HCA Healthcare's Q4 revenue dips under omicron's weight

HCA Healthcare’s fourth-quarter revenues and earnings dipped below investors’ expectations due to an omicron surge that executives said is on its way out.

The for-profit hospital chain announced this morning quarterly revenues totaling nearly $15.1 billion, below the consensus estimate of about $15.4 billion. Revenues were still higher than the $14.3 billion notched during the same quarter in 2020’s fiscal year.

Net income for the quarter landed at over $1.8 billion ($5.75 per diluted share), up year over year from over $1.4 billion ($4.13 per diluted share). Of note, this includes a $563 million gain from the sales of facilities and a roughly $670 million year-over-year increase in salary and benefits expenses.

Despite the announcement of an $8 billion share repurchase program and an increased quarterly dividend, HCA’s stock opened the day down about 8% but recovered about half of the dip through the morning.

“The omicron surge started to influence our business in early December. Overall, our teams continued their tremendous response, and the effects of the pandemic’s ever-changing conditions were managed well as reflected in our fourth-quarter financial results,” Sam Hazen, CEO of HCA Healthcare, said in a statement. “Across many dimensions of our business, our teams demonstrated an impressive ability to adjust quickly and effectively to three different surges during the year and deliver for our patients, our communities and our colleagues.”

Hazen told investors that the company’s hospitals have seen about 27,000 COVID-19 patients, representing roughly 5% of its total admissions as opposed to 13% during the third quarter. HCA has provided inpatient care to more than 260,000 COVID-19 patients, he said.

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“Currently our hospitals continue to treat many patients with COVID-19,” Hazen told investors. “COVID-related census levels, fortunately, have begun to peak and we anticipate they will decline over the next few weeks.”

HCA’s same-facility volumes broadly increased on a year-over-year basis, with only inpatient surgeries dropping 1% since the fourth quarter of 2020.

HCA said it currently has a balance sheet of $1.45 billion in cash and cash equivalents. The company spent over $2 billion to repurchase shares of its common stock during the fourth quarter.

Looking to the full year, HCA tallied a total of $58.75 billion in revenues, up from $51.5 billion from the previous year. 2021 net income was $6.96 billion ($21.16 per diluted share), nearly double last year’s $3.75 billion ($10.93 per diluted share).

The 183-hospital system’s guidance for the coming year projects revenues between $60 billion and $62 billion as well as net income between $5.55 billion and $5.84 billion. Excluding acquisitions, the company said it expects to increase its capital expenditure by 17% to roughly $4.2 billion.

“As I indicated previously, we believe demand for healthcare services will be strong in 2022 and comparable to historical growth rates in the 2% to 3% zone, with COVID-related admissions representing between 3% and 5% of the total,” Hazen said. “We expect this demand to be supported by a growing economy and more insurance coverage for people through their employer or the exchanges.”

HCA adding five Texas hospitals to its tally

HCA’s earnings were preceded by a Wednesday evening announcement that the company will be building five new full-service hospitals in Texas, adding to the 45 hospitals and 632 affiliated care sites it already owns in the state.

“Communities across Texas are undergoing a rapid increase in population, and the addition of these new hospitals will help our existing network meet the increasing need for healthcare services,” Hazen said in a statement. “We are thrilled to expand our presence in Texas, and we believe it will enhance our care and better serve our patients.”

Two of the new hospitals will be built in the Austin area, with the remaining three spread across the Dallas Fort-Worth, Houston and San Antonio areas, according to the announcement.

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HCA is the largest healthcare provider in Texas with over 60,000 employees providing care to more patients than any other organization, the company said. The new hospitals are the latest in the roughly $6.6 billion HCA said it has invested in its Texas business over the past half-decade.

The Texas expansion plans come shortly after the chain announced that it would be building three new hospitals in Florida, another busy market where HCA expects demand to increase over the coming years.

Executives told investors today that the new hospitals in both states will generally start in the 50- to 75-bed range and are intended to complement HCA’s existing services in the state. Still, they said they were hopeful that the centers could grow to add more acute services down the line.