60% increase in EPS
“If you adjust the quarter’s performance for electronic health record incentive income and share based compensation, adjusted EBITDA increased 20.6% over the prior year. Net income attributable to HCA Holdings, excluding gains on sales of facilities and legal claims cost, increased 53%. And diluted earnings per share increased 60.7% over the prior year’s first quarter”
Medicare admissions up 5.9% during Q1
“During the first quarter, same-facility Medicare admissions and equivalent admissions increased 5.9% and 6.8% respectively. This does include both traditional and managed Medicare. Managed Medicare admissions increased 14.3% on a same-facility basis and now represent 32.2% of our total Medicare admissions.”
Seeing a growing number of exchange patients
“let me spend a minute talking about health reform. Health reform activity was strong for the quarter. In the first quarter, we saw approximately 9,880 exchange admissions as compared to the 1,600 we saw in the first quarter of last year. You may recall, we saw about 7,700 exchange admissions in the fourth quarter of 2014, or a 28% increase quarter-to-quarter. And we believe this is largely due to the new enrollment. We saw approximately 37,000 exchange ER visits in the first quarter, compared with the 4,000 in the first quarter of 2014 and the 26,000 in the fourth quarter of 2014.”
We think ~40% of exchange insureds were uninsured prior to ACA
“We have history on about 50% of our quarter one exchange volume and based on our look back at previous coverage, we estimate about 40% of these admissions (13:26) were uninsured to prior to health reform. Given this is the second year of reform, we are also tracking what the coverage was in 2014. Based on the exchange patients where we have 2014 experience, 36% were previously covered under a HIX product, 39% were covered by another insurance product, and 25% were uninsured in 2014. ”
Are seeing some wage pressure in stronger markets
“We have had in certain markets where the economy has historically been a little bit better seen some level of wage pressure. We’ve been able to deal with that on the fly, if you will. And we’ve adjusted certain compensation programs and so forth to give ourselves capacity to address some of those challenges. We are benefiting over the last few years from a relatively low inflationary environment and we are considering that in evaluating what we can do to prepare ourselves for possibly some level of inflation over time. I do think it will happen from one market to the other. It won’t happen in one big step across the whole organization.’
Strengthened balance sheet gives more flexibility
“Our balance sheet today, the leverage ratio is the lowest point it’s been since we entered the LBO in the fourth quarter of 2006. Our cash flow is as strong as it’s been, I think, in the history of the company. So, we’ve gained financial flexibility. And so we will continue to deploy capital in a way that we think will maximize shareholder value and shareholder returns at the same time with a view towards continuing to invest in our business for the long term.”
Better margins come from leveraging scale and more complicated service offerings
“The thing I think that we believe is driving margin production inside of HCA, you mentioned scale. We do believe leveraging the scale and continuing to find ways to leverage our scale both on making our business better with respect to quality, efficiency, patient experience, all those kind of things are very helpful in the discussion here and then finding ways, again, to take out administrative cost. We’re able to do that.
The other thing that I think is important to the company from a margin standpoint is we do have a growing complexity of services that we offer and, typically speaking, more complicated service offerings will generate higher margins. And if you put that on fixed cost base like our hospitals have, the operating leverage that comes from that is very powerful.
So we’ve been very intentional over the past four years or five years to add more complexity to our facility offering. And in most of our markets make sure we can offer pretty much any service to any patient that needs care.”
Focus on commercial segment also helps
“the fourth thing I would mention is that we have been intentional about our efforts to grow our commercial market share and put ourselves in a potion to generate margin from that particular segment.”
Learning from others also important
“And then the last thing and I think this is a powerful and tangible asset for HCA and one that we’re getting better at each and every year, is leveraging the learnings that we see across the various marketplaces. If we see a great physician strategy or we see a great outreach strategy or program strategy or quality initiative, whatever the case may be, bottling that up, finding a way to get it to the marketplace quickly is something we’re getting better at.”
There’s risk inherent to a value based reimbursement system
“Let me maybe take the last part of that question, then go back to the value equation, but we’re – as a company, we’re not looking to move and to take risk. We don’t see that right now in the intermediate term as something that we need to do. Now, do we have markets where we are taking a certain amount of risk that’s not material to the company. Sure. We have pilots going on.”
What is our value?
” with respect to value, and we talk a lot in our organization about healthcare and the value that we need to bring to our markets. And we see right now, our value as being turned by including, number one, patient safety, patient quality, patient experience, access points, so that it makes our system accessible, easy to get into, easy to access from a patient standpoint, from a physician standpoint, from the standpoint of bringing capability that Sam talked about in terms of being able to take care of any patient’s needs from basic care to some of the more complex acute care that they may need in the marketplace.”