HCA Healthcare, Inc. HCA

HCA experienced a dynamic Q1 with a milder respiratory season, leading to a 42% decrease in respiratory-related admissions and a 32% decrease in ER visits compared to the prior year. A winter storm further impacted volumes in several key markets, reducing admissions and ER visits by an estimated 30-50 basis points. These factors collectively impacted adjusted EBITDA by an estimated $180 million. However, volumes rebounded nicely in February and March, with management viewing these impacts as temporal.

The company realized an increase in net benefits of approximately $200 million to adjusted EBITDA from Medicaid supplemental payment programs, primarily due to the grandfathered approval of Georgia, reinstatement of the ATLIS Program in Texas, and the year-over-year benefit of the Tennessee program. This significantly offset the volume shortfalls. Management updated its full-year guidance for supplemental payment net benefit to a decline of $50 million to $250 million versus prior year, not including potential Florida approval.

Same-facility exchange equivalent adjusted admissions declined approximately 15% year-over-year, and same-facility uninsured equivalent admissions increased by 16%. Over half of this uninsured increase was attributed to movement from exchanges. The adjusted EBITDA impact from exchanges was estimated at $150 million in Q1 FY26, with the full-year range of $600 million to $900 million reaffirmed. Management noted a shift from silver to bronze plans and increasing patient amounts due, impacting collections.

The company's broad resiliency plan, designed to generate cost savings and enhance capabilities, is progressing as expected, contributing to operating leverage. Digital transformation and AI initiatives are advancing, with rollouts of key programs like ambient listening for physicians and nurse handoff programs to more facilities, aiming to improve quality, safety, and cost-effectiveness.

HCA invested $1.1 billion in capital expenditures, purchased $1.57 billion of shares, and paid $183 million in dividends. The company continues significant investment in network development, expanding overall sites of care by over 4%, increasing hospital beds by almost 1%, and adding 4% to ER capacity compared to Q1 last year. A substantial pipeline of $5.5 billion to $6 billion in approved capital projects is expected to come online over the next 24-30 months.

HCA continues to experience increased activity levels with payers on denials and underpayments, particularly from Medicare Advantage. Despite this, the company's strengthened revenue cycle, resources, and dispute resolution capabilities mitigated year-over-year earnings impact. For 2026, contracting is fully at targeted levels, and 2027/2028 negotiations are on target.