0000070318-25-000046
SEC filingSame-hospital revenue grew 6.8% but overall revenue up 3.2%; operating margin compressed to 16.8% from 21.2% on prior-year divestiture gains.
For the three months ended September 30, 2025, consolidated net operating revenues increased 3.2% to $5.289 billion, driven by a 0.7% rise in Hospital Operations and 11.9% growth in Ambulatory Care. However, operating income fell 18.4% to $889 million, largely because the prior-year period included $348 million in net gains on sales (primarily the AL Hospitals divestiture) versus only $20 million in the current period. Operating margin contracted to 16.8% from 21.2%, reflecting the absence of those gains. On a same-hospital basis, Hospital Operations revenue grew 6.8%, with net patient service revenue per adjusted admission up 5.9% and per adjusted patient day up 8.7%, indicating favorable payer mix and acuity. Salaries, wages and benefits as a percentage of same-hospital revenue improved 110 bps to 47.1%, aided by lower contract labor and incentive compensation.
Hospital Operations segment revenue edged up 0.7% to $4.014 billion, as growth in Medicaid supplemental revenue, commercial rate increases, and higher same-hospital admissions offset the impact of the September 2024 divestiture of the AL Hospitals. Segment operating income dropped to $418 million (10.4% margin) from $683 million (17.1% margin) due to prior-year divestiture gains. Ambulatory Care continued its strong trajectory, with revenue up 11.9% to $1.275 billion, driven by $72 million in same-facility growth (higher case volumes and net revenue per case) and $64 million from acquisitions. Operating income rose to $471 million, with margins improving to 36.9% from 35.6% as same-facility salaries, wages and benefits decreased. Consolidated total cases in the segment increased 6.2%.
Management's outlook focuses on executing strategies to expand Ambulatory Care through acquisitions and de novo development, driving Hospital Operations performance via operational efficiency and portfolio optimization, and improving profitability through cost management and service line growth. Capital expenditure guidance for fiscal 2025 is $875 million to $975 million. The company continues to deleverage, having repurchased $1.188 billion in stock year-to-date with $1.688 billion remaining under the authorization. The recently enacted One Big Beautiful Bill Act introduces significant changes to Medicaid and tax policy, with material impacts expected beginning in 2027; management cannot currently estimate the effect but highlights potential reductions in Medicaid payments and enrollment. Near-term uncertainties include tariff policies and government shutdown risks, though fixed-rate debt and staggered maturities mitigate interest-rate exposure.
For the nine months ended September 30, 2025, operating cash flow (CFO) of $2.8 billion exceeded net income of $1.7 billion, indicating solid earnings quality. The CFO increase of $431 million year-over-year was primarily driven by a $237 million rise in accounts payable and other current liabilities and a $68 million improvement in accounts receivable. Capex of $646 million represented a modest 7% increase from $601 million, reflecting continued investment in facilities. Share repurchases surged to $1.2 billion, up 77% from $672 million, funded by strong operating cash flow and proceeds from asset sales. Investing activities used $886 million, largely due to $266 million in business acquisitions and $646 million in capex, partially offset by $74 million from sales of investments. Financing cash outflows of $1.97 billion were dominated by share repurchases and $585 million in distributions to noncontrolling interests. A notable anomaly is the $1,188 million share repurchase, which is significant relative to CFO. Overall, cash generation remains robust with ample coverage for reinvestment and shareholder returns.