HCA Healthcare, Inc.

They're based on management's current expectations. Numerous risks and 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.

Very good morning, and thank you for joining the call. The solid fundamentals we have seen in our business over the past several quarters continued into the first quarter of 2025. This momentum generated strong financial results that were driven by broad-based volume growth, improved payer mix, and better operating margin. As we look to the rest of the year, we remain encouraged by our performance, the overall backdrop of growing demand for healthcare services, and the increased investments we have made across the company to serve our communities better. The people of HCA Healthcare also continue to deliver for our patients in key non-financial metrics, including improved quality outcomes, more efficient emergency room services, which have accelerated time to discharge and increased satisfaction, and finally, better inpatient capacity management with reduced length of stay. I want to thank my colleagues for their professionalism, their dedication to our mission, and the great outcomes they produced for our company to start the year. As compared to the prior year, diluted earnings per share, as adjusted, increased more than 20% in the first quarter to $6.45. Same facility volumes, even with the leap year effect, were favorable and in line with our expectations. Inpatient admissions grew 2.6% year over year. Equivalent admissions grew 2.8%, and emergency room visits increased 4%. Most of our other volume categories, including cardiac procedures and rehab admissions, also had solid growth in the quarter. Surgical volumes across the company were mixed, inpatient surgeries were slightly up, and outpatient cases were down. Same facilities revenue grew almost 6%. The volume increases I just mentioned, coupled with approximately 3% higher revenue per equivalent admission drove this growth. We continued to make progress on our cost agenda. Operating costs across most categories were in line with our expectations, and the operating margin improved on a year-over-year basis. As part of our network development plan, we used our capital spending to increase the number of facilities or sites of care by 3.3% to around 2,750, and we added approximately 2% to our inpatient bed capacity. Inpatient occupancy in the quarter was 77% as compared to 75% last year. As we move through the remainder of the year, we will focus on maintaining our operational discipline while continuing to invest appropriately in our strategic agenda. We believe this balanced approach should position the company favorably to meet our objectives. Before I finish my comments, let me address the current federal policy environment, which I know is top of mind. We are in a very fluid situation. While we have a general sense for the new administration's stated priorities, we do not have any specifics. It is unclear how these efforts might be carried out and what effects they may have on our business. We are very engaged in advocacy as it relates to health policy. Our general approach is to support reasonable reforms. However, we do not support reforms that harm coverage for families or individuals. Nor do we support policies that compromise the ability for hospitals across the country to care for people in their times of utmost need. I know you would like us to size the potential impacts of health policy risks and now tariff risks, but we are not comfortable with providing estimates at this time. We just do not have enough insight into what might happen. When we gain a better understanding, we will share more information as part of our quarterly earnings process. As you would expect, we are developing plans in the event we face adverse impacts. our planning draws from the experiences we had during the covet 19 pandemic and considers both adjustments to operations and how we may utilize the flexibility our cash flow and balance sheet provide us as part of this planning process we will maintain a long-term horizon and move forward with a sense of calm steadiness and confidence we believe we can use our financial strength mission-oriented culture, and can-do attitude of our people to navigate through this uncertain period and deliver the results our stakeholders deserve. With that, I will turn the call to Mike for more detail on the quarter.

Well, thank you, Sam, and good morning everyone. We are pleased with the results of the quarter, which highlighted the continued momentum of the company and the strength of our operating performance. Sam covered our volume and revenue performance, So let me add a few notes on payer mix. Payer mix remains strong with same facility managed care equivalent admissions of 5.4% compared to the prior year quarter. As expected, Medicaid volumes began to flatten as the redetermination process sunsets with a same facility equivalent admission decline of only 1.4% to prior year quarter. And given the strong enrollment growth in the exchanges, our same facility equivalent exchange admissions increased 22.4% over prior year quarter. Adjusted EBITDA margin improved 110 basis points compared to the prior year quarter, driven by operating leverage from our volume growth and strong cost management performance in the quarter. Salaries and benefits as a percent of revenue improved 80 basis points, supplies improved 30 basis points, and other operating Contract labor improved 9.3% from prior year quarter and represented 4.4% total labor costs in the first quarter of 25 compared to 5.1% in the first quarter of 2024. Same facility professional fee costs increased 11% from the prior year quarter and were approximately flat sequentially compared to the fourth quarter of 2024. Adjusted EBITDA grew 11.3% over the prior year quarter. You will recall that our guidance assumed the impacts of the 2024 hurricanes would offset each other in 2025 and not produce a tailwind for us. This is what played out in the first quarter. Earnings were flat year over year in our hurricane-impacted markets in the first quarter of 2025 compared to the prior year quarter. I want to remind everyone that after considering Medicaid state supplemental payments and related provider taxes, total Medicaid reimbursement does not cover our cost of caring for Medicaid patients. Considering Medicaid state supplemental payments and related provider taxes in isolation, we saw an $80 million increase in net benefits in the first quarter of 2025 compared to the prior year quarter due primarily to a reconciliation payment and a program accrual. Moving to capital allocation, we continue to deploy a balanced strategy of allocating capital for long-term value creation. Cash flow from operations was $1.65 billion and a quarter. There are a few factors that drove our cash flow from operations down just over a year, all of which relate to working capital changes that are timing in nature. Capital allocation in the first quarter of 2025 included $991 million in capital expenditures, $2.5 billion in share repurchases, and $180 million in dividends. We also paid $227 million for acquisitions with the close of the transactions for Catholic Medical Center in Manchester, New Hampshire, and Lehigh Medical Center in the Fort Myers, Florida area. Lastly, we received $161 million in proceeds from the sale of assets, primarily driven by the sale of Regional Medical Center of San Jose. This divestiture was an important component of our portfolio optimization. It was good for the community, and it will be accretive to HCA. Our debt to adjusted EBITDA leverage remains at the lower half of our stated target range, and we believe our balance sheet is strong and well-positioned for the future. As noted in our release, we are reaffirming our guidance ranges for the full year 2025.