HCA Q1 Earnings Call: Revenue Beats Expectations Amid Volume Growth and Margin Pressure

Hospital operator HCA Healthcare (NYSE:HCA) beat Wall Street’s revenue expectations in Q1 CY2025, with sales up 5.7% year on year to $18.32 billion. The company expects the full year’s revenue to be around $74.3 billion, close to analysts’ estimates. Its GAAP profit of $6.45 per share was 11.5% above analysts’ consensus estimates.

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StockStory’s Take

HCA Healthcare’s performance in Q1 was shaped by broad-based volume growth, with CEO Sam Hazen citing improved payer mix and higher inpatient admissions as key drivers. Management also pointed to gains in emergency room visits and cardiac procedures, while acknowledging that surgical volumes were mixed due to a slight decline in outpatient cases. CFO Mike Marks highlighted cost discipline, particularly lower contract labor usage and improved operating expense management, which contributed to an increase in adjusted EBITDA margin.

Looking ahead, management reaffirmed full-year guidance, emphasizing continued investment in facility expansion and workforce development to support increasing demand. Hazen noted uncertainty around federal policy and tariffs but stated, “We are very engaged in advocacy as it relates to health policy” and indicated that HCA is preparing for potential adverse impacts. The company remains focused on operational discipline, balancing capital deployment between network expansion and shareholder returns.

Key Insights from Management’s Remarks

HCA’s Q1 results were propelled by higher patient volumes and careful expense control, but management acknowledged mixed trends in surgical procedures and ongoing policy uncertainty.

• Volume Growth Across Categories: Inpatient admissions rose 2.6%, emergency room visits increased 4%, and equivalent admissions gained 2.8%. Management attributed the revenue growth to these broad-based volume improvements, with additional strength in cardiac procedures and rehabilitation admissions.
• Expense Management and Labor Trends: Salaries and benefits as a percentage of revenue improved by 80 basis points. Contract labor usage declined to 4.4% of total labor costs, down from 5.1% a year ago, reflecting successful workforce initiatives and lower turnover rates among both nursing and non-nursing staff.
• Payer Mix and Managed Care Access: Same facility managed care equivalent admissions grew 5.4%. HCA expanded its managed care contracting footprint, notably with Kaiser in Denver and Blue Cross in Chattanooga, improving access to lives and supporting growth in net revenue per admission.
• Supplemental Payment Variability: Supplemental Medicaid payments delivered a net benefit increase of $80 million year over year, but management emphasized the unpredictability of these programs, particularly pending approval in Tennessee.
• Policy and Tariff Uncertainty: Management is closely monitoring the evolving federal policy landscape, including potential healthcare reforms and tariffs. About 70% of HCA’s supply expense is contracted at fixed prices for 2025, and 75% of supply expense originates from the U.S., Canada, or Mexico, mitigating some risk. However, the company refrained from quantifying the impact until clearer details emerge.

Drivers of Future Performance

Management expects continued volume growth and operational discipline to drive results for the remainder of the year, while also citing headwinds from policy uncertainty and supply chain risks.

• Facility Expansion and Capacity: HCA is increasing its number of care sites and inpatient bed capacity to accommodate rising healthcare demand, with a pipeline of projects aimed at supporting both inpatient and outpatient growth.
• Labor Market and Cost Control: The company anticipates a stable labor market and ongoing benefits from workforce initiatives, but will monitor for any wage inflation or market changes, especially if broader economic conditions shift.
• Policy and Tariff Exposure: Uncertainty around federal healthcare policy and tariffs remains a key risk. Management is engaging in advocacy and scenario planning to address potential impacts on reimbursement and supply costs, but does not expect material changes to its 2025 cost assumptions without further clarity.

Top Analyst Questions

• Ann Hynes (Mizuho Securities): Asked about changes in guidance assumptions and the mix in surgical volumes. Management clarified outpatient surgeries saw a mild decline, largely due to lower acuity cases and Medicaid, but overall revenue growth from outpatient categories remained positive.
• Pito Chickering (Deutsche Bank): Inquired about the sustainability of productivity and operating leverage. CEO Sam Hazen explained that higher volumes on a fixed-cost base drive margin gains, supported by reduced labor turnover and improved asset utilization.
• AJ Rice (UBS): Questioned the drivers behind strong revenue per admission and managed care contracts. CFO Mike Marks cited payer mix improvement and growing access to managed care and exchanges, while noting new contracts in Denver and Chattanooga.
• Whit Mayo (Leerink Partners): Sought clarity on Medicare Advantage dynamics and tariff exposure. Management said Medicare Advantage was steady, with no material impact from denials or policy changes, and estimated 70% of supply costs are fixed for 2025 to mitigate tariff risks.
• Joanna Gajuk (Bank of America): Asked about the increase in supplemental Medicaid payments and expectations for the year. Marks noted the Q1 outcome was better than expected but stressed ongoing uncertainty, particularly regarding approvals in Tennessee.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will be monitoring (1) whether HCA can sustain patient volume growth across inpatient and outpatient categories, (2) the company’s ability to maintain operating margin improvements amid inflationary and policy-related cost pressures, and (3) any material developments in federal policy, especially around healthcare reimbursement and tariffs. Additionally, updates on managed care contract renewals and outcomes of pending supplemental payment approvals will be crucial signposts for future performance.

HCA Healthcare currently trades at a forward P/E ratio of 13.7×. Should you load up, cash out, or stay put? Find out in our free research report.

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