HCA Healthcare, Inc. (HCA) Q1 2024 Earnings Summary

Executive Summary

• Strong quarter: revenue $17.339B (+11.2% YoY), diluted EPS $5.93; adjusted EPS $5.36 and adjusted EBITDA $3.353B with a 19.3% margin; management reaffirmed full-year 2024 guidance ranges (revenue, EBITDA, EPS) and declared a $0.66 quarterly dividend .
• Broad-based volume growth and favorable mix: same‑facility admissions +6.2%, equivalent admissions +5.2%, ER visits +7.2%; commercial mix improved and exchange volume surged ~50% YoY, supporting revenue per equivalent admission (+3.5%) .
• Outpatient surgeries down (-2.1% same‑facility) on calendar and Medicaid redetermination effects, though outpatient surgery revenue rose on mix; occupancy reached 75.2% with lower average length of stay vs prior year, enabling leverage .
• Capital deployment remained balanced: $2.469B operating cash flow, $1.118B capex, $1.180B buybacks; leverage near low end of target range, with continued capacity investments (beds +~2%, ER expansions) .
• Non‑GAAP and comparability notes: Q1’24 EPS included $0.57 from facility sale gains; Q1’23 benefited from a $145M revenue settlement; investors should focus on adjusted EPS and EBITDA for operating trends .

What Went Well and What Went Wrong

What Went Well

• Broad-based demand and mix improvements: “momentum generated strong financial results… driven primarily by broad‑based volume growth” with improved payer mix and margins; same‑facility revenue grew ~9% with +3.5% reimbursement per equivalent admission .
• Labor progress: adjusted EBITDA margin 19.3%; labor cost as % of revenue improved 100bps YoY; contract labor down ~21.7% YoY and ~5.1% of total labor cost .
• Network capacity and operations: occupancy 75.2% with reduced LOS vs prior year, improved ER throughput and satisfaction; commercial ER visits up ~20% YoY .

What Went Wrong

• Outpatient surgery volumes: same‑facility outpatient surgeries declined 2.1% YoY, driven by calendar effects and Medicaid redeterminations; management expects normalization over the year .
• Other operating expense pressure: continued professional fee growth and higher provider taxes tied to supplemental programs; OpEx as % revenue steady but elevated YoY .
• Physician staffing JV drag: Valesco remained a headwind (improved but still negative EBITDA), with revenue clearing below initial expectations; management aims to moderate losses and adjust reimbursement .

Financial Results

Summary Metrics (sequential comparison)

Year-over-Year Comparison (Q1 2024 vs Q1 2023)

Operating KPIs (same‑facility, sequential)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “The positive fundamentals we saw in our business this past year continued into the first quarter of 2024… driven by broad‑based volume growth, improved payer mix and solid operating margins.” — CEO Sam Hazen .
• “Adjusted EBITDA margin was 19.3% in the quarter… contract labor… improved 21.7% from the prior year and represented 5.1% of total labor cost.” — CFO Bill Rutherford .
• “Our exchange volume was up close to 50% in the first quarter… we are seeing some people redetermined off Medicaid landing in either employer‑sponsored or HICS coverage.” — CFO Bill Rutherford .
• “Our service levels [in ER] have improved… process time to be seen and to discharge/admit has improved markedly… commercial ER visits were up 20% year‑over‑year.” — CEO Sam Hazen .

Q&A Highlights

• Medicaid redeterminations and two‑midnight rule: Management sees modest benefits from both, with ~20% of previously seen Medicaid individuals not maintaining coverage and early signs of two‑midnight rule benefit; claims adjudication is ongoing .
• Other OpEx drivers: Year‑over‑year pressure from professional fees and provider taxes tied to supplemental programs; sequential pro fee growth moderated but remained up .
• Mix and exchange: Managed care volumes up 12–13%; exchange volume +~50% YoY; strong commercial ER volume (+20%), offset by Medicaid declines .
• Capacity and capex: $1.1B capex in Q1; continued investments across inpatient beds (+2% capacity) and ER expansions; new San Antonio hospital opening later in 2024 .
• Calendar effects: March outpatient softness due to fewer business days and Easter; inpatient admissions grew despite the calendar .

Estimates Context

• S&P Global Wall Street consensus retrieval was unavailable at the time of analysis due to data access limits; therefore, we cannot assess beats/misses versus consensus for Q1 2024, Q4 2023, or Q3 2023. Values retrieved from S&P Global were unavailable.
• Given reaffirmed full‑year guidance and strong volume/mix trends, sell‑side models may need to reflect improved commercial mix and occupancy leverage, partially offset by persistent professional fee pressures and expected supplemental payment headwinds in 2024 .

Key Takeaways for Investors

• Demand tailwinds remain intact with broad‑based volume growth, improving mix (exchange/commercial), and rising occupancy; this supports sustained top‑line and operating leverage into 2024 .
• Labor normalization is a key margin driver: contract labor down >20% YoY and SWB as % revenue improved; continued hiring and retention initiatives should underpin margins .
• Professional fees and Valesco JV are the primary headwinds; management is moderating growth and pursuing reimbursement adjustments, but investors should model continued pressure near‑term .
• Outpatient surgery volume softness appears transitory (calendar/redeterminations); underlying revenue benefited from favorable payer mix, suggesting resilience of outpatient profitability .
• Guidance reaffirmation and capital deployment (buybacks/dividends) are supportive; leverage near the low end provides flexibility to invest while returning capital .
• Supplemental programs shift from 2023 tailwinds to modest 2024 headwinds ($100–$200M), introducing timing variability; monitor quarterly accrual/settlement dynamics .
• Near‑term trading: Catalyst from reaffirmed guidance and mix improvements; watch pro fee trajectory and any updates on two‑midnight rule benefits as claims adjudicate .

Additional Notes

• The Q1 2024 8‑K declared a $0.66 dividend (payable June 28, 2024) and included the earnings press release; apart from the earnings materials, no other Q1 press releases materially impacted financials were located in the period window scanned .
• Comparability: Q1’24 EPS includes $0.57 from facility sale gains; Q1’23 included a $145M favorable settlement; adjusted EPS/EBITDA are better indicators of operating performance .