HCA, Nashville, continued to see the weaker acuity in its Medicare business that led to a shortfall in its second-quarter earnings, but the company said cost controls limited the impact on its third-quarter earnings.
HCA sees sharp fall in third-quarter net income
HCA reported net income of $61 million, down sharply from $243 million in 2010’s third quarter, according to the company’s earnings release. Without a $406 million pre-tax loss on the refinancing of $7 billion in debt in the quarter, however, profits would have been greater. The refinancing is expected to cut the company’s interest costs by $350 million annually, Richard Bracken, HCA’s chairman and CEO, said during a conference call.
Net revenue increased 5.5%, to $7.31 billion. Two quarters before it is required, HCA adopted a change in bad-debt accounting issued by the Financial Accounting Standards Board that removes bad debt as an expense item and makes it a deduction from gross revenue.
For the second quarter in a row, more medical admissions and fewer surgical admissions led to the company’s Medicare case-mix index falling, this time by 1.8% after a 1.4% decline in the second quarter. Same-facility volume figures were positive, comparing the third quarters of 2010 and 2011: admissions increased 3.2%, and equivalent admissions increased 3.8%. Inpatient surgeries declined 0.9%, and outpatient surgeries declined 1.2%.
Cost management, especially on supplies, helped offset a decline in revenue per equivalent admission of 0.1%, according to Milton Johnson, president and chief financial officer. Supplies declined 3.5% per equivalent admission, Johnson said.
HCA also increased its estimates of the impact of Medicaid cuts in Florida and Texas. In Florida, changes that went into effect July 1 were expected to cost the company $50 million over the next 12 months, but the estimate now is $70 million, Johnson said. In Texas, Medicaid changes as of Sept. 1 that were expected to cost in the range of $25 million to $30 million are now estimated at $80 million, Johnson said.
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