HCA Healthcare reports strong Q4 2024 earnings with revenue growth, positive trends, and future outlook
From Nasdaq.: 2025-01-24 17:45:12
HCA Healthcare held its Q4 2024 Earnings Call on January 24, 2025, reporting strong business fundamentals with demand for healthcare services remaining high and stable operations. The company also saw a 6% revenue growth, with inpatient admissions, emergency room visits, and surgeries showing positive trends. Despite the estimated $0.60 per share financial impact from recent hurricanes, diluted earnings per share as adjusted increased by 5.4% in the quarter. HCA Healthcare’s earnings guidance for 2025 aligns with preliminary outlook, showing a positive outlook for the future. Chief Financial Officer, Mike Marks, highlighted the company’s ability to respond to challenges effectively while delivering solid results. In the fourth quarter of 2024, a decline in adjusted EBITDA margin was primarily due to the impact of hurricanes on operations, with adjusted EBITDA growing 2.6% and diluted earnings per share increasing 5.4% over the prior year. Full year results for 2024 showed strong revenue growth of 8.7%, adjusted EBITDA margin improvement, and increased diluted earnings per share. The company’s 2025 guidance includes revenue expectations of 72.8 billion to 75.8 billion, net income projections between 5.85 billion and 6.29 billion, and adjusted EBITDA estimates of 14.3 billion to 15.1 billion. A new $10 billion share repurchase program has also been authorized. In the third quarter of 2024, Medicaid supplemental payments totaled $400 million, with the highest benefit in the second quarter at $125 million. For 2025, estimates project a range between flat to a $250 million headwind due to the variability in state programs. Pricing is 80% contracted for 2025, 60% for 2026, and 20% for 2027. Denials and underpayments are being managed effectively with no significant impact on the company. Initiatives for 2025 include improving post-acute care placement and discharge processes and expanding network facilities to increase market share. The company has seen encouraging market share data, with successful initiatives in case management and emergency room operational improvement. Plans for 2025 include increasing ER bed supply and optimizing operating rooms. Employee engagement is at an all-time high, reducing turnover and improving workforce capabilities. The company is investing heavily in technology, including AI, to drive better quality and efficiencies. Capital allocation is a priority, with plans to invest $5-5.2 billion this year. Commercial mix and enrollment are growing, with opportunities to work with the Trump administration on sustaining coverage and affordability in the exchanges.
The Medicare Two-Midnight rule had an impact on inpatient admissions in 2024, and the company believes it will continue to be a benefit. The difference between Medicare Advantage observation and traditional Medicare fee-for-service is 7.5% of equivalent admissions and 9% of revenues. The company aims to close this gap over time. In 2024, the impact of Medicare Advantage Two-Midnight rule led to a 50 basis points growth in admissions for the year. Medicare Advantage observation mix is 20% higher than traditional Medicare, with no expected material changes. Hurricane impact caused a drag of 20-40 basis points on volume growth in Q4 ’24, with lingering effects in North Carolina division throughout 2025. EBITDA assumption for hurricanes in 2025 guidance anticipates increase at Largo offsetting decline in North Carolina division due to lingering hurricane effects.
Professional fees make up 24% of other operating expenses, with efforts to address subsidy pressure from hospital-based physician groups resulting in bending of cost curve in ’24. Cost pressures related to physician costs expected to moderate in ’25 but still higher than normal inflationary trends. HCA Holdings expects challenges in radiology to continue into 2025, but it will not have a significant impact on the company. The California wildfires did not affect Southern California hospitals, but Ventura County facility was on high alert. HCA received partial approval for the new Tennessee program covering July 1, 2024, through December 31, 2024. The impact of site-neutral payments on HCA’s outpatient ASC footprint is being monitored closely, with concerns about potential cuts to hospital outpatient reimbursement. HCA remains committed to building out its outpatient networks despite potential policy changes. The company is focused on expanding networks into new communities to improve patient convenience and efficiency, integrating facilities into a larger hospital-centric health system. ASC revenues are growing at about 5% to 6% annually. The impact of Trump’s tariff proposals and executive orders on labor, demand, and healthcare-related items is being closely monitored. Healthcare exchanges enrollment growth is expected to slow in 2025, affecting volume growth. M&A activity has included smaller transactions, with a focus on adding scale in existing markets or entering new ones in 2025. HCA Healthcare is focusing on organic growth through capital spending, adding bed supply and outpatient facilities to their network development strategies. They have acquired a new hospital in Manchester, New Hampshire, to expand their network in southern New Hampshire. In the last quarter, inpatient surgical growth was strong, driven by neurosciences, orthopedics, general surgery, and vascular procedures. Outpatient surgical activity was down due to declines in Medicaid and self-pay categories but revenue and profitability were up due to a favorable payer mix. The company met expectations in the fourth quarter, with factors like hurricane impacts and Medicaid supplemental benefits influencing results. Tennessee portion of the 2024 payment will be recognized in 2025. HCA Healthcare reported a 5% to 6% revenue growth in the quarter, with case volumes down 1%. The company has 124 surgery centers and continues to focus on optimizing its ambulatory surgery center network. Despite regulatory challenges in certain markets, HCA’s outpatient network, including ASCs, continues to grow. Labor progress has been made, with contract labor down 8% and wages stable. Medicaid reimbursement still falls short of covering costs, despite supplemental payment programs. HCA’s 2025 capex guidance is around $5.1 billion, with a 50-50 split between maintenance and growth capex. The hurricane did not impact capital spending plans. HCA Healthcare reported consistent capital spending focused on network development and high-quality care delivery. The Q&A session highlighted the company’s commitment to community repair and clinical capabilities. Analysts from various firms participated in the call, discussing financial results and future plans. The transcript, provided by The Motley Fool, offers insights into HCA’s performance and outlook. Investors are encouraged to conduct their own research and review SEC filings. The company’s disclosure policy and terms and conditions apply to all information shared. Overall, HCA Healthcare remains dedicated to enhancing healthcare services and network expansion. 1. The stock market experienced a significant drop today, with the Dow Jones Industrial Average falling by over 500 points due to concerns about rising inflation and interest rates.
2. A new study has found that the COVID-19 vaccine is highly effective in preventing severe illness and death from the Delta variant, with a 95% efficacy rate reported in the data.
3. The United Nations has issued a warning about the worsening climate crisis, stating that global temperatures are on track to exceed the 1.5°C limit set by the Paris Agreement within the next decade.
4. The latest unemployment numbers show a slight decrease in jobless claims, with 320,000 new claims filed last week, indicating a gradual improvement in the labor market.
5. In sports news, the Tokyo Olympics have officially kicked off with the opening ceremony taking place in a mostly empty stadium due to COVID-19 restrictions, marking the start of two weeks of competition.
Read more at Nasdaq.: HCA Healthcare (HCA) Q4 2024 Earnings Call Transcript