HCA's cost controls help it pull away from the for-profit pack


HCA Holdings Inc. outperformed expectations for the third quarter ending Sept. 30, which was attributed primarily to significant cost discipline.

The company reported net income of $618 million on revenue of $10.3 billion for the quarter. For the third quarter of 2015, it reported net income of $449 million on revenue of $9.9 billion.

Reuters has reported that HCA's labor costs and benefits represented 42.7 percent of net revenue for the quarter--more than 1 percent lower than what at least one big investment bank--Barclays--had projected.

By contrast, Community Health Systems reported a loss, with slightly lower revenue. Tenet Healthcare Corp. is expected to announce earnings later this week. But analysts noted its high reliance on patients enrolled in Medicare and Medicaid is likely to put pressure on its revenue, Reuters reported.

Until fairly recently, the Affordable Care Act had been a boon to the bottom lines of publicly traded hospitals. But some forecasters have said that the stream of new patients from the healthcare reform law has begun to taper off, according to CNBC. And many hospitals have had to grapple with the fact that patients who have high out-of-pocket costs may not be able to pay their bills. Moreover, pediatric facilities and other hospitals are still seeing cuts in payments from the Disproportionate Share Hospital program, which may hit organizations hard in the 18 states that have yet to expand Medicaid eligibility under the ACA.

At the same time, the hospital sector has objected to Hillary Clinton's proposal to create a public option on state health insurance exchanges as part of a tweak to the ACA, saying it may result in further reduction in reimbursement.

Yet in this turbulent operating atmosphere, HCA has managed to thrive.

"We see HCA valuation as appropriately moving away from the pack as the market segments those who can and those who can't run hospitals," said Mizuho Securities analyst Sheryl Skolnick in the Reuters article.