Thursday, April 21, 2005 | 10:58 a.m.
HCA Inc., the largest U.S. hospital chain and a major player in the Las Vegas market, said first-quarter profit rose 20 percent, more than analysts estimated, as the company treated more patients and reduced losses from unpaid bills.
Net income climbed to $414 million, or 95 cents a share, from $345 million, or 69 cents, a year earlier, Nashville, Tenn.- based HCA said today in a statement. The company was expected to earn 88 cents, the average estimate of 22 analysts surveyed by Thomson Financial. Revenue rose 4.1 percent to $6.18 billion.
Locally, HCA owns Sunrise, MountainView and Southern Hills hospitals, three outpatient-surgery centers and land for a hospital in Henderson.
HCA and competitors are benefiting as job growth means more patients may be covered by health insurance. HCA said admissions at its hospitals rose during the quarter, while the proportion of uninsured patients shrank. Chief Executive Jack Bovender is focusing on faster-growing markets, expanding in outpatient surgery, and offering discounts to boost bill collections.
"As they add outpatient business, HCA's going to continue to show strength and they'll see a pickup in higher-value and elective procedures," Joseph Chiarelli, an analyst at Oppenheimer & Co. in New York, said today in a telephone interview. A higher proportion of paying patients and an increase in outpatient care "is showing the potential strength of not only the company, but the hospital sector," he said.
Shares of HCA rose 60 cents, or 1.1 percent, to $53.60 at 10:01 a.m. in New York Stock Exchange composite trading. They had gained 33 percent this year.
HCA raised its forecast for full-year net income to a range of $3.05 to $3.20 a share, from a previous estimate of $2.75 to $2.90.
Analysts had raised their estimates from 76 cents, after HCA said on March 28 it would beat estimates for the first quarter with net income ranging from 88 cents to 93 cents a share. Revenue in the year-earlier quarter was $5.94 billion.
The company also said that it would sell 10 of its 190 hospitals in rural and smaller urban areas this year. Most of the company's hospitals are located in large urban and suburban markets. The 10 hospitals up for sale, including four in West Virginia and two in Tennessee, had 2004 revenue of $654 million.
Proceeds from the hospital sales probably will be used to pay down the company's debt, analysts said.
"Given the positive start to 2005, strong cash flow generation, and our opinion that debt will be reduced this year, we believe HCA should be a core holding for healthcare investors," Merrill Lynch fixed-income analyst Michael Scarangella wrote in a March 29 note to clients.
At hospitals HCA owned at least a year, the standard measure for the industry, admissions increased 1 percent and surgical procedures rose 1.1 percent from a year earlier. The number of outpatient surgeries rose 1.5 percent, boosted by a 3.2 percent increase at HCA's ambulatory surgery centers.
HCA scaled back its provision for unpaid patient bills in the quarter to $574 million, or 9.3 percent of revenue, compared with $694 million, or almost 12 percent, a year earlier.
HCA expanded its discount policy in early January to include uninsured patients who earn too much money to qualify for state aid or charity care. The discounted prices are similar to the rates negotiated by managed-care insurers in local markets, HCA said.
For patients who don't qualify for charity care, HCA said it may ask for deposits or steer some patients to other facilities for nonemergency treatment.
"HCA is very focused on the upfront collection process," Darren Lehrich, a senior analyst at Piper Jaffray & Co. in New York who rates HCA shares "market perform" and doesn't own any, said in a telephone interview on April 20. "That's the key business strength to have right now because over time we see more and more cost shifting to the consumer in terms of higher co-pays and deductibles."
Patient admissions for the Las Vegas hospitals during the first quarter rose nearly 13 percent to 15,086 patients from 13,394 in the year-ago quarter.
Patient-bed days, which is the number of days a patient occupies a bed, increased 8 percent to 95,627 bed days from 88,430 bed days in the year-ago quarter.
HCA is investing millions of dollars in the Las Vegas community to expand its hospitals and the services they provide. At MountainView, about $16 million was spent to add 36 beds to the fifth floor, which opened during the first quarter. The hospital also spent $1.2 million to redesign the rehabilitation department and build a 12-bed observation unit, which is scheduled to open in a week.
MountainView also is building a third catheterization lab and space for a fourth one, which will cost about $2.8 million, while Sunrise opened two catheterization labs in the first quarter.
At Sunrise, construction continues on a $75 million expansion of Sunrise Children's Hospital, which is connected to Sunrise Hospital and will provide 56 private pediatric rooms when the multi-year expansion is completed. The expansion includes spending between $4 million and $5 million this year on the project, which will add pediatric intensive care beds and beds for children with cancer. Those projects are scheduled to be done in August.
In February, Southern Hills received its certification to open its level-two nursery with nine beds. The hospital plans to break ground on its second medical-office building this summer.
Sun business writer Michelle Swafford contributed to this report.
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