Hospital company HCA says admissions rise, sector shares up

Tue Jul 16, 2013 4:48pm EDT

(Reuters) - HCA Holdings Inc (HCA.N), the largest U.S. for-profit hospital operator, said on Tuesday that second-quarter patient admissions rose more than 1 percent, boosting revenue and profit and pushing up shares in the sector.

The admissions increase, while small, came after a slow first quarter as HCA and other hospital chains struggled to attract patients. People are using medical services less frequently due to rising out-of-pocket expenses for their insurance plans, or because they have no insurance coverage.

The rebound for HCA surprised the market, coming after rival hospital operator Tenet Healthcare Corp (THC.N) warned in June that patient admissions remained soft in the second quarter. In April, smaller chain Health Management Associates Inc HMA.N reduced its outlook for full-year earnings and revenue, citing weak patient admissions.

Analysts said it was too soon to tell whether the sector is poised for a rebound, but some suggested HMA might be benefiting from improvements in some of local markets.

"HCA's markets and their position within those markets are really substantially different than most of the other hospital companies. They tend to be larger markets and more rapidly growing markets," said CRT Capital analyst Sheryl Skolnick.

An HCA spokesman declined to comment on what prompted the stronger second-quarter admissions.

HCA shares jumped 4.4 percent to close at $38.86, while other hospital operators, including Community Health Systems Inc (CYH.N) and Tenet Healthcare also gained.

Investor expectations for hospital companies have been low heading into the second-quarter earnings season.

Tenet said in June that weak patient admissions in the first quarter continued into the second, pushing its outlook for adjusted cash flow for the period to the lower end of its previously forecast range.

Hospital companies' shares have rallied this year, despite weak demand for services, because investors expect earnings to strengthen in 2014 as more Americans obtain insurance coverage under President Barack Obama's healthcare law.

HCA stock had lagged the rest of the sector due to concerns it might warn of weakening demand in the second quarter, analysts said.

"With volume concerns gone, investor focus can now shift to the more important point of healthcare reform," Jefferies analyst Brian Tanquilut said in a note to clients.

Same-facility admissions rose 1.3 percent in the quarter. In the first quarter, admissions were up only 0.1 percent.

HCA preannounced second-quarter earnings of about 91 cents per share, up from 85 cents a year earlier, and higher than the average analyst estimate of 78 cents.

Revenue rose to $8.45 billion from $8.11 billion a year earlier.

Oppenheimer analyst Michael Wiederhorn called HCA's revenue growth respectable, but said the admissions results were positive albeit still below last year's levels. Stronger pricing boosted revenue in the quarter, he added.

HCA also preannounced that net income before taxes rose to $806 million from $699 million, and earnings before interest, taxes, depreciation and amortization increased to about $1.69 billion from $1.57 billion. The figure excludes special items such as losses or gains from the sales of facilities.

The company also backed its outlook for 2013 earnings. It will report full quarterly results around August 1.

Community Health shares closed up 2.3 percent at $48.50 and Tenet rose 3.4 percent to $45.19.

(Reporting by Caroline Humer in New York and Susan Kelly in Chicago; Editing by Gerald E. McCormick, Lisa Von Ahn, Jeffrey Benkoe and Andre Grenon)

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