Good afternoon. Welcome back to the Barclays Global Healthcare Conference. My name is Andrew Mock. I am the Facilities and Managed Care Analyst here at Barclays, and we're pleased to welcome HCA Healthcare on stage with us today. We have Mike Marks, the CFO, and Errol Aktamar, American Group President. So thank you for joining us here today. Just for a reminder, the American Group includes 66 hospitals across Texas and a few other states, so very relevant for our meetings here today. To start, Mike, HCA has delivered nearly double-digit EBITDA growth in each of the past two years, and you're, again, guiding to core growth of roughly 6% to 9%. What feels most different about the sources of organic growth this year compared to the prior couple of years?

I think the fundamentals are the same. We have good momentum in our markets. Our 43 markets represent markets with really good population growth and long histories of good demand for health care services and employment and coverage levels of employee-sponsored insurance. So the markets that we have the pleasure of serving are an important part of that momentum. Our synergistic approach of multi-years of capital investments and inorganic investments into our markets have really helped us build out our networks. and we believe create a really competitive offering in our markets in a way that over time we've been able to take market share. So that the fundamentals of our markets are still good. You know, when I think about the growing enterprise capabilities of the company, I would add to that equation in not only just our resiliency program, but our tech and innovation strategies, our organizational development, this continued focus on expanding our network. So, So, you know, as we look back over the last five and 10 years and look at what we've been able to produce, you know, and kind of annual earnings growth, we feel like we have good momentum coming into 2026.

Right. With that, there's a lot of policy disruption in the background. You've included a $600 to $900 million ACA exchange headwind in your 2026 guidance. What do you view as the most important variables embedded in that assumption that will influence how the year plays out? And is there anything to call out at this point?

Well, when I think about, you know, the last, you know, call it 12 to 18 months, as we were coming into this year, our modeling teams have been really studying our past experiences with exchanges and leveraging a lot of external analysis as well. And really, there's four major variables that went into producing this estimate of impact from the exchanges. The first one is enrollment loss and the resultant volume loss from exchanges. And, you know, from our call, our guidance assumes a 15% to 20% drop in exchange volume on same facility equivalent admissions. The second variable here that's on a range is of those people who lose coverage on the exchanges, how many end up in employee-sponsored insurance? And, you know, our model assumes 15% to 20% get converted to employee-sponsored insurance. that's a really important assumption as well because that has a benefit to you know to the coverage of that community and then the the the third variable is utilization and so I think about for those people call it 80 to 85 percent of people who lose coverage on exchanges that become uninsured you know we believe that that we could see something like a 30 percent drop in utilization from that population but we've also studied and built into our model the utilization expectations on a bit of a range on the people who remain on the exchanges, which is an important component. And then the fourth variable would be patient due collectability. You know, there's, as some patients potentially move from silver to bronze on metal tiers, patients are going to owe a bit more of the total amount for health care under the exchanges. And so building into our models on a range on, you know, maybe some deterioration on collections from patients would be the fourth variable, all of which kind of, when considered together, created the 600 to 900 million dollar estimate. And we'll be, you know, studying those carefully as we go through the year and updating everyone as we go through our quarterly calls in 2026. Right. And on that downshift into bronze

tier coverage, what, you know, what sort of impact do you expect that to have on utilization and acuity trends this year going beyond just payment dynamics? Yeah, our models assumed a bit of a range

of potentially some deterioration of utilization as you go to bronze just again because patients owe more. The fact that this population uses the emergency room more heavily than traditional managed care, our past look at silver versus bronze, there is some utilization difference but it's not super material so that's good. And then on patient due collections again they do owe a bit more you know on bronze due to the benefit design so there is a bit of a deterioration in the patient due collections range, and we modeled that on a range, and that's inclusive in the total impact that we highlighted. Right. That's obviously going to be an important

factor on compensated care and bad debt this year. You know, for those exchange patients that don't end up paying their premiums and enter the grace period, can you help us understand, you know, how that process works from the hospital standpoint? At what point does the financial responsibility

shift from the payer to the hospital? So it's a little different whether that enrollee is a new enrollee onto the exchanges or if they're an auto re-enrolled enrollee. So the auto re-enrolled enrollee will have a 90-day grace period. And during that 90-day grace period, you know, we're checking and verifying their eligibility and the payer system show them as eligible. And so, you know, in that grace period, when we provide care, we're at risk. And so if they end up not paying those premiums, you know, we're at risk of that take back. And we build into our net revenue accounting to ensure that we state our AR at net realizable value related to those trends the best that we can. The new enrollees, we have a little less risk. I mean, they have to pay for their coverage and kind of call it 30-day increments. So, you have a little better visibility with that population. But broadly speaking, you know, what you're talking about is the effectuation rate, and while that's always been a part of the exchange construct over the last many, many years, I think we're all concerned that this year the effectuation rate will be bigger, you know, just because of the expiration of the EPTCs, and that certainly was built into

our model estimates. Great. Let's move on to some of the resiliency and mitigation efforts that you're deploying this year. Resiliency has always been a defining concept for HCA, particularly during periods of stress and uncertainty. And, you know, it's no different for 2026. How would you compare the resiliency playbook you're deploying this year with the approach you took during COVID? And we'd love to hear Errol's thoughts on what he's doing at the local level to operationalize this. Well, let me fill it in and he'll add color for the American

group for sure. But, you know, you said this, but resiliency is not new for us. The origins of our resiliency program really started in our response to COVID and we've been building it ever since. Over the last call it 18 to 24 months we've been both accelerating and enhancing this and we're really trying to build it out programmatically as an enterprise capability for the company. Our original intention was to try to offset as much of the headwinds from the Affordable Care Act reforms as possible which led us to really think about this broadly. And so every corporate function, every shared service platform, every hospital in the company has developed and is executing their resiliency plan. This is a multi-year effort, and the $400 million that we included in guidance really reflects those work streams where we had enough visibility on their implementation status that we could track and execute and ensure that we could capture those savings in 2026 as part of that of that strategy. But this is not a one-year event and we believe that we have set up our resiliency program you know to focus on revenue integrity and asset optimization and fixed cost and variable cost and really structured with a lot of capability building around benchmarking and our shared service platforms and a lot of AI and automation opportunities in a way that our intention is to build a lasting capability that will help us deal with challenges and then over time improve our performance as we go through the back half of the decade. Errol, take a minute and kind of give them a sense of what it feels like

in the operating environment. Yeah, Mike did a really nice job of covering financial resiliency, which is a journey we've been on for a long time, obviously accelerated here recently with more structure tracking and execution orientation. But there is a component also that we're carrying over into operational resiliency and really taking a deeper look at our emergency rooms. We've been on maybe a three-year journey to revitalize our emergency rooms. A fair amount of our patients are coming through the emergency room, sometimes referred to as our front door, just because of the amount of volume and patients that come through there. And so coming out of COVID, where there was a deceleration in ER volume, and then there was workforce disruption, and then there was more demand in the ERs, we saw the need to get back to the discipline of delivering an exceptional service experience and exceptional clinical experience. And so we've deepened our work around ensuring that our arrival degree times, patients perceive their care in terms of how long they wait. And so we've been on a three-year journey to really move back to best demonstrated practice best company performance and industry performance around the wait times for our patients to see a physician, and then when they discharge, and then some of them are admitted. Similarly, we've been on a journey for about a year on our OR optimization. Again, big financial engine for the hospital. It's where we generate surgeries and procedures. Most of our physicians are still independent. They have a choice as to where they practice, and so that resiliency effort is to make our ORs, the operating rooms of choice for our physicians. And again, it's around efficiency and giving our physicians time back in their schedule, which is a premium for them.

Great. Mike, you've organized AI initiatives into three domains, administrative, operational, and clinical. Which of those domains represents the largest opportunity today, and what is the furthest along in terms of execution and tangible impact? Well, we have a balanced portfolio between

the three domains that we organize our work in, but they have a different duration and a different work process to deliver. Our administrative platform, so if you think about rev cycle and supply chain and IT human resources, we operate in shared services. We have more centralized management, more centralized data, and so we do believe that we'll be able to deliver digital products in our administrative domains a little faster. So think short-term to intermediate term, you know, over the next year to three years, you're going to continue to see digital products that we have developed, that we're piloting, that we're rolling out, you know, come across the company in a way that we believe will have impact here in the short to intermediate time. The operational domain is a little harder. You know, we have 100,000 nurses, we have 50,000 doctors, on our medical staff. And so just the energy and time it takes to both pilot, build, and then roll out digital products operationally are more challenging. And, you know, I've said this before, but the work to implement digital products in our operational domain is harder than building those products. You know, you have a lot of change management and a lot of work to do to to get the people to adopt and to make sure that, you know, you're taking that seriously. And so it's a little more intermediate term, but it's also heavily impactful. You know, things like labor scheduling and staffing using AI, things like length of stay management using AI, we see a world of opportunity to take the variability that we see and use AI to drive really a step change in performance. It just takes longer. So think about that being more intermediate to longer term. And then in the clinical space, which is the holy grail, I mean, everyone's heard Sam say this, and largely because it's what we do. I mean, our mission is the care and improvement of human life. And, you know, what we do is take care of patients in hospitals and other health care facilities. And so when I think about the variability, the patterns that are in the data, there's tons of opportunity here to use AI, to bring artificial intelligence alongside our care teams, our doctors, our nurses, to improve the safety of the care, the outcomes of the care, and the efficiency of the care. There's a lot of administrative burden on doctors and nurses in a hospital setting. And so using AI and automation techniques to try to reduce that burden and let them focus on patient care is the North Star of what we're trying to do. But it's a lot harder. And so we find ourselves between our responsible AI programs, the way that we are doing human-in-the-loop testing, the time it takes to pilot and build and roll out, these are longer-term programs. And so think about administrative a little shorter term, operational more intermediate, and then clinical longer-term effects. Great. And the

company also highlighted investments into the EHR platform in conjunction with this. Errol, can you share what you're doing on that front in the American group and what benefit you expect to drive with those investments.

Sure. So a lot of investment in technology in the company. I think some of that is in new technology and AI, and that's very exciting. It's also very exciting that we're investing in our EHR platform to get an upgrade there, taking our Meditech platform from Meditech Magic to Meditech Expanse. That has allowed us to really take a leap forward in our EHR product and what it delivers to our clinicians, our nurses, and our physicians. Part of that process is to really standardize data and to standardize workflows across the company that there's great variability of nursing unit to nursing unit, hospital to hospital. As part of moving into this new EHR, we've had to standardize the data and standardize the workflows. That then enables us to move into an EHR that then allows us to put AI on top of that. So I think that's the great accelerator. So far, 40 of our hospitals have made the conversion. It's gone pretty well. We started slow and deliberate. We've resourced this from an HCA perspective to ensure success. It's gone well enough that we've accelerated our plans to actually be done by the end of 2028, and it's gone well in the hospitals we've implemented, and so we're feeling good about the work effort there. Great. Over the last six months or so,

the industry conversation around generative AI seems to be evolving from tools that, you know, primarily automate clinician workflows, such as ambient documentation, towards applications that are deeply embedded in clinical decision making. First, is that shift consistent with your experience, and second, as these tools move closer to physician decision-making at the point of care, you know, how do you deploy that in a way that ensures patient safety and proper clinical

oversight? Yeah, it's a great question, and I've covered a little bit just on how complicated the clinical domain for AI is because of these factors. You know, at the end of the day, what you're talking about is making sure that AI can support doctors and nurses and the care teams in taking better care of patients. And so you have to be mindful of that. We are seeing a shift from more just automation to more deeply integrated into process AI. But I would also highlight that the opportunities for automation using AI are still immense in our hospitals. Yes, in documentation, and Ambient's a good example of that. And that's still evolving. I mean, there's still a lot of opportunity there. But when you just think broadly across all the processes the clinical workflows that exist in a hospital, the amount of pure AI automation opportunities that still exist are significant. So we're excited about that. Those are a little bit easier to get after. And then as we start thinking about these more deeply embedded products, you know, this is where that training and the way that you handle AI has to be way more sophisticated. And so it takes longer and it's slower. A good example of this would be our nurse handoff tool that's still in development, and, you know, it has aspects that are using AI in a generative way to really support nurses in understanding risk and providing nudges to think about the full context of patient care, and so that takes longer, and we have a lot of structure around this to make sure that we're doing it right, and so I think clinical for AI is still the north star of the company, and it's going to take a long time to get it done and done correctly, but, boy, there are a lot of

opportunities. Great. Another opportunity that, you know, we hear a lot about is revenue cycle management. That's become an increasingly strategic priority for, you know, all hospitals. Which RCM capabilities have driven the greatest benefit in recent years, and where do you see the

greatest opportunity from here? You know, one of the things that we've been working on for the last really 12 to 18 months and really starting to get some traction on is better digital integration with our payers. And when you think about how payers and providers communicate, the amount of faxes, the amount of phone calls, the amount of administrative bureaucracy that has kind of infected our systems, this opportunity to partner between providers and payers and really drive towards digital integration, drive towards digital simplification, is a huge foundational piece of this work. We have several engagements going on with several of our large payers, and I'm getting excited about where that can lead, both in terms of better digital workflows, but also in terms of over time reducing friction between the parties, and I think that's going to be super beneficial. The other area of our work over the last few years that has really helped us is all the work we've done in denial mitigation. And, you know, we've had to invest heavily in people, in processes, and in technologies to deal with just the challenges of the prior authorization process, the authorization to get patients discharged to the right setting post-acute. And so that's required a lot of effort on the company's part. And those efforts, I think, have paid good dividends. And I think AI is a part of that, and we've talked about that before. So that whole part of denial of mitigation, I think, is important and will continue to be good. As I think about the future, you know, the other thing that we're looking at is how to use machine learning to really study. We have 47 million patient encounters last year and really study claims more holistically. The clinical data, the administrative data, the claims data, and really try to understand what elements let a claim go through and get paid on time, on the amount you expected versus claims that have friction. And then using machine learning to find those patterns in the data so that we can continue to be a process improvement organization over time and use artificial intelligence to help us with those insights. And so I think we still have a lot of work to do to continue to invest in our revenue cycle, but I also think that we've seen good results from those investments in 2025 and in the past several years.

Great. Errol, HCA has emphasized a network strategy that expands outpatient access points, and the company now has 14 outpatient assets for every hospital. How do you decide where to deploy capital at the local level for new outpatient capacity, and what return or strategic hurdles need to be met?

I think when you think about our markets, I'm the American group, Dallas-Fort Worth, Houston, Austin, San Antonio. We're a hospital-based company, but over the years, we've filled it in with a lot of other access points, like ambulatory surgery centers, urgent care clinics, freestanding ERs. And really, the goal is to take around one hospital and create a network to serve the community that then funnels patients both into the hospital, then back out into the community for their care needs. Then in those markets that I just mentioned, those hospitals come together and those networks come together, and they create a health system, a local health system that then really moves patients through a continuum to tertiary and quaternary care and then back out to the community. So the opportunity we've had, particularly in Texas over the last few years, is there was a fair amount of private and even PE investment in urgent care clinics and freestanding emergency rooms and some ASCs. The opportunity has availed itself for us to be acquisitive in those areas and to tuck in those strategic assets where they round out our footprint and complement the growth of, you know, 14 access points to 20. And so that's really been the way we've thought about it is the hospital, its network, then the market and the network as it develops. And so that's been our strategy, and we think that that's worked.

Great. And the Galen College of Nursing often comes up in conversations as a relief valve during periods of labor pressure, but it tends to receive less attention when things are more stable. What progress have you made on campus expansion, and how is that strengthening your internal labor pipeline over time?

Yeah, I'll go there. It's been impressive. We, in 2019, had five campuses. At the end of 26, we'll have 25 campuses. That campus expansion is focused on some of our core markets. Again, I'm an American group, so Dallas-Fort Worth has two. Houston has two campuses. probably going to a third in each of those just because of the size of the population. I think roughly 7,000 graduates coming out of that program per year. Our goal by 2030 is to have 30,000 students in that program. So I think it's been a strong solution to a macro issue, which is workforce development. Similarly, in GME, we're up to 5,800 graduate medical education physicians and training. We're the largest trainer of graduate medical education physicians across 81 hospitals, 270 programs. So, again, these are all workforce solutions that we're bringing to bear to both help the communities we serve and to feed the needs of the health system.

Great. Maybe in the final minute here, I just wanted to touch on the Medicaid state-directed payments. You've had a few meaningful programs enhanced and grandfathered over the last six months. Could you provide an update on the programs still pending? And to your knowledge, is the holdup in states like Florida related to the structure of these programs or the administrative backlog at CMS?

Well, I would say, you know, we're encouraged that these states that have grandfathered applications, where it's clear that the review processes between CMS and those states continue. And we're aware of really good conversations and review to that end. We are encouraged that there has been approvals here over the last three to five months. I mean, Georgia, which was one of our grandfathered applications, did get approved yesterday afternoon, which was encouraging. And so I think when I think about what the process that CMS is going through, I mean, they're taking this bill, the one big, beautiful bill that had the grandfathering provision, and they're starting to put the rule structures around it. You know, they've issued guidance letters. They're doing rulemaking. And I think they're being deliberate and working through these programs in a methodical way. and you know while I can't sit here today and tell you when or if Florida or these other states will get approved I am encouraged based on what we're seeing both from the review and from the recent approvals

okay great well with that we're out of time Mike Errol thank you so much for joining us here today and please enjoy the rest of the conference

thank you