An unexpectedly rough labor market, inflation and lower-acuity COVID-19 cases led HCA Healthcare to lower its guidance for the remainder of 2022, executives told investors during a Friday morning earnings call.
The news comes alongside the health system’s quarterly report, in which HCA saw higher year-over-year revenues but dipped on income due to increased costs and the lower acuity of COVID-19 patients.
“The COVID-19 pandemic continued to influence our results in the first quarter with the omicron surge, which slowed in the middle of the quarter,” HCA CEO Sam Hazen told investors.
“More significantly, the challenging labor market pressured margins as the cost of labor increased more than we expected compared to the first quarter of the prior year. In the face of these challenges, however, we had a number of positive volume and revenue indicators that were encouraging.”
Leading those upsides was a 2.1% year-over-year increase in same-facility admissions, which Hazen said largely occurred during February and March. The system also saw year-over-year same-facility growth across emergency room visits (14.6%), inpatient surgeries (0.8%) and outpatient surgeries (6.8%).
Total revenues for the quarter grew nearly 7% to $15 billion, up from the prior year’s $14 billion. Same-facility revenue per equivalent admission increased 2.7% over the first quarter of 2021, while same-facility inpatient revenues grew 5.4% and same-facility outpatient revenues rose 10.6%.
Despite these gains, HCA’s year-over-year net income trended in the opposite direction, dropping from the first quarter of 2021’s $1.4 billion to nearly $1.3 billion in the first quarter of 2022. Adjusted EBITDA for the quarter also dipped from last year’s nearly $3.1 billion to just over $2.9 billion.
One key contributor cited by Hazen and Chief Financial Officer William Rutherford was the system’s roughly 49,000 quarterly COVID-19 inpatients. These low-acuity cases represented about 10% of the company’s total admissions for the quarter and generally drove down margins, they said.
The greater impact on earnings, however, came from the omicron surge’s effect on labor markets. Echoing comments shared this week by Tenet Healthcare, HCA Healthcare executives said they saw “modest improvements” in contract labor measures compared to the fourth quarter of 2021 but that prices for these temporary workers—and subsequently the full-time labor market—are normalizing more slowly than expected.
“In some situations, the challenges in the labor market also constrained our capacity, preventing us from delivering hospital services to certain patients,” Hazen said. “By the end of the quarter, we were able to overcome some of these capacity constraints and, for the most part, our transfers were able to operate normally and move more patients to the proper settings in our networks.”
Hazen and Rutherford said HCA has retention, recruitment, capacity management and care model initiatives underway to mitigate both labor costs and interruptions to care delivery.
However, the combined impact of labor costs, first-quarter COVID-19 cases and inflation—which will impact professional fees, energy procurement, cost of utilities and other purchased services—led HCA to reevaluate its performance for the remainder of the year.
Full-year revenues guidance now sits in the range of $59.5 billion to $61.5 billion, a $500 million reduction over prior estimates released in January.
Net income guidance for the year is $4.95 billion to $5.34 billion (versus January’s $5.55 billion to $5.84 billion) and adjusted EBITDA fell to $11.8 billion to $12.4 billion (from $12.55 billion to $13.05 billion).