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Higher Admissions Drive HCA’s Q4 Earnings, Stock Price

News  |  By Steven Porter  
   January 30, 2018

The large for-profit hospital operator has been pursuing an aggressive M&A strategy.

Shares for HCA Healthcare Inc. were trading higher Tuesday morning on news that an increase in patient admissions drove the major hospital operator’s earnings up by 8.6% in 2017’s fourth quarter.

The recent growth in revenue stemmed primarily from the company’s 2.3% rise in same-facility equivalent admissions compared to 2016’s fourth quarter, the company said in its earnings statement.

Although low admissions have been putting financial pressure on hospitals nationwide in recent quarters, HCA has been acquiring facilities from its competitors, as Reuters reported.

“We’re pleased with the number of transactions we were able to complete in 2017,” Chairman and CEO R. Milton Johnson said during a conference call with investors Tuesday, noting that the company will assume operation of the latest target in its acquisition “pipeline,” Savannah Memorial Health in Georgia, within two days.

Related: Hospital, Physician Group M&As Slowed in Q3

The local hospital authority approved the sale just last week, as the Savannah Morning News reported.

“We’re very excited about entering that new market and the prospects for our future in Savannah,” Johnson added.

While acknowledging that HCA isn’t the only large hospital operator aggressively pursuing mergers and acquisitions, Johnson said HCA doesn’t feel threatened by the recent M&A spree among other large health systems.

“With respect to some of the other consolidation activities, we don’t see that having at this point a major impact on our outlook. We’re not, when you think about those consolidations, we’re not adding new competitors in any of our markets,” he said. “They do maybe benefit from scale. But, again, in here over the intermediate term, we don’t foresee those transactions that have been announced having an impact on our outlook.”

Johnson made a couple of other noteworthy statements about HCA’s technology and taxes:

  • Technology: “The use of our continuously expanding clinical data warehouse supports our clinical excellence program and positions us well for emerging approaches like artificial intelligence,” Milton said. “Over the next three years, the company plans to deploy approximately 100,000 iPhones as part of our nursing technology agenda.”
     
  • Taxes: “As a result of the recent passage of the Tax Cuts and Jobs Act, we currently estimate the company’s effective tax rate in 2018 to be 25% and estimate that the reduction in cash taxes in 2018 to be approximately $500 million. It is our plan to reinvest these expected savings into our markets and into workforce development.”

Despite the savings attributed to the tax reform law, HCA also saw a $301 million tax-related charge that Reuters reported had lowered net income attributable to HCA by 48.5%.

HCA Executive Vice President and CFO William B. Rutherford said during Tuesday’s call that this $301 million charge related to the tax law’s estimated impact on deferred tax assets and liabilities.

“This estimate may be refined as further information becomes available,” Rutherford noted.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


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