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Analysis

$405M in Facilities Sale Drives Busy Q1 for HCA

By Jack O'Brien  
   April 30, 2019

The Nashville-based for-profit hospital operator's revenues topped $12.5 billion but net income dropped below $1.1 billion.

HCA Healthcare posted total revenues of nearly $12.5 billion in Q1, a 9.6% year-over-year increase, though net income dropped to $1.03 billion, according to the company's latest earnings report released Tuesday morning.

The Nashville-based for-profit hospital operator's cash flows from operating activities fell by more than $300 million compared to Q1 2018, while adjusted EBITDA rose to $2.5 billion.

The company's revenues were bolstered by two factors: the finalizing of an arbitration with a payer regarding out-of-network claims that amounted to $86 million and the sale of Oklahoma facilities totalling $405 million. 

Related: HCA Revenues Top $12.2B in Q4, Admissions Continue to Rise

Like the trend at the end of 2018, same facility admissions and same facility equivalent admissions rose slightly, though same facility emergency room visits dropped by 2.3%.

Same facility inpatient surgeries declined by 0.3% while same facility outpatient surgeries rose 1.3%, leading to same facility revenues per equivalent admission that increased 4.4% year-over-year.

Related: Outgoing HCA CEO Made 383-Times as Much as Median Employee

HCA's Q1 was marked by two major acquisitions: closing its purchase of Mission Health for $1.5 billion and securing a majority stake in the Galen College of Nursing, one of the largest private nursing schools in the nation.

HCA's move to finalize the Mission deal did not receive an objection from North Carolina Attorney General Josh Stein and closed on February 1. 

The Galen College acquisition marks HCA's move to expand its nursing rolls, increase access to education and "provide career development opportunities." The deal is still subject to regulatory review and approval.

Related: HCA Completes $1.5B Mission Health Acquisition

Related: With an Eye on Professional Development, HCA Purchases Galen College of Nursing

HCA also recorded cash and cash equivalents totalled $531 million, capital expenditures of $781 million, and cash flows from operating activities of $974 million, which was down from $1.2 billion in Q1 2018.

The company raised its financial guidance slightly, projecting diluted earnings per share in a range between $9.80 and $10.40, an increase of $0.20 on each end of the estimate.

Earlier this month, Barron's reported that Wall Street analysts have begun telling company shareholders that HCA's stock is steady because there's "almost no chance" of Medicare for All becoming law.

ADDITIONAL HCA Q1 EARNINGS REPORT HIGHLIGHTS:

  • Salaries, benefits, supplies, and other operating expenses accounted for 79.8% of revenues, down from 81.6% this time last year.
  • The company repurchased $278 million worth of stock in Q1 and has nearly $2 billion remaining under its existing repurchase agreement.  
  • The company also declared a quarterly cash dividend of $0.40 per share to be paid on June 28.
  • By the end of Q1, HCA was operating 185 hospitals and 2,000 sites of care, marking increases for both.

For complete financial information, review HCA Healthcare's filing with the Securities and Exchange Commission.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: KONSKIE, POLAND - December 01, 2018: Hospital Corporation of America (HCA) logo displayed on smartphone - Image / Editorial credit: Piotr Swat / Shutterstock.com


KEY TAKEAWAYS

The company's revenues were bolstered in part by the sale of Oklahoma facilities totalling $405 million.

HCA's Q1 was marked by two major acquisitions: closing its purchase of Mission Health for $1.5 billion and securing a majority stake in the Galen College of Nursing

The company raised its financial guidance slightly, projecting diluted earnings per share in a range between $9.80 and $10.40.


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