HCA Healthcare, Inc. Healthcare Services and Technology Conference

Yeah, it's a dynamic environment for the industry on the hospital side for sure, and you've noted some of the biggest moving parts. On the headwind side, we're kind of halfway through the end of second quarter, the first year of the reform to the exchanges with the expiration of the EHITCs. So that's the biggest moving part for not just for HCA, but really for the industry as we sit here halfway through 2026. There's some positive aspects, too. I think for the industry, certainly for HCA, the demand environment continues to be good. We are seeing overall strong demand, at least in our markets, for healthcare services.

While the exchanges have had a payer mix dynamic under that where people are losing coverage on the exchanges and becoming uninsured, so we're dealing with that pressure, the fundamentals of demand are still strong. Second quarter, and again, I'll use HCA as a proxy, but for second quarter, our insured business, excluding the exchanges, were up 3.2% over prior year. That is a good number when I think about our commercial business, our Medicare and Medicaid business. So demand's good. The policy framework is always such that there's some negative aspects and some positive aspects. In the One Big Beautiful Bill, I think the headlines are the SDP reform and work requirements. But part of this was grandfathering, and HCA was fortunate. We had five states, including one of our largest states, that had this opportunity under the One Big Beautiful Bill to enhance our programs.

Our states, those five states were able to execute on that. Over the last 6 months here, we've seen all five states now move through to approval. The policy gods taketh away, and the policy gods giveth. In this one, it's a real benefit, and it's helping us navigate some of the negative headwind challenges. There are other aspects, I think, longer term, the industry, we're starting to look at the reform of Medicaid under the One Big Beautiful Bill and how to navigate that. Then I think the whole industry is working through resiliency. We certainly are, and we'll talk about that as we go through today. That's the pace of play. It's a reform environment. It's a dynamic environment. I think the stronger players are navigating through these challenges. Then you got to get to specifics.

Yeah, if you think about the moving parts in our second half guidance that was implied, there are really three or four key moving parts. You have noted one, which is the update to our exchange impact. Based on what we have learned here through the first six months, we did update the negative impact to $1 billion-$1.2 billion, based on what we have learned through the first half. That is a big moving part. The second piece here would be the state supplemental payments. With all the grandfathering applications that are now approved and with the pickup that we were able to record in second quarter related to Florida, we now believe that that is a $300 million-$500 million net benefit for the year, which is a positive thing. I think second quarter also highlighted the improvement in the volume story.

In the first quarter, our volumes were disrupted a little bit with the winter storm and with the kind of sudden stop to the respiratory season. Second quarter pulled right back. We saw 2.5% admission growth, 2.7% on AA growth and, as I have already noted, good results on our insured book, excluding exchanges. We were pleased in our overall guidance, and that includes our belief that that volume growth will continue here through the back half of the year, and that is important. The other component really that is embedded in our guidance update is cost. For second quarter, our resiliency plan produced a good output on our cost management efforts. We believe, given the line of sight we have with resiliency and the actions that we are taking, that it will even be a bit stronger here in the back half of the year.

As I think about the rest of the year, I am really pleased with where we are and where we are going. We also took the time to just realize where we were and adjust the guidance accordingly with those factors. We will update you when third quarter comes.

Well, what we did is what we always do. Given the dynamic nature of the exchanges, it is the biggest moving part that we have this year, as I have noted. We took what we have learned through the first six months, we made our best estimates for the back half of the year, and then we set a range. We have this range of $1 billion to $1.2 billion. The only other thing I would note here is that there is a bit of a fourth quarter comparison factor here. In hindsight, when you look back at fourth quarter of 2025, we were already starting to see some of the effects of reform. One example of that would be the suspension of the special enrollment period for low-income people. Fourth quarter of 2025 was up only about 2.5% over prior year.

The full year was over 10% growth in 2025 versus 2024. Even sequentially, typically, fourth quarter would be the peak of our exchange volumes out of the four quarters of the year. In fourth quarter of 2025, we actually saw a 5,000 decline from third quarter to fourth quarter on equivalent admissions. The slowdown started in fourth quarter of last year, and so that is a piece of the story in terms of our second half of 2026 versus second half of 2025. It is one of the reasons why we highlighted that we thought fourth quarter's growth rate would be a little better than third quarter's, is this dynamic on year-over-year comparison on exchanges. It is a dynamic moving part for us.