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3 Reasons Why HCA Holdings Inc Stock Could Rise

Hospital operators such as HCA Holdings  (NYSE: HCA  ) are enjoying a renaissance as they expand into new markets and benefit from rising demand tied to an improving economy and healthcare reform.

Although there's no way to predict the future share price of the company, as any number of events could cause stock to falter, let's look at three factors that may make HCA Holdings worth owning.

Source: HCA Holdings.

1. Invigorating its business model
Outpatient facilities offer HCA an important growth opportunity as aging and increasingly insured Americans look for more convenient and less-costly healthcare alternatives.

HCA is positioned to capture its fair share of the outpatient market given that it's one of the nation's biggest hospital operators and maintains significant market share in states with rising demand for such services, including retiree-heavy Texas and Florida.

In the past three years, HCA has spent more than $5.5 billion to open 200 new facilities, including stand-alone ERs, urgent care centers, surgery centers, and provider clinics. The company expects to spend another $2 billion this year on  initiatives that are likely to include opening more urgent care centers. If those investments help the company capture more patient visits, HCA will get a larger share of its revenue from higher-margin outpatient operations, as well as benefit from rising referrals to its hospitals for acute care.

2. Shrinking bad debts
The launch of the Affordable Care Act's healthcare insurance exchanges, along with Medicaid expansion in 26 states, is dramatically reducing the number of patients unable to pay for care.

During the law's first open enrollment period, more than 8 million people signed up for insurance through the exchanges and another 7 million people were approved to join Medicaid.

Previously, many of those patients often sought treatment in emergency rooms and couldn't pay for care, and writing off that care reduced hospital earnings. Going forward, however, more of that care is being reimbursed either by private insurers or government programs.

In its second quarter earnings call, HCA reported that in the four markets in which it operates that chose to expand Medicaid eligibility, Medicaid admissions were up 32% year to date in 2014, resulting in uninsured admissions falling by 48%. That led to companywide Medicaid admissions growth of 7.8%.

But it's not just expansion states that are helping to lower HCA's charity care expense. Nonexpansion states also saw uninsured volume fall 6.6% year to date versus last year thanks to increased awareness of the program due to the launch of Obamacare.

As a result, HCA delivered second-quarter earnings per share of $1.07. That was nicely above Wall Street's consensus analyst forecast for $0.92 and may have led to analysts boosting their forecast for HCA's 2015 EPS from $4.32 to $4.74.

If the trend in uninsured care continues lower and other states opt into Medicaid expansion, HCA's profit could head nicely higher. That's particularly true if strong opposition to expansion in Texas and Florida softens. Those two states accounted for 65% of HCA's uninsured admissions during the second quarter.

Source: HCA Holdings,

3. Improving Medicare payments
HCA and hospital industry efforts to increase Medicare reimbursement rates appear to be paying off.

The industry has long struggled to turn a profit on care provided to Medicare patients. According to the Medicare Payment Advisory Commission, the average hospital had a negative 5.4% average margin on Medicare patients in 2012. 

HCA's Medicare margin may improve now that the program approved a 1.7% bump in Medicare reimbursement for outpatient services in 2014 and may increase payments by 2.1% in 2015. Medicare will also increase payments for inpatient care by 1.4% next year. 

Although those increases may not sound like a lot, Medicare spent more than $37 billion on outpatient care in 2013. That suggests that the 2014 and 2015 increases -- all things being equal -- could translate into another $1.4 billion heading to HCA and other hospital operators.

Given that Medicare accounts for roughly 40% of all revenue collected by hospitals, reimbursement growth for both inpatient and outpatient care could have a significant impact.

Fool-worthy final thoughts
Outpatient services like those provided by surgery centers and urgent care centers make up as much as 85% of the hospital industry's operating profit and account for 40% of the industry's revenue. Since outpatient facilities are more profit-friendly, HCA's investments in such operations should add earnings tailwinds. And more patients enrolled in private and public insurance, along with rising reimbursement for older patients, could mean HCA's earnings growth will continue next year.

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  • Report this Comment On August 28, 2014, at 2:14 AM, SellOutsHca wrote:

    As someone who works on the inside of the inner-workings of HCA & is seeing firsthand the changes

    that are being made in the name of profit I can guarantee you that this company is a sell & sell fast.

    They are all selling out and cashing in at the expense

    of those who trust them with their lives (the patients)

    and their livelihood (those workers who have time &

    money invested in the company). Eventually they will end up in a huge lawsuit that will cause the company

    to go bankrupt. Meanwhile the non-brass workers who've invested their retirement will suffer right along with the patients who are no longer getting the care

    they deserve in return for profit. Sell and sell fast

    my friends.

  • Report this Comment On August 30, 2014, at 4:09 PM, ourinstantmatter wrote:

    What happened?

    Employees of the both DOCTORS HOSPITAL OF AUGUSTA, LLC (owned by HCA) and JOSEPH M. STILL BURN CENTERS, INC. stole my property (2 year old son) on December 5th, 2012 at around 8 P.M. Said employees then performed experimental medical procedures upon my property without my consent, at gunpoint, and against my express non-consent. That property was restored to me approximately two days later in physically (burned wrist) and mentally damaged condition.

    Who was involved?

    Attendant at the time of this property theft were the following: My son, my wife, my father-in-law, a sociopath pediatrician by the name of Dr. Richard J. Cartie, three nurses: Donna A. Masters, Julie Lewis, and Terrell Yelverton, patient advocate Trisha M. Foster, social worker Thomas Dorn, hospital administrator Heyward Wells, and hospital admissions director Christopher Haga.

    Why did it happen?

    Only one reason has been implied to justify the theft of my property: that my son's life was put in danger, possibly, by my refusal to provide informed consent to the administration of one tetanus toxoid vaccine. That reason was provided by three attorneys : Lisa C. Rambo, Patrick Eidson, and James Hurt. Said attorneys had no firsthand knowledge of the events and were without any medical training whatsoever. To date, no medical professional or unprofessional has ever claimed that my son's life was endangered due to not receiving the tetanus vaccine at that time. On the contrary, medical doctors, including an esteemed surgeon, claim that those medical staff acted criminally in stealing my property firstly and performing unwanted and medically unjustified procedures upon him secondly.

    The more likely reason my property was stolen:

    Medicaid reimbursement by means of fraud.

    It was disclosed to this hospital on December 4th, 2012 that my son and I had not contracted with any third party insurance schemes at the time of this hospital visit. Attempts were then made by Christopher Haga to encourage us to sign up for Medicaid. Thomas Dorn also let me know that Medicaid insurance was available. I refused to sign up for Medicaid and let Haga know, in no uncertain terms, that I was responsible for any financial obligations regarding this hospital visit. At this time Haga requests to see my ID and I give it to him to examine after which time he gives the ID back to me.

    Haga then directs me to fill out a DOCTORS HOSPITAL OF AUGUSTA, LLC. admissions contract without any of its terms and conditions struck out. Just after being admitted I had signed an admissions contract after reading and struck out any terms and conditions that I found disagreeable such as the sharing of our private medical records with Medicaid. I told Haga (while Trisha Foster observed our conversation) that I had already read and signed the admissions contract and would not sign another. Soon thereafter the conversation ended and we all went on our way.

    Unknown to us at the time was the fact that all kids taken from their parents by hospital / State actors are automatically given Medicaid. Also unknown to us was that Dr. Richard Cartie and nurse Donna Masters (high level corporate employees) were fabricating a story implicating us parents as kidnappers in order to involve DFCS in the theft of my property in order for my son to acquire Medicaid thereby enabling them to seek Medicaid reimbursement. When that fabricated story fell apart then it was alleged that our property was somehow, possibly (not probably as the Fourth Amendment requires), in danger.

    Next, Christopher Haga has a Sheriff's deputy from Richmond County dispatched to question me about my ID alleging that it has been tampered with. Other than the deputy, Haga is the only one to have seen my ID. Deputy checks my ID to find that it is the genuine article. Someone within the hospital has also called DFCS (a version of child protective services) resulting in two young, medically uneducated girls making terroristic threats toward me and my wife to steal our property if we did not provide consent to the tetanus toxoid vaccine. We refuse the unlawful aggressions of these two hostile State actors. At 8P.M. that night men with guns steal our property thus automatically enabling my son to be the conduit to the Medicaid funds Dr. Richard Cartie and others desired in the first place.

    Dr. Richard Cartie is first and second to bill Medicaid without my consent and

    against my express and written non-consent:

    Given that my property, stolen by hospital and State actors, was now covered by Medicaid the primary instigator of the theft, Dr. Cartie, began to share medical info with and receive medical payment from Medicaid even though I had expressly disallowed the sharing of medical info with Medicaid via the aforementioned admissions contract which Haga was so eager for me to rescind.

    Fraud discovered in DOCTORS HOSPITAL OF AUGUSTA, LLC medical records:

    After requesting and receiving the entire medical record including doctor and nurse notes, it was discovered that the admissions contract that I had originally signed forbidding the sharing of medical information with Medicaid was missing. Instead, another copy of the admissions contract was in its place without my signature, without any of my strike-throughs which effectively barred all actors from sharing our medical info with Medicaid, and with Christopher Haga's and Trisha Foster's signature. Trisha Foster went so far as to qualify her signature with the written implication that I refused to sign the admissions contract.

    Warning to all patients and potential patients of HCA hospitals, DOCTORS HOSPITAL OF AUGUSTA, LLC, and JOSEPH M. STILL BURN CENTERS, INC.

    Employees of the both HCA owned DOCTORS HOSPITAL OF AUGUSTA, LLC and JOSEPH M. STILL BURN CENTERS, INC. will steal property (such as one's son) from uninsured people in order to acquire Medicaid benefits which automatically accrue to wards of the State. Govern yourself appropriately and seek other non-ethically challenged hospitals.

    Source documents and supporting evidence:

    Contact email:

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Todd Campbell

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.

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