HCA Healthcare, Inc. (HCA) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the HCA Healthcare Second Quarter 2026 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. Frank Morgan. Please go ahead, sir.

Good morning, and welcome to everyone on today's call. With me this morning is our CEO, Sam Hazen; and CFO, Mike Marks. Sam and Mike will provide some prepared remarks, and then we'll take questions. Before I turn the call over to 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, uncertainties and other factors may cause actual results to differ materially from those that might 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, which is a non-GAAP financial measure. A table providing supplemental information on adjusted EBITDA and reconciling 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 available later today. With that, I'll now turn the call over to Sam.

Good morning. We believe that access to health care and affordability for Americans begins and ends with health insurance coverage. Most people need support to secure it, whether that is through an employer, the federal government or some other means. Throughout 2025, our teams advocated for extending, in some form, the enhanced premium tax credits for those individuals who needed it. Unfortunately, the enhanced premium tax credits expired at the end of the year and the effects, as expected, were that many people became uninsured and still needed emergency care from hospitals. As we look at the first half of the year, our expectations proved accurate, although the impact was greater than our estimates. Our colleagues, however, have continued to deliver high-quality compassionate care to an increased number of patients during the first half of the year while managing well through the various headwinds we faced. On behalf of our Board and our senior team, I want to thank our colleagues for their great work. When I look at the company's midyear results, I'll focus on 3 factors. But before I get to those, I do want to indicate that the company had solid diluted earnings per share growth of 11% in the quarter and 11% year-to-date. First, we experienced an unfavorable payer mix shift, which created most of the financial pressure for the company. Overall, adjusted admissions for patients who were formerly covered by the health insurance exchanges declined by 15%. We expected some of these patients to shift to other forms of coverage, but this did not happen. Instead, these patients migrated almost one for one to uninsured. We had 3 of our 15 domestic divisions that had outsized effects for this payer mix shift, and they accounted for around 50% of the company's overall impact. In the quarter, we had an incremental net benefit from Medicaid supplemental payment programs primarily related to Florida. These programs, which are fundamental to our providing services to Medicaid patients play an important role in supporting access to care. This support has been especially important for hospitals as they are now providing more uncompensated care to uninsured patients. Our updated guidance for the year incorporates what we have learned through the first 6 months with respect to patients who have lost their coverage on the exchanges. We believe most of the attrition this year is attributable to the expiration of the enhanced premium tax credits. The second factor was the strength in demand. Despite the payer mix shift, we were pleased with our volume growth. Insured volumes, excluding exchanges across many of our services were solid with improving trends over the course of the first 6 months. Emergency room visits, cardiac procedures and rehab volumes helped drive these improvements. With respect to surgery volumes, the primary explanation for the decline was from reduced demand in elective surgeries across both inpatient and outpatient settings. We believe there are several factors contributing to this dynamic, including declines from patients who were previously covered through the exchanges. Emergency inpatient surgery volumes, which account for approximately 2/3 of our total inpatient cases, were up as compared to last year. As stated, we continue to be encouraged by the overall backdrop in demand. We believe our longer-term assumptions for demand growth of 2% to 3% are supported by market factors and population growth rates that we see in the communities we serve. To meet this expected demand, we have continued to add capacity and facilities to our networks this year. Additionally, we have approved more than $7 billion in capital expenditures that should come online in the next 3 years. We believe these investments will increase offerings and quality for our patients, improve our competitive positioning and help us grow. HCA Healthcare has produced strong returns on invested capital over the years, and we believe there will be opportunities to do more in the future. We expect to use our cash flow and balance sheet strength to invest further in our business while also returning capital to our shareholders through our capital allocation plan. The last factor I want to focus on is the advancement of our financial resiliency program. We continue to see improvement in cost metrics as we move through the first 2 quarters. For years, HCA Healthcare has found ways to create economies of scale, increased operational efficiency and enhance margins. We believe the resiliency program we are advancing now has more capacity through digital transformation, global capabilities and enhanced workforce development programs. We believe our program will continue to add value this year and on into subsequent years. I'll close with this. HCA Healthcare has a strong track record of effectively responding to challenges regardless of the event. From these experiences, we have built a culture of discipline. This culture has helped us stay true to our core mission to care and improve human life. Next, it has allowed us to allocate resources productively to generate solid returns for our shareholders. And lastly, it keeps us focused on execution to deliver the outcomes necessary to make the company stronger. With that, I will turn the call over to Mike for more details on the quarter.

Thank you, Sam, and good morning, everyone. Let me start by providing a compare on second quarter same facility volume compared to prior year. Admissions increased 2.5% and equivalent admissions increased 2.7%. Inpatient surgeries were down 2.3%, and outpatient surgeries were down 3.4%. ER visits increased 3.6%. Regarding payer mix, same facility equivalent admissions and our insured population excluding exchanges increased 3.2% in the second quarter and 2.2% year-to-date versus prior year. Exchanges declined 15%. As Sam noted, these patients losing coverage on the exchanges migrated almost one-for-one to uninsured. This one-for-one migration makes up approximately 80% of our uninsured volume growth with the remaining 20% related to a decrease in Medicaid conversions, mostly in Texas, which has had a modest financial impact. Our second quarter net revenue per equivalent admission growth of 6.4% was probably [ a payment ] benefit during the quarter. In addition, our contracted rate increases and governmental payment updates offset the negative rate impacts from payer mix changes relating to the exchanges and to a lesser extent, service mix. Let me now transition to the impact of the exchanges and Medicaid supplemental payment programs in the quarter. The significant payer mix shift related to the exchanges has had an unfavorable impact on adjusted EBITDA of approximately $400 million. This amount includes an increase of our -- of approximately $75 million related to our previous estimate of our first quarter exchange [ impact. ] During the second quarter, the company recognized approximately $400 million of incremental net benefit from Medicaid supplemental payment programs. This included a $540 million incremental net benefit related to the recently approved Florida program from October 1, 2024 to June 30, 2026. This benefit was partially offset by retro payments received in the second quarter of 2025. Sam touched on the advancement of our financial resiliency program. Resiliency is core to how we operate the business. Our resiliency program is a long-term multifaceted enterprise-wide set of initiatives designed to generate efficiencies across the organization. We were pleased with our cost results in the second quarter. Same facility cost per equivalent admission when considering Medicaid supplemental payment programs was essentially flat versus prior year quarter, and it improved 1.4% sequentially. Let me add a note on our year-to-date performance. Given the challenging policy and reform backdrop, we are pleased with our operating performance at the halfway mark of the year. When we consider the impacts of the exchanges, Medicaid supplemental payment programs and the impact from the [indiscernible] season and winter storm in the first quarter. Our year-to-date operational performance has moderated from our 2025 growth and our initial guidance assumptions. Our revised guidance in 2026 is more in line with our long-term adjusted EBITDA growth rate target of 4% to 6%. Moving to capital allocation and cash flow. Capital expenditures totaled $1.2 billion in the quarter. Additionally, we purchased $2.1 billion of our outstanding shares, and we paid $171 million in dividends for the quarter. Cash flow from operations was $2.3 billion in the quarter, which is a 45% decline from prior year quarter. This decline was primarily due to timing differences in cash flows related to Florida's Medicaid supplemental payment program as well as the prior year deferral of federal income tax payments to the fourth quarter of 2025. Our debt to adjusted EBITDA leverage remains in the lower half of our stated target range, and we believe our balance sheet is strong and well positioned for the future. So with that, let me speak to our revised 2026 guidance ranges. Revenue between $77 billion and $79.5 billion, adjusted EBITDA between $15.4 billion and $16.1 billion. Net income attributable to HCA Healthcare between $6.3 billion and $6.7 billion. Diluted earnings per share between $28.70 and $30.50. We also included revised key assumptions related to the expected unfavorable impact on adjusted EBITDA from payer mix shifts due to the health insurance exchange as well as anticipated incremental net benefit from Medicaid supplemental payment programs as follows. Health insurance exchanges between a negative $1 billion and $1.2 billion. Medicaid supplemental payment program net benefit between $300 million and $500 million. The variables on the exchanges are difficult to predict and require significant judgments. We have now revised our estimated impact to adjusted EBITDA based on the updated information through the first half of the year. Specifically, the key change in our updated estimate is driven by our evaluation that almost all of the individuals losing coverage on the exchanges of becoming uninsured versus our original assumption of 80% to 85%. In addition, our original assumption around declining utilization for patients that become unsure due to the loss of insurance coverage did not materialize. Regarding Medicaid supplemental payment programs, our updated guidance implies a $100 million to $300 million headwind in the back half of the year. This second half headwind reflects program approvals and retro payments received in 2025, which are projected to exceed the incremental benefit of the Florida program. As we think about the quarterly progression for the remainder of 2026, we believe the fourth quarter adjusted EBITDA growth rate compared to the prior year may be higher than for the third quarter. This is based on our assumptions around the timing effects of exchanges, Medicaid subtotal payment programs and our resiliency growth. We are maintaining our stated CapEx range of $5 billion to $5.5 billion and currently plan to complete most of the existing authorized share repurchase program, subject to market conditions and other factors. I will now hand the call back to Frank Morgan for questions.

Thank you, Mike. As a reminder, please limit yourself to one question so we might give as many as possible in the queue an opportunity to ask a question. Abby, you may now give instructions to those who would like to ask a question.

[Operator Instructions] And our first question comes from the line of Ben Hendrix with RBC Capital Markets.

Hoping you can give us a little more color on your increased estimate for exchange headwinds. What were those key variables that were informing the $1 billion to $1.2 billion estimate? And what's giving you confidence in the magnitude of that increase? And then also by extension, kind of how we think about that directionally as it paces through the back half of the year?

Thanks, Ben. This is Mike. If you think about first half of the year, we've gained a lot of experience and especially in the second quarter. And given that experience and understanding of the exchange is better, we've adjusted our estimates accordingly. If you go back to our original set of assumptions, the volume declines that we are seeing in first and second quarter on the exchanges, which are 15% in both first and second quarter, are in line with our original guidance estimates in terms of exchange volume decline. What's different as we have gone through second quarter is that we originally have seen that about 80% to 85% of the patients who lose exchange coverage would become uninsured. And our data is telling us now that it's closer to one-for-one. And so that's really the biggest driver of the updated estimate of the impact. When I think about kind of first half versus second half, first, we are providing a range. And so this $1 billion to $1.2 billion range that we're calculating for the first -- for the full year 2026 considers a variety of scenarios. But to come up with that estimate for second half, we're using what we've learned through the first 6 months of the year. And we've also stated our past attrition rates over the last several years. In addition, we have pulled, I'm sure just like all of you have, all the external data that we can with updates as we've gone through the year. So based on that, that is the driver of our full year guidance update. I would note, though, as we look back to last year, we began to see some slowing exchanging volume in the fourth quarter of 2025. Historically, over many years, our exchange volume would typically peak in fourth quarter. But this was not the case last year. In hindsight, we now believe that the exchange reforms that actually started late last year started having an impact and specifically in fourth quarter. I'll give you one example. The pausing of the low-income special enrollment period during 2025, we think now in hindsight have an impact. Our fourth quarter 2025 exchange volume growth to prior year was only 2.5%. The full year 2025 versus 2024 is over 10%. So that gives you a sense of it. So we do think when we think about second half of last year -- '26 compared to prior year, that fourth quarter had a bit of an easier comparison. So Ben, that's a wrap on the HICS assumptions and our second half guidance.

Our next question comes from the line of A.J. Rice with UBS.

Let me maybe just drill down a little bit on surgeries. That's been a topic of conversation this quarter across the board with companies. Your inpatient and outpatient surgeries were down. I wondered if you could go -- talk a little bit more about the types of surgeries that were impacted relative to service lines. Do you see this as being more elective procedures, postponable procedures that are being deferred and are you attributing this mainly to the HICS, this enrollment? And finally, on surgeries. Are you giving any allowance for people hitting deductibles as the year progresses and maybe doing those surgeries that have been postponed from the first half later this year?

A.J., this is Sam. There's a lot of questions in there. I will see if I can sort through a condensed answer here. I think it's important to understand our surgical business. We have, on the inpatient side, 2 sources of channels, if you will, for surgery. We have the emergency room, which represents about 2/3 of our inpatient surgeries, trauma programs, cardiac events, general surgeries, you name it. That continues to grow. We've seen in '25 over '24, our emergent inpatient cases were up 2% year-over-year. And thus far, through the first 6 months of this year, that particular component of our surgical business is also up 2% year-over-year. So that's a stable component of our surgical business, and we continue to invest heavily in our emergency room capacity in network offerings to enhance opportunities for patients to enter our system and get the care they need. That's number one. The other piece of our inpatient surgery is clearly elective, which represents about 1/3. And we are down this year more than we were last year. Last year, we were down on elective 2%. This year, we're down on elective 6%. We do believe that HICS demand which is a big piece of our elective declines on both inpatient and outpatient is a part of it. So this discussion that Mike just referenced around HICS, it's cutting across all aspects of our business. We're seeing it in the ER with our payer mix there. We're seeing it in outpatient surgery from an elective standpoint and we're seeing it on the inpatient. On the outpatient, it's predominantly all elective, as you would expect, there are some cases that do migrate through the emergency room, but 9 out of 10 patients are roughly elective. Here again, HICS demand was a big piece of it, not the sole piece of it, but a big piece of it. We do hear from our physicians that their activity flow is off a little bit this year. They're attributing it, as you would suspect, to sort of the general affordability and pressures that people are experiencing with the economy as a whole. It's hard for us to tease that apart, but that's the best feedback loop that we have. And then I think there's just a handful of other things that are connected to it. Obviously, the Medicare inpatient rule change has had an impact, and we've seen some cases move from inpatient to outpatient. We do capture some of those and we lose some of those, as you would expect, because the outpatient surgery market is a little bit larger than the inpatient surgery market. So those are some of the factors that we see. We have a response to this, as you would expect of us. We are investing in our ORs to make sure they have the equipment that they need. We're optimizing our operations so that the patient and the physician has the flow and efficiency that they require. And then we're aligning with our physicians where it makes sense to ensure that they have a connection to our network. With our ASC business, our ASC division actually had earnings growth over the first 6 months of this year. We have roughly the same number of facilities in that division. And for both surgery and what we consider nonsurgical cases like endoscopies, colonoscopy, lithotripsy pain, our overall volume in our surgery center due to more units is up slightly year-over-year, but the acuity of those cases is growing. So we continue to add to that network also, as you would expect, so that we have multiple offerings for our patients, multiple offerings for our physicians and making our network more resilient with additional capacity. So we're obviously sorting this out, and we think that we're in a good position competitively. And we'll have to see, A.J., as we move through the balance of the year whether or not we see a recovery from some of the early indicators that we've seen in the first 6 months.

And our next question comes from the line of Ann Hynes with Mizuho Securities.

Just a follow-on to that question. And I think in your prepared remarks, you said you'll be investing $7 billion over 3 years. And is that more offensive and defensive, just almost as a response to your last question that maybe there's an acceleration of like a shift from inpatient to outpatient because some of the CMS regulatory changes? And can you just talk about the competitive environment? Do you think you're still gaining market share? And where do you see the biggest opportunities to gain market share over the next couple of years? And just given some of the markets that are under pressure, I'm assuming your not-profit peers are also under pressure. And are you seeing any change in behavior when it comes to their investments competitively?

Okay, Ann. Thank you. This is Sam. Let me see if I can pull all that together and respond to your questions there. If you look at our company over the past, let's just say, 5 or 6 years with our capital spending, we have added to our inpatient chassis. Just to give you some numbers on that, we had roughly 37,000 beds at the end of 2018 operation -- in operations. We have 42,000 today. Our occupancy level since that time, it's grown from 71% to 75%. So in addition to adding roughly 15% inpatient capacity to our company, our utilization of that capacity has grown by 5 points. Within our $7 billion that I referenced earlier, we do have another 1,000 to 1,200 inpatient beds that we're adding. But in addition to that, we are also adding to our outpatient network. In the second quarter of 2026, as compared to the second quarter of 2025, we had 5% more sites of care than we did last year. And that's roughly 250 or so, if I remember correctly. In our pipeline, we have another 250 to 300 outpatient facilities either in our capital plan or in our acquisition plans that will come online, we believe, sometime later this year and early next year. So that will add roughly 10% to our overall network capacity, more units on the outpatient, as you would suspect. The $7 billion includes components for all of that. It includes new beds, actually new hospitals, in some cases, a number of outpatient facilities, some of which I just referenced. And all of that goes to help us compete. We are losing no competitive positioning. We have judged through our midyear reviews, through our market share analytics that our competitive positioning is stable to growing net-net. Yes, there may be a market or 2 here that has had a competitor to do something that we have to now respond to. But that's fluid and dynamic always. And our touch points with our markets allow us to make adjustments, invest in initiatives to respond to those dynamics. And so we do believe we're gaining market share in many of our markets, some are flat and some are modestly down. That is a normal course for us. But overall, we feel good about our programs that are necessary to extend our networks and create convenience and more offerings for our patients. And then the investment back in our hospital-centric components of our facilities, increasing capacity, increasing technology offerings for our physicians and patients and then creating the kind of availability so that patients can get into the system, it's positive because we see, again, demand growing. And our job, given our position in these communities, is to meet that demand. Let me make this last comment on our markets because I think this is a very important component, and we shared it with our Board with our midyear review just this week. The demographic trends that we see in HCA markets, we believe are as positive or more positive than they were during the COVID migration that we saw to the southeastern and southwestern parts of the country. Through our study, through our understanding of other people's studies, we believe those trends are going to be supportive to the overall growth that we expect in HCA's markets, Florida, Texas, Utah, Nevada, South Carolina, Georgia, Tennessee, all of these states are targeted for growth that we think is going to support these investments, provide for more health care demand and create great opportunity for HCA to grow.

And our next question comes from the line of Brian Tanquilut with Jefferies.

Maybe, Mike, as I look at the P&L, shifting gears to the cost side a little bit. The other OpEx line was up a decent bit. And I'm guessing now that's primarily tech. But if you can just walk us through other moving pieces potentially there. And pulling to a broader view, just curious how you're thinking about the resiliency programs. Obviously, HICS was a surprise. So any other incremental offsets that we can be thinking about maybe as we even think through 2027 and beyond?

Yes. Brian, thank you. As I mentioned in my prepared comments, when you kind of consider labor. And you're right. I mean our other operating expenses are being inflated because of the provider tax associated with our way of benefit for sure. If I pull up and just look at our total cash, total cost per adjusted addition to prior year in the quarter -- the second quarter and think about that, and that would be SWB supplies and other operating expenses combined, Brian. When I look at that compared to prior year, we're only up about kind of, call it, flat, just slightly up over the prior year. That really reflects really good work in second quarter related to our resilience plan. As Sam noted in his comments and as I reinforced in mine, resiliency is really core to the business, and it's something we've been working on for a long time. You'll remember that we've highlighted this in our Investor Day back in 2023. And resiliency has been in the company's results going back to the pandemic. As we look at all of the work in flight with resiliency, the gaining maturity of these programs, we're confident that we're going to be able to bend the cost curve and bend the cost curve, improving our cost trends, if you will, in the second half of the year and into 2027. And then from the next generation of that work, when you think about digital transformation, building global capabilities and all the work we're doing to expand shared services, we believe this will produce multiyear benefits for the company as we go out in time. The only other thing I would mention to your question, if I think about kind of other operating expenses would be potentially professional fees that are in other operating expenses. They're up about 8.5% on a same facility basis to prior year, which has moderated and is pretty flat sequentially to first quarter. And so we're pleased with that work. It's still a little elevated from our other cost trends, but we believe we made progress here in terms of our professional fees.

Yes. And Mike, let me add to that for 1 minute. I've been with the company for 43 years, and I've seen our approach to our business grow when it comes to complexity of services that we offer, whether that's trauma, bone marrow, solid organ transplant, whatever the case may be. If I juxtapose our resiliency program against sort of our service components and how complex and sophisticated our services are in our hospitals, that's exactly where we are with our financial resiliency program. We are getting more sophisticated. We're getting more sort of capabilities to execute on this piece of the agenda. And this has been an opportunity for us for years. We just didn't have the tools to get after it. And the tools and capacity that Mike just alluded to reminds me of where our networks were maybe 7 or 8 years ago, where we didn't have a full array of services or we didn't have the outpatient capabilities that we needed to build out a network. Well, today, with our resiliency agenda, we have these additional components, technology, digital, global, capabilities corporately to support all that. That's why we think this particular program has durability and capability to add value for the company as we push into the future.

And our next question comes from the line of Pito Chickering with Deutsche Bank.

Looking at 2Q core EBITDA, excluding DPP and HICS, can you help bridge us how you get to your guidance in the back half of the year, specifically can you call out any changes to assumptions on the top line like surgeries or payer mix? And on the bottom line, can you call out any savings initiatives that are coming online and details around those initiatives.

Sure. Pito, this is Mike. First, just a couple of background statements. One, we do have a range. So it's always important to note that when we gave our updated full year guidance, we gave a range to ensure that it contemplates a variety of scenarios. And then inherent in your question, we do think about in the second half of the year the assumptions that we're making related to health insurance exchanges and the incremental net benefit from the Medicaid supplemental payment programs. When we think about the rest of the business, what I really think about is 3 drivers that give us confidence here in our guidance for the back half of the year. The first one is really volume. And our second quarter results profile, solid volume growth, particularly in our insured population, excluding exchanges. And we do believe that, that demand momentum will continue through the balance of the year. The second is our costs. And you know that, that it's clear in second quarter, we have really good performance in our cost trends. From what we're seeing in our resiliency plan and the visibility into the execution of that plan and as well, if you think about the operating leverage that we generated in second quarter from volume growth that we believe continues, we are confident that we'll be able to improve our cost trends in the back half of the year and into 2027 as well. And then lastly, I think it's important to say that we have an excellent management team in the field and in corporate, and our management team has demonstrated through many past challenging cycles the ability to handle challenges and exceed and thrive during environments like that and like the one we're in now. And so I'm confident that as we kind of go through the year, our management team...

Abby?

My apologies, I wasn't sure if the line had cut out. Our next question comes from the line of Matthew Gillmor with KeyBanc.

Just circling back on the exchange headwind discussion. You had mentioned that 3 divisions represented 50% of the impact. Can you give some context in terms of either the geographies or just the commonalities in terms of those divisions and why they're seeing a bigger impact.

Yes. This is Sam Hazen. We have 3 divisions, our Gulf Coast division, North Florida and South Atlantic division are the 3 that had a lot of HICS exposure going into the year, and they've had dramatic impacts from the HICS exchange volume shift. Their composite adjusted admission decline in HICS, it's somewhere between 25% and 28% for the first half of the year, and that has obviously created a lot of pressure. We didn't expect it to be that much in those markets and the teams have tried to adapt to it. As you would expect, as best they possibly can, but that's a fairly sizable impact. So it has had an outsized effect on the company. Obviously, we're all in on all of our divisions. And typically, we have a more balanced performance across the company. But in this instance, it's been a bit imbalanced with those 3 situations. And so we're reacting to it appropriately. In 2 of the 3 divisions, actually, we have more volume than we did in the previous year in total. But again, the payer mix in those divisions have been compromised by the expiration of the enhanced premium tax credits, and that's produced a significant move from HICS to uninsured in those markets.

And our next question comes from the line of Whit Mayo with Leerink Partners.

Mike, I just wanted to get an update on the internal views on work requirements for 2027. Just any thoughts on potential coverage leakage or headwinds or just general thoughts would be helpful.

Sure, Whit. Obviously, there's a proposed rule out for Medicaid work requirements. Just a couple of notes. One, we believe work requirements will have an impact in nonexpansion states -- I'm sorry. That will have an impact in expansion states way more than nonexpansion states because of this focus on working adults. As a reminder, all of our Medicaid revenues, about 40% of our Medicaid revenues are in expansion state, and 60% are not. We are monitoring this proposed rule, as you can imagine. And we're going to have to see how it plays out. I mean it's -- there are some litigation and legal challenges around the way that CMS is implementing the work requirements. We'll have to see how they move through the system. And we're also monitoring how the states implement these plans. Most of these, if not all of these expansion states, tend to be a little bit more blue, a little bit more democratic. And we are working with those states to make sure and try to support the notion of a good supportive approach towards implementing work requirements within the [indiscernible] rule, of course. And so our Parallon teams are also getting really worried [indiscernible]. I think about the coverage benefit support teams that we have embedded in all of our facilities in these states and the work that they do with patients to help them work through the Medicaid application process and help them work through the work requirements process. And so we beefed up those teams with -- and we are preparing as best we can. I will say, when I just think about the distribution of our assets between the expansion and non-expansion states and the work that we're doing to prepare, we still think that on balance, while Medicaid work requirements are going to have an impact, we believe, we do believe we are going to manage through those in a reasonable way.

And our next question comes from the line of Justin Lake with Wolfe Research.

Sam, really helpful on the surgeries. You gave us 6-month numbers for the inpatient coming through the ER and the electives, the down 2% and the down 6%. Maybe you can give us first quarter versus second quarter and just how things were running through the second quarter? And then can you guys also run us the volume growth by payer and hopefully give us commercial employers separately from exchanges?

Yes. I don't have a different explanation for the second quarter versus the year-to-date. I think it's hard sometimes in short cycles to make judgments about demand, and 90 days is a short cycle. So I think from that standpoint, I don't think the explanation varies much from quarter-to-quarter. And so a midyear review, I think, is a more relevant perspective on that. So I don't really have anything to add additionally to the commentary on surgeries.

And then Justin, if I look at same facility equivalent admissions in the second quarter of 2026 compared to prior year. All-in Medicare is up 3.6%, Medicaid is up 2.7%. And commercial, excluding the exchanges are up 2.4%. The exchanges are down 15% and the total uninsured is up 15%. I would note the total unassured equivalent admissions now represents about -- a little over 10% of our total equivalent admissions and the exchanges now represent about 6.8% of our total equivalent admissions.