strong start to the year, with a notable increase in diluted earnings per share and growth in various volume categories, including inpatient admissions and emergency room visits. Revenue grew due to higher volumes and an increase in revenue per equivalent admission. The organization improved operating margins and expanded its facilities and inpatient bed capacity. The company plans to maintain operational discipline and strategic investments while navigating a fluid federal policy environment.

The paragraph discusses the company's cautious approach to potential impacts from health policy and tariff risks, noting their advocacy for reasonable health reforms that don't harm coverage or hospital care. The company isn't comfortable estimating impacts due to a lack of insight but plans to share more information in their quarterly earnings report. They are preparing contingency plans based on their COVID-19 experiences, focusing on maintaining financial stability and a positive culture amid uncertainties. Mike Marks then expresses satisfaction with quarterly results, noting strong operating performance and a 5.4% increase in managed care admissions compared to the previous year.

In the first quarter of 2025, Medicaid volumes stabilized with a minor decline, while exchange admissions significantly increased by 22.4% compared to the prior year. The adjusted EBITDA margin improved by 110 basis points due to volume growth and effective cost management, with better metrics in salaries and benefits, supplies, and contract labor. Professional fee costs rose 11% from the previous year but remained steady from the fourth quarter of 2024. Adjusted EBITDA grew by 11.3%, with flat earnings year-over-year in hurricane-affected markets. Despite increases in Medicaid state supplemental payments and related taxes amounting to a net $80 million benefit, caring for Medicaid patients still incurs losses. The firm maintains a balanced capital allocation strategy for sustained value creation.

In the paragraph, the company reported $1.65 billion in cash flow from operations for the quarter, noting a decline year over year due to timing-related working capital changes. They allocated funds in the first quarter of 2025, including $991 million for capital expenditures, $2.5 billion for share repurchases, and $180 million for dividends. They spent $227 million on acquisitions, closing deals for Catholic Medical Center and Lehigh Medical Center. They gained $161 million from asset sales, mainly from selling the Regional Medical Center of San Jose, which supports their portfolio optimization and benefits the community while adding value to HCA Healthcare. Their debt to adjusted EBITDA ratio is favorable, indicating a strong balance sheet, and they reaffirmed their full-year 2025 guidance ranges. The call was then handed off for questions, with operators providing instructions for participants.

In the paragraph, Ann Hynes inquires about any significant changes in assumptions related to the reiterated guidance, specifically inquiring about the expected performance of surgeries. Mike Marks responds by emphasizing the company's satisfaction with its first-quarter performance, noting solid volume growth and revenue alignment with expectations. The guidance for 2025 remains unchanged, and updates will be provided in future earnings calls. Outpatient revenue growth has outpaced inpatient growth for the quarter, with growth across four main categories: emergency services, outpatient surgery, ambulatory services, and other hospital-based services. Outpatient surgery saw a slight decline in case volumes due to lower acuity cases and Medicaid factors.

The paragraph discusses the company's performance in its outpatient surgery business, noting growth in net revenue and earnings despite a decline in volume, partly due to the leap year effect. Sam Hazen mentions a slight decline in outpatient surgery volume and a modest increase in inpatient volume per business day. He acknowledges the challenges of predicting first-quarter performance due to the impact of factors such as new deductibles and co-pays. Nevertheless, the company experienced solid volume activity across service categories, including strong cardiac activities and rehabilitation growth. Behavioral health volumes were intentionally down due to repurposing beds for medical-surgical needs. Obstetrics volumes slightly increased. Overall, the company is pleased with its volumes and market share gains, believing it is meeting patient needs in its networks. Ann Hynes and Pito Chickering from Deutsche Bank also make brief comments but no new information is provided.

The paragraph discusses the company's improved operating leverage, emphasizing its fixed-cost structure and the benefits of increased volume on profitability and margins. Sam Hazen highlights the company's ability to manage labor and other operating expenses effectively, resulting in regained operating leverage. Human resource efforts have been successful, with reduced turnover and contract labor usage, and high employee engagement. This positive environment is enabling the company to achieve high productivity and deliver quality patient outcomes.

The paragraph discusses the company's efforts to maintain a stable labor market through internal and external initiatives, such as their Galen School of Nursing and workforce development programs, to meet demand. Capital spending is enhancing facilities, and HR initiatives are improving workforce engagement and operations. The company feels encouraged by the efficiency and quality outcomes from their operations, which also provide a positive work environment. Pito Chickering questions the potential for increased occupancy to improve fixed cost leverage, to which Sam Hazen responds affirmatively, noting efforts to use technology and benchmarking to create efficiencies. AJ Rice from UBS then inquires about revenue improvements, specifically regarding DPP programs, rate updates, commercial mix, and managed care contracting.

The paragraph discusses the financial and contractual status of a healthcare organization, with Mike Marks explaining that their net revenue per equivalent admission is strong despite a decline in lower acuity outpatient surgeries. The revenue growth is more significant in the outpatient segment, primarily driven by Medicaid. Additionally, the organization is well-advanced in its contract negotiations with payers, with high rates of contract completion for the coming years. The contracting cycles are productive, and they have strong access to lives through both commercial and exchange channels. Sam Hazen adds that the decline in inpatient surgeries, as a portion of overall admissions, is minimal and not significant in terms of revenue.

The paragraph discusses the organization's improved managed care positioning and contract expansions over the past year. It highlights the addition of significant contracts with Kaiser Health Plan in Denver and Blue Cross of Tennessee in Chattanooga, enhancing their access to patient lives. The organization is also expanding its capabilities to support Medicare Advantage payers. Following this discussion, a question is posed by Whit Mayo from Leerink Partners regarding any observed changes in Medicare Advantage (MA) plan behavior, particularly in relation to denials, dispute resolutions, and length of stay. Mike Marks responds to this inquiry by referencing the Medicare Advantage in the context of the "two midnight rule."

The paragraph discusses the observation and inpatient status related to the two midnight rule, noting no significant change as expected in the first quarter of 2025. It highlights Medicare Advantage making up 57% of total Medicare admissions, with a 15% higher observation mix compared to traditional Medicare. Dispute resolution activities, such as denials and underpayments with payer partners, did not significantly impact financials due to improved response efforts. Whit Mayo inquires about tariffs, and Mike Marks explains that the dynamic environment and lack of clarity make it challenging to assess the impact on HPG supplies sourced from overseas.

The paragraph discusses the efforts of a HealthTrust organization in managing supply chain expenses and risks for 2025. They have secured significant fixed pricing, with 70% of their supply expenses contracted at fixed rates for 2025 and over 60% for 2026. Additionally, 75% of their supply expenses are sourced from the U.S., Canada, Mexico, or tariff-exempt products like pharmaceuticals. HealthTrust is working on supply chain mapping, risk assessments, and rationalizing suppliers to manage tariff risks, while collaborating with suppliers to diversify supply chains away from China. The environment remains fluid, and they continue to monitor risks. After these remarks, Whit Mayo thanks the speaker, and Ben Hendrix from RBC Capital Markets asks a question about the nursing labor market in recessionary environments.

The paragraph discusses the labor market's reaction to recessions and wage trends. Sam Hazen notes that the labor market typically eases during recessions, potentially lowering wages. After an intense labor market period from 2021 to early 2023, wage trends have significantly decreased. While further reductions are possible, it's too early to forecast the impact of a potential recession. Current wage guidance for 2025 is expected to hold. Sarah James asks about CapEx allocation for growth in cardiac surgeries. Hazen responds that their capital allocation strategy remains unchanged, focusing on facility and ambulatory development with significant capital approved through the next few years.

The paragraph discusses capital expenditures (CapEx) and share repurchases related to a company's financial activities. It outlines that a significant portion of capital dollars is allocated toward increasing inpatient capacity by approximately 2.5% compared to the current level. The investment also extends to outpatient facilities, emergency room capacity, and clinical technologies to enhance patient care. While exact equipment spending figures are not provided, it is acknowledged that clinical technology investment is part of the overall budget. Additionally, Brian Tanquilut from Jefferies inquires about the company's lower-than-typical CapEx spend, which was about 5.4% of revenue, and asks about the rate of share repurchases. Mike Marks responds that $2.5 billion worth of shares was repurchased in the first quarter.

The company anticipates completing a significant portion of a $10 billion authorization by 2025, depending on market conditions. They spent $991 million on capital expenditure (CapEx) in the last quarter, which was less than expected. However, they still aim to reach their target of $5 billion to $5.2 billion in CapEx for the year due to a strong pipeline of projects. Regarding hurricane impacts, earnings in affected markets were flat year-over-year, aligning with their 2025 guidance that assumed hurricane impacts would balance out over the year. Specifically, the North Carolina division and Largo Medical Center in West Florida saw no year-over-year earnings growth due to hurricane effects.

In the paragraph, Sam Hazen addresses a question from Matthew Gillmor about the competitive environment in their markets amidst ongoing policy and macroeconomic uncertainties. Hazen notes that there haven't been substantial changes in competitor behavior regarding CapEx priorities or investments. However, he acknowledges that challenges, like NIH funding issues or other policy adjustments, could influence competitor actions. Hazen emphasizes HCA's advantage due to its scale and diversification, which offers a different capability level compared to local competitors. He highlights that HCA has regained market share and sees potential opportunities to capture more if competitors face challenges.

In the paragraph, Justin Lake from Wolfe Research asks about the percentage of volumes and revenue from exchanges in the quarter and the impact of potential subsidy removal on insurance coverage. Mike Marks responds, noting strong enrollment growth in 2025, with exchange volume constituting 8% of equivalent admissions and 10% of revenues for HCA. He expresses uncertainty about the effects of the potential sunset of the enhanced premium tax credits (EPTC), acknowledging that some people might return to employer-sponsored insurance, some might remain on exchanges with lower-tier plans, and others could become uninsured.

The paragraph is part of a financial earnings call where Mike Marks addresses a question from Joanna Gajuk regarding an $80 million year-over-year increase in net benefits from a state supplemental payment program. This increase was largely driven by a record payment from one state, which began accruing in the previous year. Mike explains that projecting state supplemental payments is challenging, but based on current information, they expect a $50 million improvement to a $200 million decline for the full year 2025 compared to 2024. Additionally, he notes continued fund flows from legacy programs and expresses optimism due to recent approvals by CMS in Arizona and Nevada.

In the article excerpt, Mike Marks discusses the financial expectations regarding state supplemental payments, specifically mentioning that Arizona and Nevada's approvals have influenced a more optimistic outlook for the year. He clarifies that the positive outcome from Q1 exceeded expectations and, despite anticipating a flat first half with potential declines in the latter half, a net benefit from Q1 boosts their confidence. They estimate supplemental payments could be between a $50 million improvement and a $200 million decline, primarily contingent on whether Tennessee gets approval. Currently, they have not recorded or received approval for Tennessee-related payments. Joanna Gajuk seeks confirmation on Tennessee's impact on full-year numbers, to which Marks confirms that the range is heavily dependent on Tennessee's approval status. The operator then introduces Ryan Langston from TD Cowen, who shifts focus to inquiries about the progression of surgical schedules and block time utilization.

The paragraph is an exchange between individuals discussing the impact of economic factors like tariffs, recession, and declining consumer confidence on elective medical procedures and patient behavior. Sam Hazen, the speaker, states that detailed forward scheduling information is not available at the corporate level, but there is a belief that demand for healthcare will remain stable. Despite current challenges, inpatient surgeries have increased. Hazen highlights efforts such as building medical staff, adding facilities and technology, and a workforce development agenda to support surgical services. The paragraph touches on HCA's technology investments, with an implication that AI is part of their clinical care strategy.

The company is focusing on advancing technology through a new department called the Digital Transformation and Innovation Group. This initiative targets three main areas to enhance the business: administrative functions, operational processes, and clinical practices. Administrative improvements involve digital tools for supply chain and HR functions, while operational upgrades focus on hospital staffing, scheduling, and case management. The clinical area is being explored cautiously to ensure accuracy and compliance, aiming to provide value to physicians and caregivers by leveraging data for best practices.

The paragraph discusses a company's efforts to improve the labor and delivery process in obstetrics using digital tools and technology, indicating early signs of success. The company's spokesperson, Mike Marks, clarifies that a reported 5.4% increase in managed care volumes includes exchanges. Exchanges have risen by 22%, while employee-sponsored insurance slightly increased. A question from John Ransom highlights a query about the company's updated guidance on EBITDA for Asheville and Largo in 2025 compared to 2024, though it remains unanswered in the paragraph.

In the paragraph, Mike Marks discusses the earnings impact of a hurricane, stating that the effect on year-over-year earnings in West Florida and North Carolina was neutral, with both areas offsetting each other's performance. Lance Wilkes from Bernstein then asks about the pressures on managed care organizations and how they affect value-based care, consumer costs, bad debt, utilization, and the flu's impact. Mike Marks replies by addressing respiratory volumes, mentioning that the volumes in the fourth quarter of 2024 were lower than the previous year and that the respiratory season started later.

In the first quarter of 2025, respiratory volumes were largely consistent with the first quarter of 2024, despite an early flu season beginning in late 2023. In terms of patient receivables, there have been slight increases in patient balances, influenced by changes in employer benefit plans and growth in health exchange volumes, which typically incur higher patient responsibilities. While collection rates for exchange patients are slightly higher than those with traditional commercial insurance, these differences have not significantly impacted the overall collectability of patient receivables.

In the paragraph, Sam Hazen discusses that value-based care co-pays and deductibles are not affecting the demand for healthcare services, as their demand trends remain stable. Ben Rossi from JPMorgan asks about the potential impact of a recent executive order targeting drug prices at hospital outpatient departments (HOPBs) and its relation to Medicare site neutrality. Mike Marks responds that while they are aware of the executive order and its goals to lower drug prices, they are awaiting more detailed rules to understand the potential effects on their operations. Craig Hettenbach from Morgan Stanley inquires about the durability of healthcare demand and its alignment with the company's target of 3 to 4% emissions growth, to which Sam Hazen replies that their current demand assumptions seem accurate based on first-quarter data.

The paragraph discusses the positive impact of accounting for the leap year effect, resulting in an almost 3.8% increase in adjusted admissions, which is seen as a strong metric and encouraging year-over-year growth. It mentions there is no significant competitive threat or influence from value-based care initiatives affecting demand. The company remains confident in its volume assumptions for the rest of the year, barring any unforeseen dramatic events. The paragraph concludes with Craig Hettenbach acknowledging the information and the operator ending the call, with Frank Morgan offering further assistance if needed.

This summary was generated with AI and may contain some inaccuracies.