HCA Healthcare, Inc. (HCA) Q2 2026 Earnings Call Transcript

Ladies and gentlemen, welcome to the HCA Healthcare Second Quarter 2026 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, 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 e-stock 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. Good morning.

We believe that access to healthcare and affordability for Americans begins and ends with health insurance coverage. Most people need support to secure it, whether that is through an employer, the federal government, or some other means. Throughout 2025, our teams advocated for extending in some form the enhanced premium tax credits for those individuals who needed it. Unfortunately, the enhanced premium tax credits expired at the end of the year, and the effects, as expected, were that many people became uninsured and still needed emergency care from hospitals. As we look at the first half of the year, our expectations proved accurate, although the impact was greater than our estimates. Colleagues, however, have continued to deliver high-quality, compassionate care to an increased number of patients during the first half of the year, while managing well through the various headwinds we face. And our senior team I want to thank our colleagues for their great work. When I look at the company's mid-year results, I focus on three factors, but before I get to those, I do want to indicate that the company had solid earnings per share growth of 11% in the quarter and 11% year-to-date, created most of the financial pressure for the company. Overall, adjusted admissions for patients who were formerly covered by the health insurance exchanges declined by 15%. We expected some of these patients to shift to other forms of coverage, but this did not happen. Instead, these patients migrated almost one for one to uninsured. We had three of our 15 domestic divisions that had outsized effects from this payer mix shift, and they accounted for the company's overall impact. In the quarter, we had an incremental net benefit from Medicaid supplemental payment programs primarily related to Florida. These programs, which are fundamental to our providing services to Medicaid patients, play an important role in supporting access to care. This support has been especially important for hospitals as they are now providing more uncompensated care to uninsured patients. Updated guidance for the year incorporates what we have learned through the first six months with respect to patients who have lost their coverage on the exchanges. Most of the attrition this year is attributable to the expiration of the enhanced premium. The second factor was the strength in demand eased with our volume growth. Insured volumes excluding exchanges across many of our services were solid with improving trends over emergency room visits, cardiac procedures, and rehab volumes help drive these improvements. The explanation for the decline was from reduced demand in elective surgeries across both inpatient and outpatient settings. Contributing to this dynamic, including declines from patients who were previously covered through the exchanges, emergency inpatient surgery volumes, which account for approximately two-thirds of our total inpatient cases were up as compared to last year. We continue to be encouraged by the overall backdrop in demand. We believe our 2% to 3% are supported by market factors and population growth rates that we see in the communities we serve. In the expected demand, we have continued to add capacity and facilities to our networks this year. Additionally, we have approved more than $7 billion in capital expenditures that should come online in the next three years. We believe these investments will increase offerings and quality for our patients, improve our competitive positioning. TA Healthcare has produced invested capital over the years, and we believe there will be opportunities to do more in the future. We expect to use our cash flow and balance sheet strength to invest further in our business, while also returning capital to our shareholders through our capital allocation plans. The last factor I want to focus on is the advancement of our financial resiliency program. We continue to see improvement move through the first two quarters. For years, HDA Healthcare has found ways to create economies of scale, increase operational efficiency, and enhance more resiliency program we are advancing now has more capacity through digital transformation, global capabilities, and enhanced workforce development program will continue to add value this year and on into subsequent years. I close with this. HCA Healthcare has a strong responding to the event. From these experiences, we have built a culture of discipline. This culture has helped us stay true to our core mission to care and improve human life. Next, it has allowed us to allocate resources productively to generate solid returns for our shareholders. And lastly, it keeps us focused on execution to deliver the outcomes necessary to make the company stronger. With that, I will turn the call over to Mike for more details on the quarter.

Thank you, Sam, and good morning, everyone. Let me start by providing commentary. On second quarter, same facility admissions increased 2.5 percent, and equivalent admissions increased. Inpatient surgeries were down 2.3 percent. Surgeries were down 3.4 percent. ER visits increased 3.6 percent. Same facility equivalent admissions, and our insured population, excluding exchanges increased 3.2 percent in the second quarter and 2.2 percent year-to-date versus prior year. Exchanges declined 15 percent. The Sam noted these patients losing coverage on the exchanges migrated almost one-for-one. This one-for-one migration makes up approximately 80 percent of our uninsured volume growth, with the remaining 20 percent related to a decrease in Medicaid conversions, mostly in Texas, which has had a modest financial impact. Our second quarter net revenue per equivalent admission growth of 6.4% of payment benefits in addition, our contracted rate increases and governmental payment updates offset the negative rate impacts on payer of exchanges relating to the exchanges and to a lesser Let me now transition to the impact of the exchanges and Medicaid supplemental payment programs in the quarter. However, the significant payer makeshift related to the exchanges has had an unfavorable impact on adjusted EBITDA of approximately $400 million. This amount includes an increase of approximately $75 million related to our previous estimate of first quarter exchange impact. During the second quarter, the company recognized approximately $400 million of incremental net benefit from Medicaid supplemental payment programs. This included a $540 million incremental net benefit related to the recently approved Florida program from October 1, 2024 to June 30, 2026. This benefit was partially offset by retro payments received. Sam touched on the advancement of our financial resiliency program. Resiliency is core to how it operates your business. Our resiliency program is a long-term, multifaceted, enterprise-wide set of initiatives designed to generate efficiencies. We were pleased with our cost results. Same facility cost per equivalent admission when considering Medicaid supplemental payment programs was essentially flat versus prior year quarter, and it improved 1.4%. Let me add a note on our year-to-date performance. Given the challenging policy and reform backdrop, we are pleased with our operating performance at the halfway mark of the year. When we consider the impacts of the exchanges, Medicaid supplemental payment programs, and the impact on the respiratory season and winter storm, our year-to-date operational performance has moderated from our 2025 growth and our initial guidance assumptions. Our revised guidance in 2026 is more in line with our long-term adjusted EBITDA growth rate target of 4% to 6%. Moving to capital allocation and cash flow, capital expenditures total $1.2 billion in the quarter. Additionally, we purchased $2.1 billion of our outstanding shares, and we paid $171 million in dividends from operations with $2.3 billion in the quarter, which is a 45% decline from prior year quarter, primarily due to time differences in cash flows related to Florida's Medicaid supplemental payment program, as well as the prior year deferral of federal income tax payments to the fourth quarter, our debt to adjusted EBITDA leverage remains in the lower half of our stated target range, and we believe our balance sheet is strong and well positioned. So with that, let me speak to our revised 2026 guidance ranges. Revenue between $77 billion and $79.5 billion. Adjusted EBITDA between $15.4 billion and $16.1 billion. Net income attributable to HCA Healthcare between $6.3 billion and $6.3 billion. Deluded earnings per share between $28.70 and $30.50. We also included revised key assumptions related to the expected unfavorable impact on adjusted EBITDA from payer mix shifts due to the health insurance exchange as well as anticipated incremental net benefit from medicaid supplemental health insurance exchanges between a negative 1 billion and 1.2 billion medicaid supplemental payment program net benefit between 300 million the variables on the exchanges are difficult to predict and require significant judgments we have now revised our estimated impacts to adjust the divot off based on the updated information through the first half of the year specifically the key change in our updated estimate is driven by our evaluation that almost all of the individuals losing coverage versus our original assumption of a in addition our original assumption around declining utilization for patients that become uninsured due to the loss of insurance coverage did not material regarding Medicaid supplemental payment programs our updated guidance implies a 100 to 300 million dollar head in the back half of the year this second half headwind reflects program approvals and retro payments received in 2025, which are projected to exceed the incremental benefit. As we think about the quarterly progression for the remainder of 2026, we believe the fourth quarter adjusted EBITDA growth rate compared to the prior year may be higher than for the third quarter. This is based on our assumptions around the timing effects of exchanges, Medicaid supplemental payment programs, and our resiliency program. We are maintaining or stated capex range of 5 billion to 5.5 billion and currently plan to complete most of the existing authorized share repurchase program subject to market conditions and other factors i will now hand the call back to frank working 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 to ask a question Thank you.

If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you're 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 1 to join the queue. And our first question comes from the line of Ben Hendricks with RBC Capital Markets. Your line is open.

Thank you very much. I'm hoping you can give us a little more color on your increased estimate for exchange headwinds. What were those key variables that were informing the $1 to $1.2 billion estimate? And what's given you confidence in the magnitude of that increase? And then also, by extension, kind of how we think about that directionally as it paces through the back half of the year.

Thanks, Ben. It's Mike. You know, if you think about first half of the year, we've gained a lot of experience. And given that experience and understanding of the exchanges better, we've adjusted our estimates accordingly. You know, if you go back to our original set of assumptions, the volume declines that we are seeing in first and 15 percent in both. What's different as we had gone through second quarter is that we originally assumed that about 80 to 85 percent of the patients who lose exchange coverage would become uninsured. And our data is telling us now that it's closer to one for one. And so that's really the biggest driver of the updated estimate. When I think about kind of first half versus second half, you know, first we are, you know, this one to 1.2 billion range that we're calculating in 26, you know, considers a variety. But to come up with that estimate for second half, we're using what we've learned through the first six months of the year. And we've also studied our past attrition rates. In addition, we have pulled, I'm sure just like all of you have, all the external data that we can with updates as we've gone through the year. So based on that, that is the driver. I would note, though, as we look back to last year, we began to see some slowing exchange volume in the fourth quarter over many years. But this is not the case. We now believe that the exchange reforms that actually started late last year started having an impact. And specifically, I'll give you one example. The pausing of the low-income special enrollment period during late 2025, we think now in hindsight, quarter 2025, the exchange, 22.5% or 25%. So we do think, when we think of that second half of last year, 26 compared to prior year, that fourth quarter has a bit of an easier affairs. So, Ben, that's a wrap on the Higgs assumptions and our second half guide.

Thank you.

And our next question comes from the line of A.J. Rice with UBS. Your line is open.

Hi, everybody. Let me maybe just drill down a little bit on surgeries. That's been a topic of conversation this quarter across the board with companies. Your inpatient and outpatient surgeries were down. I wondered if you could go talk a little bit more about the types of surgeries that were impacted relative to service lines. Do you see this as being more elective procedures, post-punable procedures that are being deferred? And are you attributing this mainly to the HICS disenrollment? And finally, on surgeries, are you giving any allowance for people hitting deductibles as the year progresses and maybe doing those surgeries that have been postponed from the first half later this year?

AJ, this is Sam. There's a lot of questions in there. I'll only see if I can sort through a condensed answer here. I think it's important to understand our surgical business. We have, on the inpatient side, two sources, if you will, for surgery. We have the emergency room, which represents about two-thirds of our inpatient surgeries, general surgery, you name it. That continues to grow. We've seen in 25 over 24, our emergent inpatient cases were up 2% year over year. And thus far, through the first six months of this year, that particular component of our surgical business is also up 2% year over year. So that's a component of our surgical business, and we continue to invest heavily in our emergency room capacity and network offerings to enhance opportunities for patients to enter our system and get the care they need. Other piece of our inpatient surgery is clearly elective, which represents about this year more than we were last year. We're down on elective 2%. This year, we're down on elective 6%. We do believe that HICS demand, which is a big piece of our elective declines on both inpatient and outpatient, is a part of it. So this discussion that Mike just referenced around HICS, it's cutting across all aspects of our business. We're seeing it in the ER with our payer mix there. we're seeing it in outpatient surgery from an elective standpoint, and we're seeing it on the inpatient. On the outpatient, it's predominantly all electives, as you would expect. There are some cases that do migrate through the emergency room, but nine out of 10 patients are roughly elective. Here again, Hicks demand was a big piece of it. Not the sole piece of it, but a big piece of it. We do hear from our physicians that their activity flow is off a little bit this year. They're attributing it, as you would suspect, to sort of the general affordability and pressures that people are experiencing with the economy as a whole. It's hard for us to tease that apart, but that's the best feedback loop that we have. And then I think there's just a handful of other things that are connected to it. You know, obviously the Medicare inpatient rule change has had an impact, and we've seen some cases move from inpatient to outpatient. We do capture some of those, and we lose some of those, as you would expect, because the outpatient surgery market is a little bit larger than the inpatient surgery market. So those are some of the factors that we see. We have a response to this, as you would expect of us. We are investing in our ORs to make sure they have the equipment that they need. We're optimizing our operations so that the patient and the physician has the flow and efficiency. We're aligning with our physicians where it makes sense to ensure that they have a connection to our network. With our ASC business, our ASC division actually had earnings this year. We have roughly the same number of facilities in that division. And for both surgery and what we consider non-surgical cases like endoscopies, colonoscopies, lithotripsy, pain in our surgery center due to more units, year over year, but the acuity of those cases is growing. So we continue to add to that network also, as you would expect, so that we have multiple offerings for our patients, multiple offerings for our physicians, and making our network more resilient with additional capacity. Obviously, sorting this out, and we think good position competitively, and we'll have to see, AJ, as we move through the balance of the year in the first six months.

Thanks so much. That was great.

And our next question comes from the line of Amhines with Mizuho Securities. Your line is open.

Great. Just to follow on to that question, I think in your prepared remarks, you said you'll be investing $7 billion over three years. Is that more offensive and defensive, just almost as a response to your last question that maybe there's an acceleration of like a shift from inpatient to outpatient because some of the CMS regulatory changes? And can you just talk about the competitive environment? Do you think you're still gaining market share, and where do you see the biggest opportunities to gain market share over the next couple of years? And just given some of the markets that are under pressure, I'm assuming your not-for-profit peers are also under pressure, and are you seeing any change in behavior when it comes to, you know, their investments competitively?

Okay, Ann, thank you. This is Sam. Let me see if I can pull all that together and respond to your questions there. If you look at our company over the past, let's just say five or six years with our capital spending, we have added to our inpatient, just to give you some numbers on that, we had roughly 37,000 beds at the end of 2018 in operations. we have 42,000 today. Our occupancy level, 71% to 75%. So in addition to adding roughly 15%, our utilization of that capacity has grown by five points. Within our 7 billion that I referenced earlier, we do have another 1,000 to 1,200 inpatient beds. But in addition to that, we are also adding to our outpatient network. In the second quarter, 2026, as compared to the second quarter, we have 5% more sites of care than we did last year. And that's roughly 250 or so, if I remember correctly. In our pipeline, we have another 250 to 300 outpatient facilities, either in our capital plan or in our acquisition plans that will come online, we believe, sometime later this year and early next year. So that will add roughly 10% to our overall network capacity, more units on the outpatient as you would suspect. The $7 billion includes components. It includes new beds, in some cases, a number of outpatient facilities, some of which I just read, help us know competitive positioning. We have judged through our mid-year reviews, through our market share analytics, that our competitive positioning is stable to growing net-net. Yeah, there may be a market or two here that has had a competitor do something that we have to now respond to. But that's fluid and dynamic always. And our touch points with our markets allow us to make adjustments, invest in initiatives to respond to those. So we do believe we're gaining market share in many of our markets. Some are flat and some are modestly down. That is a normal course. We feel good that are necessary to extend our networks and create convenience and more offerings for our patients. And then the investments back in our hospital-centric components of our facilities, increasing capacity, increasing technology offerings for our physicians and patients, and then creating the kind of availability so that patients can get into the system. Again, demand grows. Given our position in these communities, it's to meet that demand. Let me make this last comment on our markets, because I think this is a very important component, and we shared it with our board with our mid-year review just this week. The demographic trends that we see in HCA's markets, we believe, are as positive or more positive than they were during the COVID result to the southeastern and southwestern standing of other people's studies. We believe those trends are going to be supportive in HCA's markets, Utah, Nevada, South Carolina, Georgia, Tennessee, all of these more health care demand and create great opportunities for HCA to grow.

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

Hey, good morning, guys. Maybe, Mike, as I look at the P&L shifting gears here to the cost side a little bit, yeah the other the other opx line uh was up a decent bit and i'm guessing some of that's just provider attacks but if you can just walk us through other moving pieces potentially there and pulling through a broader view just just curious how you're thinking about the resiliency programs obviously hicks was a surprise so any other incremental offsets that we can be thinking about maybe as we even think through 2027 and beyond thank you i mentioned in my opinion consider waiver and just look at our, and that would be, you know, you'll remember that we even highlighted

this in our investor date. And resiliency has been in the company's results going back to the pandemic. All of the work in plight with resiliency, the gaining maturity of these programs, and from the next generation of that question.

Let me add to that for one minute. You know, I've been with company for 43 years, and I've seen our approach to our business grow when it comes to complex trauma, bone marrow, solid organ transplant, whatever the case may be. If I juxtapose our resiliency program against sort of our service components and how complex and sophisticated our services are in our hospitals, that's exactly where we are with our financial resiliency program. We are getting more sophisticated. We're getting more sort of capabilities to execute on this piece of the agenda. And this has been an opportunity for us for years. We just didn't have the tools to get after it. And the tools and capacity that Mike just alluded to reminds me of where our networks were maybe seven or eight years ago, where we didn't have a full array of services or we didn't have the outpatient capabilities that we needed to build out a network. Well, today with our resiliency agenda, we have these additional components, technology, digital, global, capabilities corporately to support all that. That's why we think this particular program has durability and capability to add value for the company as we push into the future.

And our next question comes from the line of pedo-chickering with Deutsche Bank. Your line is open.

Hey, good morning, guys, and thanks for taking my question. Looking at 2Q core EBITDA, excluding DPP and HICS, can you help bridge us how you get to your guidance? Can you call it any changes to assumptions on the top line, like surgeries or paramix? And on the bottom line, can you call it any savings in the initiatives that that are coming online and details around those initiatives.

Hey, Pito, this is Mike. You know, first, just a couple of background statements. One, we do have a range. We gave our updated, you know, four-year guidance. We gave a range to ensure that it costs. And then, you know, inherent in your question, we did think about, in the second half of the year, the assumption that health insurance changes and the incremental net benefits. When we think about the rest of the business, I really think about three drivers that give us costs. The first one is really volume, and, you know, our second quarter results, you know, solid volume growth, particularly in our insured population excluded changes, and we do believe that that demand momentum will continue. The second is our cost, and you noted that, but what we're seeing in our resiliency plan, and as well, if you think about the operating leverage that we generated in the second quarter from volume growth that we believe continues, we are confident that we will be able to improve our cost. and into 2027 as well and then lastly i think it's a team and like the one we're in now and so

we kind of go through the year uh our management team apologies i wasn't sure if the line had cut out um our next question comes from the line of matthew gilmore with key bank your line is open hey thanks for the question um just circling back on the exchange edwin discussion um you mentioned that three divisions represented 50 percent of the impact. Can you give some context in terms of either the geographies or just the commonalities in terms of those divisions and why they're seeing a bigger impact?

Yes, this is Sam Payson. We had three divisions. Our Gulf Coast Division, North Florida, and South Atlantic Division are the three that had a lot of Hicks exposure going into the year, and they had impacts from the Hicks. Their adjusted admission decline in Hicks is somewhere between 25% and 28% for the first half of the year, and that has obviously created a lot of pressure. We didn't expect it to be that much in those markets, and the teams have tried to adapt to it, as you would expect, as best they possibly can, but that's a fairly sizable impact. So it has had an outsized effect on the company. Obviously, we're all in on all of our divisions, and typically we have performance across the company, but in this instance, it's been a bit imbalanced with those three. Back into it appropriately, in two of the three divisions, actually, we have more volume than we did in the previous year in total, but again, the payer mix in those divisions has been compromised by the expiration of the enhanced premium tax credits, and that's produced a significant move from...

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

Hey, good morning. Mike, I just wanted to get an update on the internal views on work requirements for 2027? Just any thoughts on potential coverage leakage or headwinds or just general thoughts would be helpful. Thanks.

Sure. Obviously, there's a proposed rule about Medicaid work requirements. Just a couple of notes. One, we believe work requirements will have an impact in non-expansion states, have an impact in expansion states, way more than non-expansion. As a reminder, our Medicaid revenues are an expansion state. We are monitoring this proposed rule, as you can imagine. We're going to have to see how there are some litigation and legal challenges around the way that CMS is implementing the work requirements. We'll have to see how they move through the system. And we're also monitoring how our states tend to be a little bit more blue, working with those states to make sure and try to support the notion of a good implementing work requirements within the bank. And so our Paraline teams are also getting really organized here. And the work that they do with them work through the Medicaid application, work through about the distribution of our assets, you know, between expansion and non-expansion states and the work that we're doing to prepare. You know, we still think that on balance while Medicaid worker works.

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

Thanks. Good morning. Sam, really helpful on the surgeries. You gave us six-month numbers for the inpatient coming through the ER and the electives, the down two and the down six. Maybe you could give us first quarter versus second quarter and just how things are running through the second quarter. And then can you guys also run us the volume growth by payer and hopefully give us commercial employers separately from exchanges. Thanks a lot.

Yeah, I don't have a different explanation for the second quarter versus the year-to-date. I think, you know, it's hard sometimes in short cycles to make judgments about demand, and 90 days is a short cycle.

So I think from that standpoint, I don't think the explanation varies much from quarter to quarter and so a mid-year review i think is a more relevant person i don't really have anything to add uh additionally to uh and then justin if i look at same facility equivalent admissions in second quarter 2026 compared all in medicare is up 3.6 percent medicaid is up 2.7 percent excluding the exchanges are up 2.4 percent the exchanges are down 15 percent and the total uninsured is up 15%. I would note the total uninsured equivalent admissions now represents about 10, a little over 10% of our total equivalent admissions and the exchanges now represent about 6.8%.

If you look at the payer mix, Mike, of the company on the inpatient side this year versus last year, and then when you put health insurance exchanges and uninsured together, and this is why we conclude that there's a bit of a one-for-one, it's the same number. And so that's what's happened here, is our payer mix is actually the same in Medicare as it was last year, Medicaid as it was last year, Managed Care and other as it was last year, and then HICS and self-pay, uninsured, together are exactly as they were last year. And so our conclusion on one-for-one is reinforced, we believe, by, you know, that sort of fact. And for us, obviously, that's not a good thing. And we do, and our people do a wonderful job. But it does put pressure on the P&L.

You know, Sam, to that point, you know, another way we've looked at this, and this, again, junior year today, same facility compared to prior year, our health care exchange equivalent emissions are down about $22,000. And our uninsured equivalent emissions are up about $26,500. And so, you know, we get the one-for-one migration from the exchanges. And then with the uninsured, we also, on top of that, have a little bit of this Medicaid conversion slowdown.

To Sam's point, that— And to put that into context, those 20-some thousand patients, Mike, that you referenced, we took care of about 1.1 million people. And so the implications for the company are really hinging on those 22,000 patients. It is what it is. We understand that. But you've got to appreciate the context here in the backdrop of 1.1 million adjusted admissions and 22,000 or whatever that number was you gave represents about 2% of that. And that movement has had an obvious proportionate effect. And we're responding to it as well as we can.

Next question comes from the line of Stephen Baxter with Wells Fargo.

Your line is open. hi thanks um i think in the past you've discussed an expectation that you know the moderation of exchange coverage and volumes could take place over a couple of years rather than than all of it occurring in 2026. i guess based on what you've observed this year in the larger head limit you faced like you still think that's a reasonable planning assumption do you think there's any you know any change to the way that that dynamics around coverage transitions and Bolingan could look versus this year. Thank you.

Changes in 2027, you know, we believe even with premium increases that we're starting, we'll be, you know, this estimation assumes the core premium tax credit to the original Affordable Care Act will continue. We're thinking, we again believe most of the patients who were benefiting from the enhanced premium tax credits, now that those have gone away, we think will be in a normal course as we push into 2027.

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

Hi, good morning. Can you clarify how many quarters worth of Florida DPP were recognized in the quarter itself and also clarify whether the retroactive sort of payment that offset the benefit in 2Q were included in initial guidance? And relatedly, can you share what line of sight you have into the approval of Florida for fiscal year 26, given the decision to recognize it in 2Q results? Thanks.

Sure. So, as a set context here at the quarter, we recognized $400 million of incremental net benefits. That included $540 million incremental net benefits related to the recently improved Florida program. And the time period that's October 1 of 2024 to June 30th, 2026. So, So that's 21 months worth of benefit booked into the second quarter. Now, in the second quarter, that Florida benefit got a little bit netted down because there were some retro payments in the second quarter of 2020. If I just think about Florida specifically, you know, the other, I'd make maybe two other notes here. You know, the approved benefit into that, given that the Florida program is a longstanding program, This approval is an enhancement for that program, given that the program was approved for state fiscal year 2025, and the state recently submitted the fiscal note as we are guidance also.

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

Great, thanks. Sorry if I missed it. Hoping you could give us the monthly cadence of surgical and non-surgical volumes in the second quarter. and looking or appreciate any thoughts on the proposed OPPS rule for 27 appears to be a nice tailwind for HCA and for-profits in general if it holds in the final rate. Just curious how you view the proposal. Thank you.

You know, I think about both the inpatient and the outpatient rule.

Alignment and it sort of skews a comparison and you have to normalize for that. That's why I think again you need some longer runs to really judge what's going on as you push through, you know, the different month-to-month, and that's why it doesn't really make sense, we believe, to give you sort of an indication on the second quarter because there were different movements, and I don't even think we have it in here.

Okay. Thank you.

And our next question comes from the line of Scott Fidel with Goldman Sachs. Your line is open.

Thanks. Good morning. Sam, I would be definitely interested if you wanted to provide from HCA's perspective the view on this, you know, very quickly sort of hyperscaling dynamic around the IDR claims from the No Surprises Act. And, you know, the payers are talking about this being a really significant sort of 50 to 100 basis point impact on overall medical cost trend, and CMS just released a whole bunch of data as well. And just curious around, you know, from particularly from HCA's perspective, just the, you know, the potential as we think about, you know, sort of reimbursement dynamics and payers looking to offset those higher costs and doing that by trying to put, you know, reimbursement pressure on hospitals who may not even be involved in the IDR process. And so, and just then the overall effect it's having on, you know, sort of overall healthcare costs in the U.S., definitely curious on your perspective on that.

Well, thank you for that question. Let me pull up first and give you some backdrop because I think it's important to our philosophy when it comes to our relationships with our payers. I mean, largely, and I mean, almost universally, we are an in-network participating provider with all of our facilities. There are a few one-off side of the exchanges that we don't participate in. Within the exchanges, roughly 85%, 80% to 85% of all available, we participate in those, and that's a very important part. With our acquisition of Valesco, we have gained control of many of our hospitals' hospital-based services and through, well, to integrate them into our, really, with reimbursement and with what those services need to operate. So as a company, we have various, and it happens, you know, at times of the exchange contracts where we don't participate or in a few commercial contracts here or there that we don't participate in. We do not use the same methodology that I think is in question broadly across the industry. We have internal resources that appropriately work the process inside a pair line with the calls and so forth. I don't have a good viewpoint into the full impact that it's having for the payers through these other situations that are developing. You know, like any early stage regulatory solution for a marketplace, it takes a while to sort those out. And maybe we're in that period where the regulatory framework that was established for the IDR process still needs refinement in order to balance out the process. I don't know. We're not that active in it. And so I stuff you've read. And so I can't really speak to the full effect on the industry as a whole, but I can give you our viewpoints as it's been in instances, we can get the contracts that we need so we don't have to use.

And our next question comes from the line of Ben Rossi with JP Morgan. Your line is open. Great.

Good morning. Thanks for taking the question here. I heard you're making some good progress on professional fees. One of your peers called out the elevated growth here, particularly for anesthesia and radiology. How did those trophies trend in 2Q across those two areas specifically, and how sensitive are anesthesia subsidies to the current slowdown among elected surgical procedures? Thanks.

Well, as I noted in my previous answer, I think it was to Brian, what we're seeing now is about an eight and a percent growth same facility year to date you know through june it's almost 10 clearly if you go back we've come off of two previous years that where our pro fees were inflated as we've been dealing with all of these hospital-based you know physician group pressures if you go back in time as sam mentioned the the acquisition of the blesco joint venture and bringing in through that work we've been able to stabilize our emergency room physician component and our hospital medicine in a much better shape what we're dealing with now is similar to what you're hearing the components of hospital that are anesthesia those are really the components that are driving even our car continuing pressures there and we continue to work diligently through both of those those lines of businesses if you will using the ACA playbooks that we're working on people process and technology and our management teams in the field are hard at work in both of those components as our clinical service. I do think we have stabilized. It's running at above inflationary levels for sure. Better today as we sit here in June.

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

Thank you. On the uninsured build from Medicaid. Can you talk a little bit about what your conversion assumption was versus where it landed and what's specifically weakening in Texas?

I think the right way to profile this is as follows. If you look at our growth in unassured volume, about 80% of that growth is coming from the one-for-one migration out of about 20% of that growth in our unassured volume to prior year is coming from this slowdown in Medicaid conversions so that'll give you a bit of we talked about this a little bit in first quarter as well but there's really a couple of components that we're watching for that are frankly different than what we saw last year you know the first one is for emergency Medicaid I think I'm is mostly undocumented so that is a piece of what's driving Medicaid conversions down the slowdown on applications to emergency Medicaid you know the other component is a general slowdown of people who are eligible for Medicaid. As we see the self-paying, seeing less people, you know, those are the two factors we see. And Texas seems to be filling the brunt. I mean, not that we're not having a Medicaid conversion slowdown. Texas is uniquely...

Annie, I think we have to have one more question.

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

Great. I just wanted to get a little bit more color on the building blocks to the volume to the guidance change. I guess you guys lowered your overall EBITDA by 250, and it looks like you raised the SDP number by 550. So it kind of feels like the XSDP number was cut by about 800, and it sounds like 350 is because of the exchanges. I'm still not clear to me what the other 450 is, as far as the guidance reduction.

Yeah, you know, and Kevin, I tried to deal with that a little bit in my prepared comments, but as we've gone through the first six months, and you think about our updated guidance, and to your point, to change assumptions related to the changes, you know, you're left with, you know, call it $500 million, right? And when I think about that, you know, that really reflects our seeing this year, compared to where we were in 24 and 25 with our initial guidance. I would note, you know, it looks of adjusted EBITDA growth, and, you know, really even for a full year. You know, that's how I think about it.

Okay, so it's just a view that the original guidance had a little bit above the long-term growth algorithm starting point, and now you're back at the long-term growth algorithm.

Yeah, and that's really, you know, what our experience is.

And 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 everyone for joining. We can around this afternoon if you have questions.

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