HCA raises its forecast for 2025, but headwinds loom

Diving brief:

• HCA Healthcare raised its full-year earnings and revenue outlook Friday after the state’s recently approved supplemental payment programs in the third quarter helped boost the for-profit company’s revenue beyond Wall Street expectations.
• The operator now expects a turnover of between $75 and $76.5 billion and a net profit of between $6.5 and $6.72 billion for 2025.
• Increased single-facility equivalent admissions and increased surgical volumes also contributed to HCA’s third-quarter revenue of $19.2 billion, an increase of 9.6% year-over-year.

Dive overview:

Analysts question whether HCA’s new outlook for 2025 might be conservative given its outperformance in the third quarter.

“The revised guide, we believe, under a number of scenarios with [Medicaid state supplemental payment program] factors probably seem quite conservative,” Whit wrote Mayo in a note from Leerink Partners on Friday.

Completed Medicaid supplemental payment programs in Tennessee, Kansas and Texas added $240 million to HCA’s adjusted earnings before interest, taxes, depreciation and amortization in the quarter and contributed about half of the year-over-year growth in inpatient revenue per equivalent admission, Chief Financial Officer Mike Marks said during a Friday morning call with investors.

Government funds are intended to make up the gap between Medicaid reimbursement rates and the actual costs of care, and providers are financially dependent on them.

HCA said other additional state payments, including those from Florida, Georgia and Virginia, could be approved by the end of the year, according to Marks. However, HCA does not expect CMS to approve additional state payments during the government shutdown.

The system also saw a slight increase in volumes during the quarter, which helped boost revenue. Single-facility equivalent admissions increased 2.4% year over year, while emergency room visits and inpatient and outpatient surgeries increased about 1%.

During Friday’s investor call, analysts also pressed executives on the possible impact of disruptions to the Affordable Care Act’s enhanced subsidies.

The grants, first rolled out during the COVID-19 pandemic, are set to expire at the end of 2025 without further congressional action. Without an extension, millions of people risk becoming uninsured as premiums climb and providers lose billions in revenue. The fate of the grants is at the center of a funding battle between Democrats and Republicans that prompted a government shutdown earlier this month.

Marks said HCA was not prepared to assess the potential impact of ACA market disruptions, saying the circumstances surrounding any agreement in Washington were “fluid.”

“When we get to the fourth quarter call … we’ll have a lot more information,” Marks said.

For now, CEO Sam Hazen said HCA, like other providers, would continue to push for an extension of the subsidies. Before the shutdown, the CEO said he saw “greater recognition from lawmakers of the negative impact this issue will have on families, small businesses and individuals than earlier in the year.”

However, “at this point…we still don’t know how this policy is going to play out,” Hazen said.