Rising Inpatient Volumes Boosted HCA’s First Quarter Earnings

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Dive Brief:

• HCA Healthcare reported first-quarter earnings on Friday that beat Wall Street expectations on revenue. The operator posted $17.3 billion in revenue and a net income of $1.6 billion, as patient volumes rose and HCA controlled expenses.
• Strong inpatient metrics drove HCA’s volume growth, CEO Sam Hazen told investors Friday. Inpatient admissions grew 6% year over year, inpatient surgeries were up almost 2% and equivalent admissions grew 5%. 
• “Every division had growth in inpatient admissions — actually, we had the best portfolio performance, I think, I’ve seen in my experience in the company,” said Hazen.

Dive Insight:

The Nashville, Tennessee-based operator became the latest for-profit health system to report strong inpatient volumes in the first quarter.

Inpatient admissions grew 10% year over year in almost a third of HCA’s hospital portfolio, and another quarter of its portfolio increased by 5%, Hazen said.

Growth occurred “even in obstetrics,” said Hazen, “and that’s been down a little bit. So [it’s] very broad-based from a service line standpoint as well.”

CFO Bill Rutherford said HCA’s inpatient numbers may have gotten a “modest”  lift from the CMS’ two-midnights rule, which was published in April. The rule mandates inpatient care when a clinician believes a Medicare beneficiary needs hospital care that will likely last for two midnights.

HCA attributed most of its increased inpatient volumes to improved capacity management. HCA, like its peer Community Health Systems, has been working to decrease length of stay and increase total available beds to allow for higher inpatient volumes, executives said. 

The system bumped up its inpatient bed capacity by 2% as part of its $1.1 billion in first-quarter capital expenditure spending, according to executives. HCA also increased its geographic footprint by almost 5% during the first quarter. 

Capital spending for the full year is expected to run between $5.1 billion and $5.3 billion as the company chases its goal of holding a 29% market share in healthcare services by the end of the decade. 

“We’re investing more in the business than we’ve ever invested because of the capacity that we need and the network development that we want,” Hazen told investors. “We’re really excited about what we’re spending our money on, and our patterns have proven that we can generate very positive returns.”

Outpatient surgeries decreased by approximately 2% compared to the first quarter of 2023.

The executives attributed the dip in outpatient surgeries to the lingering impact of the Medicaid redetermination process, noting a loss of Medicaid outpatient surgery volumes, and “calendar effects” of having fewer working days during March to schedule elective surgeries. Executives expected some of the surgeries lost in the first quarter may be made up later in the year.

On the expense front, the operator reported strides to contain costs that dogged the company during 2023, including labor costs and physician fee expenses.

Rutherford said labor costs as a percent of HCA’s revenue improved by 100 basis points year over year. Contract labor came down by more than 20% year over year to total just 5.1% of HCA’s labor costs. 

While total operating expenses remained high at $15.1 billion, Rutherford said they were in line with HCA’s expectations.

The operator reaffirmed its guidance for 2024.