Ladies and gentlemen, welcome to HCA Healthcare's second 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 our 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 Healthcare, Inc. is included in today's release. This morning's call will be available later. I'll now turn the call over.

Good morning to everybody. A 4% increase in diluted earnings per share has adjusted to $6.84. since. The results reflected solid revenue growth driven by greater acuity levels. Operating environment, which allowed us to the team's great start to the year, we increased our demand environment. The effectiveness of our strategic initiatives, quality outcomes, quality local health networks with the capabilities of a national system will continue to reinforce our competitive position, effectively to evolving market dynamics, and meet the needs of our patients. As a team, we remain relentless in our pursuits to innovate using technology, find new ways to increase efficiencies, and hold ourselves accountable for their outstanding work and their ongoing pursuits to deliver on our mission. We've been able to transition to the federal policy environment and the recent passage of the one big, beautiful bill. The Medicaid component in this act, we believe the adverse impacts over the next few years are manageable based on the grandfathering provisions for supplemental programs, which include a number of previously submitted applications for state-directed payments, and the timelines for phasing in work-requimental payment programs. Also note that the bifurcation of the policy between expansion and non-expansion states lessens the expected impact to HCA health care. Approximately 60% of our Medicaid volumes and revenue are in non-expansion. To the exchange provisions in the Act, we do anticipate that some people will lose insurance coverage over the next few years. But we believe our financial resiliency program should offset these effects. Scheduled expiration of the enhanced premium tax credits at the end of this year. We continue to advocate strongly for their extension, what the outcome will be. Recent polling indicates that many Americans want them extended. Many believe they need them for their faith. They say their voting patterns could hinge on their ultimate. We're looking to develop and execute resiliency programs to offset as much as possible any adverse impact. Let me close with this. Regardless of the outcome with these federal about the future of HCA health care, our balance sheet is strong. We have an experienced, capable and disciplined team. We'll adjust as we can as we can and continue delivering on our mission. more details.

Good morning, everyone. We are pleased with our second quarter earnings. Equivalent admissions increased 1.7% for the quarter and 2.3% for the year. Year-to-date managed care equivalent admissions, including the exchanges, grew 4%, which is in line with our expectations. Medicare grew 3%, which is slightly below our expectations. Medicaid was down slightly and self-pay was up slightly. Both were below our expectations and represent our lowest reimbursing payers. However, given the payer mix and acuity of our patients, we had revenue growth of 6.4 percent, slightly above the top end of our long-term 4 to 6 percent guidance. Adjusted EBITDA margin improved 30 basis points compared to the prior year quarter. Salary and benefits, along with other operating expenses, both improved as a percentage of revenue when compared to the prior year. Same facility contract labor improved 1% from the prior year quarter and represented 4.3% of total labor costs in the second quarter of 2025 versus 4.6% in second quarter of 2024. Supply expenses increased slightly as a percentage of revenue due primarily to increased spending on cardiac-related devices. Adjusted EBITDA in the second quarter grew 8.4% over the prior year quarter, and we were pleased that a substantial portion came from CORE. Regarding Medicaid supplemental payment programs, as we've said in the past, these programs are complex, variable in time, and do not fully cover our costs to treat Medicaid patients. Considering Medicaid state supplemental payments and related provider taxes in isolation, we We saw an approximate $100 million increase in net benefits in the second quarter of 2025 compared to the prior year quarter due to prior period reconciliation payments and program accrual times. The new Tennessee Directed Payment Program was approved in late June. As this is a newly approved program, we did not accrue any benefit from this program in second quarter of 2025, and we'll record as we receive cash. Moving to capital allocation, we continue to deploy a balanced strategy of allocating capital. Flow from operations was $4.2 billion in a quarter. Capital allocation in the second quarter of 2025 was $1.2 billion in capital expenditures, $2.5 billion in share repurchases, and $171 million in dividends. We were able to defer approximately $850 million in tax payments to the fourth quarter due to the IRS providing relief to Tennessee taxpayers of severe weather and early. Our debt to adjusted EBITDA leverage remains in the lower half of our stated guidance range, and we believe our balance sheet is strong and well-positioned for the future. We will discuss the health policy implications of the One Big Beautiful Bill Act. I will provide a few more detailed notes. As it relates to tax policy, this act was positive for ACA, making 100% bonus depreciation permanent and effective back to Inauguration Day, which is helpful given our capital investment program. The act did not include policies that would have materially increased our tax. we continue our work to develop and execute resiliency plans to offset as much of any adverse impact as possible from the act the potential expiration of the eptcs and other administrative actions such as tariffs we will provide more information on our resiliency efforts during our fourth quarter 2025 earnings call when we issue our 2026 guidance so with that let me speak to our 2025 guidance as noted in our release this morning we are updating the full year 2025 guidance as follows we expect revenues to range between 74 and 76 billion we expect net income attributable to hca healthcare to range between 6.11 billion and $6.48 billion. We expect adjusted EBITDA to range between $14.7 billion and $15.3 billion. We expect diluted earnings per share to range between $25.50 and $27.00. We expect capital spending to be approximate. Updating our guidance to project growth and equivalent emissions to be between 2 and 3 percent. With the approval of the Tennessee program and with updated information from across our programs, we now anticipate our supplemental payment full-year net benefit to be between flat and $100 million favorable year over year. This projection does not include any potential impact in 2025 from the grandfathering of applications under the Act. We believe one of the underlying strengths of HCA is our diversified portfolio of markets. The recovery in our facilities impacted by Hurricane Saline and Milton in third and fourth quarter of 2024 is going better than anticipated. However, we have a couple of markets below our expectations that are offsetting some of the better performance in the hurricane. We understand the challenges in these markets and have confidence in the plans in place to address them. Ultimately, the increase in our earnings guidance is equally weighted between the updated net benefit from the state supplemental payment programs and the improvement in our overall portfolio operational performance, including the hurricane-impacted markets. With that, I will turn the call over to Frank 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. abby you may now give instructions to those who would like to ask 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 simply 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'd like to join the queue and our first question comes from

the line of aj rice with ubs your line is open uh thanks hi everybody um just maybe just asking around the guidance update so uh you raised your EBITDA um guidance adjusted EBITDA by about 300 million at the midpoint i think that's roughly the amount of outperformance um that you saw in the scene so far year to date in the first half. Just a couple questions around that. Obviously, you now have the Tennessee DPP program. Should we think of that as reflected in this updated outlook? And then second, I know you're making a modest tweak on the admissions number down. You're not alone in that. Some of your peers have already reported have done that. any commentary on what you're seeing in terms of underlying demand on the volume front?

AJ, good morning. Let's talk about guidance first. The $300 million increase in guidance at midpoint, as I noted in my comments, about half of that is from state supplemental payment programs. And that does reflect the approval of the new Tennessee program we expect to receive, start to receiving cash in that here in the back half of the year. And probably a material chunk of that in third quarter likely. It also reflects in just better visibility as we always have here at mid-year about the increase. You know, if I think about the other half of our guidance increase, it really relates to our portfolio. And again, as I mentioned in my opening statement, you know, about $150 million of that increase is related to the portfolio. And I would size that for you as follows it's about a hundred million dollar better uh in our hurricane related markets and you know you'll recall that we originally guided that to be flat to prior years so that's that's a hundred million dollars of it we have a couple of markets that are underperforming roughly in the 50 million dollar range of impact so those two markets are offsetting some of the hurricane market improvements. And then really the rest of our portfolio is performing better than anticipated. So the net combined effect of our combined portfolio, including the hurricane markets, really results in the other half. I might mention though, just so that you guys can think through this as you prepare your, I think third quarter, the earnings growth will be a little bit lower and fourth quarter is likely going to be a little bit higher in terms of growth rate compared to that that midpoint of the guidance and that's largely related to both the timing of supplemental payment program payments and you know specifically to fourth quarter you may recall that we received one-time payments uh fourth quarter of last year that do not repeat and then we believe our hurricane markets uh you know the recovery that we're that we're showing is largely going to be in for a couple of notes on that so on volume uh let me start and then sam uh please feel free to jump in i know you will the the when i think about our volume uh year to date through june of 2.3 percent equivalent emission growth and i compare that to our original three to four percent guidance coming into the year there are a couple of moving parts that that i would mention the first is that medicaid uh you know for for june year today medicaid's down 1.2 percent to prior year and we originally uh believed and built into our guidance the notion that medicaid would flatten out this year if not even show a bit of growth coming off of the Medicaid Radio Determination Program. And then our self-paid charity volumes are only up 1.5% June year to date, and we had believed originally that they would at least grow at the overall rate of volume growth. And, you know, just for context, our self-paid volumes were up almost 7% and 24 over 23. So the combined of Medicaid and self-paid being below our expectations explain about half of the difference of our current year-to-date volume growth versus our three to four percent original guidance and really the other half is medicare um we uh originally expected medicare to grow a bit faster than it is although i would note that a three percent growth in medicare year-to-date through june is still pretty good so those are the two main categories of our volume that are trailing our original expectation of three to four. And Sam, I don't know if you...

Yeah, let me just add a couple of comments here, Mike, because I think context is always important. You know, you look at the head, there's one metric what everybody looks at, and we get But when you start lines, you start to see the productive business. For example, we had 14 out of 15 divisions that grew their admissions. 14 out of 15 domestic divisions grew their adjusted admissions. Our cardiac procedure volume was up 5%. Our obstetrics volumes were up 3%. Neonatal volumes up 13%. So the details, in many respects, reflect the diversified portfolio and services. I think another point for us, and this is how we look at it, we've had 16 consecutive quarters. So that consistency tells us that the network model that we're investing in very heavily and we're focused around execution on it, allows us to compete effectively. It's allowed us, and we think it adds value for our patients, it adds value for our physicians, and we think it adds value for our shareholders. The number is 1.7%, but when you look underneath at the productive and qualitative aspects, then maybe first.

Okay, thanks a lot.

And our next question comes from the line of Ann Hines with Mizuho.

Your line is open. hi good morning thank you can you just provide more details on your resiliency programs um i think the street really at this point don't doesn't believe that the subsidies will be extended how much of the headwind do you think you can offset in 2026 is any of this benefit embedded in your 2025 guidance or will it all be implemented to 2026 and any other incremental details about what type of cost savings you'll be doing, that'd be great. Thank you.

So let me kind of summarize our thinking about one big, beautiful bill, ACT, the EPTCs, and how we're thinking about a resiliency program. And then, Ann, as I mentioned in my comments, we will comment further and provide more details related to this in our fourth quarter 25 earnings call when we give guidance for 2026. First, let me start with the ACT itself. You know, I do believe in the near term that our financial resiliency program should offset the change provisions in the act. In the longer term, as it relates to the act specifically, with both the delayed start and the phased-in nature of these provider tax and state-directed payment reimbursement reforms, along with the potential for the approval of the submitted supplemental payment applications, we believe HCA will be able to generally manage these incidents without material impact to our long-term guidance. Specific to EPTCs, at this point, we do not know. As noted, we are working to develop our resiliency programs to offset as much as possible any adverse impact should they expire. And again, the potential approval of the grandfathered applications would certainly help. We will comment further, as noted, when we do our 2026 guidance. Suffice it to say, our resiliency efforts, as we continue to work through them, and we've been working on them, as we've talked about over the last year, in a very diligent way, address both benchmarking our corporate departments and shared service organizations against best practices and finding operational improvement opportunities. We are deep in the middle of our field-based resiliency efforts, many of which we commented on before, from length to stay and improvement opportunities with our case management operations through significant opportunities around both our automation and our digital transformation agendas. and our labor and supply related resiliency plans are also very we will get more updates on that and when we get to the fourth quarter call but but hopefully that helps and our next question comes from the line of ben hendrix with rbc capital markets your line is open great thank you very

much um i appreciate all the color about you know trends in the various payer classes i was wondering if you could comment a little bit on uh commercial volume you're seeing one of your peers talked about waning consumer confidence uh driving some weakness in their book um but wanted to see what you're seeing and kind of that weighed against any expectation for a pickup in activity you know assuming people are are trying to get procedures done toward the end of the year in anticipation of losing uh the enhanced uh premium subsidies uh any thoughts there on on what we can expect through 4Q and commercial. Thanks.

I'll give you, Ben, June year to date, our maintenance care and HICS equivalent emissions are up 4% over prior year. If you think about how that compares to our expectations coming into the year, it's right there. I mean, that's about what we expected for as part of our original 3% to 4% guide. I would say that healthcare exchanges, which are up 15.8% through June year to date are a little better than our original expectation. And our commercial managed care book, excluding the exchanges, which is up just short of a point to prior year, maybe a little below our original guidance, but that's how we read We're pleased with the payer mix through second quarter. Sam, I don't know if you have any comments about consumers.

No, I don't think we can make any comments yet about consumer confidence. I think, again, the demand for health care largely, if anything, is necessarily changing that, at least across a driver. We had goods in a lot of categories. We mentioned that we're in pediatrics, that we didn't have this. Health admissions were down in our company. Some of that was because we shrunk supply in certain facilities. So, again, that doesn't have, I think from that standpoint, you know, confident, as we mentioned, in the demand, see that being disrupted too much in the short run here.

You know, Ben, the only other thing I might mention is that it's a pretty tough prior year. You know, just a couple of notes here when you think about the first half of this year compared to the first half of last year. You know, we still have a bit of a leap year impact, volume impact. Medicaid redeterminations last year were fueling big exchange growth last year. You may recall that our exchange volume growth last year was robust over 40 percent. Kind of an interesting statistic. From first quarter to second quarter of 24, our exchange equivalent emissions increased 14 percent. This year from first quarter to second quarter of 25, they're up about 3 percent. So we still saw growth sequentially from first quarter and second quarter, but I think prior year just had robust exchange volume growth. And then just the other thing just to keep in mind when you're thinking about the prior year comp is that the Medicare Advantage 2-bit night rule did impact admissions in 24, and that has sunset into 25. So I think the prior year compares.

Great, thank you.

And our next question comes from the line of Brian Tankulet with Jeffries. Your line is open.

Hey, good morning, guys. Maybe, Sam, just to follow up on some of these discussions on, I appreciate your comments on the growth rates that you saw with the different regions, but how are we thinking about market share that you're seeing in the local market, maybe also in the context of, you know, the payers are talking about high utilization rates and, you know, that translating to the volume trends that you're reporting. So just curious if you're seeing any dynamics at the local level you can share with us.

Well, yeah, Brian, thank you. As I mentioned, we've had sustained market share gains, and we think we've continued to, with the most recent data that we've seen in our market share, if you really sort of exclude behavioral health, given that we put above 28 percent, and we're showing signs of shared growth. We do have a few more U.S. markets that we focus our share on and some responding to being in our business. We still have that it's inpatient facilities as well as inpatient capacity where appropriate. We think that will continue to produce the necessary overall capacity to meet the demand to anticipate with our initiatives. So we continue to find ways to improve what we call the integrity of our network. and keep patients inside the system where appropriate for them. And that's an area of, so I'm pretty pleased with how our teams are executing on to deliver value for our patients. We recently finished our mid-year reviews with all of our divisions, and we're optimistic that their assessments of the markets are continually favorable and will allow it.

And our next question comes from the line of Pito Chickering with Deutsche Bank. Your line is open.

Hey, good morning, guys, and thanks for taking my questions. One quick clarification and then a real question. Clarification on supplemental payments, I believe you raised the annual guidance by about $170 million at the midpoint. I believe the first quarter was $80 million ahead. The second quarter was $100 million ahead, so it's confirming that you are not changing supplemental payment guidance the back half of the year. And then the real question is, give any color of how many of your HICS patients have access to. Let me just look at the millions of jobs created below job growth.

Let me start with guidance. As I noted in my comment, increased guidance at this point is coming from states. That reflects not only the fact that the Tennessee program has been approved, but that we expect to start receiving cash here. I would think about it this way, as you think about kind of the second half of the year versus the first half of the year. In terms of the first half of the year, we've had $180 million of supplemental payment net benefit to year-over-year earnings in the first half. In the second half of the year, we anticipate $130 million decline in net benefits compared to the second half, and really entirely in the fourth quarter. And so, you know, just as you think about the implied guidance rate in our revised guidance, the second half, after considering the hurricane market improvement in fourth quarter and the state supplemental payment declined in the back half of the year, we think that the second half of the year's growth rate is roughly comparable to the first. We do not, at this point, have good enough insights relative to what percentage of the people, other than to say.

And our next question comes from the line of Whit Mayo with Lurink Partners. Your line is open.

Hey, thanks. Just wondering if there are any changes that you guys are seeing in MA behavior, denials, anything to call out that's maybe changed versus last year, and any investments maybe that you've made around documentation or revenue cycle that's also changed?

So just on Medicare Advantage, a couple of numbers here. So Medicare Advantage now represents 58% of our total Medicare admissions. Just one note on the two midnight rule, that seems to be fully implemented in 2024. We're really not seeing any additional movement from observation to inpatient there. You know, as it relates to the payers, we are not seeing, you know, any significant impact on our results from denial activities. But I think that does reflect the significant work that we have put into our revenue cycle over the last couple of years, you know, to strengthen our organization's management of denials. i'll mention that we have over the last year or so we have initiated several partnership activities with our key partners in our key managed care payer partners these partnership activities focus on things like digital integration administrative simplification and better management of disputes i think there's a lot of good work in flight between us and our payer partners and hopeful that we can continue to manage through these things as we have been in a really meaningful way. We need them. They need us. And I think we have a good relationship.

And our next question comes from the line of Andrew Mock with Barclays. Your line is open.

Maybe just one quick info request and then a question. Can you give us the latest quote on ACA revenue and admissions? and maybe just a question on the hurricane performance. Appreciate all the color there. But I think the headwind, at least to start the year, was $250 million versus last year. Now you're attributing $100 million of the guidance raised to the hurricane. So does that mean there's still $150 million of continuing headwinds embedded in the guidance for the back half? And can you give us a sense for how occupancy, payer mix, and profitability stand in that Mission North Carolina market versus pre-hurricane?

Let me start with that. The exchange is about 8% equivalent emissions and just a smidge over 10% of the exchanges. On the hurricane markets, remember, think about last year, a piece of that $250 million were lost revenues and a piece of that was additional expenses. And it's roughly 60-40 additional expenses, 40% lost revenue. So you don't get the lost revenue. does clearly you get you you do get to go year over year on the uh on the additional expenses for our year so when we were constructing our original guidance the hurricane markets you know we we had pretty good confidence and insight that the largo hospital would have year over year reopened on december 1st and a lot of the impact there was repairs and maintenance expense and then in our north carolina division you may recall we were concerned we didn't we never closed operations, but we were concerned about the lingering effect of the broad. And so our best estimates at the time when we issued our original guidance was that we thought that when combined, the hurricane markets would be flat year over year, 25. As we've gone through the first two quarters, you know, what we've seen is a little better recovery than our original anticipation. You may recall that in first quarter, the year over year impact of those two markets was was a bit negative, and there was a decline in earnings year over year. It wasn't material at the company level, but it was certainly a bit negative. We think third quarter could be a bit negative as well, and then we see a recovery year over year. The full year, we believe that the hurricane-related markets will come in at about $100 million year over year, which, again, is compared to our original fall.

Mike, let me add one thing. What we've seen in North Carolina is greater demand than we anticipated. Unfortunately, I've seen the labor market get more tight, and that's required us to use more contract labor in North Carolina to, again, this is in particular in what it means to them and so forth. Our teams have dealt with the operational requirements, the patient requirements, when they continue to push, continue to underneath the rules in that state. We continue to improve the quality, and we continue to engage with our stakeholders in a very effective way. So we're in a position of Mission Hospital. We'll continue to.

And our next question comes from the line of Justin Lake with Wolf Research. Your line is open.

Thanks. Good morning. I'm going to try to get at this resiliency stuff and maybe another way without trying to pin you down on it. If the world looks at what's coming, right, There's going to be a bunch of lost revenue, and when we think about exchanges and these provider taxes, there's certainly very high margin revenue. There's the potential for a big impact, right? I don't think I'm telling you anything you don't know. I think the main question I'd love to get from you guys here is just, you know, you've done an incredible job over time in different operating environments and staying around a 19% to 20% margin, and is that a reasonable framework? like, look, we're going to lose revenue, but we're going to stay at, you know, we think with the resiliency efforts, we can keep within that typical margin target. Is that a reasonable framework to think about the next few years?

You know, Justin, this is Sam. I don't know if I'm going to put a frame of reference on any of that at this particular juncture. We need to get through the last half of the year to understand exactly where the premium tax credits land. We will score that. We are actively developing a cost plan in order to respond to that. I will tell you this, our realities, whatever they happen to be, in finding pathways forward to accomplish our financial objectives, our growth objectives, our return on capital objectives, our quality objectives, and I'm confident that we will do that in an appropriate fashion. We're not ready to give you a margin range. We're not ready to give you a revenue implication just yet because it would be inappropriate for us to do that until we have greater clarity on exactly how this lands, where some of these people go. I understand everybody's concern and desire to want to try some sense of time here and ability. When I pull up and I think about who this organization is, the people we have on our team, the position we have in the markets that we serve, I'm pretty confident that we'll get to where we need to be.

Our next question comes from the line of Matthew Gilmore with KeyBank. Your line is open.

Hey, thanks for the question. And going back to the guidance discussion, there was a comment about a handful of markets that were underperforming. Can you give us some sense for the drivers of that underperformance and then the actions that are underway to improve results?

Yeah, this is Sam. We have 16 geographic divisions in HCA when you include the U.K. Obviously, you have one or two of them that aren't accomplishing what we, you know, realize as we anticipate competitors do something that we didn't expect. Physicians have dynamics that create, you know, flow of business. It's so variable. So we have two divisions. Other than to say we're all positioning in both of them, these are seasoned leaders in these hospitals and in these divisions. dynamics in one division that dislocated some of our business, but we're responding to that appropriately. In the other division, nothing structural, but it hit us pretty hard in the second quarter. And we're reacting to that appropriately with our car in the second half of the year. And so this is sort of the normal give and take with what's uniquely, I think, our diversified portfolio. And again, having geography company allows us to absorb the performance that we have. And that's what happened last year. We had a couple of divisions that did not accomplish their objectives in 24. And we overcame it last year. And we're doing it again this year.

Got it. Thank you.

And our next question comes from the line of Josh Raskin with Neffron Research. Your line is open.

Hi, thanks. Good morning. Could you provide just a little bit more color on maybe surgery volumes, both on the inpatient and outpatient side, and maybe any changes in trends you're seeing around site of care?

There's a continuation of kind of our path, Josh. I mean, I would note that on the pure case count standpoint, we were down 0.6% for the quarter. Recent trends and still almost entirely driven by Medicaid and self-pay and a bit of a drop in lower acuity cases. I would note, as we've noted before, that we are seeing good revenue growth in our outpatient surgery book of business. You know, call it 7.5%, 8% growth here that we're seeing on the revenue side, so that's good. And really, if I pull up outside of this outpatient surgery and look at outpatient in total, We had a good quarter, I want to say 8%, so that we tracked performed well. The inpatient surgery is a very similar story.

Inpatient surgery is on the same facility.

Perfect. Thanks.

And our next question comes from the line of Sarah James with Cantor Fitzgerald. Your line is open.

Thank you. Can you talk about how commercial exchange and self-pay compare historically on fee schedule and revenue collection rate And to the degree we see some shifting in volume to self-pay in the future, is there anything that your team can do on the revenue collection strategy side to improve collection rates on self-pay?

Yes, Sarah. So let me kind of double-click on patient collections a bit here. When I think about the patient portion or the patient balance that's owed under our commercial contracts, you know, the first thing that we track is, you know, this idea of what do we typically see on an annual basis in terms of the increase in the average patient balance. You know, over many years, we've seen, you know, kind of mid-single-digit increases annually on the amount patients owe as part of their kind of overall commercial increase. And then in recent quarters, we've seen that a little higher, and that's been influenced by the healthcare exchanges where patients do tend to have a little bit higher patient responsibilities compared to traditional commercial. regarding collectability of those amounts owed we've generally maintained our historical levels of collection on patient balances on our traditional commercial population the healthcare exchange population the rate of collection is a bit lower than on the traditional side the traditional commercial side but overall you know we have not seen yet any significant impact in the app an update on what we're seeing relative to patient collection but are you able to give us a comparison to what that looks like versus self-pay uh so for the uninsured population that self-pays how much of a delta is there on collection rates or or the fee schedule charged we uh we collect very little uh cash from the truly uninsured population what you see with truly there is not any material collection most uninsured patients in our company qualify our

charity significantly reduced amounts to policy. So there's not a lot of revenue produced for uninsured patients.

And our next question comes from the line of Ryan Langston with TD Cowan. Your line is open.

Thanks. Can you give us an update on the commercial contracting percentages over the next couple of years, I guess, in terms of what's already negotiated and what's still kind of hanging out there? And then on CapEx, we've heard from several larger nonprofits that the outlook's very uncertain. They're taking a pretty cautious approach, maybe in some cases cutting budgets. I guess, is there a scenario where you see that in your markets and actually ramp up capital spending to try to capture some of that market share, maybe longer term? Thanks.

Our managed care contracting today, we're largely done for 25. About 80% contracted, Again, achieving the targets that we had established for each of those contracts. Twenty-seven, again, achieving specific contracts. So we're pleased with where we are in our contracting cycle. We continue to try to work with the payers to create value for them, easy access for their beneficiaries. And then, as Mike alluded to, eliminating some of the administrative transfer, their members, and even our physicians who participate in the process. So that's where we are on the managed care side at this particular juncture. You know, the company is continuing to operate on the inpatient side with a 70% occupancy, maybe 73%, 74% occupancy year-to-date. We have, as I mentioned, five and a half, and should come online later this year, next year, and on into 27. And we continue to see opportunities for us to add to our networks, as I mentioned. I think we're today a company. We continue to add facilities both through greenfield projects as well as acquisitions where we can, and we will look for them. There are opportunities for us to accelerate investments in certain situations and put ourselves in a better position to achieve our objectives than we will in the normal course. But I don't see anything necessarily positioning in our spending to accomplish.

Okay, thank you.

And our next question comes from the line of Kevin Fishbeck with Bank of America. Your line is open.

Okay, great, thanks. I just wanted to go back to kind of think about the exchange subsidy expiration. There's a few dynamics in there. I guess one is, can you just remind us what your exchange revenue was as a percentage total back in 2019 before these enhanced subsidies were in place? And I guess, is there any reason to think that that wouldn't drop back down to that level? And you mentioned that there was the potential that that might drop. but many of those people might show up on commercial. Can you – is there any way to kind of go back and look and see, you know, historically if there was a shift out of commercial when exchange grew and maybe help quantify, you know, what that looks like?

Hey, Kevin, as we noted in the call, we're going to be – we're not going to really give that kind of detail right now. It's pretty difficult to size that at this point. So as we get through the balance this year and we have a better understanding of what happens to EPTCs and a little better understanding of how we think the population will react to what happens, we'll be in a better position for those more detailed questions. I'll just note again that we're at 8% of volume now with a little bit over 10% on revenue.

Okay, then maybe you just clarify. Did I hear you say earlier that you think that between the bill and the expiration of the subsidies, over the longer term, you still expect to grow EBITDA 4% to 6% to like a five-year-plus time horizon? Even with the impact of all these things, you'll still grow EBITDA in that range? That's the expectation?

No, it's a good one. Let me go back through that just so that it's clear on what we said. So, as it relates to the Act itself, in the near term, we believe that our financial resiliency program should offset the exchange provisions in the Act. In the longer term, as it relates to the Act specifically, with both the delayed start and the phased-in nature of these provider tax and SDP reforms, along with the potential of the approval of the submitted supplemental payment applications, we believe HCA will be able to generally manage these impacts with our resiliency efforts without material impacts to our long-term guidance and then regarding the EPTCs as you know we do not know what the outcome will be at this point but we are working to develop resiliency programs to offset as much as possible any adverse impact should they expire and so we will roll all that together uh kevin has noted uh when we comment further when we issue our 26 guidance on our four

quarter 2025 earnings call okay that's helpful so so the the mitigation is is both the your actions and the additional sdp approvals combined that's what that's what did your confidence in the four to six yeah that i i'll stand on the state thank you and our next question comes from the line of Raj Kumar with Stevens.

Your line is open.

Thanks for the question. Just have one on, you know, kind of frame the $600 to $800 million of targeted savings that you had over the five years when you did that during the investor day. Just kind of bogey where we're kind of at from those cost initiatives standpoint, given that we're kind of like a year and a half into that five-year outlook.

And maybe if you've identified any additional opportunities to bolster the financial resiliency initiatives uh kind of given the policy unknowns that we have over the next couple years so we uh as we know that in our investor day at the end of 23 we've been hard at work at developing our resiliency approach three main categories work you may recall the first one is around benchmarking and and really getting to ground and benchmarking both our corporate and shared service functions against the rest of the fortune 100 and then helping our facilities benchmark their performance across a series of both operational and cost metrics to help them find their biggest opportunities for improvement and then we leverage our best practices to help them identify those opportunities and take action and so that's that's benchmarking the significant efforts in flight around both automation and digital transformation. We've commented on this before, but our digital transformation agenda includes in our administrative platforms and in our operational platforms that we believe hold significant promise as we move forward. And really third is just continuing to better leverage our sharing additional functions over time to our shared service platforms to really drive that benefit of scale, of standards as a see investor day in light of these potential challenges to ensure that we're identifying our best opportunities and then take action as we can again as we noted.

So our final question will come from the line of Lance Wilkes with Bernstein. Your line is open.

Great. Could you talk a little bit about compensation ratio and labor supply and talking a little on overall how you're managing that so well, if there are outlooks as far as how you're changing the number of employees relative to what you're seeing with wage inflation, and if there are any expectations that you can give us for contracts and wage inflation for the second half of the year.

Thanks. you know as we noted um and even on the on the first quarter call but we're seeing a pretty stable labor environment and our wage inflations are coming in about where we expected them to be um i think we've noted before you know we've seen a pretty significant improvement in our contract labor the pandemic and we're down now to 4.3 you know if you go back to before the pandemic i think it was like 4.1 percent 4.2 percent in that range so you know we're i still think there's some room for improvement, and we're working hard on that, both in terms of better retention and better recruiting. But I do think that at a macro level, the clinical labor side is pretty stable. I mean, I would note, we've talked about our physician, our same facility professional fees did increase about 10% over prior year, which is about what we expect. Great, thanks.

This concludes our question-and-answer session, so 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 us on the call. We hope you have a great weekend, and we're certainly around answering boxes.

And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.