HCA Third-Quarter Profit Gain Meets Analysts’ Estimates

HCA Holdings Inc., the largest for-profit U.S. hospital chain, reported third-quarter profit in line with analysts’ lowered expectations.

Net income jumped sixfold to $360 million, or 78 cents a share, Nashville, Tennessee-based HCA said today in a statement. Revenue rose 11 percent to $8.1 billion. Analysts expected profit of 78 cents a share on sales of about $8 billion, according to estimates compiled by Bloomberg. The estimates were reduced when HCA on Oct. 16 released preliminary data that fell short by about 3 cents a share of expectations.

HCA’s businesses, which include 162 hospitals and 112 freestanding outpatient surgery centers, are skewed to emergency room traffic that is more vulnerable to pricing pressure and uncompensated care. Most hospitals are seeing increases in patients who are on Medicare, which has lower reimbursements than private insurers, said Sheryl Skolnick, an analyst at CRT Capital in Stamford, Connecticut.

“It’s happening all over the place,” Skolnick said today in an interview. “It was a softer quarter. Their expense control was good and offset some softness in revenue.”

HCA gained 5.6 percent to $30.01 at the close of New York trading after tumbling 10 percent yesterday. The shares have risen 36 percent this year.

Tenet Healthcare Corp., the third-largest publicly traded U.S. hospital chain, is scheduled to report earnings on Nov. 7.

Industry Consolidation

Revenue growth in the quarter was aided by HCA’s $1.45 billion buyout last year of a partner’s stake in the Denver-based HealthOne hospital system.

HCA is interested in potential consolidations and acquisitions, Richard Bracken, chairman and chief executive officer, said on a conference call today with analysts.

“We feel we have plenty of capacity on the balance sheets to do any acquisition we choose,” Bracken said. “We are seeing more activity. The entire industry is seeing it.”

Growth year-over-year in same-facility inpatient and outpatient admissions, the company’s main measure, slowed to 2.6 percent in the third quarter from a 3.9 percent rate in the second quarter.

Last year, at least 45 percent of the company’s business was tied to Medicare, Medicaid and uninsured patients, according to data compiled by Bloomberg. Medicare is the U.S. health plan for the elderly and disabled. Medicaid is the joint U.S.-state program for the poor.

Patient Base

“We have speculated that HCA has trouble maintaining quality physicians and professional staff necessary to attract a more lucrative patient base, resulting in persistent weakness in higher margin volumes as well as market share,” Vicki Bryan, an analyst at debt researcher Gimme Credit LLC, wrote in an Oct. 17 note to clients.

HCA raised $2.5 billion in debt after the preliminary report, with proceeds being used to repay a term loan and issue a special dividend of $2.50 a share to stockholders.

Net income in the year-earlier third quarter was $61 million, or 11 cents a share.

The company was taken public last year by an investment group led by Bain Capital LLC of Boston and New York-based KKR & Co. in an initial offering that raised $3.79 billion. Bain and KKR remain the company’s two largest shareholders, with each holding stakes of about 20 percent, according to data compiled by Bloomberg.

The company in August forecast full-year profit excluding one-time items of $3.57 to $3.77 a share and sales of $32 billion to $33 billion.

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