News Feature | August 1, 2014

HCA Holdings Profits Rise 14%

Christine Kern

By Christine Kern, contributing writer

HCA Holding Profits Up

HCA, the largest publicly traded hospital chain by revenue, reported a 14.2 percent increase in second-quarter net income as it treated more patients and improved its payer mix thanks to insurance expansion under the healthcare reform law.

During Q2 of 2014, the Nashville-based chain reported $483 million in net income on revenue of $9.2 billion compared with $423 million in income on revenue of $8.5 billion during Q2 2013. Included in these figures is a one-time gain of $142 million resulting from the company underestimating the reimbursement for indigent care under the Texas Medicaid waiver program. HCA also added $4 million from selling facilities.

Other key second quarter metrics (all percentage changes compare 2Q 2014 to 2Q 2013 unless noted):

  • revenues increased 9.2 percent to $9.230 billion
  • net income attributable to HCA Holdings, Inc. totaled $483 million, or $1.07 per diluted share
  • adjusted EBITDA increased 18.5 percent to $2.0 billion
  • cash flows from operations increased 53.6 percent to $1.250 billion
  • same facility equivalent admissions increased 2.2 percent while same facility admissions increased 1.2 percent
  • same facility revenue per equivalent admission increased 5.4 percent

Revenues in the second quarter increased to $9.230 billion, compared to $8.450 billion in the second quarter of 2013. Net income attributable to HCA Holdings, Inc. totaled $483 million, or $1.07 per diluted share, compared to $423 million, or $0.91 per diluted share, in the second quarter of 2013. Adjusted EBITDA totaled $2.0 billion compared to $1.689 billion in the second quarter of 2013. Adjusted EBITDA is a non-GAAP financial measure.

Healthcare reform figured significantly in the results. Approximately two-thirds of its earnings before interest, taxes, depreciation and amortization came from its core operations, with one-third from healthcare reform as more patients gained Medicaid or commercial coverage, President and CEO Milton Johnson said on an earnings call. The chain is now forecasting a 2 percent to 3 percent boost in adjusted EBITDA from Obamacare, an increase from its initial 1 percent to 2 percent projection.

HCA also held its expenses to 78.8 percent of revenue in the second quarter compared with 80.7 percent of revenue in the year-ago period.

According to Modern Healthcare, the chain had already previewed the strong results when it raised its financial guidance for the year. HCA is now factoring in a bigger benefit from healthcare reform than previously anticipated.

After a slow start, the company saw a 7.8 percent increase in Medicaid admissions (or 8.8 percent when adjusted for outpatient activity) in the second quarter, Chief Financial Officer William Rutherford said. Medicaid admissions increased just 1.4 percent (or 2.4 percent adjusted) during the first quarter of this year.

In its four states that expanded Medicaid, HCA saw a 32 percent increase in Medicaid admissions on a year-to-date basis, and a 48 percent decline in uninsured volumes. The number of uninsured patients declined 2 percent in its non-expansion states.

Overall, it’s self-pay and charity-care admissions declined 14.7 percent, Rutherford said, representing 6.8 percent of total admissions compared with 8.1 percent of admissions in the second quarter of last year.

Visits to its emergency rooms increased 5.7 percent – the highest rate of growth in five quarters – with self-pay and charity patients accounting for 20.7 percent of the total compared with 23.4 percent in the prior-year period.

HCA also said 5,500 admissions were patients enrolled in insurance plans sold on the new exchanges, and the company believes that 40 percent of that volume was previously uninsured, Rutherford said.