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HCA Healthcare (NYSE:HCA)
Q3 2020 Earnings Call
Oct 26, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Welcome to the HCA Healthcare third-quarter 2020 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 Mr. Mark Kimbrough.

Please go ahead, sir.

Mark Kimbrough -- Vice President of Investor Relations

OK, thank you, Julianne, and good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen; our CFO Bill Rutherfor; along with our CMO, Dr. Jon Perlin. Sam and Bill will provide some prepared remarks, and then we'll take questions.

Bill will start with some comments on the quarter, and then Sam will provide some broader commentary around some observations that we're making today. Before I turn the call over to Bill and Sam, let me remind everyone that should today's call contain any forward-looking statements, they are based on management's current expectations. Numerous risks and uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. More information on the forward-looking statements and these factors are listed in today's press release and our various SEC filings.

On this morning's call, we may reference measures such as adjusted EBITDA, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling to net income attributable to HCA Healthcare, Inc. is included in today's release. This morning's call is being recorded and a replay of the call will be made available later today.

With that, I'll now turn the call over to Bill.

Bill Rutherford -- Chief Financial Officer

Great. Thank you, Mark, and good morning, everyone. I'll provide some additional information on the quarter. You will note in our earnings release this morning, our reported adjusted EBITDA was slightly better than our preview.

So let me highlight some volume indicators and trends. Our same facility admissions declined 3.8% in the quarter. Within this, our Medicare admissions declined 7.6% from the prior-year period, and our managed care admissions declined 0.7% from the prior-year period. Our same facility admissions declined 3.7% in July, 5.2% in August and 2.6% in September.

Thus far, in October, we have seen continued improvement in our admission trend. The COVID increases we saw in the quarter began in July and stayed elevated through most of August. Due to this, and as we have mentioned in previous settings, we voluntarily suspended elective procedures in over 100 of our hospitals for some period of time during the July and August surges, and this impacted our surgical volume statistics. Same facility inpatient surgeries declined 6.8% in the quarter from the prior-year period.

They were down about 11% in July, down about 9% in August and were within 1% of prior-year levels in September. Same facility hospital-based outpatient surgeries declined 7.5% in the quarter from the prior-year period with about a 12% decline in both July and August, but September saw some growth over prior year. Our ambulatory surgery center volume had a similar result with a decline of 4.7% for the quarter that's occurred primarily in July and August, while September's volume was about 1% over prior year. The surgical volume results were influenced by business or surgical days in any given month, and September did have one more surgical day than the prior year.

But we wanted to share some of the results we saw throughout the quarter to highlight the impact of our voluntary suspension of elective procedures. Emergency room visits trends were consistent throughout the quarter, which declined 20.3% from the prior-year period. Our Level 1 and 3 visits declined about 29%, and our Level 4 and 5 visits declined about 14%. Admissions through the emergency room were down about 2.5%.

The higher acuity and revenue intensity results we saw in the quarter offset the impact of these volume declines. Our same facility net revenue per adjusted admission increased 14.8% in the quarter compared to the prior-year period. There were three factors that contributed to this result. One is the level of COVID-19 patients we served in the quarter.

As we previously mentioned, we served close to 40,000 inpatient COVID cases in the quarter or about 8% of our total admissions. These patients have a higher acuity than average and a longer length of stay, which resulted in a higher consumption of resources. Due to this, revenue per admission is a little bit higher than our average. Second, within our non-COVID patients, we saw a higher acuity patient as those patients presenting for service have been in higher acuity areas, such as neurology, cardiology and oncology, and the lower acute services were slower to return.

Our non-COVID case mix index increased approximately 5% over the prior year. Lastly, as we mentioned earlier, our managed care mix of inpatients grew as our Medicare volume was slightly slower to recover. Our teams continue to do an excellent job managing our cost structure during these pandemic cycles, which benefited our performance in the quarter. And our labor, supply and other operating costs as a percent of revenue all showed improvement as compared to the prior-year period.

Before I conclude, let me speak briefly to some cash flow, balance sheet and liquidity metrics. As we mentioned in our earlier calls, the company took a number of measures early in this pandemic to enhance our operational and financial flexibility. Because of these actions and other factors, we were able to announce that we will return or repay early $6 billion of CARES Act funding, including $4.4 billion of accelerated Medicare payments and $1.6 billion of Provider Relief Funds we have received. We are working with various government agencies to execute these payments.

We expect to fund the entire amount from available cash and future cash flow from operations. As of September 30, 2020, the company had approximately $6.6 billion of cash on the balance sheet and $7.7 billion of capacity under our credit facilities. Our debt-to-EBITDA leverage was 2.67 times as of September 30, 2020, after netting out available cash. Cash flow from operations was $2.7 billion for the quarter, which includes the effect of approximately $300 million of stimulus payments that will be part of our repayment.

Year-to-date cash flow from operations was $12.8 billion, which includes approximately $6.1 billion of government stimulus funds. Also as mentioned in last quarter's call, we have reduced the company's planned capital expenditures and anticipate our full-year 2020 capital spending to be about $3 billion. In short, we believe, even after considering the planned return of $6 billion of CARES Act funding, the cash flow, liquidity and balance sheet position of the company provides us the financial capability and flexibility to navigate these unprecedented times, and we will continue to look for opportunities to create long-term value for our shareholders. With that, let me turn the call over to Sam.

Sam Hazen -- Chief Executive Officer

All right. Good morning. The disciplined operating culture of HCA Healthcare and the ability to take full advantage of what our size and enterprise capabilities have to offer have produced remarkable performance for the company this year. These attributes, along with the great people we have in our organization and the steadfast commitment we have to our mission, have allowed us to deliver value consistently and at high levels for all of our stakeholders.

As demonstrated again in this quarter's results, we continue to show resiliency, both operationally and financially while also enhancing our overall position across the communities we serve. For the past couple of years, we have used the third quarter's earning call to provide some early thoughts about the upcoming year. In those years, we, obviously, had a more stable environment, economically, politically and operationally. While always difficult to predict our business with precision, today's environment, with all of its uncertainty, makes it particularly challenging.

We plan to provide you with more details in January when we complete our planning process for 2021. By that time, we will have a few more months of experience that we can hopefully use to give a better indication of our thoughts regarding certain components of our business. With that being said, we are beginning to formulate some preliminary perspectives around a few aspects of our business, and I want to share those with you this morning. With respect to volume, given the unusual volatility we have seen in 2020 with COVID-19 surges, mandatory and voluntary suspension of elective business and intermittent recovery periods, we currently plan to use 2019 volumes as a starting reference point for early 2021 planning purposes.

Since the pandemic began, we have had very few months, mainly September and October, that we believe are indicative of somewhat stable activity. Notwithstanding, we have some observations from these two months, and we are using them to inform our current thinking. First, we believe we will continue to treat COVID-19 patients throughout 2021. Over the last two quarters, COVID-19 patients have represented approximately 6% of our admissions.

Recognizing that there are many variables that could affect next year, at this point, we believe it is reasonable to estimate around 4% to 5% of our 2021 admissions could be related to the virus. This factor suggests continued high levels of acuity and our overall mix of inpatient business, which should provide some support for current inpatient revenue trends. It is difficult, however, to know if the various governmental reimbursement programs for providing care to COVID-19 patients will continue through 2021. Overall, we believe demand for inpatient admissions next year will be down from 2019 approximately 2% to 3% but again with the mix being more acute.

On the outpatient side, as compared to 2019, we anticipate emergency room visits will be down in 2021, similar to this year. But like our inpatient business, we expect it to be more acute, which should drive higher revenue per visit, offsetting some of the volume decline. For outpatient surgeries, we are expecting some recovery over current levels, but we expect volumes to be down slightly. With respect to managing operating costs, which has been a key part of our solid results this year, we have continued confidence in our team's ability to hold many of the gains they have made across the different expense categories.

In those areas where we anticipate some pressure, we believe we have future resiliency actions that can help offset some of these challenges. Collectively, these factors lead us to think that our preliminary expectations for adjusted EBITDA for 2021 could look similar to the company's original 2020 guidance but likely with a slightly wider range of results. Clearly, there are additional factors that could influence these perspectives and expectations, including, but not limited to, the economy could worsen and impact payer mix, the election result could bring adverse changes to healthcare policies and the pandemic could fluctuate or affect our results in ways that we cannot anticipate. We will evolve our thinking accordingly as we gain a better understanding of these factors.

We believe, as I stated in my comments a few weeks ago, that we have proven we can meet the challenge of this pandemic. We also believe the company will be able to navigate successfully through future challenges as well. Since the onset of this historic event, we have improved many clinical, operational, technology and organizational capabilities. We believe these improvements, coupled with the financial flexibility we possess, should provide us with a platform to drive long-term growth and shareholder value.

Once again, I want to thank our colleagues and our physicians for their incredible work during this year. We are fortunate to have such capable people in our organization. And with that, I'll turn the call over to Mark for questions. Thank you.

Mark Kimbrough -- Vice President of Investor Relations

Thank you, Sam. Thank you, Bill. Julianne, we're ready for questions now, if you'll provide information on the queue and instructions. And let's please keep your questions to one, so we may hear as many people into the queue as possible.

Thanks.

Questions & Answers:


Operator

Thank you. [Operator instructions] Your first question comes from Whit Mayo from UBS. Please go ahead. Your line is open.

Whit Mayo -- UBS -- Analyst

Thanks. Just wanted to -- I got actually a two-part question. I just want to be clear on the message for 2021. I appreciate all the details.

Just the current thinking is admissions, down 2% to 3% in 2019 versus -- I'm sorry, in 2021 versus the 2019 baseline. And also just wanted to build on the $3 billion that you're spending on capital this year, it implies kind of a step-up in the first -- in the fourth quarter up to about $1 billion. Is that a good run rate to think about next year? Just was wondering if there's any comments on 2021. Thanks.

Bill Rutherford -- Chief Financial Officer

Sam?

Sam Hazen -- Chief Executive Officer

So on the admission estimation, that's our best thinking at this particular point in time. We are believing based upon September and October and maybe even June, to some degree, that we will not see some of the lesser acute inpatient admissions that we have seen in previous years, but we will continue to see acute -- more acute-type patients who need significant care throughout 2021, just as we've seen in many months this year as we've gone through this COVID period. So that's our thinking. Obviously, as we get deeper into the fourth quarter, we are hopeful that we'll have months that are reflective enough of what we'll call stable activity that will allow us to inform that thinking even further.

And if we have adjustments to that thinking, we will clearly update you in our fourth-quarter call in January.

Mark Kimbrough -- Vice President of Investor Relations

Bill, do you want to talk to capital?

Bill Rutherford -- Chief Financial Officer

Yeah. On capital, as you know, our fourth quarter typically runs a little bit higher. I don't necessarily think the fourth quarter alone is indicative go-forward run rate. We're, obviously, in the '21 planning, and we'll finalize our capital expectations.

I think it likely will land somewhere north of where we are in 2020 but less than what our original historical spend was for this year, so we'll give you some detail as we get into next year.

Whit Mayo -- UBS -- Analyst

Thank you for that. Appreciate it.

Operator

Your next question comes from Pito Chickering from Deutsche Bank. Please go ahead. Your line is open.

Pito Chickering -- Deutsche Bank -- Analyst

Good morning, guys. Thanks for taking my questions. Back on the 2021 EBITDA guidance assumptions for a minute. You talked about sort of the volume trends a little soft than 2019 levels but at higher acuity.

Can you let us know what payer mix you're assuming in the guidance, how it differs versus what you saw in the third quarter? And if you dig into the margin side, you saw some pretty good margin leverage on opex this quarter. Can you walk us through what assumptions you're making on salaries and benefits and opex within that guidance?

Sam Hazen -- Chief Executive Officer

We don't have those details at this particular point in time to share, Pito. We need to finish our planning process as we typically do in the fourth quarter. We're trying to give you some general sense of where we see things. There's, obviously, puts and takes on every line item on our income statement as always.

And as we get further into the fourth quarter and refine our thinking on each of those categories, we'll give you some range of expectations around those metrics in our planning process in our fourth-quarter earnings release.

Operator

Your next question comes from Gary Taylor from J.P. Morgan. Please go ahead. Your line is open.

Gary Taylor -- J.P. Morgan -- Analyst

Hi. Thank you. Good morning. Two-part question as well.

One, Bill, wondered if you could tell us, 2019, what emergency room was as a percent of either total revenue or total outpatient revenue, just so we can sort of think about the headwind that you've baked in there. And then, the other part is, I guess, clearly, we've seen that the worst financial result for HCA comes from when the facilities are empty because you've deferred surgical business and there wasn't COVID. Now you're managing much better. Sort of simultaneously, the COVID ebbs and flows with your surgical business.

So the question is, as investors look forward, as COVID cases increases, do we think that's a positive or negative for EBITDA? Or do we think that still just allows you to manage your overall EBITDA trajectory in a fairly tight range?

Sam Hazen -- Chief Executive Officer

Thanks, Gary. Let me answer a couple of questions here, Gary, and then I'll hand it over to Bill. I think it's important to understand that two-thirds of our ER visit decline in the third quarter was either uninsured patients or Medicaid, and the balance of our visits were patients who were more acute, as one would expect, in that they delayed possibly or deferred care and were more sick when they came to the emergency room. So I think that's a very important element of our ER business.

We don't know exactly how that's going to play out, but that has been the pattern throughout most of the pandemic.

Mark Kimbrough -- Vice President of Investor Relations

So Bill, do you want to answer the other question?

Bill Rutherford -- Chief Financial Officer

Yes. On the COVID, as you've identified, volume will fluctuate. It's hard to isolate that population by itself, if you will, because, as we mentioned and intended to highlight in our trends, it also has an impact on somewhat elective as it fluctuates. But we think we'll have a level of COVID patients that we're going to serve throughout 2021, as Sam mentioned in his comments, and I think we're prepared to manage through those fluctuations as they present.

Operator

Your next question comes from A.J. Rice from Credit Suisse. Please go ahead. Your line is open.

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

Thanks. Hi, everybody. Just one point of clarification and then a question. One, so you're saying the guidance you gave coming into the year for EBITDA sort of is general range, maybe a little wider.

I've got various data points, but I just want to make sure I'm looking at the right number. I had $10.25 billion to $10.65 billion was your original guidance. And then, for the question, I guess, I'd just ask, you mentioned future resiliency actions that could be taken as some of the other cost reductions or other aspects of the business, the benefits you've seen in the second half year fade a little bit. Maybe expand a little bit on that and how significant are those opportunities as you look out into next year.

Bill Rutherford -- Chief Financial Officer

Yes. A.J., first, on your first one, yes, I'll confirm your numbers are correct from what our original 2020 guidance was.

Sam Hazen -- Chief Executive Officer

And then, A.J., on the question around future resiliency, Bill is leading this effort. But I want to give you some strategic approach that we are taking because we believe that there are significant opportunities inside the approach, and we are executing on some of those as we speak, and we still have capacity in these initiatives as we push forward. But we have grown the organization over the last decade, I'll call it, organically. And through that organic growth, it has yielded results that we think are very powerful for the company over the past decade and have positioned the company very well.

As a matter of fact, our market share at the end of the first quarter, right before COVID hit or even at the end of March period, is at an all-time high. We think our overall positioning in the marketplace has improved over these seven months in many circumstances. And if we move forward, we should be in an even better position. But with respect to our financial resiliency program, we have looked and challenged ourselves at a number of areas where we have redundancies and/or duplications in our operations today.

For example, we have multiple call centers. We think we have opportunity to create consolidation in those areas and create efficiencies, better outcomes for our patient and ultimately a better use of overall company resources. We have similar opportunities in our lab services. Throughout the pandemic, we've enhanced our lab capabilities, and it's enlightened us on opportunities to advance our lab services in a way that we think can yield efficiencies and better access to lab services and so forth, doing it more efficiently.

And so we have those type of examples. We're challenging how we're structured to see again if we have redundancies in our structure and whether or not there are better ways to service the field and produce outcomes on that front. And then, what I'm most excited about is our technology initiative where we have opportunities to advance technology even further in the company and ultimately deliver a better patient outcome, but at the same time, support our physicians, support our management and deliver our services more efficiently. So we think these work streams to have opportunities for the company that we can use to offset any pressures that might surface in 2021 and on into 2022.

Mark Kimbrough -- Vice President of Investor Relations

Thank you, A.J.

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

OK, thanks.

Operator

Your next question comes from Ralph Giacobbe from Citi. Please go ahead. Your line is open.

Ralph Giacobbe -- Citi -- Analyst

Thanks. Good morning. Just one another clarification here. So you said inpatient, down 2% to 3% on sort of the core 2019 then plus COVID of sort of that 4% to 5%.

So net volume, call it, up 2%. Just wanted to frame that if that's right. And then, I want to go back to the competitive -- I just want to go back to the competitive positioning. In terms of if you're able to figure out if you're drawing sort of more of that acute population in your markets any more than before.

And if so, why that would be the case? Thanks.

Bill Rutherford -- Chief Financial Officer

Yeah. Ralph, on the first one, I think the 2% to 3% is just broad guidelines that we wanted to provide you with that would include all of our patients, including the COVID within that. But obviously, we're going to finalize our planning here and share with you more thoughts as we get into our year-end call, but at 2% to 3% is our broad planning, including all patients.

Sam Hazen -- Chief Executive Officer

This is Sam. As it relates to the competitive positioning, we don't have any data on the second and third quarter yet, that would give us market share information and provide insights into whether we had more patients in our hospitals than our competitors. Intuitively, I don't think that was the case because all the systems in these markets were under community pressure to respond to COVID. What I'm reacting to is certain outpatient opportunities, certain physician opportunities, certain program development opportunities that we think have evolved that positions our organization, we believe, better than what it was at the beginning of this year.

And we will continue to, as I mentioned on the preview call, continue to move forward on those components of our development in order to enhance our overall position.

Ralph Giacobbe -- Citi -- Analyst

OK, thank you.

Mark Kimbrough -- Vice President of Investor Relations

Thank you, Ralph.

Operator

Your next question comes from Justin Lake from Wolfe Research. Please go ahead. Your line is open.

Justin Lake -- Wolfe Research -- Analyst

Thanks. Good morning. Just a few quick numbers questions here. First, on EBITDA, similar to 2020 is kind of the EBITDA number you talked about.

Should we assume revenues in that general ballpark as well in terms of what you gave us for 2020? And then, can you give us the overall payer mix numbers for 3Q? And finally, any October volume numbers you can share? I know you said volume improved there in terms of volume, surgeries, ER visits in October. Thanks.

Bill Rutherford -- Chief Financial Officer

Yes, Justin, this is Bill. On the revenue side, it's a little early. We know the composition of the revenue is changing as we've seen over these past couple of quarters, so I don't want to give parameters on the revenue yet till we complete our planning. On payer mix for the quarter, very quickly, our Medicare was roughly -- our inpatient payer mix was roughly 45%; our managed care, 24%; and then self-pay was around 8% for the quarter.

And then, what was the third one?

Justin Lake -- Wolfe Research -- Analyst

The October volume numbers, anything early on surgery volumes, ER visits, inpatient, outpatient.

Bill Rutherford -- Chief Financial Officer

I'll just say a sequential improvement in our admissions. As you saw, we finished the September at 2.6%. October is probably 1.5% down, a little better from where we ended September. But obviously, it's still early in the cycle.

Justin Lake -- Wolfe Research -- Analyst

Thanks.

Operator

Your next question comes from Josh Raskin from Nephron Research. Please go ahead. Your line is open.

Josh Raskin -- Nephron Research -- Analyst

Thanks. Good morning. So just again, I sort of hate to harp on this. But the 2021 guidance of, let's call it, $10.45 billion at the midpoint, that coming despite pretty significant improvement on the margin side, margins up 500 basis points, including CARES Act in the quarter.

And so I'm curious, is there some offset? It doesn't sound like revenues are going to be materially different than what you guys were assuming. So is there some offset, some costs that are coming back? And maybe specifically in that, supply expense has been down more than 50 basis points despite this higher acuity. So is there some assumption that some of that comes back as well?

Bill Rutherford -- Chief Financial Officer -- Analyst

OK, thanks, Josh. Yeah, Josh, I think there's a couple of points. And there's, obviously, a lot of puts and takes, whether forms our thinking into next year, and we haven't finalized it. One is we know we do have some other government funding relative to COVID patients this year, whether it be the Medicare DRG add-on or the HRSA payments to recognize resources consumed by uninsured COVID.

And I don't think we see those continuing too long into 2021. And again, I think the purpose of our guidance was to give you our general thinking versus that we've gone through a lot of calcs on each one of those inputs. And so as we complete that, we'll go forward and give you our input in that. I think, again, I'd reiterate, we're confident in the team's ability to hold many of our costs that we've seen.

And as Sam mentioned in his comments, to the extent that we have any new costs that may enter the system, we've got resiliency plans that I think we can execute to help offset those. And I think given the profile we're seeing, we feel generally reasonably comfortable with our current margin performance.

Mark Kimbrough -- Vice President of Investor Relations

Thank you, Josh.

Josh Raskin -- Nephron Research -- Analyst

Thanks.

Operator

Your next question comes from Frank Morgan from RBC Capital Markets. Please go ahead. Your line is open.

Frank Morgan -- RBC Capital Markets -- Analyst

Good morning. Sam, I think you said you didn't have any market share information yet around the different regions of the country. But could you just give us some high-level perspective about the financial performance across HCA's enterprise in different areas of the country? Thanks.

Sam Hazen -- Chief Executive Officer

Thanks, Frank. I don't have for the market share, Frank, for the second and third quarter. We're, obviously, just processing the first quarter. I think we had one of the strongest portfolio performance in years across HCA's 185 hospitals.

76% of our facilities had year-over-year EBITDA growth, so we had very consistent performance across all of our divisions, save one. We have a little bit of a challenge in the far west division, primarily because of our California hospitals and just the slow uptake in the activity in those communities. But our strength across the portfolio, it's very good, consistent, and I think it, again, reflects the power of our portfolio, the diversification of our portfolio, including even the service mix that we have inside of it. So a very strong portfolio performance for the company.

Mark Kimbrough -- Vice President of Investor Relations

Thanks, Frank.

Operator

Your next question comes from Brian Tanquilut from Jefferies. Please go ahead. Your line open.

Brian Tanquilut -- Jefferies -- Analyst

Hey, good morning, guys. Congrats. Just a two-part question for me. So as I think about your guidance again, is that basically assuming that the economy stays where it is or you're not expecting any further degradation in unemployment? And then, I guess, just for Bill, with $6.6 billion of cash on the balance sheet, how should you be thinking about buybacks and the dividend resumption at some point? Thanks.

Bill Rutherford -- Chief Financial Officer

Yeah, let me start with that one. So again, I think, as we mentioned in our comments, the balance sheet and our cash flow gives us a lot of flexibility and, I think, capability of managing through different cycles. We've made -- haven't made any decisions on capital allocation at this point or resumption of the share repurchase or dividend. We will complete our planning in '21 and announce kind of what our plans are.

As we've said before, I think we have a pretty long history of having a balanced and disciplined approach to deploying our capital. And as we get some understanding of the market environment, we are looking for when is the right time to resume some of that, but we haven't made any decisions at this point.

Mark Kimbrough -- Vice President of Investor Relations

About the economy.

Sam Hazen -- Chief Executive Officer

I'll take that. This is Sam. I think, as I mentioned in my prepared comments, we're making these judgments off of our current read of economy, and we're not factoring in any kind of significant worsening of the economy. So obviously, if the economy were to worsen, it could have an impact on our expected results as we've indicated here.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you, Brian.

Operator

Your next question comes from Kevin Fischbeck from Bank of America Securities. Please go ahead. Your line is open.

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

Great. Thanks. Just maybe I want to follow up on that one, and so the first part being, as far as the guidance, are you assuming that COVID starts off at about these levels at the beginning of the year and then kind of gradually goes away as the core business improves throughout the year? Or is this kind of a steady state kind of assumption? And just to follow up on that last question about capital deployment. If next year's EBITDA is going to be more or less the same as this year's EBITDA was supposed to be, what are the markers you're looking for to get back to a normal capital deployment? I think with normal EBITDA, strong balance sheet, you'd expect a little on that? What are you looking for?

Sam Hazen -- Chief Executive Officer

This is Sam. I'll let Bill take the second question. With respect to the COVID assumption, our experience with COVID throughout the pandemic has been that it's choppy. There are going to be situations where COVID is up.

There's going to be situations where COVID is down. We're trying to give you some estimation of the average that we're expecting. We are, at this particular point in time, bouncing off what I call the floor, and were not nearly as intense with the volume of patients today as we did in late July and early August. But we are seeing a little bit of a rise, primarily in one market.

That's El Paso. And that's created a significant challenge in that community, but we only have two hospitals there. And at this particular point in time, we are able to support them appropriately. And with the actions that the community has just recently taken, as well as what the governor has done to support that community, we believe that we should be in a reasonable situation there.

So we're not anticipating month-by-month estimations around COVID. We're just going to respond to it with the capabilities we've developed, and we're estimating what we believe to be an overall metric that is likely to occur in 2021.

Bill Rutherford -- Chief Financial Officer

And Kevin, this is Bill on the capital. I don't think there's any one unique trigger that we're looking for. I mean, we're, obviously, still going through these cycles. We want a couple more stable months to kind of firm up our assessments that we've talked about.

And part of our normal routine as we go through any year is to make those assessments, judge the environment we are in and make the right capital decisions. That's what we're going to plan to do, and we'll share with you our final thinking in our year-end call.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you, Kevin.

Operator

Your next question comes from Matthew Gillmor from Baird. Please go ahead. Your line is open.

Mark Kimbrough -- Vice President of Investor Relations

Matt?

Matt Gillmor -- Baird -- Analyst

I'm here. Hey, I'm here. Sorry about that. Hey, I wanted to follow up on the resiliency topic and the technology capability Sam mentioned.

I think Sam said technology was potentially the most exciting area. I think it's efficiency and just hoping you could expand a little bit in terms of what that means, and if you had an example or two to conceptualize it for us.

Sam Hazen -- Chief Executive Officer

Well, I'll give you a very specific example that we've been able to use on two fronts this year. We have a system called NATE. NATE is a technology solution that gives us individual insight into every patient in our hospital right now. And that insight provides clinical metrics.

It provides bed location. It provides certain metrics around what requirements the patient has with respect to, let's just say, ventilator management. And we've been able to use those insights from this particular system to improve our ventilation management of COVID patients in a way that has reduced their length of stay on it and provided a much more efficacious outcome. So that's just one example that reduces ICU days.

It creates a lower length of stay for the patient and ultimately a much better outcome. So we see opportunities to advance this system. The second aspect of NATE that's proved to be very productive for us is capacity management, allowing us to position patients most efficiently within the facilities or even across our networks at time. So this insight into our capacity management has allowed us to be, I think, more efficient at managing our beds and the turnovers, if you will, around those beds, providing better discharge planning and timing and then better utilization of existing assets.

So those are just two examples. We see opportunities beyond that as we've had experiences with clinical initiatives like our sepsis initiative in the past. But going forward, we see more on that particular platform.

Matt Gillmor -- Baird -- Analyst

Thanks a lot.

Mark Kimbrough -- Vice President of Investor Relations

Thank you, Matt.

Operator

Your next question comes from Lance Wilkes from Bernstein. Please go ahead. Your line is open.

Lance Wilkes -- Sanford C. Bernstein -- Analyst

Yeah, thanks for taking the call. Quick question on capacity, and I'm just interested in getting some color on what you guys are doing as far as being able to expand capacity in order to kind of recapture those avoided or deferred cases. And then, what's the net impact as you think about the COVID protocols that you are having to deal with?

Sam Hazen -- Chief Executive Officer

Thanks, Lance. On capacity, I mean, we have multiple capacity metrics that we use to determine needs for capital. We have triggers around how many ER visits per bed, how many surgeries per surgical suite, what's the occupancy in our ICUs, what's the occupancy triggers inside of our med-surg beds in order to determine capital needs. Currently, the company is running about 70% utilization of its inpatient beds.

Where we have capacity today which won't require the same level of capital, at least in the intermediate run, is in the emergency room. With emergency room volumes being down some, we find ourselves in a situation where at a company level from one facility to the other, we may have issues. But at a company level, we're running about 60% to 65% utilization of our ER beds currently. That's down from about 85% in 2019.

So we have the situation where our ER beds are flexible now, allowing us to accommodate more volume if, in fact, it presents itself. So I don't see capacity as being a barrier to growth for us. We do have capital still in the pipeline that will ultimately add capacity to institutions that we believe need it, and those will be playing out over the rest of this year and on into 2021. And I think the company is in a solid capacity position today, generally speaking, maybe in the best capacity position we've been in a number of years given the circumstances.

And so from that standpoint, there's not any significant pressures. I don't remember what the last question was. Bill, do you --

Bill Rutherford -- Chief Financial Officer

Yeah. It was on the net effect of the COVID and the loss of those business. Let me say it's hard to really quantify the net. That's why we -- I tried to give you some of the trends we saw in the surgical volume.

We do know and as we've talked about before, we've recaptured some of that, but we don't think we recaptured all of that. And so the net effect is really hard to quantify, but we'll continue to monitor our volume trends as they progress through the balance of the year.

Mark Kimbrough -- Vice President of Investor Relations

Lance, thank you.

Lance Wilkes -- Sanford C. Bernstein -- Analyst

Thanks.

Operator

Your next question comes from Steve Valiquette from Barclays. Please go ahead. Your line is open.

Andrew Mok -- Barclays -- Analyst

Hi, this is Andrew Mok on for Steve. Just wanted to follow up on the slow ER volume recovery and expectations for a similar decline in 2021. Do you suspect that some of the ER volumes, especially on the lower acuity visits, have left the hospital system permanently? How does that scenario impact your strategy and resource allocation from here? Thanks.

Mark Kimbrough -- Vice President of Investor Relations

OK, thank you.

Sam Hazen -- Chief Executive Officer

This is Sam again. We don't know, to be honest with you. We're not anticipating a further decline in 2021. We're anticipating that what the '20 decline as compared to '19 volume, that's the metric that we're reflecting here.

As I just mentioned, we're running about 65% utilization of our emergency room beds across the company, which gives us ample capacity to absorb growth, if growth resurfaces in this particular category of our business. If it doesn't, as I mentioned, we are anticipating that the ER patients that we do see is one that is, in fact, more acute, and so the revenue per visit will actually be supported by the acuity of those patients. Whether or not they've been lost forever, I don't know. Our business model is to have capabilities outside of the ER as we've been investing in both urgent care platforms over the years, telemedicine platform significantly during COVID and then our primary care platform as well.

So we have multiple platforms to stay connected to the patient. That's the important objective for us is ultimately to stay connected with them. And if they feel that it's better for them to use telemedicine, better to go the urgent care, it's better to go to their primary care physician, obviously, we're fine with that. That's a great answer for them.

It's a great answer for the payer. And then, ultimately, they stay inside the HCA system. So we see this, net-net, it's still being a positive scenario for us and one that we can manage around.

Mark Kimbrough -- Vice President of Investor Relations

All right. Thank you. Julianne, we've got time for two more questions, and we're going to call it.

Operator

Great. Your next question will come from Scott Fidel from Stephens. Please go ahead. Your line is open.

Scott Fidel -- Stephens Inc. -- Analyst

Hi. Thanks. Just interested in as you think about the mix of patients for next year and some of the assumptions that you have around COVID, just how you're thinking about the timing and efficacy of the vaccines going into the market and how that influences your thoughts on some of this initial planning that you're doing for 2021.

Sam Hazen -- Chief Executive Officer

OK. I'm going to ask Jon Perlin, our chief medical officer, to answer that question. Thank you.

Jon Perlin -- Chief Medical Officer -- Analyst

Thanks, Sam. I think it's really anyone's guess as to when the vaccines are probably available. Certainly, they're promising but to get them broadly distributed requires a great deal of logistics. There's also broad skepticism.

So I think we have to think about next year's COVID as sort of continuation of what we see now. Clearly, diseases that are spread by respiratory transmission increase in the winter, and I think we'll anticipate some increase and drop after that. There are a number of vaccines that follow the initial two. I think there's some speculation, they may be even better.

And so I think next year is really the year where we'll see the introduction of vaccines -- the larger scale uptake of the vaccines and potentially greater effectiveness of the vaccines.

Mark Kimbrough -- Vice President of Investor Relations

Great. Thank you, Jon. Operator last call, please.

Operator

Certainly. Your last question comes from John Ransom from Raymond James. Please go ahead. Your line is open.

John Ransom -- Raymond James -- Analyst

Hey, good morning. Just to drill down into COVID a bit. If we look at the quarter, do you have a sense of kind of payer mix within COVID? And then, for your commercial COVID, are they mostly paid on a per VM basis? Or is this set up like the DRG with the 20% add-on and maybe a little extra for the commercial upgrade?

Mark Kimbrough -- Vice President of Investor Relations

Hey, John, thanks.

Bill Rutherford -- Chief Financial Officer

Yes. John, this is Bill. Our COVID mix is probably 50% running Medicare, 10% to 11% on Medicaid; and probably close to 20% on just procure manage. And then, we have a few other categories that's impacting that.

So it's fairly comparable to our overall with some changes that fluctuates from market by market. So that's the mix.

John Ransom -- Raymond James -- Analyst

So on your commercial, how do you pay per --

Bill Rutherford -- Chief Financial Officer

It follows the contractual terms. So whatever the contractual terms with that payer would be is what it would follow, so it's a mix of payment methodologies.

Mark Kimbrough -- Vice President of Investor Relations

John, Thank you so much.

John Ransom -- Raymond James -- Analyst

What can you say on the commercial real quick?

Sam Hazen -- Chief Executive Officer

There's no commercial add-on for, let's say, like the Medicare program, if that was his final.

Mark Kimbrough -- Vice President of Investor Relations

Yes, I think that was.

Sam Hazen -- Chief Executive Officer

So there is no -- it just follows the terms, as Bill indicated.

Mark Kimbrough -- Vice President of Investor Relations

Yes. All right, Julianne, I think we can wrap it up.

Operator

[Operator signoff]

Duration: 46 minutes

Call participants:

Mark Kimbrough -- Vice President of Investor Relations

Bill Rutherford -- Chief Financial Officer

Sam Hazen -- Chief Executive Officer

Whit Mayo -- UBS -- Analyst

Pito Chickering -- Deutsche Bank -- Analyst

Gary Taylor -- J.P. Morgan -- Analyst

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

Ralph Giacobbe -- Citi -- Analyst

Justin Lake -- Wolfe Research -- Analyst

Josh Raskin -- Nephron Research -- Analyst

Frank Morgan -- RBC Capital Markets -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

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

Matt Gillmor -- Baird -- Analyst

Lance Wilkes -- Sanford C. Bernstein -- Analyst

Andrew Mok -- Barclays -- Analyst

Scott Fidel -- Stephens Inc. -- Analyst

Jon Perlin -- Chief Medical Officer -- Analyst

John Ransom -- Raymond James -- Analyst

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