HCA Healthcare Third Quarter 2026 Earnings Call - HCA HEALTHCARE INC

Welcome to the HCA Healthcare 3rd Quarter 2026 Earnings Conference Call. Today's call is being recorded. After today's prepared remarks, we will host a question and answer session. We kindly ask that you please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 2 again. At this time, for opening remarks and introductions, I would like to turn the call over to Vice President of Investor Relations, Mr. Frank Morgan. Frank, please go ahead, sir. Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen, and our CFO, Mike Marks. Sam and Mike will provide some prepared remarks, and then we'll take your questions. Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements that are 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 ACA Healthcare Inc. is included in today's release. This morning's call is being recorded and a replay of the call will be available later today. With that, I'll now turn the call over to Sam. Good morning and thank you for joining the call. The company's results in the third quarter reflected improvement in key areas of our business. First, demand for our services continued to grow at a solid rate. Adjusted admissions on a same facility basis grew 3% compared to 2.3% year-to-date. Inside this growth, insured volumes grew faster in the quarter than in the first half of the year. The third quarter reflected the 22nd consecutive quarter of volume growth for the company. Second, revenue per adjusted admission for our insured business, excluding supplemental payments, increased at a higher rate than in the first half of the year. This increase partially offset the payer mix pressure from continued volume declines for patients who were formerly covered in health insurance exchanges and are now uninsured. Additionally, we had a modest incremental net benefit of $50 million in the quarter from Medicaid supplemental payment programs, primarily related to a recently approved Virginia program. These factors, coupled with improved cost results, contributed to solid financial performance in the order that slightly exceeded our expectations. Diluted earnings per share, as adjusted, increased almost 4%. I've often mentioned that HDA has strong staying power because of our scale, the important role we play in providing critical services to communities, and our disciplined culture. Despite the challenges this year brought about by federal policy changes, we have continued to move the company forward and believe we are positioned to end the year positively as we look ahead to 2027 let me share a few preliminary observations around certain aspects of our business before we provide our full year guidance in january i'll remind everyone we are still early in our planning process and there are several important areas that remain fluid including the policy environment first First, we expect demand for services to remain strong with volume growth forecasted to be two to three percent. This range is consistent with our long-term thinking. Within the demand environment, we believe it's reasonable to assume for 2027 that fewer people will lose their coverage on the health insurance exchanges than we experienced in 2026. However, we do expect that there still will be a meaningful impact on payer mix. We need to get through the fourth quarter before we can provide more details. Next, we expect to receive approximately $550 million to $650 million less in Medicaid supplemental payment net benefits due to various state programs that received grandfather approvals in 2026 and reimbursed us for services we provided in prior years. Last, we anticipate favorable cost performance, primarily due to our ongoing enterprise-wide resiliency program and the operating leverage from the expected volume growth. When we aggregate these preliminary observations, we anticipate our earnings in 2027 be generally consistent with 2026. Beyond 2027, we anticipate performance more in line with our long-term growth targets. This view makes three important assumptions. First, we move past the most significant effects on payer mix from the exchanges. Second, we assume no material policy changes beyond H.R. 1. And finally, we have a set of strategic initiatives including digital transformation network development and ongoing resiliency programs that generate significant value i'll reiterate it is still early but we believe these preliminary perspectives provide context for how we currently see the company's growth prospects let me close with this our colleagues continue to provide high quality care to our patients and and execute our strategic plans. I appreciate their efforts in delivering on our mission and I want to thank them for their good work. As we get further into the execution of our plan, we believe it will enhance access for our patients with our capital spending, create a better work environment for our caregivers with our AI transformation initiatives and deliver value for our shareholders with our enterprise-wide resiliency program and balanced capital allocation. As we look to the future, I'm confident that HCA Healthcare has the right people, the right process, and the financial position to achieve our long-term objectives. With that, I'll turn the call over to Mike for more details on the quarter. Thank you, Sam, and good morning, everyone. As Sam noted, demand for our services continued to grow at a solid rate. Compared to the prior year quarter, on the same facility basis, admissions increased 2.7%, equivalent admissions increased 3%, and ER visits increased 5.1%. Inpatient surgeries were down 1.4%, outpatient surgeries down 3.7%. Regarding surgical volumes, consistent with the second quarter, we continue to see solid growth in our emergent surgical volumes and pressure collected. Exchange facility equivalent admissions in our insured population excluding exchanges increased approximately 3% in the third quarter versus prior year. Exchange equivalent admissions declined approximately 19% versus prior-year quarter. For context, the third-quarter of 2025 was our high watermark for exchange volume, making very difficult comparisons. However, we did see sequential improvement in exchange volume from 2Q to 3Q of 2026 of approximately 8%. Like the second quarter, we continue to see patients who have lost coverage on the exchanges migrate almost one-for-one to uninsured. This one-for-one migration makes up approximately 80 percent of our uninsured volume growth, with the remaining 20 percent primarily related to a decrease in Medicaid conversions, and mostly in taxes. Our uninsure volume in third quarter 26 represented approximately 10.5 percent of total equivalent in this versus 8.5 in the prior year quarter. We estimate the pyramid shift from exchanges to insured resulted in an unfavorable impact on adjusted EBITDA of approximately $400 million in the quarter. We now expect the full-year unfavorble impact on the adjusted EBITA from payer-mixed shifts to be at or slightly above the upper end of the range of our previously updated estimates. For Medicaid supplemental payment programs, the company recognized approximately $50 million of incremental net benefit during the third quarter. We now expect the incremental net benefits from Medicaid supplemental payment programs to be between $600 million and $800 million for the full year 2026. This increase in our estimated range was driven equally by the grandfathered application from Virginia and one-time payments from across our other programs. We were pleased with our cost results in the quarter. Same facility cost for equivalent admission when excluding Medicaid supplemental payment programs was essentially flat versus prior year quarter, and it improved 40 basis points sequentially. As we typically see an increase sequentially from second quarter to third quarter, this outcome reflects strong operating discipline from our teams. According to capital allocation and cash flow, capital expenditures totaled approximately $1.36 billion in the quarter. Additionally, we purchased approximately $3 billion of our outstanding shares and we paid $165 million in dividends for the quarter, cash flow from operations was approximately $4.5 billion in a quarter. Our debt to adjusted EBITDA leverage remains in the lower half of our stated target range and we believe our balance sheet remains strong and well-positioned for the future. We currently expect to complete most of the existing authorized share repurchase program by year-end, subject to market conditions and other factors. As noted in our release, we are reaffirming our estimated guidance ranges for 2026. Given our third quarter performance, we currently expect it to be the upper half of our guidance ranges for the year. I will now hand call back to Frank Morgan for questions. Thank you, Mike. As a reminder, please limit yourself to one question so we might give as many as possible in the queue an opportunity to ask a question. Christine, you may now give instructions to those who would like to ask the question. We will now begin the question and answer session. If you would like ask a questions, please press star 1 to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of A.J. Rice with UBS. A.G., your line is now open. Thanks. Hi, everybody. Maybe just to, I know it's early to be given a lot of comments about 2027, but and you're thinking about consistent EBITDA versus this year. It sounds like you're thinking there is a fairly substantial incremental public exchange headwind that you've got to overcome. And you're also talking about incremental savings from ongoing resiliency programs. I wonder if there's any way to flesh out sort of a order of magnitude of what you think that incremental uh public exchange headwind might be next year even if it's a wide range and similarly so should we look for cost savings similar to the 400 million resiliency program you announced this year next year well aj i think what we tried to do in preparing our early book comments is give you the best information we have at this point as sam noted in his prepared comments we still are in the early stages of our planning cycle and as we kind of finish fourth quarter we're really studying 50 components number one is our results in fourth quarter and how the strength of our core performance continues to mature i think it's clear in third quarter we were pleased with our core growth and we feel like we have momentum we need to validate that in fourth quarter and that'll give us a really good sense of our quarter growth as we kind of step into 2027. the second thing that we've got to study is the exchange environment and as we go through the fourth quarter first we'll have a better information about how our exchange volumes perform uh here in in the last quarter of the year but we'll also have better intelligence about enrollment and the enrollment period starts on november 1st and it goes through you know mid-january and so with those two things you know we'll be in a much better position to give you our best sense of this on our January call our fourth quarter call for 27 guidance but I think as you as you think about core growth you think about the headwinds that we have disclosed related to Medicaid state supplemental payment programs and then what ends up happening with the exchanges in 27 those are the big moving parts and we'll give you further guidance as we as we get on our fourth-quarter call on the cost side. AJ, let me add to the cost. I mean, we see our resiliency agenda broadly as an ongoing strategic program for the company. We now have new capabilities. We have new technology. We're expanding our shared service platform as a result of that. And we're able to move the cost agenda systematically as a company today. And heretofore, we didn't have that ability because we didn't have the capabilities nor the technology and I think the mindset to accomplish it as a result of that. So when we start thinking about costs in 27, as I mentioned in my comments, we do anticipate more value coming from our resiliency program broadly within our networks and from a cost standpoint overall for the company. And so that is more of a strategic agenda item that will carry itself into the future and be a part of our programmatic efforts as we move beyond 2027. I think the other point, Mike, is the Medicaid Supplemental Payment Program is related to some payments from prior year as we think about 2027 also. Our next question comes from the line of Anne Hines with MISUO. Anne, your line is now open. Anne Hine, MISUA. Great. Thank you so much. I just want to ask about 340 . I know there's a regulation out there that if it goes into effect as is, should benefit the for-profits that don't participate in that program. And I know that would probably be challenged at some point to the legal system, but does that flat guidance assume, you know, any change in that program or any potential benefit? And if it does, have you sized that? Thanks. Thanks, Anne. So, this is part of the Medicare OPTS rule that's proposed at this point. We were pleased with the construct that is a part of this proposed rule as it relates a budget neutral reallocation on 340b it would benefit us we have not we're not sizing that publicly at this point uh and you know as we think about kind of our early look statements keep in mind the the idea of being generally consistent is is where we are standing here at third quarter we'll give you you know much more detailed information as we get on our fourth quarter call but i would say i mean we view the the opps rule as proposed and we're hoping that it gets finalized here soon as a positive a factor for aca as we head into 27. our next question comes from the line of ben hendricks with rbc capital markets ben your line is now open great thank you very much uh and i appreciate the uh the demand comments for next year and the expectation for two to three percent volume growth i'm wondering how the uh surgical backdrop is fitting into your thoughts there i know you had said that you didn't expect any uh recovery of the kind of weaker elective trend through the end of this year but as we think about next year is there pending uh demand getting pinned up there that that they could unwind and would would that be upside to that two to three percent or or would that be considered in there any thoughts on how you're thinking about surgical um progression for next year. Thanks. Ben, we haven't landed on components of that growth just yet. We have, you know, some viewpoints. I think, again, we need to get through the fourth quarter, see how the seasonality on surgery plays out in the fourth corner. I don't think we're going to be able to do that. I think, you now, our emergent business, as Mike spoke to, continues to be strong. We see some macro forces impacting the elective business, coverage being the primary macro force, and then just sort of general affordability across the economy being a second one. So I think from that standpoint, we haven't landed on any surgical viewpoints. But I think it's important for everyone to understand that our composition of volume is fairly diverse. I mean, We have cardiac, we have women's, we have NICU, we have transplant programs, we have surgery, yes, medicine, critical care. All of these components are attributes of our company that we think give us an ability to navigate through a component, not being as productive as we want. And that's what we're seeing. We're seeing more growth in other services that are compensating for some of the surgical growth or surgical declines that we're experiencing. For example, our neonatal activity in the quarter was very strong. Our cardiac business continues to be strong.Our trauma business strong. EMS traffic to our hospitals up significantly. So there's all of these elements that go into our volume assumption. We're not ready to sit there and call out surgery specifically for 2027 until we get a better viewpoint of it through the seasonality patterns that typically exist in the fourth quarter. Your next question comes from the line of Brian Tanquillette with Jefferies. Brian, your line is now open. Hey, good morning, guys. Maybe, Mike, as I look at the SWB and the operating expense lines, SWB up, sequentially other off-ex down, anything you can call out there, especially as we think through temp staffing we're seeing indicators that it looks like temp nurse staff orders are picking up so just curious what you can share with us on those two line items especially given resiliency efforts thanks sure and i mean that's part of this answer is consistent with our sequential uh notes we had in my prepared comments braun you know typically when we go from second quarter to third quarter that is the timing of when we do a lot of our merit adjustments uh in labor and so we typically see you know even even 100 basis point increase in our expense per aaa overall uh and that's one of the factors and so we were actually really pleased when we looked at our our expenses per equivalent emissions you know obviously excluding state supplemental payments you know one they were essentially flat the prior year but two they were 40 basis points sequentially down uh you know from second quarter third quarter which you know we think really reflects the the strength of not only our resiliency plan but also the operating leverage we're getting from uh state supplemental payments i mean if you look at swb on a margin basis the prior year uh even with you know the softer overall revenue we had a 40 basis point margin so we were uh we were pleased uh with uh with that and the same thing you know had good performance and supplies as well you know in other operating expenses you know if you just look at uh third quarter in a prior year you do have a bit of costs related to the state supplemental payments. Keep that in mind. Professional fees continue to be a pressure point for the company. We were up about 12 percent versus prior year quarter and professional fees now represent about 24 percent of other operating expenses. And I would note that those, you know, continue to be driven by radiology and anesthesiology. So that's, Brian, that's a bit of a rundown on the cost side. Your next question comes from the line of Pito Chikering with Deutsche Bank. Pito, your line is now open. Hey, good morning, guys. Thanks for taking my question. I'm going to ask AJ's question a little differently. You know, you quantified at $600 million, you know, or $550,000, $650,00 of Medicaid for loan payments. You talked qualitatively about Nixon Medicaid impact next year and the, you know, core mission growth of 2% to 3%. Can you just confirm that 2027 adjusted core EBITDA growth is still in a 4% to 6% range? Are the other pieces impacting that, or is core running hotter or lower? And how much is resiliency driving that core growth? Thank you. Well, you know, Peter, resiliency is just part of our core operations. And so that's the way we think about, you know, resiliency. It's just part, you know, part of the work we do every day in managing the company. When I think about core growth and third quarter, we were pleased with core growth in the third quarter and, you know, call it a 10% core growth increase. I think that reflects good volume growth. It reflected a good net revenue per unit improvement in the quarter and really good cost management as well. And I think as you see how we kind of set the guidance range in the upper half of the range, that gives you an implication of how we're thinking about fourth quarter. And then we'll give you kind of our thinking in more detail about 2027 when we get on our fourth quarter call. So that would be the way to think about core growth. We'll have to validate it for fourth quarter, but we were really pleased with third quarter. And you get a sense from the upper half of the range comment that we have confidence coming into fourth quarter. Your next question comes from the line of Matthew Gilmore with KeyBank. Matthew, your line is now open. Hey, thanks for the question. On the pricing topic, you called out an acceleration in insured revenue per equivalent admission. It sounded like that was better than expected. Can you talk about some of the drivers of that acceleration? Sure. So Matthew, if I look at kind of net revenue per unit, and I think about the insured book, obviously, you know, excluding the exchanges because the payer mix is still the big negative that we're dealing with in terms of net revenue per unit the prior year. Number one is really the strength of our commercial volume. Our commercial excluding exchanges volume was up 2.7 percent over prior year quarter and that's strong and so that component of our payer mix uh is definitely a part of why our net revenue for unit was a bit stronger in third quarter than the first half the year. The second, we continue to see solid rate growth across our payer categories. And then really third, you know, Paralon, we see continued strengthening in their abilities to collect our net revenues and yield our contracts. Their work to continue to strengthen our abilities to deal with the knowledge and underpayments continues to improve. And so I think, you Know, overall, we had a good, you Now, net revenue per unit performance in the third quarter, especially kind of given that the headwinds from our payer mix impacts. Your next question comes from the line of Sam Dodge with BMO Capital Markets. Sean, your line is now open. Yeah, thanks. Good morning. Maybe just on the 2026 guidance, Mike, you said you're now pointing to the upper half of the range. I think that still implies core growth in Q4 will accelerate some from q3 maybe if you could just walk us through the visibility you have into what's going to drive that is that just incremental gains from from resiliency you're expecting to come through uh and sam you also mentioned volume growth in q3 broadly improved from the first half of the years is that part of the assumption too that that volumes also continue to improve into nfp4 well at first i would say i mean i think if you look at the upper half of our guidance ranges that largely implies a core growth fairly consistent in fourth quarter third quarter would be the first thing out of context and then i think the drivers are similar you know number one is we did see strength in volume in third quarter uh and and so that's encouraging uh for sure we've already mentioned a little bit on the net revenue per unit side there tends to be a step up from third quarter to fourth quarter um in normal course and so we expect that that normal seasonal trend to apply broadly. And then we do believe, as even Sam mentioned, not only in his opening, but as we were talking about in the first question, that our performance around our resiliency plan, our ability to manage costs, we continue to see strength across our resiliency plan in third quarter, in fourth quarter, and into 27, 28, and beyond. So I think those are key components sean that are that are kind of making up our guidance comment for fourth quarter of 2026. your next question comes from the line of wet mayo with lee rink but your line is now open yeah thanks did the um did the hicks headwind get larger in any particular market and any comments around AR collectability balance after collectability be helpful in any of the 400 million is that related to prior quarters thanks well I would say with it that our our Hicks results in third floor were a little bit higher than we estimated you know we would have estimated a third based on our guidance that we gave the second quarter the third quarter would be you know 15 16 percent decline we ended up at about 19 decline which you know just reflects the sustained decline and saying in our exchange volumes uh i like to put that in context though i mean you know that's that two or three points is about 2 000 adjusted emissions you know just we have about a million adjusted emissions in the quarter so you know these aren't perfect uh estimates but it gives you a sense of kind of the numbers we're looking at here You know, our experience in third quarter, and I mentioned this in my prepared comments, number one, you know, third quarter of last year was our high watermark, so there was a bit of a prior year of comparison difficulty. We did see, however, a sequential improvement in exchange volume from second quarter to third quarter 26 of about 8%. And so all of that, when we brought it together, you know, it's kind of what guided us to say that we think for full year 26 now, you know, we'll be at to maybe slightly above the top end of our previously updated ranges for the exchanges. That's how that's kind OF how the numbers pulled through here in third quarter with. Your next question comes from the line of Ryan Langston with TD Cohen. Ryan, your line is now open. Great, thanks. I appreciate the commentary on elective versus emergency surgical future trend growth. Can you maybe update us on what ASC versus HOPD surgical volume looked like in the third quarter? Thanks. So the ASC surgery volumes were down 5.4% on surgery. Overall case volumes were down about 3.7 percent um the the primary pressure is related to the exchanges um in our asc book very similar to the hospital side i would note uh however that you know even in light of the volume softness there that our overall net revenue and earnings did show some growth uh to prior here the hospital-based outpatient surgeries, we're down 2.9 percent. I think it's important to understand the construct of our ASC platform, and that informs at some level for us the macro forces that are out there with elective care at this particular juncture. And so when you sort through what's going on, yeah, there are certain issues in some centers that we have, but at sort of an aggregated level, it informs a little bit of our macro thinking around some of those forces that are influencing overall demand. Your next question comes from the line of Sarah James with Cantor Fitzgerald. Sarah, your line is now open. Thank you. I'd like to keep going on that topic. So is there a way to unpack how much of the inpatient and outpatient surgical trend pressure so far this year is exchange-related versus how much is affordability and things that may be continuing. And then given your comment on affordability pressure, are you assuming any stronger than normal tailwind in 4Q ahead of the deductible reset? We are not at this particular juncture assuming anything outside of normal seasonality, but your point is relevant. It could be that some folks are making decisions. We've seen that on the margins in other years, but at this particular point in time, we are not. When I look at our elective care, surgical care, I mean, the HICS is a very large percentage of the explanation. It goes back to what we've been saying all of last year and all of this year. Coverage for people matters, and it creates access, affordability, and electivecare. It's a very fundamental element to individuals' ability to get the health care they need. And so it's a large piece of the elective equation is the coverage dynamic that's occurred in the HICS environment. And I don't have an exact percentage here in front of you, but it's a very significant piece of the variance. And we've called that out. And we think that has some incremental effects in other payer classifications as well as we talk about the affordability more broadly. Thank you. Your next question comes from the line of Justin Lake with Wolf Research. Justin, your line is now open. Thanks. Good morning. A couple quick number follow-ups. First on 2027 DPP, appreciate the 550 to 650 number. I was hoping you can isolate your estimate here of how much of that number comes from the Q4 DPP cut as HR1 gets implemented. versus the 2026 out of period that doesn't reoccur and then on the exchange impact for q4 can you tell us how much you your guidance assumes that that sequential exchange volume growth occurs from q3 to q4 this year i know you just gave us the q2 to q3 numbers on q3 to q 4. thank you well let me uh let me start with the first part of your of your question And so, as Sam noted in his comment, we expect to receive approximately $550 to $650 million less in Medicaid state supplemental payment net benefit in, you know, in 27 versus 26. And that's because of the grandfather approvals that happened in 26 that were really related to prior years. The predominance of that, Justin, was related to Florida, which we previously disclosed. You know, the rest is really related to the other grandfathered states, like Virginia, Georgia, et cetera. So, you know, that's really the makeup of those kind of the out-of-period state supplemental payment programs. If I think about what the guidance implies over the fourth quarter, you know, we are finishing September 26th year to date with $650 million of incremental net benefit from state supplemental payments. so if you think about the the full year guidance range that we just updated to 600 to 800 million dollars that would give you a sense for what we're thinking about fourth quarter you know at midpoint it would be another 50 million dollar net incremental benefit and then you can see the range and so that's that's kind of how we're think about that um for fourth quarter and then on on exchanges um not not ready to quote a sequential move from q3 to q4 at this point i i would note and we noted this on our second quarter call, you know, I would point you back to fourth quarter 25, where we did see a slowdown occur in our exchange volumes from, you Know, from Q3 to Q4 last year. And so we do think there is a bit of a benefit comparison benefit in fourth quarter 26, given that given that fact. Your next question comes from the line of Kevin Fishbeck with Bank of America. Kevin, your line is now open. Great, thanks. I just, a lot of moving pieces here, so I just want to make sure I understand, you know, the new guidance versus the old guidance. Is the right way to think about it that the new guidelines include about $300 million more of STPs and 100 plus million more headwinds from payer mix, and then that combination is largely the increase in guidance from the prior? Is that the right way to think about it? And then just a clarification on the HICS headwind that you guys are talking about, is it purely just an uninsured number, people coming in and not paying, or are you also kind of thinking about the implication of lost surgery from people losing HICs coverage in that number? Thanks. Well, let's walk the guidance first, Kevin. So yes, I mean, from supplemental payments, we raised our net benefit guidance by about $300 million. So that's certainly a piece of it. If you think about the exchanges, with this idea of kind of app or slightly above the top end of our previously released estimates, you're in the 100 to $200 million increase in headwinds related to that. And then the third thing I would call out is just core growth. I think as we noted on today's call, we believe our fourth quarter core growth should be good, then none of those three factors really led us to making the comment that we believe will be in the upper end of our guidance ranges for the full year, which will give you a sense of how all that comes together. So that would be the walk down of guidance. Your next question comes from the line of Scott Fidel with Goldman Sachs. Scott, your line is now open. Hi, thanks. Good morning. The question is just first on the, I know there's been some questions around it on the third quarter and next year, but on the fourth quarter, just maybe the visibility and expectations that you have around elective procedures and sort of how scheduling seems to be playing out in terms of just normal seasonality. And then I just wanted to also ask, in terms of the headwinds that you've laid out for next year relating to OB3, whether there's anything specifically relating just to the CMS policy that now is requiring all the 1115 waivers to be budget neutral from a federal perspective, and just whether your intel, you know, from the states, are you seeing any change in sort of approach or in terms of applications or, you know, sort of anything that you think could be sort of play out, you know, relating to that policy that could impact fundamentals in 27. Thanks. On elective, Scott, and I think Sam mentioned this when he was answering the previous question of surgery. At this point, we did not assume, you now, any pick up on elective demand related to, you co-pays and deductibles in the fourth quarter i think you know we we expect a normal seasonal move from q3 to q4 but we did not build into our guidance thinking some kind of improvement or full sort of demand from an elective standpoint into fourth quarter when i think about hr1 for 2027 and we continue to monitor all the rulemaking we know that our states continue to file their applications and and feel good about the the processes that we see in flight i would mention on hr1 that you know that the the big change is really work requirements uh for able-bodied adults in our expansion states you know i might mention just for context that expansion states are 40 percent of our medicaid volumes and revenues and when you think about work requirements targeting able-bodied adults in those expansion states you know when you take out the seniors and the disabled and the kids and those that are medically frail we think that work requirements would be you know kind of applicable to about 15 to 20 percent our medicaid bond and so you know the net of all of that while we're not quite ready to size it in terms of earnings impact we do think that work requirement specifically would have a bit of a modest impact in full year 27. so So that's the main things we're watching for HR1 next year. And I think that wraps both of your questions. Your next question comes from the line of Steven Baxter with Wells Fargo. Steven, your line is now open. Hi, thanks. Just a couple of follow-ups on the breakout of adjusted admissions. I think you gave us the commercial exchange number already, but could we get the Medicare, year-over-year AA growth, Medicaid, and then I guess you gave us the exchanges on a quarter-over quarter basis. If you also had the year-ever-year basis, that would be helpful too. Thanks. Sure. So these are same facility adjusted admissions compared to prior year for third quarter. Medicare is up 3.2 percent. Medicaid is up 2.7 percent. Commercial excluding the exchanges are up 2.7%. And then the exchanges are down 19% to the prior quarter. As I noted in my commentary, though, that is an 8% sequential improvement from Q2 to Q3. Our next question comes from the line of Jason Casorla with Guggenheim Securities. Jason, your line is now open. Great. Thanks. Good morning. I wanted to turn back to the volume discussion. You know, you guys have seen pretty solid volume acceleration over the past couple of quarters that clearly stands out. You're talking about two to three percent volume growth next year. I was just hoping if you can give us a little more in terms of what you're attributing the volume strength to. I mean, you've talked to the solid demand environment, but can you help quantify maybe like how much you're thinking is coming from the benefits of in-market initiatives, all the work you've done to expand capacity and the like, and how that kind fits into that two to three percent mold that you're looking forward for next year would be helpful thanks so if you start at the top here i mean it's our belief that uh there's sort of inherent demand growth in the markets that we serve uh coming from population growth uh aging baby boomers chronic conditions new technology even all this sort of converges to create an upward movement in demand in the markets that we serve. And so, that's a starting point. We do think across a lot of our markets, you know, we're gaining market share incrementally. We do have some markets that have to adjust to different dynamics and respond at that level. But when you look at it in the main, over time, we picked up market share. Our approach to our networks is continuing to advance with respect to our ambulatory platform. We're up to almost 3,000 units through acquisition of urgent care, ambulatory surgery centers, and other outpatient facilities that complement our hospital's ecosystem and create for our patients a more convenient and accessible location and efficient service. That continues to evolve in our networks. And as we mature on that platform and leverage the restructuring that we did with one of our group presidents, Charles Gressley, I anticipate that we're going to be able to move our ambulatory platform forward and create even more growth out of it. Again, meeting our customers, our patients, where they live so that we can create convenience and so forth for them. A second important initiative for us is creating patient coordination once they do hit one of our ambulatory facilities. And through patient coordination, we think we can create a better experience for the patient and ultimately integrate them into our system. And if in fact they need acute care services, we're helping them achieve that in an efficient and transparent way. So that's evolving also. Clearly, we are investing in our hospitals with capital. We are adding beds. We're adding other capacity within our facilities to manage the demand. We're running the company at an all-time high when it comes to occupancy levels, pushing 75% on our inpatient platform. We're benefiting, however, through patient flow initiatives where we're able to improve the flow for our patients and get them to the care sites they need. That's creating capacity for us as we evolve also. So all of these things combined are yielding growth for our company. And then lastly, it's how we engage with our physicians and support our physicians with their practices, meet them where they are, and find ways to invest in clinical capabilities, be very effective and efficient in how we process their patients, and then ultimately give them a voice in what's going on. That's allowing us to respond largely to our physician requirements as well. So all of those things, it's impossible to point to one thing. And each market's slightly different. We have to nuance our approach in each market to address those differences. That's why we're organized as we are with our divisions. But I think with 22 consecutive quarters of growth in volume, which is quite impressive from our standpoint, and then with the return on capital, and dann with the improvements in quality and service for our patients we feel like our model works and gives us again the staying power that i mentioned in my comments it allows us to push into the future with confidence and a belief that we can achieve our objectives your next question comes from the line of raj kumar with stevens raj your line is now open Maybe on the pricing conversation, just curious on – I know you're mostly contracting on the commercial side for 2027, but just kind of think about 2028 or payers starting to embed any explicit assumptions around coding and more accuracy on that front. And just curious across, you know, one of that node and in terms of how diffused it is across the platform or is it still in early stages around kind of the coding benefits and on that front? You know, this is Sam. Let me lift up a little bit on this point. It's important for us to have solid relationships with the major payers in our community, and we do that. And we're able to meet their objectives and meet our objectives in most circumstances. And that's been, I think, part of our ability to execute our strategy and help them execute their strategy. Our contracting process is transparent with our major payers, and we are accomplishing contract cycling that naturally occurs over time. We're deep into 2027 and we're not as deep into 2028, but we are making progress on 2028 as contracts mature and move into the cycle that naturally occurs. We're able to achieve our objectives and then support the objectives of the major payers. Our teams are working very earnestly to come up with solutions for people. And what I mean by that is the patient, the providers, and the beneficiaries that are all connected to what we do administratively between the insurance companies and the hospitals, HCA and many of the major payers are working diligently to eliminate the friction, create a more cost-effective solution, and sort of, you know, reduce the administrative complexity that exists within the system. And I'm encouraged by the progress that we're making. I'm discouraged by the attitudes of many of the payers, and I think we're going to progress over the next year or so and really create value for our patients and for the beneficiaries in a manner that starts to change the paradigm a little bit between what's going on with payers and what's going on with HCA. So more to come on that, but we are in fact progressing on just about every front with respect to our major payers. Your next question comes from the line of Benjamin Rossi with JP Morgan. Benjamin, your line is now open. Hey, good morning. Thanks for the question. Following up on your market-specific commentary, with some of the broader operational pressures you're facing, I appreciate that you're still adding inpatient capacity and outpatient density. But as you assess your options, are you at all considering any market exits or potential changes to your footprint? Or with these pressures hitting everyone, do you consider yourself a potential buyer as competitors similarly face these headwinds? I guess just curious where you stand on market positioning at this juncture. Thanks. So we compete in 43 markets roughly in the U.S. Some of them are smaller, and they get counted in that, and then some are mega markets. And over the last seven, eight years, we have been fairly intentional about looking at our individual markets markets and determining whether or not we can execute our model and be successful and meet the needs of our constituents. And we've largely pruned the portfolio of HCA down to the markets that we think can go the distance. And today, the markets that we have are ones that we're investing in at different levels, as you would expect, because of the different circumstances from one market to the other, the different opportunities that exist. So I don't see any significant change to our market configuration at this particular point because we've been intentional over the past few years to optimize the portfolio, if you will, and put ourselves in a position where we can succeed and build out the model that we think adds value to our patients and adds value to the organization as a whole. That allows us to focus our capital spending, to focus our talent and our resources on a smaller footprint, but with a very significant growth prospect, we believe, for the company. So that's where we are. We always have one or two items here or there. With regard to new markets, You're right, we're built to be bigger. We know that, but we just haven't seen a lot of opportunities yet. If opportunities do develop, as usual, we'll be opportunistic and take a look at whether or not it's affordable, whether or not we can execute our model, and make the right decision at that particular juncture. We do have a lot of outpatient activity, as I mentioned earlier, that is important to building out the network overall so that it is accessible for our patients, and we continue to invest in those opportunities as they develop as well. Your next question comes from the line of Andrew Mock with Barclays. Andrew, your line is now open. Hi, good morning. Can you talk about what you're seeing in the market as it relates to the removal of the inpatient-only list, both in terms of procedure migration today and the actions taken now in anticipation of future migration? And how should we think about the impact of the inpatient only list and potential outpatient capacity additions against the backdrop of fixed surgence? Thanks. Andrew, if I think about being patient-only list. Obviously, we're in year one of a three-year phase-out. This first year is focused a bit more on ortho and musculoskeletal type procedures, so that's what we're seeing. I think if I look at our elected book, I would say, you know, after the exchanges, which were the biggest driver of elective surgical volume weakness, the second driver would have been Medicare, especially on the inpatient side. So we are seeing some impact of the in-patient only list. I think it's fair to say that the outpatient market for surgery is a bit larger than the inpatient market for surgery. There's more competitors, and so that's a factor. When I think broadly, though, we look at ambulatory surgery centers, as Sam just walked through, as part of our networks. And building out our ambulatory networks they play an important role we are continuing to invest in our operating rooms and our surgical platforms in the inpatient side and the hospital side for outpatient surgery and in our asc platforms and believe that it's a you know it's a long-term important component i don't think that anything we're seeing would say that it would drive a material change in the way we're approaching building out our networks And again, Mike, I think the fact that we have, you know, 25 different service categories that we focus on across the company that are different gives us an ability at times to invest, just like I said, in different markets. We can invest in different services depending on demand, forecasts, population trends, competitive dynamics, and so forth. And you see that in our volume when it comes to some of the pressures we've seen on elective care. We've offset that with other services that give the networks a level of resiliency, give the demand sort of equation inside of the market support when it comes to our ability to provide patient care. And I'm not sure that is fully recognized in some of these isolated discussions about service A, service B. Clearly, there are always issues. We've had issues with stuff migrating from inpatient to outpatient. We've new technologies evolved that change the procedure approach for physicians and better for the patients. Obviously, we embrace that, but we've been able to backfill with other services, expand our markets, get into new capabilities, and ultimately keep the company moving forward in the face of those incremental changes that occur. And that's what I think is unique in many respects to our platform, the services we provide, and how we approach our business. And it gives us the diversification in some regards that allows us to navigate through these incremental issues that surface from time to time. Your next question comes from the line of Craig Hattenbach with Morgan Stanley. Craig, your line is now open. Yes, thank you. Mike, the comment that resiliency is part of the core now, can you just touch on some of the applications you've been able to accelerate this year, as well as any untapped opportunities you see on a longer-term basis on resiliency? When we think about resiliency, we largely think about four key focus areas that really make up this multi-faceted effort across the enterprise. The first one is really revenue integrity and working to ensure that we uh we collect the revenue from the services we provide under the contracts that we operate that's number one number two is uh is asset optimization uh craig and and that's important that's that patient flow that sam was talking about and certainly that's on the inpatient side it's also important in our emergency rooms our operating rooms our cath labs and so we continue to see good performance on patient flow and there's a lot of opportunity ahead. We are nowhere near the back innings here on asset optimization and feel good about the work ahead there. Third is variable costs, things like labor supplies and even some of our variable operating costs, which are performing well this year. We have a number of resiliency plans that are driven to focus on variable costs. And when we look ahead, We continue to see opportunity and the variability across the company in our benchmarking tools and advanced analytics and taking that forward. And then lastly, our fixed costs, both at corporate and in the field, which are an important part here. So as I think about where we are today, we have good resiliency efforts that have been in our past and that are certainly improving our current year's performance. We have a great line of sight now going into 27 and into 28 and beyond. And I think about things like the digital transformation as really being a key enabler that gives us that confidence that we're going to have resiliency benefits in the years to follow. We continue to build out our global capabilities. I think About the underlying work of expanding our shared service platforms. We have a number of expansions in flight where, for example, Parallon is taking on additional administrative functions for the company and bringing shared service scale and expertise to broader parts of our work. So as I sit here today at the end of the third quarter of 26, we believe that we're in a really good spot. We have an multi-year, multi-faceted, enterprise-wide approach to resiliency, and we believe it's going to produce great results as we move forward. Christine, I think we're at the end of our allotted time for questions. We have reached the end of the Q&A session. I will now turn the call back to Frank for closing remarks. Christine, thank you for your help today on the call, and thanks to everyone for joining us. Please reach out to me if you have any additional questions. Thank you very much. This concludes today's call. Thankyou for attending. You may now disconnect.