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HCA Healthcare expects to spend $4.6 billion during the year for land for new hospital development, outpatient networks and for relieving capacity constraints at existing facilities, according to information released during its Q1 2023 earnings call.
Some inflationary increases in construction costs have factored into HCA’s guidance, said CFO Bill Rutherford. HCA has an estimated 182 hospitals in 20 states and the U.K., and about 2,500 outpatient facilities.
“Before we get to share gain possibilities in those markets, that is going to require us to build out some new hospital facilities,” CEO Sam Hazen said on Friday’s earning call, according to the transcript published on Seeking Alpha.
HCA owns land in Austin, Texas, for new hospitals, and also in Dallas, Hazen said. HCA also recently purchased land for new hospitals in Las Vegas and Salt Lake City, and has land for new hospitals in a number of Florida markets, he said.
At least one new hospital is under construction in San Antonio, Texas.
HCA has high levels of occupancy across the board. In the first quarter, it ran approximately 73% to 74% occupancy in its inpatient facilities, according to the earnings call.
“But San Antonio is one of those markets where we have uniquely high occupancy,” Hazen said. “That market, for example, we run approximately 90% occupancy, and we think it’s better for us to open up new hospitals as opposed to keep adding on in every circumstance in that particular community.”
Hazen said, “So that’s part of what you’re seeing in our capital spending, is that we are acquiring land for future network development. In addition to that, we have significantly advanced our outpatient facility development. And we need to have sufficient capacity as we build up our staffing over time. We need physical capacity to accommodate what we believe to be the demand for healthcare.”
WHY THIS MATTERS
HCA produced solid earnings that reflect strong demand for its services and has shown improvements in its operating costs, in particular contract labor expenses, according to the earnings report.
HCA has seen improvement in turnover rates, which are now close to pre-pandemic levels, according to the report. Registered nurse hiring also improved in the quarter. Hiring increased almost 19% compared to the previous four-quarter average.
These positive results helped reduce contract labor cost by 21% compared to last year, HCA said.
Admissions grew 4.4% year-over-year. Non-COVID admissions were up 12%. Inpatient surgeries increased 3.6%. Same facility equivalent admissions increased 7.5%, driven by emergency room visits, which grew 10%, and outpatient surgeries, which grew 5%, the report said. Other outpatient categories also grew, including outpatient cardiology procedures, which increased 7%. C-section obstetric volume did not do as well as other parts of the business.
In an interesting turn from last year, total joint surgery done in the outpatient setting represented somewhere around 80% of the total, with 20% done as inpatient surgery. That number was reversed pre-pandemic, HCA said.
Hazen said, “Our surgical volumes in our hospital outpatient units were up actually, slightly more than what was inside of our ambulatory surgery centers. Across all service categories within both settings, we saw really solid volume growth. We have a more significant investment in our ambulatory surgery center development pipeline with a number of new developments, as well as some possible acquisitions that are complementary to the networks that we have across the company.”
HCA has yet to see any impact from Medicaid redeterminations that began on April 1, according to Rutherford.
“We are keeping very close to state plans,” Rutherford said. “We’ve also made outreach to our Medicaid patients to help them look at alternative coverage in the event they find themselves displaced to Medicaid. We continue to be encouraged with some of the third-party studies that we read that a relatively high percentage of those individuals potentially qualify for employer-sponsored coverage or through enhanced subsidies coverage within the health insurance marketplace.”
THE LARGER TREND
Last week, nurses rallied at HCA headquarters during the company’s annual shareholder meeting on April 19, calling on HCA to address what it called chronic short-staffing.
More than 100 nurses and other hospital workers from HCA Healthcare hospitals in California, Florida, Texas and Kansas rallied at the company’s headquarters in Nashville to promote a resolution to review staffing levels. The resolution was filed jointly by an SEIU member and HCA shareholder, together with the Office of the Treasurer of the State of Illinois.
Earlier this year, a report, “Care Crisis: How Low Staffing Contributes to Patient Care Failures at HCA Hospitals,” found “strong evidence of staffing-related quality breakdowns in HCA hospitals,” including missed nursing assessments, delays in patient treatment and patient falls. According to the report, HCA staffs its hospitals about 30% below the national average, which saves HCA billions of dollars each year. In 2022, HCA earned $5.6 billion in profits.
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