- HCA cut its full-year guidance in first quarter earnings out Thursday amid "higher than expected inflationary pressures on labor costs," CEO Sam Hazen said on a call with investors Friday. Expenses for salaries and benefits rose 10% year over year, according to financial documents.
- Heightened spending on salaries and benefits is primarily related to the ongoing use of contract labor, though the system is also adjusting wages to stay competitive in certain markets, Hazen said.
- Net income fell nearly 11% year over year, from $1.4 billion to $1.3 billion. The chain beat Wall Street expectations on revenue, though, at almost $15 billion, which is up 7% compared to the same period last year.
HCA is the latest for-profit hospital operator to report first quarter earnings — a period characterized by high COVID-19 case counts in January spurred by the omicron variant that swiftly declined through February and March.
As cases fell, HCA hoped labor costs too would ease as demand for contract labor lessened. That wasn't the case, and contract workers are still accounting for around 11% of HCA's nursing hours, CFO Bill Rutherford said on a call with investors Friday.
Operators like HCA are feeling less optimistic about labor pressures easing anytime soon as systems continue grappling with increased turnover and recruitment and retention issues.
"We now believe improvement in our labor costs will be slower than originally anticipated," Hazen said on the call. "This factor primarily influenced our revised outlook for 2022."
The chain now expects revenues of $59.5 billion to $61.5 billion, compared with a range of $60 billion to $62 billion it had projected earlier.
The lowered guidance was a rare move for the chain, Cowen analysts said in a Friday note. They noted "the company cites the impacts of COVID and related legislation, labor costs and other inflationary pressures as the main drivers of the revisions."
Staffing remains a key challenge for hospital operators two years into the pandemic, and in a recent Jefferies survey of hospital executives, 44% said shortages have worsened compared to pre-pandemic levels.
Those surveyed expect post-pandemic use of temporary labor to rise 21% compared to pre-pandemic levels, driven by ongoing challenges in the staffing environment, according to Jefferies.
Volumes in the quarter rebounded year over year for HCA as same facility admissions rose 2.1% and same facility equivalent admissions rose 5%.
Omicron patients were lower acuity than those from previous virus waves, and COVID-19 inpatient revenue was down about 15% from the first quarter of last year however, Rutherford said on the call.
Same facility emergency room visits grew 15% compared to the same period a year prior.
Inpatient surgery cases were up less than 1% year over year, while outpatient surgeries rose about 7%.