HCA
#Thank you, <UNK>, and good morning everyone
I will give you some more detail on our performance and the results for the quarter
As we reported in the first quarter, our same-facility admissions increased 1.2% over the prior year
Same-facility equivalent admissions increased 1.6%
Sam will provide more color on the drivers of this volume in a moment, and I will give you some trends by payer class
During the first quarter, same-facility Medicare admissions and equivalent admissions increased 3.5% and 4.3% respectively
This includes both traditional and managed Medicare
Managed Medicare admissions increased 7.3% on a same-facility basis and represent 34.1% of our total Medicare admissions
Same-facility Medicaid admissions and equivalent admissions increased 0.9% and 1.3% respectively in the quarter
Same-facility self-pay and charity admissions increased 3.2% in the quarter, while equivalent admissions increased 3.5%
These represent 7% of our total admissions compared to 6.9% last year
Texas and Florida still represent about 70% of our total uninsured admissions
Managed care other and exchange admissions declined 3.2%, and equivalent admissions declined 1.9% on a same-facility basis in the first quarter compared to the prior year
Same-facility emergency room visits increased 1.1% in the quarter compared to the prior year
Same-facility self-pay and charity ER visits represented 18.7% of our total ER visits in the first quarter of 2017 compared to 18.6% in the prior year
Intensity of service or acuity increased in the quarter, with our same-facility case mix increasing 3% compared to the prior-year period
Same-facility surgeries were flat in the quarter, with same-facility inpatient surgeries increasing 0.9% and outpatient surgeries declining 0.5% from the prior year
Same-facility revenue per equivalent admission increased 1.7% in the quarter
Our international division negatively impacted this stat in the quarter, mostly due to currency conversion
Same-facility revenue per equivalent admission for our U.S
domestic operations increased 2.3% over the prior year
Our same-facility managed care other and exchange revenue per equivalent admission increased 4.4% in the quarter, in line with expectations
Same-facility charity care and uninsured discounts increased $510 million in the quarter compared to the prior year
Our same-facility charity care discounts totaled $1.086 billion in the quarter or an increase of $131 million from the prior-year period, while same-facility uninsured discounts totaled $3.475 billion, or an increase of $379 million over the prior-year period
Overall, our uncompensated care trends are tracking in line with expectations and consistent with our uninsured growth trends
Now turning to expenses, our same-facility operating expense per equivalent admission increased 2.1% compared to last year's first quarter
On a consolidated basis, salaries and benefits as a percentage of revenues was 46.1% compared to 45.8% in last year's first quarter
Our salaries per equivalent admission increased 1.8% in the quarter on a same-facility basis
Same-facility wage rates increased 2.3% in the quarter, and overall our labor trends remain stable
Supply expense as a percent of revenue was 16.9% this quarter as compared to 16.7% in last year's first quarter on a consolidated basis
Our same-facility supply expense per equivalent admission increased 2.8% in the first quarter compared to the prior-year period
We did see a slight increase in medical device spend due to volume growth of some high-acuity procedures
Other operating expenses increased 10 basis points from last year's first quarter to 18.2% of revenues
Let me touch briefly on cash flow
Cash flow from operations totaled $1.28 billion, down slightly from the $1.399 billion in last year's first quarter
And as <UNK> mentioned, cash flow from operations was reduced by $188 million due to the Kansas City settlement that was paid in the first quarter
Cash from operations was benefited by continued strong performance in accounts receivable, with our AR days decreasing to 48 compared with 50 at December of 2016. Free cash flow, which is cash flow from operations less capital and non-controlling interest, was $564 million in the quarter compared to $779 million in Q1 of 2016. At the end of the quarter, we had $2.139 billion available under our revolving credit facilities, and debt to adjusted EBITDA was 3.83 times at March 31, 2017 compared to 3.82 times at the end of 2016. Let me mention briefly about healthcare reform
In the first quarter, we saw approximately 11,900 same-facility exchange admissions as compared to the 12,500 we saw in the first quarter of last year, or an approximately 5% decrease
You may recall we saw about 12,300 same-facility exchange admissions in the fourth quarter of 2016 for a 3.1% decline sequentially quarter to quarter
We saw approximately 49,800 same-facility exchange ER visits in the first quarter compared to the approximately 50,500 in the first quarter of 2016 and 43,900 in the fourth quarter of 2016. Overall, our exchange and reform activity is tracking with enrollment trends we see in our states, which is down about 5% from this time last year
So that concludes my remarks and I'll turn the call over to Sam for some additional comments
So our HIX volume was down 5%
And as <UNK> – sorry, Sam mentioned, we did have a couple of dynamics in our Texas markets
But overall, our HIX volume is kind of tracking with what we see enrollment in our states with some pluses and minuses going on, so we'll see how that tracks for the remainder of the year
And can I just add on to that? As you know, for the past couple years in health reform, the first quarter has been where we've seen significant growth in HIX volume
It just didn't happen this year
If you look at first quarter of 2016, we had HIX volume growth of 27% that just wasn't present in this quarter due to the enrollment activity as well
All right, I'll start with the trends and let Sam talk about nurse
I've characterized our labor environment, really, for the past several quarters at pretty stable
When we look at labor combined with productivity, wage rates, it's been very stable for us
The labor costs per adjusted admission at a little north of 2% is a pretty good number for HCA
And again, I think it's pretty stable
Contract labor has stabilized on us
We've got a lot of initiatives in the HR around nurse retention and recruitment, and I think those continue to provide benefit for the company
Let me kind of give you the broad brush on guidance first, and then let Sam and <UNK> add in
So obviously, we know we've reaffirmed our guidance going through the balance of the year
We've got variables that I think give us comfort in that
We look at the low end of our guidance for the balance of the year basically implies a 3% growth in the last three quarters to the high end at 7%, midpoint just around 5%
So as we look at the balance of the year, as Sam mentioned, we look at our volume portfolio, comps get better in the second half of the year
We still believe that 2% to 3% volume guidance is achievable for the company, coupled with our 2% to 3% pricing going forward
Our teams continue to manage our costs pretty well
You look at specifically in the commercial book, as <UNK> mentioned earlier, you saw those commercial trends start to decline in the last half of the year, so the first quarter still gave us a pretty good comp as our commercial grew just under 3% in the first quarter of 2016. So we think as we go through the year, that gives us confidence that we can stand behind our guidance at this point
I'll take that
On the leverage, as we stated, we're 3.83 times basically right now
Clearly, we've got the balance sheet capacity going forward
It will go up slightly, maybe 10 basis points by the end of the year if we get all these transactions completed
But again, as <UNK> said, we are optimistic in the earnings performance that that will continue to go back to current levels, well within our range to 3.5 to 4.5 times right now
So again, I think the balance sheet remains pretty strong
On the supply cost side, you're right
I did mention it was mainly due to some increase in device costs, mainly for some high-acuity volume
Overall, we're very pleased with our supply cost trends
If you look over a longer-term trend, we've been able to manage our supply costs on a per-adjusted admission basis at that 1.5% to 2%
Obviously, continued strong performance by our GPO HealthTrust Purchasing Group, a lot of initiatives in the supply chain operations as well as partnering with our clinical teams in certain clinical initiatives
So the device cost that we saw this quarter was really entirely due to volume growth in some of these high-acuity procedures, such as TAVR cases
We've seen our TAVR cases increase approximately 70% versus last year
You know this is a high supply cost area with the cost of new valves
We've also seen an increase in certain neurological cases, which include some implantable stimulator devices
So overall, given the volume growth, the supply cost trends don't surprise us, and we're pretty confident with our supply chain processes today
