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    HCA
    Earnings call· Mar 2025(Q1 FY25)

    HCA Healthcare, Inc. HCA

    Apr 25, 2025 Source

    Executive summary

    HCA Healthcare Q1 FY25 — Strong Volume Growth and Operating Leverage Drive EPS Increase

    HCA Healthcare delivered a strong first quarter, driven by broad-based volume growth, favorable payer mix shifts towards managed care and exchanges, and improved operating margins. The company reaffirmed its full-year guidance, citing continued operational discipline and strategic investments in network development and technology. Management acknowledged uncertainties around federal health policy and tariffs but expressed confidence in navigating these challenges through financial strength and operational flexibility.

    Highlights

    5

    • Diluted EPS as adjusted increased more than 20% year-over-year to $6.45.

    • Same facility equivalent admissions grew 2.8% year-over-year, with inpatient admissions up 2.6% and ER visits up 4%.

    • Same facilities revenue grew almost 6% year-over-year.

    • Adjusted EBITDA grew 11.3% over the prior year quarter.

    • Managed care equivalent admissions increased 5.4% year-over-year, including a 22.4% increase in exchange admissions.

    Concerns

    3

    • Outpatient surgeries experienced a slight decline in case volumes, down 2.1% on a same-facility basis (1% per business day), driven by lower acuity cases and Medicaid/self-pay.

    • Medicaid volumes began to flatten with a same facility equivalent admission decline of 1.4% year-over-year.

    • The company is not comfortable providing estimates for potential impacts of new federal health policy or tariff risks due to lack of insight.

    Guidance & targets

    5
    CategoryTargetConfidence
    Full-year 2025 Guidance
    Reaffirmed
    high materiality
    High
    Capital Expenditures
    $5.0B-$5.2B
    medium materiality
    High
    Share Repurchase Authorization
    Significant portion of $10B authorization
    high materiality
    High
    Medicaid State Supplemental Payments (DPP)
    $50M better to $200M decline
    medium materiality
    Medium
    Wage Inflation Forecast
    Hold to prior indications
    medium materiality
    Medium

    Operational metrics

    39
    Diluted EPS as adjusted
    $6.45up >20% YoY
    Q1 FY25

    Compared to the prior year, diluted earnings per share as adjusted increased more than 20% in the first quarter.

    Same facility equivalent admissions
    2.8%YoY
    Q1 FY25

    Equivalent admissions grew 2.8%.

    Same facility inpatient admissions
    2.6%YoY
    Q1 FY25

    Inpatient admissions grew 2.6% year-over-year.

    Same facility emergency room visits
    4%YoY
    Q1 FY25

    Emergency room visits increased 4%.

    Same facilities revenue
    6%YoY
    Q1 FY25

    Same facilities revenue grew almost 6%.

    Revenue per equivalent admission
    3%higher YoY
    Q1 FY25

    Approximately 3% higher revenue per equivalent admission drove growth.

    Inpatient occupancy
    77%vs 75% last year
    Q1 FY25

    Inpatient occupancy in the quarter was 77% as compared to 75% last year.

    Same-facility managed care equivalent admissions
    5.4%YoY
    Q1 FY25

    Payer mix remains strong with same-facility managed care equivalent admissions up 5.4% compared to the prior year quarter.

    Same-facility Medicaid equivalent admissions
    -1.4%YoY decline
    Q1 FY25

    Medicaid volumes began to flatten as the redetermination process sunset with a same facility equivalent admission decline of only 1.4% to prior year quarter.

    Same-facility equivalent exchange admissions
    22.4%YoY increase
    Q1 FY25

    Given the strong enrollment growth in the exchanges, our same-facility equivalent exchange admissions increased 22.4% over prior year quarter.

    Adjusted EBITDA margin improvement
    110YoY
    Q1 FY25

    Adjusted EBITDA margin improved 110 basis points compared to the prior year quarter.

    Salaries and benefits as a percent of revenue
    80improved YoY
    Q1 FY25

    Salaries and benefits as a percent of revenue improved 80 basis points.

    Supplies as a percent of revenue
    30improved YoY
    Q1 FY25

    Supplies improved 30 basis points.

    Contract labor improvement
    9.3%YoY
    Q1 FY25

    Contract labor improved 9.3% from prior year quarter.

    Contract labor as percent of total labor costs
    4.4%vs 5.1% in Q1 FY24
    Q1 FY25

    Represented 4.4% of total labor costs in the first quarter of 2025 compared to 5.1% in the first quarter of 2024.

    Same facility professional fee costs
    11%YoY increase
    Q1 FY25

    Same facility professional fee costs increased 11% from the prior year quarter and were approximately flat sequentially compared to the fourth quarter of 2024.

    Medicaid state supplemental payments net benefit increase
    $80MYoY increase
    Q1 FY25

    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.

    Capital expenditures
    $991M
    Q1 FY25

    Capital allocation in the first quarter of 2025 included $991 million in capital expenditures.

    Share repurchases
    $2.5B
    Q1 FY25

    Capital allocation in the first quarter of 2025 included $2.5 billion in share repurchases.

    Dividends paid
    $180M
    Q1 FY25

    Capital allocation in the first quarter of 2025 included $180 million in dividends.

    Proceeds from asset sales
    $161M
    Q1 FY25

    Lastly, we received $161 million in proceeds from the sale of assets, primarily driven by the sale of Regional Medical Center of San Jose.

    Facilities/sites of care added
    3.3%
    Q1 FY25

    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.

    Inpatient bed capacity added
    2%
    Q1 FY25

    And we added approximately 2% to our inpatient bed capacity.

    Approved capital for construction/development
    $6.2B
    FY25-FY27

    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.

    Inpatient capacity from pipeline
    2.5%greater than today
    Future

    I think our inpatient capacity with respect to that pipeline is roughly 2.5% plus greater than what we have today.

    Outpatient surgery case volumes
    -2.1%YoY decline
    Q1 FY25

    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. 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.

    Exchange volume as % of equivalent admissions
    8%
    Q1 FY25

    For HCA in the quarter, the exchange volume represented about 8% of equivalent admissions.

    Exchange volume as % of revenues
    10%
    Q1 FY25

    For HCA in the quarter, the exchange volume represented about 10% of our revenues.

    Medicare Advantage as % of total Medicare admissions
    57%
    Q1 FY25

    Medicare Advantage is now about 57% of our total Medicare admissions.

    Medicare Advantage observation mix vs traditional Medicare
    15%higher
    Q1 FY25

    Our Medicare Advantage observation mix is still about 15% higher than our traditional Medicare observation mix, and that's pretty steady at this point.

    Supply expense contracted with firm pricing
    70%
    FY25

    About 70% of our supply expense is contracted with firm pricing for finished goods.

    Supply expense from North America/exempt products
    75%
    Current

    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.

    Contracted supply expense for 2026
    60%
    FY26

    Upwards of 60% for some of all of 2026 for finished goods.

    Managed care contracts for 2025
    >90%
    FY25

    We're over 90% contracted for 2025, as you would expect.

    Managed care contracts for 2026
    >75%
    FY26

    We're over 75% contracted for 2026.

    Managed care contracts for 2027
    25%
    FY27

    Call it, 25% contracted for 2027 at rates that are really similar to the last couple of years and in context of our targets.

    Exchange enrollment growth in HCA states
    12%YoY
    2025

    In our states, the growth was about 12% over prior year.

    Total lives covered by exchanges (US)
    24M
    2025

    We're up across the United States now up to 24 million lives covered.

    Adjusted admissions (with leap year effect)
    3.8%YoY up
    Q1 FY25

    If you take the leap year effect in, our adjusted admissions were almost 3.8% up.

    Industry KPIs

    4
    MetricValueDetails
    Utilization trends77%%
    Same facility volumes2.8%%
    Payer mix supplemental payments5.4%%
    Adjusted EPS EBITDA leverage guidance11.3%%

    Deals & partnerships

    3
    Catholic Medical CenterAcquisition of hospital

    Paid for acquisitions with the close of the transactions for Catholic Medical Center in Manchester, New Hampshire.

    Lehigh Medical CenterAcquisition of hospital

    Paid for acquisitions with the close of the transactions for Lehigh Medical Center in the Fort Myers, Florida area.

    Regional Medical Center of San JoseSale of hospital

    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.

    Risks & headwinds

    4
    Federal health policy changesUnclear

    Not quantifiable at this time

    Mitigation: Engaged in advocacy to support reasonable reforms; developing contingency plans based on COVID-19 experience; maintaining long-term horizon and financial strength.

    Tariff impactFluid environment

    Not quantifiable at this time

    Mitigation: HealthTrust securing fixed pricing (70% of finished goods for FY25, 60% for FY26); 75% of supply expense from North America or tariff-exempt products; supply chain mapping, risk assessments, supplier rationalization; working with suppliers to derisk/diversify supply chains.

    Medicaid redetermination impactQ1 FY25, flattening trend

    Same facility equivalent admission decline of 1.4% YoY

    Mitigation: Focus on other volume categories and payer mix improvements (e.g., exchange growth).

    Outpatient surgery case volume declineQ1 FY25

    2.1% same-facility decline (1% per business day adjusted)

    Mitigation: Driven by lower acuity cases and Medicaid/self-pay; overall outpatient revenue growth still strong; building medical staff, adding facilities/technology, robust workforce development to support surgical services.

    What to watch in Q2 FY25

    4

    Medicaid State Supplemental Payments (DPP)

    Next quarter
    Current$80M increase YoY in Q1 FY25
    TargetClarity on full-year impact, especially Tennessee program approval

    Why it matters

    DPP benefits are a significant and volatile component of net benefits, with updated full-year guidance ranging from $50M better to a $200M decline depending on approvals.

    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. Really, that range is largely associated with Tennessee, Joanna. And we -- first of all, let me just say we did not record anything related to Tennessee in the quarter and that we have not received approval for the 2025 calendar year program from CMS.

    Q&A highlights

    5

    Are there major changes in assumptions for the reaffirmed guidance? Were surgical volumes worse than expected, especially outpatient, given the leap year?

    Management reaffirmed guidance, stating Q1 performance was in line with expectations. Outpatient surgery case volumes saw a slight decline (2.1% reported, 1% per business day adjusted) driven by lower acuity cases and Medicaid/self-pay, but overall outpatient revenue grew faster than inpatient. Inpatient surgeries were up slightly on a per business day basis. The first quarter is typically difficult to predict for surgeries due to seasonality and new deductibles.

    “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.”

    asked by Ann Hynes · answered by Samuel Hazen

    2 min read6 chapters

    Detailed Narrative

    01

    Strong Volume Growth and Payer Mix

    HCA Healthcare reported robust volume growth in Q1 FY25, with same-facility equivalent admissions up 2.8% and inpatient admissions up 2.6%. Emergency room visits increased 4%. This growth was complemented by a favorable payer mix, as managed care equivalent admissions rose 5.4%, including a significant 22.4% increase in exchange admissions. Medicaid volumes, however, saw a slight decline of 1.4% as redetermination processes concluded.

    02

    Operating Leverage and Cost Management

    The company demonstrated strong operating leverage, leading to an 11.3% increase in Adjusted EBITDA and a 110 basis point improvement in Adjusted EBITDA margin year-over-year. This was driven by effective cost management, with salaries and benefits as a percent of revenue improving by 80 basis points and supplies by 30 basis points. Contract labor costs decreased 9.3% year-over-year, representing 4.4% of total labor costs, down from 5.1% in Q1 FY24.

    03

    Capital Allocation and Network Development

    HCA continues its balanced capital allocation strategy, investing in network development and returning capital to shareholders. Capital expenditures totaled $991 million in Q1, contributing to a 3.3% increase in facilities/sites of care and a 2% increase in inpatient bed capacity. The company has $6.2 billion in approved capital projects for 2025-2027. Share repurchases amounted to $2.5 billion in Q1, with plans to complete a significant portion of the $10 billion authorization in FY25.

    04

    Federal Policy and Tariff Uncertainty

    Management acknowledged the fluid federal policy environment, including potential health policy reforms and tariff risks. They are actively engaged in advocacy but are not providing specific impact estimates due to a lack of clarity on how these efforts might be implemented. The company is developing contingency plans, drawing on past experiences like the COVID-19 pandemic, to navigate potential adverse impacts while maintaining a long-term strategic focus.

    05

    Technology and Digital Transformation Initiatives

    HCA is heavily investing in its technology agenda, led by a new Digital Transformation and Innovation Group. Initiatives focus on three areas: administrative functioning (e.g., Parallon services, supply chain), operational improvements (e.g., staffing, scheduling, case management, prior authorizations), and clinical applications (e.g., data-driven best practices, labor and delivery process improvements). The company emphasizes accuracy and compliance in clinical tool development.

    06

    Managed Care Contracting and Market Access

    The company reported strong managed care contracting, with over 90% of contracts secured for 2025 and 75% for 2026 at rates consistent with prior years. HCA has improved its global positioning for patient access, notably adding a broad participating provider contract with Kaiser Health Plan in Denver and advancing its position with a Blue Cross of Tennessee product in Chattanooga. Access to lives with payers is at historically high levels.

    AI-generated summary of the company’s earnings call. Not investment advice.