Dive Brief:

• The expiration of more generous subsidies for Affordable Care Act plans cost HCA Healthcare, the largest hospital operator in the country, about $150 million in the first quarter of this year, executives said on a Friday earnings call.
• The hit is in line with HCA’s expectations that it will lose around $600 million to $900 million this year from the expiry. HCA is the first of its peers to release detailed financial impacts from the loss of subsidies, after hospital operators earlier this year said they could lose hundreds of millions of dollars from resulting admissions declines and a rise in uncompensated care costs.
• HCA executives said that some ACA patients were converting to other forms of coverage — like employer-sponsored plans or Medicare — but others were forgoing insurance entirely, reflected by higher admissions for uninsured patients in the quarter.

Dive Insight:

Large hospital operators like HCA Healthcare, which operates facilities in 19 states, are bracing for significant financial hits from recent cuts to healthcare programs from Republicans in Congress.

HCA warned investors in January that it could lose up to $1 billion from cuts to Medicaid and the expiration of the ACA subsidies. 

The subsidies, enacted during the COVID-19 pandemic, lowered the costs of coverage on the ACA exchanges and spurred enrollment to new highs. However, Congress let the subsidies lapse at the end of last year, leading premiums to more than double on average for subsidized beneficiaries. Hospitals are projected to lose $14.2 billion in revenue this year as a result, while being saddled with higher spending on uncompensated care.

HCA’s shifting admissions in the first quarter provide an early snapshot of the impact of the subsidy loss on U.S. hospitals.

Same-facility equivalent admissions for ACA patients dropped about 15% in the first quarter compared to the prior-year period, at the low end of HCA’s range for its expected drop in ACA admissions this year of between 15% and 20%, CFO Mike Marks said.

Meanwhile, same-facility equivalent admissions for uninsured patients rose 16% in the first quarter, according to Marks.

More than half of the increase in uninsured admissions during the first quarter was from “movement in the exchanges,” the CFO said. The figure was slightly less than executives expected but still in line with the company’s projections.

More ACA enrollees have moved from silver to bronze plans, which generally have cheaper monthly premiums but carry higher out-of-pocket costs, Marks said. Additionally, HCA is seeing a growth in payment balances for ACA patients, which could signal an increase in uncompensated care.

“Overall, the payer mix deterioration from these exchanges is generally in line with our expectations for the quarter,” Marks said on the call. “It's early, and obviously this is going to continue to mature.”

HCA reported revenue of $19 billion in the first quarter, an increase of 4% year over year.

Earnings before taxes and other nonoperating expenses of $3.8 billion were slightly higher year over year but below Wall Street expectations, due to declining volumes driven by a weaker-than-expected respiratory season and winter storms in the South.

The first quarter usually produces strong respiratory admissions for hospital operators as colds and the flu circulate. However, HCA’s respiratory-related admissions fell 42% year over year in the first quarter, due to lower viral activity than normal, executives said.

In total, the admissions drop from winter storms and the poor respiratory season cost the operator $180 million in adjusted earnings.

Executives tried to assure investors that the admissions drop was temporary, and reaffirmed HCA’s estimated guidance for 2026 that includes volume growth of 2% to 3%.

“We view these factors as being temporal and not structural,” Marks said.

Most of HCA’s loss from lower seasonal admissions was offset by an increase in approved Medicaid supplemental payment programs in the quarter including those in Texas, Georgia and Tennessee. The funds, which are meant to offset low reimbursement rates in Medicaid, totaled $200 million in the first quarter — about $120 million more than expected, Marks said.

Overall, HCA brought in $1.6 billion net income in the first quarter, up less than 1% year over year.