Release Date: April 25, 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 financial performance in Q1 2025, with diluted earnings per share increasing over 20% year-over-year to $6.45.
• The company experienced broad-based volume growth, with inpatient admissions up 2.6%, equivalent admissions up 2.8%, and emergency room visits increasing by 4%.
• Operating margins improved due to effective cost management, with adjusted EBITDA margins increasing by 110 basis points compared to the prior year.
• HCA Healthcare Inc (HCA) expanded its network by increasing the number of facilities by 3.3% and inpatient bed capacity by 2%, indicating strategic growth.
• The payer mix remained strong, with managed care equivalent admissions increasing by 5.4% and exchange admissions growing by 22.4% over the prior year.

Negative Points

• Outpatient surgical volumes declined slightly, driven by lower acuity cases and reductions in Medicaid and self-pay volumes.
• The company faces uncertainty regarding federal policy changes, which could impact operations, though specific effects are currently unclear.
• Medicaid volumes began to flatten, with a same facility equivalent admission decline of 1.4% compared to the prior year.
• There is ongoing concern about potential impacts from tariffs on supplies, with the situation described as fluid and uncertain.
• Behavioral health volumes were down due to the repurposing of beds for medical-surgical use, impacting this segment's performance.

Q & A Highlights

Q: Are there any major changes in assumptions embedded in the reiteration of guidance, especially regarding surgeries? A: Michael Marks, CFO, stated that the company is pleased with its first-quarter performance, with solid volume growth and strong expense management. The guidance for 2025 remains appropriate, and outpatient revenue growth was higher than inpatient revenue. Outpatient surgery saw a slight decline in case volumes, but net revenue and earnings grew. The leap year effect impacted volume declines, with outpatient surgery down 2.1% on a same-facility basis.

Q: How did you achieve such extraordinary operating leverage this quarter, and what are your expectations for productivity going forward? A: Samuel Hazen, CEO, explained that HCA's business is fundamentally a fixed-cost business, and more volume creates operating leverage. The company has regained its ability to create operating leverage, showing up in labor costs and other expense categories. Turnover is down, contract labor utilization is down, and employee engagement is at a high watermark. The labor market is stable, and HCA is using workforce development initiatives to meet demand.

Q: Can you provide more details on the revenue per adjusted admission growth and managed care contracting? A: Michael Marks, CFO, noted that payer mix trends remain strong, with outpatient revenue growth outpacing inpatient. Managed care contracting is over 90% complete for 2025, with similar rates to previous years. Access to lives with payers is higher than ever, and HCA has improved its managed care positioning, adding important contracts in Denver and Chattanooga.

Q: Have you detected any changes in Medicare Advantage plan behavior, denials, or length of stay? A: Michael Marks, CFO, stated that there has been no additional movement from observation to inpatient status related to the two-midnight rule. Medicare Advantage observation mix is about 15% higher than traditional Medicare, and length of stay is slightly higher. Denials and underpayments did not have a material impact on financial results in the first quarter.

Q: How is HCA using CapEx to support growth in cardiac surgeries and other high-acuity areas? A: Samuel Hazen, CEO, explained that HCA's capital allocation strategy remains unchanged, with significant facility and ambulatory development. The company has $6.2 billion in approved capital projects, increasing inpatient capacity by over 2.5%. Investments are also made in outpatient facilities, emergency rooms, cath labs, and clinical technology to support growth.

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