HCA, Nashville, said its third-quarter earnings would have been below analysts' estimates even without disruptions to its Florida hospitals from four hurricanes that swept the state in August and September. HCA said results were weakened by a shift in its managed-care business to lower-paying plans, reduced outlier payments, increased bad debt and sluggish admissions growth. The company also said it will borrow up to $2.5 billion to buy back up to 61 million of its shares, which the company considers undervalued. With interest rates low, HCA said, a repurchase program is the company's best investment option right now. Standard & Poor's downgraded the company to BB+ from BBB-, saying that borrowing to repurchase shares is inconsistent with investment-grade status. Moody's Investors Service placed HCA under review for a possible downgrade from Ba1, already a notch below investment grade.
HCA said it expects to post earnings per share of 46 cents to 48 cents when it reports third-quarter results Oct. 22. That includes estimated lost revenue and increased expenses related to hurricane damage of $40 million, or 5 cents per share. Also included is an asset impairment charge of $12 million, or 2 cents per share, related to HCA's plan to close San Jose (Calif.) Medical Center in December. The average analyst estimate for HCA's third-quarter earnings per share was 60 cents. Revised to account for the effects of the hurricanes and asset impairment, the average estimate would be 53 cents per share, or 5 cents to 7 cents above what the company expects to report. HCA owns or operates about 190 hospitals, including 40 in Florida, and nearly 80 ambulatory surgery centers, including 28 in Florida. -- by Vince Galloro