All right. We're good? All right. Well, I guess, is it still morning? Yeah, it's still morning. Good morning. Thanks for joining us today. It's my pleasure to have the extended team from HCA with us. We've got Mike Marks, Chief Financial Officer, Erol Akdamar that runs the American Group, I believe, encompasses nearly 70 hospitals, including the important Texas market, and we've got some others in the room, including Frank Morgan. Maybe just to start off, there's been a tremendous amount of focus with investors around, you know, unpacking a lot of the technology, the digital agenda, maybe just spend a minute talking about some of the investments that the company is making, either Mike or Erol, and I wanna hit on a little bit about the MEDITECH rollout as well.
Sure. Well, as you think about our strategic plan for the future, this idea of AI and digital transformation is one of our really key strategic initiatives that we think will propel us here over the rest of this decade into the future. There's multiple parts to it, and the first one is Expanse. It's really important. The MEDITECH Expanse rollout, which we're now live at just short of 50 hospitals, we think will be wrapped up by the end of 2028, is a really important foundation for the company. It's also the biggest project in the company's history from resources, time, effort. It's going well. It's cloud native. It gives us the ability to have more standardized data.
It gives us the capability to manage workflows and master files in a more centralized way. It really sets us up for moving more to standards-based operations and for AI. You know, AI rests on data and MEDITECH Expanse is a really key part of building that foundation. And overall, we're pleased with how that's going. We continue to invest heavily in our cybersecurity. As you can imagine, you know, in today's world, it's a super important area, and that work never rests. And our investments to continue to strengthen that is important and part of the story. Then you get into the innovation.
You think about AI, you think about automation, and digital tools, and the overall data strategy as being really important. Those are still more in the early innings, but our investments that have started here over the last, you know, call it three years, continue to ramp up. Broadly, the investment portfolio for HCA and tech and investments is growing. I mentioned this on our fourth quarter call, but for 2026 guidance. Those investments are part of our story in 2026. You know, we're looking forward to continue to roll out this initiative as really one of our key strategic priorities in 2026 and beyond.
What phase are we in the new MEDITECH Expanse rollout? Is it go-live this year, or I'm sure you're like phasing in and across different hospitals or markets.
We're live in just short of 50 hospitals now.
50. Yeah.
out of our 191 or so hospitals. We're about a third of the way through. We think based on our acceleration of this, it will be done by the end of 2028, roughly, is kind of where we are in the rollout. Erol, take a minute and just, Erol's had markets that have gone live, so you can just give a little bit.
Yeah.
of color of what that looks like on the ground.
Yeah. I would just say, you know, the magnitude of change in changing your EMR, even from MEDITECH to a newer generation of MEDITECH, is a pretty heavy lift. It's gone really well. I think that slow at first and deliver it, but well-resourced from a company standpoint, to the point that the learnings and the integration, Mike talked about standard data and creating standard workflows. We've progressed along that continuum pretty well to the point where we're actually accelerating our plan to be complete by the end of 2028. I would say that we're building momentum and that it's going well.
Be curious to hear some, like, the clinician feedback, nurses that have, you know, how they responded to the new system.
Yeah, I think well. I mean, change is change, right?
Yeah.
Even going to a newer generation system. I think evidenced by the fact that each install is a little less bumpy and a little quicker uptake. We have a better sense of how to resource it for at the elbow support. I think generally speaking, very pleased with the usability of the system, getting used to some of the changes.
Oh.
It is a leap forward technologically. You know, Expanse replaces Magic, and Magic really was, you know, getting to be a bit of an end of life system. So moving into kind of a more of a cloud modern look and feel and workflow for clinicians, I think is well received. You know, Erol's point's not wrong. We have 100,000 nurses and 50,000 doctors, and so getting, you know, the change curve and getting them comfortable with the new routines is the work.
Right.
We have to resource it, and we have a big implementation team that does a lot of training and a lot of at the elbow support as we go through these, which is, you know, part of the drivers of success.
Okay. Big focus, of course, this year on the expiration of the enhanced premium tax credits. I think even Elevance Health came out today and indicated that perhaps they hadn't seen as much disenrollment as they would have thought. I know you framed a $600 million-$900 million headwind. I'm not asking to comment on the first quarter 'cause I know you won't. How do we think about the slope of that and how you've sort of contemplated that headwind over the course of the year?
Well, it is annual guidance, and that's important to note. We don't really give quarterly guidance, but I think, you know, it's instructive to think about, you know, the moving parts of that guidance as you think about the enrollment reduction, the effect that has on volume. The key part that we're watching and that we will, you know, continue to update as we have our quarterly calls, you know, is this idea of the effectuation rate.
you know, the you know, how many people do not sustain their coverage by paying their premiums? In our guidance, in our model, it's a pretty key component. Of the overall, you know, annual 2026 $600 million-$900 million estimate. You know, the other thing that we're watching, that is a key here would be, you know, what percentage of the people that lose exchange coverage convert to employer-sponsored insurance?
Right.
You know, we have estimated in our guidance that it's about 15%-20% of the people who drop coverage on exchanges go to ESI. That's another pretty important modeling component within you know, the modeling we did for our guidance.
Let's say that a portion of the population that was engaged with HCA's networks lose coverage and decide, "I'm not gonna engage anymore." A percentage of that's just that's all lost volume, let's call it a point. Is there a scenario that you feel like you can absorb that lost volume headwind just by making adjustments as you normally do? Or is that a, you know, just a larger headwind in terms of lost earnings from the prior year?
Well, that comes down to variable cost.
Right.
It comes down to which payer category the lost volume comes from. If we see less utilization from those people who become uninsured, then you would have, you know, less variable cost, and that would be, you know, a component that would produce a different financial outcome than if, you know, the utilization drop was in the exchanges or from people with employer-sponsored insurance, which would not be good.
Yeah.
You know, when you think about that range of two to three, the payer mix within that range is really important.
Yeah. I know we're still just in the beginning of 2026, but when you kind of extend out to 2027 and think about the subsidies and do you think that there could be a recurring headwind, or do you feel like a lot of the decisions around coverage will be enacted this year?
It's a little early to talk about 2027. I wouldn't be surprised if there's further enrollment loss in 2027, you know.
Yeah.
I think these could end up being kinda multi-year decisions as people, you know, kinda go through and deal with the cost of healthcare, deal with premiums, and make decisions for their families. I'm not ready to call 27-
Yeah.
I'm not gonna be surprised if there's not a bit of further enrollment loss in 2027.
Yeah. All right, I'm gonna get off the ACA topic. I could ask 10 more questions there.
Okay.
Volumes have been, you know, clearly strong for a period of time, and now we're beginning to see, I think, things, you know, moderate to more normal rates. Plans are still talking about, you know, elevated cost trend. I'd just be curious, Erol, to hear you talk a little bit about, you know, how you're seeing the demand across the markets today, how different it could be this year across different service lines or payer categories. Just any observations you have would be great.
Yeah. I think Mike has shared the sort of forward-looking volume estimates as we go into 2026. What I would say is that if you look backwards over a decade's worth of volume trends, I think the company's strategy, the company's markets that we operate in, the 46 key markets have good macroeconomics, good employment, good population growth trends. We think the underpinning of the volume is still really solid and will continue to deliver sort of the guidance that we've given on the volume rate. You know, couple that with business plans or strategic plans that are intact and forward-looking, and so there's demand growth, and there's also market share growth.
It's what organically are you growing in the market, and how are you competing in the market to actually move market share and outcompete for the business that's already there. I think we feel good on both fronts there.
Yeah. Maybe just to expand on the capital plan. I know HCA is a very big organization, so making generalizations is a little bit difficult. Are there any particular areas that you would highlight for the capital that you've been spending across, you know, the entire organization, you know, types of service lines or outpatient development, freestanding ED, urgent care? Like, where do you think that you guys have been spending a lot of, you know, time and effort investing in the last year, where you may start to see some of those returns this year?
Let me kick it off, and I'll have.
Yeah.
Erol, fill in with some color. But you know, broadly speaking, we're pretty balanced on our capital deployment. On the inpatient side, we're continuing to add, you know, 600-700 beds a year to both deal with capacity constraints and make sure that we can capture the demand growth in the marketplace. We're continuing to add service lines on our main campuses and our hospitals. We're expanding our outpatient footprint. You know, our goal here over the next several years is to have about 20 ambulatory sites of care for every hospital. As we finished 2025, we were at about 14. Erol, why don't you kinda walk through how we think about ambulatory and growth and development in that space?
Sure. I think one of the strengths of HCA is our network development. Obviously, a hospital-based company, but what we've done, I think, really well is fill in the ancillary components around those systems. So if you look at a Dallas-Fort Worth or an Austin or a San Antonio, we have a legacy of hospital assets, have added some hospital assets, but what we've really done is added access points in the community. Think ambulatory surgery centers, freestanding emergency rooms, urgent care to create around our hospitals a network of feeders that feed into that hospital. If you look at particularly the Texas markets, Austin, San Antonio, DFW, Houston, that then fits into a health system profile.
Even the local hospital has a tertiary quaternary referral center to an upstream hospital, and/or the upstream hospital can take a tertiary quaternary patient that discharges and move them down the continuum back into a physician's office or back into the community to use the urgent care platform. In Texas, recently, with some of the growth in the last five or six years around independent private equity private development of urgent care clinics and freestanding ERs, it's creating an acquisition opportunity for the company as these systems are built out, and then they complement sort of what we already have.
We've had some success doing tuck-in acquisitions, particularly in the urgent care space, some in the ambulatory surgery space to, again, round out that access point network and really create those systems of care that are supported by the heft and the depth of a corporate entity like HCA.
Any changes, pivots around the physician engagement strategy, employment models, non-employment, anything that's changed across your markets, Erol?
Sure. I think you'll recall a couple of years ago, we did an acquisition of Valesco, a joint venture between HCA and Envision, fully bought that out. That was largely around emergency-based medicine and hospital-based medicine, internal medicine. That has created some stability and predictability, both in the cost, but then in the sort of clinical offerings of those two key aspects of running a hospital. We've gotten stability out of that. It's a couple of years down the line, more fully integrated into HCA. It's become our hospital-based services platform. If you think about inpatient medicine and ER medicine, it's sort of the core of what a hospital does.
I think taking that from stabilizing and moving that to being a strategic asset has been the journey we've been on, and we've been very pleased with where we are just a couple of years in to really optimize both clinical care, the cost platform, and really just internalize those services, which are, again, fundamentally at the core of running a hospital.
Have you expanded Valesco to new markets, new hospitals beyond where the legacy footprint was?
Yeah, we have.
Yeah.
It's not our intention to have to employ every hospital-based.
Right
Physician specialty. Like, if you think about ER and hospital medicine and anesthesia radiology. In ER, we have found ourselves gradually moving a little bit more to employment. We still have a lot of partnerships. I think Valesco is now in the 65% of our ERs are covered. There's still a portion that are not, and we work with our partners well. Having this capability of employing and managing hospital-based physicians, it just gives you the capability when you have a negotiation or you have a vendor partner that can't go the distance in a hospital. You have a backup. You have an ability.
Right.
to deal with that. It's been a really key build for the company to have an internal capability here.
Yeah. Obviously.
I would add just on the physician alignment component, I mean, a large portion of our medical staff is still independent. We compete to be the system of choice for those independent physicians. That manifests itself in terms of OR optimization, which is our work effort to really make sure that our operating rooms are as efficient and as preferred for surgical based physicians and proceduralists, such that we're giving them back time in their schedule. We're creating a positive experience for their patients. We're deep on and pretty good historically at operating hospitals, but optimizing things like the operating room, the emergency room, which in some ways is our front door into the hospital. Those are two key components that create physician alignment that really addresses that independent discretionary component of our business.
Mike, I think I remember talking to you late last year about some of the initiatives and conversations, dialogue you've been having with some of the larger national plans. There's been a lot of back and forth between health systems and payers and feels like you're trying to reduce a lot of the friction around revenue cycle and whatnot. Maybe just share some of, you know, maybe just an update around how those conversations are progressing, and I'll just kinda leave it there.
Yeah. We're trying to build long-term strategic partnerships with our payers. It's really important to HCA. I mean, we're, as everyone knows, we tend to be, and we try to be mostly an in-network provider of care with long-term access to lives in our marketplaces, and we try to think about these relationships over time as partnerships. No, they have friction, and those are realities in the modern healthcare system. You know, the thing that the payer and the provider always agree on is that there's way too much bureaucracy, and administratively, the administrative costs are really excessive. We feel like we have a, you know, a good group now of our major payers that are working with us on engagements to drive three or four kinda key components for us.
It starts with digital. You know, it's madness how many faxes and phone calls that hospitals send to payers. We're trying to send clinical data and administrative data in more modern digital ways to our payers in the right format, at the right time, and when they need it. That helps them process and review the claims. We're asking for them to reply digitally with things like APIs so that direct contact on things like claim status and eligibility status and the like are really important to help our workflows and just advance this process digitally. That's first is this idea of bi-directional digital data exchange. Then second would be this idea of friction.
There's a lot of work on prior authorization, and there's a lot of work on getting patients authorized for discharge, and getting them to the right place post-discharge. We're working with our key payer partners to try to make that more effective, more efficient, more transparent in a way to where we could try to both minimize friction and improve visibility and transparency. I believe, and the payers that we're working with share this belief that over time, this is gonna be important for our industry to advance this work, to make it better for their members and our patients, but also to make it better between each other.
We have this opportunity where we both can win, which is, you know, part of what we're trying to accomplish with these partnerships. I'm pretty excited about them. I think they have a lot of potential in the future.
Okay. Maybe on that topic, I might just wanna dive into it a little bit more around the revenue cycle agenda. Anything new this year that you guys are focused on as it relates to revenue cycle?
There's a few things. I mean, you know, we've got a really strong revenue cycle operation in Parallon. They do a great job. We're really blessed to have them. Our work has been focused on the digital work I just mentioned.
Yep.
with the payers. Then, you know, from a detail standpoint, you know, we're in a multi-year world of trying to mitigate denials, and that's been a focus of a lot of work over the last couple of years. That work continues, and it's been the focus of a lot of our investments, you know, even in AI and automation, to do things like, you know, do a better job of synthesizing medical records and, you know, kinda helping with the payer administration processes related to appeals of denials. Then over time, investing a lot of resources, both people and in process improvement and in technology for denial and underpayment mitigation. Those efforts have paid dividends, and those will continue.
You know, the other thing that's really, I think in the future can help, rev cycle is documentation. Making it more complete, more accurate, more thorough, more timely for physicians to be able to complete their medical documentation over time is one of the key solutions here.
Right.
that you know, that you have a complete picture of that patient and that you're able to get that data, you know, more timely. You know, you hear all the stories from physicians going home after a 12-hour shift and then completing their documentation in their pajamas at home. you know, trying to work on that administrative burden for our physicians, I think over time will also pay a lot of dividends.
Yep. We've got some work requirement changes that are gonna be implemented across the states in a few years, and I know you guys spend a lot of time analyzing a lot of different things inside of HCA.
Yeah.
Kinda quantify everything. What's the work that you've done, and how are you just generally thinking about what the impact could be and maybe how you plan for it?
Sure. Work requirements were part of the One Big Beautiful Bill.
Yes.
For HCA, one of the pieces of context that's important is that 60% of our Medicaid revenue are in non-expansion states, and the work requirements are really focused on expansion states. There's a bit of that just from the profile of our portfolio of markets is helpful to us. CMS is still issuing administrative guidance to the states. For our expansion states, there's still a lot of work to be done between now and the end of this year to prepare for the work requirements. You know, the risk here is that it's not a coordinated effort and that, you know, the paperwork processes and administrative processes become complicated to the point where you could see some enrollment loss.
That would be the risk that we're watching for in those markets. At a company level, we don't really anticipate that work requirements will be a super material issue for us financially. In our expansion states, you know, we're gonna be working closely with our states and with CMS to try to support this process as best as possible. I think it will also put some pressure on hospitals as they continue to help patients navigate Medicaid. If someone loses Medicaid because of work requirements, then, you know, our team of Medicaid eligibility counselors will be helping those people resubmit applications and the like.
A lot of kind of administrative process to work through here, but right now we're not anticipating a super material outcome, but we are focused on it.
Yeah. I would think that even if you have, like, coverage loss that was an improper coverage loss, given the presumptive eligibility standards, they present themselves, and you get that process going again, and they get enrolled.
Yeah.
Yeah, so.
Some of our states have presumptive eligibility, some don't.
Yeah.
The teams on the ground, and Parallon has teams in every hospital that focus on coverage, you know, including Medicaid, that where we try to help our patients navigate these administrative processes.
Directed payment programs, there's been a number of programs that have been submitted to CMS that haven't been approved in Florida, a number of states. Is there any update or common theme as to why we're seeing maybe what most investors would call, you know, a delay in terms of the approval process?
There's a couple of encouraging signs that we continue to watch, and then I'll mention one state in particular. We are aware of a lot of continued contact between CMS and these specific states with grandfathered applications, where it's clear to us that the reviews continue and progress. Second, we are continuing to see some approvals, which are encouraging. One of our grandfathered applications in Georgia got approved yesterday afternoon, and so that's an encouraging sign that there are some approvals starting to
Yesterday afternoon?
Yesterday afternoon.
Okay.
Coming out as well. You know, there is some life there in terms of that, and we're still hopeful that the other states, including Florida, will, you know, get through this review and approval process with CMS here in due course.
Next month, we start the rulemaking cycle with Medicare. We can, you know, look at some of the files that CMS has around market basket update assumptions and whatnot. Are there any considerations that we should be aware of as we move into the April rulemaking process? Really the corollary to this is, you know, this administration has such a big focus on just spending and, you know, whether or not that influences the outcome of the IPPS update. I just didn't know if you guys had any thoughts as to what we should be expecting.
Not really. I mean, you know, I think last year's IPPS and OPPS rulings. had some moving parts to them, for sure. Even at the end of those moving parts, you know, our overall Medicare update was generally on trend.
Right.
Last year, under this administration. A little early to know what's gonna happen for the 2026 update, but, you know, I would just point you back to last year as a marker. Again, they had moving parts, right?
Right.
You know, the inpatient-only list, et cetera, et cetera. At the end of the day, between inpatient and outpatient, we generally landed in a pretty good spot last year and for the 2026 update, so we'll see what comes.
Yeah. Maybe back on like the cost side of the equation, we've been in this environment of incredibly stable, it feels like, clinical labor inflation, contract labor's come down a bunch, wages feel fairly consistent, professional fees have been elevated, but doesn't feel like it's getting worse or maybe better for you. Are there any other pockets of, you know, strength or weakness as you look at just the overall cost structure of the organization today?
Well, when I think about, let's start on labor first, and then we can kinda go through. I mean, I think we're in a generally stable operating environment with clinical labor, which is a reflection of some serious work over the last several years to stabilize our workforces and invest in workforce development. I'll have Erol take a minute and talk about Galen here in a second. On the physician cost side, they've been more elevated, and the physician cost have been the part of our cost structure that have been running hotter than inflation here for the last several years. If you go back to 2024, we're pretty seriously elevated. I think we finished 2025 with, you know, pro fees at about a 10% growth.
I think as you head into 2026, we noted on the call, high single digits. We're working on it really hard, but there is still some cost pressures on the physician side. You know, on supplies, I think we're in generally good shape. We're watching tariffs.
Yeah.
Right? It's the one wild card that we're always watching. I think everyone's watching those carefully, as we go through. You know, we're working carefully with our suppliers and vendors on sourcing, on long-term contracting at fixed prices and the like, to try to really lock in a rational inflationary environment for supplies. You know, the physician cost is probably the biggest part of the cost pressures, and then followed by we all are gonna wait and see what happens with tariffs and some of these geopolitical impacts that we're dealing with.
Right.
Workforce development's really important here, both in terms of Galen and our graduate medical education programs, and it's how we have really navigated this.
Yeah.
Why don't you take a second?
Just quickly, I think the Galen acquisition investment, if you will, has proven to be incredibly strategic. If you look back in 2019, 5 campuses will end 2026 with 25 campuses, and our goal is to have 30 campuses by 2030. This has been an investment in workforce, trying to develop some internal solutions to a macro issue. I think it's gone really well. You look at markets like Houston and Dallas that are of the size that they are. We have two campuses there, and we're looking at a third campus in each of those markets. I think they're going to graduate 7,400 nurses maybe this year. It's been a good strategic investment.
I think also we can use our expertise in running 190 hospitals and all the clinical nursing that we do to then build into the next generation of nurse some pretty bedside applicable practices and innovations. Particularly as technology comes to bear, we can get upstream into the school rather than waiting for internship or first year RNs or clinicians to develop them. I think it's been a really good investment.
What % of the graduates are graduating into an HCA system at this point?
It's still pretty early.
Yeah.
I mean, it's good. We do think that will continue to improve. Part of Galen, though, is an investment into our communities.
Yeah.
you know, what this does is it increases the supply of nursing into a community. They go various places when they graduate. you know, we're at a good spot right now, but I think improving as we go over time.
We're still aligned with many nursing schools in the community other than Galen.
Correct.
The pipe is much bigger, and so we're working at all angles.
All right. Well, great. Well, we're just out of time. Appreciate it, guys.
Thanks, Willis, for joining us.
Thank you. Appreciate it.