Hospital Corporation of America, the largest for-profit hospital operator in the U.S. and designated buyer of Memorial University Medical Center, reported first quarter net income of $659 million, or $1.74 per share Tuesday, missing Wall Street’s expectations of $1.76 to $1.77.
“Our first-quarter earnings results were consistent with the preview we issued on April 17,” Milton Johnson, company chairman and chief executive officer, told shareholders and analysts on Tuesday’s conference call.
“Revenues for the first quarter increased 3.5 percent to $10.6 billion and net income totaled $659 million or $1.74 per diluted share.
“While these results were modestly below our internal expectations, we remain optimistic about 2017,” Johnson said, adding that the company (NYSE: HCA) is maintaining its previously issued earnings guidance for the full year.
Among the reasons Johnson gave for the dip were an increase in Medicare admissions, higher labor costs, the loss of a day due to 2016 leap year, and the resolution of a legal issue.
The first quarter’s cash flow was negatively impacted by a $188 million settlement relating to a longstanding contractual dispute in our Kansas City market,” Johnson said.
“Adjusting for this payment, cash flows from operations were up approximately 4.9 percent in the quarter compared to the prior year.”
Moving to acquisitions, Johnson noted the company on Monday signed definitive agreements to acquire three Houston-area hospitals from Tenet Healthcare Corp and two other Texas hospitals from Community Health Systems.
“These facilities will strategically complement these markets and enhance our ability to meet the medical needs and improve patient access to our provider network in both communities,” he said, adding that the company expects to close on these facilities in the summer of 2017.
Closer to home, Johnson said HCA closed Monday on a 231-bed acute-care hospital in Waycross, which should complement our Jacksonville market. (See related story.)
“Last week, we signed a letter of intent to purchase Memorial Health in Savannah,” he said. “This not-for-profit acute-care hospital with 604 beds is the only provider in the market with a Pediatric Intensive Care unit, a Neonatal Intensive Care unit and Level I Trauma services. This should significantly strengthen our position along the Atlantic Coast from Jacksonville to Charleston.”
In all, the four recent transactions are expected to add seven hospitals with more than 2,000 beds and approximately $1.5 billion in new, annualized revenue to the company, Johnson said.
“We look forward to bringing HCA’s capabilities and operational scale to these facilities.”
BY THE NUMBERS
Note all percentage changes compare 1Q 2017 to 1Q 2016:
- Revenues increased 3.5 percent to $10.623 billion
- Net income attributable to HCA Holdings, Inc. totaled $659 million, or $1.74 per diluted share
- Adjusted EBITDA totaled $2.005 billion (EBITDA – or earnings before interest, tax, depreciation and amortization – is a measure of a company’s operating performance.)
- Cash flows from operations totaled $1.280 billion
- Same facility equivalent admissions increased 1.6 percent
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.