HCA Healthcare (NYSE:HCA) reported first-quarter financial results on Friday. The transcript from the company's first-quarter earnings call has been provided below.
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Summary
HCA Healthcare reported a 4.3% increase in revenue and a nearly 2% increase in adjusted EBITDA for Q1 2026, with diluted earnings per share rising by approximately 11%.
The company experienced a reduction in respiratory-related volumes due to a milder season and winter storms, which affected admissions by 70 basis points and ER visits by 140 basis points.
State supplemental programs provided a net benefit of $200 million to adjusted EBITDA, offsetting some of the volume shortfalls.
Strategic initiatives included a focus on digital transformation and AI, with new key initiatives rolled out to more facilities, and continued investments in network development, expanding sites of care by 4%.
The company reaffirmed its full-year guidance, expecting volume growth of 2-3% for the rest of the year and maintaining its outlook for the impact of health insurance exchanges on adjusted EBITDA.
Full Transcript
Operator
Ladies and gentlemen, welcome to HCA Healthcare's first quarter 2026 earnings conference call. Today's call is being recorded 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. Please go ahead, sir.
Frank Morgan (Vice President of Investor Relations)
Good morning and welcome to everyone on today's call. With me this morning is our CEO Sam Hazen and CFO Mike Marks. Sam and Mike will provide some prepared remarks and then we'll take 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.
Sam Hazen
With that, I'll now turn the call over to Sam. Good morning and thank you for joining the call. First, I want to recognize our colleagues for continuing to demonstrate a remarkable ability to adapt to changing conditions and deliver positive results for our patients, communities and stakeholders. The start of the year presented a dynamic environment for HCA Healthcare. From a volume perspective, we did not experience the typical lift related to seasonal respiratory conditions compared to the first quarter of last year. Our respiratory related admissions were down 42% and our respiratory related emergency room visits were down 32%. Additionally, the storm that hit a few of our markets adversely impacted our volumes in the quarter. On the positive side, however, we experienced a greater net benefit than anticipated from state supplemental programs. As a reminder, these programs are complex, they're variable and difficult to predict. This benefit mostly offset impact from the shortfall in volumes. Regarding payer mix for the quarter, the underlying shifts resulting from the changes in the health insurance exchanges were generally in line with our expectations. This area remains fluid. As we stated in our fourth quarter call, we have considered a range of potential scenarios as the effects continue to evolve. As mentioned, over the last several quarters, our teams have been focused on a broad resiliency plan designed to generate cost savings where appropriate, enhance network execution and strengthen organizational capabilities. I'm pleased with our resiliency efforts to date and we expect they will continue to help offset some of the expected impact from the payer mix shift. Additionally, we were pleased with the volume results exiting the quarter. The respiratory related and winter storm impacts were mostly contained to January with February and March volumes rebounding nicely. For the first quarter. Revenue increased 4.3% compared to the first quarter last year. Adjusted EBITDA increased almost 2% and diluted earnings per share as adjusted increased approximately 11% versus the prior year period. We continue to deliver for our patients in important metrics including improved quality measures, increased patient satisfaction and reductions in average length of stay. I remain excited about our digital transformation program and AI agenda. They progressed during the quarter with rollout of some key initiatives to more facilities. Our clinical teams continue to advance efforts to enhance quality, safety and services to our patients with progress on broad initiatives across nursing care, hospital based physician services and support functions. We continue to invest significantly in network development with our capital spending and with selective outpatient facility acquisitions as compared to the first quarter. Last year, our networks expanded their overall sites of care by more than 4%, increased hospital beds through capital spending by almost 1% and added 4% to emergency room capacity. To summarize, we view the respiratory related volume shortfall and the increase in supplemental payment net benefits as first quarter events. As such, we believe our assumptions for the remainder of the year related to volumes, payer mix and costs continue to remain in line with our original guidance. HCA Healthcare has an impressive capability to remain disciplined in dynamic environments. This is a resounding strength of our teams and what they have built over time. It is rooted in our culture and it helps us to execute on our mission to provide high quality care to our patients while delivering strong financial results. With that, I will turn over the call to Mike for more details on the quarter.
Mike Marks (Chief Financial Officer)
Thank you Sam and good morning everyone. Let me start by providing same facility volume comparisons for the first quarter of 2026 versus the first quarter of 2025. Admissions increased 0.9%, equivalent admissions increased 1.3%, inpatient surgeries were down 0.3% and outpatient surgeries declined 1.7%. ER visits increased 0.3%. As Sam mentioned, we had a much milder respiratory season in the quarter. This produced a drag on our quarterly volume growth in admissions and ER visits of 70 basis points and 140 basis points respectively. In addition, the winter storm in January impacted a wide swath of our markets including Texas, Tennessee, North Carolina and Virginia, reducing admissions and ER visits by an estimated 30 basis points and 50 basis points, respectively. The impact of these two factors was consistent across all payer categories and in total adversely impacted adjusted EBITDA by an estimated $180 million. Regarding payer mix, commercial equivalent admissions excluding exchanges increased 0.6%, Medicare increased 1.9%, and Medicaid increased 0.3%. We believe the variance in volume relative to our expectations was almost entirely driven by the respiratory season and winter storm. We view these factors as being temporal and not structural. Overall, taking all of this into consideration, our volume growth in the quarter was generally in line with our 2 to 3% volume growth assumption for the year, albeit at the lower end of the range. Adjusted EBITDA margin decreased 50 basis points versus prior year. Quarter salaries and benefits as a percentage of revenue improved 30 basis points and supplies improved 20 basis points. Other operating expenses as a Percentage of revenue increased 90 basis points, primarily due to an increase in costs related to the Medicaid state supplemental payments, professional fees, and technological investments. As Sam noted in his comments, volumes continued to improve throughout the quarter and we noted a similar progression of operating leverage and cost trends regarding Medicaid supplemental payment programs. While we expected an increase in net benefit of $80 million, we realized an increase in net benefits of approximately $200 million to adjusted EBITDA versus the prior quarter. This was primarily due to the grandfathered approval of Georgia, the reinstatement of the ATLAS program in Texas, and the year over year benefit of the Tennessee program that was Approved in the third quarter of 2025. We are adjusting our full year range to reflect a decline in supplemental payment program net benefit between $50 million to $250 million versus prior year. This updated guidance does not include any potential impacts from additional approvals of grandfathered applications. We continue to monitor the ongoing developments related to these programs and particularly Florida. We continue to feel positive about the prospects for the approval of the Florida program which covers the period of October 1, 2024 to September 30, 2025. If approved, we believe it should result in additional revenues which may be significant. Now let me provide additional information regarding the exchange environment. As we stated in our fourth quarter call, the complexity of the exchanges is significant and we're tracking several areas within the company for the quarter. We estimate our same facility exchange equivalent adjusted emissions declined approximately 15% versus prior year quarter. This represents our comprehensive evaluation of patients that presented with exchange coverage but ultimately will not be covered for their episodes of care. Using the same analysis, we estimate same facility uninsured equivalent missions increased approximately 16% versus versus prior year quarter. Over half of this implied increase relates to the movement from exchanges and normal uninsured growth. The remaining portion reflects a slowdown of conversions to Medicaid from patients who were not willing to fill out applications. We estimate the adjusted EBITDA impact from the exchanges to be approximately $150 million in the first quarter of 2026 versus the prior year quarter. Given our experiences today, we still believe our full year range of $600 million to $900 million expected impact on adjusted EBITDA is appropriate. However, the exchange environment remains dynamic and has not fully settled. We will continue to track the fluid nature of this reform and will provide further commentary on our second quarter call moving to capital allocation capital expenditures total $1.1 billion in the quarter. Additionally, we purchased 1.57 billion of our outstanding shares and we paid 183 million in dividends for the quarter. Cash flow from operations was $2 billion in the quarter, representing a 22% increase in the first quarter of 2026 versus the prior year quarter. Our debt to adjusted EBITDA leverage remains in the lower half of our stated target range and we believe our balance sheet is strong and well positioned for the future. As noted in our release, we are reaffirming our estimated guidance races for 2026. I will now hand the call back to Frank Morgan for questions.
Abby
Thank you. Mike. As a reminder, please limit yourself to one question so that we might give as many as possible in the queue an opportunity to ask a question. Abby, you may now give instructions to those who would like to ask a question. Thank you. If you have dialed in and would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one again. If you're called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, it is Star one to join the queue and our first question comes from the line of Ben Hendricks with RBC Capital Markets. Your line is open.
Ben Hendricks (Equity Analyst)
Thank you very much. I appreciate the color on the Respiratory STP and other components. Maybe you could just give us a rundown broadly of how your results compared to your internal expectations for the quarter.
Mike Marks (Chief Financial Officer)
Thanks, Ben, this is Mike. I mean, our results were a bit short in terms of adjusted EBITDA to our internal expectations. You know, I would size our internal expectations as being pretty consistent with the midpoint of Our guidance in terms of growth, pretty consistent actually with consensus coming into the call. Really two main drivers in terms of the shortfall to internal expectations. The first one is this kind of shortfall in the seasonal volume uplift from respiratory and the winter storms, which was mostly offset by the net benefit from the supplemental payment programs. A little detail here on the on seasonal volumes that fall. You know, I've already kind of quantified the volume side of that, so let me talk about the expense side. As we were, as we were coming into January, our respiratory season was actually strong at the beginning of the year. However, later in January, it became apparent that the respiratory season was was actually ending abruptly and we were then hit with a significant January winter storm across several of our states. Both the quick ramp down of the respiratory volume as well as the winter storm delayed our ability to flex down our seasonal cost in the quarter. We were ultimately able to do so as we move through the quarter, but there was a delay. So let me switch now to the supplemental payment program activity. The as noted, you know, Medicaid supplemental payments net benefits was better than expected as we came into the quarter. We did anticipate an increase in the supplemental payment net benefit in Q1 of $80 million, largely due to the increase in the Tennessee program that was approved in Q3 of 2025. So the $200 million in net benefit in the first quarter was about $120 million higher than our internal expectations in the quarter and again resulted from the approval of the Grandfather Georgia program as well as the reinstatement of the Atlas program in Texas. So in summary, Ben, when I think about first quarter, you know, largely we were just a bit short in total. But when you take the temporal factors of the lack of the seasonal volume uplift and the pickup in net benefit supplemental payments, those are really the main drivers in the quarter.
AJ Rice (Equity Analyst)
Thanks. Appreciate that color. And then kind of as a quick follow up, can you just give us an update on the moving pieces that kind of get you back to the initial guide? You know, maybe walk us through the components of the EBITDA bridge as you see them today after such a dynamic first quarter. Thanks. Sure. You know, if you go back to the release, you know, the really only change to our key assumptions for the 2026 guidance relates to the supplemental payment programs. We estimate that the Georgia approval and the reinstate Atlas program previously discussed will provide approximately $200 million of incremental net benefit for the full year that was not originally included in our guidance. I would note that, you know, the $120 million Georgia and Texas that we talked about for first quarter had a prior period impact in it. And so, you know, the component that applied the first quarter and for the full year of 26 really make up that $200 million. And so, you know, that's why we're adjusting our assumption for full year net benefit to now be a decline of 50 million to $250 million. And just to note, that assumption does not include any additional approvals of grandfathered applications. When I think about the rest of our assumptions, Ben, if you think about the impact of the exchanges, we still believe that that 600 to $900 million range is appropriate based on what we've learned in first quarter, our resiliency assumptions that we're in guidance also we believe are still reasonable and appropriate. And so, you know, at the end of the day, we just felt like that it was, it was appropriate not to change our total guidance ranges even with the $200 million improvement in first quarter. You know, a chunk of that really goes back to this, this temporal nature of the headwinds that we saw in first quarter being related to the seasonal volume impacts in the winter storm and the related cost impacts. And so as we think about how we progress through the quarter, you know, Sam mentioned that, you know, as we exited the calling, exited the quarter in March, there are volumes. We're improving largely back to our original plan. We also saw the same thing in our cost structure as we got through March. Our cost trends really reflected good performance in March and were largely on plan. And so that's the walkthrough on guidance. Thank you very much. And our next question comes from the line of AJ Rice with ubs. Your line is open.
Mike Marks (Chief Financial Officer)
Hi everybody. Just to put a fine point on what we're just going, all the numbers flying back and forth is the right way. Am I hearing you say you basically had 180 million of negative impact from flu and weather in the first quarter. You picked up 120 million of benefit from DPPs in the first quarter. That was not expected. So the net was a 60 million drag net of the unusual items or weather and flu. And then on the 180 million versus the 200 million of DPP in the full year impact. So you're ending up roughly 20 million if you maintain your guidance for Q2, Q3, Q4 better because of the incremental impact of DPP over the course of the year. I just want to make sure that's the right take from what you're saying. Yeah, I think that's. You're generally in the zone. I mean, you know, we view the $180 million headwind in the quarter as being temporal and not structural. So we don't think that repletes repeats. You know, the $200 million improvement for the full year 26 from, you know, supplemental payment benefits, you know, reflect Georgia and Texas and then, you know, just broadly, we're not changing our full year guidance on earnings. And I think, you know, that that's the way to read that. You know, I think I would acknowledge there's a little bit of softness, you know, midst of this consensus that maybe not fully explained, but it's pretty close from the moving factors in the first quarter. And then AJ when we look at the rest of the year and we think about the demand that we're seeing in the marketplace, you believe that we will be able to run between 2 to 3% volume growth in the next three quarters of prior year. Our original assumption around the exchanges, around revenue and our cost trends, you know, we think that the balance of the year is another way of saying is largely back on our original plan. Okay. And maybe follow up.
Sam Hazen
No, this is. Sam. I mean, we do, I'll call it a business analysis of the company in the first quarter. It's pretty much where we expected save the respiratory dynamic. So we believe the business outcomes of the company in the first quarter are in line with the guidance we provided just 90 days ago. And so we're at a point where we're judging that we're trying to influence what we can on the edges and put ourselves in a position where we get to where we need to be by the end of the year. I mean, that's sort of the short story on what happened here. There's always puts and takes with the supplemental programs. We've talked about that for years. What we're trying to judge is the business functioning and performing as we thought in general case save the one item associated with the respiratory activity.
AJ Rice (Equity Analyst)
Could I just, as a follow up, your 400 million resiliency program, I know you've got a lot of AI initiatives, but some of that's other stuff. Can you just sort of update us on where you're at with the AI initiatives? And is that 400 million a pretty firm number? Is there a range around that as to what you might ultimately realize this year? Well, in the quarter, the same AJ in the quarter as Mike indicated, you know, we get operating leverage when we get volume, whether it's respiratory volume or surgical volume. We get operating leverage. So we lost a little bit of that in the first quarter. But again, when you sort of normalized for that as we exited the quarter, we felt good about the leverage we were seeing in the subsequent months. And so when you merge that with the maturing of our resiliency program over the course of the year, we think we can get where we need to be with our cost objectives for 2026. Are there opportunities maybe more? Possibly. Could we find pressures that we haven't anticipated? Of course. I mean, that's what a dynamic environment represents. I will tell you that our artificial intelligence agenda is getting implemented. We have productivity with our physicians with our ambient listening capabilities and the documentation associated with that. We're rolling out our nurse handoff program, as I mentioned. We've got new initiatives that are rolling out to more facilities that's got more patient safety and nurse engagement, some productivity to it. We're really excited about what the artificial intelligence program can do to complement our caregivers in our company and help us provide better care, do it more cost effectively and run the business better. We're seeing it in case management. We had good outcomes with case management as we talked about with average length of stay. So all of this is coming together. Does it have some upside in some areas? Yes. Could there be some pressures in other areas? Of course. So when we put it together, we feel like we're on the program that we estimated at the beginning of the year. Okay, thanks so much.
Ann Hines (Equity Analyst)
And our next question comes from the line of Ann Hines with Mizuho Securities. Your line is open. Great. Good morning and thank you. I just have a quick follow up from a comment you made in the prepared remarks. And then I have a question just on the floor to dpp. I do think there's some anxiety in the market because it's taking so long to approve. Do you have any color on, maybe from a timing perspective when that could be approved? And then my real question is just on aca, you know, just with the increase in the uninsured and, and the bad debt, is that coming in line with your initial expectations? And can you remind us, does your guidance assume a deterioration in the collectibles of co pays and deductibles of the insured? And what change is embedded in your guidance? Thank you.
Sam Hazen
That is a multi part question and it was impressive.
Ann Hines (Equity Analyst)
Thank you.
Mike Marks (Chief Financial Officer)
So when I think about. Let me start with Florida and you know, I do think that the size of the Florida program is such, the enhanced size that CMS is thoroughly reviewing this program. As you noted. But you know, based on our sense of things as we sit here today, we do feel positive about the prospects of approval for the Florida program. And if approved, as I noted in my prepared comments, if we believe it would result not only in additional revenues, but those that may be significant. So that's a quick update on Florida. And obviously we'll be watching this just like you will, and we'll keep you informed as that moves as it relates to the exchanges and what we're seeing related to, you know, to patient amounts due. I would say it like this. You know, as we came into our modeling, our models included some shift from silver to bronze. And what we're seeing as we study our patients so far is that there has been a bit of a shift from silver to bronze in the patient selection of metal tier. I wouldn't say, however, that that shift is significant at this point, but there is some. We're also noting that even within silver, if you compare the benefit designs in 2025-2026, that the amount patients owe within silver are also increasing as we are studying the 2026 activity. And so all this is leading us to conclude that we are seeing a growth in patient amounts due on the exchanges. And as we've noted in the past, we see a lower collection rate on patient balances from the exchange plans as compared to traditional managed care patients. And this shift I do think will have an impact on patient collections on unconstitated care. But from a context standpoint, I don't think that the impact of the shift and the growth in a patient mountain dues is going to be overly material given the relatively minor portion of our patient cash collections that relate to exchange patients. We did include in our Original estimate of 600 to 900 million dollars
Brian Tankulet (Equity Analyst)
this increase in patient amount due on the exchanges. And it's within the range of our models based on what we're seeing on the broader part with the exchanges. To your point, we did anticipate movement out of the exchanges to uninsured. And so if I think about the kind of the payer mix implications within, you know, within the model, you know, as you go back to that discussion, we thought that we would lose about 15 to 20% of volume of people leaving the exchanges. And we, we think we saw about a 15% decline in first quarter. So we're at the lower end of that range. You may recall that our assumption was about 15 to 20% of those who lost coverage on the exchanges would migrate to employee sponsored insurance and the rest who Uninsured. You know, as we're studying the patients during the first quarter that previously had exchange coverage, we are noting that patients converting to employee sponsored insurance are generally within the estimated range that we built into our guidance model. Interestingly, patients migrating to uninsured are just a little bit less than expected as we are seeing some individuals converting to Medicare or Medicaid due to age or to changes in life circumstances. But I would note that this is a slight improvement. It was not significant and overall that the payer mix deterioration from these changes is generally in line with our expectations for the quarter. It's early and obviously this is going to continue to mature, so we'll have more mature insights. So I'll just end with this. I mean, if you think about the growth in the uninsured that I highlighted, you know, in my prepared comments, you know, a little more than half of that 16% growth was from the movement from exchanges and that's in line generally with our expectations. The other factor that did show up as growth in uninsured volume was this slowdown in Medicaid conversions that we highlighted broadly. Those were the components that I would say that are in our uncompensated care results for the quarter and, and largely are in line with our expectations and plans. Thank you. And our next question comes from the line of Brian Tankulet with Jefferies. Your line is open. Hey, good morning guys.
Mike Marks (Chief Financial Officer)
Mike, just a quick view, I mean maybe to follow up on your comments on Ann's question too, right. How do you want us to think about the sequential move then from Q1 EBITDA to Q2, factoring in the recovery in volumes and then your expectations on Hicks and how that's all going to play out. Yeah, you know, we don't generally give guidance by quarter, you know, other than just kind of pointing back to normal seasonality. Brian, you know, clearly as you noted from our comments, and we do view the volume shortfall in first quarter as being temporal and not structural. So I mean that's an important note. Broadly on the exchanges you get a sense for what we saw in the first quarter. It is dynamic as I think about what we're going to learn on the exchanges. We're going to continue to learn more as we go along. I think what that looks like is studying how much of the anticipated 2026 full year volume decline came through during the first quarter, which is a bit difficult to predict. You know, we, as we studied this, we know that certain individuals were in their grace period throughout the quarter and they may Drop coverage after the first quarter. We make an estimate for those patients in both our equivalent admission statistics and our financials. But I still think, you know, based on the data we've seen today, we do believe that our assumption of a 15 to 20% volume continues to be reasonable. So those would be, you know, the thoughts that I can give you now related to the progression through the year.
Brian Tankulet (Equity Analyst)
Thank you.
Whitmail
And our next question comes from the line of Whitmail with Learinc partners. The line is open. Hey, thanks. So the health plans are all on an organized campaign today on prior authorization. I just was wondering if you could talk about any of the, any payer behavior changes, particularly post discharge denials. Anything new that you saw emerge within the quarter or year to date. And I know you've been working with a number of plans to sort of streamline all this back and forth stuff. So just any color would be helpful.
Mike Marks (Chief Financial Officer)
Sure. Thanks Whit. You know, we continue to experience, you know, increased activity levels with our payers on denials and underpayments pretty broadly across payers and across products. I mean, I might continue to call out Medicare Advantage as being a specific driver within the product mix. As you know, we've been working really hard over the last several years to strengthen our revenue cycle. We've added resources, technologies and a lot of capabilities around dispute resolution to really go after the root causes of denials. That work has continued to pay dividends given the results of the work of the company. I think as you look at first quarter with even with the pretty significant increase in activity around denials and underpayments that we are seeing, you know, our recoveries, our work around dispute resolution, our work around appeals and getting these overturned are such that we were able to mitigate and not see a lot of year over year impact to earnings. But the denials and underpayments are still really high. And so it's a key part for our industry to continue to work together on. As you noted, we have launched over the last really 18 months now a series of partnerships with many of our strategic payer partners. These partnerships really focus on digital integration to try to, to share more digital and structured data back and forth between us and our payers. Eliminate faxes, eliminate paper. A lot of work around administrative simplifications for both us and our payers to deal with the really significant administrative cost burdens that are associated with, you know, kind of the healthcare in America. And then lastly, management of disputes. I would say that those are good and early work products, but we have a Long way to go as we continue to move that forward. So that's a bit of an update on denials and underpayments in freedom.
Whitmail
Okay, thanks.
Andrew Mock (Equity Analyst)
And our next question comes from the line of Andrew Mock with Barclays. Your line is open. Hi, good morning. Wanted to follow up on the slower conversions to Medicaid. Curious. Which states you're seeing that slowdown, whether you view that as a temporary or issue or durable trend. And when you take a step back on the broader uninsured and ACA population this year, did you make any changes to your bad debt accrual process? Thanks.
Mike Marks (Chief Financial Officer)
Oh, thank you. So when I think about Medicaid and the slowdown in the conversions, we think, and it's still early, there can be potentially some other contributing factors. But you know, we largely think about this as people who this year are less willing to fill out Medicaid applications. And so you know, we suspect that that could be driven a bit by concerns around immigration and like so that we're studying that. Not quite sure if that's the full reason why, but that is, that is a piece of the story here. In terms of the year over year growth in the slowdown in Medicaid conversions that's impacting our uninsured volume increases broadly. Yes, our budgets, our plans for 2026 reflected the payer mix shifts in the patient amount due collections that we anticipated being impacted by the exchanges. And so you know, that was reflected both in what we anticipated related to uninsured volume growth and related to the potential impacts in terms of patient due collection. So that was built into generally our models for 2026.
Matthew Gilmore (Equity Analyst)
Next question. Our next question comes from the line of Matthew Gilmore with KeyBank. Your line is open. Hey, thanks for the question. I wanted to ask about the hurricane impacted markets. I think guidance didn't assume any continued improvement from those markets. Can you just give us an update in terms of how things are playing out and if there's any signs that those markets are improving, particularly North Carolina. So this is Sam, North Carolina, here's the short story. Demand is above our expectation. It's costing us more to serve that demand. Because western North Carolina has a significant workforce deficit, we're having to bring in labor, nursing, non nursing to support the demand. We have a very aggressive recruitment campaign and compensation program to service that demand. And we're hopeful over time we can mitigate the cost. So we've seen more volume, it's cost us more to service. So we're a little bit behind our expectations in North Carolina on the Bottom line.
Mike Marks (Chief Financial Officer)
You know, the other thing, Sam, that we're seeing is the payer mix change in North Carolina. It clearly has been disrupted in terms of that workforce disruption is also impacted in a less favorable overall payer mix. Broadly, when we think about the hurricane related markets, you know, in our guidance we indicated that we did not think that we would see any kind of material improvement in year over year earnings from the hurricane markets. I mean, our Tampa facility, Largo Medical center is largely recovered and in flight, but we don't think we're going to see any net material increase in year over year earnings from the hurricane markets due to the reasons that Sam articulated.
Matthew Gilmore (Equity Analyst)
Got it. Thank you.
Ryan Langston (Equity Analyst)
And our next question comes from the line of Ryan Langston with TD Cowan. Your line is open. Good morning. On the impact from winter weather, should we expect any loss procedures in January to come back through the year? I think you said February, March, volumes more in line or just wondering if you picked those January volumes up already. And sorry if I missed this, but can you quantify the impact from weather to the same store inpatient and outpatient surgery growth?
Mike Marks (Chief Financial Officer)
So when I think about the winter storm specifically and you know, in my prepared comments, we indicated that that was 30 basis impact on year over year volume growth on admissions and a 50 basis impact on year over year ER visits. So just to keep that in mind from a recovery standpoint, we do believe that from the winter storm that we largely recovered the surgical component of that within the quarter. What was not recovered and what drove the net volume impact here was really the emergency visits and the related emergency admissions where there was really not a second chance to recapture that volume. And so I don't think that the winter storm was really an impact on our surgical volumes in the quarter. In a material, yeah, it's not going to be notable over the rest of the year that we and we will likely recover some volume, but it'll be sprinkled into our mix in a fashion that we won't be able to really discern it. All right, thank you.
Justin Lake (Equity Analyst)
And our next question comes from the line of Justin Lake with Wolff Research. Your line is open. Thanks. Good morning. Wanted to follow up on your comments around exchange patients sitting in the grace period in February and March that you might not get paid for. My understanding is that managed care will let you know who these patients are in real time and that their coverage is suspended. Is that right? Just to be clear, how do you treat these patients within the exchange volume decline of 15% in the first quarter and maybe share a Little more color on how you accounted for this utilization during the quarter from an accounting revenue recognition perspective. Thanks.
Mike Marks (Chief Financial Officer)
Sure, Justin. So if you think about the verification process that we have with our payers, we have some payers where we do receive some premium status information through our verification process, but the information that we are able to access is not consistent and it's not standardized across exchange payers. As a result, we generally do not have reliable third party visibility at the time of service whether a premium has been paid. When the information is available, it certainly helps us inform further patient engagement to encourage these patients to maintain their coverage. Generally, though, I would not characterize the eligibility and verification information received at the time of service as comprehensive, consistent or largely accurate as a verifiable data point. Let's talk a minute, Justin, about the grace period and how that's flowing through. Patients that receive premium assistance, whether they are auto re enrollees, new exchange enrollees, or switching plans, generally have a three month grace period after the coverage is effectuated. For the first month of the grace period, the payer is required to cover the care for the remaining two months. The payer is not required to cover any care episodes unless the premium was caught up by the enrollee. So our work as we studied the court was to first look at every patient that came in with exchange coverage and try our best to understand whether or not they attributed in they had an attrition during the quarter, at which point we recognized that revenue impact during the quarter or to make an estimate of those that we believe will lose and come out of the grace period with attrition where we will not get paid for that and we'll know that in second quarter and beyond as they get past their grace period. For that last part, we've made, you know, an accounting evaluation and a business evaluation that we've included in our analysis of both equivalent admissions and revenue. And so when we articulate that 15% drop in equivalent admissions, it contains both of those components and same thing with the impact on our revenue and earnings.
Justin Lake (Equity Analyst)
Great, thanks.
Scott Fadal
Our next question comes from the line of Scott Fadal with Goldman Sachs. Your line is open. Hi. Thanks. Good morning. Interesting.
Sam Hazen
If you could talk about what you saw with acuity and case mix in the quarter, maybe putting aside the lighter respiratory, which we know would probably drive a lowercase mix, and then in terms of, you know, maybe in terms of patients, and then some of the types of procedures and service lines, how that impacted acuity and case mix as well. Thanks. So this is Sam. We saw increased acuity as Reflected in our case mix, it was modestly up on a year over year basis. Inside of that, we did have the respiratory dynamic that we alluded to, but within the respiratory dynamic we had a fairly acute component last year that was more HMX driven than maybe we had seen in the past, but yet we still jumped over that. So when you look inside of our business, in the first quarter this year we had really strong cardiac activity. So our cardiac procedures grew significantly. Trauma was up 2 1/2 percent. Also driving Acuity. We had rehab services grow at a very good pace. So a lot of the elements that we've had momentum in from a service line standpoint over the past few years continued into the first quarter, again influenced somewhat in total by these other factors that we alluded to. So we continue to find opportunities in the market to develop more comprehensive programs as our communities grow and service our communities more effectively closer to home. That will continue to be a part of our journey here. One other metric that I think is important with respect to case mix is our receiving of patients through our patient logistics centers grew by 2.4%. That tends to have a higher acuity level. As well as rural hospitals, other community based hospitals are using the deeper service offerings that we have in some of our tertiary and quaternary facilities. So all in all, we were generally satisfied with our case mix.
Scott Fadal
And can I just ask for the follow up?
Sam Hazen
Just around the payer buckets on acuity and case mix, were they relatively consistent or with the exchange sort of disruption, did you see any sort of movement around? Pretty consistent. You know what's interesting, the case mix was pretty consistent. The respiratory effects were pretty consistent. So we had, you know, consistency across all aspects of our payer classes when it came to sort of the overall story for the company. Thank you. You're welcome.
Kevin Fishbeck (Equity Analyst)
And our next question comes from the line of Kevin Fishbeck with Bank of America. Your line is open. Okay, great, thanks. Can you talk a little bit about the $150 million impact from the exchanges this quarter and how that compares to the 600 to 900 million annual number? Did you guys assume that that number would build as the year goes on, or are you saying that, you know, you're kind of trending towards the lower end for the year on that dynamic? And then also on the Medicaid side, is this dynamic something that you just kind of started noticing in Q1 or has it been building for a while? And is it a dynamic that you think is peaking in Q1 or will get better or worse? You know, from here. Thanks.
Mike Marks (Chief Financial Officer)
Yeah. On the, on the. Let's start with Hicks. Kevin. If I think about the 150 million for the quarter, I mean, it's a quarter estimate and, you know, obviously that would put us a bit at the lower end of the full year range, but I think it's a bit early. I mean, it's dynamic. You can imagine, as we've gone through the quarter and we're trying to understand and analyze all the moving parts around the exchanges, it's probably a little early to declare that the full year would be, you know, at the lower end of the range. So not quite ready to say that, but I would say that, you know, we were. We were pleased that in the quarter, we think that this $150 million were reflects, you know, not only what we saw in the quarter, but our estimates of the attrition rate and alike that we built in, you know, to our county routine. So a little early to try to give you a broader sense for the full year yet. But I would say, like, we do think that this range of 600 to 900 million dollars is a reasonable estimate for the year. So let me leave that there. On the Medicaid conversion slowdown issue, it's pretty nascent. You know, we maybe saw a smidge of it at the very end of last year as well, but it really popped up on us here in first quarter. Given its nascy. It's again, a little early to call, whether it's a sustained trend or something that just popped in first quarter. And we're watching it, as you can imagine. And we'll keep you up to date as we go forward. So that. That would be.
Sam Hazen
Yeah, I would say, though, Mike, just adding that. I mean, our Paralyn teams have a robust process for qualifying patients who need support through our financial counselors and other efforts. And so those continue. You know, we're just dealing with some, you know, dynamics here that we haven't experienced before. And it's like Mike said, too early to really suggest that it's peaked or not peaked. We just need a little bit more time to judge it.
Sarah James
And our next question comes from the line of Sarah James with Kantor Fitzgerald. Your line is open. Thank you. I'm sorry to circle back onto this, but that March volumes were recovering towards the range of 2 to 3%. Possible for a full year to hit the existing guide of 2 to 3% volume.
Sam Hazen
Okay, we couldn't hear what you were saying on the front end, but here we think we know what you said, and that is, you Know, how are volumes, you know, exiting the quarter and what does that do to our full year guidance? You know, February and March were generally in line when you put the two together with our full year guidance, January was the quarter, I mean, the month in the quarter where we saw a decline in activity. So when we're making a judgment about the rest of the year, we're judging what do we think is going to happen in the last three quarters of the year. And we think our guidance around volume of 2 to 3% in the rest of the quarters is appropriate. In what we see with demand in the market, what we see with trends coming out of the quarter and what we see with capital projects and other initiatives to develop our networks, we feel that that's still a reasonable target. So that's where we are at this point.
Stephen Baxter (Equity Analyst)
Thank you. And our next question comes from the line of Stephen Baxter with Wells Fargo. Your line is open. Yeah. Hi. Thank you. For all the color on the moving parts in the quarter. We think about, I guess the only sort of year over year number you haven't given us yet is on resiliency. And I guess I'm wondering is there any reason to think that just kind of the core of the full year impact that you talked about wouldn't be a reasonable placeholder for the first quarter? And then if we go through and kind of look at those moving parts, it does imply that the core growth in the quarter was probably closer to 2 and a half or 3%. And I think you have a bit higher of a full year guide embedded here. Just wondering if you could help us understand what you think the shortfall was on the core kind of normalizing for all these moving parts. Thank you. When I think about the resiliency plan, we're still confident in the full year, you know, $400 million guidance. So I'll leave that there. I mean, I think that's a good estimate for the full year. When I think about core growth, I mean, you know, we, our first quarter's EBITDA growth was, you know, called 1.9%. And the midpoint of our full 20, 26 year guidance is kind of call it 2.8, 2.9%. And so that gives you a sense, I think we've articulated the drivers in first quarter. And so we largely think that that indicates that we believe we're going to be largely on plan for the next three quarters in terms of the overall makeup of volume and revenue and earnings back to our original plan here over the next three quarters. And that's how we think about it.
Jason Casorlo (Equity Analyst)
And our next question comes from the line of Jason Casorlo with Guggenheim. Your line is open. Great, thanks. Good morning. Maybe just to follow up on the outpatient side, you know, historically you've talked about some of the pressures you saw on Medicaid, but you more than made up of that. On the revenue side of the fence, it looks like revenue was up just shy of 3% in the quarter for outpatient compared to the 9% or so you did last year. Sorry if I missed this, but can you give the impact any impact on the weather on the outpatient side and then you know, maybe how trends, revenue and volume wise, you know, trended in the quarter, I guess compared to with your ASCs, compared to your remaining outpatient footprint would be helpful. Thanks.
Mike Marks (Chief Financial Officer)
Sure. Let's start with the EV side of the outpatient, you know, business. And yes, between respiratory and the winter storms there was an impact on our ER volumes. And you know, it's about 140 basis points impact on ER visits from respiratory, about 50 basis points of impact from, from the storm. If you, if you think about that compared to the 0.3% growth in ER visits, it gives you a sense that, you know, your, you're back kind of at normal trends when considering things like the winter weather storm and the respiratory season shortfall there on er. Sam mentioned this, but we did have good growth in year over year, things like emr, EMS visits and trauma visits. So that was good. On the surgery side, our outpatient surgeries declined 1.7% and that was 2.1% in hospital based outpatient and 1% in our ambulatory surgery center. On the hospital side, we saw a little bit of weakness in our ortho related cases. On the ASC side, it was really more of the low acuity service lines like ophthalmology and ENT that drove the statistical decline. I would say we were pleased with our revenue performance in our ASCs for sure. And when I think about payer mix for surgery, really for first quarter, the two big drivers of weakness on the payer side was Medicaid and of course the exchanges which we anticipated. So those would be kind of a rundown.
Sam Hazen
Let me give a little backdrop here. When you look at our outpatient revenue and the composition of it, about a third of it is emergency room, about a third of it is outpatient surgery and the other third is imaging, primarily driven by cardiac and so forth. And so when you think about the storm, it affects obviously the emergency room and our outpatient Surgery and our imaging, all three categories. The respiratory is mainly the emergency room. So all of it sort of comes together in this composite view and that's how we sort of dissect the outpatient business. So as we push into the rest of the year, we don't really have the implications of either of those for our outpatient platform. And we're confident that we'll be able to generate the revenue expectations for the balance of the year.
Benjamin Rossi (Equity Analyst)
And our next question comes from the line of Benjamin Rossi with JP Morgan. Hey, good morning. Thanks for taking my question across your network development efforts. I guess what's your current cadence of ramping new beds and orcs capacity? And how much of your 2026 growth is dependent on projects already coming online versus future years? And then could you just give us an update on how you're generally thinking about M and A as a potential growth lever this year and how inbound and outbound conversations with opportunities in your pipeline have developed to start the year. Thanks. So as I mentioned in our prepared remarks, we did see a number of outpatient acquisitions close in the first quarter order. Those were primarily related to opportunities in urgent care, in ambulatory surgery, and in our freestanding emergency room business unit. We had a number of acquisitions there. As we think about the going forward aspects of acquisition, we continue to believe that's where most of our opportunities will be is in the outpatient arena in that complementing our hospital networks. And so our pipeline has a number of promising projects in it, and I'm hopeful that we'll get to close those as we push into the balance of the year. With respect to capital spending, we do have a significant pipeline of projects that have already been approved that are in development. That's almost five and a half to six billion of approved projects that will come online over the next 24 to 30 months throughout, you know, sort of different periods within that time period. A lot of those projects are long lived projects. And by that I mean they're adding hospital capacity, which is difficult to do because, you know, they're big projects, they're disruptive projects to our facilities, and it takes a while to get them done. And then at the same time we try to build those for future growth that we anticipate in the markets. So there is a component of our growth expectation in 26 that's related to projects that have come online in 24, 25 and 26. And so we sort of blend that into our expectations every year. And we do have a slightly accelerated expectation in 26 as compared to the previous two years related to capital projects that are coming online. So we remain encouraged with the opportunities to invest in our networks. Our occupancy levels continue to be at high levels for us, and that presents opportunities for investment and growth. And as we build out our networks with outpatient facilities, as communities grow and as our overall hospital positioning increases, we think that gives us a good opportunity to grow our share and deliver positive returns. And we've had a tremendous pattern, I think, of producing positive returns on capital, and we still continue to believe we can deliver on that. Abby, let's take one last question.
Craig Hettenbach (Equity Analyst)
And our final question comes from the line of Craig Hettenbach with Morgan Stanley. Your line is open. Oh, yes, thank you. Just a question on kind of contracting
Sam Hazen
just for this year. Just kind of what you're seeing in the race backdrop as well as any visibility into 2027. This is Sam for 2026. We're pretty much fully contracted at our targeted levels. As we push into 27 and 28, we're in a contracting cycle as typical with our payer contracts. And we're about a third of the way through on 27 and modestly into 28. And right now we're on target. We believe we're going to be able to get into a range that works for our business as we finalize these contracts with the payers, as Mike alluded to, we. We got other issues that we're working with them on that we think can be additive to them, additive to us, beneficial to our patients and their customers in a way that makes the system work better. And so we're confident that we'll get to the good answers on these contracts that we're in negotiations on currently. That's helpful. Thank you.
Frank Morgan (Vice President of Investor Relations)
And that concludes our question and answer session. I will now turn the call back over to Mr. Frank Morgan for closing remarks. Abby, thank you for your help today. And thanks to everyone for joining us on the call. We hope you have a great weekend. Come around this afternoon if we can answer additional questions. Have a great day.
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