HCA Healthcare, Inc. (NYSE:HCA) Q1 2023 Earnings Call Transcript

So that was the main thing affecting the as reported, was the COVID volume. When we exclude COVID, we’re really pleased with the revenue per unit ramps. Outpatient growth was heavy during the quarter, driven, as we talked about, with the emergency room. So that is influencing the per equivalent admission statistics while we broke down the per admission as well.But again, very pleased with the outpatient growth demand that we’re seeing as well as the inpatient. So we’re pleased with the top line metrics that we’re seeing.Ben Hendrix Just as a quick follow-up. Can you parse out the degree to which your — the acuity that you’re seeing is just kind of normalization in terms of admission patterns versus kind of some of the investments you’ve made to expand your network capabilities?

Thanks.Bill Rutherford It’s hard to parse it out. I mean it’s all-inclusive. I mean, obviously, with a good surgical volume that we had that helped fuel that. We do continue to see a recovery of demand in the marketplace, but we continue to invest in growing our service offerings and our higher acuity services. So it’s hard to parse out and attribute that from one or the other. But both I think are factors and the trends we’re seeing.Sam Hazen Yes. And Bill, I think it’s important to understand that our acuity or our case-mix index, the composite view of that is holding strong and actually up over 2019 when you consider we’ve lost a really high case mix component in total joint surgery. So I think that speaks to the underlying acuity mix within our remaining inpatient portfolio.

We also had total joint surgery growth when you look at inpatient and outpatient again in the quarter.But nonetheless, those cases are now in the outpatient setting and out of our inpatient mix, but yet, we’ve been able to sustain a really strong acuity mix in total. And that’s due to again, program development as Bill alluded to specific efforts in certain markets and certain facilities to advance their clinical capabilities. And it’s yielding what we hoped. Next question?Operator Your next question comes from the line of Gary Taylor from Cowen. Your line is open.Gary Taylor Hi. Good morning. One of my favorite expressions is when Sam starts talking about EBITDA clearance rates. So I was disappointed not to hear that catchphrase this morning, but otherwise, really solid quarter.My question is about commercial rate cycle.

I think with all the moving parts with COVID, even when we see the Q, it’s going to be hard to sort of tease out what’s happening there. So just wanted to see if you could just update us on how you’re doing on your commercial rate renewals. Is there any material activity on off-cycle renewals? Does this $145 million settlement say anything about the environment in terms of how you’re positioned with the payers? Or is it just completely sort of a one-off? Thanks.Sam Hazen So, Gary, not to disappoint, our EBITDA clearance in the quarter was 36%. So that’s a really good metric for us recognizing operating leverage in the face of really inflation. So it sort of proves the model when we can drive activity into our facilities where we have embedded fixed cost, we’re able to turn that into earnings in a very productive way.

Again, it speaks to our management team’s ability to manage their operations effectively.We’re pleased with what’s going on in our payer contracting cycles. As we said, we’re targeting mid-single-digit increases, and we are achieving that in most circumstances. And I think the payers recognize again the pressures in the marketplace for providers and are allowing, sort of, responsible increases. So we are roughly contracted for 2023. We’re 93% of the way there. We’re about two-thirds of the way through 2024 and about a quarter of the way through 2025. And at this particular point in time, we’re able to maintain the trend that we feel is necessary and appropriate for today’s circumstances.The one payer settlement that we talked about, we have processes in place in our Parallon organization, which we believe is a best-in-class revenue cycle capability.

And through their efforts and through our support efforts of other components of our business, we were able to resolve some claims that we felt were underpaid in previous years, and those payments were recognized in particular quarter. I don’t know that it’s reflective of anything in the marketplace other than the specifics around that particular circumstance.I will say that we are focused on making sure that we have the right controls in place, the right relationships in place and the right procedures around ensuring that we get the reimbursement that we have earned. And if there are underpayments or denials that we think are not appropriate, then we will make sure that we work our way through those disputes to get to the answer that we think is appropriate for the company.

And I wouldn’t say that’s anything new necessarily, but it continues to be an ongoing opportunity.Operator Your next question comes from the line of Pito Chickering from Deutsche Bank. Your line is open.Pito Chickering Hey, good morning, guys. Thanks for taking my questions. Any color on how full-time nurse wage inflation is tracking so far this year versus your expectations? And are you seeing any competitors increase their wages again in 2023? Or is it pretty stable at this point? And on the non-nursing staff, where is that tracking? And can you reflect us on what you assume for nursing and non-nursing wage inflation for 2023 in your guidance?Sam Hazen Peto, this is Sam. I think our overall compensation per hour across all aspects of our workforce are trending where we expected them to trend this year.

And we’re pleased with the progress. And that’s in the face of us making some fairly significant increases over the latter part of ‘22, and we continue to make modest increases in certain market circumstances in ‘23, responding to new data or new understandings around what’s happening from one market to the other.As I mentioned on our call, our turnover was down. Our nursing turnover was approaching pre-pandemic levels. We were running about 15% — 14.5% to 15% in 2018 and 2019. We’re running about 17%, when you look at the last six months annualized. So a very good trend happening, and we think it’s, again, a factor of the macro trends, some of our specific actions around compensation program efforts to really increase resourcing and capabilities for our nurses and other caregivers.

So we’re really encouraged by the efforts of our teams, the recruitment metrics that we’re seeing and where we are competitively in the market.Will there be a market here or there we have to adjust to as we move through the year? Yes. We believe that’s factored into our guidance appropriately, and we should be able to manage through those changes as the year progresses.Operator Your next question comes from the line of Joshua Raskin from Nephron Research. Your line is open.Joshua Raskin Hi, thanks. Appreciate taking the question. Could you speak to the increase in CapEx guidance for the year? And I’m curious if you accelerated anything specifically in 1Q as that came in a little bit above where we were thinking? I’m specifically interested in the types of projects that are getting funded and especially the ones that have been that weren’t contemplated maybe three months ago?

And then lastly, I heard real estate purchases. I’m assuming those are for new inpatient hospital facilities over time.Sam Hazen Yes. This is Sam. Thank you for the question. We have a number of communities that we serve where we believe, over time, we’re going to need to add to our hospital network, we’re obviously adding significantly to our outpatient network. We have approximately 2,500 outpatient facilities that support our 180 or so hospitals across our communities. But we believe that over time, as our communities continue to grow, and we believe that’s one of the differentiating attributes of HCA, that are — we’re in great markets that have great growth prospects in and of themselves, before we get to share gain possibilities in those markets, that is going to require us to build out some new hospital facilities.We do have a new hospital opening in — or under construction in San Antonio — actually two in San Antonio.