HCA 3Q16 Earnings Call Notes

HCA Holdings (HCA) Q3 2016 Results
Milton Johnson

Not seeing any change in wage inflation trends

“Well, let me just mention – this is Milton. I mean, we’re not seeing really any substantial change in our wage rate and wage inflation. I think as we’ve been saying over really the last few quarters, we have pockets of wage pressure from time to time. We’re always monitoring the marketplace. We make those adjustments. It’s in our run rate, and nothing in particular this quarter, Sam, that I see in the wage inflation that’s any different from recent trends.”

William B. Rutherford

Sam Hazen

Volume growth was not as high as planned because inpatient demand down and increased competition

“All in all, we had another good quarter of volume growth. However, the overall growth rate was not as high as we had planned. It is important to note that the third quarter last year was also a relatively strong volume quarter and presented a difficult comparison, with inpatient admits up 2.9% and adjusted admissions up 3.6%. We believe this deceleration in the growth rate was primarily attributable to the following two reasons. First, overall demand growth in inpatient services has moderated.”…”The second reason can be explained by growing competition in certain areas of our business. In particular, a growing supply of freestanding emergency rooms by independent companies and health systems in various Texas and Colorado markets has had impact on emergency room visits and some downstream admissions.”

Looking to build networks of emergency room, urgent care and hospitals to complement each other

“In some respects, we try to build an urgent care strategy around our emergency room strategy which is built around our hospital strategy. So it’s almost in concentric circles of facilities that create a fairly broad HCA network in these large markets, allowing our patients to enter the system in different forms or different fashions and also creating relatively favorable price points, if you will, for our payers where they can direct as they feel they need to direct but keep them in the HCA system. So it’s hard to give you a specific because we have to look at the individual markets, but those are some of the general approaches that we take.”

Cost per FTE actually at lowest y/y growth rate

“And I would add, Milton, that our cost per FTE, when we look at our SWB per FTE, which includes benefits, contract labor and wages as a whole was actually at its lowest point on a year-over-year growth rate in the third quarter. So we have seen moderation in contract labor. We have, as Milton said, made these adjustments ongoing to different markets in different situations as they’ve surfaced, and we’re at a pretty good point we believe with wages.”

Victor Campbell

Election will probably have some effect on Medicaid expansion

“Gary, I think most everyone would agree, if the Republicans gain control of the White House and what have you, there will be pressures and probably less opportunities for states to expand Medicaid. If the Democrats are in place there, I do believe that there will be consideration, hopefully. Maybe see some additional incentives, maybe a little more flexibility in bringing some states to bear. And you would hope that some of the states that haven’t expanded Medicaid will look at this as, ACA is not going away. There’s money there that can help our states and get people insured. So I’m not about to say every state goes, but I think you’ll start to see some – hopefully, you’ll start to see some movement.”