That's all good numbers. We've got Mike and Tim from HCA. We have an operator, and we have the finance guy, and this is pure fireside, and we have lots of questions, so let's get started. I think in talking to people, the top of mind is... and I saw your comments yesterday, but just recap, you know, where we are with the AI and then we'll have some follow-up questions, but just kind of the near term, intermediate term, long-term opportunities by bucket and like the cadence of pulling that down into margin.
Good morning, everybody. When I think about AI, I put it in context of our long-term strategic plan. AI is one component, and if you just kind of take AI and even broaden it and think about digital transformation of creating a step change in performance for the company over time. G iven HCA's size and scale, you think about 47 million patient encounters last year, you think about the size of our revenue cycle, supply chain, and related, you know, operations. We are ripe for being able to use things like artificial intelligence and automation to drive effectiveness and efficiency. We've been about building our internal capabilities to both identify, prioritize, and then build, pilot, and then scale out key use cases in three domains related to AI.
The first one's clinical, and clinical is really our holy grail as a company because it supports our mission, and our mission is the care and improvement of human life. About a third of our efforts related to AI are focused on improving clinical, and this is the idea of supporting our physicians, our nurses, and our care teams with decision support and with use cases that reduce administrative burden. Those use cases in the clinical domain are gonna take longer, they're riskier, and so we put a lot of structure with human in the loop and supports to make sure that those use cases are ready when they, when they go to scale, and we can give some examples in clinical.
Those are longer- term, and you just got to think about those use cases taking multiple years to build and scale out as we roll through the enterprise. The second area is operational. Think about just the running of the hospitals, and so the throughput of the patients and the operations around labor management and the like are a big part of our operations. We have several use cases already in flight. Operations as a domain will be more intermediate term. Think three to five years, roughly, in terms of, you know, really starting to see material impacts over time.
Let's just kind of break that down. An example of an operational initiative would be what?
Yeah. Labor would be the first one that we're further so long on, and we have a digital product that helps us predict demand and then schedule against that demand for all of our labor. Think we have 100,000 nurses. We have 50,000 doctors. The ability to use AI to predict what the census level will be in a nursing unit, you know, 28 days out, is a huge help for us in terms of knowing how many staff members to bring in.
Then to use AI to really help balance that schedule and get the right care team members, scheduled to take care of those patients over time. The first big digital product, and we're live in about 80 hospitals right now, is a product that we call Timpani, which is all focused on using AI to predict demand and then do a better job of scheduling our care teams. We're really excited about that, digital product. That's one.
Again, I'll just I remember when the staffing companies were red hot a few years ago after COVID.
Sure.
You guys talked about maybe offering either an employee model or a pay-per-click model. Did that really happen? Do you have internal nurses, like an internal staffing company where you can flex up and down on a variable basis, o r is most of your clinical labor still kind of salary and bonus?
It's a blend. We own our own staffing company under HealthTrust w hich is our GPO, structure. It's called HealthTrust Workforce Solutions. In that organization, we have both what you would think of as travelers or contract labor that operate as travelers, we also have market pools that operate on per diem. That's our variable workforce.
That's where AI could really help out with that.
Yeah, 100%.
Okay. Yeah.
That's part of Tempany. That's part of our labor management tool, is really thinking about the flex path nd how to flex up and down to volume over time. The other area operational that I would call that is throughput. You know, the importance of managing length of stay in the inpatient settings, the emergency department throughput, the operating room throughput is really important. We're developing several digital tools that really help us predict how long a patient will need to be in the hospital, identify barriers to discharge, and then help our teams orchestrate care and streamline patients getting through their care journey and then out of the hospital to their next point of care. Throughput, given the importance of length of stay management, is another operational use case that we're, you know, in early innings on, but pretty excited about using AI.
How much have you been able to flex down length of stay so far using this tool?
Yeah. Well, the tools are still pretty early and our efforts around length of stay are broader than just technology. I mean, we've invested heavily in people, heavily in our processes, and now our tech tools are just now starting to come out.
Yeah.
I n terms of using AI. We've had a good success. I mean, last year, you know, I'm going by memory here, but it was about a 2% reduction in length of stay. This is a multi-year effort. I mean, I think between now and the end of the decade, we still have a lot of opportunity to reduce length of stay in our hospitals and improve turnaround times in our emergency departments and operating rooms as well. Asset optimization is a really key part of our work.
Okay.
The third area for AI is administrative. Think supply chain, rev cycle, human resources, and the like. For HCA, we tend to operate big shared service platforms. We have centralized management, we have more standardized data, I think you're gonna start seeing, and we are seeing, AI use cases even in the short to intermediate term with administrative. Think 2026, 2027, 2028, we are seeing digital products come, into our hospitals from our efforts, because we have, you know, a little more ability to move quicker in our administrative platform. I think about short-term, intermediate-term, and long-term. Broadly speaking for AI, I think we're still pretty much in the early innings.
Guys, I just have this insane need to, let's go from the general to the specific.
Yeah.
Rev cycle specifically, one thing we've heard is it's now easier to submit a rejected claim using AI, especially the small ones. It wasn't worth it before. You don't do a lot of small claims, but what specifically in rev cycle, as you fight through increased denials, what tools does it give you that you might not have had two years ago, and any quantification around, you know, bringing down denial rates or just at least holding your own there?
Yeah, it's a great question. large language models. But one of the big areas that we're working on, and these are products that are in beta and starting to scale out for us now, is using large language models to summarize and synthesize a medical record and the administrative record. That allows us to really do three specific use cases. The first one is to help our physician advisors prepare for peer-to-peer consults with their payer partners. It reduces the time they need to prepare, and it creates a more comprehensive review of the record. The second is appeals of denials. You can use large language models, and we are, to summarize the record, summarize the administrative record, and prepare a denial appeal letter.
Those denial appeal letters then still go through reviews by our doctors and nurses before they're submitted. Think about the efficiency gains and the accuracy gains of being able to appeal thousands and thousands and thousands of denials versus human beings having to type, you know, de novo every time, and that's gonna be powerful. The third area that large language models I think will have a big impact on is helping us prepare for dispute resolution. Helping our legal department to summarize thousands of claims and get prepared for things like arbitration. Large language models in the revenue cycle I think are gonna be a big help for us. The second area in rev cycle that and it's also related to denials-
This is being implemented?
Now.
It's fully implemented or.
It's not fully implemented.
It's being implemented.
We're through alpha and beta, and we're starting to scale.
Okay.
... those out in 2026.
Got you.
That's my point about administrative a little quicker.
Yeah.
... here in terms of seeing our efforts. The other one administratively in rev cycle would be what we think of as kind of intelligence. Think about studying-
I'm not familiar with that concept.
Think about this idea of studying all your claims, all the claims that got paid on time the amount you expected versus claims that had a denial or had friction u sing machine learning to understand why a claim got denied, from the clinical record and from the administrative record, learning from those root causes, and then trying to take actions earlier in a patient's stay to address any friction that you may see from a payer. I think over time, AI's gonna help us advance our work in terms of denial mitigation in a material way. It's a little early to see results yet because these products are still pretty new, but we're excited about them.
You're not using third-party point solutions. These are all internally developed.
You know, we organize our efforts under an organization called Digital Transformation and Innovation department's name. When we build digital products, it is a blend of build, buy, and partner.
Okay.
For the specifics ones that I just mentioned in terms of large language model and intelligence, we partnered with Palantir, and so that's one of our.
Oh.
... partners that we partner with. I think everyone has heard us mention before, we use Google pretty heavily as well for our cloud and for our data science tools. That one was a partner use case. We have others where we build it entirely, and we have others that we buy just off the shelf.
Okay. Yeah, there's a lot of, lot of ways we could go. I don't wanna belabor this point, but, you know, you've spoken in the past about despite the ACA pressure, you're still looking at 2%-3% volume growth this year. In the simplest SEC math way possible, describe the decremental margin effect from the ACA and kind of the I know you quantified the bounds, but maybe simplify that calculation a little bit for people.
Sure, I'll do my best. If that works.
I got lost at the fourth step.
Understood. When I think about the Affordable Care Act, reforms, it's really a combination of three factors. It's the expiration of the EPTCs.
Mm-hmm.
It's the administrative rules that were passed as part of the One Big Beautiful Bill Act. It's the administrative rules that came through rulemaking from the Trump administration last year. What we've endeavored to do is try to model what we think the potential impact of the comprehensive effect of those three changes are to HCA. Just in a very simplified way, first, we believe that our exchange volumes will be declining about 15%-20% in 2026 versus 2025 full year. That's the first impact that we think we'll see. Out of that decline, we think about 15%-20% of the people who lose coverage on the exchanges will get coverage through employed sponsored insurance.
Yep.
That's a benefit. The balance, so that 80%-85% we think go become uninsured. For the uninsured population, we believe that there'll be about a 30% reduction in utilization of healthcare services on that population that becomes uninsured.
Mm-hmm.
The comprehensive impact or calculated impact of those changes, including our assumptions around utilization trends and around collectibility of patient amount dues leads to that $600 million-$900 million of negative impact to adjusted EBITDA in 2026.
This one-
Was that?
That's perfect.
Close?
I'd like to get a joint answer here. One thing that intrigued me was, you know, 13 outpatient things around one hospital going to 20. From your perspective, Tim, what are the most needle-moving investments you can make? What, what assets are getting the, so the front of the line, be it surgery centers or imaging centers, and what are kind of more incidental?
Right. That's. It's an interesting question. I think a couple bigger plays for us that we spent a lot of time and energy focusing on. The first would be the freestanding emergency room. This puts care closer to people's homes. It takes it frankly decompresses many of our hospitals that are incredibly full and trying to make that throughput for the patient experience be better. It also in some ways funnels off some of those lower acuity patients into a softer setting from being in an inner city emergency room. The second big one, you know, today I think we have 150 freestanding emergency rooms. I think in my I oversee about a third of the company, have about 38 of those, and we just keep adding to those every year because it's a really efficient use of capital.
More importantly, it's a great way to get patients to come in, and maybe first to-touch points within our system. The second one is really the urgent care platform. This has sort of been going on for a while, but we've really doubled down as you see the generational differences of people accessing healthcare. People don't go to their one family practice or internal medicine doctor for 30 years. They wanna go when I wanna go, where I wanna go, and either I'm close to my work, close to my home, and access that. We've really significantly beefed up the number of urgent care centers, some de novo, some through acquisitions across our markets.
When ambulatory surgery centers has been, you know, been a terrific way for us to partner with our doctors, also decompress some of our ORs in our hospitals as care has shifted to the outpatient setting. That's been very material. Probably the fourth is expansion of clinics to find opportunities where there's unmet need. We've spent a lot of time trying to acuitize our hospitals. That's been a little bit of a, I think of as the secret sauce. To do that, you have to have more cardiologists, more surgeons, and so forth out in the communities and not be expecting all those people to be coming back to just the home base to get that care where it's more complicated to park and the like. We think that those are differentiating models of how our expansion's been.
Remind me of your ASC footprint. How much is on-campus HOPD versus now freestanding and physician fee schedule?
Yeah, it's, we have ASCs. These are not HOPDs for the most part.
Okay.
I mean, there's a small handful that are HOPDs. These are ambulatory surgery centers. There are a number of them that are on or proximal to campus, but we also have a lot of ASCs in the communities broadly. One of the things I've mentioned and from what Tim said, if you think about the net effect of this, what we intend to do over time is build out a comprehensive network of different continuums of care. As patients need to access physician clinics, urgent care clinics, emergency rooms, surgery centers, we're able to give to our patients, to our doctors, and to our payers, different accesses to price points, to affordability points, to provide the care that's needed at that time for those patients.
I think the idea of a network is this comprehensive nature of it over time, I think creates competitive advantage, as Tim was mentioning.
We were surprised, you know, your adjusted organic growth guidance this year is 8%. You know, that's a departure from your longstanding 4%-6%, supplemented by resiliency, $400 million from resiliency. You know, I think this is inevitable, but just when somebody asks you, "Hey, that old 4%-6% EBITDA guide and 19%-20% margin, with AI and all your efforts, when do you think you might be ready to revise those long-term targets?
Well, you know, we clearly are gonna have to get through this reform era. You know, if you think about our guidance at midpoint for 2026, it's just short of 3%, and that's our guidance for adjusted EBITDA growth. That's reflective of the full nature of our guidance. You know, obviously, the audience knows this. We give full year guidance, not quarterly guidance. In that full year guidance, what we highlighted on our fourth quarter call was this reality, is that, you know, we are facing $600 million-$900 million of headwinds from, you know, from the Affordable Care Act, reform items.
We're also dealing with, you know, something like $250 million-$450 million of, you know, of state-directed payment headwinds as well. That assumes none of the grandfathered applications get approved. Different matter. I know we'll talk about that in a minute.
Okay.
Resiliency, we've been working hard to put a resiliency plan in place that would help, you know, offset as much of the adverse impact from the Affordable Care Act reforms as we could. The net of all that, though, still yields this kind of just sub 3% at midpoint.
Right.
You know, as I think about the long term, what we've said is, we believe that between resiliency, between the AI strategies and our network development and optimization strategies, that, you know, we still believe that we'll be able to maintain our long-term plan. I think about this as advancing the company through this point of reform, getting to our long-term plan, and then over time, you know, as our AI strategies and network strategies continue to mature, we are hoping that we bust through those margins...
Okay.
... and continue to improve. We're still talking about our long-term plan for now.
A joint question. Yeah, you've been a long-standing customer of MEDITECH. You're expanding from their legacy model to something more modern, mobile, cloud-based. How does that, as an operator, how heavy a lift is that? How much help do you get from corporate? You know, just practically speaking, what does it do for you? How does it play into your AI initiatives? Is it integrated or separate? How do you partner with them on your technology?
Yeah.
I could have like 19 more questions there, but I'm gonna stop.
I'm gonna try to get-
Jesus.
I'm gonna try to hit all your questions you had there.
I can't keep going. Good Lord.
When we think about our primary goal with MEDITECH Expanse is to reduce variation and optimize the care model so that we can take more accurate, more timely care, and more coordinated care of our patients through our continuum of our systems. I'll give you an example. Through COVID, you had care plans, policies, procedures change rapidly. If you go back to a system like we had, MEDITECH MAGIC, now we've already implemented 40 of our hospitals into our new Expanse plan. We expect to have all of our hospitals converted for the most part over by 2020.
40 for the company or 40.
40 for the company.
... not your.
40 for the company. Yeah, for the company. A lot of those were actually happen to have been in my group.
Mm-hmm.
Through that transition, what we're finding is that in a COVID example, we can change the policy and procedure literally in minutes across those enterprises that are currently on the MEDITECH Expanse model that would have been more clunky in the past where we'd have to go one by one and do that.
Mm-hmm. Okay.
A different example would be that for pharmaceuticals, there's a announced drug shortage of something, in the past, the clumsiness of trying to go into each individual system and communicate, "Hey, that drug's not available. Here's an alternative," wasn't as readily available to do that. Today we can change that care paradigm immediately and then give and speed up the care. We're not going back to doctor, "Hey, we don't have this. What would you like to use as a substitute?" It just improves the efficiency of the care.
From the ones that's gone live, how have the transitions gone?
Yeah, it's, you know, transition's difficult, really difficult with a complex thing like an EHR. What's happened with the companies, the resources the company has really put behind it and MEDITECH have enabled the go live to go, frankly, smoother than what we even envisioned they could go. We're doing big, complex hospitals in Nashville, Centennial Medical Center. It's a 800 lbs, 800-bed hospital.
Mm.
That transition we just did in the recent months went really smoothly. That's a differentiator for physicians who are understandably anxious about this transition or nurses who are using these systems. Now it's a much more intuitive system versus for folks, and particularly when you have, maybe you may have contract labor and others who are coming in and out of your system to be able to utilize the system and take great care of our patients.
Great. Last year, and I'm glad it's over, way too much time spent on the enhanced subsidy debate. Hospital lost that round. This year, you know, we've been looking at site neutral, and there's a little bit of a debate in the team of what could CMS do on its own versus what Congress would have to do. Talk about that. I mean, we think about it as drug administration, HOPD going to outpatient. We think about maybe tacking on a facility fee for a doctor visit, maybe radiology being paid on HOPD going to half the rate. Just talk about and when you're talking to the average Congress critter, how do you frame that debate?
Well, I don't ca them Congress critters.
I don't. That's fine. Pejorative, I know. That's a pejorative, sorry.
Yeah.
They've earned it, though.
When I think about site neutral, at least to this point, it's been pretty limited. It's been limited, to physician clinics, as you mentioned, that where some systems set up their physician clinics as HOPDs. HCA generally does not.
Okay.
... that's one big distinction. The other is drug administration. For those two kind of current areas in focus, the impact to HCA is pretty immaterial, pretty limited.
Mm-hmm.
It would be a bit more notable if that starts getting expanded-
Yeah.
... you know, to things like surgery centers and radiology and the like. We're watching that carefully. When I think about kind of what's in flight right now, there's not typically site neutrality gets mentioned when their people are looking for offsets for other funding needs.
Mm-hmm.
Right now, we don't see a lot in the near term that would drive that, but we're watching it carefully. You know, for site neutrality for us, I would just say that it's not as material as a topic for HCA because of the way that we structure our operations as potentially the not-for-profits and the academics, which it would be more notable for. It is an area that we're watching carefully.
Especially when you're running on a 1% operating margin.
Right.
You know, some of these are negative operating margin.
I think a lot of the not-for-profits, for example, they've set up their cancer systems, their outpatient infusion centers, and their hospital-based clinics. They've set them up as hospital-based.
Mm-hmm.
You know, given the way site neutrality works, it would just be a more notable reform.
Right.
For those systems than it would be for HCA.
Great. Speaking of doctors, Valesco was mentioned a million times a couple years ago. You guys had to do kind of an emergency bailout of your staffing provider. You haven't really cited professional fees as prominently as maybe some of your peers, but maybe just kind of reset where we are with Valesco. How much is inside, how much is outside? What are the pressure points in the physician, hospital-based physician? Is it radiologists? Is it pathologists? Is it ER docs? Where are you seeing the pressure?
Sure.
Anesthesiologists. I'll throw them all in there.
Sure. Yeah. I mean, clearly you go back a couple of years ago, we had to complete an acquisition of Valesco. Valesco, just for everyone's rememory, was mostly emergency room physicians. It also had some hospital medicine physicians. You know, it was important at the time that we do that. We've largely integrated the Valesco team into HCA now. I'm really proud of that team. Our hospital operators, like Tim, our physician services organization, has done a wonderful job of bringing those teams on board and now starting to manage our hospital-based physician platform in the emergency room area and the hospital medicine area, you know, in the HCA way. People, processes, technology, really making good investments.
We're seeing a good stability now, in our cost factors related to the emergency room and related to hospital medicine and that, and we're pleased with that. 2025, just to kind of size it in total, we were up about 10% on the same facility pro fees. You know, if you go back to 2024 and before, it was twice that level of growth because of the pressures we were seeing. I still think when, and we mentioned this on the call, but I still think we have some pressures coming into 2026, and it's now more related to radiology and to anesthesiology. So we're guiding something like high single digits for our professional fee growth.
You know, we're working really hard, as a company, both in anesthesiology and in radiology, and we're making investments, but we are not as far along in terms of getting through that change curve as we are in the emergency room and in hospital medicine.
A little bit of an ad lib. We follow a company that has developed, and there are others, that radiology tools that use AI to improve throughput. Have you been studying those as a potential productivity and cost lever for your radiologists?
Absolutely. Yeah, me have a radiology committee that has been hard at work looking at not only technology, but teleradiology and all of the various components to improve our day-to-day radiology services. We work mostly with partners in radiology.
Okay.
We don't really have a big employed or insourced capability. You know, our partnerships with, you know, the, the big groups and a lot of smaller local groups are really important. We are not only studying, but starting to execute on things like both enhanced teleradiology and identifying the right AI and automation plays as well.
Okay.
Mostly with partners.
Right. We've got about three minutes. I did wanna hit, we talked last night, I wasn't aware that you had a GME program, and Galen, I'd love an update on that. Just obviously, one of the things I've always thought about you is your tech platform. Let's say you hire a nurse who's used to work on the Epic or Cerner platform, so you've got to train this person on your MEDITECH, which I've heard that sometimes can be an issue. Then, you know, there's also a bottleneck in residency spots, you know, for a graduating physician. You guys have kind of, in your kind of classic Toyota long-term thinking, you've made some investments there. Maybe just kind of level set where we are on that.
Yes. Just to touch on GME first. Today we have 5,800 residents across 81 of our hospitals. That covers sort of 270 different residency programs. What that does for us, first of all, is it helps us plant doctors in our communities. If they do their residency there, they're more prone to stay there and live there and have their families in those markets. The alignment, there's obviously natural alignment, to that component. It also, if you go back 15, 20 years ago, most of those residencies were in academic medical centers, and this just gives a whole slew of more choices to people, in some cases, maybe living in their hometown that they grew up in.
When we think about our 43 major markets across the country, as soon as we open these programs, the demand is there. As you and I talked last night, there's about 1,000 students that come out of med school and have no residency because of the limitation of available slots. On the Galen part, which has been really interesting, we acquired Galen, I think it was 2019. It was sort of five bricks-and-mortar campuses. Today, it's 25 bricks-and-mortar campuses, to soon to be 30 over the next couple of years. This is now we now have about 20,000 students in our programs. You think about the long-standing notion that demand has way outstripped supply of nurses.
This program, one of the interesting things that it's done, it's to really allow for one, second careerists, people who our average age in that school is about 33 years old. Frankly, 50% of those people have dependents relying on them. They may be doing, switching into a different course and frankly, upskilling them to meet that demand. It's been really a powerful connection, not only for HCA, but our, the communities we serve. We're really excited about that launch. The other real component for us is this thinking about clinical education. We've spent a lot of time building sim centers and taking nurses or newer people in their field or new technologies come out. We can bring them in the sim letter.
We can sim center. We can bring them for pre-preceptors and continually push their skill sets in a sort of a safe, protected environment that isn't directly with the patient.
I'll bump up against Tom, but approximately what percent of the graduates end up at HCA hospitals versus other hospitals?
I think it's about 35% or 40%. Mike, is that about what you think it is?
Yeah. I mean, you know, obviously, some of them go out in the community, some stay with us. Over time, what we're trying to do is create a system where when, someone graduates from Galen, we're gonna try to make it easy for them to come into HCA.
Mm-hmm.
Over time, I think that'll improve.
Okay. Thank you.
Yeah.
Let's go to breakout.