News Column

HCA Posts 4Q and FY 2013 Results

February 7, 2014

HCA Holdings, Inc. has announced financial and operating results for the fourth quarter ended December 31.

In a release on February 4, the Company noted that key fourth quarter metrics (all percentage changes compare 4Q 2013 to 4Q 2012 unless noted):

-Revenues totaled $8.836 billion, an increase of 4.8 percent

-Net income attributable to HCA Holdings, Inc. totaled $424 million, or $0.92 per diluted share

-Adjusted EBITDA was $1.714 billion, an increase of 6.7 percent

-Cash flows from operating activities totaled $1.226 billion, a decline of 2.9 percent

-Same facility equivalent admissions declined 1.0 percent, while same facility admissions declined 1.8 percent

-Same facility revenue per equivalent admission increased 4.8 percent

HCA President and Chief Executive Officer, R. Milton Johnson, said, "We are extremely pleased with the results for the quarter and the year. As we look to 2014, we will continue our focus on improving patient quality and experience, growth and efficiency. We believe we are well positioned for continued success in our markets."

Revenues in the fourth quarter totaled $8.836 billion, compared to $8.434 billion in the fourth quarter of 2012. Fourth quarter revenue growth was driven primarily by higher revenue per equivalent admission as case mix, or acuity, increased 3.0 percent compared to the prior year. Same facility total surgical volume in the quarter increased 1.4 percent compared to the prior year.

Same facility equivalent admissions declined 1.0 percent while same facility admissions declined 1.8 percent in the fourth quarter of 2013 compared to the fourth quarter of 2012. Same facility emergency room visits declined 2.4 percent in the fourth quarter of 2013 compared to the prior year period. The decline in admissions in the fourth quarter was primarily due to a reduction in pulmonary and short-stay admissions from the prior year. Also, last year's fourth quarter same facility volume was strong due, in large part, to the severity of the 2012 flu season, presenting difficult comparisons to the prior year volumes.

Revenue per equivalent admission increased 4.6 percent in the fourth quarter of 2013 (4.8 percent increase on a same facility basis), primarily reflecting increasing acuity and changes in payor mix. During the fourth quarter same facility inpatient surgeries increased 0.9 percent while same facility outpatient surgeries increased 1.6 percent compared to the prior year period.

The Company's operating expense per equivalent admission, excluding electronic health record (EHR) and equity income, increased 3.5 percent from the prior year's fourth quarter (4.1 percent increase including EHR and equity income). During the fourth quarter of 2013, salaries and benefits, supplies and other operating expenses totaled $7.172 billion, or 81.2 percent of revenues, compared to $6.918 billion, or 82.0 percent of revenues, in the fourth quarter of 2012.

Net income attributable to HCA Holdings, Inc. totaled $424 million, or $0.92 per diluted share, compared to $314 million, or $0.68 per diluted share, in the fourth quarter of 2012. Results for the fourth quarter of 2012 include pretax legal claim costs of $175 million, or $0.24 per diluted share, and pretax gains on sales of facilities of $11 million, or $0.01 per diluted share. Adjusted EBITDA for the fourth quarter of 2013 increased 6.7 percent to $1.714 billion compared to $1.606 billion in the prior year period.

Revenues for the year ended December 31, 2013 totaled $34.182 billion compared to $33.013 billion for 2012. Net income attributable to HCA Holdings, Inc. for 2013 was $1.556 billion, or $3.37 per diluted share, compared to $1.605 billion, or $3.49 per diluted share, for the year ended December 31, 2012. Results for the year ended December 31, 2013 include losses on sales of facilities of $10 million, or $0.02 per diluted share, and a loss on retirement of debt of $17 million, or $0.02 per diluted share. Results for the year ended December 31, 2012 include net favorable Medicare adjustments which increased revenues by $188 million, Adjusted EBITDA by $170 million and diluted earnings per share by $0.22. Results for 2012 also include legal claim costs of $175 million, or $0.24 per diluted share, and gains on sales of facilities of $15 million, or $0.02 per diluted share.

As of December 31, 2013, HCA Holdings, Inc.'s balance sheet reflected cash and cash equivalents of $414 million, total debt of $28.376 billion, and total assets of $28.831 billion. During the fourth quarter of 2013, capital expenditures totaled $596 million, excluding acquisitions. During November, the Company paid $500 million to repurchase 10,656,436 shares of its common stock from certain of its sponsors. Net cash provided by operating activities in the fourth quarter of 2013 totaled $1.226 billion compared to $1.263 billion in the prior year's fourth quarter.

As of December 31, 2013, HCA operated 165 hospitals and 115 freestanding surgery centers.

2014 Guidance

This guidance assumes a benefit to Adjusted EBITDA from the Patient Protection and Affordable Care Act (Health Reform Law) in 2014 of approximately 1 to 2 percent of Adjusted EBITDA. The guidance also includes estimated electronic health record incentive income assumptions in a range of $110-$130 million and EHR expenses in a range of $110-$130 million. The Company's guidance also includes an estimated increase in share-based compensation expense to approximately $168 million from $113 million in 2013. Guidance excludes the impact of items, if applicable, that are non- operational in nature including items such as, but not limited to, gains or losses on sales of facilities and businesses, gains or losses on early debt retirement and impairments of long-lived assets. This guidance is also subject to certain conditions including those as set forth below in the Company's "Forward- Looking Statements".

The Company's 2014 annual stockholders' meeting will be held in Nashville, Tennessee on April 23, at 2 p.m. local time for stockholders of record as of February 28.

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