HCA’s income falls on collections, uninsured patients

Geraldine Ryerson-Cruz

Friday, Oct. 22, 2004 | 11:10 a.m.

HCA Inc., the largest U.S. hospital chain and an operator of three Las Vegas hospitals, said third-quarter profit fell 26 percent as payment increases for each admission slowed and collections from uninsured patients declined.

Net income dropped to $227 million, or 47 cents a share, from $306 million, or 61 cents, in the year-earlier quarter, the Nashville, Tenn.-based company said in a statement. Revenue rose 5.9 percent to $5.79 billion. The company released preliminary results Oct. 13.

Chief Executive Jack Bovender is facing an increase in the percentage of bills that remain unpaid as more uninsured patients seek treatment at HCA's 190 hospitals. A shift to lower-paying plans at managed-care companies slowed increases in reimbursements for care during the quarter, too, HCA said.

"The hospital sector is not an easy place to make money these days," said David Borah, an analyst for Century Capital Management, in a telephone interview before the earnings report. Century Capital sold its remaining 105,000 shares of HCA as of a June 30 filing. Managed-care payers "have greater bargaining power versus hospitals, and that's not specifically an HCA issue. It's an issue for a lot of the hospital companies."

Shares of HCA rose 54 cents to $35.63 today in midmorning trading on the New York Stock Exchange. HCA's shares have fallen 18 percent this year.

In Las Vegas, HCA owns Sunrise, MountainView and Southern Hills hospitals, three outpatient-surgery centers and land for a fourth hospital.

HCA set aside $688 million, or 11.9 percent of revenue, during the quarter for unpaid bills, compared with $566 million, or 10 percent of revenue, in the year-earlier period. The provision for doubtful accounts was $661 million, or 11.3 percent of revenue, in the second quarter.

In Las Vegas, HCA spent $38.5 million for charity care in the third quarter among its three hospitals, up from $24.7 million in the year-ago quarter, Sunrise spokeswoman Cheryl Smith reported.

Standard & Poor's last week cut its corporate-credit rating for HCA to junk after the company said it would buy back as many as 61 million of its shares at a price of $35 to $41 a share. The offer, valued at as much as $2.5 billion, ends at midnight New York time on Nov. 10.

Damage and disruption from four hurricanes in Florida during the quarter hurt profit by $40 million, or 5 cents a share. HCA has 40 hospitals and 28 surgery centers in the state that account for a quarter of the company's revenue.

Southern Hills hospitals, Smith said.

Changes in Medicare regulations on Oct. 1, 2003, caused outlier payments, those for especially costly patients in the federal government's health insurance program for the elderly and disabled, to drop $36 million in the quarter from a year earlier, to $29 million. The smaller payments contributed to slower revenue-per-admission growth in the quarter, the company said.

HCA confirmed its Oct. 13 forecast that full-year profit probably would fall to $2.40 to $2.45 a share from $2.61 in 2003. Earnings will rise to a range of $2.75 to $2.90 next year, HCA said.

HCA continues to invest in the Las Vegas market with expansions.

MountainView Hosptial is building a new parking garage that is scheduled to open next month and is adding 36 patients beds to its fifth floor that are scheduled to be available in early 2005. The hospital is also considering adding a five-story patient tower.

Sunrise is expanding the number of children's hospital beds and the hospital's services for children and adults. In July, Sunrise announced it was launching a neurosciences institute.

Southern Hills Hospital plans to add an outpatient surgery center and additional medical office space.

HCA said it plans to build a hospital in Henderson on about 41 acres just north of Interstate 215 at Stephanie Street and the proposed Wigwam Parkway.

Sun business reporter

Michelle Swafford contributed to this report.