Operator
Welcome to HCA Healthcare's first quarter 2025 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. Frank Morgan. Please go ahead, sir.
Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen, 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, they're based on management's current expectations. Numerous risks and uncertainties and other factors make 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 continued into the first quarter of 2025. This momentum generated strong financial results that were driven by a broad-based operating margin. As we look to the rest of the year, we remain encouraged by our performance, the overall backdrop of growing demand for health care 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. to our mission and the great outcomes they produce for our company to start the year. Included earnings per share, as adjusted, increased more than 20% in the first 45 cents. Facility volumes even with the lease 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. Volumes across the company were mixed, inpatient surgeries were slightly up, and outpatient cases were down. Same facilities revenue grew. Volume increases I just mentioned, coupled with approximately 3% admission. 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. Network development plan, we used our capabilities or sites of care by 3.3% to around $2,750, and we added approximately 2% to our inpatient bed capacity. Occupancy in the quarter was fainter of the year. We will focus on maintaining or continuing to invest appropriately in our strategic agenda. Favorably, to meet comments, let me address the current federal policy environment. While we have a general sense, 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 for individuals. Nor do we support policies that compromise the ability for hospitals to care for people in their times of utmost need. It's 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, in the event we face adverse impacts, our planning draws from the experiences we had during the COVID-19 pandemic and considers both adjustments to operations and how we may utilize the flexibility our cash flow and balance sheet provide us. After this planning process, I believe we can use our financial strength, mission-oriented culture attitude of our people to navigate through this uncertain period and deliver the results. 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 highlight the continued momentum of the company and the strength of our operation. Sam covered our volume and revenue performance, so let me add a few notes on payers. payer mix remains strong with same facility managed care equivalent admissions of 5.4 as expected medicaid volumes began to flatten as the redetermination process sunsets with a same facility equivalent admission decline of only 1.4 and given the strong enrollment growth in the exchanges our same facility equivalent exchange admissions increased 22.4 percent 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 to 80 basis points. Supplies improved 30 basis points. And other operating expenses were based. Contract labor improved 9.3% from prior quarter and represented 4.4%, 5.1% in the first quarter. Same facility professional fee costs increased 11% and were approximately flat sequentially compared to the fourth quarter of 2024. Adjusted EBITDA grew 11.3% over the last 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 market. I want to remind everyone that after considering Medicaid state supplemental payments and related provider taxes, total Medicaid reimbursement during 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. From operations, there's $1.65 billion in the quarters that drove our cash flow from operations down just over years, 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 exchange, $5 billion in share repurchases, and $180 million in dividends. We also paid $227 million for acquisitions, 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 centers. This divestiture was an important component of our portfolio optimization. It was good for the community, and it will be accretive to ACS. 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.
I will now hand the call back to Frank Boardman for questions. Thank you, Mike. As a reminder, please limit yourself to one question so we might give as many as possible. in the queue an opportunity to ask a question. Abby, you may now give instruction to those who would like.
Operator
Thank you. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, press star one a second time.
If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question again it is star one if you would like to join the queue and your first question comes from the line of anheims with mizuho securities your line is open hi good morning um i know you reiterated guidance but are there any major changes in assumptions embedded in that reiteration of guidance and within that i know you um talked about Sam and you prepared our remarks that surgeries were mixed did you expect them kind of flattered down because of the tough compare due to leap year or
were they actually worse than your expectations thanks let's deal with guidance first and we'll talk about outpatient surgery and so if I think about you know it's Sam noted initial commentary we're really pleased we continue to see solid volume growth revenue was in line with our expectations and as I noted we had strong expense management in the quarter As noted in our release, we did reaffirm guidance for 2025, you know, its first quarter, and really at this point in the year, we believe our guidance ranges continue to be appropriate for where we are. Certainly, as we progress through the year, we will, you know, continue to update you on our subsequent earnings calls. Specifically to outpatient surgery, you know, we're really pleased. I mean, you take it in total, grew at a rate a bit higher than our inpatient revenue. Just as a reminder, we really categorize our outpatient revenue into four emergency services, outpatient surgery, which include both hospital-based and our ambulatory surgery center platform, ambulatory, things like our physician clinics and our urgent care clinics, and other hospital-based services like cardiology, diagnostics, and all four of our outpatient categories had revenue growth over the prior year quarter. On outpatient surgery specifically, we continue to see a slight decline in case volumes, driven by lower acuity cases and by Medicaid and self-pay. However, we had good growth in net revenue and earnings in our outpatient surgery business overall, inclusive of both hospital and the ambulatory surgery center. I'll finish and just note that the leap year effect did impact the stated volume declines. If you think about outpatient surgery at a 2.1% same facility decline, on a per business day basis, that's about a 1%.
An inpatient, Mike, would be up about 1% per business day. So maybe a little softer end than we had expected, but the first quarter is always a difficult to predict surgical period because typically the fourth quarter is active, and so you're dealing with respiratory implications and new deductibles and co-pays and so forth. Activity on both surgeries and procedures were strong inpatient and outpatient. Our rehabilitation, as I mentioned in my prepared comments, were percent, I think, on the same storage basis. Behavioral health was down, but behavioral health was down because we had repurposed quite a bit of the supply beds over the years and repurposed those for med surge in many instances. And so that was intentional in some facilities. Obstetrics volumes were up slightly, even with the business day decline, and one wouldn't think that has an influence, and we believe we are doing the right things within each of our networks to develop them to meet the needs of the patients and the communities.
Great. Thanks for the detail.
Operator
And your next question comes from the line of Pitocickering with Deutsche Bank. Your line is open.
Good morning, guys, and thanks for taking my question. You know, I guess if you leverage this quarter, you know, the growth you saw year over year, I guess, you know, how do you guys sort of get that much leverage this quarter, you know, and, you know, going forward, you know, like, how do you get that productivity? You're sort of getting that level of productivity. Are you sort of behind the hiring curve? I mean, how should we think about that level of productivity going forward, you know, after such a huge growth?
Peter, this is Sam. I'm not sure I understood that question completely. Let me speak to the operating leverage, and I think that's what you're referring to. I mean, fundamentally, our business is a fixed-cost business. We've said that over time, and the more volume we can push through the organization, the more operating leverage we create, the more contribution margin that generates, and it It helps our overall profitability and margins. And we have regained, as we mentioned last year, our ability to show up in labor costs. It shows up in some of our other operating expense categories. And we're able to do that, again, with a very mindful approach. And then at the same time, you know, using more to absorb the vol source agenda. that we've continued to progress. The company on both nursing and non-nursing is less than it was year over year. Our contract labor utilization is down year over year. Overall engagement with our most recent engagement surveys with our employees, was that a high watermark for us? So we're very encouraged about what our human resource and operating teams are doing to people can succeed and deliver the outcomes that our patients deserve. We believe we can continue that, that the labor market in general is stable, and we have initiatives inside the organization and then outside, if you will, with our Galen School of Nursing and other workforce development initiatives to deliver the people that we need to serve the demand. The facility side, as I mentioned in my comments, is spending, and we're adding to our networks very deliberately on that front, and then we're using our workforce development, our engagement, and other HR initiatives to deal with the people side of that. So we're pretty encouraged by operations. Our teams are doing a wonderful job in dealing with translating that, as I mentioned, to quality outcomes, efficiency, and a great place to work for our employees.
At this level, you know, I guess 43.6, I guess since you've IPO, we haven't seen that just low. As your occupancy keeps on increasing, is it fair to think that this number can keep getting better?
Generally speaking, yes, it can improve as we deliver more volumes on the asset base that we have. And we will continue to use technology. We use our benchmarking and other tools to find ways to create efficiencies. And we feel, you know, that we're in a pretty good spot and that we can leverage, again, the fixed cost that we have in our system to drive efficiencies if we can grow the volume.
Operator
And your next question comes from the line of AJ Rice with UBS. Your line is open.
Hi, everybody. The revenue per adjusted admission up 2.9%, I think, was strong, especially with surgeries off. Can you parse out a little bit more, whether that was year-to-year improvement and dvp programs rate updates generally commercial mix or anything and then maybe just broadly commenting on what you're seeing and contracting with managed care uh is is the debate in washington having any impact on um the the the discussions with managed care hey aj thanks for the question this mike um when i think about our net revenue per equipment emissions you know the first thing I would call it.
Acuity continues to be good in that regard as well. I think, as I mentioned on the outpatient surgery comment, we actually had a little more outpatient revenue growth than we did on the inpatient side. And even on outpatient surgery, it was really driven by lower acuity cases. And from a payer mix perspective, on the outpatient surgery side, continues to be driven almost a tireless influence is on both the inpatient and the outpatient side. So generally speaking, I think we're in good shape on net revenue per equivalent admission in a quarter, and we were pleased with, on the payer side, and I'll start, Sam, you, you know, we're over 90%, call it 25%, contracted at rates that are really similar to the last couple of years and, you know, in context of our, we're also pleased with our contracting I think sets the lives with payers are really higher than they've almost ever been on the exchange side. And I think we're off to a good start this year in terms of our net revenue per equivalent admission.
Yeah, and Mike, this is Sam A.J. I think a couple of points are relevant here. You know, our inpatient surgeries as a percent of overall admissions was down 50 basis points. That's not meaningful in the overall revenue equation. I mean, obviously, we'd rather it be higher than lowly down 50 basis points. Our critical care admissions were at a really good position as it relates to total admissions. So I think there are other aspects to acuity, and their overall case mix, I think, was modestly up. So all of that suggests that we still have the acuity within the larger population of our patients. With respect to the managed care contracting, our overall managed care positioning with respect to the contracts that we participate in has improved on a year-over-year basis, where we have added a very important contract to our overall portfolio of participation. Our participating provider broadly with Kaiser Health Plan in the Denver College encouraging development. And then in Chattanooga, Tennessee, with Blue Cross of Tennessee, we have advanced our position with one of their products. So we've improved globally our overall positioning, and that's played out in our HICS and exchange relationships as well. And then, obviously, with Medicare Advantage, we continue to build capabilities there to support the Medicare Advantage. But those are two important points, A.J., that I want to bring up in addition to what Mike said.
Okay, great. Thanks a lot.
Operator
And your next question comes from the line of Whitmail with Lyrink Partners. Your line is open.
Hey, thanks. Good morning. Just was wondering if you guys have detected any changes with MA plan behavior or denials, any dispute resolution changes, and any changes on length of stay.
Let me first kind of talk about the Medicare Advantage in context of kind of the two midnight rule. And as we noted really on the fourth quarter call, we really did not see, you know, any additional movement from observation to inpatient status in 25. That was our expectation, and that's really what Medicare Advantage is now about 57% of our total Medicare. A couple of notes on the Medicare Advantage compared, you know, our Medicare Advantage observation mix is still about 15% higher than our traditional Medicare observation. And yes, Medicare Advantage continues to run a bit harder on dispute resolution. And I'll go broadly here and not just, you know, there continues to be activity, as you would expect, in denials and underpayments broadly with our payer partners that we have invested in over the last couple of years to strengthen our response to that or paying off. And I would tell you that that is in first quarter that activities like denials and underpayments did not have a material.
Okay. My second question is, I know, Mike, you said you're not prepared to share any views on tariffs at this point, but is there any way to perhaps frame the percentage of supplies that you or HPG are sourcing from overseas? Just anything would be helpful. Thanks.
Sure. You know, as Sam said at the beginning, we're in a really dynamic and fluid. So, you know, until we, which good, you know, it's really difficult to size the impact ACA, you know, as you know, and as we've talked about on a previous call, has been working on this diligently. And part of that work, and I'll talk about 25 and then give you a couple of other numbers for context, you know, for 2025, part of their work was the ability to secure significant fixed pricing. You know, when you think about finished goods, so the purchases of supplies of finished goods, and just to give you a sense, that's upwards of 60%. Another point of context that I think is helpful, 75% of our supply expense comes from either the United States, Canada, or Mexico, or from products that currently have broad exemption. As I noted, Health Trust continues to work on this. They're working on this to continue to secure fixed-price contracting. They're continuing their work around supply chain mapping and risk assessments, and they are also with this tariff risk environment. Lastly, I would say that we're working hand-in-hand with our partners in our supply chain, our key suppliers, as they continue to work on de-risking and diversifying their supply chains in specifically a way. So I do believe that our tariff risk for 2025, I'll reiterate, that the environment is extremely fluid, and we are continuing to closely monitor it.
Operator
And your next question comes from the line of Ben Hendricks with RBC Capital Market. Your line is open.
Hey, thank you very much. I just have a broader labor-related question. We've heard from providers in the past that recessionary environments generally loosen the nursing labor market. It still seems like there's a lot of competition. Just based on your observations from the past, how reactive is the labor market to recession expectations? And is there any change to your wage inflation forecast in this current environment?
Or different through different recessions. I think, in general, your comment, Ben, is right. And that is that the labor market tends to ease somewhat during a recessionary cycle. And that can put some downward pressure on wages. Now, we went through the most intense labor market environment from 2021, 2022, and the early part of 2023. So our wage trends have come down from that quite significantly. Will it come down further? Possibly. but it's way too early to provide any kind of forecast recession could do to the labor market. I think as we sit at this particular point in the year, we believe our guidance around our wages for 2020 can be somewhere close to what we have indicated already.
Operator
Thank you. And your next question comes from the line of Sarah James with Cantor Fitzgerald. Your line is open.
You guys had strong growth from both inpatient and outpatient cardiac surgeries. How are you using your CapEx to support forward growth of that? Can you give us some insight into how you're thinking about dividing your spend into high acuity versus low acuity or outpatient?
This is Sam. Our capital allocation within our capital spending hasn't really changed. and I don't anticipate it's going to change materially as we push forward here. We have a very significant facility and ambulatory development strategy. Fortunately, most of those facilities are in comparison to what it takes to build out inpatient capacity. Today, we have about $6.2 billion in 25, 26, or the first part of 27. capital dollars go toward inpatient capacity. I think our inpatient capacity with respect to that pipeline is roughly 2.5% plus greater than what we have today. So a significant portion of that goes toward the inpatient capacity. We have outpatient capacity that includes outpatient facilities, emergency room capacity, cath lab capacity as you spoke to, ambulatory capacity from a surgery standpoint, dollars in the overall scheme of what it takes to build out those type of facilities. And then obviously we have a lot of clinical technology that we invest in so that our physicians and patients have the latest access to clinical technologies that can provide better environment for patient care. I don't have the exact equipment spend within all of it as well. So that's largely unchanged because we are running the company at high levels of occupancy. We continue to have a nice pipeline and new projects that we think will make sense beyond the ones that we vote be any material change in sort of the allocation of the dollars within those categories.
Operator
And your next question comes from the line of Brian Tankulit with Jeffries. Your line is open.
Hey, good morning, guys. Maybe Sam will follow up just to that comment that you made in a different light. So as we think about CapEx spent for the quarter, it was a little lower than typical range, like 5.4% revenue. So just curious if there's anything there we need to be thinking about and maybe broader capital allocation, you know, good buyback during the quarter, how should we be thinking about the pace of repurchases for the year?
Brian, this is Mike. Let me cover the share repurchase first, and then we'll talk about Cater. You know that in our first quarter release, we completed $2.5 billion of share repurchase in the first quarter, and we anticipate completing a significant portion of the $10 billion authorization in 2025, obviously subject to market conditions and other. On CapEx, you're right, and we spent $991 million in the quarter, which seemed a little light is to your question. We still believe we're on track of getting to our targeted level of capital span and anticipate markets.
Operator
And your next question comes from the line of Andrew Mock with Barclays. Your line is open.
Hi, good morning. Hoping you can clarify your hurricane commentary. I think first, you noted that hurricane earnings were flat year over year in your impacted markets, but I'm not 100%. I understand that because you have two markets that were hurricane-impaired in Q1 this year that were not impaired at this time last year? And if that's true, wouldn't that point to a year-over-year tailwind for the full year as those markets continue to improve against a more negative impact in the back half of last year?
Yeah, thanks, Andrew. This is how we think about it. And you'll recall when we did our 2025 guidance that our guidance assumed that the impacts of the hurricane during the course of 2025 and would not produce a full-year tailwind for us. As it relates to first quarter, this is largely – if you take the earnings growth year over year from our two main impacted markets in North Carolina Division and West Florida, specifically the Largo Medical Center, our earnings were flat year over – and then I would just point you back to – And your next question comes from the line of Matthew Gilmore with KeyBank.
Operator
Your line is open.
Hey, thanks for the question. I wanted to ask about the competitive environment in your markets. So with the ongoing policy and macro uncertainty, do you see health system competitors behaving any differently in terms of their CapEx priorities or investments? Maybe that creates an opportunity for HCA, or is the competitive dynamic not really impacted by the macro?
This is Sam. I would say at this particular point in time, we haven't seen any substantial changes in competitors and how they interact in the market. Now, obviously, if NIH funding continues to be challenging for certain academic medical centers, that may influence their behaviors and spending. If there are other policy adjustments that take place that could play out, we do think, you know, with our scale markets, you know, that provides a different level of capability than a lot of our local competitors who tend to only be in one particular market. But, you know, our competitors in many instances have solid balance sheets, and we have to be able to anticipate their behaviors and their spending. And as I mentioned in my comments, we have regained growing market share in markets, so we're very encouraged by the progress we're making practices in any fashion going forward, then maybe that presents an opportunity for us to pick up even more market share.
Operator
And your next question comes from the line of Justin Lake with Wolf Research. Your line is open.
Thanks. Good morning. I just wanted to talk about the exchanges first uh the can you give us the percentage of volumes and revenue in the quarter that came from the exchanges uh i apologize if i missed them and then uh bigger bigger uh picture question just you know some of the academic work out there guys indicates that uh you know the if the subsidies do go away there's a real potential that a lot of these folks will go back to uh commercial-based insurance. I've seen numbers as high as, you know, almost half the people that lose coverage via the subsidies would go back to the commercial pool. Just curious if you have any view on that in terms of what could happen there. Thanks.
Yeah, good morning. This is Mike. Specifically on exchanges, let me give you a quick update here. I think you know this, but 2025 was another year of strong enrollment growth. We're up across the United States now to 24 million lives covered. For HCA in the quarter, the exchange volume represented about 8% of equivalent admissions and about 10%. You know, I think there's still a lot of unknowns here about what could happen. Enhanced premium tax credits do sunset current form or through some revised form. And so we're going to have to wait and see exactly how it plays out. and we're really not in a position to sponsor insurance, although I think we generally agree that there will be some that would go back to employee-sponsored insurance. I think there'll be some that would stay. And then others that if these enhanced premium tax credits do sunset, that would lose cover. We're in a position yet until we have a little more clarity around what's going to happen.
Operator
And your next question comes from the line of Joanna Gadgek with Bank of America. Your line is open.
Hey, good morning. Thanks so much for taking that question. I guess maybe first on just clarifying the comment around your DPP benefits. You said it increased year over year by $80 million. So can you confirm whether there was anything unusual in there? Is it as expected, you know, what you had expected in the quarter, and do you still expect the full year DPPs to be flattened down to $150 million?
Hey, Joanne, this is Mike. So yes, during the quarter we recognized approximately $80 million increase in our net benefit year over year. The largest driver of this was really the increase in one state where we received a reconciliation payment and began accruing for that program in Q4 of last year, so that was what drove You know, as we've talked about on past calls, the projecting or the guidance related to really the most difficult thing that we that we predict and so we we keep those updated for you when we meet quarterly i would say now based on what we know now after our first that we would be thinking about for a full year 25 versus 24 something like 50 million better to a 200 million dollar decline now so that would be the as it relates to just kind of a general update we continue to generally get a flow of funds. I would say that we were in approvals by, you know, largely.
I'm sorry. So you said that Arizona and Nevada approved. So is that the reason why you're thinking TPP payments for the year higher? Or there was just something that happened in Q1 that this $80 million that makes you feel better by the year?
Yeah, I think that the Q1 outcome was a bit better than we expected. You know, our expectation was really that the first with you know potential declines primarily coming in the back half the year so you know based on this first quarter net benefit estimating that for the full year to a 200 million dollar decline uh you know really that range is largely associated we did not record anything related to tens and that we have not received approval because that was my question
so just to clarify you still assume tenancy benefits in that uh full year number correct So let's take the quarter first.
We recorded nothing in Tennessee. The back half of 2024 interim payment was not received. We did not record it, and we have not received approval for the 2025. If you think about this range of guidance from a $50 million improvement to prior year for the full year to a $200 million decline, largely that range is associated with whether or not.
Operator
And your next question comes from the line of Brian Langston with TD Cowan. Your line is open.
Hi, thanks. I'm wondering just how the surgical schedules and block time utilization is kind of looking and progressing. I'm not trying to get quarterly guidance, but just wondering if we can glean anything, you know, just given potentials for tariffs, recession, and just, you know, consumer confidence declining. Wondering if there's, you know, having any impact on the elective procedural side and patient behavior. Thank you.
This is Sam. I don't have that information in front of us as far as, you know, forward scheduling. We have systems within each of our facilities where that information is available. We don't roll that up at the corporate level, so I'm not able to give you that answer at this point. I think, again, in general, we think demand for healthcare is going to be there. Our inpatient surgeries were up on a per business day. So as we normalize, we have, you know, sort of comparable calendar dynamics. We expect our surgical volumes up to, you know, levels that we think are in line with market share trends or market share gains that we have expected. So we continue to build our medical staff, which are critically important as i mentioned we're adding facilities where we need to adding technology we've got a robust workforce development agenda to support our surgical services and we continue to make inroads into better operations which are beneficial to our physicians and surgeons and beneficial to our patients so all that sort of converging on our our viewpoints that that surgical demand is reasonable and we can execute underneath that.
Operator
And your next question comes from the line of Joshua Raskin with Nephron Research. Your line is open.
Hi, thanks. I was wondering if you could speak to your technology agenda and maybe specifically some investments that you think differentiate HCA on the clinical care side, and I'm going to assume that AI is a part of that conversation.
We are investing heavily in our tech agenda. One of the key initiatives that we have within our strategic plan is advancing technology and applying it broadly to the organization. We've set up a new thing called the Digital Transformation and Innovation Group, and they are leading the charge for us as we push forward on this particular initiative. we have three areas that we think we can benefit our business using better digital tools, using automation, and using AI. The first categories are administrative functioning. When you think about our supply chain services, human resource functioning, and so forth, we have early tools that are being developed and implemented in those areas, which are incrementally adding operational. And by that, I mean what goes on in our facilities, primarily our hospitals, where we can improve staffing and scheduling and create better tools for our management teams, tools and insights for our employees as they schedule to meet their needs. Another area in our management functions, as it relates to link to stay management, as it relates to prior authorizations, all of these things that go into the operations at a facility level, we are deploying tools in those areas. As you mentioned, we do have some opportunities there. We're slowly moving into that space where we can use, again, some digital tools. We can use our practices, and we're working to create value for our physicians and our caregivers in a way that they have the advantages that come from those insights. We're early in that space because it's very important that we be accurate. It's very important that we be compliant and that the tools that we provide truly add value. And we've got some areas where we think we can improve the labor and delivery process with these tools. And we've got early signs of success there, but it's really early in that particular category. So I'm encouraged by where we are. We continue to find ways to advance the use of digital tools and technology for our business. And that, I believe, is going to be something that we build upon in the years to come.
Operator
And your next question comes from the line of Stephen Baxter with Wells Fargo. Your line is open.
Hi, thanks. Just another question, you know, kind of the managed care mix. Just the 5.4% you gave on the managed care volumes, just to make sure, is that inclusive of the exchanges or excluding it? And if it's including it, would you be able to give just a standalone, you know, managed care exchange over for the quarter? Thank you.
Yes, it's a 5.4% equivalent admission, same facility growth in total managed care. The exchanges were up 22%, and the core thing of it is employee-sponsored insurance was up about, let's just call it just short of half.
Operator
And your next question comes from the line of John Ransom with Raymond James. Your line is open.
Hey, good morning. I'm going to be the slow child in class, so forgive me. But if we're just to look at Asheville and Largo, is your new guidance assumed that the EBITDA is now flat in 25 versus 24?
The guidance, if you think about the four-year guidance we gave on our fourth, what we indicated is that we thought with the lingering effects of the herd would kind of be flat, would be neutral, and would not produce it. Is our report out of the year-over-year earnings change in West Florida, in the Largo area, compared to the year-over-year earnings change?
Operator
Thank you. And your next question comes from the line of Lance Wilkes with Bernstein. Your line is open.
Great, thanks. Can you talk a little bit about how you're seeing the downstream impacts from the pressure on the managed care organizations, both in the quarter and the outlook going forward for the year? And what I'm thinking about is increased use or not increased use of value-based care. Are you seeing any of the changes in deductibles or out-of-pocket for consumers in some of the products having impacts on bad debt or utilization? And then just a point of clarification, what do you see as far as flu impacts, both to the positive and negative, in the quarter?
Let me cover, you know, our related volumes were we indicated that the respiratory season had a bit of a late start compared to the previous year. So what we saw in first quarter of 25, but when I look at first quarter of 25 compared to first quarter of 24, our respiratory volumes in total up just a tick to prior year, our first quarter of 24, pretty much in line with prior year levels. And, you know, you may recall, but if you go back to that prior year flu season, it started early. So it started kind of at the beginning of fourth quarter of 23, and it persisted pretty much through the end. our first quarter at 24. So that's the year-over-year cost. Think about, you know, and you'll remember from past conversations on this over the years, but we monitor this closely and what we're looking at is kind of what happens over time to the patient portion or the patient balance. Historically, for our commercial payers, we experienced increases in average patient balances in the mid-single digit. In our recent quarters, we have seen increases a little higher than that, but not material. The increases certainly have been influenced by growth, which tend to have a slightly higher patient. On collectability, we generally maintain our historical level of collections on patient balances. As it relates to the exchanges, the rate of collections on patient balances is a bit lower than the traditional employee-sponsored insurance population. But while lower, the exchanges have not had a material impact on the collectability of our patient receipt. That's a bit of an update.
I think it's safe to say, Mike, that deductibles aren't in any fashion disrupting the demand curve. And that's sort of our overarching view when we look across our markets and we look at what demand trends suggest. We don't see those items influencing in any material way our thinking around overall demand.
Operator
And your next question comes from the line of Ben Rossi with JP Morgan. Your line is open.
Hey, good morning. Thanks for taking my question. So for the executive order from the other week, there was a call out on hospital acquisition costs for covered outpatient drugs at HOPDs. It sounds like this would be more geared towards drug administration. I can appreciate the uncertainty here with the broader discussion on Medicare site neutral from your opening comments, but just curious how you're thinking about the initial impact here, would this encompass more of a lower acuity set of procedures relative to your broader set of outpatient services?
Yeah, so, you know, we're certainly aware of the executive order from the administration on potentially our directing agencies to lower drug prices. We're going to have to see, you know, the draft rules that come out of this. We believe they'll be part of it.
We're going to need that additional specific on what potential and your final question comes from Craig Hittenbach with Morgan Stanley your line is open great thank you just Sam going back to the demand backdrop can you just talk about you know the durability of demand and in particular in in light of the equivalent emissions growth target of three to four percent this year kind of how you see that playing out as I've just mentioned I
I don't think we are seeing anything that the demand assumptions that we have, if you take the leap year effect in, are adjusted admissions. We're almost three. That's a really good metric for us, and we're encouraged by that year-over-year growth, as we mentioned. Like there's anything happening that's compromising our ability to gain share. I just mentioned that value-based care and other efforts aren't necessarily negatively influencing demand, and so as we push through the rest of this year, we continue to believe that materialize unless something dramatic happens, and at this point, we just said, thanks for the color.
Operator
And ladies and gentlemen, that concludes our question and answer session. I will now turn the conference back over to Mr. Frank Morgan for closing remarks.
Abby, thank you for your help today and thanks to everyone for joining our call. Hope you have a good weekend. I'm around this afternoon if you have any additional questions, to answer any additional questions you might have.
Operator
And this concludes today's call. We thank you for your participation. You may now disconnect.
