- Diluted Earnings Per Share (EPS): Increased 28% to $5.50.
- Inpatient Admissions: Grew 5.8% on a same-facility basis.
- Equivalent Admissions: Increased 5.2% on a same-facility basis.
- Emergency Room Visits: Increased 5.5% on a same-facility basis.
- Inpatient Surgeries: Up 2.6% on a same-facility basis.
- Outpatient Surgery Cases: Down 2% on a same-facility basis.
- Commercial Volumes: Represented 36.2% of equivalent admissions.
- Same-Facility Revenue Growth: 10% increase.
- Operating Margin Improvement: Improved by 100 basis points year-over-year.
- Labor Costs: Improved 200 basis points as a percent of revenue from the prior year.
- Contract Labor Costs: Declined 25.7% from the prior year, representing 4.8% of total labor costs.
- Supply Costs: Improved 50 basis points as a percent of revenue from the prior year.
- Adjusted EBITDA: $3.55 billion, a 16% increase over the prior year.
- Cash Flow from Operations: Just under $2 billion, a decline of $500 million from the prior year.
- Capital Expenditures: $1.28 billion.
- Share Repurchases: $1.37 billion during the quarter.
- Dividends Paid: Approximately $7 million.
- Updated Revenue Guidance for 2024: $69.75 billion to $71.75 billion.
- Updated Net Income Guidance for 2024: $5.675 billion to $5.975 billion.
- Updated Adjusted EBITDA Guidance for 2024: $13.75 billion to $14.25 billion.
- Updated Diluted EPS Guidance for 2024: $21.60 to $22.80 per share.
- Estimated Share Repurchases for 2024: Around $6 billion, subject to market conditions.
Release Date: July 23, 2024
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 28% increase in diluted earnings per share as adjusted, reaching $5.50.
- Same-facility revenue growth was 10%, driven by strong demand and improved payer mixes.
- Operating margins improved by 100 basis points year-over-year, with labor costs as a percent of revenue improving by 200 basis points.
- Contract labor costs declined by 25.7% from the prior year, representing 4.8% of total labor costs.
- Adjusted EBITDA increased by 16% to $3.55 billion, reflecting solid operational performance.
Negative Points
- Outpatient surgery cases were down 2%, primarily due to lower volumes in Medicaid and self-pay categories.
- Cash flow from operations declined by $500 million year-over-year, driven by increased tax payments and timing of Medicaid supplemental program accruals and cash receipts.
- Capital expenditures totaled $1.28 billion, indicating significant ongoing investments.
- Medicaid equivalent admissions were down 10%, mostly related to Medicaid redeterminations.
- Professional fee costs grew by approximately 13% year-over-year, although this was an improvement from the 20% increase in the first quarter.
Q & A Highlights
Q: How are Medicaid supplemental payments running relative to expectations, and what is the trend in public exchanges year over year?
A: Michael Marks, CFO: Medicaid supplemental payments have historically been challenging, but recent programs have improved reimbursement. In Q2, we saw a $125 million year-over-year increase in earnings from these programs. For public exchanges, equivalent admissions for managed care, including exchanges, were up 12.5%, with exchange volumes up 46% year-over-year.
Q: Can you discuss the sequential decline in SW&B (Salaries, Wages, and Benefits) and the impact of contract labor?
A: Michael Marks, CFO: Contract labor was down 25.7% year-over-year, representing 4.8% of total labor costs, compared to 6.8% last year. This improvement is due to better recruitment and retention efforts. Wage inflation remains stable.
Q: Can you bridge us to the back half EBITDA raise for this year?
A: Michael Marks, CFO: The raise is driven by better-than-expected volume and payer mix, solid labor management, and a tailwind from Medicaid supplemental payments. We now anticipate a $100 million to $200 million tailwind from these programs in 2024.
Q: What is the sustainability of the elevated utilization trends given the Medicaid redeterminations?
A: Samuel Hazen, CEO: We expect volume trends to continue throughout 2024, supported by market characteristics, network development, capital investments, and increased coverage. We are seeing broad-based growth across payer classes and services.
Q: Can you comment on the sources of acuity strength?
A: Samuel Hazen, CEO: Our strategy includes enhancing trauma, transplant, and neonatal services, among others. This has naturally lifted the case mix and acuity of patients. The two-midnight rule is dilutive to case mix, but overall, our core services have seen increased complexity.
Q: What is the potential impact of exchange disruption if subsidies expire at the end of 2025?
A: Samuel Hazen, CEO: It's too early to forecast the political outcome. We are studying the potential impact, but we don't have a clear line of sight on which participants have what level of subsidies.
Q: Can you provide more details on the efficiencies and throughput initiatives in the ER?
A: Samuel Hazen, CEO: Our ER revitalization program has improved metrics like time to see a patient and length of stay. Commercial ER volumes grew almost 18%. We are also adding capacity both on-campus and off-campus.
Q: What is the impact of M&A on EBITDA?
A: Michael Marks, CFO: M&A had a 1% negative impact on EBITDA for the quarter. This includes the Valesco acquisition, which will move to same-store in 2025.
Q: How have Medicaid margins evolved with supplemental payments?
A: Michael Marks, CFO: Historically, Medicaid margins were significantly below the cost of care. Supplemental payments have improved margins but are still below the cost of treating Medicaid patients. We see good sustainability for these programs.
Q: What is the outlook for CapEx given the higher 2024 revenue and EBITDA outlook?
A: Michael Marks, CFO: We are maintaining our CapEx outlook at $5.1 billion to $5.3 billion. The improved outlook will primarily go towards share repurchases, estimated at around $6 billion for 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
