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February 03, 2015 12:00 AM

HCA offers conservative expectations for 2015

Beth Kutscher
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    HCA, the largest hospital chain by revenue, reported a 24.3% increase in net income for the fourth quarter of 2014, continuing a strong year.

    However, the Nashville-based company offered projections for its 2015 financial results that were more conservative than analysts had been expecting.

    Still, for 2015, HCA is expecting healthcare reform to account for 6% to 7% of the growth in its adjusted earnings before interest, taxes, depreciation and amortization, compared with 4.5% in 2014. HCA did not factor in any additional state decisions to expand Medicaid eligibility, which could provide some additional benefit.

    The outcome in the case of King v. Burwell—which deals with the issue of whether individuals who purchase health plans on the federal exchange qualify for subsidies—was not mentioned as a factor in its expectations.

    However, the case appears to be weighing heavily on HCA; the company last month filed an amicus brief (PDF) in support of the government.

    In the brief, HCA drew on its own experience (PDF) to argue that the Patient Protection and Affordable Care Act is working as intended. Patients with insurance coverage purchased on an exchange are taking greater control of their healthcare costs, it said, and are using the emergency room less frequently, opting instead to seek care at other outpatient sites.

    Moreover, taking away the subsidies for exchange plans would leave hospitals with the burden of significant Medicare cuts without the benefit of more insured patients, the company argued.

    With only five of its states expanding Medicaid, most of the benefit from healthcare reform has come from HCA's exchange contracts. The chain this year broadened its participation in insurance exchanges, increasing its exchange contracts by 37% over 2014.

    The company has calculated that 42% of patients with plans purchased on an exchange were previously uninsured. For the fourth quarter, the company saw 7,700 admissions with health plans purchased on an exchange and 26,000 emergency room visits with exchange plans.

    HCA attributed its fourth quarter results to a strong increase in patient volume, a favorable payer mix and cost controls. For the fourth quarter, the chain reported $527 million in net income on $9.6 billion in revenue compared with $424 million in net income on $8.8 billion in revenue in the prior-year period.

    Its same-facility admissions increased 5% in the quarter, or 5.6% when adjusted for outpatient activity. Revenue per adjusted admission increased 2.5%. The volume increase was one of the best the company has seen in recent years, said William Rutherford, the company's chief financial officer, on an earnings call.

    Yet some of the increase could be attributed to a more severe flu season compared with 2013, with flu-related admissions up 77% over last year.

    The company also continued to see benefits in its five states that expanded Medicaid eligibility. Medicaid admissions in those states increased 51% year over year in the fourth quarter, compared with a 3.3% increase in states that didn't expand Medicaid. Its uninsured admissions decreased 65% in expansion states compared with a 1.6% decrease in non-expansion states.

    The company also is planning to spend $2.4 billion on capital expenditures but expects to invest more in its current facilities than mergers and acquisitions.

    Follow Beth Kutscher on Twitter: @MHbkutscher

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