HCA Healthcare, Inc.

Welcome to the HCA Healthcare Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Mark Kimbrough. Please go ahead, sir.

All right, Chris, thank you so much. Good morning and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen, and CFO, Bill Rutherford. Sam and Bill will provide some prepared remarks and then we'll take questions. Before I turn the call over to Sam and Bill, let me remind everyone that should today's call contain any forward-looking statements, they 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 Adjustative Adha, which is a non-GAAP financial measure. A table providing supplemental information on Adjustative Adha and reconciling net income attributable to HCA Healthcare Inc. is included in today's release. This morning's call has been recorded and a replay of the call will be available later today. With that, I'll turn the call over to Sam. Sam?

Good morning and thank you for joining us. The third quarter was the most intense period yet for us with the COVID pandemic. The Delta variant surged and drove significant demand for our services. For the quarter, COVID patients accounted for 13% of total admissions. This level compares to 3% in the second quarter, 10% in the first quarter, and 11% in the fourth quarter of last year. our teams provided record levels of inpatient care during the quarter, which drove revenue growth of 15% as compared to the prior year. Inpatient revenue grew 18% and outpatient revenue grew 11%. As compared to prior year and also 2019, same facility volumes increased across all major categories, with the exception of inpatient surgery. Surgery volumes were constrained because capacity was used for treating COVID patients. This growth was supported by a better payer mix of commercial business. Adjusted EBITDA margin was strong at over 21%. Diluted earnings per share, excluding gains on sales of facilities, increased to $4.57, which is a notable increase over the prior year. even considering that last year's third quarter included the $1.72 per share effect of the reversal of the government stimulus income, which as you may recall resulted from our decision to return or repay early approximately $6 billion of governmental assistance we received from the CARES Act. Once again, our colleagues and physicians delivered for our patients and for our communities. I am tremendously proud of their dedication and service to others, and I want to thank them for their great work. As we look to the remainder of 2021, we have raised our annual earnings guidance again to reflect the strong performance of the company. Now let me transition to some early and general perspectives on the upcoming year. Just like in 2020, we are providing some preliminary thoughts in the midst of a very fluid environment. which obviously makes it challenging given the uncertainties that continue to exist with the pandemic. We plan to provide more details with our annual guidance in January after we complete our planning process for 2022. By that time, we hope to have a few more months of results that are more indicative of a normal operating environment, that is a non-COVID surge environment, to analyze and give you a better indication of our business. Overall, We believe demand will return to historical trends for us with volumes growing across most categories in the 2% to 3% zone. As part of this growth, we expect to treat COVID patients throughout 2022. We estimate that approximately 3% to 5% of our total admissions will be COVID related. We believe our business will be supported by a strong payer mix as a result of stable enrollment in the health insurance exchanges and good job growth across our markets. We are also assuming patient acuity continues at high levels. We do expect certain pandemic-related governmental reimbursement programs either will not continue or will continue, but at significantly reduced amounts next year. However, we anticipate the reduction of these revenues will be partially offset by certain costs we incurred in treating COVID patients. Clearly, we are operating in a challenging labor environment, which we expect to cause some cost pressures. But at this point in time, we anticipate being able to manage through these challenges along with other inflationary cost pressures. In sum, these assumptions lead us to believe that adjusted EBITDA for 2022 will show modest growth over this year's estimated results. Again, we are providing early perspectives and expectations. and they could change. The past two years have been a remarkable period for ACA Healthcare. We have demonstrated a high level of resiliency and resolve, while at the same time staying true to our mission. Across many dimensions of our business, we have improved our operational and organizational capabilities, which should allow us to provide higher quality care to our patients. I also believe we will emerge on the backside of this event stronger financially and better positioned competitively to grow and drive value for our stakeholders. We are investing aggressively in our operating model, which is to develop a comprehensive and conveniently located local network coupled with and supported by an enterprise level system with unique scale and system level capabilities. We believe this model creates competitive advantage drives market share gains, and produces better outcomes for our stakeholders. With that, I'll turn the call over to Bill.