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HCA CFO William Rutherford
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HCA reports increased net income despite reduced patient admissions in fourth quarter


By Beth Kutscher
Posted: February 4, 2014 - 3:30 pm ET
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HCA, the largest hospital chain by market capitalization, saw a decline in patient admissions during the fourth quarter of 2013, but increased its net income through higher-acuity cases and a better payer mix.

Net income increased to $424 million from $314 million in the fourth quarter of 2012 as the company also tightly managed its expenses.

After two consecutive quarters of inpatient growth, the Nashville-based hospital operator reported that same-facility equivalent admissions declined 1% in the fourth quarter compared with the same period in 2012. Visits to the emergency room dropped 2.4%.

In what could be a telling sign for other chains expected to report earnings later this month, HCA attributed the fall-off to fewer pulmonary and short-stay admissions as well as a less severe flu season.

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Nevertheless, HCA said its revenue per equivalent admission increased 4.8% on a same-facility basis. Revenue for the quarter also increased 4.8% to $8.8 billion, compared with $8.4 billion the previous year.

On an earnings call, CFO William Rutherford said the CMS' controversial “two-midnight” rule—which uses length of stay to determine whether a patient visit should be reimbursed as inpatient or outpatient—had an impact on overall volume, but not on its financials.

Despite putting pressure on admissions numbers, the rule allowed HCA to cut costs associated with outside reviewer audits on whether stays were being billed appropriately, Rutherford said.

HCA also forecast a 1% to 2% benefit from the Patient Protection and Affordable Care Act on its 2014 earnings before interest, taxes, depreciation and amortization—an estimate that a number of analysts described as “conservative.”

But executives said a number of variables remain, including how many previously uninsured patients enroll in a health plan; the company's current forecast projects that 7% to 9% of HCA's current patient base will gain coverage. In addition, the plans selected might also make a difference. About 97% of HCA's hospitals are participating in an exchange plan, with 67% participating in the lowest-cost bronze plan, and 54% in the lowest-cost silver plan.

Still, Milton Johnson, the chain's president and CEO, said HCA is “well-positioned to succeed in the healthcare reform environment.”

HCA plans to increase its capital expenditures this year to $2.2 billion—about $200 million more than last year. It is adding five new hospitals, 15 new emergency rooms and three surgery centers, among other projects.

Follow Beth Kutscher on Twitter: @MHbkutscher


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