Thanks so much for joining us. My name is Joanna Gajuk. I'm the Healthcare Facilities Manager Analyst at Bank of America. Thanks so much for joining the conference, and thanks so much for joining this session today. We are in the biggest room, Mike. All right. Now we're going to have a great conversation here with Mike Marks, who's the CFO of HCA Healthcare, the largest healthcare system company in the U.S. and also Frank Morgan is here in the audience if anybody has any follow-up questions to him. I guess we'll go right into Q&A. Sounds great. Yeah, I guess you're ready for it. I'm ready for it too. I have a long list. Let's see. Q1, right? Very strong quarter and surprisingly, you know, strong quarter despite, you know, some weather and flu and this and that. You know, especially the margins came in that much better. We were surprised with that. Can you walk us through, you know, I guess what happened? The quarter, is it sustainable going forward as we think about this performance? Sure. We were really pleased with first quarter. We had really good volume. I think our margins performed really well, both from leveraging from an operational standpoint, our volume growth, and then really strong cost management in the quarter. You know, we were pleased and encouraged with the start to the year in terms of sustainability. You know, we reaffirmed our guidance as part of our first quarter release and kind of reflects our belief that it's early. Given everything going on in first quarter and the broad kind of topics around the industry, we felt like it'd be prudent to just reaffirm guidance. We'll have an opportunity in terms of the rest of the year to talk to you guys another two or three times. As the start of the year, we were really pleased. Right. Because there were a couple of different items. So the DPP, the State Directed Payment Program benefits was actually higher. You're talking about the higher for the year. And then the hurricane impact, sounds like that was maybe a little bit better. But to your point, you just kept the guidance, right? So is this sort of, you know, you're trying to be conservative or there's some things you kind of consider that maybe you should be conservative as a reason to keep the guidance? The way we think about it is we try to set our guidance ranges broad enough to be, you know, inclusive of a broad range of outcomes. Given the uncertain policy environment and the macro environment they're operating in, we just felt like it was prudent to not update in first quarter and to reaffirm guidance for the year. We will have an opportunity as we get through second quarter to update that. The fundamentals of the company are really good. I mean, again, really good volume growth. Our net revenue per unit came in as we expected it, right at 3%. We had good top line growth. The margin performance of the company really reflects a lot of hard work. I think if you look at both our labor margin performance, our supply margin performance, and really even our other operating expense margin performance, it was solid. There is nothing but positivity coming out of the quarter from the fundamentals of the business. Right. I guess, you know, you mentioned some post-concerny, a lot of headlines almost every day, daily. I guess any thoughts on this, I guess, reconciliation bill draft from the House? Anything you guys looking at us and say, hey, like, you know, is this worse or better, you know, how you were preparing for it? It's early and we're still reviewing a lot of details. Two things as a caveat that we're looking at. One is it's got a long way to go. You know, it's got to get through the committee structure in the House. It's got to pass the full House, and then it's got to pass the Senate. There's still a fairly rigorous road ahead for this. There's a lot of details in the draft bill that came out of the Energy and Commerce Committee. We're still studying and assessing a lot of the details. I would say from a, you know, a broad statement that our read of this bill is that it's largely a grandfathering for state supplemental payments. For us, I think there's a good thing and a bad thing here. You know, the good thing is, is it looks like that the provider taxes that a state has now will largely be maintained. The reimbursement level that a state has now will largely be maintained under the bill, at least best reading that we have of it. We do not see big cuts to our current net benefits from the state supplemental payment programs from this bill, at least the early draft of it. We also would forego opportunities. And, you know, we have states that have a significant opportunity for enhancement that then, you know, those would be not available to us under this bill. You know, the way I think about it is that it is certainly not the worst case outcome for this bill. I think it is, you know, it is positive. Right. The other piece or the proposal came out around the tax reforms, but I guess it missed the one item we're looking out for in terms of the enhanced subsidies and exchanges. Can you walk us through, you know, your thought process about, you know, what could happen? There are so many different scenarios. We do not know exactly how it's going to be, but kind of, you know, what would be the impact to the company if, you know, say half of these subsidies or, you know, a portion of that expires, you know, in 2026? Is there any mitigation strategy you have in place to kind of prepare for that? When I think about the enhanced premium tax credits on the exchanges, it was not in this reconciliation bill draft, to your point. We are still advocating, you know, heavily that the Congress extend the EPTCs either in their current format or in some kind of modified format. We think it's really important. We think it's important for coverage for working families. We think it's important as a cost of living item as our communities and our citizens are dealing with cost of living concerns. We're continuing to advocate heavily that the EPTCs get extended. I think there will be other opportunities as we go through the balance of this year for Congress to pick that up. That's what we're advocating for. Given the uncertainties, you know, we're not sizing the impact of EPTCs yet until we have a better sense of what's going on and what comes out of Congress. But we are strong advocates that, you know, these tax credits stay in place. I mean, we think about it from the coverage perspective of individuals and I think it's important that they extend it. Right. I guess, you know, 2025 seems like there's a nice benefit from exchanges going faster than maybe other payer categories. That does create, you know, sort of a bigger headwind when this was, you know, to end or somehow, you know, be reduced. Can you help us kind of understand, quantify the things around what could this mean? Sure. If you think about where we are right now in first quarter, you know, 8% of our equivalent admissions are from the exchanges and 10% of our net revenue. The enrollment growth, which shows the demand, you know, down in the markets, was in our states over 12% growth in enrollment, which again, it just shows that the communities that we serve really appreciate the exchanges and the ability to get health insurance coverage. It is an important part of how we think about 2025. It is part of why, you know, we are trying to be careful for 2026. You know, we have got to get an understanding as we go through the rest of this year of what happens to federal health policy, what happens to tariffs. Those are important parts before we are going to be ready to give, you know, an early look into 2026. As we said in our first quarter call, I mean, we are working on plans now as a company, as you all would expect that we would, that if there are adverse impacts to the company from federal health policy changes or from tariffs, that, you know, we will make operational adjustments and adjustments to capital. I think back to the COVID experience that we have, where we were able to, with our management teams, with our capabilities to manage at scale, we were able to navigate a really challenging period. Our planning efforts are well in flight. Once we have a better sense of potential adverse impacts, we will be ready to face them. As you mentioned, tariffs. I have to ask the follow-up question on that. I know you kind of outlined, you know, the way you're thinking about the potential exposure that for this year, you know, somewhat minimized. You know, I guess we'll see what exactly is going to be finalized. Before we do, the one kind of lingering question out there is, you know, are you willing to kind of give us a sense of, you know, the exposure to China specifically? Because that seems to be like the one area where, you know, these tariffs could be, you know, higher than other markets. Are you willing to kind of help us quantify the exposure to this specific market in your supply? Let me start by just saying that I think we've been encouraged on the recent progress with tariffs, both with the pause and the reduction of tariffs that we saw over the last few days between the U.S. and China and even the deal that was cut with the U.K. I think that's positive steps that help frame up what hopefully will be, you know, a positive environment here. As I think about our supply expense, you know, as I said on the call, 75% of our supply expense either comes from the U.S., Mexico, and Canada or are related to products like pharmaceuticals that have broad exemptions from tariffs as we sit here today. It's about 60% from the U.S., Mexico, and Canada, and 15% are pharmaceuticals. The other 40% of our supplies kind of come from the rest of the world. Europe is a big component in that, especially with medical devices. The rest of Asia and China is a piece of that. India is a big supplier, and Indonesia and Vietnam and the like. You know, over the last decade, really even since the first term of President Trump, we have been working with our suppliers to try to mitigate our exposure to China. We've made a lot of progress. You know, China, while we still import supplies from China, we've mitigated that to a good degree. Let me just stop there. All right. Sounds good. Let's move on to something else. Yeah. You know, we started talking about the quarter and how strong it was on margins, but also volumes, right? Like 2.8%, same store, adjusted admission growth. That's essentially, you know, it's lower end of your full year guidance, right? There are some headwinds there. Can you walk us through, you know, are you on track with your full year guidance on volumes? Maybe also can you give us any color in terms of any recent trends that you're seeing, you know, through this quarter so far? We do not give guidance about what has happened in the current quarter. As I think back to first quarter, we were pleased with the volume growth that we saw, especially when you consider the leap year effect of the calendar impact. You know, it was broad-based. We saw volume growth in almost all of our geographies. We saw broad-based volume growth across our service lines. You know, I think it is evidence of good demand growth still in our markets. I think it reflects our 43 markets and the, you know, the strong economies and the strong population growth that we are pleased to serve in the communities that we serve. I think it also reflects the good work that we have done over the last many years investing into our networks and, you know, trying to take market share. It's a good start to the year on volume. To put a fine point on it, we reaffirm guidance. That's how I think about even our volume guidance of 3%-4%. Would you say, because I guess in the past, if there was, you know, some changes in an economic environment, we were able to observe some changes in volume. Is there something that you're seeing right now that maybe there's either people putting off some things because they don't know what's going to happen, or they maybe actually pull forward some utilization because in anticipation of what might happen? Is there anything to be said about that economic kind of environment impacting utilization? Yeah, it's a good question. It's one that we keep really our eyes out for as well. We don't see evidence yet that in first quarter that we saw either a pull forward of utilization because people were concerned about losing their employee-sponsored insurance or, frankly, yet deferral of care. I think from our best we can tell from what we hear from our markets, I think it's, you know, more reflective of kind of our normal demand so far. I think, you know, obviously I'm still hopeful. I'm sure everyone in the room is that we don't find ourselves in a recession. We didn't see indications yet that what we saw in first quarter was influenced by, you know, a changing utilization pattern. Right. And that number for the year where the two to, sorry, three to four, right, is higher than two to three, which used to be your long-term target. Still is. Still is? Okay. Because that was my question. Is there something to be said about this? Like, are we going to be sustainable going about that two to three, or that's early to say? As in, like, is there some catching up that's happening that's driving this above-average growth this year? You know, I don't, and I go back to even post-COVID, you know, I think we have caught up with any volume that was deferred during the COVID pandemic. I don't think that that is really a driver here. When I think about the last couple of years for HCA Healthcare, and we had good volume growth in 2023. We had really good volume growth in 2024 and a good start this year. I still think it's a little early to be changing our long-term guide from 2-3 until we have a better sense of the federal health policy changes that may occur and what happens with the economy. We acknowledge that our volume growth over the last couple of years has been on top of our long-term guide, but not quite ready to change that yet until we get, you know, through this year and get a better sense of what comes out of federal health policy changes. We are still locked in long-term to this 2%-3% growth. Feels like when I think about our markets, when I think about our long-term capital investments and our building out of our networks, that feels like the right long-term guide for now. In the quarter, EBITDA grew 11% year over year, right? Very impressive number there. So is that, you know, also an indication of things to come in terms of how should you think about, you know, your four to six percent EBITDA long-term guidance? You know, first quarter was strong. I think to your right, it's 11% growth. You know, even if you take the state supplemental payment net benefit impact into consideration, it's close to nine percent growth. The other thing I would think about when we look at first quarter is our hurricane-impacted markets. You have Largo Hospital in the Tampa area and our North Carolina division. You know, when I think about those two and you combine those for the first quarter compared to first quarter of last year, their earnings were flat year over year. If you think about the company at 11 and those two markets at flat, we would have been even better if they would have grown at, you know, just kind of company average level. It was a strong quarter economically. Again, I think for the year, as we stated, we're going to reaffirm guidance. And just, you know, I think there's really nothing in our quarter that I would say other than state supplemental payments and hurricanes that I would call out as being, you know, kind of non-core operational type results. But I just think it's a little early given everything going on in this first quarter to change guidance at this point. Right. Maybe just unpack a couple of these things you mentioned in the quarter at the start of the conversation. You know, labor came in better, supplies, other OPEX. Maybe first on labor, you know, any update on the trends there in terms of the wages, retention, and specifically maybe you can talk about Galen. Sure. Because, you know, we don't talk about it too much, but I think it must be helping everyone there. It is. When I think about kind of overall our operating environment for 2025, it's pretty stable, including the wage environment. We're seeing right where we expected in terms of wage inflation, both on clinical labor and administrative labor, which is great. It reflects a lot of work. I mean, if you think about the last three years of HCA Healthcare's work, our management teams have focused very heavily on retention and high-impact practices, how we go about retaining our clinical staff, super important to our business. You know, we have over 100,000 nurses in HCA Healthcare and almost 50,000 doctors who practice medicine on our staff. Retention is a really key part of this work. I'm pleased to say that, you know, we saw year-over-year improvement in our retention levels. Our retention is back to where it almost was in pre-pandemic levels. I think our retention efforts are going well. On workforce development, we've invested heavily to reach out and work with academic institutions in our markets, both nursing schools and allied health programs. Those efforts continue to pay dividends. We're finding our ability to be a place to practice for nurses and for other clinical labor to continue to be attractive. They come and do rotations. They come and do their practicums. We try to become the employer of choice for nurses and for allied health workers in our markets. That's where we're seeing good improvement there, including with Galen. You know, we started at Galen with four campuses. We're up to 22 campuses now, just short of 20,000 nursing students. If you go out in a few years from now, call it by the end of the decade, we'll probably have 30 campuses and just short of 30,000 students. You know, the work around Galen is a really important tool for workforce development. It helps us build, you know, kind of the HCA way into this integration between nursing school and nursing practice in our hospitals. It's been a really good strategy for us. It's great for the communities we serve. I mean, I think most of you are aware that there's a lot of people in America who want to go to nursing school every year. There's just not enough spots. This is an investment that we're making that helps HCA Healthcare, but it also helps the communities we serve by adding nursing slots for, you know, for people who want to go to nursing school. We're real proud of the investments we're making in our Galen College of Nursing. Right. The other component, the other operating expense, that is where the professional fees sit. Maybe we can talk about that piece. Obviously, you know, growing faster than inflation, but it sounds like maybe that is stable. Any update there? Is there any solution, I guess, to that sort of issue you are facing with? Yeah. And we've said this over the last year or so. I mean, professional fees continue to be, you know, one component of our cost structure that is inflating or growing faster than inflation for sure. For the quarter, on a same facility basis, we're up about 11% over prior year quarter. It was flat sequentially to fourth quarter. There is some stability there. Our teams continue to work really hard on this, both our operating teams and our physician services colleagues. This is mostly related to hospital-based physician pressures that, you know, have been long-standing here over the last several quarters. We've made good progress in the emergency room and with our hospitalist platform, with our Valesco integration. That gives us a more strategic asset from a solution standpoint, Joanna. When we face a contract negotiation on the hospitalist side with a third-party contractor that we work with, and if we are uncomfortable with the subsidy requests that we get, we have an internal capability now to be able to, you know, provide coverage in the emergency room and with hospitalists with our employee model. You know, we do not have a program that says we're going to employ every program at every hospital, but it certainly gives us an internal capacity to deal with challenges when they arise. I'd say the piece of the hospital-based physician dynamic that's still under more pressure is anesthesia and radiology. We are working diligently with our teams to continue to address those pressures. I think the fact that we've been able to moderate the rate of growth and stabilize our cost structure is a good thing. Our work continues, I assure you. Right. So given that pressure, is it something to be said about, does it permanently impact your margins? Because it's just going to be that way. There's no way to kind of reverse it. In your kind of, you know, long-term targets, when you think about your margins, does that kind of impact that? Is it big enough? Because I guess it's like 5% of revenues right now, roughly. It's about just a smidge over 24% of other operating expense would be the way to think about it. You know, I think in first quarter, you saw our ability to manage our margin in total. I think we think about our margins in total in two ways. One would be operating leverage. I mean, we run pretty much a fixed cost business. If you can keep your fixed costs fixed and get volume growth, we can leverage that synergy and produce operating leverage for the company. You saw that in first quarter. Then second, I think about our cost management activities that are, you know, strong for the company. That generated overall margin improvement in first quarter and even in context of growing pressures on the physician side. That's how we'll think about it. In no way are we giving up on the notion that we'll be able to manage down cost pressures with physicians over time. It's just we're still kind of going through the curve of dealing with it. I think over time, we'll continue to try to get that back to a margin performance category of our cost structure. But we're where we are. I mean, it's part of what, you know, nothing's perfect at all at all the time, right? This is just this part of our cost structure that right now we still have some challenges and we're working through them. Maybe on the flip side, one of the areas I'm thinking, you know, you can try to find offsets is push on the commercial payers. Maybe you can talk about that strategy in terms of where you are in the cycle on your contracting and where are these updates you're getting right now versus, say, the last couple of years? It sounds like there was a nice repricing cycle going on, you know, from 2023, 2024, and 2025. As we think about 2026, you know, would you expect sort of like the celebration of this or there's, you know, still cost pressure, say, professional fees that might kind of still justify those a little bit higher rate updates from commercial plans? Let me give you an update on our contract cycle first, and then we'll talk about where our pricing's landing. We're at over 90% contracted for 2025, as you would expect. We're about 75% contracted for 2026. We're well contracted for 2027 now. I think most of you are aware, we do two and three-year renewal cycles. If I think about the renewals that have happened this year and late last year, we're still kind of consistent with our past rate uplifts. We're still largely in this mid-single digits rate increase in our renewal cycles. I would say overall, our renewal and our contracting efforts with our payers continue to be steady. We continue to see access to lives, growing access to lives in our contract status now, both on the, you know, straight employee-sponsored insurance side and on exchanges and Medicare Advantage are, you know, as high as it's ever been. I think overall, we're moving through our contract cycle with our payer partners in a good and strong way. Is there any pushback you're getting from these commercial payers? Because obviously they all complain about high trend and, you know, it's mostly in MA, but it seems like maybe it's spreading somewhere else. So sort of, you know, is there some sense that you're getting that, you know, it's getting harder and harder to negotiate with these guys? You know, I think as evidence of we're getting our contract renewals done, we're getting our contract renewals done. That's a good thing. I mean, these negotiations are what they are. I I mean, they're negotiations and they have a point of view and a position and we do as well. I think for HCA, what we look at over the long term is we would like to be in contract. We want access to lives. I mean, it fits. If you think about the way we approach our markets, we like to set up networks and we have inpatient and outpatient facilities. We try to cover a broad segment of the population. Our model really depends on having contract access to as many lives as possible. We're motivated to get contracts done and be a good partner with our payer partners. I think we try to be meaningful and relevant in the markets we serve. You know, broadly, yes, you know, negotiations are negotiations and they can get tough. We, you know, we respect the payers and their needs and their positions. I would just say largely as evidence of our contract renewal, you know, numbers I just gave you, we're working through our contracts in a good and appropriate way. Right. HCA is actually the fourth largest ASC provider, I think. Maybe you can give us a sense of where the trends are. I want to say that the last couple of quarters, you kind of talk about the ASCs being not really the main growth driver. I mean, it seems like there's some things going on. Maybe you can kind of, you know, remind us what's been going on the last couple of quarters in ASCs business in particular and how you're thinking about this business going forward in terms of the growth outlook and such. We have about 150 ASCs across HCA. We think of them in context of our networks. They're an important part in the networks to do two things. One, to drive physician alignment with our surgeons. Two, to provide payer access to that level of service. We believe they do play a role in our broad approach and our networks. If I think about our results in 2024 over 2023 or first quarter of last year, you know, we've seen slight volume declines on the case side, same facility. A lot of that's been driven by a decline in lower acuity cases in our surgery centers getting replaced with higher acuity cases in many cases. A lot of Medicaid and self-pay that were part of the decline. Economically, when I look at our ambulatory surgery business, I'm seeing mid-single digit net revenue growth on the same facility basis and good economics. As an engine for outpatient for us, we're pleased with our ambulatory surgery platform. We think it plays a good role for us as we approach our markets. It's an important part going forward. Right. I guess there's other non-hospital assets you guys have in your network. Maybe without going into details, since we only have a couple of minutes left, just big picture, you know, non-hospital assets, kind of, you know, how important they are to the strategy sounds like very important, but also how much contribution from these assets do you get when you talk about, say, a 4-6% EBITDA growth longer term? Yeah. And, you know, Sam mentioned this in our first quarter call, but we're up to 2,750 sites of care. And that's inclusive of 193 hospitals. You can do the math here. For roughly every hospital, we'll have about 13 non-hospital assets in a marketplace on average across our markets. That is continuing to grow. I mean, as you look at how we spend our capital, how we develop our networks, you will see that grow over the next 5-10 years. We have a target of getting to 20 sites of care per hospital over time. They are an important part of our enterprise and our network. If I think about first quarter, and I'll just use this as a proxy, you know, outpatient revenue grew a little bit higher than inpatient revenue. All four categories of outpatient for us, surgery, emergency room, our ambulatory platform with our physicians and urgent care, and then our diagnostic platform, all four grew over prior year in revenue and in earnings. And so, you know, we're seeing good economic activity on our outpatient book and on our inpatient book. We tend to have a balanced approach to the market on inpatient and outpatient. You can see that in the way we build our networks. We're pleased with the way our non-hospital assets are performing. As we think about another, you know, a part of the HCA story, you know, cash flow very strong. Maybe talk about your plans in terms of deployment of your free cash flow and also as it relates also to your target leverage ratio. At the end of first quarter, we landed our leverage ratio at 3.1, which is in the lower half of our targeted leverage ratio of 2.75-3.75. We feel like our balance sheet is strong and well positioned as we navigate the next year here and go through, you know, this time that we have. I would say if you think about our balanced approach to capital allocation, when we reaffirm guidance, that in effect reaffirms what our thought process is for 2025 in terms of, you know, our capital investments in our facilities, our dividend, our mergers and acquisition activities, and share repurchase. We have a balanced approach. I think first quarter represented that. We are largely believing that we will stay on that for the balance of the year and largely achieve the guidance that we gave for capital allocation for 2025. Given the political surety and potential changes here and there, would that impact your plans for CapEx investments? As you know, again, we mentioned this on the call, but as we're thinking about the federal health policy changes and tariffs, there could be a potential for adverse impacts. Our planning is looking at both potential changes that we could make to our operating platform and potentially to our capital allocation. We did that during COVID as a reminder. Right now, I think we're solid for 2025, as I've noted, but we have flexibility. As I've noted, our balance sheet is strong. We will take changes to our capital allocation in consideration, especially as we get better clarity on what the potential impacts might be from the federal health policy changes and the tariffs. We feel good as we sit here today about 2025. As we know more, we'll keep you updated. Great. That's all the time we have today. Thank you so much. Thank you everyone for joining. Please stick around. Thank you. All right. This was perfect. Thank you. Thank you.