HCA Healthcare closes out 2022 with revenue gains, lingering capacity constraints

HCA Healthcare closed out a back-and-forth 2022 with year-over-year fourth-quarter revenue and net income gains despite executives acknowledging persistent capacity constraints even with stabilizing labor rates and reduced nurse turnover.

Full-year results for the hospital chain showed higher revenue but lower net profit compared to 2021.

The quarter’s income and projections for 2023 each came in slightly below Wall Street’s expectations. The company’s shares opened the day with a roughly 3% hit but rebounded to about even by midday.

In Friday morning’s investors call, CEO Sam Hazen said the system has seen a return to normal seasonal demand during the back half of the year as well as a decline in COVID volumes compared to the flurry of late 2021 and early 2022.

“2023 was a tale of two halves, with the first half being more about winding down from the previous two years of intense COVID activity and responding to the resulting challenges,” Hazen said. “The second half was more about normalization, which included strong demand and an improving labor market.

“Our turnover rate is still higher than what we want, but we believe it is better than the industry average. Employee engagement scores recovered to around pre-pandemic levels. Again, our engagement is above the industry average. Our recruiting teams continue to generate results for the company. Hiring increased 6% year-over-year in 2022.”

HCA’s fourth-quarter revenues landed at $15.50 billion compared to $15.06 billion during the same period last year. Net income attributable to the company was $2.08 billion ($7.28 per diluted share), up from $1.81 billion ($5.75 per diluted share).

HCA noted that the results include gains on facility sales of $1.33 billion. The quarter also saw an estimated $50 million revenue and expenses hit related to Hurricane Ian’s impact on a Florida facility, the system said.

On a year-over-year basis, same facility admissions were up 2.9% for the quarter while same-facility equivalent admissions rose 5.4%, HCA reported. Same-facility inpatient surgeries fell 0.1%, same-facility outpatient surgeries rose 0.3% and emergency room volumes were up 11%, executives said.

HCA executives said that year-over-year volume comparisons are somewhat skewed by COVID-19 volumes. Specifically, COVID-19 admissions represented 3.1% of all same-facility admissions during the quarter versus 5.4% during the prior year’s closing period, which also had an impact on patient acuity metrics, they said.

Still, the system saw enough volume growth and overall favorable payer mix and acuity levels to push revenues higher, Hazen said.

HCA is also making steady progress against industrywide staffing shortages, though there are still areas for improvement. The fourth quarter's hourly labor spend was roughly equivalent to the prior quarter, hiring through 2022 was up 6% year over year and nurse turnover for the quarter was down 26% compared to the average of the fourth quarter of 2021, Hazen said.

“Our turnover rate is still higher than what we want, but we believe it is better than the industry average,” he said. “Employee engagement scores recovered to around pre-pandemic levels—again, our engagement is above the industry average. Our recruiting teams continue to generate results for the company.”

Despite the gains, HCA faced labor-driven capacity constraints during the quarter that were “a little bit elevated over the third quarter,” Hazen said.

“We … had some moments in the quarter where we were unable to receive transfers in or take certain patients into our facilities," he noted.

“We had … approximately 2% of our total admissions we were unable to take through our transfer centers, and had to find those patients alternative solutions where we could,” Hazen said. “We were busier in the fourth quarter than we were in the third quarter, so that was part of it. But nonetheless, we still are seeing opportunities for us to improve the throughput.”

For the full year, HCA revenues totaled $60.2 billion, up from 2021’s $58.76 billion. Net income attributable to the company was $5.64 billion ($19.15 per diluted share), down from $6.96 billion ($21.16 per diluted share).

2022’s numbers include $1.3 billion in gains from the sales of facilities and $78 million in losses on retirement of debt, versus corresponding $1.62 billion gains and $12 million losses during 2021.

HCA Healthcare reports $908 million in cash and cash equivalents as of the year’s end. Its board announced a quarterly cash dividend of $0.60 per share as well as the authorization of $3 billion in additional share repurchases.

Looking ahead, HCA issued a 2023 guidance estimate with revenues between $61.5 billion and $63.5 billion and net income attributable to the company between $4.53 billion and $4.9 billion, which was slightly under the street’s consensus estimates. Capital expenditures are estimated to be roughly $4.3 billion, which is below 2022.

For the coming year, Hazen said HCA’s agenda will be focused on addressing labor and capacity issues, countering inflationary pressures and accelerating growth, Hazen said. Beyond that, the system aims to update its digital capabilities, care models and workforce development capabilities while investing capital into its existing networks to expand service offerings.

“As we push ahead into 2023 and beyond, we believe the strong demand for healthcare services presents an opportunity for HCA Healthcare in an otherwise challenging macro environment,” Hazen said. “We believe the company is well positioned culturally, competitively and financially to capitalize our agenda next year.”