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spk05: degrees on leverage and how much share repo is assumed in the 2021 guidance.
spk07: All right, Peter, thank you. Peter, this is Bill. Thank you. Yes, at a current level, you could probably assume most, if not all, of our free cash flow will be dedicated to share repurchase. But as we've said, we have ample capital capacity ending the year, both in terms of cash on the balance sheet as well as access to our short-term revolvers and bank commitments on there. So we've got capacity to execute. you know, as I said, on the majority of the share we purchased. And then we'll evaluate the market conditions as they present to fine-tune the cadence of that. As we said, we believe lowering the leverage ratio is the right thing to do given where we are today and what our outlook is. And we do anticipate a running at the, you know, mid to low end of that as we execute on all of our capital philosophies. And I think that leaves us in a a very strong position to pursue, you know, any acquisitions that may present themselves, as Sam talked about. So I think all of those are part of our comprehensive plan.
spk05: So just to sort of follow up, how much share repo do you assume in your 2021 EPS guidance? And do you think you guys can get to an SMG credit? at these current leverage rates? Yeah, thanks.
spk07: So, you know, our range and our EPS guides provides accommodation that we can accomplish and will accomplish the majority of our share repurchase program. In terms of investment grade rating, you know, we're just going to have to continue our positive discussions with the rating agencies. As you know, our secure credit facilities are already at the investment grade. In terms of getting the whole company upgraded, we'll just have to wait to see. You know, I think the agencies are expecting us to state our range and commit to that area, and we'll have to see how they evaluate it relative to investment grade going forward. What I can tell you is we have ample access to the market, and we believe at reasonable rates, and so we're generally comfortable with our position today. Hey, Peter, in their earnings release this morning, there is a supplemental non-GAAP disclosure on the guidance piece, which gives you the weighted average shares for the year. So you can kind of use that as your starting point, understanding that share repo will take place throughout the year, obviously. And, you know, that's a weighted number.
spk05: Great. Thanks so much, guys. Thanks, Peter.
spk07: All right, Nora.
spk00: Next question is from Scott Fidel of Stevens. Your line is open.
spk03: Hi. Thanks. Good morning. I'm interested if within the 2021 guidance, obviously there's a lot of impact from MIPS around the revenues per adjusted admission. So just would be interested if you could walk us through maybe the average underlying rate update assumption that you're thinking about for commercial Medicare and Medicaid tax.
spk07: Okay. All right, Scott, thank you. Yeah, Scott, there's always a lot of variables in that. You know, as Sam mentioned, we've got good visibility into our commercial contracting at comparable rates with what our historical trend have been. And our Medicare rates, you know, probably, you know, is in that 1% to 2% level, as we've seen going forward, maybe a little north of that, depending on how some of the the specifics fall out. You know, the rest of our acuity is going to be impacted just by the decline in COVID, as we've talked about, that's brought a higher acuity. And then we do receive some supplemental funding for COVID, the DRG add-ons and some of the HRSA and some of the other things that, you know, may have delayed some sequestration cuts that we don't anticipate continuing throughout the entire year. So all of those are our factors when we talk about our revenue per equivalent emission discussion. You know, I will say that, you know, if we hold where we are in 20, it still represents about a 10% growth where we finished 19. So we think our estimates are reasonable at this point. Thank you, Scott.
spk00: Your next question?
spk08: is from ralph jacoby of cd bank your line is open thanks good morning um i just want to go back to hey i just want to go back to the labor um side of things i thought you managed it pretty well but your commentary suggests greater pressure so just hoping you give us a little more detail on sort of wage growth um you know turnover competition uh and maybe what you've embedded into guidance for 2021 and maybe just how the acquisition or investment in galen you know perhaps is helping that line out thanks
spk06: All right, Ralph, thank you. This is Sam. Yeah, in my comments, I was referring to the fourth quarter vis-a-vis the third quarter as it related to the marketplace and some of the dynamics of the marketplace, specifically for nursing, but secondarily even for respiratory therapists. Obviously, when the whole country is in a respiratory distress mode because of the COVID surge that was occurring on a broad-based level, it put pressure on nursing. There were opportunities for nurses. to go from one community to the other as it related to travelers and special pay programs and all that kind of stuff. So we were seeing a bit of velocity inside of our flexible staffing categories that we hadn't seen before, and that required us to respond. And so we did experience some cost per FTE pressure in the fourth quarter that we didn't have in the third quarter and the surges that occurred more recently then. As we think about 2021, we have advanced our cost per FTE assumptions somewhat, and we expect the marketplace to be a little bit more advanced than it has been historically. We think that will moderate as COVID moderates because of the fact that there will be less sort of national demand for nurses across the country as COVID moderates over the course of the year. We do believe we have a robust agenda. We have to execute on that agenda. That includes better retention. That includes better recruitment and sourcing. And it also includes advancing our Galen strategy. We acquired Galen at the beginning of 2020. We have been limited in our ability to expand it because of the Department of Labor requirements where it imposed upon us a one-year moratorium on expansion. We have an expansion strategy that we will execute over the next two to three years, and we think that will create the continuum of nursing education that we want that will solidify our sourcing and training of nurses on the front end, and then coupled with the clinical education programs that we've advanced over the past few years, once a nurse is in our system, we can continue to develop their skill sets, their competency, their confidence, and hopefully create an environment where nurses feel that they can be even more successful inside of an ACA facility.
spk05: All right, Ralph, thank you so much. Nora?
spk00: Your next question comes from the line of Jackson Lake with Wolf Research. Your line is open.
spk04: Thanks. Good morning. I've got a couple of numbers questions here. First, you're guided to about 5% revenue in EBITDA growth at the midpoint year-over-year, but you mentioned 2% to 4% volume in flat pricing and margins. So I'm wondering if I'm missing something here in the components to get the 5% versus that, you know, call it 3%. And then you did a great job of managing costs in a tough 2020 environment. I'm just curious, how much flexibility do you think you still have here into 2021, given the uncertainty you talked about around volume and acuity and pair effects? Thanks.
spk07: Thank you, Justin. Yeah, Justin, you know, that volume was on the inpatient admissions, and we do anticipate recovery soon. of the outpatient volume and revenue. So, you know, I would tell you that our revenue expectation is more in that four to six. And that, I think, lines up more with the midpoint of where our expectations are in terms of the EBITDA range. So I think it lines up pretty well, and we can talk further about that. In terms of, you know, room and the management costs, we've talked about before of our resiliency plans and You know, as Sam mentioned in his commentary, we continue to search for, you know, every way we can to improve efficiencies out there. We are well into kind of our stage two of our resiliency plans that are looking, you know, at longer-term impacts, whether it be, you know, how do we use technology? Automation is an example of some initiatives that we have going on that front. We have initiatives around, you know, support structures that we have throughout the organization. We have some call center discussions and optimization efforts. And we have a whole host of what I would call stage two resiliency that we are going to continue to focus on and execute throughout 2021. And I think that can provide upside and, you know, protect a little bit buffers if we continue to see some upper pressure on the labor costs. So we do see continued opportunity for efficiency gains in HCA in a lot of our areas. Our supply chain teams continue to find opportunities to improve supply chain and utilization. Our revenue cycle teams, as well as, you know, a host of other efforts going around the support structure of the enterprise.
spk04: Thanks, Bill. Can I just follow up with the, can you give us a view on adjusted admissions then for 2021 that you kind of built in the guidance that include the operations?
spk07: Yeah, so that would be more in that 3% to 5% level. Okay, perfect.
spk04: Thanks for the help. All right, Justin, thank you so much. Nora?
spk00: Our next question comes from the line from Wheat Mayo with UBS. Your line is open.
spk02: Hey, thanks. I was just looking at the ER numbers, and I don't think the trends are terribly surprising to many of us, but I'm just curious how – you're thinking about the ED, maybe not this year, but next year, and maybe more specifically how you're reorienting how you manage the ED for the lower volumes. I just have to imagine there's some fundamental changes you guys are thinking about in terms of how you approach the ER moving forward.
spk06: All right. Thank you, Whit. Whit, let me speak to that. I think just as our inpatient population of patients this year is more acute, our emergency room population of patients is more acute. We have seen less declines in our upper level acuity categories for emergency room patients than we've seen in previous years. We have lost some lower acuity business. Of the total business that we lost, almost 70% of our declines have been in uninsured patients or Medicaid patients. So it's been interesting to me that the payer mix on a relative basis is actually slightly better, even though all categories are down. And then within the categories, it's more acute. As a company, I will tell you we have sufficient ER supply beds at this particular juncture. We do have some pocketed opportunities, as I mentioned in my my call, my comments rather, around certain freestanding emergency rooms in certain markets where we see opportunities to serve the community better. And we will push on those. I think today we have roughly 125 or 130 freestanding ERs. We'll add another 12 to 15 over the next year or so. And those are very strategic with respect to certain markets. The emergency room is a very important component of our system, and it will remain that for really high-end care, trauma, burn, stroke, cardiac, and so forth. Our patient satisfaction has been stable this year. It's been a difficult year in the emergency room. Our throughput continues to be reasonable given some of the pressures we've seen with the acuity of patients. So we continue to be optimistic about the purpose and the role that our emergency rooms play to our system, but we have seen some change in overall mix. And that will put downward pressure on capital needs that we had historically, and we'll be able to utilize those capital capacity for other strategic opportunities or other components of our programs as we move through the next few years.
spk07: All right. Thank you. Hey, Mark, let me correct something I said with Justin's question. Our AAA guidance would be more four to six. I misspoke saying three to five, so I wanted to correct that. Okay. Thank you, Bill. Nora?
spk00: Your next question comes from the line of Lance Wilkes with Bernstein. Your line is open.
spk04: A little bit about how you're looking at drug costs and revenues going forward. I'm particularly thinking of three points. One would be Policy and transparency sort of risks or headwinds those might present. Second would be sourcing initiatives you may have underway. And the third might be opportunities you see, whether it's adding capabilities, et cetera. Appreciate it.
spk07: All right, Lance, thank you so much. Bill? Yeah, I missed the first part of that question, but it was regarding around drug cost and revenue and opportunities that we have. So our HPG teams do a great job in the sourcing of our pharmaceuticals, and I think that was clearly evident as we navigated the challenges of 2020. We actually have several initiatives going on around pharmacy procurement and sourcing of that. And so that's ongoing. We continue to work with our clinical teams as we have pharmacy optimization through our efforts as we've over the years consolidated a lot of our pharmacy supply chain. So we continue to see opportunity to advance in the supply chain of that. I don't really see You know, material changes on the revenue side relative to pharmaceutical costs, you know, given what our Medicare reimbursement structures are as well as some of our commercial side. You know, we are optimistic that there's going to be some revenue support of some of these COVID drugs that we've seen increased utilization. As Sam mentioned, the use of remdesivir in his comments. And so, you know, I think it's pretty much fairly stable in that environment for us. Relative to transparency question on the pharmaceutical cost, we'll have to see. You know, we have other price transparency. I'm not so sure if your question went into there that we continue to work on complying with the federal price transparency regulations and posting through those. But in terms of drug cost transparency, I don't see that having much of an impact on us going forward. Does that answer your question, Lance?
spk04: Yeah, yeah, that's perfect. Thanks, guys. All right, thank you much. Nora?
spk00: Next question is from the line of Brian Tanklet with Jefferies. Your line is open.
spk09: Morning, guys, and congrats. Sam, I guess I'll ask about the CapEx, right? I mean, it's up $850 million year over year. You're already spending an elevated amount of CapEx prior to this. So, you know, you called out ASCs and freestanding EDs, among others. But, you know, how are we thinking about your long-term strategy in terms of continuing to ramp up CapEx? And then is there a goal in terms of kind of like penetration and freestanding EVs and ASCs, and there's a number of units or percentage contributions that you've set? And I guess the last part is, you know, from a returns perspective, you know, how long do you normally see the investments before they yield in terms of growth or, you know, hitting your internal metrics?
spk07: All right, Brian, let me see if we can hash that one out for you. Yeah, sorry about that. That's all right.
spk06: Let me speak generally to capital expenditures and where we are at this particular juncture, and then Bill can speak to the returns and how we analyze our capital spending from that standpoint. We are increasing revenue. Our capital spending from 2020 level, we spent about $2.8, $2.9 billion this past year. We're going to approximately $3.7. We believe, as I mentioned in my comments, that a lot of this increase is going to some of our growth plan initiatives that we have. I think one thing that's very important to HCA Healthcare, and I hope you all appreciate and understand, is that we have a unique portfolio of markets that we serve, and when we look and score objectively, the HCA markets that we serve compared to the national average with respect to certain economic indicators, roughly two-thirds of our portfolio of top markets outperforms, and in many instances outperforms the national averages as far as forecasts vary significantly. So we still have growth opportunities embedded in our portfolio. That's the first thing I would tell you. Secondly, We are investing in our outpatient facility development. A reasonable point of reference is roughly every one of HCA's hospitals has 10 to 12 outpatient facilities attached to it. That's not exactly symmetrical from one institution to the other, but when you look at the total outpatient facility network capabilities we have, it's roughly 2,200 to 2,500 outpatient facilities on top of 185 hospitals. So it's roughly 10 to 12x the number of hospitals. We will continue to build on that because we believe that our patients deserve a convenient offering of facilities in our network. That doesn't require fortunately as much capital as the inpatient components of our spending. On the inpatient side, we have a handful of projects out there that we felt still made sense. Most of them are in these high-growth markets, Dallas, Texas, Austin, Texas, Nashville, Tennessee, Jacksonville, Florida, places like that that are on fire with respect to demographic changes that appear to be occurring across the company. We don't want to miss those opportunities. Fortunately, a lot of our investments are long-lived assets. and we're in a situation where some of the historical capacity that we put into the market will serve us well in the future. And then as we look at what's already in the pipeline, the $3.3 billion that I referred to, those are going to supplement our capacity. And then by then, hopefully, we're starting to get better visibility into what's happening with demand, and then we can adjust accordingly. So at this particular point in time, we're not giving any additional long-term guidance on CapExes, but we believe we're in the zone of what we need in the near term to be responsive to the marketplace, competitive, provide the patient-safe environment that we want, and ultimately achieve our overall objectives.
spk07: So, Bill, you want to speak to... Yeah, I'll just mention briefly, I think, for all of you who follow this, you know we have a very robust process for vetting and evaluating and validating assumptions in our growth capital projects that Sam talked about. In addition, we've got a very robust process where we do retrospective analysis after those projects have been completed and come online to evaluate our assumptions and really, I think, to take away, you know, those retrospective assessments say that we achieve the majority of a very high percentage of our returns. So we're very confident in the assumptions that we use. In terms of timeframe for returns, you know, each project is a little bit differently, as you might imagine. So your outpatient, maybe your freestanding EDs, you know, the returns come very quickly. Your new hospitals are maybe longer-term returns and long-lived assets. Many times your expansion projects on a hospital campus are dealing with pent-up demand. So we can, you know, once we get through the construction and the opening, those returns come quickly. in a reasonable level. So each project's a little bit different, but we have a really strong process to evaluating our assumptions and taking those into account as we approve projects going forward.
spk06: And let me just add to that. Even on our acquisitions, I think, you know, we had a strong year with respect to the company's acquisitions. The portfolio of acquisitions we have done over the past three or four years was, you know, solidly accretive. The margins continue to grow. They're into the low double digits at this particular point. Our tax-exempt assets that we acquired in Savannah and North Carolina are ahead of model. And then we have a host of other outpatient acquisitions that we've integrated effectively. So here again, to Bill's point, we're doing retrospective analyses on our organic growth capital. And then at the same time, we're studying what's worked well and what hasn't worked well with our acquisition portfolio and continuing to refine that in a way that I think is very productive for the company. And as we think about acquisitions, to the point Bill made in his comment, we've created balance sheet capacity for that. We think, we don't know when, that there's going to be nice opportunities for us to capitalize on that balance sheet capacity and build out more capabilities across the company. So we will be very opportunistic with respect to that, given the position of the balance sheet and the performance and the confidence we've gained with respect to our acquisition integration.
spk07: Thanks, Sam, Bill. Hey, Nora, we've got time to squeeze in one last question, please.
spk00: All right. Your last question comes from the line of Jamie Perls of Goldman Sachs. Your line is open.
spk01: Hey, Jamie. Good morning, guys. Hey, good morning. Just wanted to follow up on your inpatient and outpatient guidance for the year. You talked about that being below 2019 levels. I'm curious if in the back half of the year, fourth quarter, you're anticipating getting back closer to flat or even growth, and then any breakdown by medical or surgical, the cadence you're expecting throughout the year in that recovery. Thanks. Thanks.
spk07: Yeah, this is Bill. You know, as we said, we do anticipate as the COVID volumes decline that we'll start to see return of our historical volume and maybe capture some of that pent-up demand. So many variables at this point. It's hard to call and give you specifics in terms of timing of the year. Obviously, we have some comparable issues as we go through the last half of 2020 versus 2021. So we'll have to see how it plays. But, you know, generally speaking, our broad commentary going on says that we expect, you know, our volume to recover but still run slightly below 2019 levels. All right. Thank you, Bill.
spk05: Thank you, Jamie.
spk07: Nora, I think we're finished here. Listen, we want to thank everyone for participating on today's call. As always, feel free to reach out and contact me if you have further questions. Thank you so much. Have a great day.
spk00: Ladies and gentlemen, this concludes today's conference call. Thank you for participating in our disconnect.
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