HCA Healthcare, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; compared with the three months ended March 31, 2023, unless otherwise noted. HCA operates hospitals and related healthcare businesses; at quarter-end it operated 188 hospitals and 121 freestanding surgery centers in 20 states and England.
Financial performance and liquidity
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $17.339 billion | $15.591 billion; up 11.2% consolidated and 8.8% same facility |
| Income before taxes | $2.247 billion | $1.922 billion; up 16.9% |
| Net income attributable to HCA | $1.591 billion | $1.363 billion; up 16.7% |
| Diluted EPS | $5.93 | $4.85 |
| Adjusted segment EBITDA | $3.353 billion | $3.172 billion; up 5.7% |
| Cash from operating activities | $2.469 billion | $1.803 billion |
| Capital expenditures | $1.118 billion | $1.197 billion |
| Cash and cash equivalents | $1.284 billion at March 31 | $935 million at December 31, 2023 |
| Total debt | $40.191 billion at March 31 | $39.593 billion at December 31, 2023 |
Reported net income attributable to HCA was 9.2% of revenue, compared with 8.7% a year earlier. Adjusted segment EBITDA was about 19.3% of revenue versus 20.3% in Q1 2023 (calculated from reported figures; EBITDA is a non-GAAP measure). Working capital was $2.141 billion, down from $2.272 billion at year-end. HCA reported $7.987 billion available under senior secured credit facilities and said operating cash flow, credit availability and expected debt-market access should meet liquidity needs for the foreseeable future.
Operating trends and changes versus prior year
- Revenue growth reflected a 7.1% increase in equivalent admissions and a 3.9% increase in revenue per equivalent admission. Same-facility equivalent admissions rose 5.2%, and same-facility revenue per equivalent admission increased 3.5%.
- Admissions increased 6.8% consolidated and 6.2% same facility; emergency department visits rose 7.8% and 7.2%, respectively. Consolidated surgeries declined 0.1%; outpatient surgery volume fell while inpatient surgeries increased.
- Salaries and benefits rose in dollars but declined to 44.4% of revenue from 45.4%. Supplies were 15.4% of revenue versus 15.5%. Other operating expenses increased to 20.9% of revenue from 18.7%, with management citing professional fees and state provider fees.
- Interest expense increased to $512 million from $479 million. Average debt was $40.383 billion, compared with $38.513 billion, and the average effective interest rate was 5.1% versus 5.0%.
- Operating cash flow rose by $666 million, mainly from a $512 million favorable change in working-capital items, particularly accounts payable and accrued expenses, and higher earnings excluding facility-sale gains and losses.
Capital allocation and unusual items
- HCA issued $4.5 billion of senior notes in February, with stated coupons from 5.450% to 6.100% and maturities from 2031 to 2064. Proceeds repaid revolving-credit borrowings and supported general corporate purposes. It repaid $2.0 billion of 5.000% notes at maturity in March.
- HCA repurchased 3.894 million shares for $1.180 billion during the quarter, at an average $303.06 per share. At March 31, $5.595 billion remained under the January 2024 repurchase authorization. The board declared a $0.66-per-share dividend payable June 28, 2024.
- Q1 2024 included $201 million of gains on facility sales, primarily the sale of a California hospital; Q1 2023 included $15 million of facility-sale losses. The 2024 gain contributed $0.57 to diluted EPS, net of applicable tax. Q1 2023 revenue also included $145 million from resolving disputed prior-year commercial-payer claims.
- Estimated cost of total uncompensated care increased to $1.010 billion from $831 million. Same-facility uninsured admissions increased 2.4%.
Outlook, risks and contingencies
- HCA expects 2024 capital expenditures of approximately $5.1 billion to $5.3 billion. Projects under construction had an estimated $4.6 billion of additional costs to complete and equip over the next five years. No full-year earnings or revenue guidance is provided in the supplied filing text.
- Management noted continued inflationary pressure, labor-market and staffing risks, and potential increases in operating costs. Contract, overtime and premium labor costs had declined year over year, but future costs remain uncertain.
- Government reimbursement and supplemental Medicaid payment programs are subject to regulatory review or change; HCA said the financial effect of potential program modifications could not be estimated. Other disclosed risks include patient-volume and payer-mix changes, uninsured-account collectability, debt refinancing, litigation and investigations, cybersecurity incidents, and natural disasters.
- HCA reported $40.191 billion of total debt and significant debt-service requirements. Approximately $1.294 billion was variable-rate debt; a hypothetical 1% rate increase was estimated to reduce annualized pretax earnings by about $13 million.
- Net reserves for self-insured professional-liability risks were $1.956 billion. Expected net claim payments over the next 12 months were approximately $534 million, including an estimated $499 million for claims subject to the self-insured retention.
- The IRS was examining specified 2016–2018 federal returns and 2019 returns for certain affiliates. Gross unrecognized tax benefits were $650 million, excluding $189 million of accrued interest; HCA could not estimate the range of possible changes within the next 12 months.
- A Texas Medicaid-related qui tam matter was considered closed after the Fifth Circuit affirmed dismissal and the relator did not appeal by the deadline. HCA stated there were no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective as of March 31, 2024.
Investor verification points
- Separate recurring operating performance from the $201 million facility-sale gain and compare against the prior-year $145 million payer-claim resolution.
- Assess whether volume and rate growth can continue, particularly alongside flat-to-lower surgery activity and higher uninsured-care costs.
- Monitor other operating expenses, labor and supply costs, and the effect of inflation on margins.
- Review debt maturities, refinancing costs, interest-rate exposure, capital spending commitments, and continued share repurchases and dividends.
- Track Medicaid supplemental-payment developments, tax examinations, professional-liability claims and other regulatory or legal matters.