Nashville, Tenn.-based Hospital Corporation of America is the largest for-profit operator of health care facilities in the country. According to its latest annual report, it operates 170 hospitals — 166 full-service acute care hospitals, three psychiatric hospitals and a rehabilitation hospital — as well as 118 freestanding surgery centers and 134 other centers, either freestanding ERs or urgent care facilities.
While Florida and Texas have the most HCA-owned facilities, Georgia currently has seven — including Doctors Hospital in Augusta, Fairview Park Hospital in Dublin and Coliseum Health System in Macon.
The company is publicly traded on the New York Stock Exchange under the symbol HCA.
In a letter to its shareholders at the end of last year, HCA chairman and CEO R. Milton Johnson characterized HCA as “a company with a near half-century history of successful navigation through political shifts and emerging market trends,” adding that 2016 represented a year of solid growth and deliberate attention to a strategic agenda.
“We believe the delivery of high quality care and a positive patient experience are essential to sustaining our financial strength,” Johnson said.
Indeed, the company’s growth trend has been consistent and sustained, its longstanding strategy of moving into growing urban populations leading to ongoing demand for its services.
Although HCA appears to be better positioned than most hospital systems to withstand adverse changes in the economy, it is not immune to risk.
Perhaps the most significant risk the health care giant faces is the fact that it is substantially leveraged, with a total indebtedness at the end of 2016 of more than $31 billion and credit availability of just more than $2 billion.
Nonprofit vs. for-profit
Savannah’s two major health systems, Memorial and St. Joseph’s/Candler, have always operated as nonprofits. HCA will bring the first for-profit hospital business model to town.
While it’s unlikely the average patient could discern between the two, there are several major differences.
Perhaps the most significant is that a nonprofit entity answers to a volunteer board of directors, usually made up community leaders, while a for-profit entity has to answer to shareholders who are invested in the company’s bottom line.
Beyond that distinction, studies indicate there is little difference in the operational efficiency, environment or standard of care. Both for-profit and nonprofit hospitals can be found on lists of the best — and worst — institutions.
A Harvard study in 2014 found that when hospitals change status from nonprofit to for-profit, revenues rise but patient care remains the same.
“We did not see that there were higher mortality rates, even for vulnerable populations like the disabled,” said the study’s lead author Karen Joynt, a cardiologist and an instructor in health policy at the Harvard School of Public Health. “Nor did we find that quality suffered in the ways that we could measure quality.”
The Harvard study focused on 237 struggling nonprofit hospitals that chose to become for-profit institutions. For each hospital, Joynt and her two co-authors selected up to three nonprofit hospitals similar in size, location and teaching status, then looked at Medicare and Medicaid records to compare the hospitals’ finances and patient outcomes from 2002 to 2010. For-profit hospitals were stacked up against their matched nonprofit hospitals and also compared against themselves pre- and post-conversion.
“We did find that the hospitals’ financial performance improved after conversion to for-profit status, which makes sense,” Joynt said in a story in US News & World Report.
“The reason a for-profit hospital would acquire a hospital is they see potential to improve it.”
A few red flags
That said, HCA has not been without its share of legal troubles and controversy. And, while its sheer size alone is enough to put it under intense scrutiny, there is no denying the company’s intense focus on the bottom line has plunged it into hot water more than once.
In 2000, according to reports in the New York Times, the company admitted to submitting inflated bills and expenses to the government, illegally structuring business deals so that Medicare picked up the cost of corporate expenses, and providing doctors with kickbacks for patient referrals.
The criminal complaints — filed in five different federal court districts in Florida, Texas, Georgia and Tennessee – resulted in HCA agreeing to pay a total of $840 million in civil and criminal penalties in that year alone.
It was, at the time, the time the largest fraud settlement in U.S. history.
Then, five years ago, the New York Times published a detailed, two-part look at the inner workings of HCA and found some questionable practices remaining, including a cardiologist at one of HCA’s Florida hospitals that an outside hospital reviewer said was too quick to perform catheterizations without first doing necessary stress tests to see if patients really needed the expensive, invasive procedure.
That same physician, the reporters said, had been identified several years earlier by the hospital as its “most profitable doctor.”
HCA previews first quarter earnings
HCA Holdings, Inc. (NYSE: HCA) this week announced preliminary financial and operating results for its first quarter ended March 31, 2017. The financial results are subject to finalization of the Company’s quarterly financial and accounting procedures.
HCA anticipates revenues for the first quarter of 2017 to approximate $10.623 billion compared to $10.260 billion in the first quarter of 2016. Net income attributable to HCA Holdings, Inc. for the first quarter is expected to approximate $659 million, or $1.74 per diluted share, compared to $694 million, or $1.69 per diluted share, in the first quarter of 2016.
Adjusted EBITDA (Earnings before interest, taxes, depreciation and amortization) for the first quarter of 2017 is expected to approximate $2.005 billion compared to $2.003 billion in the previous year’s first quarter.
Basically, EBITDA is a way to evaluate a company’s performance without having to factor in financing and/or accounting decisions or tax environments. Adjusted EBITDA is a non-GAAP financial measure, meaning it does not meet standards of generally accepted accounting principles.
HCA anticipates reporting its complete financial results for the first quarter of 2017 on or about May 2.
The Company’s financial guidance remains unchanged for the year ending December 31, 2017.
Hospital Corporation of America stock (NYSE: HCA) closed down 60 cents to $84.61 at the end of trading Wednesday.