Inpatient volume growth across HCA Healthcare’s entire hospital portfolio and other steady gains on payer mix, length of stay and operating expenses have set the large chain on a strong trajectory for 2024, executives told investors Friday.
The 188-hospital for-profit reported first-quarter net income of $1.59 billion ($5.93 per diluted share) and $17.34 billion in revenues.
Those numbers are up from the $1.36 billion ($4.85 per diluted share) and $15.59 billion of the same period last year, and squarely ahead of consensus estimates of $5.09 earnings per share and $16.82 billion in revenues.
But despite the quick start and assurances of continued demand, the company said it's holding firm on its projections for the remainder of the year. The conservative approach left its shares trading about 3% lower as of early Friday afternoon.
Patient volumes were the highlight for executives. During Friday morning's investor call, they made sure to underscore same-store inpatient admissions growth of about 6.2% and same-store equivalent admissions growth of 5.2% from last year. Also on a same-facility basis, emergency room visits rose 7.2% year over year and inpatient surgeries grew by 2.1%.
Speaking to investors, CEO Sam Hazen noted that the inpatient volume growth was clear among each of HCA’s divisions and often at an individual hospital level.
“Actually, we had the best portfolio experience I think I’ve seen in my experience in the company,” he said during Friday morning’s earnings call. “Fifty-six of our hospitals [grew] greater than 10%—so almost a third of our portfolio grew by 10%. We had another one-quarter of our portfolio grow greater than 5%.”
The uptick was consistent across HCA’s various service lines, Hazen said. “Even in obstetrics we saw births grew on a year-over-year basis, and that’s been down a little bit,” he added.
Executives noted that the volume gains were supported by HCA’s efforts to better manage length of stay and free up capacity. The company is also working to increase its inpatient bed total to maintain the volume momentum, exectives said.
Acuity levels and payer mix shifted year over year in HCA’s favor as well, with Hazen noting that commercial volumes’ share of equivalent admissions rose from 34% of the total to 36% from last year. These helped the company reach 3.5% higher reimbursement per equivalent admission.
Same-facility outpatient surgeries fell by 2.1% year over year, which executives attributed in part to the "calendar effect" of this year's spring break falling in March. The lost volume was also largely among Medicaid patients, leading executives to suspect that redetermination likely has more patients choosing to defer their self-paid elective procedures at the top of the year.
The company noted that its results for the quarter included $201 million ($0.57 per diluted share) of gains from facility sales and $145 million of revenues ($0.40 per diluted share) that had been locked up in disputed claims with a commercial payer from prior years.
On volumes more broadly, executives said they suspect that year-over-year volume comparisons will likely be “slightly more difficult.”
“We will be able to sustain growth,” Hazen said. “It may not be at this particular level, but we’re pretty encouraged by where we are from an overall competitive positioning standpoint, as well as what we see as the backdrop of demand.”
Elsewhere within its operations, outbound Chief Financial Officer Bill Rutherford said labor costs as a percent of HCA’s revenue improved by 100 basis points over the prior year’s first quarter. Contract labor was 5.1% of the system’s total labor costs, a 21.7% improvement year over year.
Like other systems, HCA was hit hard last year by a spike in physician professional fees that was further complicated by its recent investment in the Valesco physician staffing business. Rutherford told investors that these fees “continue to moderate and perform in line with our expectations,” while Valesco’s operations “performed better than our expectations in the quarter.”
Rutherford said the system’s other major operating expense headwind going forward will be an "expected" bump in provider taxes related to the supplemental payment programs HCA participates in.
HCA announced a cash dividend of $0.66 per share and reaffirmed its estimated guidance for the year. It also repurchased nearly 3.9 million shares of its common stock for about $1.2 billion, and still has nearly $6 billion remaining in repurchase authorization.
The hospital chain was already coming hot off of a “better than expected” fourth quarter in which patient volumes showed a similar near-universal rise across the company. This helped push the company to a full-year revenue performance of $65 billion and net income of $5.2 billion ($18.97 per diluted share), as opposed to the prior year’s $60.2 billion and $5.6 billion ($19.15 per share).
HCA’s reports of higher volumes and revenues join similar performances from fellow public for-profits Community Health Systems and Universal Health Services, which shared their first quarter numbers earlier in the week.