HCA Healthcare Inc (HCA) — Q2 2023 Earnings Call Transcript

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen; and CFO, Bill Rutherford. Sam and Bill will provide some prepared remarks, and then we will take questions. Before I turn it over to Sam, let me remind everyone that should today's call contain any forward-looking statements, they 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 HCA is included in today's press 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. Thank you for joining the call. The company produced solid earnings in the second quarter. These results reflected continued strong demand for our services and healthy operating margins. Across most areas of our business, we maintain the operational momentum that we experienced over the past three quarters. We believe this strength should continue into the second half of the year. Accordingly, we updated our earnings guidance for 2023 to reflect this outlook. Against the difficult comparison to the second quarter of 2022, diluted earnings per share increased to $4.29. Same-facility volumes across the company were strong. Admissions grew 2.2% year-over-year, inpatient surgeries increased 1.8%, same facility equivalent admissions increased 3.7%. This growth was driven by emergency room visits, which grew 3.7% and outpatient surgeries which grew 3.3%. Other outpatient categories also grew, including outpatient cardiology procedures, which increased by 5%. The growth in volumes was broad-based across the company's divisions and diversified within most service lines. Additionally, volumes were supported by strong acuity growth of 1.6% and a favorable payer mix from commercial adjusted admissions growth of 5%. These factors drove an increase in same facility revenue of 6.3% as compared to the prior year. In the quarter, we continued to invest in our people, and as a result, we saw improvements across virtually all key labor metrics. Turnover continued to decline for nurses and trended at an annualized rate of 17%. Nurse hiring remained strong in the quarter and for the year has increased by 9% as compared to last year. These positive results helped reduce contract labor costs by 20% compared to the second quarter last year. During the quarter, we improved available bed capacity. Instances where we could not accept patients from other hospitals declined and represented 0.8% of total admissions, down from 1.5% in the first quarter. We believe the significant investments we are making in our networks, our people and our technology agenda will provide us with the necessary resources to improve our services and provide even higher quality care to our patients. As we look to the future, we remain encouraged by both the backdrop of strong demand that we expect in our markets and our overall competitive positioning within them. HCA Healthcare will continue to use its disciplined operating culture to execute our strategic and capital allocation plans. I want to thank our colleagues for their dedication and their overall effectiveness. So let me close with this. I want to speak to a recent event that we take very seriously. On July 10, we announced that we had recently discovered a list of certain information with respect to some of our patients was made available by an unknown and unauthorized party on an online forum. We have confirmed that the list does not include clinical information, payment information or other sensitive information like passwords, driver's licenses or social security numbers. Our forensic investigation is ongoing, but this event appears to be a theft from an external storage location that was exclusively used to format email messages. We are in the process of notifying all affected patients in accordance with our legal and regulatory obligations. And not unexpectedly, we have been named as a defendant in multiple class action lawsuits. This incident has not caused any disruption to our day-to-day operations nor do we believe it will materially impact our business or financial results. HCA Healthcare believes the privacy of its patients is a vital part of its mission and remains committed to maintaining the security of their personal information. With that, I will turn the call to Bill for more details on the quarter's results.

Great. Thank you, Sam, and good morning, everyone. I will provide some additional comments on our performance for the quarter. Consolidated net revenue increased 7% to $15.86 billion from $14.82 billion in the prior year period. This was driven by 4% growth in equivalent admissions and a 2.9% increase in revenue per equivalent admission. We remain pleased with our team's management of operating costs even with the backdrop of inflation. Our consolidated adjusted EBITDA margin was 19.3% in the quarter. During the quarter, we completed our transaction to acquire a majority stake in the Valesco joint venture and we are now consolidating the operations of this venture. This reduced our consolidated margins by approximately 30 basis points in the quarter. We believe this transaction not only mitigates business risk with the Envision bankruptcy proceedings but will also further support alignment between our hospital-based physicians and our hospital care teams on improving quality, patient satisfaction and efficiencies. When you consider this transaction and the $145 million payer settlement we recognized last quarter, our adjusted EBITDA margins have remained consistent between the first and second quarters. So let me speak to some cash flow and capital allocation metrics as they remain a key part of our long-term growth and value creation strategies. Our cash flow from operations increased by $845 million in the quarter from $1.63 billion in the prior year to $2.475 billion this year. Capital spending was just over $1.2 billion. We paid $164 million in dividends and repurchased $915 million of our stock during the quarter. Our debt to adjusted EBITDA leverage ratio remains near the low end of our stated leverage range of 3 times to 4 times. As noted in our release this morning, we are updating our full year 2023 guidance as follows: We expect revenues to range between $63.25 billion and $64.75 billion. We expect net income attributable to HCA Healthcare to range between $4.9 billion and $5.255 billion. We expect full year adjusted EBITDA to range between $12.3 billion and $12.8 billion. We expect full year diluted earnings per share to range between $17.70 and $18.90, and we expect capital spending to approximate $4.7 billion during the year. So with that, I'll turn the call over to Frank and open it up for Q&A.

Thank you, Bill. Bailey, you may now give instructions to those who would like to ask a question.

I know Sam mentioned that performance was solid across divisions. I've heard there was some discussion this quarter about Florida and Texas rebounding early and experiencing strong volume, and now the rest of the country is also recovering. Could you comment on that? Additionally, some managed care representatives noted strength in Medicare and Medicare Advantage, as well as pent-up demand being released. Are you observing any of that as well?

As I mentioned in my comments, our volume growth was broad-based across our divisions. I think we had 13 out of 16 divisions in the company that had admission growth and adjusted admission growth. We clearly have some divisions that don't perform the same pretty much every quarter, but it was fairly broad-based across top line metrics, admissions, adjusted admissions, payer mix improvements and so forth. So a fairly consistent performance. We did have a couple of divisions that struggled, but one was isolated in Florida. The other one was isolated more out west in the Midwest. And so for the most part, we were really pleased with the overall performance that we had across the geographies of the company. And it's interesting, I was looking at something yesterday. We have, from an admission standpoint, almost 72% of our hospitals have greater than 2% admission growth for the year. And this includes a little bit of pressure from COVID in the first part of the year from a comparison standpoint. We have very significant performance from the surgery standpoint as well, where almost 50% of our hospitals have inpatient surgery growth above 2%. So really consistent portfolio performance that speaks to the strength of our markets, I think the competitive positioning of our facilities, and then the ongoing network development and physician development that we have as part of our core strategy.

With regard to your updated guidance, can you provide some more color on what you're assuming for SWB, supplies and other operating expense, particularly professional fees through the second half versus what you've seen thus far this year? And then anything to call out that would alter typical cadence through the second half?

Yes, Ben, this is Bill. Let me start. I think our updated guidance reflects what we're observing in the market on our year-to-date performance, which is positive related to growth opportunities. I think net-net, when I think about the margin profile of the company between the first half and the second half of the year, we'd expect the margin profile to be slightly better in the second half of the year. I think our salary, wages and benefits as a percent of revenue were running mostly where they're running year-to-date. Same with supplies. We have seen a little pressure on the professional fees. And we don't think that same pressure will exist in the balance of the year but will be able to meet us through that.

Maybe just a question around labor. I think I heard you say, Bill, that contract labor improved maybe 20% year-over-year. Did it change much throughout the quarter? Just trying to get a sense of maybe the exit rate and expectations for the second half of the year?

Yes. I mean, we're pleased with the labor environment. We did mention our contract labor is down 20% versus the prior year. It's improved as well sequentially between Q2 and Q1. Our hiring metrics are up, turnover is down. And I think that portends good things for us going through the balance of the year. We mentioned before, our contract labor cost as a percentage of our SWB was under 7%. I think it was 6.8% in the quarter. So again, I think we're pleased with that. Especially as we go through the summer months, some of our hires get through kind of their orientation process. And then we get into the balance of the year, we would expect some continued improvement.

I have two quick questions. Bill, I may have missed this, but could you provide some managed care metrics on admissions, adjusted admissions, and surgeries? Also, regarding the Envision joint venture, I wanted to clarify if we are estimating around $250 million in revenue and whether all the expenses are included in the SWB line, leading to a roughly EBITDA breakeven point.

Yes. Gary, let me start with that. Some of our managed care, I think as we mentioned in the same mentioned her comments, really favorable payer mix. Our managed care admissions were up over 4% in the quarter. Adjusted admissions were 5%. I think we mentioned that in our prepared comments. Emergency visits managed care were up 9.8% in the quarter, and again, good acuity of case mix growth. So we're really pleased with the payer mix that we're seeing, and that showed itself in the commercial trends. Relative to the Valesco joint venture, your numbers are really close. About 70% to 75% of the revenue is in SWB and the rest is in other operating. And you're right, it's basically a breakeven proposition a little north of $220 million of revenue that we had in the quarter as we consolidated that.

Question on the pricing in the quarter. So with strong acuity and strong payer mix, maybe can you remind us, is there anything in the second quarter that I might have slipped that drove the pricing? I would have expected it to be a little bit better given those mix items and strong commercial pricing. And then, Bill, can you just give us what you expect in the back half of the year for volumes? Would that be the guidance?

Yes. Justin, nothing specific I will call out. I mean, obviously when we do year-over-year comparisons, COVID was still an impact for us. We had roughly $40 million of COVID support payments last year that we don't have this year. Our COVID admissions were 3% of total last year, roughly 1%. So that's still influencing a little bit on the revenue line. On our volume projections for the balance of the year, I think we'll be largely consistent. We've seen thus far, our year-to-date admissions same facility are about 3.3%. I would think for the full year, we hover around 3% as well for the balance of the year. Our adjusted admissions year-to-date are 5.6%. I would think by the time we finish the full year, it's still 5% to 6% adjusted admissions. So I think the volume trends we would expect in the second half of the year will be pretty consistent with what we've seen in the first half of the year.

As I look at the implied revenue raise and EBITDA raise at the back half of the year, I'm trying to understand the flow-through of how much revenue raises should flow through into EBITDA upside. So how is it tracking in sort of 2023 versus sort of pre-COVID years?

Well, when I think about that, when I look at the rate, it's based on where we perform them in our view of the position going forward. We do expect continued improvement in the labor market. But as I said, I think as a percent of revenue, we hold, I think the margin profile overall for the second half of the year will be slightly better than the margin profile we saw in the first half of the year. And that all in all has contributed to the guidance raise. I remind you, we've raised our guidance almost the midpoint of our EBITDA guidance, roughly $450 million from where we turn the calendar. So I think all that's reflective in our considerations right now.

Yes. And Bill, let me add a point here. I think it's a relevant point. Obviously, we've dealt with a fairly unprecedented labor market over the last three years or so. And we do believe, as Bill indicated earlier, it's moderating. We've also dealt with sort of an unprecedented hospital-based physician dynamic at a macro level. And if you just take a snapshot of where we are six months into this year versus where we were pre-pandemic when neither of these macro forces were in place, we've actually increased our margins by comparison to 2019. So I think it's sort of a testament to the ability of the company to adjust operationally to dynamics and continue to move forward with our strategy. As we've mentioned before, we think our competitive positioning has improved compared to where we were pre-pandemic. Our market share has also improved during that time period. So we continue to believe that the company has the wherewithal to adjust to these factors, continue to move ahead in a very positive way and generate the results that we all want.

I know it's early, but do you have any observations on how Medicaid determinations is impacting your business? I know one of your bigger states, Texas, started early. It sounds like it's been a little bit messy. So any early observations? And can you remind us if you have anything from the KB determinations in your guidance? And do you think this process is going to be an overall positive or negative for HCA?

Yes. Thanks for that. It's a good question. And you're right, it is still early, and we've got a pretty organized approach to not only continue to watch the market but respond on there. So we haven't seen any negative or any material impact on this today. We think what we're seeing many of the patients who are receiving determination, that there's some opportunity to continue to get them reenrolled in Medicaid, some of them are more technical. They either didn't complete an application or some other aspect of that. So our teams are trying to identify those individuals as best they can, assist them in gaining coverage, which remain encouraged by many of the studies that the people are being redetermined off, who will qualify either for coverage in an employer sponsor plan or qualify for coverage in the health insurance marketplace. And so we'll continue to watch that as that unfolds. But no impact right now. Nothing in our guidance is assumed for Medicaid redetermination. We believe over the long run, there could be some positive trends from this but we'll just have to wait to see how that plays out.

I wanted to explore further how you're approaching volume growth in the latter half of the year. It seems like you're anticipating trends to be fairly similar in the second half compared to the first half. Last year, when COVID cases surged early in the year and then became less of a problem, we noticed that volume began to normalize in the second half. This suggests that the comparisons might become more challenging as we enter Q4, potentially leading to a slowdown in growth rates. I’m curious about your perspective on volume growth and how it aligns with long-term trends. How do you see the continuation of this growth rate in the latter half of the year?

Kevin, this is Sam. Let me give you sort of the backdrop, we think, of what exists for us with respect to volume. And this is more of a general commentary. I'll let Bill sort of reconcile the back half of the year to the first half of the year with numbers, I'm not sure I can do that at this particular point in time. As we said before, and we continue to believe this we feel that within our markets, there are unique attributes that are driving solid demand for health care services. Population growth continues to be strong in Texas and Florida, in Utah, Nevada, South Carolina, and pretty much Tennessee. Across the board, we're experiencing population growth within our markets. The second point is we're investing very significantly in our strategy and our positioning within these communities so that we can respond to our patient needs, put our facilities in the best position to grow. And we think that's going to help us sustain market share growth as we move forward. What we're seeing is that our overall volume assumptions are supported by acuity. Acuity has maintained, some of that strategic, some of that, I think, is the dynamics that exist within the markets. And then the second support mechanism that's in place, and we view this positively, is the payer mix dynamic. We have seen throughout the first half of the year, commercial admissions outpaced our total admissions. Again, we think that's reflective of a strong economy and job positioning that a lot of people have in our communities as well as the exchanges. And so we think those will continue on into the last half of this year. And we're optimistic that those will continue on into the future, at least in the near term. So Bill, you can maybe try to reconcile…

I'll just say, I mean, when we think about projecting going forward, we try to take all of those factors into consideration, as Sam mentioned and where we're seeing year-to-date. Mind you, when we originally set our guidance, we anticipated 1% to 2% admission growth, mid-single-digit outpatient growth. So that's still hovering around 2% to 3% equivalent admission growth was our expectation. And given the fact that we're seeing north of 3% admission growth and 5.5% adjusted admission, that's informing our position for the balance of the year. So I still think around 3 is a good number for the full year now based on the first six months of the year. We're continuing to see good outpatient revenue growth. And so that should support this 5% to 6% equivalent admission expectation for the full year.

Yes. And Bill, if I can add one thing. With respect to our investments in our networks. We have, at this particular juncture, the largest pipeline of projects that are in motion, including our outpatient development components which are very robust as well as other inpatient and facility needs there. So our pipeline from an organic standpoint as far as capital that we will see hit the market in latter '23, '24, early '25 is more robust than we've seen in pretty much recent years.

Bill, you mentioned that Envision is having a 30 basis point negative impact. I understand there's quite a bit of activity surrounding American Physician Partners and some changes in physician staffing. Considering this impact, do you see any opportunities to improve the situation, or is it more of a structural issue that requires bringing in-house capabilities for physician staffing?

Yes, this is Sam. Let me begin and then Bill can add to this. As I mentioned, the situation in the hospital-based physician sector has been very challenging over the last few years due to various factors. In the short term, we have had to adapt to these challenges to keep our capacity and services available. We took necessary steps to ensure that our business continued to progress appropriately. Overall, we've managed to overcome these pressures, leading to growth, and we have increased our earnings expectations for the year despite these difficulties. As Bill noted, we do not expect the same level of increases and pressures in the latter half of the year, although some will still persist. However, we believe it will not be as pronounced as what we faced earlier in the year. With the Valesco operations, we now have a platform that enhances our ability to tackle such challenges and potentially integrate hospital-based physicians into our hospital operations more effectively, which should lead to better clinical performance and growth. I reiterate that we have a history of responding to various operational challenges, whether they involve labor issues, physician costs, or uninsured patients. We have typically managed to overcome these obstacles. In the short term, they may create specific pressures, but I believe that HCA's scale, resources, and capacity to execute will help us navigate these challenges over time and achieve our goals.

I've got a strategic question for you on digital health and AI. I was just interested in the initiatives that you're kind of putting in place through the organization at this point, where you're maybe investing on the venture capital side here. And long term, what do you see is the opportunity for this, whether it's potentially reduced compensation or an ability to expand volume across the footprint?

This is Sam. We have a growing digital agenda in our company, and I'm very excited about what the prospects are for us around that. We are investing in a new clinical system, which we think is going to allow us to move information to the cloud more efficiently, and in fact, move standard data sets into the cloud so that we can then use big data even more effectively and infuse that back into the care process. We will couple our digital agenda with something we're calling care transformation innovation. And inside of that, we believe we have opportunities to improve care processes, eliminate a lot of the variation that exists today in our company, create better quality and, at the same time, more efficiencies. Artificial Intelligence, we believe, will play a huge part in that. It's way early for us to know exactly what that will be and how that will influence our agenda, but we're encouraged about the prospects for it. We are partnering with some very sophisticated companies to help us push through this in ways that I think will accelerate our agenda and inform it with more expertise than what we have internally. So we're excited about what this can yield for us as we push into our next life cycle, if you will. And we'll wait to see what Artificial Intelligence, in fact, can do. But we view it as a positive potential for us in a very significant way.

I just wanted to follow up on the pricing discussion maybe from a different angle. Revenue per outpatient equivalent looks like it was down about 1% in the quarter, which seems to be weighing on strong inpatient pricing up 6%. Can you help us understand the pricing and mix trends across your outpatient platform that are causing that unit revenue metric to blend down this year?

We're pleased with the outpatient growth we're experiencing. Overall, our expectation for outpatient growth was mid-single digits, but we are significantly above that for the quarter and year-to-date. There can be some mix issues. Our emergency room volume increased by 3.7%, which contributes significantly to our outpatient numbers. Our outpatient surgical growth rose by 3.3% in the quarter, which are strong figures. There is always a mix between surgical, emergency room, and diagnostic revenues. Overall, we are very satisfied with the growth in our outpatient sector.

Yes. And Bill, just the second quarter overall outpatient revenue growth was actually up over the first quarter. So we are seeing some acceleration. There's a lot of moving parts, as Bill just alluded to, to outpatient revenues between physician, clinics, urgent care, all the way up to outpatient cardiology procedures, which tend to be our highest reimbursed type of procedures. And so the mix of that can influence the outpatient. We tend to look at it in the aggregate. And for the most part, our aggregate revenue growth has been stronger in the second quarter than it was in the first quarter. And then within sort of the pricing elements, we continue to get the targeted price increases that we want in both our inpatient and our outpatient businesses. So it's more, to Bill's point, sort of the mix and the mixture of all of the different components in a way that has produced solid growth for us.

I wanted to ask about the commercial rate cycle. I think last quarter, you said you guys are about 2/3 of the way through 2024 and about 1/4 of the way through 2025. Can you give us an update on the progress and how those rate discussions are evolving?

Yes. They're evolving pretty consistent. As we just mentioned, we're continuing to see rates in kind of the mid-single digit level. As far as contracted for '24, I think we're a little north of 70% for '24 now. And I think our efforts continue. I think our relationships with our major payers continue to be strong and we're pleased with the progress we're making in that area.

Interested just as against the backdrop where the managed care payers are seeing the higher medical cost trends this year, whether you're seeing any changes in behaviors when interfacing with them from a prior authorization or utilization management-type perspective? Or are things pretty consistent there? And then just a quick follow-up, just on the slight raise in the CapEx. Is that just related to the general broad-based investments that Sam just talked about? Or are there any specific projects that you would cite around the update to the CapEx guide?

Yes, let me address both of those questions. As we've mentioned previously, authorization and medical necessity reviews have increased again after easing during the COVID period. However, we still encounter significant challenges in navigating these processes. We collaborate with our payers to address these issues appropriately and defend our positions when necessary, which requires a considerable effort from both sides to streamline the process. Fortunately, we generally manage to work through these challenges. Regarding capital expenditures, this reflects the opportunities we see in the market for ongoing growth. We are pleased to continue generating strong cash flow to support this capital expenditure, which is indicative of the growth opportunities available to us.

And Bill, as we mentioned on the last call, we have acquired some land for future expansion in some of these fast-growing markets that we serve, and that's put some upward pressure on our capital spending. But we believe those are long-term good decisions for us.

Yes. Great. Just wanted to ask a little bit more on the labor front. Thinking about all the efforts and programs you put in place contributing to the better turnover and hiring trends, I guess, is there a way to help frame what inning you're in as it relates to these efforts? Where do you like to see some of the outputs on turnover retention kind of move to? Or any other thoughts on the labor front and the trajectories there?

Yes, this is Sam. Thank you for the question. We have made significant investments in our workforce initiatives over the past few years. Our recruiting capacity has increased, resulting in strong hiring, and we expect this trend to continue into the second half of the year. Our efforts to address employees' needs by providing them with the right resources and tools have improved our retention rates, bringing turnover levels close to pre-pandemic figures, particularly in nursing, where we are slightly above those levels. However, if we annualize the turnover from the second quarter, it suggests a slightly lower figure, which is encouraging, and we see opportunities for further improvement. Regarding contract labor, we anticipate progress in the latter part of the year as discussed. I'm also very enthusiastic about our workforce development programs. We're investing significantly in Galen College of Nursing, which is expanding into new markets and forming new partnerships. Additionally, we're focusing on our Centers for Clinical Advancement to enhance ongoing clinical education, allowing our employees to improve their skills and advance in their careers. As for our current situation, we are in the middle stages of our efforts, and we'll see how the second half of the year unfolds. Overall, we have achieved strong results, and we believe we remain competitive with our compensation and benefits. Despite the challenges we have faced, we have managed to maintain our margins. Our labor costs as a percentage of revenue in 2023 are lower than in 2019, even in a tough labor market.

Can you comment on seasonality expectations for the third quarter? Anything beyond normal seasonality from a headwind or tailwind perspective that we should be thinking about? And I think normally, revenue is down slightly and EBITDA down maybe mid-single digits to high single digits. Is that the right way to be thinking about the third quarter? And anything in July that's informing that? And then there was an earlier question on backlog that may not have been fully answered. I'd love your thoughts on that as well.

We mentioned at the end of the fourth quarter that we were starting to see normal seasonality patterns materialize. And we've seen that so far through the first half of this year, and we think that will continue on into the second half of this year. The third quarter is not as strong as the fourth quarter. The fourth quarter is always the strongest quarter of the year for us given the outpatient activity and deductibles and so forth. And so we think the third and fourth quarter will be similar in patterns to pre-pandemic seasonality. And that's what's reflected in our guidance.

As a follow-up to some previous questions regarding the labor and commercial rate update, there were discussions about HCA's limited number of commercial payer contracts up for renewal for fiscal '23, which could affect the ability to secure better rates for increased labor costs, with more renewals expected in '24. Now that the overall labor cost pressure has eased somewhat in mid-23 compared to 12 to 15 months ago, do you still feel confident in your ability to achieve better than average commercial rate updates for fiscal '24? Is labor pressure still a significant factor in these discussions, or will these negotiations become more challenging now that some of the pressure has decreased? I would like to hear your latest thoughts on this matter.

Well, this is Sam. Bill indicated that we're 70% contracted on '24 around our targeted escalation objective. Labor costs, as you mentioned, are moderating some. Yes, there's still inflationary pressures underneath it, as one would expect. Now we have physician cost pressures with respect to pro fees. And our belief is that, that will have to be paid for by someone. And so that will become a new factor in our thinking and our justification for appropriate price increases. So our costs are not just one category. We have multiple categories, as you can see on the income statement. And all of that factors into our considerations when we're negotiating.

Were there any meaningful differences in the payer mix on the outpatient side, an obvious focus on Medicare and specifically Medicare Advantage volumes. And are you seeing anything in the Medicare market that would support higher levels of demand than we saw last quarter or the quarter before, anything that you feel like is inflecting?

Yes, Josh, when I look at kind of the admissions versus adjusted admissions between the payer categories, they're comparable. Our Medicare adjusted admissions were up 5%. Our managed care adjusted admissions were up 5%, as we mentioned earlier, fueled by emergency room growth. So I think the trends are pretty comparable among the payer categories. And that's strengthening payer mix, that's, I think, positive trends for us. So nothing else underneath the outpatient area that I would distinguish, other than we continue to see good commercial ER traffic. Our commercial outpatient was up pushing close to 4% as well. So again, I think they're pretty comparable in terms of the general trends we're seeing.

I would say, Bill, just to put a little bit of color on the outpatient. Our commercial outpatient revenue growth is clearly outpacing our Medicare outpatient revenue growth. Some of the adjusted admissions are influenced by some of the calculations, if you will. But we are seeing really solid commercial outpatient revenue growth, again, influenced by the ER, influenced by surgeries, which are represented by roughly 50% to 55% commercial. So good growth there. And all of that yields solid commercial revenue growth.

Bailey, thank you so much for your help today. Thanks, everyone, for joining our call. I hope you have a wonderful rest of your week. And I'm around this afternoon if we can answer any additional questions you might have. Thank you very much. Have a great day.