HCA Healthcare Q4 2025 Earnings Call Transcript

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Provided by AlphaStreet
January 24, 2025
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Operator

For standing-by. My name is, and I will be your conference operator for today. At this time, I would like to welcome everyone to the HCA Healthcare 4th-Quarter 2024 Earnings Call. All lines have been muted to prevent any background noise. After today's presentation, there will be an opportunity to ask questions. To ask questions, we press star followed by the number-one on your touchdown phone. Your question, please press star followed by the number-one again. I will now turn the call over to Frank Morgan, Vice-President of Investor Relations. Please go-ahead.

Frank Morgan
Vice President, Investor Relations at HCA Healthcare

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen; and CFO, Mike Marks. Sam and Mike will provide some prepared remarks and then we'll take questions. Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

More information on forward-looking statements and these factors are listed in today's press release and in our various SEC filings. On this morning's call, we may reference measures such as-adjusted EBITDA, which is a non-GAAP financial measure, a table providing supplemental information on adjusted EBITDA and reconciling net income attributable to HCA Healthcare Inc. Is included in today's release. This morning's call is being recorded and a replay of the call will be available later today. With that, I'll now turn the call over to Sam.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

All right. Thank you, Frank, and good morning to everybody. The company finished the year with strong business fundamentals that were consistent with the previous quarters this year. Demand for healthcare services remained strong, operations were in good order and stable, and the company continued to see favorable investment opportunities. These fundamentals represent a good starting point as we enter 2025. Our teams have done a fantastic job in remediating a number of facilities in North Carolina, Georgia and West Florida that were impacted by the two major hurricanes we experienced a few months ago.

All of these facilities, including Mission Hospital in Nashville, where the community's recovery efforts continued and Largo Hospital in our West Florida division resume normal operations in the quarter. As we end 2024, the first-half of this decade has been another period of long-term growth for the company. We have seen operational improvements across key performance indicators and we have delivered increased value for our shareholders. These accomplishments position us well for the future. I'm grateful to our colleagues who made this happen. We believe the HCA way of combining our high-quality local health networks with the capabilities of a national system consistently produces better patient outcomes, drives greater innovation and efficiency and yields stronger financial results. While gratified with these accomplishments, we will maintain our pursuit to improve outcomes further for our stakeholders.

We believe the strength of our cash-flow and balance sheet position and position us well for investing further in our networks to increase access, expand capacity and enhance clinical capabilities. They also allow significant investments in our people to improve training, while also creating career growth in our company. And finally, this financial strength creates opportunities to deliver value to our shareholders by effectively allocating capital to generate favorable returns. Diluted earnings per share as-adjusted increased 5.4% in the 4th-quarter as compared to the prior year. These results included the effects of the two major hurricanes. In the quarter, we estimate the financial impact from increased costs and lost revenue equated to approximately $0.60 per share. This was in-line with the estimation we provided on our previous earnings call. Revenue growth was approximately 6%, demand, payer mix and acuity continued to be strong across most service categories and markets.

On a same facilities basis, inpatient admissions and equivalent admissions grew 3%. Emergency room visits increased 2.4%, inpatient surgeries were up 2.8%. Outpatient surgery cases, while down 1.3%, again, due to the strong payer mix and service mix, we had solid revenue growth in this service line. And lastly, rehab obstetrix and cardiac procedure volumes continued to be strong. Operating costs were well-managed by our teams and remained in-line with our expectations. Before I close, you will see that our earnings guidance for 2025 aligns with the preliminary outlook we provided on our prior call. And with that, I'll turn the call to Mike for details.

Mike Marks
Chief Financial Officer at HCA Healthcare

Thank you, Sam, and good morning, everyone. I will provide additional comments on the quarter and year and then discuss our 2025 guidance. Regarding the 4th-quarter, we are pleased with the results of the quarter, which demonstrates the excellence of our teams in responding to challenges and still producing solid results.

As Sam noted, we estimate that the adverse hurricane impact in 4th-quarter of 2024 was approximately $200 million or $0.60 per diluted shares, in-line with our expectations. These estimates do not include any insurance recoveries the company may receive in the future. Considering the hurricane impact, we had good top-line growth. Sam reviewed the volume information for the quarter. Our volume in the quarter was adversely impacted by both the hurricane impact and a depressed respiratory season compared to the 4th-quarter of 2023. Same-facility net revenue per equivalent admissions increased 2.9% over prior year, in-line with our expectations.

Consistent with our trends all year, payer mix remained strong in the 4th-quarter of 2024 with same-facility managed-care admissions up 9.2% compared to the prior year quarter. While our operations performed well in the quarter, adjusted EBITDA margin declined 60 basis-points compared to the prior year quarter. This decline is primarily related to the impact of the hurricanes on our Largo Hospital in Tampa and the North Carolina division, which had a 100 basis-point unfavorable impact on adjusted EBITDA margin in the quarter. Additional expenses related to these hurricanes, including repair costs for our Largo hospital, drove the increase in other operating expenses as a percent of revenue and half of the supply increase.

Adjusted EBITDA in the quarter grew 2.6% compared to the prior year quarter, which reflects the impact of the hurricanes. Diluted earnings per share as-adjusted and the 4th-quarter grew 5.4% over the prior year quarter, also reflecting the impact of the hurricanes. Let me briefly highlight our full-year results for 2024. We had strong top-line growth of 8.7% with revenue per equivalent admission up 3.2% and equivalent admissions growing 4.5%. We posted a 10 basis-point improvement in adjusted EBITDA margin for the year. Adjusted EBITDA increased 9% over prior year and diluted earnings per share increased 15.5% over the prior year. We estimate that the lost revenue and additional expenses from the hurricanes adversely impacted full-year 2024 by $250 million or $0.73 per diluted share.

Our full-year incremental net benefit from supplemental payment programs was approximately $400 million with 4th-quarter being the lowest incremental net benefit of the year. This is an increase from the $100 million to $200 million incremental net benefit we expected, largely due to one-time payments and higher-than-expected program payments in a few states. When we consider the $250 million unfavorable hurricane impact, the prior year $145 million payer settlement and the incremental net Medicaid supplemental program benefit in the year, we are very pleased with the core operating performance of the company in 2024.

Moving to capital allocation. We continue to deploy a balanced strategy of allocating capital for long-term value-creation. Cash-flow from operations was $2.6 billion in the quarter and $10.5 billion for the year. This represents an 11% increase in operating cash-flow in 2024 over prior year, indicative of great work by our operating and administrative teams. Capital expenditures totaled $1.29 billion in the quarter and $4.9 billion in the year. And we paid $1.7 billion for repurchases of our outstanding shares during the quarter and $6 billion in the year. We paid $165 million in dividends for the quarter and $690 million for the year. Our debt-to-adjusted EBITDA leverage remains at the low-end of our stated guidance range, and we believe we are well-positioned from a balance sheet perspective. As a result, we are lowering our targeted leverage ratio from our current 3 to-4 times to 2.75 to 3.75 times. We believe this new range fits our profile and our anticipated use of leverage as a company, assuming no significant transactions or extraordinary events. So with that, let me speak to our 2025 guidance for a moment.

As noted in our guidance this morning, we are providing full-year 2025 guidance as follows. We expect revenues to range between $72.8 billion and $75.8 billion. We expect net income attributable to HCA Healthcare to range between $5.85 billion and $6.29 billion. We expect adjusted EBITDA to range between $14.3 billion and $15.1 billion. We expect diluted earnings per share to range between $24.05 and $25.85. We expect capital spending to be approximately $5 billion to $5.2 billion. Our guidance assumes a growth in equivalent admissions between 3% and 4% and net revenue per equivalent admission between 2% and 3%. Regarding the effects of the 2024 hurricanes on our earning guidance for 2025, we expect a year-over-year increase in adjusted EBITDA from the reopening at Larga and a year-over-year decline in the North Carolina division as our current assumptions in this market will have lingering effects of Hurricane Heline throughout much of 2025.

The increase at Largo and the decline in North Carolina are expected to offset and are not expected to produce a tailwind for us in 2025. Regarding Medicaid supplemental payment programs, as we've said in these past, these programs are complex, variable in timing and do not fully cover our cost to treat Medicaid patients. Based on current assumptions, when we aggregate the impact of all of our supplemental payment programs, our guidance contemplate the net effect of Medicaid supplemental payment programs to range from being flat to 2024 to a $250 million headwind, driven by one-time payments received in a few states in 2024. The new Tennessee program is considered in this range.

We expect full-year margins to be consistent with 2024 and cash-flow from operations to range from $10.75 billion to $11.25 billion. As noted in our release this morning, our Board of Directors has authorized a new $10 billion share repurchase program and we anticipate completing a significant portion in 2025, subject to-market conditions and other factors. In addition, our Board declared an increase in our quarterly dividend from $0.66 to $0.72 per share. And with that, I will turn the call over to Frank for questions.

Frank Morgan
Vice President, Investor Relations at HCA Healthcare

Thank you, Mike. As a reminder, please limit yourself to one question so that we might get as many as possible in the queue an opportunity to ask a question. Your name -- you may now give instruction to those who would like to ask a question.

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Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, can you press star followed by the number-one on your touchdown phone? You will hear a prompt that your hand has been raised. Should you wish to withdraw, can you press star followed by the number-one. If you are using a speaker phone, please leave the handset before pressing any key. One moment please for your first question. Our first question comes from the line of Peter Chickering from Deutsche Bank. Please go-ahead.

Pito Chickering
Analyst at Deutsche Bank Aktiengesellschaft

Hey, good morning guys and thanks for taking my questions. I guess this question will be on Medicaid supplemental and I just want to understand a little bit on where we were in -- for 2024, it has been bouncing around a little bit. From 3rd-quarter sort of 4th-quarter, did that number change -- was that $400 million that you came in on the year? I guess you sort of bridge where we were on the last-time you guided us into where it is now? And then for 2005, can you just sort of make sure that we bridge sort of where we are in 2004, 2005 or what's in the low-end and high-end of guidance for Medicaid payments? Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

Hey, Peter. This is Mike. Yes. So if you think about the net incremental benefit from our supplemental payment programs, for the full-year 2024, it's about $400 million. And as I noted in my comments, 4th-quarter was the lowest incremental net benefit of the four quarters in the year. You may recall from our second-quarter that the second-quarter of '24 was the highest benefit at $125 million. And so that's kind of how it spread-out. The driver was really largely related to one-time payments that came in a few states and a couple of our state programs that came in a little more favorably than we expected. So that's where we landed.

And then as you start thinking about 2025, as I noted in my guidance, when we consider all the various programs, noting the complexity and the variability in the moving parts. We are projecting and estimating that our net effect of supplemental payment programs will range between flat to 2024 to upwards of a $250 million headwind. And that is inclusive of a pretty wide range of estimation related to the new Tennessee program. So that's -- that's how it kind of went through the year and that's the basis of our projections for '25.

Pito Chickering
Analyst at Deutsche Bank Aktiengesellschaft

So -- so Mike, actually just on, I guess for 2024, you're saying it's $400 million, the highest in 2Q is 125 and lowest in 4Q. I guess, can you just actually give us just a quarterly benefit because $400 million with 2Q $125 that seems is not that high versus the rest of the quarter. So any color on sort of how that flows through the whole year? Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

Well, I mean, I think you can take Q2, Pito, 125 is a high watermark. And then obviously, first and 3rd-quarter would be a little bit higher in 4th-quarter would be the lowest. I mean that's the best I can give you in terms of the flow-through the year.

Pito Chickering
Analyst at Deutsche Bank Aktiengesellschaft

Great. Thanks so much.

Operator

Thank you. Our next question comes from the line of A.J. Rice from UBS. Please go-ahead.

A.J. Rice
Analyst at UBS Group

Hi, everybody. It sounds like the MA managed-care or managed-care rather same-store admissions were strong. I wonder because there was so much publicity in the quarter around MCOs. Did you -- where you added your pricing for '25, '26, any anything new or different you're seeing in terms of utilization review, denial rates, anything along those lines?

Mike Marks
Chief Financial Officer at HCA Healthcare

So hey, A.J. This is Mike. In terms of our contracting, we are 80% contracted for '25, 60% contracted for '26 and I think it's 20% contracted for '27. We're still in -- on-top of our range estimates, our targets in terms of pricing. And as I think about denials and underpayments, clearly a lot of activity, but we put a lot of effort over the last couple of two or three years in really beefing up our capabilities and managing through the denial and underpayment process. I would say when we think about not only 4th-quarter, but the full-year of '24, we are not seeing growth in denials being a material impact for the company at this point.

A.J. Rice
Analyst at UBS Group

Okay. Thanks.

Operator

Thank you. Our next question comes from the line of from Partners. Please go-ahead.

Whit Mayo
Analyst at Leerink Partners

Hey, thanks. Good morning. I just wanted to hear maybe some of the internal initiatives that may be moving to the forefront this year. I feel like you guys have been talking a lot about throughput, ER optimization for a while, case-mix, length of stay, all that. Anything on the back-end with discharge management, anything around length of stay and bottlenecks that you might be seeing around post-acute. Thanks.

Mike Marks
Chief Financial Officer at HCA Healthcare

So the case management inpatient throughput has been a really strong initiative for us over the last couple of years with we even mentioned it in the Investor Day conference last year. And our work continues and continues to strengthen. And specifically, when I think about the going-forward into 2025, we have a number of initiatives within our case management infrastructure-focused on improving the post-acute care placement and discharge process and I might say even especially with our Medicare Advantage payers and that work continues and it's important. But if I kind of take stock of where we are today, our length of state performance in the year has been solid and we are -- we're forecasting another good year for length of state management as we head into 2025.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

Yeah. And let me add to that, Mike. So, I mean, we have a number of initiatives that are progressing across the company. And when you think about our network development initiatives, we continue to add facilities. You'll see that we've got more facilities at the end of this year than we did last year. So our capital as well as some incremental acquisitions in some key markets is allowing us to expand the reach of our networks. That's showcasing itself in growing market-share. What we're seeing in our market-share data is really encouraging and lends itself to sort of continued opportunities in that particular initiative.

In addition to the case management operational initiative that Mike was talking about, we've had tremendous success with our emergency room operational improvement plan as well, and that's yielded throughput improvements, patient satisfaction improvements and growth allowing us again to extend the reach of that channel and meet the needs of the community in an effective way. And again, as we push into 2025, we'll see more emergency room bed supply inside of our networks as a result of the investments that we're making and then the ability to use those beds productively with our ER revitalization program. We're carrying the elements of success from that program to our operating rooms.

We have an operating room optimization initiative that we think is going to be very beneficial to our surgeons also our patients and it mirrors a lot of the efforts and the progress we've seen with our emergency room and this involves you turnaround time, staffing, other elements of OR efficiency that's important to our physician partners as well as our patients. And then finally, I will say that our labor agenda continues to improve. This past year, I'm really proud of our accomplishments as a company. Our employee engagement broadly across all colleagues and especially inside of nursing is at an all-time high for the company. That has allowed us to reduce turnover and really improve the capabilities of our facilities with having continuity and staffing, a more competent workforce and the necessary capacity to really meet the demand.

So we have a number of what I call winning plays that are beneficial to the organization, responsive to the communities and really position our company for success. As we push forward, we've talked about our longer-term initiatives. Our longer-term initiatives are geared toward by technology and using technology, we're on our journey. We're already seeing early signs of success with how AI can improve aspects of our organization administratively, operationally inside of our facilities and we think clinically as well. So that's a very exciting agenda. And I know others speak of AI, but within the processes that exist for us as a healthcare provider, we see a lot of potential to drive better-quality, greater efficiencies and even better management of our business. And so those things continue. I think our capital allocation is another important initiative of the company.

We're investing heavily back-in the business. We'll invest somewhere between $5 billion and $5.2 billion this year. And then we've got the ability to use the cash-flow and our balance sheet to deliver even more value through shareholder programs that Mike alluded to earlier. So all of these combined, we believe to create value, value for our patients, value for our employees and value for our shareholders.

Whit Mayo
Analyst at Leerink Partners

Thank you.

Operator

Thank you. Our next question comes from the line of Ben Hendrix from RBC Capital Markets. Please go-ahead.

Ben Hendrix
Analyst at RBC Capital

Great. Thank you very much. After another strong year of state exchange enrollment growth, just wanted to get your thoughts on how you see commercial mix progressing and how -- how enrollment fared for you guys in your opinion, how it's going to impact Florida and Texas? And then any thoughts broadly on the fate of the enhanced subsidies under the new administration and any efforts you've made with lobbyists or whatever in that regard? Thank you.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

All right. Thanks, Ben. Clearly, the enrollment inside the exchanges continue to strengthen. We think it's somewhere around 25 $25 million at this particular juncture. So it's up 12% to 15%, I think, over '24. And we're seeing consistent growth across a number of HCA states. So that's a positive, we believe. It's a positive outcome for families. It creates greater access to care, it improves outcomes. So all of that is a backdrop, we think politically is a positive and presents an opportunity for the Trump administration, we believe, to sustain and ensure that families have coverage, they have affordability and they have the opportunity to achieve positive outcomes for their -- for themselves and really for their families. So we don't have any current insights into where this is going.

All we know at this particular juncture is that they are due to expire at the end of next year. We think the backdrop of growth, the backdrop of satisfaction within the enrollment is a positive and we we see opportunities to work with the Trump administration to find a pathway forward to continue what's been a very positive community benefit, we believe, with the exchanges. We have a very robust agenda to partner with other organizations to work within our coalition to support advocacy here to achieve the outcome that we think makes sense for the different communities that we serve. So it's too early for us to call anything on that, but we are active in the process as you would expect.

Mike Marks
Chief Financial Officer at HCA Healthcare

And Ben, in terms of your question about payer mix and where it landed. Healthcare exchanges now represent 7.5% of our equivalent admissions in 2024 and about 9% of our revenues.

Ben Hendrix
Analyst at RBC Capital

Thank you very much.

Operator

Thank you. Our next question comes from the line of Ann Heinz from Mizuho Securities. Please go-ahead.

Ann Hynes
Analyst at Mizuho Securities

Great. Thank you. I just want to ask about the Medicare 2 minute rule. How much impact do you think that had on inpatient admissions in 2024? And do you think it will continue to be a benefit? I think last earnings call, you gave a stat that detailed the difference between Medicare advantage observation versus traditional Medicare fee-for-service. Can you remind us of what that stat is? And do you think over-time you can close that gap? And that'd be great. Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

Hey, this is Mike. So in terms of the impact, if I look at kind of the movement from observation to inpatient status consistent with the Medicare Advantage to midnight rule. For the full-year 2024, we estimate that it was equivalent to approximately 50 basis-points of our overall admission growth. I would say that that's remained pretty consistent over the four quarters. So I don't think that it's going to be -- you'll see much more movement as you go into 2025.

As to the comparison of Medicare Advantage observation mix to traditional. I would note that the Medicare Advantage observation, you know as a percentage of total to to-end is approximately 20% higher than traditional Medicare, but I don't suspect at this rate that we're going to see material changes. You know, at this point, we're really focused on collecting on that revenue and working through the denial and appeal processes associated with the Medicare Advantage program, I don't think you'll see a material change in-kind of the volume trends that we've seen so-far this year as we head to '25

Operator

Thank you. Thank you. Our next question comes from the line of Andrew Mock from Barclays. Please go-ahead.

Andrew Mok
Analyst at Barclays

Hi, good morning. Hoping you could spike out the performance of Mission Hospital in the quarter and help us understand what impact that had on same-store volumes in the quarter and the pace of recovery throughout 2025, including any explicit EBITDA assumptions around hurricanes in the guidance? Thanks.

Mike Marks
Chief Financial Officer at HCA Healthcare

Let me let me just talk about volumes overall, Andrew, as we think about 4th-quarter. With 3% same-facility admission and equivalent admission growth to prior year in the quarter. The first thing I might mention is, it was a little bit of a tougher comparison to 4th-quarter of '23, which had strong growth. We did experience, I mentioned this overall. And again, I'm speaking overall, not just related to North Carolina division. But overall, we did experience a depressed respiratory season in 4th-quarter of '24 compared to 4th-quarter of '23.

Our estimates is that this depressed respiratory season had about a 1 point drag on same-facility admission growth to prior year and about a 2 point drag on same-facility -- emergency room visits growth to prior year. You know, overall, as a company, the hurricanes as well had an impact on volume growth primarily in October, but -- but for the whole -- for the whole quarter. Our estimates are somewhere between 20 and 40 basis-points of drag on volume in the quarter related to hurricanes. And that's directly attributable. I'd also mention that in the month of October, if you look at the rest of the state of Florida, there was clearly some lingering effects as they kind of recovered. And then we saw good recovery in November and December. So that's kind of a tail of the tape on volume in the quarter?

Andrew Mok
Analyst at Barclays

And was there any explicit EBITDA assumption for hurricanes in the guidance?

Mike Marks
Chief Financial Officer at HCA Healthcare

Yeah. So if you go back to my comments, Andrew, you know, the way that we are guiding for hurricane impact into 2025 is this that if you think about -- let's start with Largo, if you think about the Largo hospital, we do expect a year-over-year increase in adjusted EBITDA from the reopening at Largo. And a year-over-year decline in the North Carolina division as our current assumption is this market will have lingering effects of the hurricane throughout much of 2025. The guidance really contemplates that the increase at Largo and the decline in North Carolina are expected to offset and are not expected to produce a tailwind for us in 2025. So that's the way to think about the hurricanes and their impact into 2025.

Andrew Mok
Analyst at Barclays

Great. Thank you.

Operator

Thank you. Our next question comes from the line of Joanna from Bank of America. Please go-ahead.

Joanna Gajuk
Analyst at Bank of America

Hi, good morning. Thank you for taking the question. So I guess on the somewhat related question. I guess on the cost side of things. So thanks for the color on the impact from the hurricane in the quarter and Q4 to the other opex line. So I want to ask about professional fees. You've been talking about this for quite some time, but most recently, you highlighted the higher-than-expected professional fees to continue into '25. So can you talk about what you're seeing there? What do you assume in your guidance? We heard maybe radiologists are the next group of doctors that are asking for higher fees. So that's what you're seeing? And also can you help us maybe also size that line in your -- in your other opex line? Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

So professional fees are about 24% of other operating expenses. So that's how you would size it. And as we've mentioned in the last several calls, our operating teams have continued to work diligently to address the subsidy pressure from the hospital-based physician group component of our business. And as we've noted, as we've gone through the year, we have bent the cost curve on professional fees as we move through '24 really due to these efforts. So as I think about the guidance into 2025, I would say it like this. We expect the cost pressures related to physician costs to moderate a bit further in '25, but it's still going to be higher than just normal inflationary cost trends. And that's how you would think about that flow to into the next year. Maybe a double-click on radiology.

When you're looking at our hospital-based physician categories, clearly, the emergency room and the hospital medicine segments have moved more fully through the business challenges that we see in this segment, really especially given the significant work HCA has done with the acquisition and integration of. And with it relates to radiology, we did see pressure as we've gone through 2024, and we expect that to continue into 2025. But keep in mind that radiology is a much lower portion of our hospital-based physician subsidies. And I'll just finish with this is that our teams have focused efforts between both our operating teams and our physician management teams focused on addressing radiology, and we do not expect it to be a material impact in '25.

Joanna Gajuk
Analyst at Bank of America

Thank you.

Operator

Thank you. Our next question comes from the line of Matthew Gilmore from KeyBanc. Please go-ahead.

Matthew Gilmore
Analyst at KeyBanc

Hey, thanks for the question. I wanted to see if there was any commentary on the California wildfires. I know you've got a couple of facilities in the L.A. Area, but any impact there to call-out or is it just not big enough at the consolidated level to make a real difference?

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

This is Sam. We had no impact at our Southern California hospitals as a result of the. We did have one of our facilities in Ventura County on notice, so to speak, in the sense that there was the Kenneth Fire, I think it was that was in Ventura County. The Palisades fire did not reach through the valley into Ventura County, but we were on high alert and we have a fire mitigation tactics in that particular hospital due to its location and so forth. And we continue to evolve that just like we do with hurricanes and making sure that we can protect our patients and protect our colleagues and protect the asset. And we're iterating, if you will, on our plan there to advance it even further. In Riverside, California, there's been some fires in the proximity that have produced some smoke issues in the community, but no issue whatsoever on our facility there. So we're fortunate that's a horrible event as everybody knows, but we were on the other side of the canyon with our facility in 1,000 Oaks.

Matthew Gilmore
Analyst at KeyBanc

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Ryan from Jefferies. Please go-ahead.

Meghan Holtz
Analyst at Jefferies Financial Group

Good morning, everyone. This is Megan Holtz on for Brian. As we think about Q1 EBITDA, are there any moving pieces, including some seasonality or non-recurring items that we should be considering? And then just a quick clarifying question on the supplemental payments. You referred to the new Tennessee program. Does that mean it was approved recently?

Mike Marks
Chief Financial Officer at HCA Healthcare

Well, let me handle the second one first. So in the Tennessee program, we have been notified of approval of a partial year. And so we have -- we see an approval that would in effect cover July 1 of '24 through December 31st of '24. And then they are transitioning that to a calendar year program beginning in '25. The 2025 calendar year program, which is new, has not been approved. And so the new administration will be addressing that. So that's the status of the new Tennessee program. We don't give a quarter-by-quarter guidance. So our normal advice is just to follow our historical season historical seasonal trends and we would stick with that. So the '25 guidance is for the full-year of 2025.

Meghan Holtz
Analyst at Jefferies Financial Group

Thank you.

Operator

Thank you. Our next question comes from the line of Justin Lake from Wolfe Research. Please go-ahead.

Unidentified Participant
at HCA Healthcare

Hi, thanks. It's Anna on for Justin. Have you guys attempted to size the potential impact of site-neutral payments? And if so, does that sort of alter your strategy at all surrounding your outpatient ASC footprint? And can you tell us where also the same-store ASC revenue growth was in the quarter? Thanks.

Mike Marks
Chief Financial Officer at HCA Healthcare

So on-site neutral, you know, let's start which is stating obvious, we're against program implementations that would cut Medicare hospital outpatient reimbursement. Nor do we think that programmatically that it makes sense to pay the same rate for a hospital and I'll use surgery, but you could use all of our service that operates on a 24x7 basis with full capabilities of physicians of staff and equipment. If you'll compare that, for example, to our surgery centers who generally operate eight to-4 Monday through Friday and do much less complex work.

The idea of paying the same rate for those does not seem to make a lot of sense to us. As it relates to sizing the potential impact, we have not seen a bill yet that would give us enough information to estimate a potential impact. And in the past, as you've seen various proposals and discussions around this, there's been a range of procedures being considered for Medicare site-neutral. On one end-of-the range would be proposals around hospital-based physician clinic visits and outpatient infusion facilities.

At that end-of-the range, HSA would not be materially impacted given how we structure our physician clinics and other draft proposals, we've seen certain outpatient surgical procedures being considered for cuts to hospital outpatient reimbursement. And we would expect that those would have a bit more notable impact to HCA. But like a lot of these health-care policy debates that are going through the government right now, we continue to monitor them closely, as I'm sure you do and we'll be tracking them

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

Mike, I don't see that any site-neutral policy per se will force us or cause us to rethink our strategy around building out our outpatient networks, we believe we are finding opportunities to extend the reach of our networks into new communities, again, make it more convenient and more efficient for the patient and then fully integrate that particular facility into the larger hospital-centric health system is part and parcel to our network development strategy. So I don't see any changes to that as a result of a Medicare site-neutral provision if one were to be implemented.

Mike Marks
Chief Financial Officer at HCA Healthcare

And to your question around the growth in ASC revenues, it's about right at 5% to 6% growth over prior year

Operator

Thank you. Our next question comes from the line of Scott Fidel from Stephens. Please go-ahead.

Scott Fidel
Analyst at Stephens

Hi, thanks. Good morning. I wanted to stick on the policy side and was curious just in understanding it's clearly still very early, but if you've done any type of preliminary analysis around Trump's tariff proposals and if you think there could be any net effect or economic impact from that? And then also from some of the recent executive orders that he's already been tossing out at a risk rate as it relates to foreign workers and immigrants, et-cetera. Just curious if you think any of those may have an effect on either the labor or demand environment? Thanks a lot.

Mike Marks
Chief Financial Officer at HCA Healthcare

Down tariffs, our Health Trust group purchasing organization has been working on tariff mitigation strategies for many years, including actions like fixed-price contracting, supply-chain mapping and risk assessments and a lot of work on sourcing. Many of our key suppliers have been working on de-risking and diversifying their supply chains over the many -- over the last many years, really kind of especially away from China. Like you, we are closely monitoring the announcements on tariffs from the new administration, including which countries are targeted, the rate of tariffs being implemented and potential tariff exclusions for healthcare-related items. I would note that for 2025, we have about 70% of our supplies being contracted with firm pricing.

As it relates to kind of sizing it, we need more specific information on the details of these tariff policies as noted and we're going to need that before we can produce additional estimates of impact. On the other-related items, we're tracking those carefully as all of you are. We don't hire undocumented workers. And so the impact would be more on supply-and-demand for labor in those skill mixes and we're tracking it like you are and -- but no special insider note that we can give you at this point.

Operator

Thank you. Our next question comes from the line of James from Cantor. Please go-ahead.

Sarah James
Analyst at Cantor Fitzgerald

Thank you. I want to clarify again the bridge on equivalent admissions going from the 4.5 to the 3% to 4%. So it sounds like you're implying mission and LIGO offset each other explicitly on EBITDA, but sort of implied on volumes. And then we're calculating 27 bps from a non-repeated leap year. And I'm not sure if you're assuming any pull-forward of procedures from consumers that may be concerned about expanded subsidies going away? So I'd love to know that. And then just the rest of it, is that just conservatism going back to the mean or is there anything specific exiting 4Q that you saw that led you to be conservative?

Mike Marks
Chief Financial Officer at HCA Healthcare

So when I think about our '25 guidance on volume. And so we're projecting a 3% to 4% growth in equivalent admissions for '25. And as you've noted, we ran higher than that through September year-to-date, Call-IT a 5% growth. And then 4th-quarter was a little bit more in-line with that at a 3% growth. Although, as I noted on an earlier question, we did see in 4th-quarter a bit of impact with depressed flu season -- sorry, respiratory season and a little bit of drag in 4th-quarter related to hurricanes.

As I bridge our volume into '25, I mean, I might note a couple of things. One would be -- and probably the big one is just the healthcare exchanges. We had big enrollment growth in 2024, Call-IT 30%. And we had big volume growth in 2024, 44%, 45% growth in exchange volume in 2024. As we look at enrollment into 2025 on the healthcare exchanges, we're seeing, Call-IT, 13% 14%, 15% growth in enrollment in our states for 2025. And so we do expect that there'll be less volume growth in '25 related to healthcare exchanges than we saw in '24. And that's one of the big drivers of the pullback there. I mentioned earlier that we had an admission benefit-related to the Medicare Advantage to midnight rule in '24 that I don't think repeats in '25.

And so and then the other thing would be the Medicaid redetermination process that was down this year. I think it flattens out next year. So all-in, we're still forecasting what we think to be a strong demand for healthcare services in '25. A 3% to 4% growth is still above our long-term guide of 2% to 3% and feels rational as we think about the balance of 2025 compared to where we landed in '24.

Operator

Thank you. Our next question comes from the line of Jamie from Goldman Sachs. Please go-ahead.

Jamie Perse
Analyst at The Goldman Sachs Group

Hey, thank you. Good morning. Just on M&A, you guys have had a couple of smaller transactions recently. I wanted to see what you're seeing just in terms of market activity, how you're thinking about the portfolio overall, including adding scale in existing markets or going to new markets? And just the aggressiveness you guys could show on the deal front in 2025.

Mike Marks
Chief Financial Officer at HCA Healthcare

So our primary growth in capacity is going to be through our capital spending and I'll Call-IT organic measures where we add bed supply, we add outpatient facilities as we mentioned, and those are central elements to our network development strategies and have proven to be very successful and have proven to be very productive from a capital return standpoint. We have, as you've mentioned, added when we can to our existing networks, we've bought outpatient businesses. We've complemented our hospital networks with rural facilities and surgical facilities and so forth. And that will continue, I think into 2025.

We don't necessarily have any significant items to point to at this particular juncture. However, we do have a new hospital acquisition that we are expecting to close-in the first-quarter in Manchester, New Hampshire that will add to and round out our New Hampshire network and give us a fairly broader and more productive, we think, overall Southern New Hampshire network. We're excited about that. But most of our investments are going to go toward, I'll Call-IT, just organic system development. We'll have to wait-and-see if the market starts to shift and more inorganic growth opportunities develop. But at this particular point, we're not anticipating anything material.

Jamie Perse
Analyst at The Goldman Sachs Group

Okay. Thank you.

Operator

Our next question comes from the line of Ryan Langston from TD Cowen. Please go-ahead.

Ryan Langston
Analyst at TD Cowen

Hi, thanks. Same-store inpatient surgical growth looked pretty strong in the quarter. Can you maybe just give us a sense on the types of procedures that was driving that? And outpatient surgical, again, was down. I think the last couple of quarters you've said that was mostly in the Medicaid and uninsured categories. Maybe I missed it in your commentary, but I'm just wondering if that's still the case. Thank you.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

So this is Sam. On the inpatient side, we did see very solid growth in the quarter, fairly broad-based. Again, I think our diversified array of service offerings allows us to move through cycles and then also have less risk with the programs that we have. But we saw strong neurosciences. We saw strong orthopedics. We saw a solid general surgery in vascular. So it was really broad-based on the inpatient side.

On the outpatient side, again, it's driven largely by Medicaid declines, which were down 10% of our commercial and exchange volumes were up a little over 1%, self-pay was down. So that's why we indicated that our revenue growth and our profitability growth within our outpatient surgery category was up again in the quarter and for the year because of the mix and the payer mix and that's added to more capacity for those type of cases. So we're not concerned about the outpatient surgery activity in the company when we look underneath the hood

Operator

Our next question comes from the line of Steve Baxter from Wells Fargo. Please go-ahead.

Stephen Baxter
Analyst at Wells Fargo & Company

Hi, thanks for the question. Just trying to understand some of the moving parts in the quarter a little bit better. I mean, it looks like broadly you met expectations in the quarter, but the Medicaid supplemental benefit on a full-year basis is now, I think, $200 million larger than what you discussed on the 3rd-quarter call and hurricanes, I think came in at maybe when the guidance range that you previously provided. I think what people are trying to square those moving parts and whether that's the right way to think about it or that's a misunderpretation of how to look at the quarter. Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

Sure. This is Mike. The way I would frame 4th-quarter is you kind of think through the moving parts here. The first, as we've mentioned, would be the hurricane impact as noted. In terms of the supplemental payment benefits, I think our description of the 4th-quarter having the lowest portion of the net benefit and supplemental payments for the year is kind of a good way to think about that component. And then a couple of other things I might mention when you're thinking about our 4th-quarter of '24 earnings growth or adjusted EBITDA growth would be, one, the 4th-quarter of 2023 was very strong. So it was a little bit of a tougher comparison in 4th-quarter of this year to last year.

And then the second thing just to keep in mind, and this is somewhat related to the depressed respiratory season is that our admission growth in the quarter was at 3% versus if you think about more a 10% to 5% September year-to-date of '24. So those are some thoughts. I might mention that if you look at that kind of growth -- growth rate, it -- we do believe it's consistent from a launching point as we think about the midpoint of our 2025 guidance range as well. So we're pleased with the quarter and felt like given everything the company was dealing with in the 4th-quarter of 2024, it was a good quarter.

Stephen Baxter
Analyst at Wells Fargo & Company

Thanks. And just to clarify, is the Tennessee portion of the 2024 payment recognized in the 4th-quarter or is that in the 2025 guidance now? Thank you.

Mike Marks
Chief Financial Officer at HCA Healthcare

Yeah, it was not recognized in 4th-quarter of '24. It will be a 25.5%

Operator

From the line of Joshuarez Research. Please go-ahead.

Joshua Raskin
Analyst at Nephron Research

Hi, thanks. Good morning. Could you speak a little bit more to the ASC performance in the quarter, maybe more specifics on rate versus volume underneath that 5% to 6% revenue growth that you talked about? And then more broadly, how you think about the opportunity? And I'm specifically interested, are there any markets where you've got significant inpatient acute-care share, but maybe not there on the ASC side yet?

Mike Marks
Chief Financial Officer at HCA Healthcare

Sure. So if -- let's kind of start with the numbers. We're at 124 surgery centers now. In my previous comment, I mentioned that the net revenue was up 5% to 6% in the quarter. The case volumes were down 1% in the quarter. We feel-good about our ambulatory surgery center network. They're an important part of our overall network in the markets we serve and it will be -- it will continue to be a part of our network development and optimization work as we go through into '25 and beyond as part of that work. Sam, I don't know if you had.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

Well, I'm sitting here just sort of canvassing across the company and thinking about the number of surgery centers vis-a-vis the number of hospitals that we have. And we do have a few markets for a variety of reasons that don't have sort of an average number of facilities per hospital. We've talked about on average, we have roughly 14 outpatient facilities, including ASCs, clinics, urgent care and so forth per hospital. That's an average we have in some markets because there's no certificate of need in some markets where we can move much more quickly and aggressively to build-out our outpatient network in some markets like in Georgia, where they have restrictive CON, it limits our ability to execute a strategy the same in Virginia and in North Carolina.

So you have some differences because of those dynamics. Where we have sort of control over our own destiny, if you will, we're fairly consistent with a large outpatient network, including ASCs per hospital. So I'm really struggling to point to a particular market where we feel like we're out of position, if you will, in this space.

Mike talked about 125 ambulatory surgery centers, we probably have another 20 or 25 GI centers that we don't even include in our number and that's part of our larger outpatient network. Those continue to grow incrementally also. So I think the limitation for us is mostly regulatory and we have to work our way through that, as you would expect through that administrative process.

Joshua Raskin
Analyst at Nephron Research

Helps, Phil. Thank you.

Operator

I'm Stein. Please go-ahead.

Unidentified Participant
at HCA Healthcare

Great. Thanks a lot. Could you talk a little bit about the progress on labor and labor agenda you've been making, in particular, talking to the pace of hirings in like nurse and support staff in '24 and what the guidance is or what's implied in '25, maybe a little commentary on wage inflation. And then if you could just give a little background on what's the total exposure in the supplemental programs these days and what would be the margin on Medicaid without those programs? Obviously, those are essential to kind of get to an appropriate margin level there. Thanks.

Mike Marks
Chief Financial Officer at HCA Healthcare

Let's cover labor first. I think a good way to measure the progress we've been making is kind of looking at our use of premium labor or contract labor. And contract labor continues to improve. It was down 8% or so for the quarter to prior year. Our contract labor as a percentage of SW&D was down to 4.6%, 4.5% in the -- in the quarter. And it really represents, I think a lot of really good work that our teams have done, both in terms of improving the retention and reducing the turnover rates that we've seen over the last couple of years coming out-of-the pandemic and a lot of good work on workforce development, including targeted hiring. Our workforce development plan is robust.

We've talked in the past about that we're continuing to add Galen colleges and nurses in our key markets. We're continuing to see increases in enrollment in Galen and we have a robust academic medicine plan where we go out and work with other nursing schools really across our markets. And we're a really large hire graduate nurse. So I think overall, the labor agenda has gone and progressed really well. In terms of wages, in 4th-quarter, the wages were stable, wage inflation was stable. And our guidance really contemplates, if you think about our margin guidance, it really contemplates a steady operating environment as we head into 2025, including overall wage inflation being what I think is stable and rational. So we're in a good spot-on labor.

On Medicaid, I'll just mentioned this that when you take a total Medicaid reimbursement, including the effects of supplemental payment programs on Medicaid, we're still short of covering the cost of care around Medicaid. These programs are important and they're important to the industry and not just HCA, but the wide range of not-for-profit and public hospitals across America. So that's where I'll leave on margins for Medicaid.

Unidentified Participant
at HCA Healthcare

Great. Thanks.

Frank Morgan
Vice President, Investor Relations at HCA Healthcare

Jeanine, maybe time for one more. We're right at the top of the hour.

Operator

Thank you. Our next question comes from the line of Ben Rosie from JPMorgan. Please go-ahead.

Benjamin Rossi
Analyst at J.P. Morgan

Good morning. Thanks for squeezing me in here for one last one. So your 2025 capex guide at about $5.1 billion, I think historically, you've weighted this to 50-50 growth between cap maintenance and growth capex. Just with the hurricane recovery, is there any shift in this prioritization in the near-term or is 50-50 still a fair consideration for 2025?

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

I think that's a fair number. The hurricane is not changing our capital spending, but dynamics in North Carolina really weren't around physical plant destruction, it was community destruction. Our hospitals mostly were on higher levels than the community as a whole. So we didn't experience it. In Largo, where we dealt with that, that was mostly repair costs as Mike mentioned in his commentary. So our capital spending is really consistent and it's geared toward our network development. It's geared toward making sure we have the clinical capabilities in the environment necessary to deliver high-quality care. So that will continue.

Benjamin Rossi
Analyst at J.P. Morgan

Got it. Thank you.

Samuel N. Hazen
Chief Executive Officer at HCA Healthcare

Thank you.

Frank Morgan
Vice President, Investor Relations at HCA Healthcare

Okay, Jeanine.

Operator

That concludes our Q&A session. I'd now like to turn the call over back to Frank Morgan for closing remarks.

Frank Morgan
Vice President, Investor Relations at HCA Healthcare

Juneet, thanks for your help today and thanks to everyone for joining the call. We hope you have a good weekend. We're around this afternoon if we can answer any additional questions. Thank you.

Operator

That concludes our conference call for today. You may now disconnect

Corporate Executives
  • Frank Morgan
    Vice President, Investor Relations
  • Samuel N. Hazen
    Chief Executive Officer
  • Mike Marks
    Chief Financial Officer
Analysts

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