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HH

HCA Healthcare, Inc. (HCA)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 revenue was $17.487B (+7.9% YoY) with diluted EPS $4.88 (includes ~$0.15/share negative impact from Hurricane Helene); Adjusted EBITDA rose to $3.267B (+13.4% YoY) and margin expanded 90 bps YoY to 18.7% .
  • Volumes were broad-based: same-facility admissions +4.5%, ER visits +4.6%, inpatient surgeries +1.6%; outpatient surgeries fell 2% but revenue mix/acuity offset on profitability .
  • Guidance reaffirmed for FY24 (revenues $69.75–$71.75B; Adj. EBITDA $13.75–$14.25B; EPS $21.60–$22.80) with management now expecting results in the lower half due to hurricane impacts; FY24 capex trimmed to ~$5.0B (timing) .
  • Initial 2025 outlook: diluted EPS and Adjusted EBITDA growth “near or slightly above” the upper end of long-term ranges; management assumes volume growth 3–4% and a mostly stable operating environment .
  • Incremental Q4 headwind from Helene/Milton estimated at $200–$300M (or $0.60–$0.90/share) excluding any insurance recoveries; dividend declared at $0.66/share payable Dec 27, 2024 .

What Went Well and What Went Wrong

What Went Well

  • Broad-based volume strength drove 7.1% same-facility revenue growth, with payer mix and acuity tailwinds; CEO emphasized the “HCA Way” in operational execution and disaster response: “Leveraging corporate capabilities effectively to support committed people in our facilities is fundamentally our formula for success. We call it the HCA Way” .
  • Labor efficiency improved: labor costs as % of revenue improved 160 bps YoY; contract labor costs -18% YoY and now 4.6% of total labor cost; adjusted EBITDA margin +90 bps YoY to 18.7% .
  • Early AI initiatives showing promise (scheduling, revenue cycle) with a multi-year roadmap to drive administrative and clinical efficiencies; complemented by new ambient AI partnership with Commure to deploy at scale .

What Went Wrong

  • Hurricanes Helene/Milton: $50M Q3 impact ($0.15/share) and expected Q4 impact of $200–$300M (~$0.60–$0.90/share), primarily NC and HCA Florida Largo; insurance recoveries not yet estimated .
  • Outpatient surgery volumes declined 2% (same-facility), with weakness concentrated in Medicaid/uninsured; however, revenue/case ↑7% and profitability improved due to mix/acuity .
  • Other cost pressures: supply cost as % of revenue +30 bps YoY; other operating costs +40 bps YoY (Medicaid supplemental accruals; hurricane-related repairs); professional fees +10% YoY (but flat sequentially vs Q2) .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Revenue ($B)$16.213 $17.492 $17.487
Net Income ($B)$1.079 $1.461 $1.270
Diluted EPS ($)$3.91 $5.53 $4.88
Adjusted EPS ($)$3.91 $5.50 $4.90
Adjusted EBITDA ($B)$2.880 $3.550 $3.267
Adjusted EBITDA Margin (%)17.8% 20.3% 18.7%

KPIs and Operating Metrics

KPI (same-facility where noted)Q3 2023Q2 2024Q3 2024
Admissions (reported)537,943 554,456 562,100
Admissions (same-facility)534,323 550,610 558,105
Equivalent Admissions (same-facility)943,614 975,130 985,613
ER Visits (same-facility)2,325,946 2,400,248 2,433,887
Inpatient Surgery Cases (same-facility)132,793 135,129 134,913
Outpatient Surgery Cases (same-facility)249,753 254,371 244,733
Revenue per Equivalent Admission ($, same-facility)$16,887 $17,503 $17,311
Inpatient Revenue per Admission ($, same-facility)$18,214 $18,845 $18,793
Occupancy (%)71.4% 71.9% 71.9%
Avg Length of Stay (days)4.856 4.802 4.787

Context and drivers

  • YoY: revenue +7.9%, Adjusted EBITDA +13.4%, adjusted EPS +25% on volume/mix and labor efficiencies; hurricane reduced EPS by ~$0.15 .
  • QoQ: revenue flat, EPS/Adj. EBITDA down sequentially reflecting storm disruption and state supplemental dynamics; management cited lower growth in supplemental revenue vs 1H for NRA deceleration .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024$69.75–$71.75B $69.75–$71.75B; expect lower half due to hurricanes Maintained (lower-half bias)
Adjusted EBITDAFY 2024$13.75–$14.25B $13.75–$14.25B; expect lower half Maintained (lower-half bias)
Diluted EPSFY 2024$21.60–$22.80 $21.60–$22.80; expect lower half Maintained (lower-half bias)
Net IncomeFY 2024$5.675–$5.975B $5.675–$5.975B; expect lower half Maintained (lower-half bias)
Capital ExpendituresFY 2024$5.1–$5.3B ~ $5.0B (timing) Lowered
Q4 Hurricane Impact (ex-insurance)Q4 2024—$200–$300M ($0.60–$0.90/share) New headwind
DividendQ4 2024—$0.66/share payable 12/27/24 Declared
Initial OutlookFY 2025—EPS and Adj. EBITDA growth near/slightly above upper end of LT ranges Positive initial outlook

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Volume and mixQ1: broad-based growth; commercial mix improved to ~36% of eq. admissions; ER +7%; outpatient surgery down 2% but mix helped revenue . Q2: volumes remained strong; commercial ER +18%; exchange admissions ~7% of total .Same-facility admissions +4.5%; ER +4.6%; payer mix/acuity positive; exchange volume +43% YoY; Medicaid down 8.5% .Growth sustained; exchanges moderating in 2025
Hurricanes / disaster responseMinimal in Q1/Q2.~$50M Q3 impact; Q4: $200–$300M impact expected; Largo (FL) repairs, Mission (NC) lingering infrastructure issues; BI insurance not yet estimated .New temporary headwind
Labor & contract laborContract labor -21.7% YoY in Q1; wage inflation ~2.5–3% . Q2: contract labor -25.7% YoY; now 4.8% of SWB .Contract labor -18% YoY; 4.6% of total labor; wage inflation stable 2.5–3.5% .Improving, stabilizing
Professional fee expenseRising since 2023; moderation noted in Q1 . Q2: +13% YoY; moderation vs Q1 .+10% YoY and flat sequentially vs Q2; expected stable backdrop in 2025 .Moderating
Payer dynamics & denialsQ1: two-midnight rule expected modest benefit . Q2: exchange volumes +46% YoY; Medicaid down 10% .MA admits +11% (≈2% from two-midnight); denials mitigation ongoing; still too many MA denials; pursuing dispute resolution (1–2 years) .MA adoption helping; denial burden persists
Medicaid supplemental programsQ1: modest 2024 headwind vs 2023 . Q2: ~+$125M YoY lift; tailwind $100–$200M for 2024, largely 1H .Modest Q3 benefit; variability by state; leaning to higher end of $100–$200M 2024 tailwind .Tailwind this year; variable
AI/technologySustained investment; ER throughput gains; Galen nursing pipeline .Early AI benefits in scheduling/revenue cycle; enterprise ambient AI partnership with Commure .Building momentum
2025 set-up—Volume growth plan 3–4%; EPS/Adj. EBITDA growth near/slightly above upper end LT range .Constructive

Management Commentary

  • CEO on operational model and disaster execution: “Leveraging corporate capabilities effectively to support committed people in our facilities is fundamentally our formula for success. We call it the HCA Way… It works well in normal times… and now it has proven itself again in these hurricanes” .
  • CFO on margin drivers and cost controls: “Adjusted EBITDA margin in the quarter improved 90 basis points over prior year… contract labor… improved 18% from the prior year and represented 4.6% of total labor cost” .
  • CEO on AI roadmap: “We see many opportunities to improve our administrative functioning, our operational management… and clinical outcomes… areas where we’re seeing promising results… scheduling… revenue cycle… early stage initiatives… yielding positive results” .

Q&A Highlights

  • Two-midnight rule and denials: MA admits +11% (~2% from two-midnight); denials still elevated at some MA payers; pursuing dispute resolution (1–2 years) .
  • Pricing/2025 contracting: Planning 2–3% cash net revenue per adjusted admission growth; 2025 commercial renewals ~80% complete, tracking mid-single-digit rate updates .
  • Professional fees: Growth moderated to +10% YoY in Q3; sequentially flat vs Q2; expecting stable environment into 2025 .
  • Capex and insurance: FY24 capex ~ $5B due mainly to project timing; business interruption coverage exists but timing/amount of recoveries not estimated yet .
  • Medicaid supplemental dynamics: Q3 modest net benefit; 2024 tailwind now leaning to high end of $100–$200M due to state-by-state timing and new Nevada program .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 EPS and revenue was not retrievable at this time due to data access limits; as a result, “vs. estimates” comparisons are not shown. Values would normally be sourced from S&P Global and labeled accordingly if available.

Key Takeaways for Investors

  • Core demand remains healthy with continued volume and mix strength; hurricanes create a transitory earnings headwind but do not alter the medium-term trajectory (volume +3–4% assumed for 2025) .
  • Margin quality improved YoY (Adj. EBITDA margin +90 bps), supported by labor efficiencies and contract labor normalization; professional fees are moderating .
  • FY24 guide intact but likely to land in the lower half of ranges due to Q4 storm impacts; capex trimmed to ~$5B on timing, not strategy .
  • Medicaid supplemental programs remain a 2024 tailwind but are inherently variable; management views sustainability as solid across red and blue states .
  • Early AI execution plus a scaled ambient AI deployment partnership (Commure) can incrementally support productivity and care quality over the next several years .
  • Watch near-term catalysts: pace of recovery at affected hospitals (Mission/Largo), any insurance recovery visibility, and January’s formal FY25 guidance framing growth “near/slightly above” LT range .

Additional Disclosures and Balance Sheet Highlights

  • Q3 operating cash flow $3.515B; share repurchases $1.795B (4.948M shares); cash $2.888B; total debt $42.965B; dividend declared $0.66/share payable Dec 27, 2024 .