HCA Healthcare, Inc.

Hello. Welcome to the HCA Healthcare Third Quarter 2024 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 the Vice President of Investor Relations, Mr. Frank Morgan. Please go ahead, sir.

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Payson, 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 Shareholder, 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.

All right, good morning to everybody. Before we get to the financial results for the quarter, I want to share the heroic efforts by our people as they recently responded to, in less than two weeks, two major hurricanes. that impacted some of our communities and facilities. Over the years, HCA Healthcare has developed industry-leading enterprise capabilities to support our hospitals during disasters. We have used learnings from past experiences, conducted extensive training, and built strong partnerships with key vendors to create a systematic approach to preparing for and responding to major events like hurricanes. These resources were put to use by our teams with outstanding results over these past few weeks as a number of hospitals were in the path of these storms. But what's even more impressive is the unwavering dedication, remarkable bravery, and outstanding leadership demonstrated by the people in our company who worked throughout these storms and in many instances multiple days without rest to ensure our patients and colleagues were safe. Leveraging corporate capabilities effectively to support committed people in our facilities is fundamentally our formula for success. We call it the HDA way. It works well in normal times, it worked well in the pandemic, and now it has proven itself again in these hurricanes. A few of our communities were significantly impacted by these storms. This is especially evident in the Asheville area and parts of Tampa, St. Pete. Given the basic infrastructure role we play in our communities and the duty we have to be there for them in these situations, we have not veered from doing the right thing. I'm humbled by the determination and teamwork of HCA people. I'm honored to be associated with them, and I'm proud of how they continually show up in difficult circumstances and deliver tremendously positive outcomes for our patients, each other, and their communities. They truly demonstrate that they are, above all else, committed to the care and improvement of human life. And I want to thank them for what they do to make this company great. Now to the quarter's results. Like the first half of the year, the results for the third quarter were strong and reflected solid revenue growth and margin improvement. Diluted earnings per share, as adjusted, increased 25% to $4.90. These results include an estimated impact of 15 cents per share from lost revenue and additional expenses caused by hurricane. While the rest of our hospitals and outpatient facilities in the path of the storms are fully operational, we have two hospitals that continue to deal with the after effects of the storms. First, HCA Mission Hospital, which is the only hospital in the Asheville area, was affected by Hurricane Helene, and it has continued to operate and provide high-quality patient care, even with significant city infrastructure in disrepair, and that's primarily water. As a consequence of this storm, we anticipate incurring significant expenses and lost revenue related to these issues throughout the remainder of the year. We also expect some continued, but we think manageable, impact into 2025. As it pertains to Hurricane Milton, which hit Florida in October, our HCA Florida Largo Hospital was flooded. It is currently closed because of damage to the building's infrastructure. We anticipate significant repair expenses will be incurred at this hospital during the fourth quarter, in addition to losing revenues. Our teams, however, are working around the clock to reopen it in late December. HCA Healthcare has numerous examples from past hurricanes where our hospitals have recovered from major storms and become more productive than pre-storm performance. I believe we can produce similar results with these two hospitals in time as we move beyond the accurate effects of these most recent storms. During the quarter, volume growth across our markets and service lines, while modestly affected by Hurricane Helene, was strong and broad-based. On a same-facilities basis, inpatient admissions grew 4.5% as compared to the prior year. Adjusted admissions also grew 4.5%. Emergency room visits increased 4.6%. Inpatient surgeries were up 1.6%. Other volume categories, including cardiac procedures, inpatient rehab admissions, and obstetric volumes, had solid growth. Outpatient surgery was the only major service category that declined. It was down 2%. However, the revenue in this service line increased 5% because of acuity and payer mix. payer mix across other service lines, and acuity within inpatient services improved in the quarter. These factors help generate same facilities revenue growth of 7.1%. We continue to believe the investments we are making in our network development agenda drive value for our patients and the organization. By the end of this year, we expect to have added approximately 600 inpatient beds and 100 new outpatient facilities, bringing our total sites of care to over 2,600. Currently, the company has around $6 billion of projects under development. These investments, which should come online over the next few years, will add more capacity and and create greater access across our networks, allowing us to meet the growing demand for healthcare services we anticipate in our markets. Before I turn the call to Mike, I want to close with a few early thoughts on 2025. Our planning process, which includes continuing assessments of the hurricane-related impact, has not been completed. So I will caveat my comments with the fact that it is always difficult to predict with certainty the various components of our business, and these preliminary views may change. With respect to volume, we went into this year believing that growth would exceed our long-term demand assumptions of 2% to 3%, and throughout the year, it has. As we look to 2025, we assume volume growth will continue at elevated levels in terms range of 3% to 4% for the year. With respect to our earnings outlook for next year, we believe that the strong volume growth assumption coupled with an anticipated mostly stable operating environment should generate earnings growth near or slightly above the upper end of our long-term target ranges for both diluted earnings per share and adjusted EBITDA. As usual, in January, we will provide you with our guidance for 2025. And with that, I'll turn the call to Mike.