- A rebound in medical utilization, higher patient acuity and improved payer mix spurred for-profit hospital operator HCA Healthcare to beat Wall Street expectations on earnings and revenue in second quarter results released Tuesday morning.
- Revenue of $14.4 billion, up more than 30% year over year, propelled the Nashville-based system's net income to jump 37% year over year to $1.7 billion.
- HCA, considered the industry bellwether for the hospital earnings season, raised its full-year expectations for earnings and revenue following the results, forecasting current levels of demand will continue over the rest of 2021, CEO Sam Hazen told investors. HCA's stock was up about 15% in morning trading Tuesday on the results.
Behemoth systems like HCA navigated the pandemic significantly better than their rural, more cash-strapped peers, relying on large pools of investments and assets to remain profitable, along with generous federal relief funds many critics saw as unnecessary given hospitals' financial performances.
Despite medical and market volatility due to COVID-19, HCA brought in $51.5 billion in revenue in 2020, up slightly from 2019's topline of $51.3 billion. Similarly, the operator's net income was $3.7 billion, up from $3.5 billion the year prior, as cost-control measures, a large outpatient footprint, higher-acuity patients in its markets (and congressional funding the system later elected to return) offset plummeting utilization.
In the first quarter, HCA — which operates 187 hospitals and roughly 2,000 sites of care in 20 states and the United Kingdom — also beat analyst expectations on revenue, and raised its 2021 forecast as a result.
Now, the system has upped its full-year guidance for a second time.
HCA expects to bring in revenue between $57 billion and $58 billion this year, up from prior guidance of between $54 billion and $55.3 billion, following what Credit Suisse analyst A.J. Rice called an "impressive quarter across the board."
Patient volumes increased significantly on a year-over-year basis, as the second quarter last year was when most pandemic-related restrictions to elective procedures were enacted, stifling utilization.
During the quarter, HCA's same-facility admissions gained almost 18% year over year, while same-facility equivalent admissions rose almost 27%. Same-facility emergency room visits and same-facility inpatient surgeries increased 40% and 15% year over year, respectively, while same-facility outpatient surgeries jumped 53%.
Some volume metrics also improved when contrasted to the pre-coronavirus baseline. Compared to the second quarter of 2019, same-facility admissions and same-facility equivalent admissions increased about 3% and 1%, respectively.
However, inpatient surgeries and emergency room visits were slightly down, by about 3% and 6%, respectively.
But higher acuity and an increase in commercial volumes compared to 2020 caused HCA's per-patient revenue to increase 3% year over year in the quarter, contributing to the overall topline growth, management said on a Tuesday morning call with investors. And COVID-19 admissions were down to 3% of total admissions, compared to 10% in the first quarter, according to Hazen.
The recovery in volume as more Americans are vaccinated and re-enter the healthcare system was expected, but is still a good sign for hospital earnings season. Operators like Tenet and Community Health Systems will report second-quarter results in the coming days.
However, Goldman Sachs analysts said in a note the sector's recovery has been slower than expected, due to concerns over the highly infectious delta variant and seasonality following a year of lockdown. Tailwinds for hospital systems could only grow in 2022, when a more material volume backlog could come into play, the analysts said.
HCA management declined to comment on the coming year, with CFO Bill Rutherford noting "it's a little early to put math to 2022 numbers," but "we do feel confident in the general direction the company's seen."
Hazen said HCA expects the demand seen in the second quarter to continue into 2022 and contribute to the higher expected topline, helped by HCA's differentiated and broad swath of markets, balance sheet flexibility and ongoing capital investments.
The hospital chain has announced a slew of recent M&A and divestitures as it works to expand its outpatient capabilities in a bid to keep patients under the HCA umbrella.
In the second quarter, HCA closed its $73 million acquisition of Meadows Regional Medical Center in rural Georgia and its $400 million purchase of hospice and home health business Brookdale Senior Living, Rutherford said. HCA leadership have said in the past that post-acute care is a key area of focus for strategic growth, as the business discharges about a quarter of a million patients annually into the post-acute system, and wants to retain those patients — and the revenue they generate.
Rutherford said HCA currently has more than 15 surgery center additions still ongoing, along with a "number of urgent care and physician practice acquisitions." The CFO also said HCA expects to close its sale of four smaller hospitals in Georgia to Piedmont Healthcare for $950 million by the end of the third quarter, and plans to use the infusion of cash for additional M&A.