HCA Healthcare either surpassed or came in at the high end of its 2019 guidance on some of its key metrics: revenues, non-GAAP earnings and capital spending, prompting praise from analysts on its Tuesday earnings call.
"They delivered once again," said Frank Morgan, an analyst with RBC Capital Markets.
HCA also posted non-GAAP adjusted earnings before interest, taxes, depreciation and amortization of $9.9 billion in 2019. That's above the high end of its guidance, which was $9.75 billion. It's also up from adjusted EBITDA of $8.9 billion in 2018.
Still, the company's reported $3.5 billion in net income for 2019 was down 7.4% from $3.8 billion in 2018.
In the fourth quarter, HCA's revenue was $13.5 billion, up 10.2% year-over-year. Net income was mostly flat at about $1.1 billion.
Salaries and benefit expenses climbed 11.3% to $6.1 billion in the quarter from $5.5 billion.
HCA's admissions grew 5.2% in 2019 year-over-year and revenue per equivalent admission grew 3.2% in that time. Emergency room visits increased 4.5% year-over-year—with what the company said was only modest impact from the flu in the fourth quarter—and outpatient surgery cases increased 4%. Inpatient surgeries grew 3.4%, and patient days jumped 6.9%.
Sam Hazen, HCA's CEO, said on the call that the company has now grown inpatient admissions in 23 consecutive quarters.
"This remarkable consistency reflects positive market forces across our diversified portfolio, a robust growth agency, significant capital spending and strong execution by our people," he said.
HCA treated 35 million patients last year, which Hazen said is a new record.
Matthew Gillmor, a senior research analyst with Baird, said he was particularly impressed that HCA's commercial inpatient admissions grew 4.7% in the fourth quarter of 2019 year-over-year.
"It's the strongest quarter for commercial volumes that we've seen," he said.
Gillmor chalks that up to HCA's intentional strategy over the years of locating its hospitals in growing markets, as more jobs means more commercially-insured patients. He said it also shows their capital spending on clinical capacity is paying off.
"I believe part of the commercial volume trend you're seeing is a reflection of the capital investments they made several years ago," Gillmor said, "that capacity coming online and patients getting served by that capacity."
Hazen indeed attributed HCA's volume growth in 2019 in part to its $4.1 billion in capital spending, some of which goes toward improving clinical capabilities. Capital spending was another area HCA exceeded its own prediction for last year, which was $3.7 billion .
Some of the capital spending was necessary investments in HCA's major recent acquisitions, including six-hospital Mission Health in Asheville, N.C. HCA has also added bed capacity over the years, including about 1,800 beds in 2019 alone.
At the end of 2019, HCA had 184 hospitals and 123 freestanding outpatient survey centers. Hazen said up to 14% of HCA's ER traffic enters through its freestanding platform.
HCA does not support the controversial Trump administration price transparency rule that forces hospitals to disclose the rates they negotiate with payers, Hazen said on the call.
"We don't think it will accomplish what others think it will accomplish," he said.
Hazen said he thinks the resulting information will be difficult for patients to discern and complicated for hospitals to produce. He doesn't think HCA will run into compliance issues, however.
Earlier this month, HCA announced it completed the purchase of Galen College of Nursing, the company's third nursing school investment. On Tuesday's call, Hazen said the company is in the final stages of expanding Galen's educational offerings to its own nurses.
"We think that's a winning formula for us," he said.
In its guidance for 2020, HCA predicts revenue between $53.5 billion and $55.5 billion, adjusted EBITDA of $10.25 billion to $10.65 billion and capital expenditures between $4 billion and $4.2 billion.
Asked how HCA would respond to a possible recession, Hazen said provisions of the Affordable Care Act might provide a buffer to hospitals that didn't exist in prior recessions. People today are buying subsidized policies through exchanges and enrolling in expanded Medicaid programs.
"We haven't determined exactly how to process that yet," he said. "That could create a different resiliency, if you will, with respect to our ability to navigate a recession."