- Hospital chain HCA Healthcare reported rising admissions for the 21st consecutive quarter, though it missed Wall Street earnings expectations and net income fell from a year earlier, sending its shares down 10% in late morning trading Tuesday.
- The Nashville-based hospital operator hit revenue expectations with $12.6 billion in the quarter, up 9.3% from $11.5 billion in the second quarter of last year. At the same time, HCA executives said revenue growth was slower than the company expected.
- HCA was largely unmoved by the CMS' push to mandate price transparency, with officials calling it unlikely to affect the company's performance moving into the second half of the year and beyond. "We'll have to see on implementation," HCA CFO Will Rutherford said on a Tuesday earnings call.
HCA, a favorite of investors with its trend-beating admissions growth, typically beats Wall Street estimates.
Both same facility equivalent admissions (including outpatient) and same facility admissions increased year over year, by 2.6% and 2.1% respectively, over the three months ending June 30, the company announced Tuesday.
Over the past year, HCA's stock has rallied 30%, compared to the hospital industry's growth of 14%. By comparison, competitors Tenet Healthcare and Community Health Systems have seen their stock plunge 44% and 11%, respectively.
But investors did not appear pleased with the quarter's results.
Net income dipped in the quarter, at $783 million, down 4.5% year over year from $820 million. Earnings per share were also down — analysts expected diluted earnings per share to land around $2.47. HCA ended the quarter at $2.25 per diluted share, down 2.6% from the same period last year.
Operating cash flow totaled $1.99 billion, maintaining the momentum of the last several quarters. HCA's operating expenses totaled $10.3 billion in the quarter, or almost 82% of revenues. That's slightly up from $9.3 billion, or 81% of revenues, in the same quarter of last year, due to more growth-related investments and operating costs, analysts say.
HCA's same facility ER visits increased 3% in the quarter, same facility outpatient surgeries increased 0.6% and same facility revenue per equivalent admission increased 1.7%, all year over year. Same facility inpatient surgeries declined slightly, 0.1%, compared to the same quarter last year.
An increase in Medicare and Medicaid patients drove the stronger admissions. Same-facility Medicare patients grew 2.5% year over year and equivalent admissions increased 3.2%, including traditional and managed Medicare, Rutherford said on the call.
Medicaid same-facility admissions were up 3.2% and equivalent admissions up 2.3% in the quarter compared to the prior year. Commercial admissions remained largely flat.
"We did have a couple of markets that were softer than anticipated," along with weaker service lines in spine surgical procedures and women's services, Rutherford said.
Myriad factors, including the shift to lower-cost care settings, payer pressures and a higher percentage of government patients compared to lucrative commercial ones have all contributed to the overall industry slump. According to analysts, HCA has largely bucked those trends through a few key strategies, including picking the right markets to riding the trend to care in a local, community setting.
In early July, HCA purchased 24 Medspring urgent care clinics in Texas from Fresenius Medical Care for an undisclosed sum. They will operate under HCA's Medical City Healthcare division, which (with the acquisition) expanded its urgent care network to 160 nationwide.
The network of outpatient facilities helps the chain capture market share (especially in those Texas regions, which have experienced significant population growth in recent years). High-acuity patients can then be pushed to the area's HCA hospitals if needed.
Though admissions grew in the quarter, so did revenue per patient admitted, indicating initial positive financial results from HCA's focus on high-need, high-cost patients. Revenue per equivalent admission was up 1.7% year over year and inpatient revenue per admission was up 3.4% from the same quarter last year.
Additionally, HCA fully incorporated Mission Health in February. HCA snapped up Mission, North Carolina's sixth largest health system, for $1.5 billion in a deal that's been in the works since early 2018 and added seven facilities to HCA's portfolio.
The for-profit giant has 184 hospitals and about 2,000 sites of care located across 21 states and the United Kingdom. It reported total revenue in 2018 of almost $46.7 billion, compared to $43.6 billion in 2017.
The company bumped up its guidance for the 2019 financial year. HCA expects revenues of $51.5 billion, adjusted EBITDA of $9.85 billion, capital expenditures of $3.7 billion and earnings per share of $10.25 to $10.65 per diluted share.
HCA competitor Universal Health Services also reported a solid second quarter, with a similar uptick in admissions, net income and revenue. Dallas-based Tenet and Franklin, Tennessee-based Community Health Systems both report their second quarter earnings Aug. 5.