Sicker patients, stronger reimbursement behind HCA’s profitable 2020

Even in a year of historic crisis defined by a global pandemic, hospital chain HCA Healthcare raked in almost $4 billion in profit because its patients—many of them battling COVID-19—were sicker and more likely to be commercially insured.

Investor-owned HCA reported net income of $3.8 billion in calendar 2020, up from $3.5 billion in 2019. The 185-hospital company collected $51.5 billion in revenue, which was effectively flat year-over-year. A good portion of that profit—$1.4 billion—came in the final quarter of the year, when U.S. COVID cases were higher than ever. Almost half of the COVID patients HCA treated in the fourth quarter took place in December, and January saw even more COVID patients.

“This year we’ve been benefited by the acuity and the payer mix in terms of our commercial volume declined slower than our Medicare volume,” HCA Chief Financial Officer Bill Rutherford said on the company’s earnings call Tuesday. “I think that will eventually settle out and return to what our historical norms have been.”

At the same time, the Nashville-based company is betting it can hold onto its 2020 gains. Analysts use earnings to judge performance, measured by earnings before interest, taxes, depreciation and amortization. HCA’s adjusted EBITDA margin climbed to 19.5% in 2020, which is at the mid-point of its guidance for 2021. That’s up from 19.2% in 2019.

Sam Hazen, HCA’s CEO, said on the call the company will harness economies of scale across its hospitals, outpatient facilities and technology ventures to possibly sustain its current profitability.

“That’s our management challenge,” he said. “We’re obviously not there yet, but we have opportunities we believe inside our financial resiliency programs to advance that initiative.”

While many healthcare providers were propped up by federal relief grants last year, HCA opted to return all $1.6 billion in grants it received back to the federal government.

HCA’s leaders described plans to further reinforce the company in 2021 by adding another $850 million onto its capital spending plan from 2020, growing that to $3.7 billion this year. Part of that will mean adding to its already sizable outpatient portfolio. Every HCA hospital has between 10 and 12 outpatient facilities connected to it, Hazen said. That amounts to between 2,200 and 2,500 outpatient facilities. HCA also plans to add more rehabilitation services, post-acute care, behavioral health and telemedicine.

That’s in addition to $3.3 billion in projects under construction systemwide that HCA expects to be operational this year or next. The work includes capacity expansion projects at hospitals, two new hospitals and additional outpatient facilities, mainly ambulatory surgery centers, free-standing emergency departments and physician clinics.

On the volume front, HCA’s admissions were down 4.7% year-over-year in 2020, although revenue per admission grew 10.5% year-over-year. Revenue per admission was even higher in the fourth quarter at 14.2%. Across inpatient admissions, revenue per admission jumped 15.7% year-over-year. Outpatient surgeries declined 12.6% year-over-year, and inpatient surgeries declined 7.8%.

Like other providers, HCA’s biggest admissions decline was in ED visits, which fell 18.7% in 2020 year-over-year and more than 21% in the fourth quarter year-over-year. Most of the declines have been among lower-acuity ED visits, Hazen said. Of the total business lost in 2020, almost 70% was among uninsured patients and those who rely on Medicaid, he said.

“It’s been interesting to me that the payer mix on a relative basis is actually slightly better, even though all categories are down,” Hazen said.


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