HCA Healthcare has aggressive plans to add hospitals in fast-growing population centers, determining that adding onto existing facilities isn't always the best call.
The Nashville, Tennessee-based for-profit system has two hospitals under construction in San Antonio, Texas, and owns land for new facilities in Austin, Dallas and some Florida markets, CEO Sam Hazen said Friday during HCA's first-quarter earnings call. HCA purchased land for new hospitals in Las Vegas and Salt Lake City during the quarter, he said. The system also continues to add to its outpatient network, which has grown to roughly 2,500 of those facilities.
HCA estimated capital spending will reach $4.6 billion in 2023, excluding acquisitions. Last year, it was $4.2 billion.
"We believe that over time, as our communities continue to grow—and we believe that's one of the differentiating attributes of HCA that we're in great markets that have great growth prospects in and of themselves—before we get to share gain possibilities in those markets, that it's going to require us to build out some new hospitals," Hazen said. "We think it's better for us to open up new hospitals as opposed to keep adding on in every circumstance in [some communities]."
The aggressive plans come as HCA turned in a quarter that beat expectations. It reported $1.36 billion, or $4.85 per share, in first-quarter net income, up from $1.27 billion, or $4.14 per share, a year ago.
Revenue rose 4.3% year-over-year to $15.59 billion, including $145 million gained after a dispute with a commercial payer was resolved. An HCA spokesperson declined to give more details on the dispute.
Demand for services continues to recover, with same-facility inpatient and outpatient surgeries increasing 3.6% and 5.1%, respectively. Admissions were up 4.4%, and emergency room visits jumped more than 10%.
Expenses rose 4.1% to $13.67 billion, including a 2.1% increase for salaries and wages and a 4.4% jump for supplies. HCA said it saw continued improvement in staffing during the quarter, with contract labor costs down by about 20% from the prior year.
Chief Financial Officer Bill Rutherford said contract labor accounted for just over 7% of HCA’s salaries, wages and benefits, compared with 9.5% a year ago. The system wants that percentage to decrease to between 6.5% and 7% by the end of the year, Rutherford said during the call.
Turnover in nursing is approaching pre-COVID levels, averaging 17% over the last six months, Hazen said.
HCA raised its guidance for 2023, projecting annual net income to fall between $4.75 billion and $5.16 billion, compared with the $4.525 billion and $4.895 billion range projected earlier this year.
The stock market reacted favorably to the news. Shares of HCA jumped more than 6% from Thursday's close to open at $287.18 per share Friday morning.