On the de­cline

More hos­pi­tal op­er­a­tors un­cer­tain as acu­ity falls

Modern Healthcare - - The Week In Healthcare - Vince Gal­loro

Ev­i­dence emerged last week that HCA is not the only hos­pi­tal op­er­a­tor see­ing a de­cline in acu­ity among Medi­care pa­tients, as Tenet Health­care Corp. re­ported an un­usu­ally large de­cline in Medi­care acu­ity for July and Au­gust. HCA, too, said Medi­care acu­ity fell for the first two months of the third quar­ter.

Nashville-based HCA also tried to bet­ter ex­plain dur­ing a con­fer­ence call why Medi­care acu­ity fell in the sec­ond quar­ter, caus­ing a $74 mil­lion rev­enue short­fall. About half of the rev­enue de­cline came on fac­tors that are likely to re­cur, mostly re­lated to the lower acu­ity of its Medi­care pa­tients, ac­cord­ing to the com­pany. The com­pany’s shares have plunged since it re­ported that short­fall in July, so HCA also an­nounced last week that it will spend $1.5 bil­lion to buy­out most of Bank of Ameri- ca’s stake in the com­pany. The move will re­duce the num­ber of shares out­stand­ing for the com­pany, giv­ing a boost to earn­ings per share.

HCA also noted the fa­vor­able im­pact of re­fi­nanc­ing its debt at lower rates and the ex­pected earn­ings con­tri­bu­tion from buy­ing out its not­for-profit part­ner in the HealthOne joint ven­ture in Den­ver.

Com­par­ing its Medi­care busi­ness for the sec­ond quar­ters of 2010 and 2011, HCA found that its car­dio­vas­cu­lar surgery cases fell 769 and its car­dio­vas­cu­lar med­i­cal cases rose 540, prob­a­bly in part be­cause car­dio­vas­cu­lar is a ser­vice line with more scope for sub­sti­tut­ing among dif­fer­ent treat­ments, Sam Hazen, HCA’s pres­i­dent of op­er­a­tions, said dur­ing the call. De­mand for car­dio­vas­cu­lar ser­vices in­dus­try-wide have been fall­ing by about 3% an­nu­ally, ac­cord­ing to HCA.

Across all ser­vice lines, HCA had 540 fewer Medi­care surgery cases in 2011’s sec­ond quar­ter, but 4,588 more Medi­care med­i­cal cases, lead­ing to a 1.2% de­cline in Medi­care case-mix in­dex for the quar­ter. For July and Au­gust, the de­cline in Medi­care case mix was 2%.

Lower acu­ity joins health­care re­form and the Bud­get Con­trol Act as ma­jor fac­tors boost­ing uncer­tainty for the in­dus­try, Trevor Fet­ter, pres­i­dent and CEO of Tenet, told in­vestors last week. “We’re in a pe­riod of greater uncer­tainty than I’ve ever seen in 15 years in this busi­ness,” Fet­ter said at the Mor­gan Stan­ley Global Health­care Con­fer­ence.

For Dal­las-based Tenet, Medi­care acu­ity has been trend­ing down, Fet­ter said, but in July and Au­gust, the de­cline was three to four times as large as the re­cent trend, and the com­mer­cial rise was not enough to off­set it. An­other fac­tor af­fect­ing Tenet’s re­sults is that three-quar­ters of the growth in its vol­umes is com­ing from Med­i­caid pa­tients, ac­cord­ing to a Tenet news re­lease.

Tenet ex­pects to reach only the low end of its ex­pected range for 2011 earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­za­tion of $1.18 bil­lion to $1.28 bil­lion, ac­cord­ing to the re­lease. Fet­ter noted that that range was in­creased ear­lier in the year.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.