HCA Healthcare, Tenet Healthcare, Universal Health Services and Community Health Systems all posted financial results that beat Wall Street expectations for the first quarter of 2025.
Still, the health systems are maintaining their full-year outlooks as they exit the first quarter, despite most systems growing their revenue.
Outlooks, which were set in the winter, were already more conservative to begin with, but a quickly evolving political landscape, coupled with challenges to normally reliable revenue streams, led providers to exercise caution.
“We’re early in the year,” Tenet CEO Saum Sutaria said on a call with investors. “And while we are very pleased with both our fundamental outperformance and the continued demand for our services… we’ll address our full-year expectations in the future.”
HCA reaffirmed its revenue guidance between $72.8 billion and $75.8 billion; UHS between $17 billion and $17.4 billion; Tenet between $20.6 billion and $21 billion; and CHS expects to take in between $12.2 billion and $12.6 billion.
Analysts from JP Morgan said it was prudent for the health systems to reaffirm their guidance, given broader uncertainties.
“We attribute the decision to maintain most facets of 2025 guidance to broader uncertainty, which fits the pattern so far from other names as we await greater clarity on policy development (particularly for Medicaid supplemental payment program decisions),” said Benjamin Rossi of JP Morgan in a research note following Tenet’s earnings report.
Unknowns in Washington vex providers
Since President Donald Trump took office in January, providers have been contending with uncertainty about how the president’s agenda, including possible cuts to Medicaid and increased tariffs, might impact their bottom lines.
Despite lobbying the Trump administration on public payer programs, including Medicaid, and tariff carveouts, executives said they’re still in the dark about the administration’s priorities.
For Medicaid, Republicans have floated various cuts to the program, including implementing work requirements. HCA CEO Sam Hazen told investors he had a “general sense” of the administration’s priorities on Medicaid, but lacked specific details.
“It is unclear how these efforts might be carried out and what effects they may have on our business,” Hazen said.
Investors have reacted negatively to the uncertainty. HCA’s shares dropped approximately 4% following the company’s earnings results in late April.
“Despite what we viewed as a good Q1, HCA shares reacted negatively post-earnings call as [management] noted the lack of certainty in the healthcare space given the current political environment,” said Jefferies’ analyst Brian Tanquilut in a research note. “We share management’s view that quantifying risks associated with various legislative scenarios is a challenging endeavor given the lack of visibility into the direction Congress would take.”
On earnings calls, investors also scrutinized the health systems’ plans for tariffs. Trump has flip-flopped on trade policy since April, reconsidering which countries to charge tariffs, how high to set rates, when policies might go into effect and what goods could be subject to import taxes.
However, he has set a 145% import tax on China, where health systems frequently source devices and supplies, and has threatened pharmaceutical tariffs.
Each health system said partnerships with group purchasing organizations should insulate them from immediate impacts of a possible trade war. HCA, which purchases through HealthTrust, estimates about 70% of the health system’s supply expense for 2025 is attached to fixed pricing through the group purchaser.
About 75% of the health system’s supply expense comes from domestic products, Canada or Mexico, or from products currently exempt from tariffs, according to CFO Mike Marks. Executives at the other health systems said their figures were similar to HCA’s.
Still, the company said it wasn’t comfortable speculating about the financial impact of tariffs.
“I know you would like us to size the potential impacts of health policy risks and now tariff risks,” said HCA’s Hazen. “But we are not comfortable with providing estimates at this time. We just do not have enough insight into what might happen.”
Still, analysts remain concerned about the possible impact of tariffs and Medicaid cuts, and said it was wise to keep 2025 guidance in place. Threats from tariffs could emerge over the long term, when fixed pricing contracts expire, according to JP Morgan analysts.
Disruptions to revenue streams
Providers also experienced strains on normally reliable revenue streams, with all providers, save Tenet, reporting declines in different volume metrics.
Troubles were most pronounced at UHS, where the King of Prussia, Pennsylvania-based operator saw discrepancies between volumes in its acute care and behavioral health lines.
Typically, behavioral health services are a core growth area for the provider. However, during the first quarter, behavioral health adjusted admissions shrunk by 1.6% year over year, and acute care admissions grew 2.4%. The performance put UHS well off its target to grow behavioral health patient day revenue by 2.5% to 3% by the end of the year.
CEO Marc Miller attributed some of the decline to atypical weather, noting winter storms and associated school closures impacted admissions at youth outpatient behavioral health programs. Miller said volumes had begun to improve toward the end of the quarter, but declined to specify when UHS would be on track to meet its patient day revenue guidance.
HCA Healthcare, which has invested heavily in ambulatory surgery centers through acquisitions and new developments, said outpatient surgeries dipped 2.1% year over year during the first quarter.
Executives sought to write off the decline as a leap year effect, noting that HCA had an extra day in 2024 to schedule surgeries. However, TD Cowen analysts noted HCA’s outpatient surgeries have trended down for the last five quarters.
CHS also saw a dip in surgeries, with same-store surgeries declining by 3% year over year. CEO Tim Hingtgen attributed the change to an unusually strong flu season.
“It did have some squeeze effect on some of our lower acuity surgery volumes in the quarter, largely on the outpatient side due to either provider illness, staff illness or perhaps patient illness,” Hingtgen told investors during the company’s earnings call.
Declines in patient volumes — no matter how slim — are relevant as health systems contend with recession worries, which could further pressure volume growth. Demand for services can fall further during an economic downturn if patients postpone elective procedures to save money or lose health insurance due to layoffs, wrote Jefferies’ Tanquilut.
The analyst said health systems are comparatively more insulated from risk than they were during the last non-COVID-19 recession, in part due to rising enrollment in Medicare and Medicaid versus employer-sponsored plans. However, he said health systems are not “completely immune” from economic pressures.
In addition, health systems reported delays in approvals for new Medicaid state supplemental programs, which have historically provided a revenue boost for providers
The supplemental payment programs help cover the shortfall between low Medicaid reimbursement rates and the actual cost of care for providers. While providers have argued the payments are insufficient to cover the cost of treating Medicaid patients, payment rates did increase under the Biden administration, which helped stem losses.
In a research note published last month, JP Morgan noted the Trump administration has only approved three Medicaid supplemental payment programs worth approximately $100 million since January. In comparison, the Biden administration approved 37 programs worth $33.7 billion between Jan. 20, 2024, and April 21, 2024.
CHS’ Hingtgen said it appeared “things were moving” at the CMS regarding supplemental payments. However, critical funds for programs in New Mexico, Tennessee and Washington, D.C. remain outstanding.
“But we’re just still in a wait and see, and as we sit here today, we know of no reason that they will not be approved going forward,” Hingtgen said.
In the case of CHS, time is of the essence. The lack of funds is hampering its already poor credit rating from S&P Global Ratings, according to a credit report released last week.
Other health systems are considering how they can become less reliant on the payments entirely.
“We certainly are not counting on growth in those programs, and it’s certainly possible that we will see some deceleration in those supplemental payments or under Medicaid reimbursement,” said UHS’ Miller. “And I think what that really means ultimately, is… we’re going to [have to] grow the behavioral business in the intermediate and long term… and that’s why it’s important that we get to that 2.5% to 3% patient day target.”
