Obamacare coverage brings HCA more paying patients

HCA, the largest publicly traded hospital chain by revenue, reported a 14.2% increase in second-quarter net income as it treated more patients and improved its payer mix thanks to insurance expansion under the healthcare reform law.

The Nashville-based chain reported $483 million in net income on revenue of $9.2 billion compared with $423 million in income on revenue of $8.5 billion during the second quarter of last year.

The results included a one-time gain of $142 million after the company underestimated the reimbursement it would receive from providing indigent care under the Texas Medicaid waiver program. HCA also added $4 million from selling facilities.

But healthcare reform was a significant factor in the results. About two-thirds of its earnings before interest, taxes, depreciation and amortization came from its core operations, with one-third from healthcare reform as more patients gained Medicaid or commercial coverage, President and CEO Milton Johnson said on an earnings call. The chain is now forecasting a 2% to 3% boost in adjusted EBITDA from Obamacare, an increase from its initial 1% to 2% projection.

HCA's same-hospital admissions increased 1.2%, or 2.2% when adjusted for outpatient activity. Revenue per adjusted admission increased 5.4%, or 3.5% without accounting for the revenue from the Texas Medicaid program.

HCA also held its expenses to 78.8% of revenue in the second quarter compared with 80.7% of revenue in the year-ago period.

The chain had already previewed the strong results earlier this month, when it raised its financial guidance for the year. Like its peers LifePoint Hospitals and Universal Health Services, HCA is now factoring in a bigger benefit from healthcare reform than previously anticipated.

After a slow start, the company saw a 7.8% increase in Medicaid admissions (or 8.8% when adjusted for outpatient activity) in the second quarter, Chief Financial Officer William Rutherford said on the call. Medicaid admissions increased just 1.4% (or 2.4% adjusted) during the first quarter of this year.

In its four states that expanded Medicaid, HCA saw a 32% increase in Medicaid admissions on a year-to-date basis, and a 48% decline in uninsured volumes. The number of uninsured patients declined 2% in its non-expansion states.

Overall, its self-pay and charity-care admissions declined 14.7%, Rutherford said, representing 6.8% of total admissions compared with 8.1% of admissions in the second quarter of last year.

Visits to its emergency rooms increased 5.7%—the highest rate of growth in five quarters—with self-pay and charity patients accounting for 20.7% of the total compared with 23.4% in the prior-year period.

HCA also said 5,500 admissions were patients enrolled in insurance plans sold on the new exchanges, and the company believes that 40% of that volume was previously uninsured, Rutherford said.

Follow Beth Kutscher on Twitter: @MHbkutscher