HCA Third-Quarter Profit Climbs 23 Percent

By BETH RUCKER

NASHVILLE, Tenn. – HCA Inc., the nation’s largest for-profit hospital operator, said Tuesday its third-quarter profit rose 23 percent as revenue increased slightly and the company incurred fewer costs for uninsured patients and bad debt.

Net income rose to $280 million, or 62 cents per share, from $227 million, or 47 cents per share, a year earlier. The result was in line with the company’s forecast earlier this month for earnings of 61 cents to 63 cents.

The latest quarter included 5 cents per share in charges from hurricanes Katrina and Rita, which were offset by an estimated tax benefit of 5 cents per share from repatriated foreign earnings.

Revenue rose 4 percent to $6.03 billion from $5.79 billion.

“That’s very consistent with their prerelease,” said Frank Morgan, an analyst with Jefferies & Co. in Nashville. “It’s a very difficult environment with the higher level of uninsured activity and bad debt.”

HCA shares fell 69 cents, or 1.4 percent, to close at $48.31 on the New York Stock Exchange. They have traded in a 52-week rangs of $35.50 to $58.60.

HCA facilities provided $298 million worth care to uninsured in the third quarter compared with $228 million in the same period last year, the company said.

The company’s provision for doubtful accounts dropped to $618 million, or 10.3 percent of revenue, from $688 million, or 11.9 percent of revenue, a year ago. Adjusting for the effect of the uninsured discounts, the provision for doubtful accounts for the latest quarter was 13.7 percent of revenue.

HCA executives told analysts in a conference call Tuesday that uninsured patients and bad debt remain “big variables” for earnings.

Executives also said they don’t expect Medicare pricing to be as strong this year as last year.

“This is a very volatile environment we’re in – more volatile than I’ve seen in my career,” HCA Chairman and CEO Jack O. Bovender Jr. told analysts in a conference call.

Bovender said the company remains optimistic on HCA’s long-term financial stability and that a share repurchasing program currently under way “does imply that when management looks at the long-term future, we have confidence in our company.”

HCA said revenue at facilities open at least one year rose 4.6 percent in the third quarter. On a per-patient basis, same-facility revenue was up 3.4 percent. Adjusting for discounts provided to uninsured patients of $239 million, same-facility revenues increased 8.8 percent and same facility revenue on a per patient basis grew 7.6 percent.

For the nine months ending Sept. 30, net income rose to $1.1 billion, or $2.46 per share, from $924 million, or $1.88 a share, during the same period a year ago. Revenue rose to $18.3 billion from $17.56 billion a year ago.

HCA backed its forecast for 2005 earnings per share of $3.10 to $3.20, excluding effects from the company’s $2.5 billion share buyback. For 2006, HCA said it still estimates earnings per share of $3.25 to $3.45, including one-time items.

Analysts estimate earnings per share of $3.02 in 2005, and $3.29 in 2006.

Morgan said HCA’s future earnings would be difficult to predict because of variations in admissions volume and uninsured patients numbers.

“Clearly they’re expecting to see higher levels of bad debt,” Morgan said. “The biggest question mark is when do overall volume trends recover and secondly how long does it take to recover from any residual affects from the hurricanes.”

HCA President and Chief Operating Officer and Director Richard M. Bracken told analysts in a conference call that all company hospitals in Louisiana, Mississippi, Texas and Florida are operational, with the exception of New Orleans’ Tulane Hospital, which could partially reopen early next year.

HCA was recently in the spotlight as regulators probe Senate Majority Leader Bill Frist’s decision to sell shares of the company – founded by his family – shortly before the stock plunged in July.

Morgan said the Frist investigation has not and likely will not adversely affect the company’s earnings.

Nashville-based HCA owns and operates about 190 hospitals and 92 freestanding surgery centers in 23 states, England and Switzerland.

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On the Net:

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