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Becker’s Healthcare Podcast
Health System Earnings, Divestitures, and Strategic Shifts to Watch with Alan Condon
00:10:32
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- [00:02]
A
Every year, Becker's annual meeting brings healthcare leaders together to unpack the most pressing issues facing the industry. And every year those conversations shift in profound and unexpected ways. This April, more than 3,500 healthcare executives will return to Chicago for Becker's 16th annual meeting. 795 elite speakers will offer new lessons, new case studies and predictions about what comes next. Join us April 13th through the 16th. For the agenda and event details, visit BeckersHospitalReview.com and click on the Events tab in the upper right.
- [00:38]
B
This is Scott Becker with the Becker's Healthcare Podcast. We're thrilled today to be joined by Ellen Condon. Ellen is an editor in chief, the editor in chief at Becker's Healthcare Brilliant leader, brilliant thinker about healthcare and healthcare system issues. Ellen, I'm going to tee it up and ask you to take it away and tell us what are a few of the stories that you're watching currently in healthcare. Again, Scott Becker with you with Becker's Healthcare. Alan Condon, Editor in Chief, what are a couple of stories you're watching closely currently?
- [01:11]
C
Yeah, pleasure to be to be back on after a couple of weeks away, Scott, but I think coming to the end of January now of course we're starting to see some of the health system Q4 full year 2025 financial reports come true and also on the payer side as so just today HCA really did the results or earnings call a little bit later on this morning. So just kind of to give readers audience a quick update on where HCA stands of today. Fantastic system, huge for profit system and some really stellar financial results as it relates to 2025. So HCA overall reported a net income for 2025 of around about $6.8 billion. To give you some context, that's increase year over year from the net margin net income they reported in the previous year. And just to hone in on the revenue growth, HA grew in revenue by about $5 billion in revenue this year. Now it's about a $75 billion company, $75 billion health system revenue outpaced expenses by quite a bit. Revenue grew by $5 billion, expenses grew by about $3.7 billion. So really a substantial performance on the operating side, financial side. And just to give some context as to what we're expecting, what HCA is expecting for 2026 issued some guidance. Granted it's only the start of the year now, but HCA similarly expects to grow by about another $5 billion in revenue for 2026. Now a lot still up in the air A lot can change, but still forecasting some impressive revenue growth and figures, but for this year as well. And it also has earmarked about $5 billion for the entire company for acquisitions, for capital expenditures, new hospital bills, new ASCs, outpatient growth and whatnot. So certainly no signs of slowing down in terms of HCA growth. Fantastic leadership and really, really impressive performance across the board from that for profit health system.
- [03:20]
B
Scott, thank you. And they keep on sort of chugging along and it seems like some of the larger not for profit systems are doing pretty well as well. But HCA at least profitability wise seems to outpace everybody year after year. And they're also one of the few large, large health systems, for profit health systems that have stuck to really being a hospital system or at least as much as anything a hospital system, whereas Tennant and others have moved to heavily outpatient as well as being a health system. I mean, it's fascinating what HCA has accomplished and how they continue to do so.
- [03:59]
C
Yeah, absolutely. I think it is really interesting, Scott, to your point, as you look at where HCA stands, where Tenet stands, some diverging strategies over the last couple of years. Hc, no doubt it's quite a substantial outpatient footprint, but nowhere near has made that investment the likes of Tenet is doing the likes that we're even see ascension somewhat doing on the for profit side with their potential acquisition of Amsurg, which is likely to close maybe this quarter as well. But I think HCA very much still in the hospital game. I believe about 100 ninth many hospitals in the US compared to about 2,500ambulatory care sites and whatnot. But kind of ties nicely into the next story that I wanted to touch on Scott, when staying on the line of for profit health systems here. Community Health Systems with our for profit system hasn't Quite reported its fourth quarter or full year 2025 results yet. We believe they're going to come either next week. So pay close attention to there. But had the pleasure of speaking with my colleague Kelly Gooch. We interviewed the CFO and the CEO of Community Health Systems, that is Kevin Hammonds, the former CFO and their new CFO Jason Johnson. So just to really dive into the strategy behind CHS ongoing turnaround with their new CEO, new CFO leader. So really ongoing divestiture program here. CHS is selling this year five hospitals for a combined about a billion dollars. So those five hospitals are in Alabama, they're in Tennessee and notably three of the hospitals it's selling are in Pennsylvania and Those three hospitals that's been trying to get over the line for quite some time, had one deal with a nonprofit health system that fell through, collapsed in November 2024. Now trying to sell that same three hospital health system in Pennsylvania Commonwealth help. And that would signify its exit from the state of Pennsylvania. So looking to sell hospitals in Alabama, Tennessee and Pennsylvania as part of its ongoing divestiture program, those five hospital sales in those three different markets again would be a combined $1 billion in capital for CHS. So I think the last quick kind of note here, just in terms of speaking with Kevin and Jason at chs, essentially what they told us is that this divestiture plan really for exosystems broader strategy of redefining its portfolio around those core, core markets and hospitals that it wants to focus on and continuing to reduce its debt. So since 2019, I believe CHS has paid down more than $3 billion in debt. And again more of these hospital sales will acquire more liquidity, more capital again to pay down some of its debts, really hone in on some of its core markets. But different end of the spectrum when we see what's going on at chs, ongoing revamp of its operating model, paying down some of its debt, ongoing turnaround and we look at the likes of your HCAs and your tenants, really, really strong returns continue to grow and strong margins there.
- [07:09]
B
No, it is remarkable what CH's HSS, God community health Systems has done over the last decade to get themselves back into the type of fiscal shape they need to be in. They'd at one point overextended themselves in the effort to chase HCA and be the largest owner of hospitals in the country. That was under a couple CEOs go and in doing so they'd highly leverage themselves to. Then they've spent the last five to 10 years trying to trim themselves back down and put themselves in great fiscal shape and they've done a great job of it. But it is fascinating to see the divergencies between hca, Community Health Systems and Tenant Healthcare and where they've each gone in terms of being some of the major for profit health system chains in the country.
- [07:55]
C
Yeah, absolutely. And I think last, last one. On that note, I think since we're on the topic of mergers and acquisitions, hospital sales investors, I think we should call out Providence, Common Spirit, two big two of the largest nonprofits, Catholic Face Based Systems also going through looking to divest and sell some hospitals in certain markets as they look to really kind of focus on some of their Core markets really take a harder look at where they're operating and also look to get a bit of an injection of capital as well to focus on some of their ongoing turnaround efforts. Both systems do expect a big, big financial hit this year in terms of some of the Medicaid federal cuts coming down the pipeline late 2026, 2027, everything along with the ACA subsidies as well up in the air course accounting for that. So really kind of trying to get ahead of the game in terms of offloading some hospitals that make sense in certain markets. And Common Spirit is in talks to sell seven hospitals at the moment. Four hospitals will be sold in North Dakota to local health system Altru Health System. And then it also is aiming to sell three hospitals in Ohio. It's to UPMC Health. So essentially that would really UPMC really make it expand deeper and deeper into Ohio with that tree. Hospital sale is expected to close, I believe in the second quarter of this year. It's not just the for profit systems that are also making some of these divestitures. We're also seeing likely the same we saw Ascension, of course on the nonprofit side, really revamped its hospital portfolio, consolidate hospitals, a lot of divestitures in key markets. Common Spirit and Providence now doing some of the same as we think about some of the financial challenges that are coming down the pipeline late this year and into next.
- [09:42]
B
Scott Ellen, literally just fascinating. Thank you so much for taking the time with us today on the Beckers Healthcare podcast. The amount of efforts at these major, major not for profits. I mean Ascension is doing a fascinating thing to get into the ASC business with acquiring AMP Surge. Common Spirit, like Community Health Systems trying to trim the portfolio of hospitals a little bit. But it's fascinating to see the different strategic moves that some of these large systems are making to stay competitive and stay financially thriving. Just fascinating. Ellen, thank you so much for joining us as always on the Backwards Healthcare podcast. You're both a remarkable journalist and more importantly, remarkable leader. Thank you so much for joining us.
- [10:27]
C
Always a pleasure. Thank you so much, Scott. Cheers.