For the past couple of years, HCA Healthcare has used its third-quarter earnings call to provide some early thoughts about the upcoming year.
But, after a turbulent and unprecedented year, HCA had to change things up, CEO Sam Hazen said during the health system giant's third-quarter earnings call Monday.
"In those years, we obviously had a more stable environment economically, politically and operationally. While always difficult to predict our business with precision, today's environment, with all its uncertainty, makes it particularly challenging."
In its third-quarter earnings, HCA reported same facility admissions and equivalent admissions declined 3.8% and 9%, respectively, in the third quarter of 2020, compared to the same period a year earlier. Similarly, same facility emergency room visits declined 20.3% in the third quarter of 2020 compared to the same period in 2019.
Same facility inpatient surgeries dropped 6.8%, and same facility outpatient surgeries declined 6.3% in the third quarter of 2020, compared to the same period of 2019. Same facility revenue per equivalent admission increased 14.8% in the third quarter of 2020, compared to the third quarter of 2019, due to increases in acuity of patients treated and favorable payer mix in the quarter.
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So, Hazen said, the company would hold off on its typical predictions until at least January, when company officials have completed their planning process.
In the meantime, Hazen said, he could offer a preliminary look at how the health system is thinking. In a nutshell, he said: They are looking back to 2019 as they prepare for 2021.
- Setting the baseline: Hazen said the company plans to use 2019 volumes as a starting reference point for early 2021 planning purposes "with respect to volume, given the volatility we have seen in 2020 with COVID-19 surges, mandatory and voluntary suspension of elective business and intermittent recovery periods."
Specifically, he said, September and October are indicative of "somewhat stable activity" that the company is using to inform current thinking about what's ahead.
- Estimating COVID-19 activity: "First, we believe we will continue to treat COVID-19 patients throughout 2021. Over the last two quarters, COVID-19 patients have represented approximately 6% of our admissions," Hazen said. HCA is estimating between 4% and 5% of its admissions in 2021 could be related to the virus. "This factor represents continued high levels of acuity in our overall mix of inpatient business which should provide some support for current patient revenue trends," he said.
It is unclear at what rate government reimbursement programs for providing care to COVID-19 patients will continue through 2021, he said.
- Predicting inpatient and outpatient admissions: Overall, Hazen said HCA believes inpatient admission demand next year will be down from 2019 levels of approximately 2% to 3%, but they expect the case mix to be more acute.
On the outpatient side, he said, the health system anticipates emergency room visits will be down in 2021 compared to 2019. "But, like our inpatient business, we expect it to be more acute, which should drive higher revenue per visit offsetting some of the volume decline."
For outpatient surgeries, he said, HCA is expecting some recovery over current levels but volumes to remain down slightly.
Managing operating costs has been key for the health system's balance sheet, Hazen said. "We have continued confidence in our team's ability to hold many of the gains they have made across many of the different expense categories. In those areas where we anticipate some pressure, we believe we have future resiliency actions that can help offset some of these challenges."
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"Collectively these factors lead us to believe our preliminary expectations for adjusted EBITDA for 2021 could look similar to the company's original 2020 guidance but likely with a slightly wider range of results," Hazen said.
Overall, the health system reported profits of $668 million, or about $1.95 per diluted share in the third quarter ending Sept. 30, up from $612 million, or $1.76 per diluted share in the third quarter of 2019. That was on revenues of $13.3 billion in the third quarter, up from $12.7 billion in the third quarter of 2019.
Earlier this month, HCA announced it planned to return $6 billion in COVID-19 relief funds it received as part of the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, earlier this year.
The results included a reversal of $822 million, or $1.72 per diluted share, in government stimulus income recorded in the second quarter, received from the Provider Relief Funds established by the CARES Act, as well as $14 million, or three cents per diluted share, of gains on sales of facilities. The results also included losses on retirement of debt of $211 million.