HCA gets bigger boost than expected from reform
HCA, the country’s largest for-profit hospital chain by revenue, previewed strong second-quarter results last week, highlighting a 12.2% increase in income before taxes. It also raised its financial guidance for the year.
The Nashville-based company is the first to offer investors a glimpse into what is widely expected to be a strong quarter for hospital operators. The chain’s full results are scheduled for July 29.
HCA expects to report $904 million in pretax income on $9.2 billion in revenue compared with $806 million in pretax income on $8.5 billion in revenue in the second quarter of 2013.
After seeing only a modest effect from healthcare reform in the first quarter, HCA said the law’s effect on second-quarter earnings has exceeded its expectations. Its revised financial projections assume a 2% to 3% impact on earnings before interest, taxes, depreciation and amortization, an increase from 1% to 2%.
HCA also reported a 1.2% boost in same-facility admissions and a 2.2% increase in same-facility equivalent admissions. Its revenue per admission rose 5.4% on higher-acuity patients.
The magnitude of the increase was even more impressive given that HCA faced a tough standard against last year’s strong second quarter, wrote A.J. Rice, an analyst at UBS, in a research note.
HCA shares were trading up nearly 10% after the announcement, which also boosted shares of peers Community Health Systems, Tenet Healthcare Corp., Universal Health Services and Life-Point Hospitals.
“If HCA’s performance is any indication, 2Q14 earnings season should be strong for acute-care hospital investors,” wrote Frank Morgan, an analyst at RBC Capital Partners.
Other one-time items included a $142 million adjustment to Medicaid revenue after it underestimated its reimbursement from the Texas Medicaid waiver program for providing indigent care. It also booked a loss of $226 million from retiring its debt, and a gain of $11 million from selling facilities.