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HCA Holdings Inc (NYSE:HCA)
Q2 2019 Earnings Call
Jul 30, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the HCA Second Quarter 2019 Earnings Conference Call. [Operator Instructions]

At this time, for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Mr. Mark Kimbrough. Please go ahead, sir.

Mark Kimbrough -- Senior Vice President

Well, thank you for the promotion, Ian, I appreciate that very much. Good morning and welcome to everyone on today's call and our webcast. With me this morning is our CEO, Sam Hazen; and Bill Rutherford, our CFO, which will provide comments on the company's results for the second quarter. Before I turn the call over to Sam, let me remind everyone that should today's call contain any forward-looking statements, they're based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

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 statement, 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 into today's second 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 N. Hazen -- Chief Executive Officer

Good morning and thank you for joining us today. Earlier today, we reported our second quarter results. The results were driven by positive trends in the following areas: solid volume growth; cost metrics that were mostly in line with our expectations; and good performance from our acquisitions. These positive results were offset by slower growth in revenue per equivalent admission, which resulted in reported revenue and adjusted EBITDA that were slightly below our internal expectations.

Adjusted EBITDA grew by approximately 3% to $2.3 billion with adjusted EBITDA margin at 18.2%. Diluted earnings per share in the quarter was $2.25, which was down 2.6% from last year. We have carefully reviewed what drove this slower revenue growth. And importantly, we don't believe it presents a headwind with respect to achieving our full year's earnings guidance. Bill will provide the details in his comments.

Revenue grew by almost $1.1 billion, a 9.3% increase. This increase was driven by volume growth broadly across our markets, service lines and by revenue generated from our recent acquisitions. On a same-facilities basis, revenue grew by 4.3%. Inpatient admissions and equivalent admissions grew 2.1% and 2.6% respectively. Emergency room visits grew 3% and total surgeries were up modestly. We have now grown same-facilities inpatient admissions in 21 consecutive quarters. Inpatient market share trends remained a positive for the company.

Based upon an analysis of our results and year-to-date performance, we are confident in the second half of the year. We have not seen any major structural changes within our markets from a competitive standpoint, physician standpoint, payer standpoint or execution standpoint. The fundamentals in our markets remain strong with growing demand for healthcare services.

We continue to believe, we are well-positioned for growth, as we execute our operational initiatives, improve the overall competitive positioning of our local healthcare systems and integrate our acquired hospitals. The strategic investments we are making to expand the inpatient and outpatient capacity within our networks and improve our clinical capabilities create more opportunity for patients to access high quality convenient care in an HCA Healthcare facility.

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

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

Okay. Thank you, Sam and good morning, everyone. I will cover some additional information relating to the second quarter results. Then, we will open the call for questions. As Sam mentioned, our volume stats were solid and I'll provide some additional information. During the second quarter, same-facility Medicare admissions increased 2.5% and equivalent admissions increased 3.2%. This includes both traditional and managed Medicare. Same-facility Medicaid admissions increased 3.2% and equivalent admissions increased 2.3% in the quarter compared to the prior year. Our same-facility commercial admissions were flat, while equivalent admissions increased 1.9% in the second quarter compared to the prior year.

Same-facility self-pay and charity admissions increased 5.1% in the second quarter compared to the prior year and was in line with our expectations. We're looking at our 3% growth in emergency room visits in the quarter, our Level 1 through 3 visits increased 0.6%, while our higher-acuity Level 4 and 5 visits increased 4 9% over the prior year. In addition, admissions through the emergency room increased 3% over the prior year. Same-facility net revenue per equivalent admission grew 1.7% over the prior year in the quarter. This growth rate was lower than our recent results, which is averaged 1.5% to 2% higher.

So let me give you a little more information on factors that affected us in the quarter. And there are two primary drivers, I would like to call out. Our commercial revenue growth was softer in the quarter, primarily because admissions were flat and there was a moderation of our acuity growth in the quarter, which was primarily driven by decline in inpatient surgeries. The second item is that we had some favorable revenue items last year across some states supplemental and graduate medical education programs that did not reoccur this year.

Our total adjusted EBITDA impact from these supplemental programs was approximately $65 million, which was primarily attributable to revenue. We do not believe the supplemental programs will be a headwind for the remainder of the year. Our year-to-date revenue performance is in line with our full year expectations. Year-to-date same-facility net revenue per equivalent admission has increased 3%, which is within our guidance range of 2% to 3% for 2019.

So let me move on to operating expenses. Operating expenses per equivalent admission for the second quarter were consistent with recent trends. Our same-store operating cost per adjusted admission grew 3.1% over the prior year in the quarter. While our cost as a percent of revenue did increase in the quarter, we view this as a function of the softer revenue growth I discussed previously. Our recent acquisitions had an approximate 80 basis point unfavorable impact on margins for the quarter. Same facility labor trends were consistent with recent trends and prior year. Man hours per adjusted patient day and employee per occupied bed two key productivity indicators both improved 0.8% compared to the prior year. Same facility average hourly rate grew 2.6% in the quarter versus prior year.

Same facility supply cost per equivalent admission grew 2.1% over the prior year period. Same facility other operating expense per adjusted admission rose 3.6%, mainly due to a change in some stage supplemental program expenses, which I mentioned earlier. In summary, while our revenue results were softer than our expectations. Our adjusted EBITDA was only about 1.5% below our internal expectation. And overall, we remain pleased with our year-to-date performance.

So let me take a moment to talk about cash flow. Cash flow from operations was strong in the quarter. Cash flow from operations totaled approximately $2 billion versus $1.58 billion in the second quarter of last year. Capital spending for the second quarter was $964 million, in line with our expectations. During June 2019, we issued $5 billion aggregate principal amount of senior secured notes and use the proceeds to temporarily reduce the outstanding balance on our asset-based revolving credit facility. During July 2019, we redeemed $4.95 billion outstanding aggregate principal amount of senior secured notes.

Pre-tax losses on retirement of debt totaling $211 million for these redemptions will be recognized during the quarter ending September 30, 2019. During the second quarter, we paid $242 million to repurchase 1.9 million shares and had 1.75 billion remaining on our previous authorization as of June 30 2019. Also as mentioned in our release this morning, our Board of Directors has declared a quarterly cash dividend of $0.40 per share. At the end of the quarter, we had $5.7 billion available under our revolving credit facilities and our debt to adjusted EBITDA ratio was 3.83 times.

However, the amount available under our revolving credit facilities would have been $2.47 billion and the debt to adjusted EBITDA ratio would have been 3.66 times after giving effect to our July 5, 2019 debt redemptions. As noted in our release, we adjusted our full year 2019 guidance with projected adjusted EBITDA to range between $9.6 billion and $9.85 billion and projected EPS to range between $10.25 and $10.65.

So let me turn the call back over to Sam before we go to Q&A.

Samuel N. Hazen -- Chief Executive Officer

Thank you, Bill . Before we go to Q&A, I want to make four more points. First, our management teams are relentlessly focused on executing our agenda, as we have always been. Secondly, we are confident in what we are doing in our outlook for 2019. Third, periodically we have quarterly results that don't reflect our longer run beliefs, the first quarter was that and the second quarter was also that, that's why we believe year-to-date performance is more indicative. And fourth, we're appropriate, we are making adjustments to our cost structure as we historically have done.

So with that Ian, let's go into questions-and-answers.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll now take our first question from Pito Chickering of Deutsche Bank. Please go ahead.

Pito Chickering -- Deutsche Bank -- Analyst

Good morning, guys. Thanks for taking my questions. Just to drill down a little bit more on the inpatient admissions -- free commercial book of business. A couple of questions, can you sort of talk about, sort of different markets, if that weakness was sort of widespread among the markets, you talked about some more competition. Did you see some markets that had increased competition from that? And then, also on strategic investments, you guys are to continuing to invest in inpatient admissions -- does 2Q results change your view of making those investments?

Samuel N. Hazen -- Chief Executive Officer

All right, Pito. Thank you. This is how I would answer that question. We had 12 of 14 domestic divisions that had admission growth. We had 12 of 14 adjusted admissions -- our divisions that had adjusted admissions growth. On the managed care side, we had eight divisions that were up, two that we're flat, and four that were down. On surgeries, in total, we had nine divisions that were up, one was flat and four was down. So generally speaking, our portfolio performed pretty well. We did have a couple of markets that were softer than we anticipated. We understand what those drivers are. We think we have the appropriate responses in place to deal with them and we'll continue to execute on those.

To give you a few more statistics on the volume side, which again, the company had a very productive volume quarter. Rehab admissions were up 8%. As Bill said, our emergency room visits were up 3%. Our trauma was up almost 15%. We had a tremendous growth again in our cardiac volumes with our PCI volume -- our Cardiac Cath [Phonetic] volume up 2.5%, electrophysiology up 4%, CV surgery up 4.5%. So we had very broad-based, as I mentioned in my comments, service line growth and also division wide growth. The issue is, we were a little bit softer in total for our managed care admissions as Bill alluded to and that did put some pressure in the quarter on our revenue. I don't think it significantly changes our thinking around investments.

As I mentioned, we believe our strategy is appropriate for the market. We continue to invest in it, in an appropriate way in my opinion. And we think it will produce opportunities for the company to generate growth in the future.

Pito Chickering -- Deutsche Bank -- Analyst

Great. The one follow-up, if the weak commercial story continues in the back half of the year, what levers do you see available on the cost side to react to those -- to the softness?

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

Yeah, Pito. This is Bill. Let me try to address that. As Sam mentioned, our teams are making adjustments every day. We have great operators and we're obviously proud of the work they do. We manage productivity daily, even hourly matching our labor trends to projected volume and I mentioned our productivity gains in the comments. We have process improvement teams throughout our operations, who work in a variety of cost efficiencies such as throughput in the emergence room and OR, also working with our clinical teams on clinical efficiencies. We benchmarked ourselves to our best performers on a wide range of metrics in identifying improvement opportunities.

We continue to strive for cost efficiencies in our support structures and continuing to leverage size and scale, which we've been doing for some time in revenue cycle, supply chain, information technology, support, human resources and the like. And then, as Sam mentioned, we'll look for fixed cost and overhead reductions where appropriate and where we believe we have the opportunity. So, we continue to believe we have appropriate control systems around managing our cost structure. As we step back, we don't think cost management was the issue for the quarter, we continue to make adjustments where I believe is appropriate and we'll continue to do that in the future.

Mark Kimbrough -- Senior Vice President

Thanks, Pito.

Pito Chickering -- Deutsche Bank -- Analyst

Great. Thanks.

Operator

Thank you. We'll now take our next question from Steve Tanal of Goldman Sachs.

Steve Tanal -- Goldman Sachs -- Analyst

Good morning, guys. Thanks for the question. I guess, I just wanted to focus on the revenue per adjusted admission, the metric there and then some of the drivers you called out. So forgive me for being specific here, but there is a few things I wanted to touch on. The lapping of the $65 million of supplemental payments in the second quarter. Was the expectation of that would recur, I just don't remember that as a call out last year, and just thinking through that, I think the size of that is maybe 60 bps or so, you framed 150 basis point to 200 basis point delta versus recent trends on the metric. So is it sort of fair to say that the biggest driver within there was sort of commercial volumes? And any reason why that slowed, maybe how widespread it was? Just really trying to understand if that's just a function of sort of low unemployment more macro-driven or if there's anything more specific you could tell us about that? And then finally just in acuity mix, where it would be helpful or I don't know if I missed that, but those are the three parts to that question.

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

Yeah. Thanks, Steve. Let me start, so on the supplemental payments on there, we did not expect that to reoccur. We didn't call it out in '18 because it wasn't really an issue on a year-over-year basis, because we had at least two of the three programs we mentioned in '17 and '18. As we went through our budget process, we knew those wouldn't reoccur, so they were not in our internal plan as we went forward in 2019. So that's why our internal plan, we weren't that far off with -- on our performance for the level.

On the managed care volume, as Sam mentioned, it's a handful of markets. We did see our commercial surgical volume decline in that area that did flow through on the acuity in a couple of service lines. But as Sam mentioned, we don't think that we see any structural or significant changes across the marketplace. So that influence both the volume and the flow through acuity related to that.

Samuel N. Hazen -- Chief Executive Officer

Thanks, Steve.

Steve Tanal -- Goldman Sachs -- Analyst

Thank you.

Operator

Thank you. And we will now take our next question from A.J. Rice from Credit Suisse. Please go ahead.

A.J. Rice -- Credit Suisse -- Analyst

Hi, everybody. Just wondering, picking up on Sam's comment toward the end there. A little more volatility from quarter-to-quarter, I mean that seems to be something we're seeing across the sector, obviously, one of your major peers had the exact opposite really soft first quarter and a strong second quarter and surgeries were part of that. Do you think there is anything going on either with benefit design changes, I don't know in terms of your managed care contracts, when people talk about the deductibles and high deductible plans and that having an impact on traditional seasonality. Is there anything you can look at the calendar that's may -- I know the calendar is different in the way some of the holidays fell this year versus last year, or is there anything else that you think is creating a little more volatility from quarter-to-quarter where you still end up at the same point for the year, but maybe the seasonal patterns or not what they used to be exactly?

Samuel N. Hazen -- Chief Executive Officer

A.J., this is Sam. I don't know that we have anything that would suggest the seasonal patterns are changing on us. I mean we went through a period of time, as we've discussed on these calls, in the past, where we felt there was some migration to outpatient procedures in the last part of the year because of deductibles and holidays and so forth. So we tend to see some outpatient surgical activity and procedure activity increase in the fourth quarter, but as it relates to the first half of the year, I don't know that we have any indications that seasonality factors are changing on us. I think my point was that, the first quarter was incredibly good for HCA and had tremendous, like mid-teens same-stores growth, if I remember correctly and we just felt that we had a perfectly good quarter that yielded tremendous bottom line results.

And then, we looked at the second quarter and it just didn't play out as we had anticipated entirely, not that far off as Bill indicated and so when we sort of pull up and look at the business and then look at our markets and we just completed our mid-year reviews with our divisions. We feel pretty good about where we are on a year-to-date basis and we think that's fairly reflective of our business and how it should play out over the remainder of the year. And so that's why we sort of called it out that way, but we will continue to study. We will hopefully get a good indicator here in the third quarter and move through the year as we think. But there is nothing to suggest that seasonality has played into -- to this in any material way.

Mark Kimbrough -- Senior Vice President

Thank you. A.J.

A.J. Rice -- Credit Suisse -- Analyst

I think the managed care companies have pointed to an extra business day in the third quarter. There is a bit of a headwind for them, is that something -- is that enough to move the needle in your mind for you guys at all?

Samuel N. Hazen -- Chief Executive Officer

Well, clearly with an extra business day, we will have more procedures, most likely because of that. So whether or not, over the course of the whole quarter that will have a material impact. We will just have to wait and see. But our business days do influence our surgical activity and some of our procedure activity.

A.J. Rice -- Credit Suisse -- Analyst

Okay. Thanks.

Mark Kimbrough -- Senior Vice President

Thanks, A.J. Appreciate it.

Operator

Thank you. And we will now take our next question, it comes from Justin Lake of Wolfe Research. Thank you. You may go ahead.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. Sam, I appreciate the comments on the confidence in the second half EBITDA run rate. Given the weaker commercial volumes and acuity in the second quarter, curious whether that confidence is a function of management expecting commercial trends to return to previous levels in the second half or whether you're driving cost improvements that will allow you to hit these numbers even if the commercial trends continue at those second half or I should say, those second quarter levels?

Samuel N. Hazen -- Chief Executive Officer

Well, I would say, it's a bit of a blend. It's not one or the other. I don't think the second quarter is necessarily reflective of commercial volumes. We've had -- I think six straight quarters where we've had adjusted admission growth in our commercial activity. I think five straight quarters heading into the second quarter, where we had inpatient commercial admission growth. So we don't necessarily see anything changing within the markets, as I've mentioned that would suggest that the second quarter is the marker for us, as we move forward. But when you do bump up our expectations for some rebound there plus some cost initiatives where we think we have some incremental opportunities for improvement, those two combined, I think, Justin, give us a reasonable level of confidence as we look to the last half of the year.

Justin Lake -- Wolfe Research -- Analyst

Okay. If I could just squeeze in a quick number. Right. Got it. Thanks.

Operator

Thank you. And we will now take our next question from Ralph Giacobbe from Citi. Please go ahead.

Ralph Giacobbe -- Citigroup Inc -- Analyst

Thanks. Good morning. Can you maybe call out the specific service lines, where you saw the pressure that drove the lower acuity? And then I think in the past you've given managed care revenue, I think per admission so hope, you can kind of give that for the second quarter? And then the last thing, just anything to call out on bad debt or collection rate that could you maybe influence the revenue capture and pricing's down in the quarter? Thanks.

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

Yeah, Ralph. Let me try to take some of those. When we look at the service lines, it was in some of our spine surgical procedures orthopedics and some women services. We think on the orthopedic side on the commercial, we could have caught some of that as we moved into the outpatient area. But it's mainly in the spine, spine and women services and, as Sam mentioned, spread among a handful of markets on there. On the collection rates, we're not seeing any material change in our collection rates. We're -- our net days actually had declined on us for the year. So we continue to feel very comfortable with our revenue cycle operations. And the net revenue per admission for our commercial side, it was running 3.5% on a revenue per admission in the Q2 -- in the second quarter.

Ralph Giacobbe -- Citigroup Inc -- Analyst

Thank you.

Mark Kimbrough -- Senior Vice President

Thanks, Ralph.

Operator

Thank you. We will now take our next question Brian Tanquilut of Jefferies. Please go ahead.

Mark Kimbrough -- Senior Vice President

Hey, Brian.

Brian Tanquilut -- Jefferies -- Analyst

Paul, Sam, can you hear me?

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

Yeah. We can.

Brian Tanquilut -- Jefferies -- Analyst

Hi. Good morning. Yeah. I just wanted to ask a question on price transparency. Obviously, CMS came out with a proposal yesterday and how do you think that plays out? And where do you think HCA is positioned if that actually goes through in terms of pricing? And where do you stand in the markets that you operate in? Thanks.

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

Yeah. This is Bill. I'll make a stab at it. Obviously, it's early. We just got that last night. We're still interpreting that. We've been on record that HCA supports price transparency and we believe that's helping our patients gain a reasonable understanding and estimate of the cost prior to service. So, we support those efforts. We will have to see an implementation in terms of the specific procedures out there. Our approach to complying with that and we think HCA will continue to show good value. We don't know exactly where we stand relative to others in the marketplace. And we think that will create some opportunities maybe some challenges there, but we think again the HCA system will stand up well on a price transparency view.

Samuel N. Hazen -- Chief Executive Officer

Yeah. Let me just add to that Bill. I think a couple of things over the past five to 10 years, we have been on this journey to try to narrow the band among our payers, so this is not a large delta between the lowest payer and the highest payer. Now we have a delta, but it's not significant and we've narrowed it significantly over time. So that's point number one.

Point number two, we think we are competitive in the marketplace. Otherwise, we would not be accomplishing contract renewals at the pace that we are. And for 2020 we're about 80% contracted and for 2021, we're about 60% contracted at what I would call normal inflationary trends. Therefore, I believe we are generally competitive. To Bill's point, there could be a market here or there where we're under a competitor. We believe that in a handful of cases. There could be a market here or there where maybe we're in a better position from a pricing standpoint. We'll just have to sort that out over time.

But at this point, we're focused on the patient and getting the patient, the necessary information for them to understand their costs. So we're going to go through this comment period that CMS has offered and make sure we push forward appropriate thoughts and appropriate ideas on dealing with the patient and then we'll determine whether or not there is an appropriate way to deal with other kind of pricing that is embedded in the proposed rule.

Mark Kimbrough -- Senior Vice President

All right. Brian. Thank you.

Operator

Thank you. Now we will take our next question, it comes from Frank Morgan of RBC Capital Markets. Please go ahead.

Frank Morgan -- RBC Capital Markets. -- Analyst

Good morning. Hate to keep beating this issue, but could you talk just a little bit maybe about on the commercial volume side, how that progressed and tracked through the months of the second quarter? And then did you see any kind of change in that by the end of the quarter? And then just also wanted to confirm, no major losses of contracts, nothing went out of network during the quarter. And then, any commentary around surprise billing legislation? Thanks.

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

Yeah, Frank, let me try it. The quarter, you have to align, we mentioned before, around business days. April had a favorable. June you had one less business day. So I had normalized for that, but I don't think we see any inter-quarterly trends of any material nature in the trends that we're talking about. Relative to surprise billing, I don't think there is any new developments out there. We've worked with various policy makers and industry leaders to express our views on surprise billing and we'll see where that ultimately finalizes, but we don't think that's an issue for us in the near term as we look at various proposed legislation that's out there.

Frank Morgan -- RBC Capital Markets. -- Analyst

Anything about out of network during the quarter?

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

No.

Samuel N. Hazen -- Chief Executive Officer

No.

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

We haven't lost any material contract or any material out of network activity.

Mark Kimbrough -- Senior Vice President

Thanks, Frank.

Operator

Thank you. And we will now take our next question, it comes from Josh Raskin of Nephron Research. Please go ahead.

Josh Raskin -- Nephron Research -- Analyst

Hi. Thanks. Good morning. Appreciate the question. I understand you guys are saying that's it's not really a cost side of the issue. And I think I heard a couple of comments around labor, but maybe you could just flush that out. Was there any increase in temporary labor? Are you seeing any shortages in specific market, any specific lines etc. that caused any potential changes in the volumes or is it really steady as she goes on the labor front?

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

Well, I think, it's pretty consistent. When we look at the overall labor trends, as I mentioned in my comments, Josh, for productivity improves. We improved just under 1% for the quarter. Our wage rates at 2.6% are in line with our expectations. Our temporary and contract labor is remained stable, a reason we're very proud of the efforts our operators are making on that front. And we're running nice turnover ratios in there. So again, when we step back and look at the cost trends, when we manage on our per unit basis, they are very consistent with our trends. We recognize on a per -- as a percentage of revenue, they're showing some growth. But just as in the first quarter, when you got really solid commercial growth, it helps the per revenue stats and the opposite occurred in the second quarter, but when we look at how we're managing the cost on a volume basis, they're remaining relatively and stable in our view across all categories, labor and suppliers at that standpoint.

Josh Raskin -- Nephron Research -- Analyst

Thanks.

Mark Kimbrough -- Senior Vice President

Thank you, Josh.

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

Yes.

Operator

Thank you. And we'll now take our next question, it comes from Whit Mayo of UBS. Please go ahead.

Whit Mayo -- UBS Investment Bank -- Analyst

Hey, thanks. One quick clarification. Can you provide what state supplemental program actually changed and why it was different versus your expectation? And then, my real question was just on the Houston market. I think you've recently come out of a rebranding initiative and announced a new affiliation with large medical school just looking for any commentary on the market? Thanks.

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

Yeah. Well, let me start, the two supplemental programs over the drivers were our graduate medical education bonus program we had received that didn't reoccur that was principally in Florida. And then, we had a disproportionate share settlement that was principally going back to Colorado in some past year. So those were the two major programs and then, we got a little bit of change in our California supplemental that showed down in our operating expenses. So those were the three. The remaining programs as we said, are -- we view as stable and we think those issues are behind us. We don't see them, creating a headwind going forward on there. And then relative to Houston market, Sam?

Samuel N. Hazen -- Chief Executive Officer

Yeah. We are in our turnaround, I would say, in Houston . We struggled for a couple of years, as we've called out on this call in the past and I think this year, we have started our recovery and we're seeing pretty good results from some of our initiatives to grow our business. We've seen some results with respect to consolidating some excess capacity. The new acquisition we did in the northeast -- the northwest side of town is going to be a nice acquisition for us. So all in all, the branding, I think the repurposing of some assets, the focus that the team has put forth in that market is starting to show results. We think the macros in Houston have turned a little bit, where we're starting to see job growth again and see a slightly better payer mix in that market than what we had seen historically. So we're pretty pleased with the first-six months of the year's performance in Houston and believe some of the other initiatives strategically that we had in place, including branding, are going to be productive for us. The graduate medical education program that you speak to is in an early stage and it's really not yielded anything yet, but we think over time, it will be a valuable program for us in the Houston market.

Mark Kimbrough -- Senior Vice President

Thank you, Whit.

Operator

Thank you. And we will now take our next question from Sarah James of Piper Jaffray. Please go ahead.

Sarah James -- Piper Jaffray -- Analyst

Thank you. I wanted to ask a bigger picture question. So when you talk about seeing competition in the market, how exactly is it presenting today? So, are you talking more from surgical referrals, branding or where you sit and ensurers efficiency networks and how that presents to the consumer? So if you could give us some color on where the big competition is now in your industry, that would be helpful.

Samuel N. Hazen -- Chief Executive Officer

Well, I'll try to generalize it as best I can obviously, it's market-to-market in somewhat competitor-to-competitor. I think the unique thing about HCA and we've mentioned this before, is we don't compete against the same systems from one market to the other. We believe fundamentally that creates competitive advantage for us, as we look to deliver best practice solutions from one market to the other or allocate resources in a more timely manner.

I think generally speaking, most of our competitors are trying to do a lot of what we're trying to do. They're trying to attract physicians, there trying to create outpatient capabilities that are responsive to the markets and so forth. And so, I think from that standpoint, those are always won and loss in my opinion, when it comes down to execution, when it comes down to detailing your business and your relationships with physicians and so forth. And then, really creating a compelling offering for the patient. And we think that's in HCA's wheelhouse.

And so, we have been about that for many years and we will continue to be about that and we think it's that level of execution and such that ultimately delivers market share gains. Again, we are growing our market share on the inpatient side, as we've mentioned, we have actually grown our market share from a commercial standpoint. We don't have the second quarter of 2019 yet. So we have fairly broad-based market share performance when you look at the most recent available data, which is all of 2018.

We had two-thirds of our markets grow their market share. The company in total is at an all time high on both overall market share as well as commercial market share. So we think our approach to building out comprehensive and clinically capable networks that are easy to access for our patients very responsive to our physicians and produce a positive outcome for our payers, for our patients and others is yielding results, and we'll continue to focus on that and we'll continue to resource that as we move forward and we think that's going to be a successful model for us.

Mark Kimbrough -- Senior Vice President

Thanks, Sarah.

Sarah James -- Piper Jaffray -- Analyst

Thank you.

Operator

Thank you. We'll now take our next question, it comes from Peter Costa of Wells Fargo. Please go ahead.

Peter Costa -- Wells Fargo -- Analyst

Good morning. My question is on same-store outpatient surgery cases. If I look at Q1, you're up 1.3%. In this quarter, you're up 0.6%. Q1 you should have been negatively affected by the number of days. So this quarter, you would think it will be a little bit stronger. When I look at a year ago, you had a very strong quarter, up 2.6% in the second quarter. But you have an even stronger quarter in the third quarter for outpatient surgeries. So I'm kind of wondering, what happened last year in outpatient surgeries that's perhaps not happening this year. If that's the right way to look at it, and then will the problem be bigger in the third quarter?

Samuel N. Hazen -- Chief Executive Officer

So let me speak to outpatient surgery. This is Sam. So our hospital based outpatient surgeries were up 1.9% in the quarter. Our ambulatory surgery center surgical volumes were down 0.6%. And then, our UK surgery volumes were down and that influence sort of the composite. But when you look at our hospital based outpatient surgery, up almost 2%. That's a pretty good number for us. Some of that was a migration from inpatient in a couple of service lines as Bill alluded to, but it didn't influence, I think the aggregate number in any significant way for the company.

In the ambulatory surgery center area, we actually categorize our surgical cases into three tiers, Tier 3 being the most significantly reimburse, Tier 2 in the middle, and Tier 1 at the lowest. When you look at our Tier 1 volumes, they were down significantly. That's ophthalmology cases, some pain cases and so forth. And that's what influence the metric for the quarter. I don't recall the specifics in the second quarter of last year. But we feel pretty good about what we're doing with our surgical growth initiatives and our quality and investment initiatives inside of our ORs. And we've had a fairly good pattern of growth over time, it does go up and down a little bit from one quarter to the other, some of that could be calendar, some of it can be this transition that we spoke to.

But generally speaking, we had a pretty good metric this quarter with our outpatient surgeries. Again inpatient surgeries were the metric of concern for us. They were slightly down flattish, if you will. Domestically, but down with international and so that created a little bit of pressure. We will have to continue to work on that and monitor that as we move forward. But all in all, our surgical activity on the outpatient side, I think is yielding pretty good results for the company.

Mark Kimbrough -- Senior Vice President

Thanks, Pete.

Peter Costa -- Wells Fargo -- Analyst

Okay. Thank you.

Operator

Thank you. And we will now take our next question, it comes from Steven Valiquette of Barclays. Please go ahead.

Steven Valiquette -- Barclays Bank -- Analyst

Thanks. Good morning, everybody here. So just sticking with the main topic of the day. I'm just curious, I mean are you able to comment on whether the inpatient surgical volumes and/or revenue per admission are improving in early 3Q '19, just following the softer result in 2Q?

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

Yeah. This is Bill. See, we do not comment on the current quarter. So we'll leave our comments to the period ending June 30 in the second quarter and year-to-date.

Steven Valiquette -- Barclays Bank -- Analyst

Okay. Maybe just one quick question here around North Carolina. I mean there's been some headlines around the proposed state employee contract hospital rates for 2020. And the state wants to move to Medicare reference pricing. Obviously, hospitals do not want to do that. I'm just curious, first of all, I mean how critical is that contract within North Carolina? If you able to opine on it, is your bias to stay out of network, or are you willing to potentially agreed to like Medicare reference rates knowing that it could kind of filter into other contracts as well? Just curious to get your thoughts around that topic? Thanks.

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

This is Bill. I'll try, I think that's -- the point is, I don't know and I don't have any data in front of me to suggest that if a move to reference for the state employees that it would have a major impact on our North Carolina operations. But I do think from a precedent standpoint, we don't believe haven't government dictate fixed pricing especially Medicare pricing is an appropriate kind of response to managing healthcare demand. So I think that's where our focus will be on that topic. I don't view it will be a material issue to HCA as we run it up. And as we go through our 2020 planning, If it becomes an item we will disclose it, but I don't think at this point that particular issue will be a material issue for us.

Steven Valiquette -- Barclays Bank -- Analyst

Got it. Okay. Thanks.

Operator

And we will take our next question, it comes from Michael Newshel of Evercore. Please go ahead.

Mark Kimbrough -- Senior Vice President

Michael?

Operator

Michael your line maybe muted. We'll move on. We'll now take our next question from Gary Taylor of JP Morgan. Please go ahead.

Gary Taylor -- JP Morgan -- Analyst

Hey. Good morning, guys. Just asking this question, certainly in the context that there is normal fluctuation between quarter. So I'm kind of beating the dead horse a little bit, but just maybe want to ask slightly different way. When we look at net revenue per adjusted admission on a same-store basis. I mean the comps do get a little tougher in 3Q and 4Q. So, Sam, When you talk about looking at this, analyzing the quarter, reaching a conclusion that there is not a concern with respect to seven second half guidance. How much of that is looking at the market-specific explanations for some of the commercial softness this quarter and being comfortable with whatever issue that might have been and the trajectory versus some of the new cost initiatives that you've talked about?

Samuel N. Hazen -- Chief Executive Officer

Well, I answered that, I think earlier, I don't remember who asked it maybe, Justin. But I do think we are not of the mind yet that our commercial volume growth is flattening out. Again we've had five quarters in a row, heading into the second quarter where we had inpatient admission growth on commercial activity and six quarters heading into the second quarter and now, seven, if you count outpatient where we've had adjusted admission growth. And so, we don't see anything again from a structural standpoint whether it's payer, physician, competitor, what have you that would suggest that our trends should just immediately change.

As it relates to pricing trends, as we sequentially move through the rest of the year. We do typically run about third quarter and second quarter very close and then, we ramp up in the fourth quarter through normal contract provisions that we have and so forth. And we don't see anything at this particular point in time, preventing us from being able to ramp up in the fourth quarter as we typically do, obviously, some of our Medicare increase has come through in the fourth quarter as well.

As we mentioned earlier, we do have a calendar day advantage in the third quarter, that tends to produce more commercial activity because of the type of volume we get typically from commercial activity. So there could be some influence there as we work through the quarter. So we're pretty confident -- confident in what I'll call the structural aspects of our business. And none of those issues suggests that anything has changed in any material fashion that would cause us concern. And that's why we are reiterating our confidence in our outlook for the rest of the year.

Gary Taylor -- JP Morgan -- Analyst

Okay. Thank you.

Operator

Thank you. And we will now take our next question, it comes from Kevin Fischbeck of Bank of America.

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Great. Thanks. Just wanted to kind of understand a little bit, the rationale for the guidance raise. You mentioned that Q2 came in below expectations and yet you're raising the guidance by $150 million. I assume it sounds like you're just saying that Q1 was so strong, you now feel comfortable with those trends, but just trying to understand maybe a little more color about what exactly came into the guidance. Is there anything new in the second half of the year versus what you were expecting? And I guess, we don't have the final regs. I don't know, if DSH at all change in that assumption, but if there is any change in DSH there that would be helpful?

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

Yeah, Kevin. This is Bill. Let me try to take that. After the first quarter, we feel that a lot of questions about our guidance adjustment that we made in the first quarter, which as we raised our guidance after first quarter, $100 million, which was primarily due to that favorable payer settlement, we recorded in the first quarter. We indicated we typically wouldn't raise guidance further after just one quarter, but we did just for that settlement. So obviously now the half of the year is behind us. Well, in essence, we did was tightened our guidance by raising the previous low and about $150 million, which obviously effectively raises the midpoint by $75 million. So as we look at our year-to-date performance, it's an appropriate benchmark we think as we've said several times throughout the call for our full year guidance expectations. And if you look at year-to-date, once you adjust for the payer settlement for us, we've grown EBITDA just over 9%. And so our new midpoint suggests just over 9% growth for the second half of the year. And when you adjust for last year's insurance settlement and the Harvey settlement that we had. So we believe that tightening the guidance range after the second quarter. Looking at the midpoint is really consistent with what our year-to-date trends, and so that was really what was behind the tightening and raising of the midpoint of our guidance after this quarter.

Mark Kimbrough -- Senior Vice President

Thank you, Kevin.

Operator

Thank you. Now we'll take our next question, it comes from Matthew Gillmor of Robert W Baird. Please go ahead.

Matthew Gillmor -- Robert W. Baird -- Analyst

Hi. Thanks for the question. I wanted to ask about the contribution from recent acquisitions of Mission [Phonetic] and the 2017 acquisitions contribute about 3% EBITDA growth again this quarter or was that any different? And if you have any sort of general comments about how those deals are going, especially Mission and Savannah, that would be helpful.

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

Yeah. This is Bill. Let me start, so we are very pleased with the performance of the acquisitions and they did have a good quarter. As you mentioned, we anticipated them in our guidance to contribute about 3%, that's what they had in the first quarter. They ran stronger in the second quarter. Year-to-date, we're running about 4% contribution from our acquisitions. Mission in particular continues to perform very well. We're ahead of both our internal expectations and plan at Mission. As did Savannah, Savannah is progressing nicely and had a nice growth in the quarter. So, overall performance is very strong for the acquisition. I think when we look at the full year, we still think 3% to 4% contribution is probably a good number for all the acquisitions. And the Houston market is on track as well with our plans. We've made some adjustments in Houston. Our North Cypress acquisition in our markets performing very nicely. So overall pleased with the performance of the acquisitions in the quarter and a little ahead of our expectations on a year-to-date basis.

Matthew Gillmor -- Robert W. Baird -- Analyst

Thank you.

Mark Kimbrough -- Senior Vice President

Thanks Matthew.

Operator

Thank you. And we have no further questions at this time. So I'd like to hand the call back to our speakers.

Mark Kimbrough -- Senior Vice President

Okay. Listen, I want to thank everybody for joining us today and I will be around if anyone wants to follow up. Thank you so much.

Operator

[Operator Closing Remarks]

Duration: 51 minutes

Call participants:

Mark Kimbrough -- Senior Vice President

Samuel N. Hazen -- Chief Executive Officer

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

Pito Chickering -- Deutsche Bank -- Analyst

Steve Tanal -- Goldman Sachs -- Analyst

A.J. Rice -- Credit Suisse -- Analyst

Justin Lake -- Wolfe Research -- Analyst

Ralph Giacobbe -- Citigroup Inc -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

Frank Morgan -- RBC Capital Markets. -- Analyst

Josh Raskin -- Nephron Research -- Analyst

Whit Mayo -- UBS Investment Bank -- Analyst

Sarah James -- Piper Jaffray -- Analyst

Peter Costa -- Wells Fargo -- Analyst

Steven Valiquette -- Barclays Bank -- Analyst

Gary Taylor -- JP Morgan -- Analyst

Kevin Fischbeck -- Bank of America Merrill Lynch -- Analyst

Matthew Gillmor -- Robert W. Baird -- Analyst

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