CMS move boosts for-profit hospital sector

Investor-owned hospital chains continued to report unexceptional first-quarter earnings this week, but good news from the CMS on 2014 Medicare payments renewed investor confidence in the sector.

The CMS late Friday proposed a 0.8% increase for inpatient prospective payments, totaling an estimated $27 million. It also cut disproportionate share hospital payments only an overall 0.9%.

Both proposals were better than analysts had expected and took the sting out of more earnings reports showing fewer patients seeking care and a more adverse payor mix.

At least one investment bank, UBS, raised its ratings on Tenet Healthcare Corp., Dallas, and LifePoint Hospitals, Brentwood, Tenn.

Hospital stocks had been underperforming the broader market ever since HCA, Nashville, and Health Management Associates, Naples, Fla., previewed disappointing first-quarter results earlier this month.

The results from their peers—including Tenet, LifePoint and Community Health Systems, Franklin, Tenn.—weren't necessarily better, but share prices reflected more optimism for the sector.

All companies said the calendar was the biggest obstacle to admissions—with this year's results being compared against a prior-year quarter that was boosted by leap day and didn't have an early Easter break.

Tenet also cited the industry-wide rural floor settlement as boosting last year's results. The company this morning reported a net loss of $88 million in the first-quarter compared with net income of $58 million in first-quarter 2012.

The chain said it saw a 2.5% decrease in adjusted admissions, reflecting a 4% decrease for inpatient admissions and a 2.2% increase in outpatient visits. It also posted 28% growth in earnings before interest, taxes, depreciation and amortization from Conifer Health Solutions, its revenue-cycle management subsidiary.

Community Health Systems yesterday reported net income of $96.3 million for the first quarter compared with net income of $99.7 million for the same period last year.

It reported a same-facility decrease in adjusted admissions of 5.2%.

Follow Beth Kutscher on Twitter: @MHbkutscher