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What's Behind HCA Healthcare's Disappointing Q3 Results

By Keith Speights - Oct 26, 2020 at 1:49PM

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The big hospital operator continued to experience negative impacts from the coronavirus pandemic.

Hospitals have faced some significant challenges in 2020 due to the COVID-19 pandemic. HCA Healthcare ( HCA -0.88% ) is no exception. While shares of the large hospital operator have rebounded significantly from the lows earlier this year, HCA stock remains in negative territory year to date.

HCA announced its third-quarter results before the market opened on Monday, and although there was some good news, investors were disappointed overall. Here are the highlights from the update.

Male healthcare provider working on laptop with notebook and pen in his hands.

Image Source: Getty Images.

By the numbers

HCA Healthcare reported third-quarter revenue of $13.31 billion, up 5% from the prior-year period's total of $12.69 billion. That also topped the consensus Wall Street estimate of $12.87 billion.

The hospital chain's bottom line also improved significantly, with GAAP net income of $668 million, or $1.95 per share, compared to $612 million, or $1.76 per share, in the same period of 2019. However, its earnings fell well short of analysts' average estimate of $2.32 per share.

HCA recorded adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.053 billion. The company posted adjusted EBITDA of $2.285 billion in the prior-year period.

Behind the numbers

In the second quarter, HCA received federal stimulus money from the CARES Act that boosted its earnings by $822 million, or $1.72 per diluted share. The company didn't receive any stimulus money in Q3. On the other hand, its Q3 earnings were boosted by $14 million, or $0.03 per diluted share, from gains on the sales of facilities.

The main problem for HCA during the third quarter was that admissions fell. The hospital operator reported that same-facility admissions and equivalent admissions slipped by 3.8% and 9%, respectively, year over year. Same-facility emergency room visits plunged by 20.3%. HCA said that same-facility inpatient surgeries were 6.8% lower year over year, with same-facility outpatient surgeries down 6.3%.

There was one bright spot, though. Same-facility revenue per equivalent admission jumped 14.8% year over year. This increase resulted from higher levels of acuity in patients along with a favorable payer mix. 

Looking ahead

HCA announced earlier this month that it plans to return or repay early all of the $1.6 billion it received from the Provider Relief Fund and $4.4 billion it received from Medicare in accelerated payments. The company stated that it's working with federal agencies on the timing of these repayments. HCA plans to use available cash and future operating cash flows to cover the outlays. 

The biggest wild card for this healthcare company is without question the pandemic. If the coronavirus crisis continues to worsen, HCA could again face challenges similar to those it was confronted with earlier this year.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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