HCA 3Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Exchange admissions increase, reduction in uninsureds

“Health care exchange admissions continued to increase in the quarter. We also saw significant reductions in our uninsured volumes during the quarter. ”

Healthcare reform accounts for 1/3 of the growth

“Consistent with our second quarter, we believe approximately 2/3 of our adjusted EBITDA growth can be attributed to our core operations and approximately 1/3 to health care reform.”

A little less than half of health exchange volume was newly insured

“Based on our look-back of accounts previously seen, we now believe about 44% of our health exchange volume was newly insured. The acuity of exchange volume, using case mix as a measure for intensity, is still running about 8% to 10% higher than our managed care book of business. ”

Health reform has been a boost

“The impact of reform has progressed favorably throughout the year, and we remain optimistic on the long-term benefits of health reform. And accordingly, we revised our full year health reform benefit guidance, where we now estimate a full year positive impact of approximately 4% versus our previous estimate of 2% to 3%.”

We’re prepared for Ebola

“Now let me say a few words about the company’s preparation for Ebola patients. We, like most health care providers, have redoubled our efforts across the company to make sure our hospitals and outpatient centers are prepared. ”

A few states may still be up next for medicaid expansion

“I think we’ve got 5 states you all know that have expanded. It appears Utah will be next, so we would expect Utah to come on. Indiana was in the mix, but it appears they have withdrawn their application. Tennessee, we would be hopeful going into next year, post the election, that there would be an opportunity here. Time will tell, but I think that would be maybe the next most likely to consider it. Florida, we’ll just have to wait post-election and see what happens in terms of the new governor and in terms of the state legislature. And again I say new governor, whether it’s the existing governor or a new governor, I think both support it, so the question is really the legislature down there.”

Pharmacy and surgery are two areas that we can get better purchasing efficiencies

“pharmacy and surgery, in particular, are areas where we are moving our supply chain deeper into our operations and creating a better controlled system for purchasing, and at the same time freeing our teams up to interact with our physicians and other clinicians to drive improvement in pharmacy utilization and other type of clinical utilization.’

HCA 2Q14 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Results exceeded expectations

“Volume trends were solid. expense management was excellent, and improving payor mix and increasing acuity continue to drive higher revenue per equivalent admission. Results for the quarter exceeded our own internal expectations”

Noticeable decrease in uninsured volume

“In our second quarter of health care reform, we experienced continued growth in exchange and Medicaid volume, with fairly noticeable reductions in our uninsured volume.”

Healthcare reform driving EBITDA growth

” as noted in our revised guidance, we now believe health care reform will comprise 2% to 3% of our 2014 adjusted EBITDA growth, up from 1% to 2% in our earlier guidance.”

Medicaid growth of 7.8%. Self pay and charity admissions decline

“Same facility Medicaid admissions and equivalent admissions increased 7.8% and 8.8%, respectively, in the quarter. This compares to increases of 1.4% and 2.4%, respectively, in the first quarter of this year.”

“Same facility self-pay and charity admissions declined 14.7% in the quarter, while equivalent admissions declined 4.9%. Self-pay and charity admissions represent 6.8% of our total admissions compared to 8.1% last year.”

Uninsured admissions down by 48% in expanded medicaid states

“On a year-to-date basis, we have seen a 32% increase in Medicaid admissions and a corresponding 48% decline in uninsured admissions year-to-date in our 4 expansion states. It is interesting to note that uninsured volume from non-expansion states has also declined just under 2% on a year-to-date basis”

Tough to say whether these utilization trends will stay high for newly insured

“I think that is one of the variables where there’s a lot of uncertainty in. And we read about it, that’s what we’re keeping our eyes on. I think one can kind of argue that as people get newly insured, there may be some pent-up demand. And so in the early periods of coverage, that’s where you start to see some of the higher demand and maybe some of the outpatient and others trails off. And I think the uncertainty around the future of health reform is that’s just a factor of utilization trends we’re going to have to monitor. As we look forward and see really the progression throughout the early periods of health reform, we have seen higher utilization rates than maybe we originally anticipated. Where do they go for the balance of the year? We are making some assumptions that the month-over-month grow will moderate, but will still grow. ”

More people enrolled, higher utilization and medicaid expansion

“I think one of the first ones is enrollment was greater than we originally anticipated. At the time in January, we were sitting there with probably 2.5 million, 3 million people enrolled in exchanges and used some assumptions, as you know, bouncing off CBO estimates, and we saw that exceed. So I think that is really a key driver. And then the corresponding utilization and how it ramped up was probably a little bit more. It happened a lot faster than maybe we anticipated. And then I’d say the other third variable would be is in the Medicaid expansion states, the shift into the decline in uninsureds and the increase in Medicaid in those 4 expansion states, even though it’s a relatively small percentage of our footprint, about 12% of our beds. I think that change in mix happened quicker than maybe originally anticipated. So those are really, I think, the 3 major variables that as we’ve got 6 months now of reform experience”

HCA 3Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“the most successful and sustainable strategies to participate efficiently over the long run in the ACA will be those that emphasize comprehensive patient access points, state-of-the-art and well-capitalized facilities and clinical technologies, a proven and transparent track record of providing high-quality care and service and the ability to leverage the cost structure to provide better value for the consumer.”

“the result of our work has been that we have access to bronze plans in most of our hospitals, 97%. Almost 100 of our hospitals in the lowest or second-lowest bronze plan, so we feel good about that. We do think that in certain markets over time, where we may not be in the lowest-priced offering in a particular market, it’d be interesting to see how that evolves. In many of these markets, we have a large footprint. We have significant capacity with our emergency rooms. And it will be interesting to see how that plays out over time with respect to certain out-of-network activity in certain markets.”

“I think when you think about what HCA is trying to go, it’s more of a systemic effort at trying to gain efficiencies than it is an episodic effort at responding to certain dynamics here or there…through eliminating redundancies in overhead, eliminating process inefficiencies and identifying new ways to leverage our supply chain. On our biggest cost trend, our labor, at this particular point, we’re not seeing any unusual wage pressures in the marketplace as we think about our positioning today and look forward.”

“The variables are, I think, the biggest one is, especially here in the early part of reform, what will be the overall uptake in our markets through the exchanges. Will states ultimately expand Medicaid or not? And as you know, only 4 states that we operate in expanded Medicaid. So the big states to us, like Texas and Florida, did not expand. So how will that evolve over the coming couple of years would be very interesting for us and material, I think, to our model.”

“We have a good sense right now of what our pricing would be, of course, now that we’ve negotiated our rates. But still the overall volume uptake is going to be the big question.”

“I think one of fundamental aspects of our growth agenda is to ensure that we have adequate access to our system. And that includes a host of different capabilities, everything from emergency room capacity, as Richard mentioned, to physician clinics to other outpatient settings in locations that make it convenient and easy for patients to access an HCA system. We are exploring the concept of urgent care in a very substantial way to understand how it can fit into our overall network of offering care spot in 2 markets, largely at this particular point in Nashville and Kansas City. We are studying the effects of that. It is intended to be more around creating access than it is to move patients necessarily from one setting or the other, although it does play a part in that approach. But we believe it’s a convenient and efficient way for patients to get low in care and then provide access to an HCA network if they need more substantial care or sophisticated care down the road. ”

HCA 2Q13 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“I’ll retire from the role of CEO. But more importantly, that Milton Johnson, whom you all know is our President and Chief Financial Officer, will become CEO effective at that same time.”

“second quarter results, which were the product of solid volumes, better than expected revenue unit growth attributable to increase in acuity and excellent expense management by operating management teams.”

“emergency room visits were soft in comparison to past trends.”

“I would just add that we still think that given health care reform and over the longer view that there will be consolidation in the industry, we think our platform allows us to participate very efficiently in that process.”

“the uncertainty of health care reform, there’s 2 main drivers where we still have a great deal of uncertainty. One, and to your question, what’s going to be the ramp-up or the uptake on health care reform? In other words, how many — at what rate and how many of the uninsured will sign up for coverage in the exchanges. That’s a significant uncertainty for us. And then second, of those that do come into the marketplace and go into the exchange, how many will recapture?”

“we monitor what we call the in-migration of business from the rural markets into these major metropolitan markets. And that segment of our business is the fastest-growing segment of admission activity on the inpatient side. The composite growth in 2012 was actually 2.8%. And as I indicated, for 2012, overall inpatient demand was only 0.4%. So you can see that at least in rural markets surrounding HCA’s urban markets, there is a growing in-migration volume that’s taking place”

“[In ER] we actually had a decline in the lower level, the lowest levels of acuity, and that was fairly broad-based across the company…There are increased competitors in both the urgent care space, as well as the emergency room space in a lot of our markets, whether that’s coming from hospitals or freestanding entities, and we think that is yielding some pressure on the overall demand in this particular area.”

“[new] hospitals are in demographics in major metropolitan markets where there are opportunities to introduce an HCA facility and round out our network. As Richard mentioned, we usually start out with 40 to 60 beds, inpatient beds, as an example. And typically, you will see a younger population in these markets. So they’re not demanding as much inpatient health care as you might in a market where there’s a different kind of demographic. And so we’ll start out with basic services on the outpatient areas, clearly emergency room capability, outpatient surgery, a lot of imaging, and then we’ll have a lot of women services in those facilities because they’re connected to a younger population and in our obstetric service line and so forth. But what’s important is that they now are connected to a larger network and when there’s a need for more sophisticated or tertiary service, we can work with our physicians and our other hospitals to transfer patients to more tertiary level hospitals and deliver the services that those folks need. Then over time, it grows. We add beds, we add services, we bring in new physicians, and we start to get the certifications that we just spoke about, and we put ourselves in a position where it becomes a much more substantial hospital, and they move to different levels of capability over time. And that life cycle can vary, it can be 10 years in some cases, it can be 5 in very unique cases. But it’s typically a 10 to 20 years kind of cycle where these hospitals will move into a much more sophisticated level.”

HCA at Goldman Sachs Conference Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“The shift to the outpatient is continuing. It’s unclear how much technology will allow us to continue to do that. But there is growth opportunity there.”

“Most Americans sitting here in this room don’t get their indicated care at the rate that they should. That is a quality opportunity. It’s a growth opportunity for company like us under a fee for service reimbursement model. And that in the outpatient setting, as well as what’s precipitated as a result of that is a growth opportunity. And obviously with Healthcare Reform, we have a cohort that has not previously been insured or at least underinsured. There’s a general belief of somewhere in the range of 1% to 3% at least by our view of increased utilization among that cohort wants to have insurance and a fair amount of that’s going to be in the outpatient setting as well. So we clearly have our eyes on access strategies, on everything from urgent care and retail to the emergency room to solve their acute problems, as well as continued growth in our ambulatory surgery centers and other ambulatory constructs to capture that.”

“what we’re seeing is this declining physician take-home compensation. And so we see physicians looking for income stability. That’s got 2 sides to it. The obvious side is the declining physician professional reimbursement, as well as the fairly historically lucrative reimbursement around diagnostics in the outpatient setting. That has really declined more than the evaluation of management fees. But on top of that, the expense base for the physicians has been growing, not just from the standpoint of labor, but the IT initiatives, the electronic health record, has rarely perhaps resulted in core operational efficiencies, but certainly has added overhead and initial costs, as well as an initial drag during implementation where there’s typically a 30% or 40% production loss for a period of time. You put all those things together and the net result is in the small practices, you end up seeing declines.”

“mom and pop practices that have not been perhaps as deeply operationally managed. They’ve not had the leverage of scale, whether in their contracts, their supplies, their labor or understanding what best practice can look like. So in many cases, we’ve been able to pull this together, operate it at market level integrate them into larger practices, larger footprints and create some pretty important efficiences that might have otherwise, stabilized them. So as we look forward, we see growth in employment, but I don’t necessarily see the same trajectory of cost growth.”