Participants

Frank Morgan; Vice President of Investor Relations; HCA Healthcare Inc

Samuel Hazen; Chief Executive Officer, Director; HCA Healthcare Inc

Michael Marks; Chief Financial Officer, Executive Vice President; HCA Healthcare Inc

Ann Hynes; Analyst; Mizuho Securities

Pito Chickering; Analyst; Deutsche Bank

A.J. Rice; Analyst; UBS

Whit Mayo; Analyst; Leerink Partners

Ben Hendrix; Analyst; RBC Capital Markets

Sarah James; Analyst; Cantor Fitzgerald

Brian Tanquilut; Analyst; Jefferies

Andrew Mok; Analyst; Barclays

Matthew Gillmor; Analyst; KeyBanc Capital Markets

Justin Lake; Analyst; Wolfe Research

Joanna Gajuk; Analyst; BofA Global Research

Ryan Langston; Analyst; TD Cowen

Joshua Raskin; Analyst; Nephron Research

Stephen Baxter; Analyst; Wells Fargo

John Ransom; Analyst; Raymond James

Lance Wilkes; Analyst; Bernstein

Ben Rossi; Analyst; JPMorgan

Craig Hettenbach; Analyst; Morgan Stanley

Presentation

Operator

Welcome to HCA Healthcare's first-quarter 2025 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

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 are 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.

Samuel Hazen

All right. 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 2025. 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 health care 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 nonfinancial metrics, including improved quality outcomes, more efficient emergency room services which have accelerated time to discharge and increased satisfaction and finally, better 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 the 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 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 risk 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-19 pandemic and considers both adjustments to operations and how we may utilize the flexibility our cash flow and balance sheet provides. 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 stakeholders deserve. With that, I will turn the call to Mike for more detail on the quarter.

Michael Marks

Well, thank you, Sam, and good morning, everyone. We are pleased with the results of the quarter, which highlighted the continued momentum of 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 [by 5.4%] compared to the prior year quarter.
As expected, Medicaid volumes began to flatten as the redetermination process (inaudible) with a same facility equivalent admission decline of only 1.4% to the 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 margins improved 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 '25 compared to 5.1% in the first quarter of 2024. Same-facility professional fee costs increased 11% from the prior year quarter and were approximately flat sequentially compared to the fourth quarter of 2024.
Adjusted EBITDA grew 11.3% over the prior year quarter. You will recall that our guidance [assuming] the impacts of the 2024 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 2025 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 million increase in net benefits in the first quarter of 2025 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 $1.65 billion in the quarter. There are a few factors that drove our cash flow from operations down over year, all of which relate to working capital changes that are timing in nature. Capital allocation in the first quarter of 2025 included $991 million in capital expenditures, $2.5 billion in share repurchases and $180 million in dividends.
We also paid $227 million 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 million 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 HCA. Our debt-to-adjusted EBITDA leverage remains at the lower half of our stated target range that 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 Morgan for questions.

Question and Answer Session

Frank Morgan

Thank you, Mike. As a reminder, please limit yourself to 1 question so we might give as many as possible an opportunity to ask a question. Abby, you may now give instructions to those who would like to ask a question.

Operator

(Operator Instructions) Ann Hynes, Mizuho Securities.

Ann Hynes

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, in 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 in your expectations?

Michael Marks

Let's deal with guidance first, and we'll talk about outpatient surgery, Ann. So if I think about -- 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, its first quarter. And really, at this point of the year, we believe our guidance ranges continue to be appropriate for where we are. Certainly, as we progress through the year, we will continue to update you on our subsequent earnings calls.
Specifically to outpatient surgery, 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 4 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 4 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.

Samuel Hazen

And inpatient, Mike, would be up about 1% per business day. So maybe a little softer, Ann, 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 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 of beds over the years and repurposed for MedSurg in many instances. And so that was intentional 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 pleased with our volumes 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.

Operator

Pito Chickering, Deutsche Bank.

Pito Chickering

Nice job in the quarter. I guess going to -- I guess you would be levered this quarter, pretty extraordinary the growth you saw year-over-year. I guess, how do you guys sort of get that much levered this quarter. And going forward, like how do you get 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 after such a huge growth.

Samuel Hazen

Okay. pito, this is Sam. I'm not sure I understood that question completely. 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 in 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, using more of our asset base to absorb the volumes. With respect to our human resource agenda, we've continued to progress across the company. Our turnover both nursing and nonnursing 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. And so we're very encouraged about 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 and 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 a great place to work for our employees.

Pito Chickering

So with (inaudible) at this level, I guess, 43.6, I guess since you IPO, we haven't seen this 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?

Samuel Hazen

Well, I think generally speaking, yes, 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 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.

Operator

A.J. Rice, UBS.

A.J. Rice

The revenue per adjusted admission up 2.9%, I think, was strong, especially with [surgeries up] 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 the debate in Washington having any impact on the discussions with managed care?

Michael Marks

A.J., thanks for the question. This is Mike. When I think about our net revenue per equivalent admissions, the first thing I'm going to call as [basics]. We continue to have payer mix trends, as I noted in my opening comments, continues to be good in that regard as well. I think, as I mentioned on the outpatient surgery comment, we actually had a little more outpatient revenue growth than we did on the inpatient side.
And even on outpatient surgery, the case decline that we saw was really driven by lower acuity cases. And from a payer mix perspective, on the outpatient surgery side continues to be driven almost entirely by Medicaid (inaudible) . So that payer mix influences on both the inpatient and the outpatient side. So generally speaking, I think we're in good shape on net revenue per equivalent admission in the quarter, and we were pleased with the performance in that way.
On the payer side, and I'll start, Sam, you, please include, but 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 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 our work with our payer partners continues. Our contracting cycles continue to be productive. And I think we're off to a good start this year in terms of our net revenue per equivalent in this .

Samuel Hazen

And Mike. This is Sam, A.J. I think a couple of points are relevant here. Our inpatient surgeries as a percent overall admissions was down 50 basis points. That's not meaningful in the overall revenue equation.
I mean, obviously, we'd rather be higher than lower. But it's only down 50 basis points. Our critical care admissions were 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 modestly up or -- 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 2 markets where we have added a very important contract to our overall portfolio of participation in Denver. We are now 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 at Tennessee, we have advanced our position with one of their products. So we improved globally our overall positioning for access to lives.
And that's played out in our HICS 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 2 important points, A.J., that I want to bring up in addition to what Mike said.

Operator

Whit Mayo, Leerink Partners.

Whit Mayo

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?

Michael Marks

Whit, let me first kind of talk about the Medicare Advantage in context of the kind of the two-midnight rule. And as we noted, really on the fourth quarter call, we really did not see any additional movement from observation to inpatient status related to the adoption of the two-midnight rule as we move through first quarter of 2025. That was our expectation, and that's really what we saw. Medicare Advantage is now about 57% of our total Medicare admissions. A couple of notes on the Medicare Advantage compared to traditional to your question.
One would be that our Medicare Advantage observation mix is still about 15% higher than our traditional Medicare observation mix, and that's pretty steady at this point. [NDS] Medicare Advantage continues to run a bit harder or a little higher on length of stay than traditional Medicare as well. On dispute resolution, and I'll go broadly here, not just Medicare Advantage. But 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 in first quarter, that activities like denials and underpayments did not have a material impact on our financial results.

Whit Mayo

My second question is, 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're HPG] or sourcing from overseas? Just anything would be helpful.

Michael Marks

Sure. As Sam said at the beginning, we're in a really dynamic and fluid environment right now with tariffs. So 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, it's really difficult to size the impact. As you know and as we talked about in previous calls, our HealthTrust organization has been working on this diligently, and I'm really proud of our HealthTrust team. And part of that work, and I'll talk about '25 and then give you a couple of other numbers for context, for 2025, part of their work was the ability to secure significant fixed pricing.
When you think about finished goods, so the purchases of supplies of finished goods, about 70% of our supply expense is contracted with firm pricing for 2025. And just 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' products as needed to deal with 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 Sam's opening comment that the environment is extremely fluid. And we are continuing to closely monitor as each day goes forward.

Operator

Ben Hendrix, RBC Capital Markets.

Ben Hendrix

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. It 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?

Samuel Hazen

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, 2022 and early part of 2023. 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 said 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.

Operator

Sarah James, Cantor Fitzgerald.

Sarah James

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?

Samuel Hazen

Well, this is Sam. 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 $6.2 billion of capital that has been approved and is in a construction or development phase that will come online in '25, '26 or the first part of '27. Those capital dollars go toward inpatient capacity. I think our inpatient capacity with respect to that pipeline is roughly 2.5% plus greater than what we have today. So 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.

Operator

Brian Tanquilut, Jefferies.

Brian Tanquilut

Maybe just a follow-up just to the comments 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?

Michael Marks

Brian, 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 quarter release, we completed $2.5 billion of share repurchase in the first quarter and we anticipate completing a significant portion of the $10 billion authorization in 2025, obviously, subject to market conditions and other factors.
On CapEx, you're right, I mean we spent $991 million in the quarter which seemed a [little light] 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 a step-up here as we go through the remaining part of the year. So we still think we're in this $5 billion -- maybe as high as $5.2 billion of CapEx spend in the year. As Sam indicated, we continue to see a robust pipeline of really good projects from our markets. And so I believe that, that level of capital spend is appropriate.

Operator

Andrew Mok, Barclays.

Andrew Mok

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% I understand that because you have 2 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?

Michael Marks

Yes. Thanks, Andrew. This is how we think about it. And you'll recall that 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 2 main impacted markets in North Carolina division and West Florida or specifically Largo Medical Center. Our earnings were flat year-over-year. In other words, the year-over-year earnings change was about negative -- about neutral in those 2 markets year-over-year. And then I would just point you back to our original guidance for the year as it relates to the full year impact of the hurricanes.

Operator

Matthew Gillmor, KeyBanc.

Matthew Gillmor

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?

Samuel Hazen

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 market. Now obviously, if NIH funding continues to be challenging for certain academic medical centers that may influence their behaviors and spending. There are other policy adjustments that take place that could play out. We do think with our scale, with our diversification across the portfolio of markets that provides a different level of capability than a lot of our local competitors who tend to only be in 1 particular market.
But 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.

Operator

Justin Lake, Wolfe Research.

Justin Lake

Just wanted to talk about the exchanges. First, can you give us the percentage of volumes in revenue in the quarter that came from the exchanges? I apologize if I missed them. And then bigger picture question, just some of the academic work out there, guys, indicates that 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 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?

Michael Marks

This is Mike. Specifically on exchanges, let me give you a quick update here. I think you know this, the 2025 was another year of strong enrollment growth. In our states, the growth was about 12% over prior year, and we're up -- across the United States, now up to 24 million 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 update for the quarter.
I think there's still a lot of unknowns here about what could happen if the EPTC, the enhanced premium tax credits do sunset and -- or not extending their current form or through some revised form. And so we're going to have to wait and see exactly how it plays out, and we're really not in a position to comment on estimates related to how many go back to employee-sponsored insurance, although 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 (inaudible). And then others that if these enhanced premium tax credits do sunset that would lose coverage and become uninsured. And so we're not in a position yet until we have a little more clarity around what's going to happen in the legislative environment, just to specifically size it or comment on others' research in this space.

Operator

Joanna Gajuk, Bank of America.

Joanna Gajuk

I guess maybe first on just clarifying the comment around your DPP benefits, you said it increased year-over-year by $80 million. So can you confirm whether there was anything unusual in there? Is it as expected what you had expected in the quarter? And do you still expect the full year, [to be] flat to down $150 million.

Michael Marks

Joanna, this is Mike. So yes, during the quarter, we recognized an approximately $80 million 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 Q4 of last year. So that was what drove it. As we've talked about on past calls, the projecting or the guidance related to state supplemental payment programs are really the most difficult thing that we predict.
And so 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 million better to a $200 million 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, 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 largely, that would be kind of where we are right now in state supplemental payment programs.

Joanna Gajuk

I'm sorry. So you said that Arizona Nevada approved. So is that the reason why you're thinking DPP payment for the year higher or there was just something that happened in Q1 that this $80 million makes you feel better about the year.

Michael Marks

Yes. I think at the Q1 outcome was a bit better than we expected. Our expectation was really that the first half of the year would be flat with potential declines primarily coming in the back half of the year. So based on this first quarter net benefit we are comfortable now sizing or estimating that the supplemental payments would be something like $50 million better for the full year to a $200 million decline. Really, that range is largely associated with Tennessee, Joanna.
And we -- first of all, let me just say we did not report anything related to Tennessee in the quarter and that we have not received approval for Tennessee at this point.

Joanna Gajuk

Because that was my question. So just to clarify, do you still assume Tennessee benefits in that full year number, correct?

Michael Marks

So let's take the quarter first. We reported nothing in Tennessee in the quarter, in the first quarter. So the back half of 2024 interim payment was not received. We did not report it, and we have not received approval for the 2025 calendar year program from CMS. The guidance, if you think about this range of guidance from a $50 million improvement to prior year for the full year to a $200 million decline, largely that range is associated with whether or not Tennessee gets approved.
And so that's how I would context that for you, Joanna.

Operator

Ryan Langston, TD Cowen.

Ryan Langston

I'm wondering just how the surgical schedules and block time utilization kind of looking and progressing. I'm not trying to get quarterly guidance, but just wondering if we can glean anything just given potentials for tariffs, recession and just consumer confidence declining. Wondering if there's having any impact on the elective procedural side and patient behavior?

Samuel Hazen

This is Sam. I don't have that information in front of us as far as 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 up on a per business day.
So as we normalize calendar effects and we have sort of comparable calendar dynamics, we expect our surgical volumes to recover to levels that we think are in line with market share trends or market share gains that we have expected. So 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's sort of converging on our viewpoints that surgical demand is reasonable and we can execute underneath that.

Operator

Joshua Raskin, Nephron Research.

Joshua Raskin

I was wondering if you could speak to your technology agenda and maybe specifically some investments that you think differentiate HCA on the clinical care side and I'm going to assume that AI is a part of that conversation.

Samuel Hazen

We are investing heavily in our packaging. 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 new function 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 3 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 Parallon services or 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 length of stay management as 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 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'd 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 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 encouraged by 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.

Operator

Stephen Baxter, Wells Fargo.

Stephen Baxter

Just another question kind of the managed care, the 5.4% you gave on the managed care volumes. Just to make sure, was that inclusive of the exchanges or excluding that? I think if it's including that, would you be able to give just a standalone managed care ex exchange number for the quarter?

Michael Marks

Yes, this is Mike. So the 5.4% equivalent admission same facility growth in total managed care does include exchanges. If you parse those apart, the exchanges were up 22% and the kind of (inaudible) employee-sponsored insurance was up about, let's just call it, just short of 0.5 point over prior year.

Operator

John Ransom, Raymond James.

John Ransom

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.

Michael Marks

So the guidance -- if you think about the full year guidance we gave on our fourth quarter '24 earnings call, what we indicated is that we thought with the lingering effects of the hurricane that 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. But report out here in our first quarter call 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 is flat -- were flat, and they offset each other to a large degree, and that's our update for the first quarter.

Operator

Lance Wilkes, Bernstein.

Lance Wilkes

Can you talk a little 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?

Michael Marks

So let me cover respiratory first, and then we'll get to the your payer questions. On respiratory volumes, I would refer you back to fourth quarter where clearly, in fourth quarter '24, our respiratory-related volumes were behind prior year, and we indicated that the respiratory season had a bit of a late start compared to the previous year. So what we saw in first quarter of '25 was they were pretty significantly up over fourth quarter.
But when I look at first quarter of '25 compared to first quarter of '24, our respiratory volumes in total were pretty much in line. They were just a tick to prior year, our first quarter '24, pretty much in line with prior year levels. And you may recall, but if you go back to that prior year flu season, it started early, so it started kind of at the beginning of the fourth quarter of '23, and it persisted pretty much through the end of first quarter at 24%.
So that's the year-over-year comp on the respiratory season. When I think about the impact on patient receivables and you'll remember from past conversations on this over the years. But we monitor this closely and what we're looking at is kind of what happens over time to the patient portion or the patient balance as 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 increases certainly have been influenced by growth in health -- the exchange volumes, which tend to have a slightly higher patient responsibility compared to traditional commercial.
On collectability, we generally maintain our historical level of collection on patient balances across either kind of our population as. It relates to the exchanges, the range of collections on patient balances is a bit lower than the traditional employees sponsored insurance population. But while lower, the exchanges have not had a material impact on the collectibility of our patient receivables in the aggregate. So that's a bit of an update there on patient receivables.

Samuel Hazen

I think it's safe to say, Mike, that value-based care co-pays and deductibles in any fashion disrupting the demand curve. And 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.

Operator

Ben Rossi, JPMorgan.

Ben Rossi

So for the executive order from the other week, there was a call out on hospital [admission] costs for covered outpatient drugs at HOPDs. It sounds like this will be more geared towards drug administration. I appreciate the uncertainty here with the broader discussion on Medicare site neutral in your opening comments. But just curious how you're thinking about the initial impact here. Will this encompass more of a lower acuity set of procedures relative to your broader set of outpatient services?

Michael Marks

Yes. So we're certainly aware of the executive order from the administration on potentially our directing Agencies to lower drug prices. We're going to have to see the draft rules that come out of this. We believe it will be part of a public comment and notice period and we're going to need that additional specificity to be able to kind of comment on what potential impact it could have on HCA.

Operator

Craig Hettenbach, Morgan Stanley.

Craig Hettenbach

Great. Just, Sam, going back to the demand backdrop, can you just talk about the durability of demand in particular in light of the equivalent admissions growth target of 3% to 4% this year, kind of how you see that playing out.

Samuel Hazen

Well, as I've just mentioned, I don't think we are seeing anything currently that suggest 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. 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 the 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 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.

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

Amy, thank you for your help today, and thanks to everyone for joining our call. Hope you have a good weekend. I'm around this afternoon, if you have any additional questions -- to answer any additional questions you might have. Thank you.

Operator

And this concludes today's call. We thank you for your participation. You may now disconnect.