It’s good to be big: HCA releases update on Q2 as early numbers show better than expected earning

The largest U.S. for-profit and publically traded hospital operator, Hospital Corporation of America (HCA), based in Nashville, Tennessee, is having such a good year so far, that it updated its second quarter and full year guidance for investors to reflect expectations of even higher earnings than it had initially anticipated for 2014.

According to HCA holdings, it now anticipates revenues for the second quarter of 2014 to be approximately $9.230 billion compared to $8.450 billion in the second quarter of 2013. Income before income taxes for the second quarter is expected to approximate $904 million compared to $806 million in the prior year period. Net income per diluted share for the second quarter of 2014 is expected to be approximately $1.07 per diluted share compared to $0.91 for the second quarter of 2013. Adjusted EBITDA for the second quarter is expected to be approximately $2.000 billion compared to $1.689 billion in the previous year’s second quarter.

The news sent its stock soaring nearly 5 points or almost 8 percent. As this article was posted, it was up 4.31 (7.8 percent).

“Results for the second quarter of 2014 exceeded our internal expectations, both in terms of our core operations and healthcare reform,” said R. Milton Johnson, HCA president and CEO, in a statement posted at 7:30 a.m.  “As a result, we are raising our earnings guidance for the full year 2014.”

The better than expected results were due to a variety of factors, but key was a $142 million adjustment to increase Medicaid revenues during the second quarter of 2014 related to the receipt of reimbursements in excess of HCA’s estimates for the indigent care component of the Texas Medicaid Waiver Program

The second quarter of 2014 also includes $11 million in income from sales of facilities and a rise in admissions. According to HCA, same facility admissions for the second quarter of 2014 are up 1.2 percent while same facility equivalent admissions increased 2.2 percent. Better yet, the revenue per equivalent admission is increasing. It expects same facility revenue per equivalent admission to rise approximately 5.4 percent in the second quarter of 2014 compared to the prior year’s second quarter and case mix, or acuity, should increase 1.7 percent in the current quarter compared to the prior year.

HCA now also expects healthcare reform changes in the Patient Protection and Affordable Care Act (ACA) to bring in an additional 2 to 3 percent of adjusted EBITDA in income for 2014. It had originally thought it would only bring in 1 to 2 percent extra. Plus, it expects to pretty much cover all of its $110-$130 million in expected electronic health record (EHR) expenses with federal incentive payments for meeting EHR meaningful use requirements.

HCA had gotten of to somewhat of a rough start to the year as its first quarter financials — the first since its merger with Health Management Associates — were impacted by unusually harsh late winter stroms in the Midwest, East Coast and Southeast states. (More here.)

The revised guidance assumes a benefit to Adjusted EBITDA from the Patient Protection and Affordable Care Act (Health Reform Law) in 2014 of approximately 2 to 3 percent of Adjusted EBITDA (original guidance was 1 to 2 percent), and the second quarter Medicaid revenues from the indigent care component of the Texas Medicaid Waiver Program. Both the original and revised guidance also include 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 guidance reflects estimated increases in share-based compensation expense to approximately $168 million (original 2014 guidance) and $160 million (revised 2014 guidance), 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 risks including those as set forth below in the Company’s “Forward-Looking Statements.” - See more at: http://investor.hcahealthcare.com/press-release/hca-previews-2014-second-quarter-results-updates-2014-guidance#sthash.ChFvhJ9y.dpufThe revised guidance assumes a benefit to Adjusted EBITDA from the Patient Protection and Affordable Care Act (Health Reform Law) in 2014 of approximately 2 to 3 percent of Adjusted EBITDA (original guidance was 1 to 2 percent), and the second quarter Medicaid revenues from the indigent care component of the Texas Medicaid Waiver Program. Both the original and revised guidance also include 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 guidance reflects estimated increases in share-based compensation expense to approximately $168 million (original 2014 guidance) and $160 million (revised 2014 guidance), 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 risks including those as set forth below in the Company’s “Forward-Looking Statements.” - See more at: http://investor.hcahealthcare.com/press-release/hca-previews-2014-second-quarter-results-updates-2014-guidance#sthash.ChFvhJ9y.dpuf