What can CFOs learn from the health system's better-than-expected financial results?
HCA's better-than-expected second quarter performance boosted the health system's revenue up to $17.5 billion for the quarter, up 10.3% from $15.86 billion for the same time last year.
The 188-hospital, Nashville-based health system reported second quarter net income of $1.46 billion, up from $1.19 billion, putting the system's stock at $5.53 per diluted share.
How did the system accomplish this?
The Playbook
As health systems are smacked by contract labor costs, which soared during the pandemic, the game of cutting costs grows more intense, as it is coupled with workforce shortages.
HCA was able to slash its contract labor costs in its second quarter by 25.7%, compared to its Q2 contract labor costs in 2023. Total Q2 labor costs were $7.7 billion, up from $7.3 billion in the same quarter last year. As HCA continues to make cuts to contract labor, it notes that wage inflation has helped by remaining relatively stable.
Outside of cutting costs, HCA's Q2 success also came out of other initiatives, like academics. HCA expanded its Galen School of Nursing, growing to 10 campuses across 10 states, improving its nursing supply into its markets. Last spring the health system invested more than $200 million to open new campuses throughout the college, and with this in place HCA is able to more easily acquire nursing talent for its operations.
The Payoff
The health system has adjusted its full-year guidance and is now projecting revenue between $69.75 billion and $71.75 billion, up from its previous guidance of $67.75 billion to $70.25 billion. The company's stock jumped more than 7% in premarket trading at the end of July.
HCA saw inpatient admissions growth of 5.8%, compared to 5.2% the previous year. Other departments saw increases as well: Same-facility emergency room visits increased 5.5% in the second quarter of 2024 compared to 2023, and same facility inpatient surgeries were up 2.6%. However, same-facility outpatient surgeries declined 2.1% in the second quarter of 2024 compared to the same period of 2023.
"The company's results for the second quarter were positive and reflected strong demand for our services," Sam Hazen, Chief Executive Officer of HCA Healthcare, said in a press release. "Our teams continued to execute our strategic plan effectively and produce positive outcomes for our patients."
Marie DeFreitas is the finance editor for HealthLeaders.
KEY TAKEAWAYS
HCA Healthcare saw a revenue jump in its second quarter of 2024, powered by a couple strategic moves.
HCA was able to slash its contract labor costs in its second quarter by 25.7%, compared to Q2 in 2023.
Expanding academic initiatives and investments played into HCA’s financial success.