A drop in the acuity of patients HCA, Nashville, treated during the second quarter led to lower operating and overall profits, according to a news release announcing HCA's quarterly financial results.
Lower patient acuity a drag on HCA profits
The company saw admissions increase 1.9% and equivalent admissions increase 1.8%, both on a same-facility basis compared with 2010's second quarter, but a shift of patients from surgical to medical cases and lower intensity among the surgeries themselves kept a lid on revenue, which increased 4% to $8.06 billion. HCA reported second-quarter net income of $229 million, down 21.8% compared with $293 million in the year-ago quarter. The company had a pre-tax expense of $75 million on the early retirement of $1.1 billion in debt.
HCA recorded a 4.7% drop on a measure of operating results known as earnings before interest, taxes, depreciation and amortization, or EBITDA, at $1.42 billion for the quarter versus $1.49 billion a year ago. EBITDA was adjusted in both periods to eliminate losses on sales of facilities, asset impairment, loss on debt retirement and the termination of a management agreement, HCA said. The management agreement was between the company and the investors who still hold a majority interest in HCA even after its March initial public offering; those investors include three private equity funds and members of the Frist family.
HCA posted a 3.7% increase in same-facility medical admissions, but a 1.6% decline in surgeries, said Milton Johnson, president and chief financial officer. Nearly all of the impact on earnings came on Medicare cases, Johnson said. Medicare case-mix index declined 1.2% for the quarter, he said. The magnitude of that decline was unusual, but it is too soon to tell whether it heralds a trend or is just an outlier, he added.
Expenses related to employing physicians also weighed on EBITDA, rising to $243 million in the quarter from $179 million in 2010's second quarter, Johnson said.
Investors dumped HCA shares, which were down $6, or more than 17%, in mid-day trading on the New York Stock Exchange. Other hospital stocks were down as well: Community Health Systems, down $1; Health Management Associates, down 49 cents; Tenet Healthcare Corp., down nearly 27 cents; and Universal Health Services, down $2.28. All trading figures are according to Quote.com.
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.