Care. They are the largest health system company in the country. Presenting today, we have Sam Hazen, who's the CEO, as well as Mike Marks, CFO. We have Frank Morgan from Investor Relations in the audience as well. I don't know if you're laughing because you remember, but last year I introduced you as the largest hospital company and you shut me down 30 seconds in, being like, "No, no, no. We're a health system company." So maybe. We're a hospital-centric health system. How's that? Okay. All right. We can draw down the line there. But I guess maybe it's a good place to start then. I mean, you guys have been investing a lot outside of the hospital system. You guys talk a lot about having these other sites out there. I mean, why is that such an important part to the growth story at HCA? Well, we believe to be effective as a hospital, you need an ecosystem. For us, we believe a system model locally, Kevin, is important to our success. In the markets that we serve, we're in 43 different markets. We will have typically a clustering of hospitals, but a greater clustering of outpatient facilities. Today we have roughly 2,500 outpatient facilities as a company, somewhere in that zone, that support and are part of the ecosystem of 185, almost 190 hospitals. Our belief is that the outpatient facilities are very important to the patient and very important to the payer also because it provides a different price point for the payer. But for the patient in particular, it provides a level of convenience and efficiency. Our belief is that we need to take the care to the patient. So our outpatient network allows us to do that. Then integrating that outpatient network into our hospitals whenever a patient needs more acute or complex services allows us to create the ecosystem that we're talking about. So you take a community like Dallas-Fort Worth, we probably have 500+ facilities in the DFW area that are all part of our Medical City Health System in the Dallas-Fort Worth market. If you go to Nashville, you'd see something similar, smaller simply because the community is smaller. So all of that is connected to our provider system of choice model that we have as an organization. So in 2011, we defined that. We felt very clearly for our teams. We expected each of our teams to build out plans. We resourced those plans and we executed around it. That model, we think, Kevin, allowed us to grow our market share from roughly 23% to a little over 27% on the inpatient side. We, again, are hospital-centric, but we need that system approach. We're investing in the outpatient arena very aggressively. We will grow, I think, that number of outpatient facilities to each hospital from roughly 12 to somewhere in the high teens, we believe, over the next five-seven years simply because the communities that we serve are growing. It's important for us to widen the funnel, if you will, for interactions with our patients in the HCA system. Okay. Maybe take a step back. I I think the market is very much focused on where volumes are today. How would you characterize where we are? Your guidance for 2024 volumes is slower than 2025, but still above average in an average year. Where do you think that we are from a baseline perspective? I think COVID 2019 was a long time ago, but we're still trying to go back to, say, 2019, trending forward. I mean, are we back to that long-term trend line where we would have thought we would be today back in 2019, or are we still below that? There's still room for above average? Well, I think the growth is actually better than it was pre-pandemic. Growth in demand, that is. I think for our markets, we're seeing demand growth exceed pre-pandemic levels. We grew significantly in 2023, which was really the first year sort of post-COVID. I think our overall volumes were pushing mid-single digits. The first quarter continued that momentum. That's a little above the guidance we provided for the year. We thought our volume for 2024 would be in the 3%-4% zone. Clearly, we're going to be around the top side of that, I think, as we push through the rest of this year, maybe slightly above it. I'm not sure. But we're encouraged by the backdrop of demand in the markets that we serve, not only in 2024, but as we look forward to the rest of this decade, we think demand is going to continue to grow. Population growth for us, aging baby boomers, unfortunately, chronic conditions still persist in people, and it produces a need for healthcare. And we believe our model is positioned well to serve that demand. But we're pretty encouraged by the demand scenarios that are existing in our market. Is this demand still a function of normalization and utilization, or is it this is kind of like what you think demand should be growing in the next two years? It's hard for us to discern why people get sick and when they get sick. So I think from that standpoint, the question of, "Oh, is this pent-up demand from pre-pandemic?" I have no idea. I don't know that we can really get an answer to that. I do think the demand picture is positive. Is that going to sustain itself at exactly the same level for the next four-five years? I'm not sure I would say that. But I think in the near term, it's going to be comparable. It seems like part of the growth algorithm that you have at that 2%-3% volume growth is to take share the way you were talking about taking inpatient share the last several years. Where's that share coming from? Are you? You've added beds and that kind of reflects the bed expansion over the last few years. Is it because you're filling your beds faster and taking share from that perspective? And how should we think about that? It's coming from others. But. Mathematically, yeah. It's hard to say. Is it our outpatient strategy? Is it our physician alignment initiative? Is it our capital? Is it execution? It's all the above. We have to add them all up. We believe, very importantly, that we have to detail the market. We have to detail the opportunity. Then we have to execute at a very high level. So for us, all of those things add up. We've added to our physician network just like we've added to our outpatient network, Kevin. We've added programs to our hospitals so that we can offer more services, more acute services. We try to integrate the network with navigation capabilities, with people, as well as technology so that we keep people in our system. Our payer strategy is a piece of it. So all of it adds up. I will tell you, most of our competitors have a similar strategy. It gets down, again, into resourcing and execution. I think that's what differentiates us and has allowed us to grow over the years. We believe that formula still has potential. We will continue to sort of push forward on that. We adjust from one market to the other. We're in 43 U.S. markets, one international market. We have to adjust to the nuances within those markets. So there are moments in time where if somebody does something that can take a little share from us, and we have to adjust to that. But we're pretty good because of our connections and how we're organized to interact with those nuances and make the necessary adjustments. Is there a way to think about what type of volume you've been gaining share in? When you look at it, would you say, "Oh, well, it's actually cardio that we've really increased over X, Y, Z"? Well, it's hard for our composite share to be driven by one service line. We're very diversified. There's no one service line that provides any more than 12%-13% of our total activity. And so one service line can't even grow enough to really move the needle. So you have to grow more holistically, I think, to really move your market share from 23%-27%. I'm not sure I could point to a service line that's uniquely grown for us. It's been pretty broad-based. I want to say over that time period, Kevin, we grew our share in almost 80% of the service lines that we measure. And we have about 16, 17 service lines that we categorize all the business in a market into. And we've grown in about roughly three out of four of them. Okay. Great. And then when we think about on the cost side of the equation, labor, I guess, is still kind of somewhat a constrained environment. How would you characterize the environment today? It's definitely stabilized from the heights of the pandemic. You've seen our turnover ratios come down almost back to pre-pandemic levels on the clinical side. We've invested heavily on the supply side or the education capabilities of the company with our Galen School of Nursing, with expanding the number of residencies we provide for physicians. So the net of that has allowed us to really deal with the staffing challenges. And it's stabilized. A great marker for that would be contract labor. If you look at contract labor as a percentage of salary, wages, and benefits, at the height of COVID, that would have been at about 10%. In first quarter of 2023, it was down to 7%. And then in first quarter of 2024, it was down to 5%. So you've seen the real stabilization through our recruiting efforts, through our retention efforts. And it's allowed us to really adjust accordingly. If I had to think about kind of where the future looks like, we're guiding in this 2.5%-3.5% zone for labor inflation and feel like that's a pretty stable environment for us as we progress through the rest of the year. We've been able to add to our headcount. And that's allowed us to open up capacity. We had some issues in 2022 and 2023 where we were actually having to close physical capacity because we couldn't staff. And we have increased our headcount to the point where we're pretty much receiving 90% of the patients who are attempting to get into our hospitals through transfers from other facilities or other rural markets or what have you. And that's on an elevated demand for those transfers. So we're pretty encouraged by the opening up of supply from our labor agenda that Mike just alluded to. Yeah. The added thing I would say too is length of stay. I mean, we've been able to really invest in our case management function. So in addition to adding headcount, we've been able to increase our bed turns. And a good example, 2023 versus 2022, we had almost a 3% decline in length of stay, which is the equivalent of adding almost 500 beds of capacity without spending a dollar in capital. So this capacity management initiative that we have as a company really buttresses the staffing capacity and allows us to take on more volume and deal with the staffing challenges in unique ways. 10%-5% of SWB is great. But now we're always like, "What can you do for me next?" Where could that go? Is that driving the right number, or can it go lower than that? Well, I mean, I would say 5% is not a terrible number for the company. And if you think about the decline from 10% to 7% to 5%, you will not see that kind of sequential improvement going forward. But in a normal environment, maybe pre-COVID, you would have been in the low to mid fours. So I could see over time, over the next year or so, there's still room for improvement, Kevin, as we continue to work on this. There's still room in terms of retention gains, in terms of recruiting gains. So the investments we're making will continue to pay dividends. So that's how I would characterize the move forward. Don't get me wrong. I'd love to get that down to 2%. But I don't know that that's in the cards. Okay. And so when we think about the labor side of things, how much is capacity now a constraint from a labor perspective? You said improving labor has helped that. Is it still a? Say it again. How much is labor today a capacity constraint, or is it now no longer a constraint? It's not nearly to the degree that it was. If you think about and let's just use occupancy as an example. Our occupancy level for the demand is up in first quarter compared to last year. We're up to 76% occupancy. Most of that's driven by just robust volume growth because we've added 2% bed count to our bed count. And then, as I already mentioned, we're having really good gains on length of stay. So it's really the combination of our labor strategies to continue to add headcount, reduce length of stay, and then be able to take on the demand. We're way better now, for example, in taking transfers and reducing the amount of transfer declines. But that's not a zero. And so as we continue to move forward, we do have opportunities to continue to service this demand, reduce the amount of patients holding in our emergency rooms, and increase the number of transfers coming in from outside. So it's a piece of it. But it all works together with both staffing capacity and physical capacity with our bed adds. When you talk about the length of stay reduction, is that apples to apples on the same DRG basis, or is there any kind of service mix happening where lower length of stay could be growing faster? We measure our length of stay in many ways. We have a ratio index that's indexed against actual DRG volumes. And we're seeing really good improvement in our length of stay management, even adjusted for the DRG mix of volume. So if you take 2023 again versus 2022, this 3% drop reflected itself as well in kind of our Geo index drop. So it's really the reflection of the work of the teams more than just the mix of the volume. But in the aggregate, our case mix in the first quarter was up, and our length of stay was down. So that's sort of the way we would sort of aggregate it. Yeah. And so when we think about HCA, it's been impressive how consistent the margins have been in that 19%-20% range for most of the past couple of decades. Every once in a while, I'll blip above or below. But what is the opportunity from a margin perspective today? I guess you're in the low 90s, I guess, from a guidance perspective. Can it go above 20%, or how should we think about that? Well, if all things stay equal, we think yes. Unfortunately, all things don't stay equal. We have to navigate through different events, whether it's staffing shortage, physician fee pressure, what have you. We try to adjust to that. But if all things stay the same, Kevin, with respect to no unusual policies or no unusual pressures, we do see opportunity. We have untapped potential, we believe, in our business. Our opportunity to get that is really centered around three areas. One, our digital agenda that we're implementing as a company includes changing out our clinical system, moving more information to the cloud, leveraging big data in ways that we haven't. And then I know everybody says it, but it's real for us. Using artificial intelligence to support our business is a potential game changer for us because we have so many humans involved in process. And that yields opportunities for us to narrow variation. Additionally, we think we can gain greater visibility into the processes that take place and then use this incredible proprietary, large proprietary database that we have to extract the learnings from the patterns. We have all kinds of patterns. And our ability to learn patterns is limited by us as humans. But with the machine, we have an opportunity to learn from these patterns year- on -year -on -year -on -year. And that's going to help us administratively get more efficient and better, operationally get more efficient and better, and then clinically, it's the Holy Grail, we believe, on the clinical side in supporting our physicians, supporting our caregivers, and really improving the outcomes and the environment for safety for our patients. So we are going aggressively into that. That's going to help us unlock some of this embedded value. The second agenda, and Mike can speak to this if you want, is our financial resiliency agenda, which, again, is being informed a lot by data. It's being informed by benchmarking. We're finding new opportunities to leverage certain things in our company to help us generate reductions in our fixed costs, better performance in our variable costs, and really move our agenda on that front also. And then the workforce development agenda that we have as a company with our Galen College of Nursing, with our graduate medical education programs and so forth, are going to allow us to integrate the next generation of talent into our company culturally, systematically, in ways that we think are going to be more efficient for us. So all of those things, we believe, in addition to our normal provider growth model in the market that we previously spoke to, give us an opportunity to generate margin improvement, assuming we don't have somebody strike a pen and change the reimbursement methodology or something like that. So we're pretty encouraged by where we are. And we now have what we believe to be a pathway and a set of initiatives that's going to unlock this potential that we see in our company. I guess you guys had your investor day for the first time in a long time last year. One of the things that kind of surprised me, 46% growth has been a great guidance number that you guys have been holding on to for a long time. You guys have been delivering, from an EBITDA perspective, 6%-7% over the last five years, 10 years, 20 years. Any CAGR you'd want to look at, you guys have been doing 6%-7%. When you look at the CBO forecast for hospital spending, it's 6% for the industry over the next 10 years. You guys are in faster-growing markets than the average industry. You have better capital. You're investing and getting share. Why is 4%-6%? 4%-6% seems to me to be the low end. Why isn't it 6%-8%? Is it just that risk of the stroke of the pen that you don't want to get ahead of, or is there? I mean, there's a lot of variabilities. We're going to produce as much as we can possibly produce. If we can get to 8, we're going to produce it. If we can get to 10, we're going to produce it. If we can only do 5, that's sort of how we think about it. It's a range, Kevin. Do you want to say that it's conservative? Maybe. But we felt it was the right thing for us to guide at that particular point. So I can't get you to raise guidance on the. Not right now. That's what I try to do throughout the day, is just get everyone to raise long-term guidance. But so far, no one's bid on it. But we'll keep trying. But I guess maybe you can help maybe debunk some of the myths that I hear about hospitals. I will often get generalist investors saying, "Well, wait a second. Do I want to own hospitals to begin with or capital-intensive businesses? Volume's trying to shift out of the hospital into lower-cost settings. So there's a structural demand issue there. And then your fastest-growing part of your business is Medicare, which is lower margin than commercial." So how do you think about that? I mean, those things aren't untrue. But the long-term growth, as I said, is 6% of top-line growth. Demand's there. So how do you respond? So our average daily census for our inpatients since 2012, it's up 27%. I mean, 27%. So what did Mark Twain say? The rumors of my death are exaggerated. That's what I say about inpatient hospital business. I mean, people are aging. Chronic conditions persist. New technologies support inpatient demand. And then you've got population growth as well. And so I understand the discussion. But I think the evidence has proven itself. I think our company is unbelievably durable. We're diversified geographically. We're diversified from a service standpoint. And it's our belief that demand on the inpatient side as well as demand on the outpatient side is growing. And we are positioned with our network model to really benefit from that growth. So I think also the patients that we do see are more acute and have more complex conditions. That connects back into our strategy, where we're trying to build out even more capabilities clinically with the services that we offer so that we have more critical care capabilities. We have more comprehensive cardiac programs, more transplant programs. All of those kind of things are really connected to what we see happening with demand. Obviously, if it shifts to Medicare from commercial, that's not a great thing for us. But we've been able to prove that we can manage through that because we have tremendous fixed costs. And that fixed cost is leverageable even with a Medicare patient. And so how we manage capacity with length of stay, how we use our scale as an enterprise or even within a community helps us to navigate through some of those components. But I mean, when I look back and I hear in 2011, when the Affordable Care Act was passed, that hospitals were going to become cost centers. And then I'll look at the fact that we have grown our inpatient census by almost 30% during that time period. It sort of belies the point. Our CAGR for inpatient revenue is the same as our CAGR for outpatient revenue. So this myth that outpatients 2x, 3x the growth of inpatient certainly has not been our experience. And why is that, though? Because you guys have been investing in outpatient. I would think that the number of hospitals you've been operating for the last five or 10 years has actually been pretty consistent, around 180. You guys have bought assets and sold assets. And so that's been consistent. But the outpatient assets have grown, at least in number. So why hasn't outpatient revenue grown much faster than inpatient revenue? It It seems to be where the investments are. Go ahead, Sam. No, go ahead. So I think Sam mentioned this network. It's a funnel. So if you think about kind of having the assets, the outpatient assets in a marketplace, and we serve the patients where they are, that creates a funnel into the inpatient as they need more acute services. Our investments in the freestanding emergency rooms, our hospital-based emergency rooms, and the ability to really kind of service the needs of the public, I think you'll see that pull through. A lot of hospital systems over the last 10 years have not invested in their inpatient capabilities. They've been focused on outpatient. We've been taking a very kind of balanced approach, not only in terms of our service line development but also in terms of our capital. And if you look back over the last 10 years and the way we use our capital investments, it's been pretty balanced between adding inpatient beds, adding emergency room and operating rooms, but then also adding outpatient facilities. And so I think it just reflects the demand in the marketplace. There is this myth that there's just not growing demand for inpatient services. That myth has not played out in the markets that we serve. And I think our strategy over the last 10 years of staying focused on being a comprehensive provider of services to a marketplace has allowed us to capture that demand both on the inpatient and the outpatient side. Yeah. Part of the revenue growth on the inpatient has been, again, the acuity of our inpatient population. I don't know what it is off the top of my head. But if I go back to 2012 to today or 2014 to today, it's grown significantly. So that helps with our revenue turnover because we have more acute services to offer. And the patient cohorts that we have are sicker. It yields some growth on the inpatient side. So all that's sort of embedded in that discussion. If you pull up to the highest level, Kevin, inpatient demand in our markets has grown about 1.5% over the previous decade. We forecast that it's going to grow somewhere between 1.5%-2% over the next five-seven years. So we actually see a little bit of acceleration in inpatient demand as we push through the rest of this decade. Okay. Great. And then I guess shifting a little bit, you mentioned stroke of the pen and risk that you're kind of worried about. They've actually gotten some nice tailwinds recently on the supplemental payments. I mean, there's been a bit of debate within the investor community about, well, are these things sustainable, or are they potentially at risk in the future? So how do you view them when you are talking to the states about passing these things? How are they thinking about it? So we have supplemental payment programs now in 18 of our 20 states, including three or four fairly new programs over the last two or three years. Those new programs have been approved in a consistent way by CMS. From a risk standpoint, the other thing that I'm encouraged about is the new rule that CMS just posted on supplemental payments. This is the first new rule update since 2015. Generally speaking, we view the new rule as favorable to providers and provider health systems. And if I had to just call it right now, there's no such thing as a zero-risk environment. But the policy and regulatory support for supplemental payments is strong now. I think states and the federal governments view supplemental payments as a way to protect providers for Medicaid. We really view these supplemental payment programs as really just part of our Medicaid net revenues and really core to our operations. I'm actually encouraged compared to the past related to both the stability and the policy structure that supports supplemental payments in our markets. I guess the other thing that's been going on is Medicaid redeterminations. How are you guys thinking about the impact of that? Has that been a tailwind? I mean, it seems like that could potentially be a tailwind. It has. It's been a modest tailwind. I wouldn't call it material. The redetermination process for Medicaid really kicked in the back half of last year. As we study revisits of that population into this year, we're still seeing 75%-80% of the patients come back with Medicaid. So they're making their way through the redetermination process. If you think about that 20% that we see losing Medicaid through the redetermination process, about half of those are showing up with other forms of insurance coverage: employer-sponsored insurance, healthcare exchanges, even Medicare. And then the other half of that 20% is uninsured or self-pay. And then we're taking that population back through the Medicaid eligibility process with the states. And so over the next four to six months, we'll get a sense for how many of those are able to get back on the Medicaid rolls. But the net effect of all that would be a modest tailwind for the company so far. And you'll see that kind of catch up to itself at the back end of this year. Okay. And I guess when I think about election risk, it seems like Biden's generally supportive of coverage. But you never know what Trump might do. But if we saw these subsidies expire in 2026, is there a way to think about how that might impact the company? Does that result in a volume headwind? Does it result in a payer-mix headwind? How should we be thinking about the risk there? Well, if it goes away, it would be the subsidies, that is. It would be a bit of a payer-mix tailwind. We don't know to what degree yet how many of the people would actually migrate back into the exchange without subsidies, how many might migrate back into employers, how many might migrate back into Medicaid. We don't have a good sense of that yet, Kevin, because we don't have complete visibility into the mix of folks in the exchanges. But I think it's reasonable to assume it'd be a modest tailwind in our payer mix. Tailwind or headwind? Headwind. I'm sorry. Okay. All right. Yeah. Okay. How much of your volume is exchange? 7% first quarter of total admissions. Okay. And then you guys have a great balance sheet, great cash flow. You bought back $1.2 billion of stock in Q1. So how do you think about capital deployment? Yeah. Do you think about the power of HCA? You combine this annual growth in operating earnings through adjusted EBITDA, which is all the work that Sam talked about earlier, coupled with a really disciplined approach towards capital allocation. And you think about 45%-55% of our operating cash flow will be invested back organically into our markets through capital investments. We support a modest dividend that will grow a little bit every year. And then the balance of our free cash flow, we tend to do share buybacks. And we think of share buybacks as some of the best investments that we can make for our shareholders and for the company. I think that'll be fairly steady as you see us moving forward. The good news is, with our operating growth, we grow our operating cash flow every year. That gives us immense flexibility and optionality as we think about opportunities in the marketplace. But I think what you've seen in the past will continue. We're on track to hit the guidance level that we gave at the end of last year, both for capital investments and for share buybacks for 2024. All right. Great. That's all we have time for. Thank you very much. All right. Thank you.