2024 Volume Expectations
Q: What's driving higher volume growth in 2024?
A: HCA anticipates adjusted admissions to grow by 3% to 4% in 2024, exceeding the historical 2% to 3% range. This increase is driven by strong demand, successful capital initiatives, favorable economic indicators, and robust enrollment in health insurance exchanges across their states. Access to contracted lives remains strong, supporting this optimistic outlook.

Labor Cost Outlook
Q: How will labor costs and wage inflation trend?
A: HCA expects wage inflation to normalize to 2.5% to 3% going forward. There's continued opportunity to reduce contract labor expenses, with plans in place for 2024. Professional fees are targeted to decrease, aiming for growth of 8% to 10% next year compared to 15% to 20% this year, through multiple initiatives including revenue enhancements and program adjustments.

Managed Care Pricing and Medicaid Redeterminations
Q: Is guidance factoring benefits from the 2-midnight rule or Medicaid shifts?
A: The 2024 guidance includes a 2% to 3% aggregated revenue per adjusted admission increase but doesn't materially factor in benefits from the 2-midnight rule or Medicaid redeterminations. While there's potential for modest benefits as patients migrate from Medicaid to health insurance exchanges or employer-sponsored coverage, it's too early to assess significant impacts.

Capital Expenditure Plans
Q: How is capital being allocated, and what are returns?
A: HCA plans to invest $5 billion in capital in 2024, maintaining consistent allocation between inpatient, outpatient, and technology investments. Returns remain solid, in the upper teens percentage. Outpatient facilities offer quick returns, while hospital investments provide long-term value, enhancing the overall network and meeting demand in fast-growing communities.

Medicare Advantage Trends and 2-Midnight Rule
Q: What are Medicare trends and the 2-midnight rule impact?
A: Medicare Advantage admissions grew roughly 10% in the quarter, consistent with trends throughout the year, due to conversions from traditional Medicare and utilization gains. The 2-midnight rule is expected to benefit patients and could provide modest positive results over time, but it's too early to quantify its impact for 2024.

Professional Fees Management
Q: How will professional fee growth be managed in 2024?
A: HCA aims to reduce professional fee growth to 8% to 10% in 2024 from 15% to 20% this year. This will be achieved through initiatives such as integrating operations, adjusting programs, and internalizing certain services, with a focus on bending the trend line of expense growth.

Supplemental Payment Headwinds
Q: What's the outlook for supplemental payments in 2024?
A: Supplemental payments are expected to be a headwind of $100 million to $200 million in 2024. This is largely due to non-recurring settlements received in 2023 and the impact of beginning accruals for new programs, such as in Florida. These factors contribute to the anticipated decrease in supplemental payment income.

Demand Trends in Senior Population
Q: Is pent-up senior demand still impacting volumes?
A: Medicare admissions have shown slight acceleration, growing from 2.6% in 2019 to 4% in 2023. This growth is attributed to aging demographics, population increases in HCA's markets, and market share gains. It's challenging to determine if there's a structural change in utilization patterns.

Surgical Growth Outlook
Q: How is surgical volume expected to trend?
A: HCA expects consistent surgical volume growth in 2024. In 2023, inpatient surgeries increased by 2% and outpatient surgeries by 2.5%, despite a slower fourth quarter due to calendar effects. Ongoing investments in ambulatory surgery centers and complex program offerings are anticipated to support this growth. Cardiac volumes are particularly strong, growing in the mid-single digits.

Labor Supply and Capacity Constraints
Q: Are there still labor-related capacity issues?
A: HCA's patient acceptance rate has improved to approximately 90%, meaning about 10% of referred patients couldn't be admitted due to capacity constraints. While still below 2019 levels, improvements are expected in 2024 as hiring continues and new capital projects come online. Efforts to enhance staff retention and create a supportive work environment are ongoing.

Expense Management Initiatives
Q: Any new strategic focus on expense reduction?
A: HCA is enhancing financial resiliency through sophisticated revenue cycle integration and internal benchmarking efforts. Initiatives like the case management program have reduced length of stay and modestly increased case mix, contributing to operating leverage and efficiency. These programs aim to find better ways to serve stakeholders while managing costs effectively.

Valesco Operating Improvements
Q: How are Valesco's operating losses being addressed?
A: Valesco's performance aligned with expectations, with operating losses around $150 million annually for both 2023 and 2024, considering the transition from 9 months to a full year. HCA anticipates continued improvements through integrating the joint venture and implementing operational enhancements, expecting run-rate improvements as the year progresses.

COVID Impact on Operations
Q: How is COVID affecting patient acuity and costs?
A: COVID admissions have remained stable at approximately 2% of total admissions, with acuity levels consistent over the past year. COVID has not been a material factor in HCA's overall operating results recently.

Capital Expenditure Returns
Q: Are returns on capital investments changing?
A: Returns on capital expenditures continue to be strong, in the upper teens percentage. Outpatient facilities provide efficient and quick returns, while hospital investments yield long-term value. The integrated network model combining outpatient and inpatient facilities supports positive enterprise returns and aligns with HCA's growth strategy.