Release Date: January 24, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• HCA Healthcare Inc (HCA, Financial) reported a strong demand for healthcare services, with stable operations and favorable investment opportunities.
• The company successfully remediated facilities impacted by hurricanes, resuming normal operations in affected areas.
• Diluted earnings per share as adjusted increased by 5.4% in the fourth quarter compared to the prior year.
• Revenue growth was approximately 6%, with strong demand, payer mix, and acuity across most service categories and markets.
• HCA Healthcare Inc (HCA) announced a new $10 billion share repurchase program and increased its quarterly dividend.

Negative Points

• The company experienced a decline in adjusted EBITDA margin by 60 basis points compared to the prior year quarter, primarily due to hurricane impacts.
• Outpatient surgery cases were down 1.3%, although revenue growth in this service line remained solid.
• The adverse impact of hurricanes resulted in an estimated financial impact of $200 million, or $0.60 per diluted share.
• The company faced increased operating expenses related to hurricane repair costs, affecting overall margins.
• HCA Healthcare Inc (HCA) anticipates a potential $250 million headwind from Medicaid supplemental payment programs in 2025.

Q & A Highlights

Q: Can you provide details on the Medicaid supplemental payments for 2024 and expectations for 2025? A: Michael Marks, CFO, explained that the net incremental benefit from supplemental payment programs for 2024 was about $400 million, with the fourth quarter being the lowest benefit. For 2025, they estimate the net effect of these programs to range from flat compared to 2024 to a $250 million headwind, considering the new Tennessee program.

Q: How are you managing the impact of managed care and denial rates? A: Michael Marks, CFO, stated that they are 80% contracted for 2025 and 60% for 2026. They have invested in capabilities to manage denials and underpayments, and currently, denials are not a material impact on the company.

Q: What are the key internal initiatives for 2025? A: Michael Marks, CFO, and Samuel Hazen, CEO, highlighted initiatives such as improving post-acute care placement, expanding emergency room and operating room optimization, and enhancing labor engagement. They also focus on network development and leveraging technology, including AI, to drive efficiencies and better outcomes.

Q: How is the commercial mix progressing, especially with state exchange enrollment growth? A: Samuel Hazen, CEO, noted that exchange enrollments are strong, representing 7.5% of equivalent admissions and 9% of revenues in 2024. They see continued growth in enrollment and believe it provides positive outcomes for families and communities.

Q: Can you discuss the impact of the Medicare two-midnight rule on inpatient admissions? A: Michael Marks, CFO, mentioned that the rule contributed approximately 50 basis points to overall admission growth in 2024. The Medicare Advantage observation mix is about 20% higher than traditional Medicare, but no significant changes are expected in 2025.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.