美國醫院公司 (HCA) 2026 Q3 法說會逐字稿

Welcome to the HCA Healthcare third-quarter 2026 earnings conference call. Today's call is being recorded. (Operator Instructions)

At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Frank. Please go ahead, sir.

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen and our CFO, Mike Marks. Sam and Mike will provide some prepared remarks and then we'll take your questions.

Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements, they're based on management's current expectations. 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.

Good morning.

Thank you for joining the call. The company's results in the third quarter reflected improvement in key areas of our business. First, demand for our services continued to grow at a solid rate.

Adjusted admissions on a same-facility basis grew 3% compared to 2.3% year-to-date.

Inside this growth, insured volumes grew faster in the quarter than in the first half of the year.

The third quarter reflected the 22nd consecutive quarter of volume growth for the company.

Second, revenue per adjusted admission for our insured business, excluding supplemental payments, increased at a higher rate than in the first half of the year. This increase partially offset the payer mix pressure from continued volume declines for patients who were formerly covered in health insurance exchanges and are now uninsured.

Additionally, we had the modest incremental net benefit of $50 million in the quarter from Medicaid supplemental payment programs, primarily related to a recently approved Virginia program.

These factors coupled with improved cost results contributed to solid financial performance in the quarter that slightly exceeded our expectations.

Diluted earnings per share as adjusted increased almost 4%. I've often mentioned that HCA has strong staying power because of our scale. The important role we play in providing critical services to communities and our disciplined culture.

Despite the challenges this year brought about by federal policy changes, we have continued to move the company forward and believe we are positioned to end the year positively.

As we look ahead to 2027, let me share a few preliminary observations around certain aspects of our business before we provide our full year guidance in January.

I'll remind everyone we are still early in our planning process and there are several important areas that remain fluid, including the policy environment.

First.

We expect demand for services to remain strong with volume growth forecasted to be 2% to 3%. This range is consistent with our long-term thinking.

Within the demand environment, we believe it's reasonable to assume for 2027 that fewer people will lose their coverage on the health insurance exchanges than we experienced in 2026.

However, we do expect that there still will be a meaningful impact on payer mix.

We need to get through the fourth quarter before we can provide more details.

Next, we expect to receive approximately $550 million to $650 million less in Medicaid supplemental payment net benefits due to various state programs that received grandfather approvals in 2026 and reimbursed us for services we provided in prior years.

Last, we anticipate favorable cost performance, primarily due to our ongoing enterprise-wide resiliency program.

And the operating leverage from the expected volume growth.

When we aggregate the preliminary observations, we anticipate our earnings in 2027 will be generally consistent with 2026.

Beyond 2027, we anticipate performance more in line with our long-term growth targets. This view makes three important assumptions: first, we move past the most significant effects on payer mix from the exchanges second, we assume no material policy changes beyond HR1.

And finally, we have a set of strategic initiatives, including digital transformation, network development and ongoing resiliency programs that generate significant value.

I'll reiterate, it is still early, but we believe these preliminary perspectives provide context for how we currently see the company's growth prospects.

Let me close with this: our colleagues continue to provide high-quality care to our patients and execute our strategic plans. I appreciate their efforts in delivering on our mission, and I want to thank them for their good work.

As we get further into the execution of our plan, we believe it will enhance access for our patients with our capital spending, create a better work environment for our caregivers with our AI transformation initiatives and deliver value for our shareholders with our enterprise-wide resiliency program and balanced capital allocation.

As we look to the future, I'm confident that HCA Healthcare has the right people, the right process and the financial position to achieve our long-term objectives.

With that, I'll turn the call over to Mike for more details on the quarter.

Thank you, Sam, and good morning, everyone.

As Sam noted, demand for our services continued to grow at a solid rate. Compared to the prior year quarter, on the same-facility basis, admissions increased 2.7%, equivalent admissions increased 3%, and visits increased 5.1%.

Inpatient surgeries were down 1.4%. Outpatient surgeries were down 3.7%.

Regarding surgical volumes, consistent with the second quarter, we continue to see solid growth in our emergent surgical volumes and pressure in elective.

Same facility equivalent admissions in our insured population, excluding exchanges, increased approximately 3% in the third quarter versus prior year.

Exchange equivalent admissions declined approximately 19% versus prior year quarter.

For context, the third quarter of 2025 was our high watermark for exchange volume, making for a difficult comparison.

However, we did see sequential improvement in exchange volume from 2Q to 3Q of 2026 of approximately 8%. Like the second quarter, we continue to see patients who have lost coverage on the exchanges.

Migrate almost one-for-one to uninsured.

This one-for-one migration makes up approximately 80% of our uninsured volume growth, with the remaining 20% primarily related to a decrease in Medicaid conversions and mostly in Texas.

Our uninsured volume in third quarter 26 represented approximately 10.5% of total equivalent admissions versus 8.5% in the prior year quarter.

We estimate the payer mix shift from exchanges to uninsured resulted in an unfavorable impact on adjusted EBITDA of approximately $400 million in the quarter.

We now expect the full year unfavorable impact on adjusted EBITDA from payer mix shifts to be at or slightly above the upper end of the range of our previously updated estimates.

For Medicaid supplemental payment programs, the company recognized approximately $50 million of incremental net benefit during the third quarter.

We now expect the incremental net benefit for Medicaid supplemental payment programs to be between $600 million and $800 million for the full year 2026.

This increase in our estimated range was driven equally by the grandfathered application from Virginia and one-time payments from across our other programs.

We were pleased with our cost results in the quarter.

Same facility cost per equivalent admission when excluding Medicaid supplemental payment programs was essentially flat versus prior year quarter, and it improved 40 basis points sequentially.

As we typically see an increase sequentially from second quarter to third quarter, this outcome reflects strong operating discipline from our teams.

Moving to capital allocation and cash flow, capital expenditures totaled approximately $1.36 billion in the quarter.

Additionally, we purchased approximately $3 billion of our outstanding shares and we paid $165 million in dividends for the quarter.

Cash flow from operations was approximately $4.5 billion in the quarter.

Our debt to adjusted EBITDA leverage remains in the lower half of our stated target range, and we believe our balance sheet remains strong and well-positioned for the future.

We currently expect to complete most of the existing authorized share repurchase program by year end, subject to market conditions and other factors.

As noted in our release, we are reaffirming our estimated guidance ranges for 2026.

Given our third quarter performance, we currently expect to be in the upper half of our guidance ranges for the year.

I will now hand the call back to Frank Morgan for questions.

Thank you, Mike. As a reminder, please limit yourself to one question so we might give as many as possible in the queue an opportunity to ask a question. Christine, you may now give instructions to those who would like to ask a question.

(Operator Instructions) AJ Rice, UBS.

Thanks. Hi everybody.

Maybe just, I know it's early to be given a lot of comments about 2027, and you're thinking about consistent EBITDA versus this year. It sounds like you're thinking there is a fairly substantial incremental public exchange headwind that you've got to overcome, and you're also talking about incremental savings from ongoing resiliency programs. I wonder if there's any way to flesh out sort of an order of magnitude of what you think that. Incremental public exchange headwind might be next year, even if it's a wide range? Similarly so, should we look for cost savings similar to the $400 million resiliency program you announced this year or next year?

Well, AJ, I think what we try to do in preparing our early book comments is give you the best information we have at this point.

As Sam noted in his prepared comments. We still are in the early stages of our planning cycle. And as we kind of finish fourth quarter, we're really studying two key components.

Number one is our results in the fourth quarter and how the strength of our core performance continues to mature.

I think it's clear in third quarter, we were pleased with our core growth and we feel like we have momentum. We need to validate that in fourth quarter and that'll give us a really good sense.

Of our core growth as we kind of step into 2027.

The second thing that we've got to study is the exchange environment. And as we go through the fourth quarter first, we'll better information about how our exchange volumes perform here in the last quarter of the year. But we'll also have better intelligence about enrollment. The enrollment period starts on November 1st and it goes through mid-January. And so with those two things, we'll be in a much better positioned to give you our best sense of this on our January call, our fourth quarter call for '27 guidance.

But I think as you think about core growth, you think about the headwinds that we have disclosed related to Medicaid state supplemental payment programs, and then what ends up happening with the exchanges in 2027. Those are the big moving parts, and we'll give you further guidance as we get on our fourth quarter call.

AJ, let me add to the cost. I mean, we see our resiliency agenda broadly as an ongoing strategic program for the company. We now have new capabilities. We have new technology. We're expanding our shared service platform as a result of that. And we're able to move the cost agenda.

Systematically as a company today and heretofore we didn't have that ability because we didn't have the capabilities nor the technology and I think the mindset to accomplish it as a result of that. So when we started thinking about costs in 2027, as I mentioned in my.

My comments, we do anticipate more value coming from our resiliency program broadly within our networks and from a cost standpoint overall for the company. And so that is more of a strategic agenda item that will carry itself into the future and be a part of our programmatic efforts as we move beyond 2027. I think the other point, Mike, is the Medicaid supplemental payment program is related to some payment. From prior year as we think about '27 also.

Ann Hynes, Mizuho.

Great.

Thank you so much. I just want to ask about 340B. I know there is a regulation out there that if it goes into effect as is. Should benefit the for-profits that don't participate in that program.

And I know that would probably be challenged at some point in the legal system, but does that that guidance assume any change in that program or any potential benefit? And if it does, have you sized that? Thanks.

Thanks, Ann.

So this is part of the Medicare OPPS rule that's proposed at this point.

We were pleased with the construct that is part of the proposed rule as it relates to a budget-neutral reallocation of 340B.

It would benefit us. We have not or we're not sizing that publicly at this point.

And as we think about kind of our early look statements, just keep in mind the idea of being generally consistent is where we are standing here at third quarter. We'll give you much more detailed information as we get on our fourth quarter call. But I would say, I mean, we view the OPPS rule as proposed and we're hoping that it gets finalized here soon as a positive.

Factor for ACA as we head into 2027.

Ben Hendrix, RBC Capital Markets.

Great.

Thank you very much. And I appreciate the demand comments for next year and the expectation for 2% to 3% volume growth. I'm wondering how the surgical backdrop is fitting into your thoughts there. I know you had said that you didn't expect any recovery of the kind of weaker elective trend through the end of this year. But as we think about next year, is there pending demand getting pinned up there that could unwind and would that be upside to that 2% to 3% or would that. Considered in there. Any thoughts on how you're thinking about surgical progression for next year? Thanks.

Ben, we haven't landed on components of that growth just yet. We have some viewpoints. I think again, we need to get through the fourth quarter, see how the seasonality on surgery plays out in the fourth quarter. I think our emergent business, as Mike spoke to. Continues to be strong. We see some macro forces impacting the elective business, coverage being the primary macro force, and then just sort of general affordability across the economy being a second one. So I think from that standpoint, we haven't landed on any surgical viewpoints. But I think it's important for everyone to understand that our composition of volume is fairly diverse.

We have women's. We have NICU. We have transplant programs. We have surgery, yes, medicine, critical care. All of these components are attributes of our company that we think give us an ability to navigate through a component not being as productive as we want. And that's what we're seeing. We're seeing more growth in other services that are compensating for some of the surgical growth or surgical declines that we're expecting. Experiencing. For example, our neonatal activity in the quarter was very strong. Our cardiac business continues to be strong. Our trauma business strong.

EMS traffic to our hospitals up significantly. So there's all of these elements that go into our volume assumption. We're not ready to sit there and call out surgery specifically for 2027 until we get a better viewpoint of it through the seasonality patterns that typically exist in the fourth.

Brian Tanquilut, Jefferies.

Hey, good morning, guys. Maybe, Mike, as I can look at the SWB and the operating expense lines, SWB up sequentially, other OpEx down, anything you can call out there, especially as we think through temp staffing, we're seeing indicators that it looks like temp versus staff orders are picking up, so just curious what you can share with us on those two line items, especially given resiliency efforts?

Sure. And I mean, that's part of this answer is consistent with our sequential notes we had in my prepared comments, Brian.

Typically when we go from second quarter to third quarter, that is the timing of when we do a lot of our merit adjustments in labor. And so we typically see, even 100 basis point increase in our expense for salaries and benefits overall.

And that's one of the factors. And so we were actually really pleased when we looked at our expenses per equivalent admissions, obviously excluding state supplemental payments.

One, they were essentially flat to the prior year, but two, they were 40 basis points sequentially down, from second quarter to third quarter, which, we think really reflects the strength of not only our resiliency plan, but also the operating leverage we're getting from same-facility volumes. I mean, if you look at SWB on a margin basis to prior year, even with, the softer overall revenue, we had a 40 basis point margin, so we were.

With that and the same thing, we had good performance in supplies as well.

On other operating expenses, if you just look at third quarter to prior year, you do have a bit of cost related to the state supplemental payments, keep that in mind. Professional fees continue to be a pressure point for the company. We were up. About 12% versus prior year quarter, and professional fees now represent about 24% of other operating expenses.

And I would note that those continue to be driven by radiology and anesthesiology. So that's Brian, that's a bit of a rundown on the cost side.

Pito Chickering, Deutsche Bank.

Hey, good morning, guys, to take my question. I'm going to ask AJ's question a little differently. You quantify the $600 million or $550, $650 million of less Medicaid supplemental payments. You talked qualitatively about the HIX impact next year and the core mission growth of 2% to 3%. Can you just confirm that 2027 adjusted core EBITDA growth is still in the 4% to 6% range? The other piece is impacting that, or is core running hotter or lower? How much is resiliency driving that core growth?

Well, resiliency is just part of our core operations. And so that's the way we think about resiliency is part of the work we do every day in management company.

When I think about core growth in third quarter, we were pleased with core growth in third quarter and call it a 10% core growth increase.

I think that reflect good volume growth, it reflected a good net revenue per unit improvement in the quarter and really good cost management as well.

And I think as you see how we kind of set the guidance range in the upper half of the range, that gives you an implication of how we're thinking about fourth quarter.

And then we'll give you kind of our thinking in more detail about 2027 when we get on our fourth quarter calls. So that would be the way to think about core growth.

We'll need to validate it for fourth quarter, but we were really pleased with third quarter. And you get a sense from the upper half of the range comment that we have.

Matthew Gillmor, KeyBanc.

Hey, thanks for the question. On the pricing topic, you called out an acceleration in insured revenue per equivalent admissions. It sounded like that was better than expected. Can you talk about some of the drivers of that acceleration?

Sure. So, Matthew, if I look at kind of net revenue per unit and I think about the insured book, obviously, excluding the exchanges, because the payer mix is still the big negative that we're dealing with in terms of net revenue per unit to prior year. Number one is really the strength of our commercial volume. Our commercial excluding exchanges volume was up 2.7% over prior year quarter, and that's strong. And so that component of our payer mix.

Is definitely a part of why our net revenue per unit was a bit stronger in third quarter than the first half of the year.

The second, we continue to see solid rate growth across our payer categories.

And then really third, Parallon, we see continued strengthening.

And their abilities to collect our net revenues and yield our contracts, their work to continue to strengthen our abilities to deal with denials and underpayments continues to improve. And so I think overall, we had a good net revenue per unit performance in the third quarter, especially kind of given the headwinds from our payer mix.

Sean Dodge, BMO Capital Markets.

Maybe just on the 2026 guidance, Mike, you said you're now pointing to the upper half of the range. I think that still implies core growth in Q4 will accelerate some from Q3. Maybe if you could just walk us through the visibility you have and what's going to drive that. Is that just incremental gains from. You're expecting to come through?

And Sam, you also mentioned volume growth in Q3 broadly improved from the first half of the year. Is that part of the assumption too that volumes also continue to improve in the Q4?

Well, first, I would say, I mean, I think if you look at the upper half of our guidance ranges, that largely implies our core growth fairly consistent in the fourth quarter and third quarter would be the first thing out of context.

And then I think the drivers are similar, number one is we did see strength in volume in third quarter and so that's encouraging for sure, we've already mentioned a little bit on the net revenue per unit side, there tends to be a step up from third quarter to fourth quarter.

In normal course. And so we expect that normal seasonal trend to apply broadly. And then we do believe, as even Sam mentioned, not only in his opening, but as we were talking about in the first question, that our performance around our resiliency plan, our ability to manage costs, we continue to see strength across our resiliency plan in third quarter, in fourth quarter and into 2027, 2028 and beyond. So I think those are the key components.

Sean, that are kind of making up our guidance comment for fourth quarter of 2026?

Whit Mayo, Leerink.

Did the HIX headwind get larger in any particular market and any comments around AR collectability, balance after collectability would be helpful? And any of the $400 million, is that related to prior quarters?

Well, I would say with that our HIX results in third quarter were a little bit higher than we estimated.

We would have estimated based on our guidance that we gave at the second quarter, the third quarter would be 15%, 16% decline, we ended up at about 19% decline, which just reflects the sustained decline in our exchange volumes.

I like to put that in context, though. I mean, that two or three points is about 2000 adjusted admissions.

We have about a million adjusted admissions in the quarter. So these aren't perfect estimates, but it gives you a sense of the numbers we're looking at here.

Our experience in third quarter, and I mentioned this in my prepared comments, number one, third quarter of last year was our high watermark, so there was a bit of a prior year comparison difficulty.

We did see, however, a sequential improvement in exchange volume from second quarter to third quarter '26 of about 8%. And so all of that when we brought it together, it's kind of what guided us. To say that we think for full year '26 now, we'll be at to maybe slightly above the top end of our previously updated ranges for the exchanges.

That's kind of how the numbers pulled through here in third quarter.

Ryan Langston, TD Cowen.

Great. Thanks. Appreciate the commentary on elective versus emergency surgical future trend growth. Can you maybe update us on what ASC versus HOPD surgical volume look like in the third quarter? Thanks.

So the ASC surgery volumes were down 5.4% on surgery. Overall, case volumes were down about 3.7%.

The primary pressure is related to the exchanges in our ASC book, very similar to the hospital side. I wouldn't know, however, that even in light of the volume softness there, that our overall net revenue and earnings did show some growth to prior year.

The hospital-based outpatient surgeries were down 2.9%.

I think it's important to understand the construct of our ASC platform, and that informs at some level for us the macro forces that are out there with elective care at this particular juncture.

And so when you sort through what's going on, there are certain issues in some centers that we have, but at sort of an aggregated level, it informs. A little bit of our macro thinking around some of those forces that are influencing overall demand.

Sarah James, Cantor Fitzgerald.

I'd like to keep going on that topic. So is there a way to unpack.

Unpack how much of the inpatient and outpatient surgical trend pressure so far this year is exchange-related versus how much is affordability and things that may be continuing?

And then given your comment on affordability pressure, are you assuming any stronger than normal tailwind in 4Q ahead of the deductible reset?

We are not at this particular juncture assuming anything outside of normal seasonality, but your point is relevant. It could be that some folks are.

Making decisions. We've seen that on the margins in other years, but at this particular point in time, we are not. When I look at our elective care, surgical care, I mean, the HIX is a very large percentage of the explanation. It goes back to what we've been saying all of last year and all of this year. Coverage for people matters, and it creates access, affordability, and elective care. It's a very fundamental element to individuals' abilities to get the healthcare they need. And so it's a large piece of the elective equation is the coverage dynamic that's occurred in the HIX environment. And I don't have an exact percentage here in front of you, but it's a very significant piece of the variance. And we called that out and we think that has some incremental effects in other. Payer classifications as well as we talk about the affordability more broadly.

Justin Lake, Wolfe Research.

Thanks. Good morning. A couple of quick number follow-ups. First on 2027 DPP, appreciate the 550 to 650 number. I was hoping you can isolate your estimate here of how much of that number comes from the Q4 DPP cut as HR1 gets implemented versus the 2026 at a period that doesn't reoccur. And then on the exchange impact for Q4, can you tell us how much your guidance assumes that that sequential exchange. Volume growth occurs from Q3 to Q4 this year? I know you just gave us the Q2 to Q3 numbers on Q3 to Q4.

Well, let me start the first part of your question. So as Sam noted in his comment, we expect to receive approximately $550 million to $650 million less. In Medicaid state supplemental payment net benefit in 2027 versus 26, and that's because of the grandfather approvals that happened in 26 that were really related to prior years.

The predominance of that, Justin, was related to Florida, which we previously disclosed.

The rest is really related to the other grandfathered states, like Virginia, Georgia, et cetera. So that's really the makeup of those kind of the out of period state supplemental payment programs. If I think about what the guidance implies of fourth quarter, we are finishing September 26th. Six year-to-date with $650 million of incremental net benefit from state supplemental payments.

So if you think about the full year guidance range that we just updated to $600 to $800 million, that would give you a sense for what we're thinking about fourth quarter. At midpoint, it would be another $50 million net incremental benefit, and then you can see the range. And so that's kind of how we're thinking about that for fourth quarter.

And then on exchanges.

Not ready to quote a sequential move from Q3 to Q4 at this point. I would note, and we noted this on our second quarter call, I would point you back to fourth quarter of '25, where we did see a slowdown occur in our exchange volumes from Q3 to Q4 last year. And so we do think there is a bit of a benefit comparison benefit in fourth quarter of '26 given that factor.

Kevin Fischbeck, Bank of America.

Great, thanks. A lot of moving pieces here. So I just want to make sure I understand the new guidance versus the old guidance. Is the right way to think about it that.

The new guidance includes about $300 million more of SDPs and $100-plus million more of headwinds from payer mix and then that combination is largely the increase in guidance from.

The prior? Is that the right way to think about it? And then just a clarification on the HIX headwind that you guys are talking about. Is it purely just an uninsured number, people coming in and not paying? Or are you also kind of thinking about the implication of lost surgery for the people losing coverage in that number?

Well, let's walk to guidance first, Kevin. So yes, I mean, from supplemental payments, we've raised our net benefit guidance by about $300 million. So that's certainly a piece of it. If you think about the exchanges with this idea of kind of at or slightly above the top end in our previously released estimates.

You're in the $100 million to $200 million increase in headwinds related to that. And then the third thing I would call out is just core growth. I mean, I think as we noted on today's call, we believe our fourth quarter core growth should be good. The net of those three factors really led us to making the comment that we believe will be in the upper end of our guidance ranges for the full year, which will give you a sense of how all that comes together.

So that would be the walk down guidance.

Scott Fidel, Goldman Sachs.

Hi, thanks, good morning.

My question is just first on the i know there's been some questions around it on the third quarter and next year, but on the fourth quarter, just maybe the visibility and expectations that you have around elective procedures and sort of how scheduling seems to be playing out in terms of just normal seasonality.

And then I just wanted to also ask in terms of the headwinds that you've laid out for next year relating to DPP, whether there's anything specifically relating just to the CMS policy that now is requiring all the 1115 waivers to be budget neutral from a federal perspective and just whether your intel from the states, are you seeing any change in sort of approach or in terms of applications or.

Sort of anything that you think could be sort of play out, relating to that policy that could impact fundamentals in 2027. Thanks.

On elective, Scott, and I think Sam mentioned this when he was answering the previous question of surgery. At this point, we did not assume, any pickup on elective demand related to.

Co-pays and deductibles in the fourth quarter. I think we expect a normal seasonal move from Q3 to Q4, but we did not build into our guidance thinking some kind of improvement or pull forward of demand from an elective standpoint in the fourth quarter.

When I think about HR1 for 2027, and we continue to monitor all the rulemaking, we know that our states continue to file their applications and feel good about the processes that we see. in flight.

I would mention on HR1 that, the big change is really work requirements for able-bodied adults in our expansion states.

I might mention just for context that expansion states are 40% of our Medicaid volumes and revenues. And when you think about work requirements targeting able-bodied adults in those expansion states.

When you take out the seniors and the disabled and the kids and those that are medically frail, we think that work requirements would be kind of applicable to about 15% to 20% of our Medicaid volume.

And so the net of all of that, while we're not quite ready to size it in terms of earnings impact, we do think that work requirements specifically would have a bit of a modest impact in full year '27. So that's some main things we're watching for HR1 next year, and I think that wraps both of your questions.

Stephen Baxter, Wells Fargo.

Just a couple of follow-ups on the breakout of adjusted admissions. I think you gave us the commercial exchange number already, but could we get the Medicare, your AA growth, Medicaid, and then I guess you gave us the exchanges on a quarter-over-quarter basis. If you also had the year-over-year basis, that would be helpful too.

Sure.

So the same-facility adjusted admissions compared to prior year for third quarter, Medicare is up 3.2%, Medicaid is up 2.7%, commercial excluding the exchanges are up 2.7%, and then the exchanges are down 19% in the prior year quarter.

As I noted in my comments ago, that is an 8% sequential improvement from Q2 to Q3.

Jason Cassorla, Guggenheim Securities.

Great, thanks. Good morning. I wanted to turn back to the volume discussion.

You guys have seen pretty solid volume acceleration over the past couple of quarters that clearly stands out. You're talking about 2% to 3% volume growth next year. I was just hoping if you can give us a little more in terms of what you're attributing the volume strength to. I mean, you've talked to the solid demand environment, but can you help quantify maybe like how much you're thinking is coming from the benefits of in-market initiatives, all the work you've done to expand capacity and the like, and how that kind of fits into that 2% to 3% mold that you're looking forward for next year would be helpful.

So if you start at the top here, I mean, it's our belief that there's sort of inherent demand growth in the markets that we serve coming from population growth.

Aging baby boomers, chronic conditions, new technology even, all of this sort of converges to create an upward movement in demand in the markets that we serve.

And so that's just the starting point. We do think across a lot of our markets, we're gaining market share incrementally. We do have some markets that we have to adjust to different dynamics and respond at that level. But when you look at it in the main, over time, we picked up market share. Our approach to our networks is continuing to advance.

With respect to our ambulatory platform, we're up to almost 3,000 units.

Through acquisition of urgent care, ambulatory surgery centers and other outpatient facilities that complement our hospital's ecosystem and create for our patients a more convenient and accessible location and efficient service.

That continues to evolve in our networks and as we.

Mature on that platform and leverage the restructuring that we did with one of our group Presidents, Charles Gresley. I anticipate that we're going to be able to move our ambulatory platform forward and create even more growth out of it. Again, meeting our customers, our patients, wherever they live so that we can create convenience and so forth for them. A second important initiative for us is creating patient. Coordination once they do hit one of our ambulatory facilities. And through patient coordination, we think we can create a better experience for the patient and ultimately integrate them into our system. And if in fact they need acute care services, we're helping them achieve that in an efficient and transparent way. So that's evolving also.

Clearly, we're investing in our hospitals. With capital, we are adding beds. We're adding other capacity within our facilities to manage the demand. We're running the company at an all-time high when it comes to occupancy levels, pushing 75% on our inpatient platform.

We're benefiting, however, through patient flow initiatives where we're able to improve the flow for our patients and get them to the care sites they need. That's creating capacity for. Us as we evolve also. So all of these things combined are yielding growth for our company. And then lastly, it's how we engage with our physicians and support our physicians with their practices, meet them where they are, and find ways to invest in clinical capabilities, be very effective and efficient in how we process their patients, and then ultimately give them a voice in what's going on that's allowing us. To respond largely to our physician requirements as well. So all of those things, it's impossible to point to one thing. And each market's slightly different. We have to nuance our approach in each market to address those differences. That's why we're organized as we are with our divisions. But I think with 22 consecutive quarters of growth in volume.

Which is quite impressive from my standpoint. And then with the return on capital and then with the improvements in quality and service for our patients, we feel like our model works and gives us, again, the staying power that I mentioned in my comments and allows us to push into the future with confidence and a belief that we can achieve our objectives.

Raj Kumar, Stephens.

Maybe on the pricing conversation, just curious on.

I know you're mostly contracting on the commercial side for 2027, but you have to think about 2028. Are payers starting to embed any explicit assumptions around coding and more accuracy on that front? And just curious across one of that node in terms of how diffused it is across the platform, or is it still in early stages around kind of the coding on that front?

This is Sam. Let me lift up a little bit on this point. It's important for us to have solid relationships with the major payers.

In our community, and we do that.

And we're able to meet their objectives and meet our objectives in most circumstances. And that's been, I think, part of our ability to execute our strategy and help them execute their strategy. Our contracting process is transparent with our major payers, and we are accomplishing.

Contract cycling that naturally occurs over time. We're deep into 2027, and we're not as deep into 2028, but we are making progress on 2028 as contracts mature and move into the cycle that naturally occurs. We're able to achieve our objectives and then support the objectives of the major payers.

Our teams are working very.

Earnestly to come up with solutions for people. And what I mean by that is the patient, the providers, and the beneficiaries that are all connected to what we do administratively between the insurance companies and the hospitals, HCA and many of the major payers are working.

Diligently to eliminate the friction, create a more cost-effective solution, and reduce the administrative complexity that exists within the system. And I'm encouraged by the progress that we're making. I'm encouraged by the attitudes of many of the payers. And I think we're going to progress.

Over the next year or so and really create value for our patients and for the beneficiaries in a manner that starts to change the paradigm a little bit between what's going on with payers and what's going on with HCA. So more to come on that, but we are, in fact, progressing on just about every front with respect to our major payers.

Benjamin Rossi, JPMorgan.

Hi, good morning. Thanks for the question. Following up on your market-specific commentary, with some of the broader operational pressures you're facing, I appreciate that you're still adding inpatient capacity and outpatient density.

But as you assess your questions, are you at all considering any market exits or potential changes to your footprint? Or with these pressures hitting everyone, do you consider yourself a potential buyer as competitors to always face these headwinds? I guess just curious where you stand on market positioning at this juncture?

So we compete in.

43 markets roughly in the U.S. Some of them are smaller and they get counted in that. And then some are mega markets. And over the last seven, eight years, we have been fairly intentional about looking at our individual markets and determining whether or not we can execute our model and be successful and meet the needs of our constituents. And we've largely pruned the portfolio of ACA. Down to the markets that we think can go the distance. And today, the markets that we have are ones that we're investing in at different levels, as you would expect, because of the different circumstances from one market to the other, the different opportunities that exist. So I don't see any significant change to our market configuration at this particular point because we've been intentional over the past few years. To optimize the portfolio, if you will, and put ourselves in a position where we can succeed and build out the model that we think adds value to our patients and adds value to the organization as a whole.

That allows us to focus our capital spending, to focus our talent and our resources on a smaller footprint, but with a very significant growth.

Prospect we believe for the company. So that's where we are. We always have one or two items here or there.

With regard to new markets, you're right, we're built to be bigger. We know that, but we just haven't seen a lot of opportunities yet. If opportunities do develop.

As usual, we'll be opportunistic and take a look at whether or not it's affordable, whether or not we can execute our model and make the right decision at that particular juncture.

We do have a lot of outpatient activity, as I mentioned earlier, that is important to building out.

The network overall so that it is accessible for our patients and we continue to invest in those opportunities as they develop as well.

Andrew Mok, Barclays.

Hi, good morning. Can you talk about what you're seeing in the market as it relates to the removal of the inpatient only list, both in terms of procedure migration today and actions taken now in anticipation of future migration? And how should we think about the impact of the inpatient only list and potential outpatient capacity additions against the backdrop of fixed surgeons? Thanks.

Andrew, if I think about the inpatient-only list, obviously, we're in year one of a period here phased out.

This first year is focused a bit more on ortho and musculoskeletal type procedures, so that's what we're seeing.

I think if I look at our elective book, I would say after these changes, which were the biggest driver of elective surgical volume weakness, the second driver would have been Medicare, especially on the inpatient side, so we are seeing some.

Some impact of the inpatient only list.

I think it's fair to say that the outpatient market for surgery is a bit larger than the inpatient market for surgery. There's more competitors, and so that's a factor.

When I think broadly though, we look at ambulatory surgery centers, as Sam just walked through, as part of our networks. And building out our ambulatory networks, they play an important role.

We are continuing to invest in our operating rooms and our surgical platforms in the inpatient side and the hospital side for outpatient surgery and in our ASC platforms and believe that it's a long-term important component. I don't think that anything we're seeing would say that it would drive a material change in the way we're approaching building out our networks.

And again, Mike, I think.

The fact that we have 25 different service categories that we focus on across the company that are different gives us an ability at times to invest, just like I said, in different markets. We can invest in different services depending on demand forecasts, population trends, competitive dynamics, and so forth. And you see that in our volumes when it comes to some of the pressures we. Seen on elective care, we've all set that with other services that give the networks a level of resiliency, give the demand sort of equation inside of the market support. When it comes to our ability to provide patient care. And I'm not sure that is fully recognized in some of these isolated discussions about service A, service B. Clearly, there are always issues. We've had issues with stuff migrating from inpatient to outpatient.

Over the years, we've had new technologies evolve that change the procedure approach for physicians. And better for the patients. Obviously, we embrace that. But we've been able to backfill with other services, expand our markets, get into new capabilities, and ultimately keep the company moving forward in the face of those incremental changes that occur. And that's what I think is unique in many respects to our platform, the services we provide, and how we approach our business.

It gives us the diversification in some regards that allows us to navigate through these incremental issues that surface from time to time.

Craig Hettenbach, Morgan Stanley.

Yes, thank you. Mike, the comment that resiliency is part of the core now, can you just touch on some of the applications you've been able to accelerate this year, as well as any untapped opportunities you see on a longer-term basis on resiliency?

When we think about resiliency, we largely think about four key focus areas that really make up this multifaceted effort across the enterprise.

The first one is really revenue integrity and working to ensure that we collect the revenue for the services we provide under the contracts that we operate.

That's number one. Number two is asset optimization, Craig, and that's important. That's that patient flow that Sam was talking about. And certainly, that's important on the inpatient side. It's also important in our emergency rooms, our operating rooms, our cath labs. And so we continue to see good performance on patient flow and there's a lot of opportunity ahead. We are nowhere near the back innings here on asset optimization and feel good about the work ahead there.

Third is variable cost, things like labor, supplies and even some of our variable operating costs, which are performing well this year. We have a number of resiliency plans that are driven to focus on.

Variable cost. And when we look ahead, we continue to see opportunity and the variability across the company in our benchmarking tools and advanced analytics and taking that forward. And then lastly are fixed costs, both at corporate and in the field, which are an important part here.

So as I think about where we are today, we have good resiliency efforts that have been in our past and that are certainly improving our current year's performance. We have a great line of sight now going into 2027 and into 2028 and beyond.

And I think about things like the digital transformation is really being a key enabler that gives us that confidence that we're going to have resiliency benefits in the years to follow.

We continue to build out our global capabilities.

I think about the underlying work of expanding our shared service platforms. We have a number of expansions in flight where, for example, Parallon is taking on additional administrative functions for the company and bringing shared service scale and expertise to broader parts of our work. So as I sit here today at the end of the third quarter of '26, we believe that we're in a really good spot. We have. Multi-year, multifaceted enterprise-wide approach to resiliency, and we believe it's going to produce great results as we move forward.

Christine, I think we're at the end of our allotted time for questions.

We have reached the end of the Q&A session. I will now turn the call back to Frank for closing remarks.

Christine, thank you for your help today on the call and thanks to everyone for joining us. Please reach out to me if you have any additional questions.

Thank you very much.

This concludes today's call.

Thank you for attending. You may now disconnect.