HCA gets big­ger boost than ex­pected from re­form

Modern Healthcare - - NEWS - By Beth Kutscher

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.

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