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HCA Healthcare Inc. (NYSE:HCA)
Q4 2018 Earnings Conference Call
Jan. 29, 2019, 10:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Good day and welcome to the HCA Healthcare fourth quarter 2018 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 Chief Investment Relations Officer Mr. Mark Kimbrough. Please, go ahead, Sir.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, April. Good morning and welcome to all of you on today's call or webcast. With me this morning is our CEO Sam Hazen and Bill Rutherford, CFO, which will provide comments on the company's results and 2019 guidance provide in today's earnings release.

Before I turn the call 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. Many of these factors are listed in today's press release and in our various SEC filings.

Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the significant uncertainties inherent in any forward-looking statements, you should not place undue reliance on these statements. The company undertakes no obligation to revise or update any forward-looking statements whether as a result of new information or future events.

On this morning's call, we may reference measures such as adjusted EBITDA and net income attributable to HCA Healthcare, Inc., excluding losses or gains on sales of facilities, which are non-GAAP financial measures. A table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HCA Healthcare, Inc. to adjusted EBITDA is included today's fourth-quarter earnings release. This morning's call is being recorded and a replay of the call will be available later today.

I will now turn the call over to Sam.

Samuel Hazen-- Chief Executive Officer

Good morning. Thank you for joining us today. We finished the year with a strong quarter and ahead of our expectations. Solid volume increases and strong revenue growth drove this quarter's results, which were consistent with all of 2018.

Inpatient admissions and equivalent admissions on a same facility basis grew almost 2% respectively in the quarter. Volume growth was broad based across most service categories and balanced across our diversified portfolio of markets. Revenues on a same facility basis grew by 6.4% or almost $700 million. Our strategy to deliver services that are more complex supported this growth along with a good payer mix and stable commercial pricing.

Revenue per equivalent admission grew about 4.4%. The growth in revenues translated into a strong earnings quarter with diluted earnings per share of $3.01. Adjusted EBITDA grew by 6.2%, a slightly over $2.5 billion with adjusted EBITDA margin at 20.4%. Cash flows were also very strong and ahead of our expectations. Bill will provide more details on these metrics and 2019 guidance in his comments.

2018 was another strong year for HCA Healthcare. We have now grown our same facilities inpatient admissions in 19 consecutive quarters. The strategic investments in our business to expand our networks and improve our clinical capabilities are making it easier for patients to get high quality, convenient patient care in an HCA facility. We have in excess of $3.5 billion of capital spending in the pipeline that should come online over the next two years. These investments will create additional inpatient and outpatient capacity within our local healthcare system.

As I stated in last quarter's call, we believe the fundamentals in our markets are strong with growing demand for healthcare services. This coupled with the continual improvement in the competitive positioning of our local healthcare systems gives us confidence as we move into 2019. Inpatient market share in 2018 grew by 45 basis points as compared to 2017, reflecting this improvement.

As indicated in our earning's release, our board of directors has authorized an additional share repurchase program for up to $2 billion of the company's outstanding shares. Additionally, the board declared a quarterly cash dividend of $0.40 per share, which is an increase of 14%.

Lastly, we are excited about the expected closing at the end of January on the acquisition of Mission Health, which is a large, successful health system in Asheville, North Carolina. This system will add to the already strong portfolio of markets that we have inside of HCA Healthcare.

With that, let me turn the call over to Bill for more details.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Great! Thanks, Sam, and good morning, everyone. I will cover some additional information relating to the fourth quarter results and review our 2019 financial guidance, then we will open the call for questions.

As Sam mentioned, we were pleased with the fourth quarter's results as well as for the full year. Volume, intensity, and good expense management led to a solid quarter and strong finish to the year. For the quarter, adjusted EBITDA increased 6.2% to $2.508 billion up from $2.362 billion last year. We believe this was a solid result considering the strength of the fourth quarter of 2017.

As noted in our release, we did have some hurricane activity that impacted our results in the quarter. First, we estimate the impact of Hurricane Michael, which unfavorably impacted our Florida panhandle facilities mostly Gulf coast Medical Center in Panama City Beach, to be about $31 million in the quarter. Also, we recorded a $49 million benefit to adjusted EBITDA from settling our insurance coverage related to Hurricane Harvey business interruption that principally affected our Houston market in the third quarter of 2017.

So, let me cover some volume stats. In the fourth quarter, our same facility admissions increased 1.9% over the prior year and same facility equivalent admissions increased 1.9% as well. We estimate the impact of Hurricane Michael and the decline in flu activity from last year had a 50 basis point unfavorable impact on same facility admissions in the quarter.

For the year, both same facility admissions and equivalent admissions grew 2.5% over the prior year. During the fourth quarter, same facility Medicare admissions and equivalent admissions increased 2% and 2.5% respectively. This included both traditional and managed Medicare. Same facility Medicaid admissions increased 0.8% and equivalent admissions declined 0.7% in the quarter. Our commercial admissions increased 1.1% and equivalent admissions increased 1.6% on a same facility basis in the fourth quarter compared to the prior year.

Same facility self-paying charity admissions increased 7.4% in the fourth quarter compared to the prior year. Same facility emergency room visits decreased 2.1% in the fourth quarter compared to the prior year. We attribute about 60 basis points to last year's flu season. Additionally, when we look at the changes by equity level, all of the fourth quarter declines are in our level 1 through 3 visits. Our fire equity, level 4 and 5 visits, grew 1.1% over the prior year. In addition, admissions to the emergency room grew 1.9% over the prior year. Same facility revenue for equivalent admission increased 4.4% in the quarter and was up 3.9% for the year.

We are pleased with the overall rate trends we experienced in 2018 as we saw continued growth and equity, good payer mix, as well as the incremental Medicare update in the fourth quarter. We also believe we are well positioned in our commercial contracting segments as we look forward to 2019. We don't expect any major changes in this environment. We have good visibility into our 2019 commercial contracts where we are 80% contracted in rates consistent with our recent trends.

Now turning to expenses. We are pleased with the overall management of expenses. Adjusted EBITDA margins in the fourth quarter were 20.4% as reported and our same facility margins increased 10 basis points over the prior year. For full-year 2018, our same facility adjusted EBITDA margins increased 70 basis points, with labor improving 30 basis points, supply cost improving 30 basis points, and our other operating costs improving 10 basis points.

So, let me take a moment to talk about earnings per share and cash flow. As reported, diluted earnings per share in the fourth quarter, excluding gains and losses on sale of facility and losses on retirement of debt, was %2.99 versus $1.30 in the fourth quarter of last year. Year-to-date as reported earnings per share, excluding the impact of gains and losses on sale of facilities and losses on retirement of debt, was $9.77 versus $6.00 in 2017. In addition to the solid offering performance of the company, the decrease in our income tax provision was a contributor to the diluted earnings per share increases both for the fourth quarter and the year.

As Sam mentioned, cash flow is very strong for the company. In the fourth quarter, cash flow from operations was $2.18 billion versus $1.73 billion in the fourth quarter of last year. For full-year 2018, cash flow from operations was $6.76 billion or an increase of $1.33 billion from $5.43 billion last year. Capital spending for the year was $3.57 billion, in line with our expectations. Cash flow from operations of $6.76 billion plus capital spending of $3.57 billion in distributions to non-controlling interest to $441 million and our debit in payments to $487 million, resulted in free cash flow of $2.26 billion in 2018.

Also, during the year, we completed approximately $1.5 billion of share repurchases and had $272 million remaining on our previous authorization as of December 31, 2018. At the end of the quarter, we had $2.7 billion available under our revolving credit facilities and our debt to adjusted EBITDA ratio was 3.7 times. These cash flow and balance sheet metrics continue to be an important strength to the company.

So, with that, I'll move into a discussion about our 2019 guidance. We highlighted our 2019 in our earnings release this morning and notice our guidance does include the anticipated impact of the Mission Health acquisition, which we expect to close on January 31, 2019. We estimate our 2109 consolidated revenues should range from $50.5 billion to $51.5 billion. We expect adjusted EBITDA to be between $9.35 billion and 9.75 billion.

With our revenue estimates, we estimate same facility equivalent admission growth to range between 2% and 3% for the year, and same facility revenue per equivalent admission growth to range between 2% and 3% for 2019 as well. We anticipate same facility operating expense per adjusted admission growth of approximately 2.5% to 3%.

Our average diluted shares are projected to be approximately 352 million shares for the year and earnings per diluted share guidance for 2019 is projected to be between $9.60 and $10.20. There are several items affecting our year over year diluted EPS comparisons. Including the third quarter impact of our professional liability reserve adjustment to $0.015, the Hurricane Harvey settlement of $0.11, the adjustment to our deferred tax balances of $0.19, and the expected differences in the benefit of excess equity award settlements of $0.35 in 2018 versus $0.23 estimated in 2019. Adjusted for these items, our diluted earnings per share guidance reflects an approximate 8% growth at the midpoint.

Relative to other aspects of our guidance, we anticipate cash flow from operations between $6.5 billion and $7 billion. We anticipate capital spending of $3.7 billion in 2019, which includes anticipated capital spending for Mission. We estimate depreciation and amortization to be approximately $2.5 billion and interest expense to be approximately $1.9 billion. Our effective tax rate is expected to be approximately 23%.

As Sam mentioned in his comments, we also announced and increase of our quarterly dividend of $0.40 per share and authorized a new $2 billion share repurchase program. Both of these are a reflection of management's belief in the long-term performance of the company, the confidence we have in the strength of our cash flow, and our commitment to a balanced allocation of capital.

So, that concludes my remarks and I'll turn the call over to Mark for open it up for questions.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, Bill. 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 this morning. April, you may now give instructions to those who want to ask questions.

Operator

Thank you. Today's question and answer session will be conducted electronically. Anyone wishing to ask a question may signal by pressing the * key followed by the digit 1 on your telephone. We would like to ask that you limit yourself to the one question. Individuals asking questions should not the speaker phones. Please lift the handset before asking your questions.

And we'll take our first question from Justin Lake from Wolf Research. Please, go ahead.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. So, given the solid quarter and all the detail, the question I had here was just on '19. Two things, one, year over year your EBITDA growth that you talked about in the third quarter expected the growth to be about similar to '18. The guidance is very much in line with kind of what you talked about in the third quarter, but it doesn't appear to fully reflect the upside that you saw in Q4 from really strong results. So, I just wanted to see if you could kind of give us any thoughts there in terms of did that carry forward or should it in the guidance?

And then, can you tell us anything about the revenue and EBITDA impact you expect from Mission in 2019? Thanks.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, Justin, this is Bill. I'll take that call. So, as we look at our 2019 guidance, we believe it's consistent with what we talked about on our third quarter call. Obviously reflecting our continued strong performance in the core operation of the companies along with the expected improvements in the performance of our acquisition.

So, I'm just going to give you a few more details. First, if you look at the midpoint of our adjusted EBITDA guidance, roughly $9.55 billion, that equates to almost a 7% on an as reported basis that we finished 2018. And then in '18, if you adjust for the $70 million positive malpractice adjustment and the $49 million insurance settlement that we don't think we'll repeat, if you adjust for these items, we're at 80.2% at the midpoint for our '18 guidance. About 3% of this growth is from our acquisitions with 2% from our 2017 and 2018 acquisitions, admissions contributing about 1% of that growth. So, that leaves a little above 5% of the balance in the same facility growth as we continue to anticipate volume to demand, capital investments, strategy execution, and so forth. So, we think all of that is reflected in our 2019 guidance.

Justin Lake -- Wolfe Research -- Analyst

Thanks for all the detail.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, Justin. Next question.

Operator

We'll move on to our next question from Pito Chickering from Deutsche Bank. Please, go ahead.

Pito Chickering -- Deutsche Bank -- Analyst

Good morning, guys. Thanks, and a great quarter. Just to follow up the adjustment element, to the strong strength to margin level you're talking about, growth in 2019 of 4% to 6% and same source expense growth of 2.5% to 3.5%. Can you sort of help us think about what you guys need from a same source revenue perspective to maintain your margins? What do you guys need to grow? And kind of how we should be thinking about excess of the maintenance growth to margin leverage for 2019.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, Pito, thanks. Let me make a stab at that. We are pleased with the margin growth. As I said, the same facility margin growth for the year is up 70 basis point and I think that's a continued reflection of operating leverage. You know, we stayed for a long time within the 4% to 6% same facility revenue range. If we're on the high end of that, we do anticipate some margin leverage and we're seeing that. We saw that in the fourth quarter with 10 basis points increase on a same facility basis. So, we feel generally comfortable with that. As we roll up on consolidated, our acquisitions put a little pressure on the as reported margin. So, we do anticipate some margin expansion if we can achieve at the top end of that revenue range. Again, I think we're very pleased with our performance through 2018 and we'll see what '19 holds.

Samuel N. Hazen-- Chief Executive Officer

This is Sam. The only thing I would add to that is as we look into 2019, we're not seeing any unusual pressures on any category of expenses. And so, if we are able to achieve the volume expectation that we've guided toward, that can yield the operating leverage that Bill was alluding to. So, that's the good news on the expense side is there's not any excessive pressures in any category of our overall spending.

Mark Kimbrough -- Chief Investment Relations Officer

Thanks, Pito.

Operator

We'll take our next question from AJ Rice from Credit Suisse. Please, go ahead.

AJ Rice -- Credit Suisse -- Analyst

Thanks. Hi, everybody. Maybe just a drill down on the capital spending. That's been a part of the story for the last couple years. Can you just comment a couple aspects, any involving areas of spending that are different than what we've seen the last two years? And your commercial business really sort of seemed to pick up this year. Is that, you think, more company specific because of these capital spending or is that underlying market improvement?

Samuel N. Hazen-- Chief Executive Officer

This is Sam, A J. Let me take those two questions. First, I think our capital program is fairly consistent when you look at 2018, you look at 2017, and then you look at what's coming online in 2019 and 2020. I think, in general, it consists of adding capacity in facilities where we have constraints and are operating at a high level of utilization. So, that could be inpatient beds, critical care beds, operating room suites, and so forth. And just to give you a metric, the company finished the year at almost 73%, a little over 72% occupancy for our hospital beds, which is a very high number. And that's over and above where we were in 2017 and we also had a few additional beds that came online in 2017.

The second component of our spending is around building up our network and our out-patient capabilities so that we are very convenient and easy to access. So, we've added surgery centers. We've added free standing emergency rooms, urgent care centers, clinics, and other diagnostic capabilities to really support a comprehensive opportunity for patients to access an HCA Healthcare system. Those are small dollar capital items and they don't consume a huge amount of our budget, so they are very efficient from that standpoint.

The final component of our investments I think are really geared to our growth are centered around clinical technology that our physicians want. And the more we can add clinical technologies that support our practices' and our physician's needs, it allows us to grow the complexity of our services, have a very capable clinical technology platform for our physicians to take care of our patients. And we think the combination of all of those are helping us respond to the marketplace and drive market share growth.

On the commercial side, through the first 6 months of 2018 commercial demand was modestly down, but HCA picked a significant commercial market share to the tune of probably more growth over the last 9 months than we've seen in the recent past. So, our commercial growth is more a function of market share gains globally across the company than it is, necessarily, overall demand. Although, in a number of our markets we have seen commercial demand life a little bit over where it was. But as a total for the company, it was modestly down. Not significantly by any means and not like it was in the previous year, but it was not growing significantly. But the company, through these programmatic efforts, through our capital spending, through being more responsive to our physician and medical staff dynamics, we've been able to take care of more patients and take care of them more effectively.

Mark Kimbrough -- Chief Investment Relations Officer

AJ, thank you.

AJ Rice -- Credit Suisse -- Analyst

Okay. That's great. Thanks.

Operator

And we'll take our next question from Whit Mayo from UBS. Please, go ahead.

Whit Mayo -- UBS -- Managing Director

Hey, thanks. Bill, just wanted to go back to the expense question for a minute. You've been operating in an environment for some time now with what I would characterize as fairly low inflation entering the cost structure. Can you maybe just elaborate a little bit more on trends and expectations, specifically for contract labor, premium pay, professional fees? And Sam, is there anything that surprises you as you reflect back on 2018 as it relates to your ability and your team's ability to manage expenses so tightly?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, this is Bill. I'll start and then Sam can add in. So, we look at the overall cost structure. As you've said, we remain very pleased with the trends we're seeing there in that 2.5% to 3% range. If you start over to labor, very pleased with the labor trends. We have had some benefit of reduced contract labor, as you mentioned, as our teams continue to focus on reducing our turnover. I think our nursing turnovers are at lows for us and that has proven to benefit us on the premium labor side, and that's flowing through as some favorable trends on the salary cost. But we see generally wage rates in line with our expectations. So, I've always and continued to characterize it as fairly consistent trends right now and we see the same going into 2019.

We continue to be very pleased with the team's execution on the supply cost agenda. As I mentioned, we're 30 basis points down on same facility on supply costs as we continue to see great efforts by HPG and the contract team and our supply teams focusing and partnering with our clinical teams on supply utilization. So, very pleased with both of those. And as we turn the calendar into 2019, we think largely those trends should continue. I think Sam mentioned earlier, we don't see any really singular undue pressure points right now. We're always subject to cyclical trends, but we feel very pleased with how we're turning the calendar on the cost side.

Samuel N. Hazen-- Chief Executive Officer

This is Sam on the last question there, Whit. The management teams of HCA are incredible. I am constantly amazed by what our teams out in the field do. They continue to add to our agenda to improve our patient care. They continue to add to our agenda with relationships with our physicians, and they continue to find ways to grow and manage their metrics at the highest level. And I think that's something that's unique about HCA. We have what I call a "can do" management team out in the field. They relentlessly pursue execution and performance, and I think it shows in the overall consistency of the company's performance.

As I mentioned in my prepared remarks, we've grown our admissions over the last 19 quarters consecutively. And I don't remember the exact number, but if you go back over time, we've continued to grow our volume very consistently and really navigate through different kind of market dynamics, competitive dynamics, cyclical changes, and so forth, and continue to grow the company. So, I'm really pleased with what our management teams have done and what I know they will continue to do as we look forward.

Whit Mayo -- UBS -- Managing Director

Thanks.

Operator

And we'll take our next question from Stephen Tanal with Goldman Sachs. Please, go ahead.

Stephen Tanal -- Goldman Sachs -- Vice President

Good morning, guys. Thanks for the question. I was hoping you could maybe just give us a little bit more color and maybe parse out the drivers of the acceleration in revenue per adjustment admit, especially the Medicare rate. As we know, that update was positive. And then any color on why that would decelerate somewhat meaningfully like in the outlook, 140, 240 beeps, I suppose, with 4k to full year with so much of the commercial book contracted? Any color there would be helpful.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, let me attempt to do that. So, we are pleased with how we finished the year on revenue per admit. We look at year today, we're at 3.8% on the same facility basis. We're benefited by the Medicare update in the fourth quarter and, as we've said before, a continuing benefit built into 2019. So, we do have good visibility into the commercial contracting. We expect to continued growth and equity in good payer mix. And so, I think this year we were helped by the strong commercial volume that Sam talked to, continued growth and equity, and that's left us to be a little bit above our 2%-3% expectations. We'll see what 2019 has, but we don't really see any major changes going on in the payer environment. So, maybe somehow, we can continue those trends going forward. But just in terms of our planning, we would plan in the 2%-3% range. Hopefully with continued growth of equity and good payer mix we can be on the top side if not exceed that.

Stephen Tanal -- Goldman Sachs -- Vice President

Great. Thank you.

Mark Kimbrough -- Chief Investment Relations Officer

Thanks, Steve.

Operator

And we'll take our next question from Matthew Borsch with BMO Capital Markets. Please, go ahead.

Matthew Borsch -- BMO Capital Markets -- Analyst

Maybe I could just pick up on the thread you were just talking to and ask you about Medicare Advantage rates and pricing, which obviously are not necessarily tied directly to this Medicare fee schedule. How are you approaching that as that program is continuing to grow so rapidly?

Mark Kimbrough -- Chief Investment Relations Officer

Go ahead, Bill.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

So, about 37% of our Medicare book, if you will, is managed. We've seen that grow pretty steadily over the past several quarters. From a contracting perspective, the rates and terms are really consistent with what the Medicare rates and terms are, so we equalize that. So, we've been dealing with growing MA in most of our markets. We think it will continue to grow and we don't really see a pricing differential between traditional and the manage book. It generally is around utilization management is where factors come into the managed care book. So, it's something that we have and is continuing to grow on us. So, I don't think it's a headwind or tailwind either way for us.

Samuel N. Hazen-- Chief Executive Officer

Most of our contracts are paid identically to what a traditional Medicare beneficiary would pay as for the same service. So, we move in locked stat for the vast majority of our Medicare Advantage contracts in the same manner as the traditional program does.

Matthew Borsch -- BMO Capital Markets -- Analyst

Right, OK.

Mark Kimbrough -- Chief Investment Relations Officer

Is that good?

Matthew Borsch -- BMO Capital Markets -- Analyst

Well, if could, just one more which is -- How do you look at the sustainability of the Medicare unit pricing relative to commercial? So, it's sort of just a related question just because the question is out there in the industry. Is there at some point going to be an unwillingness of commercial payers to subsidize Medicare? Do you see that as much as some others in the industry do?

Samuel N. Hazen-- Chief Executive Officer

Well, I think that's been an ongoing issue that the commercial book of business tends to subsidize the uninsured. It tends to subsidize the underfunding that exists with Medicaid programs, and it somewhat subsidizes the underfunding that exists with Medicare. I mean, that's always been a pressure point and always been an issue. I don't see anything necessarily influencing that materially in the intermediate run. And so, from that standpoint, we try to make sure our commercial pricing is competitive within the market and is meeting the needs of our payer partners just as much as it's meeting our needs. We're successful, and Bill alluded to, in that roughly 80% of our contracts for 2019 are already accomplished with consistent pricing terms and consistent networking configuration terms and so forth. We're about 60% contracted at a similar trend for 2020, and slightly contracted for 2021.

So, I understand the discussion, but I just don't see at this particular point in time any significant movement in that. What we are trying to do is show to the payers how much value we can add to their organization, to their memberships, through convenient offerings at different price points. That's why we build out our network to include different price points, whether it's urgent care, whether it's ambulatory surgery centers, and so forth. We're also executing on a very robust clinical agenda which we think is driving value for our payers, eliminating infections, targeting certain difficult conditions, and so forth, timely so that we can react to the patient and get them out of the hospital in a timely manner. All of these things are value adds that we believe we are offering in addition to competitive pricing.

So, our approach is, let's produce a value proposition for the payers that ultimately accomplishes what their membership wants, what their membership needs, and what our payers need. And we think that's a durable model.

Matthew Borsch -- BMO Capital Markets -- Analyst

Thank you very much.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you so much. Appreciate it.

Operator

And we'll take our next question from Michael Newshel with Evercore ISI. Please, go ahead.

Michael Newshel -- Evercore ISI -- Analyst

Hi. Is there anything to take away from the fact that the EBITDA guidance range is wider than past years? Is there anything in particular with higher degree of uncertainty or is just the base getting bigger? And related to that --

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, I think --

Michael Newshel -- Evercore ISI -- Analyst

Go ahead.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

No, the simple answer is the EBITDA is getting a lot bigger as we go forward so we kind of range off our midpoint on either side of that and it turns out to be a $400 million or so range that we give.

Michael Newshel -- Evercore ISI -- Analyst

Got it. And does the guidance assume that Medicaid DSH cuts take effect in October if they're not delayed again? Or is it small enough to fit in the range either way since it's only one quarter?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, it's pretty small in one quarter. We do anticipate with the new year that we go back to kind of traditional inflationary rates on Medicare. And we don't really anticipate any rate increases on the Medicaid book either.

Michael Newshel -- Evercore ISI -- Analyst

And then just lastly, real quick, in the 2019 guidance, can you just confirm how much incremental Medicare DSH payments are in the guidance? Is in the $110 million zone?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Close. I characterize it as about 1% of growth for us.

Michael Newshel -- Evercore ISI -- Analyst

Okay, great. Thank you.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

In terms of the year over year effect. Yeah.

Mark Kimbrough -- Chief Investment Relations Officer

All right, Michael. Thank you much.

Operator

We'll take our next question from Sarah James with Piper Jaffray. Please, go ahead.

Sarah James-Piper Jaffray -- Analyst

Thank you. Can you update us on how you're thinking about the equity mix trending in 2019 and how you think about actively managing that mix? Because it sounded like most of the $3.5 billion capital deployment was earmarked for footprint and capacity. But I'm wondering if part of the strategy is ramping up spending on high equity services and if there's certain service areas where HCA would really like to increase exposure over time?

Samuel N. Hazen-- Chief Executive Officer

This is Sam. That's a great question. What I would tell you is that we've been on this journey over the past five or six years to increase the complexity of service offerings within our networks. And that journey has yielded case mix index growth, I think, over the last three years or so north of 3% in each of those years. Just to give you an example of that, in 2018 our bone marrow transplant volume -- we have six programs in the US and one in the UK -- but our six domestic programs grew their bone marrow transplant program volume by 17%. That growth, in my opinion, was driven by the fact that we have consistent clinical protocols. We have consistent patient navigation protocols, and the outcomes from those are very positive and our price point tends to be better than some of the marquise programs out there. And so, patient care closer to home at a high level is a very powerful model. That's just one example.

Our trauma volume in 2018 grew by 7%. Another example of where HCA is taking a programmatic approach to a very high-end, community need program and yielding value for the patients, value for the community, and we think value for our company. And so, those are two examples of how we are doing that. I will tell you that we still have opportunities to add programs. Whether it is deeper capabilities in certain service lines, like electrophysiology where we have opportunities to create a companywide collaborative in electrophysiology and drive deeper capabilities in our cardiac programs, to in many instances adding more sophisticated service lines. Whether it's critical care medicine in some instances, all of this allows us to generate a higher revenue per patient on the same six cost platform that otherwise we would have had. And the combination of that is a very positive mix of business and it contributes to the margin expansion that Bill alluded to.

So, we think we have market share opportunities. Our physician strategies are geared toward resourcing these programs with physician's capability and so forth. And then we have investments that are geared, like I said earlier, to really positioning these programs for success, whether it's with facility capabilities or clinical technology, and so forth.

The final thing I would say on our high equity business is that we have a very sophisticated rural outreach capability inside of HCA. Whether it is through telemedicine, whether it's through affiliations with rural hospitals, whether it's through EMS relationships, or in some instances actually owning a rural hospital because the channel is so important. We've been able to drive downstream business into our hospital that typically is more acute, as one would imagine, with the fact that they can't get that type of care in a rural hospital. So, our relationships with the rural market has allowed us to grow our market share on that front, and that has contributed to the case mix growth as well. So, we see this journey continuing. We do not believe we are in the late stages of it. And as our markets continue to grow, which they are, we see opportunities for us to add and at the same time pick up market share in many instances.

Sarah James-Piper Jaffray -- Analyst

Very helpful. Thank you.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, Sarah.

Operator

We'll take our next question from Matthew Gillmor with Robert Baird. Please, go ahead.

Matthew D. Gillmor-Robert W. Baird & Co. -- Analyst

Hey, thanks. I wanted to ask about your performance and your expectations for your 2017 and 2018 acquisitions. Those hospitals are obviously a headwind to the EBITDA this year. They'll be a tailwind next year. So, how do they perform in the quarter and how should we think about the cadence of those hospitals moving to break even? Will that be more back half weighted, or have they already turned the corner?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah, Matt, this is Bill. Good question. So, as we talked about throughout the year, we anticipated getting the acquisitions to a break even or better by the end of the year, and indeed we did that fourth quarter. That group was profitable for us. For the full year of '18, it did create a headwind. We've talked about that. Roughly $80 million or so, and it's going to provide, as I said earlier in my comments, about an additional 1% of our EBITDA coming from that gross. So, year over year there's about a 2% of our growth factor from those '17 and '18 acquisitions. So, we're anticipating nice turn for that group. I think it will continue to ramp and we think most of these will take several years to bring them up to reasonable margin levels for HCA. So, we think there's continued growth in those classes even beyond 2019. But part of our growth, and as I mentioned earlier, almost full 2% is going from the headwind in '18 to providing some contribution for us in 2019.

Matthew D. Gillmor-Robert W. Baird & Co. -- Analyst

Got it. Thank you, Bill.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, Matt.

Operator

And we'll take our next question from Frank Morgan with RBC Capital Markets. Please, go ahead.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. I noticed in your recent debt offering you upsized that deal. So, I'm just curious between upsizing that deal, announcing another acquisition recently, are you seeing more opportunities today in terms of bigger system acquisition opportunities? So, just any commentary on that would be appreciated. And then, just to go back. On the guidance, the last question asked hit on this shortly, but in terms of any other special cadence considerations as we think about the annual guidance? Obviously, you're going to have 11 months of Mission. You've got the DSH coming, but any other -- when we think about the cadence over the course of the year, any other considerations that we should be thinking about? Thanks.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

So, Frank, I'll start this and maybe Sam can give you some broader commentary on the acquisition markets. So, yeah, we were very pleased with the debt offering that we completed a week or two ago. We did upsize it from our original because of the demand. Obviously, that was primarily intended for our Mission financing. We did a billion and a half financing last week. Very successful and very pleased with that. Also, we have a lot of liquidity we finished the year with as well. So, we've got a lot of flexibility on the balance sheet and markets continue to be receptive to HCA.

In terms of the cyclical guidance, there's really nothing specific I would call out on there. Yes, our acquisitions will continue to improve throughout the year. But when you overlay that on HCA broad base, I think you can go with our historical quarterly trends as a good baseline.

In terms of the broader acquisition landscape, we did have some press on New Hampshire smaller acquisition for this, and I think Sam can give us some commentary on the broader acquisition pipeline.

Samuel N. Hazen-- Chief Executive Officer

Well, I think if you look at the last 2017, 2018, 2019, clearly the company has made a number of acquisitions that we think are going to be good acquisitions for us over the long-term. Whether it's adding to existing markets, like we did in Houston, or creating new market opportunities, like Savanah and Mission, both of which are really market makers we believe and will ultimately be in a position, if not already which Mission is, to deliver what we call the HCA way in the market. My instincts are that we will see more activity, whether or not it's systems that are prepared to go the distance and make a strategic decision like Mission has done, we'll just have to wait and see. My sense is, though, that there is a need to be a part of something bigger. There's a need to be able to leverage learnings across an organization. There's a need to have diversification, and HCA brings all three of those to many different systems.

And so, we will continue to showcase what we can do inside of this great organization, and we're hopeful that that will yield future acquisitions similar to what we think the Mission acquisition will do for us. That is a uniquely successful system, and we think integrating that into HCA is going to present some unique benchmarking for others to consider as they go through the same kind of deliberations.

Mark Kimbrough -- Chief Investment Relations Officer

Thanks, Frank.

Operator

And we'll move on to our next question from Scott Fidel with Stephens. Please, go ahead

Scott Fidel -- Stephens -- Managing Director

Hi. Thanks. Can you give us an update on what type of trends you saw in the UK market in the fourth quarter, and then what you're assuming in the guidance in 2019 in terms of the ongoing turnaround there?

Samuel N. Hazen-- Chief Executive Officer

This is Sam. The UK had a decent quarter compared to the first nine months of the year where they had continued struggles. I think it's important to understand that for HCA the UK division represents less than 1.5% of the company's sort of overall EBITDA. So, it's a very small component of our organization. We like the market. We think we have a great position. We've made a lot of investments in the past. I won't say we're fully invested, but we're largely invested in the necessary capacity and in the certain programs that we have. We have come contingency plans around what the Brexit dynamic may mean to us in certain areas of our business and how we're going to respond to that. But we think we're starting to turn the corner.

And as we look at 2019, we have modest growth built into our plan. And I think that modest growth is going to be driven from the development of a more capable out-patient platform, urgent care platform, and really continuation of our cancer service line capability that we think will yield some modest growth for us in 2019. Obviously, if the Brexit occurs, it could modify some of our assumptions there, but we don't see that as a very material issue for us in 2019 as we look at our performance over there.

Scott Fidel -- Stephens -- Managing Director

Thanks.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you.

Operator

And we'll move on to our next question from Brian Tanquilut from Jefferies. Please, go ahead.

Brian Tanquilut -- Jefferies -- Analyst

Hey, thank you. Good morning. Just a question, Sam, on the macro front. How are you thinking about uncompensated care for 2019? And then, you touched on commercial growth earlier and how that's under pressure, broadly speaking. So, what are your views there and how do you plan to strategize to keep gaining share? And how much opportunity do you think is left in your region?

Samuel N. Hazen-- Chief Executive Officer

Well, our market share today is only 25%, so I'd like to think we have 75% opportunity. So, that's sort of how I fundamentally think about it. Obviously, we have really formidable competitors in many different markets. The competitive landscape for HCA is very fragmented because we don't compete against the same system from one market to the other in most instances. So, that, we think, creates advantage.

I think the consistency of our model, our approach to being the provider's system of choice, has been a very workable model for us. Our fundamental belief is that the portfolio of markets that HCA has is very strong and that is going to yield growth in overall in-patient demand as well as out-patient demand. And as we continue to execute on our investment strategy, our program strategy, which I spoke of a minute ago, and the continued development of our capabilities -- our nursing initiative, our clinical agenda, our efficiency agenda -- all of those are responding to our patients in a way that's producing a better outcome for them. And we think that still has legs.

And we believe that we can continue to grow the company organically through that model. Yeah, there may be some uninsured pressures here and there. I think, like Bill said, our overall uninsured volumes grew a little bit mid-single digits this year. That doesn't put that much pressure on our business. There are some states that are considering how do they expand Medicaid. They're not Texas or Florida. They're smaller states. But nonetheless, that could be a positive for us. And then, as we continue to focus our efforts around how do we gain share in the commercial segment, or how do we gain share in these high equity businesses, we think those approaches can yield a very positive outcome for the company.

And so, we remain focused on that and I think this focus, if you look back, is what has allowed us to deliver very consistently over the last five or six years. And given that our marketplaces tend to move at a pace that is noticeable, and by that, I mean not too fast in what's happening, we can make adjustments as we need to in order to respond and continue the growth pattern that the company has had. And so, overall demand, growing our position competitively, improving our capabilities as an organization better, we think a combination of all of those should yield a solid result.

And then, if we can wrap around that programmatically and very selectively high caliber acquisition opportunities like Mission, we think that's a very powerful model.

Brian Tanquilut -- Jefferies -- Analyst

Thank you, Sam.

Mark Kimbrough -- Chief Investment Relations Officer

Thanks, Brian.

Operator

And we'll take our next question from Ana Gupte with SVB Leerink. Please, go ahead.

Ana Gupte -- Leerink Partners -- Managing Director

Hi, thanks. Good morning. Following up on that question and in your commentary. Congrats on the quarter and the consistency that you are bringing to guidance and inevitable growth. I was looking to see if you had any thoughts based on the quarter and the last four quarters for 2018, does that change in your mind anything on your normalized guidance? I think a year ago you had said 2%-3% volume growth, no market share gains, 2%-3% pricing growth, flat margins. Your assets and capabilities, as you say, you've built them out and you continue to. Your capacity utilization, I'm assuming, is going up. Do you see it skew more toward one or the other with more of a trajectory on margin expansion with share add to the 2%-3%?

And then, on markets you talked about cyclicality. Are you comfortable that if we go in to an economic downturn as a nation that the markets are fairly defensive, either secularly or a combination of secular and competitive position on that guidance?

Mark Kimbrough -- Chief Investment Relations Officer

Bill?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

So, let me try and then Sam can add in on macro. So, you're right. We've been in this 2%-3% volume guide for some time, 4%-6% EBITDA guide. We know there are going to be periods where we're on the high end of that. We're very pleased with the momentum that we've got that we've talked about throughout the call. But we know that healthcare is cyclical, mainly due to just macro issue. But we think our continuing capital investments, our continuing acquisition opportunities will still provide growth for the company. Clearly our optimism in to 2019 and hopefully will continue beyond that.

And so, right now we're still in this 2%-3% kind of volume guide. When we look at demand, market share capital, we think that's a pretty good number. When we look at our longer-term CAGRs, we land right in the middle of that. Fortunately, we are in a period we've been on the high side of that, and hopefully that will continue. So, we'll need a few more reporting periods and data points before I think we adjust that. We're very comfortable with our long-term guidance of 4%-6%, now. But we also recognize we've been on the high end of that for 2018 and 2019.

Again, as we think about the building blocks, the strength of the core operations between volume and pricing, and cost management, the acquisition opportunities, the capital investment programs, I think that will continue to contribute to the growth of HCA for the long run. And I don't think we see any macros that are going to change that in a major way in the short run.

Samuel N. Hazen-- Chief Executive Officer

This is Sam. I want to add to that. We had in 2018 one of the strongest overall portfolio performances we've seen in the company. We had almost 80% of our hospitals grew their EBITDA year over year. 70% of our hospitals grew their admissions year over year. 65% of our hospitals grew their out-patient surgery year over year. This is an incredible portfolio performance and I think it speaks to the clarity of our approach in the marketplaces, our resourcing of the agenda, and then finally, the execution by our teams. It's broad based, as I mentioned in my prepared comments, and I think the performance metrics that I just shared with you, which are the best overall performance that we have seen since 2015, is very remarkable and something we're very proud of.

Ana Gupte -- Leerink Partners -- Managing Director

Thank you.

Mark Kimbrough -- Chief Investment Relations Officer

Appreciate it. Thanks, Sam.

Operator

And we'll take our next question from Ralph Giacobbe with Citi. Please, go ahead.

Mark Kimbrough -- Chief Investment Relations Officer

Hey, Ralph.

Ralph Giacobbe -- Citigroup Inc -- Analyst

Thanks, good morning. Hey. On past calls you've given us commercial yield or managed care revenue per adjusted admission and CMI as well. Hoping you could do that for the fourth quarter as well. And then, just on the payer mix, maybe if you could give us that revenue mix and then give us the volume, the total revenue on a year over year basis as well. Thanks.

Mark Kimbrough -- Chief Investment Relations Officer

Make sure I was clear. Say that again, Ralph?

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Yeah. You lost me.

Ralph Giacobbe -- Citigroup Inc -- Analyst

So, in previous calls I know you've given commercial yield over managed care revenue per adjusted admission and the CMI as well. So, I was hoping we could get that for the fourth quarter. And then the payer mix. Hoping you could give the revenue piece; the revenue percentages of the payer mix as opposed to just the volume. Thanks.

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Just let me start with that, Ralph. For the quarter, commercial case mix was up 2.1%. Year-to-date, we're up 3.5%. We had a really strong fourth quarter of '17. So, that was the case mix. On a revenue per adjusted admission on a year-to-date basis, we're about 3%. After we adjust for some reporting procedure, about 2% in the fourth quarter. But that's really a function -- if you go back and look at fourth quarter '17, there was extremely strong commercial pricing for us at 6.8%. So, as we mentioned in my remarks, it's really a commercial environment. We see that being pretty stable. We don't see any major changes going on there. Again, good intensity, 3.5% CMI growth in the commercial book on a year-to-date basis.

Mark Kimbrough -- Chief Investment Relations Officer

Thank you, Ralph.

Operator

And we'll take our next --

Mark Kimbrough -- Chief Investment Relations Officer

I think we've got time for one more question, April. Thanks.

Operator

And we'll take our last question from Gary Taylor with JP Morgan. Please, go ahead.

Gary Taylor -- JP Morgan -- Managing Director

Thank you. Long time listener, first time caller.

Mark Kimbrough -- Chief Investment Relations Officer

I'm not sure I recognize your name, but thanks.

Gary Taylor -- JP Morgan -- Managing Director

Following on Frank's question, I wanted to ask just a little bit more about acquisitioning CapEx strategy. And specifically wanted to ask Sam, is your approach different, more aggressive less aggressive, than Milton's and could you please include international and position groups as part of the answer?

Samuel N. Hazen-- Chief Executive Officer

I wouldn't say I'm any different than Milton. You've got a little echo going on here, Mark. Obviously, I've been a part of our decision making over the past few years in conjunction with Milton. It's usually a team analysis that we go through. I think it's just the environment. When the environment is presenting opportunities for us to make sizable acquisitions, I think some of these are once in a lifetime type opportunity and it's important for the company to consider them very carefully. We have and will continue to pursue out-patient acquisitions. We recently made a large inventory surgery center acquisition in Austin, Texas. We have other markets where we are looking at acquisitions of ambulatory surgery centers, certain urgent care companies, and so forth, that are complimentary to existing networks.

I think we will be more domestic than international in our pursuits on acquisitions. Obviously, we will look at other markets outside the US, but I think the opportunities for HCA are more compelling domestically at this particular point in time than they are internationally. Simply because we can bring more synergies to the system with our capabilities in the States versus buying in to macros, per say, in the international markets. But that doesn't mean we won't look and consider it. If there's a right opportunity, we will pursue it.

As it relates to physicians' practices, yes, we continue to use acquisition of physician groups as a way to add to our capabilities. Whether it's with more convenient offerings for our patients or for strategic reasons to support certain service lines or facility needs. So, all of that is there. We don't talk about those in any significant way because they're small individually. But they add up to support for our overall network positioning and they support our overall growth agenda in a way that is productive, we believe. And it's been something that we have been doing over the past five or six years very systematically.

So, I wouldn't say there is any change in our mindset, other than we may be entering a cycler where we're going to have more opportunities to look at systems that we think are unique opportunities.

Gary Taylor -- JP Morgan -- Managing Director

Sure.

Mark Kimbrough -- Chief Investment Relations Officer

All right, Gary. Thank you for the question. April, I think we're going to close the queue here. I want to thank everybody on the call today and I look forward to talking to you through meetings following the call. Thank you so much.

Operator

This concludes today's presentation. We thank you for your participation. You may now disconnect.

Duration: 59 minutes

Call participants:

Mark Kimbrough -- Chief Investment Relations Officer

Samuel N. Hazen-- Chief Executive Officer

William B. Rutherford-- Chief Financial Officer and Executive Vice President

Justin Lake -- Wolfe Research -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

A J Rice -- Credit Suisse -- Analyst

Whit Mayo -- UBS -- Managing Director

Stephen Tanal -- Goldman Sachs -- Vice President

Matthew Borsch -- BMO Capital Markets -- Analyst

Michael Newshel -- Evercore ISI -- Analyst

Sarah James-Piper Jaffray -- Analyst

Matthew D. Gillmor-Robert W. Baird & Co. -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

Scott Fidel -- Stephens -- Managing Director

Brian Tanquilut -- Jefferies -- Analyst

Ana Gupte -- Leerink Partners -- Managing Director

Ralph Giacobbe -- Citigroup Inc -- Analyst

Gary Taylor -- JP Morgan -- Managing Director

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