Welcome to the HCA Healthcare Fourth Quarter 2021 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. Mark Kimbrough. Please go ahead, sir. All right. Thank you, Chris. Good morning and welcome to everybody on today's call. With me this morning is our CEO, Sam Hazen, and CFO, Bill Rutherford, along with our Chief Medical Officer, Dr. Michael Cuffe, and Frank Morgan, our new VP of IR. Welcome, Frank. Pleasure here. Sam and Bill will provide some prepared remarks, and then we'll take questions. Before I turn the call over to Sam and Bill, let me remind everyone that should today's call contain any forward-looking statements, they are based on management's current expectation. 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 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. All right. Thank you, Mark, and good morning, and thank you for joining us. As we begin this call, I want to reflect on 2021. Across many dimensions of our business, our teams demonstrated an impressive ability to adjust quickly and effectively to three different surges and deliver for our patients, deliver for our communities, and deliver for each other. This steadfast resolve and sacrifice to serve others are what make healthcare workers special people in general, but specifically for HCA Healthcare, they're what make our company great. I want to thank our colleagues and physicians for their outstanding work this past year. In the fourth quarter, the COVID pandemic once again altered course with the Omicron variant. As the Delta variant surge was slowing down at the end of the third quarter with some spillover into the fourth, the Omicron surge started to influence our business in early December. Overall, our teams continued their tremendous response, and the effects of the pandemic's ever-changing conditions were managed well as reflected in our financial results for the fourth quarter, which were solid and in line with our most recent guidance. In the quarter, our hospitals provided care to 27,000 COVID-19 patients, approximately 5% of total admissions. This level is significantly below the third quarter's 13%. Since the beginning of the pandemic, we have provided inpatient care to over 260,000 patients who contracted the virus. Currently, our hospitals continue to treat many patients with COVID-19. COVID-related census levels, fortunately, have begun to peak, and we anticipate they will decline over the next few weeks. Same-facility revenues grew 6.4% in the quarter as compared to prior year. Inpatient revenue grew 2%, and outpatient revenue grew 13%. Same-facility volumes increased on a year-over-year basis across most major categories, with the exception of inpatient surgeries, which were down 1%. In a challenging labor market, our teams adjusted well. Labor costs created some pressure on margins as compared to last year, but sequentially, there was no significant change in this metric as compared to the third quarter. Adjusted EBITDA margin for the quarter was strong. Diluted earnings per share, excluding gains on sales of facilities, increased 7% to $4.42 in the quarter. As we move into 2022, our overall outlook for the year remains generally consistent with the early perspectives we provided in last quarter's call. While certain aspects of our business, including the impact of the pandemic, remain difficult to predict, we believe the guidance that we are providing today is reasonable. We also believe that the combination of our proven disciplined operating culture, plus our growth plan and the strong support from our capital deployment program should help us deliver the results we are forecasting for the year and enhance long-term shareholder value. As I indicated previously, we believe demand for healthcare services will be strong in 2022 and comparable to historical growth rates in the 2%-3% zone, with COVID-related admissions representing between 3% and 5% of total. We expect this demand to be supported by a growing economy and more insurance coverage for people through their employer or the exchanges. We believe HCA Healthcare's strong and diversified portfolio of markets is differentiated across the industry and presents numerous long-term growth opportunities. Because of this, we plan to continue investing in our core strategy of developing our provider networks through our capital spending plan and also through acquisitions when available care acquisition that we completed at the end of the year in South Florida. These investments continue to add depth to our networks and convenience for our patients, creating an easier and more cost-effective accessibility for our healthcare systems. Over the past year, we have increased the ambulatory care sites in our networks by 14%, bringing the total number to approximately 2,200. These sites support the 182 hospitals we operate today and will provide support in the future to the eight new hospitals we recently announced in various Texas and Florida markets. As I mentioned, we are operating in a difficult labor market. Over the past year, we have invested in our colleagues with increased pay, supplemental bonus programs, and additional benefits. These investments, coupled with our efforts to improve operational support for providing care, should help us mitigate some of the difficulties caused by this environment. These past two years certainly have been a strain on our people. Through it all, they have demonstrated a level of excellence, compassion, and resilience that has strengthened the company in many ways. They have accomplished this while simultaneously staying true to our mission and better positioning us for continued success. With that, I'll turn the call over to Bill for more details on the quarter's results, our 2022 earnings guidance, and capital deployment plan. Thank you. Okay, great. Thank you, Sam, and good morning, everyone. I will provide some additional comments on our performance for the year, then discuss our 2022 guidance. Our cash flow from operations was $2.4 billion, as compared to a use of cash of $3.6 billion in the fourth quarter of 2020. In the prior year quarter, cash flow was affected by our returning or repaying early approximately $6 billion of CARES Act funding. For full year 2021, cash flow from operations was just under $9 billion. Capital spending was $1.2 billion for the quarter and was $3.6 billion for the full year 2021. In addition, we have approximately $4.1 billion of approved capital in the pipeline that is scheduled to come online over the next three years. We completed just over $2 billion of share repurchases during the quarter and $8.2 billion for the full year. Our debt to EBITDA ratio was 2.7 times at the end of the third quarter, and we had approximately $3.6 billion of available liquidity at the end of the quarter. For full year 2021, we realized approximately $2.2 billion in proceeds from sales of facilities and healthcare entities and recognized approximately $1.6 billion in gains on these sales. We also executed on $1.1 billion of acquisitions of healthcare entities during the year. As noted in our release this morning, we are providing full year 2022 guidance as follows. We expect revenue to range between $60 billion and $62 billion. We expect net income attributable to HCA Healthcare to range between $5.55 billion and $5.835 billion. We expect full year adjusted EBITDA to range between $12.55 billion and $13.05 billion. We expect full year diluted EPS to range between $18.40 and $19.20. We expect capital spending to approximate $4.2 billion during the year. Let me provide some additional commentary on our guidance. The midpoint of our adjusted EBITDA guidance of $12.8 billion reflects a 1.2% increase over our 2021 adjusted EBITDA. In 2021, we recognized approximately $900 million in COVID support from the DRG add-ons, HRSA reimbursement for uninsured COVID patients, and the impact of the delayed sequestration cuts. We do not have full line of sight into all these programs for the full year, but we do expect some benefit continuing, and our guidance anticipates approximately $150 million of support in 2022. In addition, our divestitures contributed about $140 million of adjusted EBITDA in 2021. When you consider these items, along with an estimate of about $300 million of incremental costs for serving COVID patients in 2021, our growth in adjusted EBITDA is consistent with our historical expectations for growth over time of 4%-6%. Within our guidance, we expect our same-facility admissions to grow approximately 2%-3%, our revenue per admission to grow approximately 1%. We anticipate outpatient revenue to grow in the mid- to high-single digits. We anticipate adjusted EBITDA margin to range between 20% and 21% for the full year. Depreciation is estimated to be about $3 billion, and interest expense is projected to be around $1.7 billion. Finally, our fully diluted shares are expected to be about 303 million for the full year, and cash flow from operations is estimated to range between $9 billion and $9.5 billion. As also noted in our release this morning, our board of directors has authorized a new $8 billion share repurchase program and declared an increase in our quarterly dividend from $0.48- $0.56 per share. With that, I'll turn the call over to Mark to open it up for Q&A. All right. Thank you, Bill. Thank you, Sam. Chris, would you provide instructions on the queue for questions and remind everyone to limit their questions to one please so that we can get as many people on the call as possible. Certainly. As a reminder, if you would like to ask a question, please Press Star one on your telephone keypad. Our first question is from Ann Hynes with Mizuho Securities. Your line is open. Hi. Great. Good morning. Hey, Ann. How are you? Just a couple of questions. When I look at inpatient and outpatient versus 2009, they're down roughly 5%, which is a deterioration from prior quarters. Can you tell us what's driving that? Is it, I mean, obviously it's staffing issues, so maybe what's driving it, staffing issues versus COVID spikes, and you're turning people away versus maybe a change in patient behavior. A quick clarification on your 2022 guidance. I think you said for 2021 you had about $300 million in incremental cost for COVID. Can you tell us what that is, embedded in guidance for 2022? That'd be great. Thanks. Yeah. Anne, you were breaking up a little bit on your first question. The second I think we all understood. The first, did anyone get that? Sure. Can you repeat that, Ann, please? Sure. When I look at inpatient and outpatient trends in Q4 versus Q4 2019, they were down roughly by 5%, which is a slight deterioration from prior quarters. Sure. Can we just get some more color on what's driving that? I mean, I know there's staffing issues. Are you not able to admit patients because of staffing issues, or is it you're turning patients away because of COVID spikes, or is it maybe a change in patient behavior? Yeah. You can provide some color on that versus 2019. Sure. I think a couple high level observations that we believe are indicative of the fourth quarter of 2021 versus the fourth quarter of 2019. Obviously, we were carrying over into fourth quarter a little bit of the Delta variant, and that was influencing some activity in some markets, and we think that had some impact on the 2019 comparison. The second item would be that overall we didn't see the same seasonality bump that we typically see in the fourth quarter. Again, we think that was influenced by the two different surges that were ramping down and ramping up. The third observation would be that on our inpatient activity, we have seen some migration in inpatient orthopedic surgeries, primarily into outpatient, and that did influence the inpatient stat and propped up the outpatient stat somewhat with respect to surgeries. Those would be the three main drivers, I think, of the comparisons. All in all, we did have to manage some capacity in certain situations, again, because of the COVID markets and we're hopeful again as we wind down the Omicron variant that we can get back to some normal period of business. Again, in 2021, as I said on our third quarter call, we really haven't had a normal run of what our business trends would be. We've had a holiday variance at the end of 2020 carried into 2021. We had the Delta variant in the middle. We had maybe 3-4 months where we could say there was no COVID influence of any significance. We're making some judgments around those variations, but that would be the three-level observations we have on the 2019 comparisons. Yeah. Ann, this is Bill. On your second question regarding the $300 million of incremental cost, that would be above and beyond what we're anticipating next year. You know, we wanted to highlight the fact that we are seeing some decline in COVID support and acknowledge that we'd also expect to see some decline of some of that direct incremental cost. That is above and beyond what we would expect. Yeah. That does include drug-related PP&E and some other costs associated with treatment of COVID patients. Great. Congratulations on your retirement, Mark. Thank you, Ann. Appreciate it. Chris. Our next question is from Kevin Fischbeck with Bank of America. Your line is open. Great. Thanks. Yeah, it seems like HCA feels a little bit more controversial today than I'm used to it being, predominantly around, you know, where the margin should be normalizing out to. Obviously, this year you're looking for lower margins than last year, but it's still nicely up from where 2019 was. Can you just level set for us, you know, where you think ultimately those margins normalize into 2023 and beyond? To the extent that it's above, you know, the 19.5% in 2019, can you help us bridge, you know, what has gotten better sustainably, from where you were pre-COVID? Thanks. Thanks, Kevin. Yeah, Kevin, this is Bill. I'll make a shot at that. As you heard in our commentary, we expect margins to land between 20%-21%. Obviously, as we know and we've talked about during this COVID period of time, especially when you compare it to pre-COVID, we've seen a growth in acuity as we've seen people return and have higher intensity of services. We've lost a little bit of the lower acuity business during this period of time, and we've enjoyed a favorable payer mix as we've seen, you know, a full employment effort, the activity in the health insurance exchanges. We saw obviously significant growth over the past, call it six quarters since the middle of 2020. We expect those trends to remain positive, but maybe not at the same level. That's helping drive some of the margins that we're seeing currently. You know, I think our view is that, you know, that coupled with other efforts HCA has, that we should be able to land within the ranges we provided. Is that the right long term to think about as well? Well, based on what we know today, there's no reason to presume we can't sustain somewhere in that range. Obviously, there's a lot of variables to our business, and we'll have to advance our perspectives on those when we get those variables, you know, I'll say better understood over the course of this next year and so forth. That's our thinking. We've had a number, Kevin, financial resiliency initiatives, and we have ongoing initiatives that we think are positive to margin, all things being equal. We'll have to wait and see how some of these other components of our business develop over the course of 2022. All right. Great. Thank you. Thanks, Kevin. Thank you, Kevin. Appreciate it. Our next question is from Andrew Mok with UBS. Your line is open. Hi. Thanks. I just wanted to echo congratulations to Mark on your retirement. On the 2022 guide, I wanna make sure I understand the progression and development of the guide since the 3Q earnings call. Are you saying that since the 3Q, you're now expecting more COVID patients, and because government relief only gives us line of sight through April, you're planning for significantly higher level of COVID costs in 2022, but only one quarter of extended government relief, such that there's somewhat of a mismatch in COVID costs and COVID relief in 2022? Thank you, Andrew. Yeah. I mean, I think our guidance is very consistent with what our third quarter commentary is. I mean, there's obviously a lot of moving parts. I think the COVID volume we're anticipating now, as Sam mentioned, between 3%-5%, is consistent with where we thought COVID volume would be when we provided our third quarter. The COVID support programs that we mentioned, I think are pretty close to what we anticipated during that discussion. So, you know, without talking about the progression of those occurring during the year, I think overall our guidance is very consistent with what our commentary and what our beliefs were at the end of the third quarter. Got it. Okay. Appreciate it. Our next question is from Justin Lake with Wolfe Research. Your line is open. Thanks. Obviously first, Mark, thanks for everything over 20 years. Enjoy your retirement. You'll be missed. Then, from a question perspective, you know, maybe you can talk a little bit about the, you know, two things, right? One, you're, you know, we think you got some dollars, at least there were some articles out there that you might have got about $250 million from Florida in terms of, you know, extra Medicaid payments. Can you talk a little bit about that? Was it recognized in the fourth quarter? Is it in the guidance for 2022? Or because maybe you haven't gotten them yet, so you didn't recognize it yet. That's one. Number 2, just in terms of your pricing assumption in terms of revenue per admit, is it fair to say that, you know, versus the typical 2%-3%, you're saying 1%, you're assuming maybe about 1% of that, is, you know, kind of a headwind from government dollars that are gonna be down materially, and then the other 1% is a little bit of, you know, if half the 1% is maybe, you know, payer mix deterioration. Is that a reasonable way to think about it? Right. Yeah. Let me try to address those. Let me talk about Florida and the other supplemental programs that we have during the quarter. I know there's been a lot of discussion. We are participating in the Florida DPP program, and in the fourth quarter, we did recognize a net benefit of approximately $130 million related to that program. We do expect to recognize a similar benefit in the latter half of 2022 as well. I also wanna talk about Texas for a moment. I think it's been reported that CMS has not yet approved the Medicaid Directed Payment program in Texas that was to go into effect 1st September of 2021. As a result of this new program not being approved, we did not record any revenue anticipated with that, this aspect of the waiver program in the last four months of the year. This equated to about a $120 million reduction in our waiver revenue in the fourth quarter compared to what we had recognized in the three previous quarters. It largely offset the impact of the Florida program in our consolidated results. We believe eventually the Texas program will be worked out, and we don't anticipate it being a headwind for 2022, but our year guidance anticipates that we'll be able to recognize that annual historical level over time, even though it may take some time for the state of Texas and CMS to work that through. On the pricing side, you know, our revenue per admit 1%, you're right, it's a little lower than maybe historically on there. When you adjust for the COVID, it does add about a point, so I think that's right. Then when you think about our outpatient revenue growth, as I mentioned, we expect to be in the mid- to high-single digits%, and you blend that, I think it would look, you know, relatively consistent when you look at revenue per equivalent admission on there. We think it's generally in the range of what our historical trends would indicate. Okay. Can I just ask a quick follow-up? Yeah. Bill, on the Texas and Florida? The way to think about them for 2022 is you're building in this extra $130 million for Florida is in the 2022 guidance. Then theoretically, you would also have a catch-up, right, from the fourth quarter or those last four months, where there's an extra $130 million. There's another $250 million of kind of extra dollars that are either at a period or probably, you know, may or may not continue from Florida and Texas in 2022. Is that the right way to think about it? Well, Justin, I think in our guidance, we're anticipating an annual amount, a 12 month in our guidance. We're not anticipating a catch-up, just given the uncertainty of how that may settle out. We're gonna have to wait to see how that is developed. The state of Texas is, you know, testing that federal program. We're hoping that we get some understanding of that soon. Our guidance really only reflects an annual amount, not necessarily a catch-up amount from this year. We'll just have to wait to see how that plays out. Got it. Thanks, guys. Yeah. Thank you, Justin. Our next question is from A.J. Rice with Credit Suisse. Your line is open. Thanks. Hi, everybody, and best wishes, Mark. I won't say how long we've been interacting. Maybe I'll pivot and ask about you guys have talked about from time to time in the COVID crisis there, you know, some of the downstream ability to discharge has been challenging, home health, SNFs, whatever. And you've also talked about that making maybe having some impact on your capital deployment priorities. Just give us your updated thoughts as you see Delta moderate, Omicron come surge. Are you seeing issues with being able to discharge patients in the timeframe you'd want? And any updated thoughts on having any of those areas as particular new or increased capital priorities? Thank you, A.J. One of the areas that we're focused on, and it's connected really to our labor agenda, it's connected to our overall business agenda for 2022 is, you know, managing capacity and throughput, you know, most effectively. Case management, length of stay management, discharge planning to post-acute and other settings is very important to our success. ER throughput, all of those elements are very important to our ability to manage capacity. Clearly, we have to execute on our labor agenda, and we have a robust labor agenda to respond to the issues that we face on the people side of our equation. As it relates to the surges, discharge planning during the surges has been a little bit more difficult. It's been more difficult in the Omicron variant because the nursing home environment and even the home care environment has been suffering from employees who have been infected by the Omicron variant. That's created a little bit of a contraction, we think, in some markets with overall post-acute capacity, and that has delayed our ability to execute on our discharge planning process as we ordinarily would. As it pertains, AJ, to our capital planning, as you know, we did acquire the home care and hospice business unit from Brookdale. We have been in the process of integrating that business into our company, and the first part of this year has been about integration. We sold non-overlap components to another home care company, and then we've been organizing ourselves around home care and hospice inside of the markets where we overlap. We're in the early stages of integration. We're looking for some significant strides on that front in 2022. Additionally, we're making significant investments in rehab, as we've mentioned on these calls in the past, particularly in Florida, but also in other components of our business. We think that will enhance our ability to manage the post-acute discharge process a little bit more efficiently. We also have preferred networks that we've evolved with our bundle payment programs over the years with certain providers in post-acute. We will continue to leverage and build on those relationships, allowing us hopefully to maintain efficient discharge planning process. The last thing I would say on that front, as well, is our case management program is continuing to be advanced in our company. We are implementing technology. We are deploying certain shared services capabilities around utilization review and so forth. We think those initiatives are going to yield benefits for us as it relates to capacity management. A lot of components to this, A.J. Overall capital spending, however, to sum it all up here, is not materially changing from what we previously indicated. Okay, great. Thanks. Yeah. Thank you so much. Our next question is from Pito Chickering with Deutsche Bank. Your line is open. Hey. Good morning, guys. Thanks for taking my questions. I want to echo everyone's comments. Mark, big thank you. It's been a pleasure working with you over the years. Frank, I look forward to working with you again in the future. Thanks. To test you guys, I'm gonna ask a single sort of multi-part question here. Labor is obviously a big topic these days. Sort of the first question is: How should, you know, we model the cadence of earnings in 2022 versus a pre-COVID year? Number two, on 3.8% of revenue growth guidance, you only guided 50 basis points of margin compression despite these labor pressures. Can you give us any color on where, you know, salary to benefits tracks in 2022 versus 2021? Any other color on supply and OpEx? And then finally, number three, what assumptions are you making on labor costs sort of throughout the year? Do you have a moderating, staying the same levels? You know, any color you can give us there? Yeah. Thank you. This is Bill. Let me start with the quarterly case, you know, because we don't give specific guidance. I think when you consider, the discussion I had around the Texas waiver program, we think that will take some time to settle out, potentially even into the second half of the year. Then we think about labor, you know, really the current trends, probably more pressured in the first half of the year. We think we can continue to manage through those in the second half of the year. I think it's reasonable to expect that our growth will be weighted in the second half of the year. We expect that, you know, as we've seen the utilization of some of our premium labor, especially around contract labor, that we can ease that as we go through the balance of the year as hopefully we, you know, get out of a COVID surge environment, and that will provide some relief as we progress through the second half of 2022. On supplies and OpEx, you know, our assumptions are really consistent with our trends. When I look at those two areas as a percentage of revenue, they stay pretty close in terms of the variability from period to period. So there's really no major tailwinds or headwinds that I would call out on those. I think our supply trends and our other operating trends would be consistent with what we've seen throughout most of this year. Okay, great. Actually a follow-up question on the premium labor. Can you quantify how much premium labor you guys saw in fourth quarter and what you're assuming in 2022? Thanks so much. I think it's. We did obviously have to utilize higher contract labor. I think the impact was as much about the cost to procure that contract labor as it was the utilization. Our contract labor FTEs were up maybe 10% compared to where we ran in the first quarter. The cost to procure that contract labor, too, was up significantly. We believe that as the COVID surges begin to dissipate, the cost per contract labor, we'll be able to manage through that and manage that down. Those are basically the numbers right now. Great. Thanks so much. Thanks, Peter. Our next question is from Whit Mayo with SVB Leerink. Your line is open. Hey, thanks. Best wishes, Mark. Bill, my question is, when I look at the framework that you've offered up for 2022, I may be off a point or so here, but if COVID is budgeted to be 3%-5% of your total admissions, it does seem to imply that non-COVID admissions grow maybe somewhere in the high single-digit range. That could be roughly flat versus 2019. I'm just trying to see if you can put into context the growth in non-COVID and how that's been trending and maybe any color around service lines just to help us bridge that increase and any views on maybe the first quarter could be helpful. Thanks. All right. Thank you, Whit. If you look at COVID in discrete terms, you're probably not incorrect with some of your estimations. But I don't think we're viewing COVID completely discrete in the sense that some of those patients would still be entering the system regardless of COVID, and that was especially true in the fourth quarter as we looked at some of our COVID patients and such that they were coming in for different reasons, and then they were also COVID positive because many people didn't even know they had COVID. So I think you have to sort of look at it as a bit of a mixed bag there, and that's how we're judging it as well. I do believe that there was deferred demand, and it still showed itself in the quarter and will yield some recovery in the first part of 2022. I mean, literally, we had surgeons who were closing practices, canceling cases because they themselves contracted the Omicron variant. I think from that standpoint, there is, you know, the typical COVID impact on volumes in the quarter while we're experiencing a surge. We believe, again that, you know, strong job growth across our portfolio of markets, more people covered by the exchange, deferrals, some elective and transfer closures across our portfolio all bode well for our ability to recover volume in 2022. Again, as I mentioned to A.J., we have to manage capacity. We have to supply that capacity with labor, and we're working through all of those elements as we speak to put ourselves in the best position to receive that demand. We're very excited about the prospects for growth across the company. As I mentioned in my comments, we're investing in that. We've announced, as I mentioned, eight new hospitals, recognizing some of the overall growth that exists in these markets. We've had momentum. If you look at our market share at the end of 2019, it was north of 26.5%. It ended with the most recent data that we get, which is about a year and a half later, right under 28%. We gained share during COVID. We positioned our organization, we believe, with our ambulatory network better. When we bump that up with what we're judging to be some demand that's been dislocated by the COVID surges, we feel like our guidance is reasonable. Okay. Thanks a lot. All right. Thanks, Whit. The next question is from Sarah James with Barclays. Your line is open. Thank you, and I echo the heartfelt comments to Mark. Thank you. How much of the wage inflation environment do you think of as a structural shift or a shift in how we think about the base wage range for nurses? How does that impact your conversations with payers and how you think about CapEx or capital deployment mix? Thank you, Sarah. Well, it's as Bill mentioned, the labor market, that is, has been significantly disrupted with COVID. What we see during COVID surges is more opportunities for our nurses and other people's nurses to go into travel and get a really outsized rate. We think as COVID surges moderate, that is gonna moderate the overall labor market to some degree. We have announced our wages for our employees. We've announced some of our benefits. We've provided certain shift bonuses throughout the year, and that has yielded some increased rate of wage growth for our employee base. We think, however, moving into 2022 as we go through the moderation on the contract labor, we'll be able to absorb the wage trends that are built into our employee base over the course of 2022 and land somewhere around 3%-3.5% possibly, on a composite basis for our cost per FTE. That, we believe, is something that we can absorb in our guidance. As it relates to our payer contracts, yes, we are talking to them about inflationary pressures and how that will influence future contracting. At this particular point in time, our book of business for 2022 is pretty much accomplished, and part of 2023 is accomplished. We're building in some flexibility to reflect the inflationary pressures that might exist, and we'll continue to work through those as we work through our contract portfolio with the different payers. I think in general, they understand the pressures that providers are facing on that front, and they have the unique ability to adjust their premiums on an annual basis in most instances. That should line up with the need for us to get a fair cost increase related to inflation. All right, Sarah. Thank you so much. Thanks. Our next question is from Scott Fidel with Stephens. Your line is open. Hi. Thanks. We'll echo the thanks to Mark and best wishes to Frank. I had a question. I was interested to get a few more details on the 8 hospitals that you've announced that you're gonna plan to build an aggregate in Florida and in Texas. Just specifically interested if you could talk about what the overall related CapEx would be for those facilities and the ROIC that you think you could generate on them. You know, maybe an aggregate sort of bed new beds that you'll think that you'll be able to add from those eight facilities and when in terms of timing those are expected to come online. Thanks. All right, Scott. Thanks. Well, I would submit that the eight projects that we've announced is not going to materially change our capital thinking over the next, you know, 2-3 years. We believe we can absorb most of that in what will be a budget that's approximately what we're indicating for this year. The situation is this. I mean, some of these markets are growing significantly. Austin, Texas, as everybody probably knows, is growing in a way that is creating opportunities for us just like it's creating opportunities for others in that community. With the growth in that market and with the occupancy that we currently run in Austin, Texas, as an example, it presents a nice platform for us to expand into some of these growing areas and add to our network. Most of these hospitals will be primary and secondary care type hospitals with basic inpatient services and many outpatient services. Then to the extent that these patients need deeper, more acute care, we obviously have those capabilities in our different markets. We have the same situation in Florida with the exception of one hospital that we're building in Fort Myers which is a new market for us. We're extending into that market because there's a need for more capacity and it's proximal to one of our West Florida markets in a way that we think we can create synergies. I think with respect to returns, we have a pattern we believe of producing very solid projects. It's reflected in the return on capital overall. We anticipate that these projects over time will yield the same kind of value that we've typically generated with capital programs. That's where we are with them. Again, most of them are gonna be 50-75 beds starting out. They're not huge hospitals. They're complementary assets that over time will hopefully grow to more acute and more capable facilities with respect to service offerings. All right. Thank you, Scott. Our next question is from Gary Taylor with Cowen. Your line is open. Hi. Good morning. Mark, congrats. Not to make you feel old, but I think HCA had $2 billion in revenue in 1982 when you started, so you've come a long way. That's right. Um- I remember. Thank you. One clarification and one question. I just wanna clarify the Utah hospitals not yet in the guide. Then my question just going back to labor. I know you've covered a lot on that. I appreciate it. Bill, on the 3Q, you had talked about contract labor overtime, shift differentials, and you had said 10%-12% of FTEs were in those premium categories. I think all three of those were included in sort of the premium categories. I just wanted to get a sense sequentially if you have that figure, if there's a sense that that eased at all yet or we're still waiting to see that. This is Bill. To answer, yes, Utah is not in our guidance. We're still in a regulatory review process, so we've not included any of that in our guidance. Regarding the contract labor and premium labor trends, we did see some improvement as we went through the fourth quarter. I think the number is closer to 11% of our nursing hours were contract hours in the fourth quarter. So there is some slight improvement going forward. You know, as we think about in my earlier commentary, you know, we think in the first half of 2022 we'll continue to see that pressure and over time as the year goes on, as hopefully COVID dissipates, we'll be able to manage that process down. Thank you. All right. Thanks, Gary. Our next question is from Jamie Perse with Goldman Sachs. Your line is open. Hey, good morning, guys. I just wanted to ask one clarification first on the COVID DRG HRSA sequestration for 2021, if you can give a breakdown of that $900 million, and same thing for 2022, the $150 million that you're planning for. Then my real question is just around, I think Whit was getting to this question, but the implied non-COVID volume in 2022. You know, you're certainly not implying you get back to trend line, maybe back to 2019 levels. Really what is the bottleneck to get back to trend line growth? Is it discharge capacity, labor capacity? You know, what are those bottlenecks that you would have to work through to see upside to non-COVID volumes? Yeah, let me take the first part of that, the breakdown of the COVID support. It was, you know, roughly $180 million from the DRG add-ons. The sequestration delay was about $200 million for us in 2021. Then we had a little over $400 million of HRSA reimbursement, and a little bit of technology add-on payments after that. Regarding in 2022, we know we have some visibility into the sequestration being phased in. That would save roughly half of the $150 million we talked about, and the rest being from the other programs. I think on the capacity side of the equation, again, if you categorize how we're approaching making sure we have adequate capacity, and we have to execute on these categories in order to achieve that. First is staffing. We have to retain the staff we have, we have to recruit new staff, and we have to manage that obviously cost effectively. Again, we have a number of initiatives in place to deal with that, and I'm encouraged by our hiring. We've advanced our recruiting agenda. We've got improvements in certain categories with turnover. Again, getting through COVID surges will be helpful to that. The second thing we're working on is something we're calling new models of care. We're exploring and experimenting with different approaches to staffing models that allow our nurses to be supported by different approaches, creating more capacity, if you will, for our nurse population in a way that delivers the patient outcomes we want and recognizes some of the market issues. Then the final piece is what I had mentioned previously around throughput and capacity management. Again, case management's a piece of that. Telemedicine inside of our hospitals is a piece of that. Load balancing across all of our bed capacity to market is a piece of that. We have a lot of elements. Technology also factors into that and how we're using some new technology solutions to help us in throughput management. Those are the areas that we're focused on. you know, I've got confidence in our teams and our abilities to execute around these categories and deliver the capacity that we're going to need in order to take care of the demand that's going to be in the communities. All right. Thank you, Jamie. Our next question is from Jason Cassorla with Citi. Your line is open. Great. Hey, fellas. Thanks for taking my question. I guess just, on the payer mix side, can you help flesh out, volume growth in the quarter by payer cohort and how you're thinking about 2022 in context of that 2%-3% overall volume growth embedded in guidance? I guess, you know, you suggest stability in payer mix for 2022, but just wondering how you're thinking about the impact of any potential Medicaid reverification activity and especially the pickup in the marketplace enrollment in your bigger states, I think particularly in Texas. Any help there would be great. Thanks. Yeah. I mean, in the quarter, we saw continued favorable payer mix. Our managed care book for the quarter was up about 2.6%. And compared to our overall admissions, that became favorable. You know, that was partly driven, if not mostly driven, by the health insurance exchange volume. We continue to see that. We've talked about good enrollment going into that. As we go forward into 2022, as I mentioned in my comments, I think we're expecting that our acuity and payer mix should continue to be positive trends, maybe not at the same pace we've seen over this past several quarters, but we expect some continued positive growth on that. Relative to the Medicaid piece, we've seen some pluses and minuses of Medicaid. Medicaid growth is up a little higher than our average. In terms of expectations for next year, I think they would be mostly consistent with what our recent trends have been. I'm not so sure what else was tagged in on his question. That was it. That was it. Yeah. All right. Thank you so much. Thank you. Our next question is from Brian Tanquilut with Jefferies. Your line is open. Hey, good morning, guys. Mark, thanks again for all the help over the years. I guess, Sam, my question, you know, in your prepared remarks, you talked about how you saw the migration of inpatient ortho to outpatient. Just wondering how you're thinking about strategizing around that and how that plays out going forward. Maybe any color you can share on the difference in economics, maybe on an EBITDA basis, apples to apples for procedures, you know, inpatient versus outpatient on ortho. Our total orthopedic volume, surgical volumes were up when you look at inpatient and outpatient in total. We have a physician alignment strategy with our orthopedic community that we think is yielding value, continue to iterate on that to respond to some of the individual needs from one market to the other. The second piece of our strategy is around our outpatient elements and how we manage our surgical space in the hospitals for outpatient cases, and then also in our ambulatory surgery centers where we have orthopedic partners. We have a multipronged approach to orthopedics just like we do with most service lines, and it involves our quality agenda, our service agenda, our facility agenda, and then our physicians. We have the same dynamic with orthopedics. You know, the reimbursement per case is obviously less in an outpatient environment than it is in an inpatient. I think the important thing about HCA Healthcare is we have such a diversification of services, and no one service provides a disproportionate amount of revenue or profits for the company. When there's migration from one setting to the other, it doesn't necessarily change the overall equation for the company. That's what we're seeing with orthopedics today. It's migrating. We've had other service lines over the years migrate from inpatient to outpatient, and we've been able to manage through that and actually create market share momentum around that transition. We're believing that we have the right approach here with orthopedics as well. Awesome. Thank you. Uh. Our next question is from Calvin Sternick with JP Morgan. Your line is open. Yeah. Hey, good morning. Just wanted to circle back to some of the Medicaid comments you made, you know, specifically related to redeterminations. Just wanna understand, you know, what's assumed in your guys' guidance with respect to the resumption of Medicaid redeterminations and, you know, whether or not you think that has a discernible impact on your numbers, particularly in the back half. Thanks. Make clear when you say redeterminations, we talked about the supplemental programs. Redeterminations. Around eligibility. Yeah, we I don't think, you know, there's any material assumptions in terms of changes of that into our expectations going forward. I haven't heard any discussion of that impact in our Medicaid volume projections going forward. I would tell you that I think for next year, it's built on our historical trends remaining pretty consistent. All right. Thanks, Calvin. Chris, we've got time for two questions, please. Okay. Our next question is from Joshua Raskin with Nephron Research. Your line is open. Great. Thanks for fitting me in, and congrats, Mark, and welcome Frank as well. On the labor front, I'm curious if you're seeing competition for clinical labor, specifically, you know, physicians, nurses, et cetera. If that's mostly coming from, you know, other hospitals, competing hospitals or maybe staffing situations, or are there trends where individuals, the clinical labor is going to other areas, other sites, or maybe even leaving healthcare because we continue to see that in media reports. Then maybe just a comment on Galen and the impact that that's having, you know, and how that may be a competitive advantage for HCA. Well, I think all of the above on labor. I mean, there's clearly competition for labor, not just in clinical labor, but non-clinical labor too. The service side of our agenda, we have competitive dynamics on that labor front as well. You know, we're no different than any other industry when it comes to that. You know, I think, again, we have advanced our recruitment very significantly, and we're recruiting significant numbers of nurses. We have retention efforts that I think are going to pay off. The care transformation that I mentioned in capacity management, all that's connected to you know, a staffing solution for our company. We're competing very aggressively in this space just like we compete for physicians, just like we compete for patients and so forth. I'm confident in our competitive abilities on this particular agenda. Galen is off to a great start. We acquired it, and we're limited to when we could start our expansions. We started our expansions this past year. I think we have 12 new schools in the pipeline. Maybe six or eight of them have actually opened. One in Austin and one in Nashville were both the fastest ramp-up in new enrollment in the history of Galen, their CEO told me. We're very excited about the prospects. It will take us time to graduate these nurses, but we expect to have, you know, 12-18 new schools over the next two to three years, and that should yield a number of new students for us. We will integrate those students into our facilities in ways that hopefully secure an employment opportunity for them in an HCA facility when they graduate. We anticipate tripling the number of graduates over what they currently produce by 2026, which you know yield a reasonable growth in number of nurses in the communities that again hopefully we can retain into our facilities. We believe our faculty will be supported by HCA nursing leadership and then the externs programs that we'll use for students in the Galen School will be integrated into HCA procedures, systems and so forth. We do think that creates some advantage in securing these graduates into our facilities. All right. Thank you, Josh. Our final question is from Ben Hendrix with RBC Capital Markets. Your line is open. Hey, thanks guys for squeezing me in at the end and congratulations to both Mark and Frank. I think most of my questions, you know, have been answered, and you've touched on this, but just kinda getting back to your inpatient care delivery efforts and then the length of stay management. This is all a consistent theme we've heard from your competitors. Certainly, Tenet has talked about this and Community as well. Just wanted to get a little bit more color on what you think is your key differentiators, whether they be your scale, your approach, and kinda what might give HCA the competitive advantage in that endeavor. Follow on to that, kinda what inning are we in? How much room to run do we have on getting efficiency out of specifically the care delivery? All right. Thanks, Ben. Yeah, I don't know what the other companies are necessarily saying about this particular agenda. I think what we're trying to do is make sure we're using technology. We have training and visibility into the processes that make a difference in case management. We're ultimately using our capacity broadly across the markets to support better throughput and overall capacity management. As I mentioned, we've advanced our capabilities in post-acute with our own acquisitions and development as well as relationships with others. I think the combination of all of those elements creates an opportunity for us to gain more efficiencies through our case management programs overall. We think also that will help us with our receivables and our management of denials and so forth with the payers and there's some yield on that front as well. We're pretty excited about the developments in this area. How much more advantaged we are than others, I can't really speak to that. All right, Chris. That concludes the question-answer session. I'll turn the call over to Mr. Hazen for any closing remarks. Yeah. Well, thank you again for participating on our call, and I wanted to take this moment to thank Mark for his 39 years of service. He and I both have worked 39 years with the company. I'm not sure why he's retiring, but nonetheless, he has had a wonderful career and represented our company incredibly well with our shareholders and others, and I wanna thank him for that. Again, welcome Frank to the team. Frank's gonna do a wonderful job as well. Mark, congratulations. Thank you. the best. Appreciate it. Well, I wanted to say a few things too, finishing up my final earnings call, I wanted to thank Sam and Bill and all the others I've known and worked alongside these past 39+ years. You know, I've truly enjoyed working with everyone here at HCA and all of you listening on the call today too. I also wanna thank Dr. Frist for his vision in creating HCA and Vic Campbell for his years of mentoring and friendship to me over the past decades. Frank and I will be here to answer any further questions you might have following this call, so feel free to give us a shout this afternoon or, you know, later in the week. Thank you so much. Ladies and gentlemen, this concludes today's Conference Call. Thank you for participating, and you may now disconnect.