HCA 1st-Quarter Earnings Drop 8.5 Percent

By ROSE FRENCH

NASHVILLE, Tenn. – HCA Inc. reported Tuesday that first-quarter earnings dropped 8.5 percent after an increase in uninsured admissions cut into revenue gains at the nation’s largest for-profit hospital operator. Its shares fell more than 1.7 percent.

Net income fell to $379 million, or 92 cents a share, from $414 million, or 95 cents a share, in the year-ago period. The result was toward the high end of the company’s recent forecast range and exceeded the average analyst estimate of 89 cents a share, according to Thomson Financial.

Revenue climbed to $6.42 billion from $6.18 billion, as revenue at units open at least a year gained 5 percent. Uninsured admissions rose 13 percent in the quarter however, and the company said its provision for “doubtful accounts” rose to $852 million from $683 million a year earlier.

The Nashville-based company also said it admitted 5,000 fewer patients with flu-related pulmonary conditions in the latest quarter due to the milder flu season.

HCA Chairman and CEO Jack O. Bovender Jr. told analysts in a conference call that first-quarter results “although mixed in several areas, provide a solid start to 2006.”

HCA shares fell 79 cents to close at $45.25 on the New York Stock Exchange.

Frank Morgan, an analyst with Nashville-based Jefferies & Co., said softer patient admissions volumes and an increase in uninsured admissions have been trends in the health care industry for the last several years.

“There’s been a shift in corporate America, where you’ve seen the increase in health care being shifted to employees, and to some degree that’s affected going to the hospital on an in- or out-patient basis,” Morgan said.

“People now have to spend more out-of-pocket. They’re thinking about that before they have to go to the hospital or doctor. People without insurance – that’s probably a secondary effect on volumes, and it’s definitely had an impact on bad debts.”

HCA-owned Tulane University Hospital – which sustained more than $90 million in damage from Hurricane Katrina – reopened its emergency room, 63 of its 235 beds and five operating rooms in February, the company said.

The New Orleans hospital also reopened an adult and a pediatric intensive care unit, a pharmacy and several cardiology labs, answering one of the city’s most urgent needs.

Company executives said on Tuesday those beds filled up quickly and that HCA planned to open up additional beds in the near future.

During the first quarter, HCA repurchased 13 million shares of its common stock, at a cost of $653 million. HCA has repurchased a total of 49.7 million shares, completing the $2.5 billion share repurchase authorization approved by the company’s board in October 2005.

Common shares outstanding at March 31, 2006 were 408.1 million, compared to 417.5 million at December 31, 2005.

HCA revised its full-year guidance downward to remove an expected pretax gain of 14 cents a share after the planned sale of five hospitals did not happen. The company now expects earnings between $3.10 and $3.30 a share. Analysts forecast $3.21 a share.

At the end of 2005, HCA operated 182 hospitals and 94 freestanding surgery centers located in 22 states, London and Geneva, compared with 189 hospitals and 92 freestanding surgery centers at the end of 2004.