HCA, the largest hospital chain by revenue, will increase its capital spending over the next three years to make room for the additional patients it is seeing thanks to market share gains and healthcare reform.
The Nashville-based company said Tuesday that it plans to spend $7.7 billion over the three-year period, or $500 million more than it has previously committed.
The increase came after the chain reported first-quarter earnings that showed its largest year-over-year patient volume growth for any quarter over the last decade. All of its domestic divisions experienced growth in admissions, admissions adjusted for outpatient activity and emergency department visits, Samuel Hazen, the company's chief operating officer, said on an earnings call.
The improving economy, market share gains and healthcare reform all contributed to the rising demand for healthcare services, executives said on the call.
Under the spending plan, HCA will add inpatient and emergency room capacity as well as offer new service lines and purchase new equipment.
Admissions at HCA's hospitals, on a same-facility basis, increased 5.1% in the first quarter, or 6.8% when adjusted for outpatient activity. Deliveries increased 3.1% and behavioral health admissions were up 11.7%. The company also experienced its eighth straight quarter of growth in inpatient surgeries.
With the strong results, the company raised its earnings projections for this year, and now expects $39 billion to $40 billion in 2015 revenue, up from its previous forecast of $38.5 billion to $39.5 billion. Earnings per share are expected to range between $4.90 and $5.30, up from $4.55 to $4.95.
Healthcare reform contributed about 5% to its earnings before interest, taxes, depreciation and amortization, Bill Rutherford, HCA's chief financial officer, said on the call. In its Medicaid expansion states, HCA saw a 59% decrease in uninsured admissions, which was only an 8.2% drop in non-expansion states.
Self-pay and charity-care patients now account for just 6.3% of its total admissions, down from 7.6% in the first quarter of 2014. Patients with health plans purchased through an insurance exchange represented 2% of its admissions, or 9,880. That number was more than six times higher than during the first quarter of last year, and 28% higher than the fourth quarter of 2014.
In total, HCA reported $591 million in net income on $9.7 billion in revenue for the first quarter compared with $347 million in net income on $8.8 billion in revenue for the prior-year period.
While HCA is reinvesting in the business, it also continues to search for acquisitions. The chain has been quiet on the mergers and acquisition front in recent years, preferring smaller, outpatient-centered buys even as its peers forged multibillion-dollar strategic deals.
But CEO Milton Johnson said on the call that the company continues to look for acquisition opportunities in current and new markets. Those deals also could take the form of a joint venture, where HCA would have less than 100% ownership.
“We're continuing to look,” he said. “We think we have a lot to offer to a strategic player out there. It's just very hard to predict when those opportunities will come.”