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HCA Holdings Inc (NYSE:HCA)
Q4 2019 Earnings Call
Jan 28, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the HCA Healthcare Fourth Quarter 2019 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 Vice President of Investor Relations, Mark Kimbrough. Please go ahead, sir.

Mark Kimbrough -- Vice President of Investor Relations

Kevin, thank you so much. Good morning, and welcome to everybody on the call today 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 fourth quarter.

Before I turn the call over to Sam, let me remind everybody 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 may be expressed today. More information on forward-looking statements and these factors are listed in today's press release and in our various SEC filings.

On this morning's call, we may reference measures such as adjusted EBITDA and net income attributable to HCA Healthcare, Inc. excluding gains or losses on 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 in 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 N. Hazen -- Chief Executive Officer

Thank you, Mark. Good morning, and thank you for joining us today. We finished the year with strong fourth quarter results that were above our expectations. Solid volume increases, strong revenue growth, and good expense management drove this quarter's results. Revenue increased on a year-over-year basis by 10% to $13.5 billion. This increase was driven again this quarter by a combination of strong same facilities volume growth and our recent acquisitions. On a same facilities basis, revenue increased by 6%, which was driven by a 4.7% growth in inpatient admissions and 5% growth in equivalent admissions.

We saw growth across most service categories and broadly across most markets in the Company. To highlight a few additional service categories, emergency room visits grew 6.7% and total surgeries grew around 2% with roughly equal growth in both the inpatient and outpatient settings. We have now grown inpatient admissions in 23 consecutive quarters. This remarkable consistency reflects positive market forces across our diversified portfolio, a robust growth agenda, significant capital spending and strong execution by our people. The growth in revenue translated into strong earnings for the quarter, with diluted earnings per share of $3.09. Adjusted EBITDA grew 9.2% to over $2.7 billion, with adjusted EBITDA margin at 20.3%.

2019 was another successful year for HCA Healthcare. The Company's results, which improved across most key performance metrics, reflected both the steadfast commitment we have to our mission and our disciplined operational culture. Across our networks, we took care of more than 35 million patients in 2019, a record level of patient volumes. We spent $4.1 billion in capital expenditures, about one-half were for routine needs and the balance were investments needed to support our growth agenda.

The strategic investments we made in our business to expand our networks and improve our clinical capabilities make it easier for patients to receive high-quality convenient patient care in an HCA Healthcare facility. As we look to the future, we believe the fundamentals in our markets remain strong with growing demand for healthcare services. This, coupled with the continued improvement in the competitive positioning of our local healthcare systems, gives us confidence as we move into 2020.

Inpatient market share in 2019 grew by 38 basis points as compared to 2018 to over 26%, reflecting the improvement. As indicated in our earnings 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 increased the quarterly cash dividend by 7.5% to $0.43 per share.

In closing, I want to thank our employees and our physicians for the great work they do every day to take care of our patients. We are proud of their accomplishments. Together with our employees and physicians, we connect our local networks with the unique enterprise capabilities and scale of HCA Healthcare to make a difference in the communities we serve. We believe this approach allows us to improve more lives in more ways and advance the delivery of healthcare services.

With that, let me turn the call over to Bill for more details on the quarter's results and our guidance for 2020.

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

Great. Thank you, Sam, and good morning, everyone. I will cover some additional information relating to the fourth quarter results and then briefly discuss our 2020 guidance. As Sam mentioned, all of our stats for the quarter were solid. We were pleased with the quarter and full-year results. So, let me provide you some additional information.

During the fourth quarter, same-facility Medicare admissions increased 4.3% and equivalent admissions increased 5%. This includes both traditional and managed Medicare. Same-facility Medicaid admissions increased 5.1% and equivalent admissions increased 4.6% in the fourth quarter compared to the prior year. Our same-facility managed care admissions increased 4.7% and equivalent admissions increased 4.8% in the fourth quarter compared to the prior year. Our same-facility self-pay and charity admissions increased 6.8% and equivalent admissions increased 6.5% in the fourth quarter compared to the prior year.

Same-facility emergency room visits increased 6.7% in the quarter. Our Level 1 through 3 visits increased 8%, while our higher-acuity Level 4 and 5 visits increased 5.3% over the prior year. In addition, admissions through the emergency room increased 4.7% over the prior year. Same-facility net revenue per equivalent admission grew 1.1% over the prior year in the quarter. Our net revenue per equivalent admission growth in the fourth quarter of 2018 of 4.4% was one of the strongest we had seen since 2014. Also our acuity growth was lower than trend due to our medical admission growth of 5.9%, which outpaced our surgical admission growth of about 2%. For full-year 2019, our same-facility net revenue per equivalent admission has grown 2.3%, which is in line with our guidance range for the year. Our same-facility inpatient net revenue grew 6.5% in the quarter and our same-facility outpatient net revenue grew 5.8% in the quarter.

So let me move on to operating expenses. Even with a more moderate revenue per equivalent admission growth, our costs were managed very well. Our same-facility operating expenses per equivalent admission grew just 0.8% in the quarter compared to the prior year and our same-facility adjusted EBITDA margins increased 20 basis points in the quarter. Our same-facility labor cost per equivalent admission increased 1.3% in the quarter. Our same-facility average hourly rate grew 2.7%. And we continue to see labor productivity improvements. Same-facility supply cost per equivalent admission grew 1.8% over the prior-year period. Same-facility other operating expenses per equivalent admission declined 0.4% compared to the prior year.

So let me take a moment to talk about cash flow and earnings per share. Cash flow from operations was very strong in the quarter, increasing to $2.5 billion versus $2.175 billion in the fourth quarter of last year. For the full-year 2019, cash flow from operations was $7.6 billion, or an increase of $841 million from $6.76 billion last year. Capital spending for the fourth quarter was $1.247 billion and for the year increased to $4.158 billion.

During the fourth quarter, we paid $272 million to repurchase 2.069 million shares. During the year, we repurchased 7.949 million shares at a cost of $1.03 billion, and had $1.24 billion of the 2019 repurchase authorization remaining as of December 31, 2019.

At the end of the quarter, we had $3.2 billion available under our revolving credit facilities and our debt-to-adjusted EBITDA ratio was 3.42 times. Earnings per share, excluding gains on sale of facilities, was $3.09 in the fourth quarter of this year versus $2.99 in the fourth quarter last year. In the fourth quarter of 2018, we recorded a $67 million or $0.19 per diluted share favorable tax benefit as was noted in our release this morning.

So that, I will move on into a discussion about our 2020 guidance. We highlighted our 2020 guidance in our earnings release this morning. We estimate our 2020 consolidated revenues should range between $53.5 billion to $55.5 billion. We expect adjusted EBITDA to range between $10.25 billion and $10.65 billion. Within our revenue estimates, we assume same-facility equivalent admissions will grow between 2% and 3% for the year and same-facility revenue per equivalent admission to also grow between 2% and 3% for 2020.

We anticipate same-facility operating expense per equivalent admission growth of approximately 2% to 3%. Our diluted shares are projected to be approximately 342 million shares for the year, and earnings per diluted share guidance for 2020 is projected to be between $11.30 and $12.10. Relative to other aspects of our guidance. We anticipate cash flow from operations to be between $7.6 billion and $8 billion. We anticipate capital spending between $4 billion and $4.2 billion. We estimate depreciation and amortization to be approximately $2.8 billion, and interest expense to be slightly below $1.8 billion.

Our effective tax rate is expected to be approximately 23%. Sam mentioned in his comments, we also announced an increase of our quarterly dividend from $0.40 per share to $0.43 per share and authorized an additional $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 we turn it back over to Mark to open it up for questions and answers.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you, Bill. Kevin, you can now provide instructions to those on the call who wish to ask questions.

Questions and Answers:

Operator

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

Pito Chickering -- Deutsche Bank -- Analyst

Good morning, guys, and thanks for taking my questions. Great quarter here. A question for you on capex. Capex as a percent of revenue guidance looks to be about 7.5% in 2020 versus 8.1% in 2019. If you think about capex over the next two, three years, do you think capex continues to drift down and are you able to still achieve the same level of EBITDA growth? Or asked differently, what is the balance between capex spend versus EBITDA growth? Thanks so much.

Samuel N. Hazen -- Chief Executive Officer

Thank you, Pito.

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

Thanks, Pito. So, yeah, when we look at capital, keeping it relatively flat in our guidance for 2020, we look at it as a percentage of our cash flow from operations. And with the strength of the cash flow, I think this current level of $4 billion to $4.2 billion is a good planning estimate for us. We continue to see opportunities to deploy capital to facilitate our growth, either through capacity expansion or network development or deepened program capability. So, I think as long as we can continue to see the growth of our cash flow, good capital opportunities, nice growth of our returns on invested capital, we think it's an important component of our ability to generate future growth.

Samuel N. Hazen -- Chief Executive Officer

Yeah, let me add to that Bill. This is Sam, Pito. I think in 2019, we had some early stage capital investments that we knew we were going to have to make with our Mission acquisition and our Savannah acquisition, and that tended to be earlier in our model. And so there was some acceleration in those items and that lifted up our capex as a little bit as a percent of revenue, and that's why I dialed back.

As Bill said, we continue to believe we have opportunities in our existing markets organically to deploy capital and deal with growth opportunities, competitive positioning and even capacity constraints. In the face of all of these new beds that we've added over the years, our occupancy levels continue to go up. And so that's really encouraging that our planning and the execution underneath is occurring at the levels that we had hoped. And so that's where we are at this particular point with our capital.

Mark Kimbrough -- Vice President of Investor Relations

Thanks, Pito.

Operator

We'll now go to Frank Morgan of RBC Capital Markets. Please go ahead.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. A question about the guidance. When you think about the high end of that range, clearly higher than it has been in the past, are there any particular things that you could call out that may be the primary driver to hitting the high end of that growth? And I guess specifically, what are you factoring in for the reentry into the network in Las Vegas? And then what about the DSH cuts that, I think, had been postponed through May of '20? Where do you have that in the -- how do you had that factored into guidance for the year? Thanks.

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

Yeah. Frank, this is Bill. Let me take that and talk about our guidance overall. As you know, if you look at the midpoint of our guidance, it's about 6% growth rate, at the high point it's at 8%, and that's before reflecting any adjustment for the payer settlement we had in 2019, which add roughly about a 1% of those growth rates. I think that's consistent with our commentary that we had in the third quarter that we continue to see momentum in the marketplace, and that is allowing us to perform from the core operations at the top end of our long-term guidance. And we think acquisitions will continue to contribute growth for us. We estimate about 1%, a little bit of north of 1% for acquisitions. So when you look at in totality, the range accounts for a number of those variables.

We continue to see volume opportunities as we see demand and market share capabilities. And I think that 6% to 8% on an as-reported basis, probably 7% to 9% when you adjust for the payer settlement, is a good planning range for us.

Samuel N. Hazen -- Chief Executive Officer

And Frank, with respect...

Frank Morgan -- RBC Capital Markets -- Analyst

And then on the DSH cuts...

Samuel N. Hazen -- Chief Executive Officer

This is Sam. With respect to the Las Vegas situation with Sierra, we do see that particular contract being a material change in our strategic dynamics in that market, but the magnitude of it for the Company as a whole is not material. And Las Vegas is part of a diversified portfolio inside of HCA, it is a very significant market for us and it's doing incredibly well without the Sierra a contract and we have significant investments going into the market that are dealing with the population growth that's occurring in that market as well as now access to more lives. So we're very excited about it. We think it's reflective of the strategic partnerships that we have with our payers and trying to figure out ways to deliver value to them, and we're excited about the prospects of being in the Sierra relationship in Las Vegas.

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

And then, Frank, on your DSH cuts, we look at that in the context of our overall Medicare rate increase as we've talked about before, we think we're in a favorable Medicare rate update 2.5% to 3%. We are not forecasting any material Medicaid discussion at this point in time. So I'll just have to wait to see how that dialog continues going forward.

Mark Kimbrough -- Vice President of Investor Relations

Thanks, Frank.

Frank Morgan -- RBC Capital Markets -- Analyst

Thank you.

Operator

Our next question comes from Kevin Fischbeck of Bank of America. Please go ahead.

Samuel N. Hazen -- Chief Executive Officer

Hi, Kevin.

Kevin Fischbeck -- Bank of America -- Analyst

Great. Hey. Wanted to follow-up on the pricing commentary from earlier. It sounded like you were saying that most of it, in your view, is just kind of from a mix perspective. Can you talk a little bit about what you're seeing on the commercial side? Obviously that numbers are moving around a lot, so how does that impact pricing? What pricing you're getting commercial? And then, two, does the flu have any impact, either on the volume or the pricing in the quarter?

Samuel N. Hazen -- Chief Executive Officer

Kevin, this is Sam. I think we're in a really good position with our contracting strategies with the commercial payer marketplace. And as we just mentioned, we gained access to Sierra in Las Vegas, which opens up more commercial lives for us as a system. But in general, we're roughly 85% contracted for 2020 and almost two-thirds contracted for 2021, and about a-third contracted for 2022 at generally consistent terms across our portfolio.

As it relates to the revenue per unit in the quarter, our commercial revenue per unit was reflective of sort of the overall trends. It was underneath maybe our composite and that was due we think to the lower medical book that Bill alluded to and also some outpatient growth in certain areas, which starts to match with the number a little bit. But nonetheless our commercial book is doing about what we thought, and we saw a great growth in high-end services with neonatal services, with trauma services, with orthopedic services, cardiovascular.

So our approach to delivering high-quality complex services is yielding value. It was offset a little bit. That's why we had a little bit more volume in the quarter because of the medical growth that we saw in the fourth quarter, and that creates a net effect of the numbers we reported. That also affects our cost as Bill alluded to and that's why we were able to create on a per unit basis margin expansion, in addition to sort of the overall growth.

Kevin Fischbeck -- Bank of America -- Analyst

Hello?

Mark Kimbrough -- Vice President of Investor Relations

Thank you, Kevin.

Operator

Our next question comes from A.J. Rice of Credit Suisse. Please go ahead.

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

Hi, everybody. Let me just maybe focus in on your -- if your debt-to-EBITDA is down at 3.4, that's sort of toward the low end of -- or you maybe slightly below the low end of your, I think, 3.5 to 4.5 target. If I think about the different buckets of where you can deploy capital, you're raising the dividend, you've reupped the buyback, but it's been pretty steady in the $1 billion to $1.5 billion annual range. You've got -- you've been doing some tuck-ins and then a few larger deals.

And then it's been steady capital deployment, but I don't know whether some of these deals or what's your comment on Vegas or something opens up new opportunities. So I guess I'm leading up to asking, can you go through each of those buckets and say where the priorities are, has there been any evolution on any of that in terms of maybe tuck-in deals or the prospects for doing bigger deals or whatever, give us some update on that?

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

Yeah. A.J., this is Bill. Let me start and Sam can add on. So you're right. Our leverage ratio of 3.42 is the lowest we've run since before the LBO. We're fortunate we did finish the year stronger than originally anticipated. We continue to look at that long-term range and give a lot of thought too. I think it ultimately gives the Company an incredible amount of flexibility and we continue to assess all three areas that you talk about.

First is to continue to evaluate strategic acquisitions. We do expect a couple of smaller acquisitions that they're in the pipeline to be completed. We did complete the acquisition of Galen School of Nursing in January. And as you mentioned and we've mentioned before, we are usually evaluating couple of larger acquisition opportunities at any particular time. It's hard to call exactly when and if they might be completed, but we have the balance sheet capacity to execute on these if they come to fruition.

And also, as you mentioned, second, we continue to evaluate capital investment opportunities that will provide growth. We've talked about that earlier, either through expand capacity, expand our network, improve our competitive positioning. Interestingly, in 2019, we brought on over 1,000 new inpatient beds and as Sam mentioned we're running one of the highest occupancies we've run in quite some time. So we continue to see capital investment opportunities in the market.

And then third, as we mentioned in the release, we do have a new $2 billion share repurchase authorization. That's on top of the $1.2 billion remaining on our 2019 authorization. And although the program has no specific time limit, there are a lot of factors that influences our timing and pacing on this and the quarterly dividend.

So, I think when I step back, we've got a pretty long track record of a balanced and, I think, disciplined capital approach as we continue to see acquisition opportunities. We have the capability to do that as we see capital investment opportunities and then manage the balance sheet through the share repurchase program, is all part of our capital strategy.

Mark Kimbrough -- Vice President of Investor Relations

Hey, A.J.. Thank you.

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

Okay. Thanks. Appreciate it.

Operator

Our next question comes from Scott Fidel of Stephens. Please go ahead.

Scott Fidel -- Stephens -- Analyst

Hi, thanks. My question is just on -- obviously, I know you don't give quarterly guidance. But just thinking about the seasonality of EBITDA margins in 2020 and just anything maybe that you'd want to call out, if necessary as it relates to sort of work day mix, and then just also with sort of the progression of the margin, realization on some of the acquisitions last year or for 2019, just in general how we should think about sort of year-over-year comps for margins on a quarterly basis over the course of the year. Thanks.

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

Thanks, Scott. This is Bill. Two things on that. You're right. We don't give quarterly guidance, but we'll make a quick note and remember that our first quarter of 2019 was an extremely strong quarter for us, not only from operational performance, but we did record the payer settlement in the first quarter. So that's the only note I would tell you. I would say, outside of that, our quarterly spread is probably consistent with our recent trends.

We are pleased with the acquisitions and their continued progression. We saw that throughout 2019. Relative to margins we talked about before, on a full-year basis, they were running high-teens, but we saw those improve throughout the year and the fourth quarter. They were hovering just above 10%. So we expect those margins to continue to evolve in 2020. And then other than that, I would say, the net -- our normal progression would be what our trends have been.

Samuel N. Hazen -- Chief Executive Officer

Hey, just a clarification. I think you said high-teens, I think you meant high-single digits.

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

High-single digits, yeah, I'm sorry on that.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thanks, Scott.

Operator

Our next question comes from Ralph Giacobbe of Citi. Please go ahead.

Samuel N. Hazen -- Chief Executive Officer

Hey, Ralph.

Ralph Giacobbe -- Citi -- Analyst

Yeah. Hey, good morning. Thanks. The volume stats obviously pop out. Can you give us a little more in terms of what you attribute the strength to both sort of on -- I guess on a macro level and then specific to your initiatives and markets? And I want to go back to sort of your prepared remarks and commentary around better competitive positioning, hoping you flushed that out a little bit. Is that just related to sort of your access strategies or is that more a reflection of the competitiveness in your market where some of your peers maybe are struggling a little more? Just some help on that. Thanks.

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

Thank you, Ralph. Sam, you want to start?

Samuel N. Hazen -- Chief Executive Officer

Yes. I think the first point I would make is, we believe, and we've said this, and we continue to believe and we're seeing evidence even in 2019, that there is growing demand for healthcare services in HCA's markets. We're very protective of our portfolio for a reason and part of that is due to the fact that we're trying to pick markets that we believe have macro trends that are supportive of our growth agenda. So that's number one.

When you look at -- the second point I would suggest is that we have a model that we believe is very competitive and responsive to the marketplace, and responds to those growth opportunities, responds to competitive dynamics and really responds to our stakeholders, our patients, our physicians and our employees, and really the communities. So four key stakeholders.

And the first point is really about building out broader and more clinically capable networks. We've talked about we want our networks to be conveniently located, easy for the patient to access and navigate, have different price points and then fundamentally a one-stop shop as a system with comprehensive service lines so our patients can obtain all of their healthcare inside the HCA network. So, we've added two facility offerings. This past year, we added with an acquisition of an urgent care center, we added with a couple of acquisitions of ambulatory surgery centers. And then, we developed a number of outpatient facilities, including freestanding emergency rooms, urgent care centers, physician clinics and so forth.

So we now have more than 2,000 sites of care that are connected to our 185 hospitals. They work as a system. We still have opportunities to have them work more effectively as a system and create better value for the patient, better value for our payers and so forth. The second key part, and this is a very important part, HCA Healthcare is a physician-friendly organization. We have significant leadership talent. On the physician side, we are fundamentally centered around providing our physician with the tools that are necessary for them to deliver high-quality care. So we give them voice, we create an efficient environment, we make sure they have the clinical specialties and nursing care that are very important to them, and we offer them an opportunity to hitch their wagon to a system that can grow.

It's over the past number of years, we've grown our physicians at about 1.5% to 2% per year. Again, in 2019, we grew our physicians at 1.5%, adding to the capabilities and the complement of specialists that we need.

On top of that, our physician engagement in 2019 was at an all-time high. And so I want to take the opportunity on this call to thank our physicians for what they do for our patients again, and thank them for their commitment to HCA. And then the last thing I'll tell you that's unique about HCA and why we believe we can create competitive advantage is we have a different set of enterprise capabilities than most of our local competitors. We have scale on the back end with respect to administrative functions that allows us to create a very efficient per-patient administrative costs.

The second thing we have is investment capabilities. Bill has already alluded to the fact that we use our financial resources to support our agenda -- our growth agenda, our clinical improvement agenda and our people agenda where we're investing heavily in our people and in our clinical improvement. And then we're able to leverage best practices. We have this incredible laboratory of people trying to take care of patients more effectively, more efficiently. And when we find a solution that we think has application across the company, we will move that solution through our organizational apparatus to our different facility so that we can create systematic improvement in patient care and efficiency.

Examples of that are our graduate medical education programs, our Sarah Cannon Research Institute, I can go down -- our trauma programs, all of these things are connected to this opportunity for us to leverage. And we think that is part of why our competitive positioning has improved and yielded the market share gains that I alluded to. So that would be sort of our approach and our belief as we look to the future. Obviously, there's a lot of discussion about the healthcare industry, but we think we're uniquely qualified to respond to those dynamics in a way that's productive for our organization and really responsive to the market dynamics.

Mark Kimbrough -- Vice President of Investor Relations

Bye, Ralph. Thank you.

Ralph Giacobbe -- Citi -- Analyst

That's very helpful. Thanks. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

Yeah.

Operator

Our next question comes from Whit Mayo of UBS. Please go ahead.

Whit Mayo -- UBS -- Analyst

Hi. Hey, thanks. Maybe I'll just follow up, Sam, on your comments there about your physician strategy. Is there anything changing with your hospital coverage or your outsourcing strategy? I mean you've talked a lot about the evolving physician strategy. But if anything changes you kind of marry your physician needs with your capital strategy this year as I've sort of hear you talk about high cost, complex service development, trauma, etc., does that just maybe influence how you think about anesthesiology or anything along those lines?

Samuel N. Hazen -- Chief Executive Officer

Whit, this is Sam again. On hospital-based physicians, we have a multifaceted approach to hospital-based physicians. In critical care medicine, as an example, in our intensive care units, and this has been a part of our efficiencies that we've talked about in the past, we have, I think, the largest intensive critical care medicine group in the country. They are deployed across a number of our facilities. We're able to leverage their learnings, some of our data to support better critical care management. We're trying to figure out how to use that platform for advancing telemedicine and critical care to support rural hospitals and to support some of our other facilities. That's one example.

The second thing would be on pathology. We have a very large pathology group that provide pathology services across HCA, not in every facility, but a number of facilities and growing. With respect to emergency room and anesthesia in hospitals, we have a mixed solution there. We contract largely with outside organizations, national organizations in many instances and some local organizations. We do have some employment models there as well. We'll continue to evaluate whether or not it makes sense for us to contract or to employ.

We have the wherewithal to do both and we work with our contracted providers very effectively to deliver high-quality efficient care and respond to the marketplace. So that model is evolving a little bit, as you know. And as it evolves, we will adjust appropriately. But hospital-based physicians are a key part of our physician strategy. They're very important to patient care, they're very important to patient satisfaction, they're very important to the efficiencies that we have. And so we have strategic relationships, again, locally, at a national level and then through our employee model. And we will continue to sort that out as the years progress.

Mark Kimbrough -- Vice President of Investor Relations

All right. Whit, thank you.

Operator

Our next question comes from Steve Tanal of Goldman Sachs. Please go ahead.

Steve Tanal -- Goldman Sachs. -- Analyst

Good morning guys. Thanks for the question. I guess I had two quick ones. One was on the recently acquired hospitals. The last around the Medicare cost reports, I think, put the EBITDA margins on a four-wall basis around 6-or-so-percent. Sounds like you're saying high singles, maybe not too different. So first, just wondering where you think that could go over time? And then more about the quarter, I was hoping to just get a little bit of clarity around the flu, the impact that you guys would estimate on admissions, revenue per adjusted admission and EBITDA and maybe tying those comments into revenue per adjusted admission with a comment on the acuity index where that shook out for the quarter and maybe even same-store revenue per adjusted admission for the commercial book? I know you've provided that in the past, just to help us think about that number there. Thank you very much.

Samuel N. Hazen -- Chief Executive Officer

All right. Steve, thanks. Steve, let me try to cover some of those. First on the acquisitions, as I mentioned earlier, or at least attempted to, the acquisitions for the full year were running at the high-single-digit margin level. We saw those improve throughout the year and hover just over 10% in the fourth quarter. We think, over time, we can get those to a reasonable margin level. Those would be basically in the mid-teen range. I think all of the acquisitions we've talked about before will take up as a multiyear prong for us. So over time, we think we can continue to see margin improvement there.

On the flu, the flu was mostly an outpatient impact for us during the quarter. With our emergency room business, we think probably 150 basis points, 170 basis points growth in that emergency room visit volume that we reported, the 6.7%. Very little effect on our inpatient admissions for the quarter. Our best estimate in the quarter is relatively nominal impact on the flu on our inpatient admissions. And I don't think it has much impact at all, if we look at the other kind of financial statistics, both either on a revenue, revenue per unit or an earnings standpoint. It's more a volume standpoint as we saw activity in our emergency rooms.

Mark Kimbrough -- Vice President of Investor Relations

All right. Steve, thank you.

Steve Tanal -- Goldman Sachs. -- Analyst

Thanks.

Operator

Our next question comes from Steve Valiquette of Barclays. Please go ahead.

Andrew Mok -- Barclays -- Analyst

Hi. This is Andrew Mok on for Steve. During January, you've finalized your acquisition of the Galen College of Nursing. Can you speak to the strategic benefit from a partnership like that in terms of building a pipeline of nursing labor to feed into your hospitals? Is that an area where we should continue to expect additional investments? And secondly, can you give us an update on the labor and wage trends you're seeing in your end markets, including what's embedded in your 2020 outlook?

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

Galen School of Nursing here.

Samuel N. Hazen -- Chief Executive Officer

Okay. Well, first of all, we're very excited about the acquisition of the Galen School of Nursing. They have a tremendous leadership in Mark Vogt, number one. Number two, their culture aligns with HCA's culture in a very significant way, so that was part of the appeal. The second thing that we learned when we studied that organization is they have a scalable model. And when we connect that scalable model with the unique platform of HCA, we think we can create a nursing school education program that starts to scale up across most of our major markets.

So we're in the final stages of building a multi-year plan to expand Galen School of Nursing and integrate that component of education with a robust agenda we have for clinical education and nursing support for our existing nurses, hopefully creating both a pipeline and a continuous education cycle inside of HCA so that our nurses are more capable of delivering high-quality care, but also have more opportunities for growth. And we think that's a winning formula for us. So the investment requirements to do that are modest. They're not significant. It's really about getting the right faculty, the right administrative leadership and so forth. And the team is working on that as we speak. But we're very excited about what the education opportunities for the Galen School of Nursing can do for HCA.

And again, that parallels what we're doing with graduate medical education today for physicians inside of HCA. Both of these components, we think, provide a tremendous community benefit for our communities and that we're creating a supply of caregivers to deal with some challenges that exist on a macro level in many markets.

As it relates to labor costs in general, we're anticipating 2020 to be consistent with what we've seen over the past few years. I think HCA has been able to respond to market dynamics very effectively with our wage and compensation programs. We've recently enhanced our living wage policy program as an organization to respond to certain dynamics on that front. And then with respect to nursing, we've been able to respond to market dynamics effectively and keep our wage trends within a level that we think are consistent with where we have guided number one, but responsive to what's going on in the market. So we fully anticipate a continuation of past trends in our model for 2020.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you so much.

Operator

Our next question comes from Josh Raskin of Nephron Research. Please go ahead.

Josh Raskin -- Nephron Research -- Analyst

Hi. Thanks. Good morning. I wanted to ask sort of again on the leverage and just push a little bit. You guys are below your long-term targets at sort of 3.4. And if I kind of just run out share buybacks at current levels, good dividend that you've talked about, the share repurchase -- I'm sorry, the capex guidance that you've given. And I know acquisitions are lumpy and difficult to time, etc., but you'll be closer to 3 than 3.5 by the end of the year. So is there a point where there's sort of pressure to deploy more capital? And I guess, is there an opportunity maybe for an accelerated buyback or a special dividend, things that you guys have thought about in the past for 2020?

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

All right, Josh. Thanks. Josh, yeah, this is Bill. Let me try to talk about that. I think we're very fortunate to have the ratio where it is. Ultimately, it gives the Company, I think, a lot of flexibility into the future. I think that acquisitions, if they materialize, could affect that. We think the increase in the share repurchase program we're anticipating for 2020, we will continue to evaluate that. I don't think it puts any pressure toward your question to us. It just gives us opportunity, I think, to continue the growth trajectory of HCA, either through acquisitions or capital and share repurchase program. I think it will likely be a combination of all three of those as it has been in the past going forward.

Mark Kimbrough -- Vice President of Investor Relations

All right. Josh, thank you.

Josh Raskin -- Nephron Research -- Analyst

Thanks.

Operator

Our next question comes from Michael Newshel of Evercore ISI. Please go ahead.

Michael Newshel -- Evercore ISI -- Analyst

Thanks. I just want to get your latest view on the price transparency regulation finalized by CMS, how it might influence payer negotiations and also market share? And are there like interesting like practical or technology challenges be ready for 2021 there? Or do you think the core challenges are just going to likely delay this?

Samuel N. Hazen -- Chief Executive Officer

This is Sam. The pricing transparency, as we've said in the past, is a policy that we're supportive of as it relates to protecting the patient. And so we believe that any transparency policy that supports the patient getting information when they can in advance of their care on their co-pay deductibles and so forth is something that we can support. As it relates to our commercial pricing contract, we're not supportive of that. We don't think it necessarily will accomplish what others are saying it will accomplish, number one. Then number two, we think it is very complicated for a patient to discern and would not necessarily accomplish the patient objectives that we think are really the intentions of many people's desire here.

And then finally, it will be administratively difficult and complicated, and a lot of systems won't have the capability to put those pricing arrangements forward. So that is a factor. We don't know exactly how this is going to shake out. There are a couple of approaches that the federal government has pursued, and we'll just have to wait and see how it develops. I don't anticipate it creating any significant issue for us. With respect to contracting, we think it just creates, like I said, confusion with the patient more than anything else. HCA is positioned, we believe, well with our networks. We're positioned well, we believe, from a pricing standpoint across most of our markets, and we don't anticipate that being a major issue for us. It's just that it does create a lot of confusion.

Michael Newshel -- Evercore ISI -- Analyst

All right. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

Michael, thank you.

Operator

Our next question comes from Justin Lake of Wolfe Research. Please go ahead.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. A couple follow-ups for me. First, I just wanted to see if I can get a little more color on the seasonality of 2020. I know you pointed, Bill, to the tough comp in Q1, which I calculated, I think, like 13% core EBITDA growth. So obviously, a great quarter, and then clearly, a much easier comp in Q2 where the core was closer to flat. So I was hoping you might give us some additional color here on the growth for the two quarters, basically asking whether you see the growth in Q1 and Q2 being only slightly different than the full year directionally? Or should we think as much as maybe flat year-over-year in Q1 might be a reasonable target, just given how strong that comp was, and maybe it gets made up in Q2?

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

Yeah. Justin, this is Bill. Without giving specific quarterly guidance, because I think if I go back to my earlier comment, our historical trends would be our best guide on there. And we're always going to be subject to some quarter-to-quarter fluctuations on there. If I go back to 2019, what we said at the end of the second quarter is that our year-to-date results were more reflective of what we thought our trend was going to be. And indeed, that was the case. So in essence, I think you -- it's hard to really call one quarter to the other. I think over a couple of quarters, we still think the core fundamentals will be there.

And again, last year does pose a couple of difficult comps for us, both in the first quarter and then in the second quarter. So I tend -- would look at it more on a year-to-date basis than I would quarter by quarter. And I think if you can kind of normalize through that noise, I think our historical trend would be our best guide going forward.

Justin Lake -- Wolfe Research -- Analyst

Got it. And then, Sam, if I could just squeeze in a second one, you made -- you talked about the benefit of getting back in network with Sierra in Vegas. And I was just hoping if you can give a little more color there in terms of given how quickly do you think the -- given the physician referral patterns have been in place for a while, how quickly do you think those can change to drive volumes to HCA? And then talk to any dilution potentially because I know you guys had some better payers, better paying volumes that have shifted over to you over time, how much those might shift out and dilute some of that benefit? Thanks.

Samuel N. Hazen -- Chief Executive Officer

Well, let me say again, Las Vegas is a very important market to HCA. We're making significant investments in a number of our facilities, and we continue to look for opportunities to invest. I think a lot of our medical staff participates in the Sierra contract. And the opportunity to sort of repatriate them, for lack of a better term, into our facilities is what we're working on. I think, generally speaking, we believe we can -- in the early part of it, 2020 period, start to repatriate some of those positions so that it's more efficient for them to take care of their full patient load inside of HCA facilities. And we're working on that as we speak. We're seeing early indications of some of that happening as we expected, but we're obviously in a very busy time in the first quarter for a lot of our facilities. So that creates some challenges, but we'll sort that out over the course of 2020 and hopefully be in the position that we anticipated. But we're excited about it, as I mentioned, when you couple the fact that United and Sierra has a very strong position in Las Vegas. Las Vegas is a growing market, and we want to be part of that growth with respect to the largest payer in that market. So we see a lot of long-term benefit here to HCA as we execute our strategy.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thanks Justin.

Justin Lake -- Wolfe Research -- Analyst

Thanks for all the color.

Mark Kimbrough -- Vice President of Investor Relations

Appreciate it.

Operator

Our next question comes from Sarah James of Piper Sandler. Please go ahead.

Sarah James -- Piper Sandler -- Analyst

Thanks. So the stronger ER trend, even if we take out the full impact, is still up about 100 basis points sequentially. How much of that is related to your investments in expanding the trauma program and share gain? And then as we think about the coronavirus playing out, can you just remind us if there was any impact on the model from SARS or MERS and whether that showed up more in ER or urgent care? Thanks.

Samuel N. Hazen -- Chief Executive Officer

Sure. Thanks, Sarah. So our emergency room visit, Bill alluded to this, were up 6.7% with a modest impact coming from the flu. Our freestanding emergency group platform did grow significantly. It was actually above trend. It grew north of 20%. It represents maybe 12% to 14% of our overall ER traffic. But when I look underneath the ER business, we continue to grow our EMS volume. From ground ambulance, it was up 7%, which is consistent with where we've been. Our trauma programs produced 20% volume growth, which is about consistent where we were for the year.

We continue to add comprehensive stroke capabilities to our portfolio of offerings that is yielding more traffic for us in our emergency room. But what's important, I think, along the lines of program development, is patient satisfaction. We have seen our operational processing improve throughout the year. We see roughly 9 million-plus emergency room visits a year. On average, we see a patient with a clinician within 11 minutes. Our time to discharge has dropped in 2019 as compared to 2018, and that's yielding both capacity, number one. But more importantly, it's yielding better patient satisfaction. And we think the combination of all of that is driving better performance, better growth and allowing us to use the investments that we put forth in this particular service category more effectively.

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

What about SARS in emergency room?

Samuel N. Hazen -- Chief Executive Officer

SARS?

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

Yeah. The impact on emergency room.

Samuel N. Hazen -- Chief Executive Officer

Jon Perlin, our Chief Medical Officer.

Jonathan B. Perlin -- President, Clinical Services Group and Chief Medical Officer

Good morning. Historically, SARS and MERS, which are members of the coronavirus family but far more toxic than the current novel coronavirus, did not affect our emergency department volumes.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you, Sarah.

Sarah James -- Piper Sandler -- Analyst

Thank you.

Operator

Our next question comes from Gary Taylor of JPMorgan. Please go ahead.

Gary Taylor -- JPMorgan -- Analyst

Hey. Good morning. Two-part question. The first was I don't think we got the same-store all-payer CMIs this quarter and last. I was wondering if we could get those. And the second part was we've heard from some hospitals about a cardinal recall of some sterile gowns and surgical kits and causing a little bit of disruption in the ORs in January. Wondering if you're seeing that. And if so, do you think you can just backfill whatever that disruption is in the next few weeks or months, such that the quarterly impact is probably immaterial?

Samuel N. Hazen -- Chief Executive Officer

All right. Let Jon take that last one, and then we'll circle back on CMI.

Jonathan B. Perlin -- President, Clinical Services Group and Chief Medical Officer

Good morning. Dr. Jon Perlin here. No. We're fortunate that there are other vendors of the surgical slides you've referenced. Entire supply chain has a pipeline on those have not disrupted our operations.

Samuel N. Hazen -- Chief Executive Officer

Yeah. Gary, on case mix, I think, as we alluded throughout a couple of comments during the call, we did see a lower trend on our case mix growth in the quarter, principally due to that growth of medical admission outpatient and the surgical admission growth.

Mark Kimbrough -- Vice President of Investor Relations

Okay. Thank you, Gary.

Operator

Our next question comes from Brian Tanquilut of Jefferies. Please go ahead.

Brian Tanquilut -- Jefferies -- Analyst

Hey. Good morning guys. Congrats on a good quarter. Sam, I guess just my question would be on total joint replacement or total knees with CMS approving reimbursement at the beginning of the year. How do you think that changes your strategy on joint replacement? And should we be expecting some volume shifting from inpatient to outpatient over the next few quarters or few years?

Samuel N. Hazen -- Chief Executive Officer

Let me start with this. Number one, in the quarter, I think total joints for HCA went up 7%. That's pretty consistent with where they were in the first three quarters of the year. Roughly 15% of our total joints are done on an outpatient basis, some in our hospitals, some in our ambulatory surgery centers. Obviously, with the new reimbursement protocols, we anticipate a few more transitioning to that setting. Our goal is to have a comprehensive orthopedic service line. So that means we're trying to align with the physicians in a way that create the environment that they want, the environment they need for their patients, the most efficient environment for the payers. And so we are always dealing with migration patterns as technology advances, and that's part of our run rate. We don't anticipate anything happening in 2020 that's going to materially change our trends as a result of one service category having a bit of migration from one setting to the other.

We talk a lot about the diversified portfolio of markets. I think it's equally important to talk about the diversified portfolio of services in HCA. Orthopedics is a very important service line, but it's one of many. It represents less than 10% of our overall revenue. And so if there's a bit of migration and pattern changes inside of that, it doesn't really offset the larger revenue picture for the Company. But we're excited about some of the technology that's advanced in orthopedics. We're excited about the research opportunities that we have with our physicians, and we're excited about further alignment of physician groups across the company as it relates to what we're trying to do with orthopedics as a whole.

We've had success similarly in cardiovascular care, where we've been able to use service line capabilities and very specialized talent to support different initiatives. We're doing the same in orthopedics, and we think it's going to yield value for the Company in the future as we continue to align with high-quality groups.

Brian Tanquilut -- Jefferies -- Analyst

All right. Great. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

Thanks Brian. Appreciate it.

Operator

Our next question comes from Peter Costa of Wells Fargo Securities. Please go ahead.

Peter Costa -- Wells Fargo Securities -- Analyst

Good morning. Nice quarter guys. Looking at your acquisitions, I think you said about 1% of your EBITDA growth is coming from the acquisitions. Is that all of the acquisitions, Asheville, Houston, Savannah and New Hampshire? Were any of those not -- no longer improving faster than your core operations?

And then if I'm doing the math right, your core operations look like they're improving sort of 6% to 8%. If we take the 7% to 9% and then back off the 1% for the acquisitions, it seems like your EBITDA growth from your core operations is growing at a faster rate than your long-term guidance. And I just want to make sure you want to stay with your same long-term guidance of 4% to 6%?

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

All right. Yes, Peter, this is Bill. Let me start. Yes, the acquisitions for 2020 will be about 1%, a little bit north. And that is for our '17, '18 and '19 acquisitions going forward on there. As we look at the numbers, we see the core hovering around that 6% and then the acquisitions being that additional 1% to drive us in that -- a little bit north of our longer-term range. And again, I think that is consistent with the discussion we had at the end of the third quarter. And it does not yet include any projection for acquisitions that have yet to be completed.

Peter Costa -- Wells Fargo Securities -- Analyst

Okay. And it seems...

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

And at this point, we don't see change in kind of that long-term guidance going forward.

Samuel N. Hazen -- Chief Executive Officer

I think it's important, this is Sam, to understand that we don't stop pushing on any opportunity. If we have an opportunity in the marketplace today, I mean, we're going to push through it as aggressively as we possibly can. So I think that's part of the operating culture of this Company is to optimize the situation, whatever it may be. And I mean we understand the challenge that's out there with our guidance, and we're working through a period of time where we've had a better growth than maybe we've indicated. But I don't think that necessarily puts us in a position yet to change the long-term guidance. As we get through 2020, if we continue to see patterns that are favorable, we will make sure we inform you all appropriately on our thinking around those patterns.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thanks Pete.

Peter Costa -- Wells Fargo Securities -- Analyst

Great. Thank you.

Operator

Our next question comes from Matthew Gillmor of Baird. Please go ahead.

Matthew Gillmor -- Baird -- Analyst

Hey, thanks. I wanted to ask about commercial volumes more specifically. Obviously, a very strong quarter, I think one of the strongest quarters we can recall. I was curious if there was any service line or geography you'd call out for the quarter? And then how are you thinking about the commercial volume trend into 2020?

Samuel N. Hazen -- Chief Executive Officer

This is Sam. I think what we said is we feel like, number one, our portfolio of markets have a lot of positive macro factors that are delivering job growth, more people in commercially insured products. And that's -- we're seeing that in demand. In the second quarter of 2019, which is the latest quarter we have for market share data, the commercial demand across HCA's markets grew by about 1.3%. We think we're picking up market share on commercial business as a result of our network investments and program strategies and physician strategies and such. And that's part of the success.

We are obviously excited, as I mentioned, about the Las Vegas scenario, and we have other efforts under way to align with payers. So the commercial side, for us, as we look forward, we anticipate demand in that area of maybe 1% to 1.25%, overall demand on the inpatient side, maybe, 1.5% to 2%, as we've mentioned in the past. And we believe, again, the programs, the investments, the outreach efforts that we have under way should yield market share gains, but we just need to continue to execute on those basic elements.

Matthew Gillmor -- Baird -- Analyst

Got it. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you. I think we will get time for one more question.

Operator

Our final question comes from Matthew Borsch of BMO Capital Markets. Please go ahead.

Matthew Borsch -- BMO Capital Markets -- Analyst

All right. I'll try to keep it brief. I just was going to ask that -- as we look ahead, the challenge there that we might face at some point, obviously, via turn in the economy. My question is, as you look back at how you've responded to past recessions, what has sort of been the takeaway in terms of your own lessons learned? Did you responded too quickly, not quickly enough? I'm sure you have a play enough on the shelf somewhere. I'm just -- I guess I'm just asking if that's something that is in your thinking right now and something that you're planning for.

Samuel N. Hazen -- Chief Executive Officer

Great. Thank you, Matt. This is Sam. Let me start and Bill can color in some things here. I think, number one, HCA has proven over time an ability as a large company to make adjustments timely. So I'm really proud of what our teams do in responding to their routine business dynamics. Obviously, if there's a macro factor where the economy starts to contract a little bit, that has implications. Historically, what we've seen is we tend to lag the economy, in general. The healthcare industry tends to lag. What's different about the economy -- the healthcare economy today versus previous recessions is the exchange and the ability for individuals who could possibly lose a job going to COBRA for a period of time and then be uninsured.

Today, there's potentially a safety net in many markets where the exchanges and the subsidies connected to that or Medicaid in expanded states, and the support from the Medicaid program provide a bit of a safety net. We haven't determined exactly how to process that yet, and that could create a different resiliency, if you will, with respect to our ability to navigate a recession. But as a general rule, our teams are constantly evaluating their trends, competitors and so forth and making adjustments, but we do have that one big factor out there. That's a new dynamic that we are evaluating and trying to understand, but we don't have any experience with it.

Matthew Borsch -- BMO Capital Markets -- Analyst

All right. Thank you. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you, Matt. Kevin?

Operator

There are no further questions at this time.

Mark Kimbrough -- Vice President of Investor Relations

Great. Thank you. I want to thank everybody for joining us today on the call and on the webcast. I'm around in the office. Feel free to give me a call or email me, if you have additional questions. Thank you so much.

Operator

[Operator Closing Remarks].

Duration: 63 minutes

Call participants:

Mark Kimbrough -- Vice President of Investor Relations

Samuel N. Hazen -- Chief Executive Officer

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

Jonathan B. Perlin -- President, Clinical Services Group and Chief Medical Officer

Pito Chickering -- Deutsche Bank -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

Kevin Fischbeck -- Bank of America -- Analyst

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

Scott Fidel -- Stephens -- Analyst

Ralph Giacobbe -- Citi -- Analyst

Whit Mayo -- UBS -- Analyst

Steve Tanal -- Goldman Sachs. -- Analyst

Andrew Mok -- Barclays -- Analyst

Josh Raskin -- Nephron Research -- Analyst

Michael Newshel -- Evercore ISI -- Analyst

Justin Lake -- Wolfe Research -- Analyst

Sarah James -- Piper Sandler -- Analyst

Gary Taylor -- JPMorgan -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

Peter Costa -- Wells Fargo Securities -- Analyst

Matthew Gillmor -- Baird -- Analyst

Matthew Borsch -- BMO Capital Markets -- Analyst

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