Uninsured Levels and Provision for Doubtful Accounts Exceed Expectations
Earnings Guidance for 2004 Revised
HCA (NYSE: HCA) expects its financial results for the first quarter
ended March 31, 2004 to approximate $0.69 per diluted share, below
current investment analysts' and Company expectations. These financial
results reflect the results of the Company's March "hindsight analysis"
of its accounts receivable. This analysis, which is performed quarterly,
indicated the collectability of uninsured accounts receivable continued
to deteriorate. In addition, the Company experienced a significant
increase in uninsured volumes during the first quarter, and in
particular, in March. As a result, the Company's provision for doubtful
accounts in the first quarter is expected to be $694 million (11.7
percent of net revenues) compared to $428 million (8.1 percent of net
revenues) in the first quarter of 2003.
"As I have commented on many occasions over the past two years, the most
significant challenge the hospital industry faces is the growing numbers
of uninsured and under-insured in this country. Hospitals have become
the ultimate safety net for health care services for the vast majority
of America's more than 44 million uninsured. Unfortunately, this is a
cost the hospital industry is increasingly bearing alone," stated Jack
O. Bovender, Jr., HCA Chairman and CEO. "It is time for all sectors of
society, both public and private, health care and non-health care, to
participate in solving this societal issue, by providing affordable
health insurance for all Americans and more equitably sharing this
growing cost to society."
The change in estimate for the provision for doubtful accounts was based
upon an increase in the number of uninsured patients in the first
quarter, coupled with a deterioration in the collectability of uninsured
accounts. The estimated collectability is based upon the results of the
Company's quarterly "hindsight analysis," in which historical write-offs
and collections experience on accounts receivable are analyzed. The
historical "look back" results, along with considerations of current
economic and volume trends in combination with collection indicators,
are used as a basis for the Company's estimate of allowance for doubtful
accounts for its accounts receivable. Approximately $30 million of the
first quarter increase in bad debts was the result of deterioration in
the collectability of uninsured accounts.
Uninsured emergency room visits rose 18 percent in the first quarter and
26 percent in the month of March, while uninsured admissions rose 14
percent in the first quarter and 19 percent in March compared to the
same periods of 2003. In addition to the significant increase in first
quarter 2004 bad debts, the Company's health care facilities provided
$218 million of charity care and discounts to the uninsured, up from
$182 million in the first quarter of 2003.
Due to the higher than anticipated provision for doubtful accounts in
the first quarter and current trends in uninsured volumes, management
now estimates the Company's provision for doubtful accounts will
approximate 11.5 percent of net revenues for the full year 2004, up from
prior expectations of 10.0 to 11.0 percent of net revenues. The 11.5
percent assumption assumes charity care levels, for the balance of 2004,
will remain consistent to the first quarter rate of growth. However,
should charity care levels increase at a faster rate, bad debts would be
reduced comparably. As a result of the expected increase in bad debts,
the Company's prior earnings guidance for 2004 of $2.85 to $2.95 per
diluted share is being revised to a range of $2.60 to $2.70 per diluted
share.
The Company's new earnings guidance range for 2004 also reflects a
decrease in its previously expected medical liability insurance premium
expense of approximately $28 million, of which $7 million was recognized
in the first quarter of 2004. In addition, management has noted current
favorable claim and payment trends, benefits resulting from the
Company's patient safety programs, the adoption of tort reforms and
limitations on losses in certain states and continued low interest
rates. As a result, our new earnings guidance includes a positive $40
million to $70 million change in the estimated professional liability
insurance reserves. The amount of any change to the estimated
professional liability insurance reserves will be determined after the
Company receives its annual, independent actuarial analyses, which are
expected to be completed over the next two to four months.
For the quarter ended March 31, 2004, the Company expects to report an
increase in consolidated revenues of approximately 12.6 percent to $5.9
billion. Consolidated revenue per equivalent admission increased
approximately 5.8 percent, while admissions increased 6.4 percent in the
first quarter compared to the first quarter of 2003. Preliminary results
indicate same facility revenues rose approximately 8.7 percent in the
first quarter of 2004, revenue per equivalent admission increased 6.0
percent and same facility admissions increased approximately 2.5 percent.
During the first quarter, same facility outpatient surgeries increased
1.8 percent; ambulatory surgery volumes increased 3.5 percent while
hospital based outpatient surgeries increased 1.0 percent. Same facility
emergency room visits increased 2.3 percent in the first quarter.
HCA will host a conference call for investors today at 9:00 a.m. CDT
(10:00 a.m. EDT). The call in number is 800-810-0924. The replay number,
available beginning at 12:00 noon CDT today until 12:00 midnight April
17, is 888-203-1112, confirmation code 619406. Interested investors may
also access a live audio broadcast of the call, via webcast. The
broadcast will also be available on a replay basis beginning this
afternoon and through the next 30 days. The webcast may be accessed at http://www.firstcallevents.com/service/ajwz404288958gf12.html
.
The Company plans to report final results for its first quarter, ended
March 31, 2004, on April 22, 2004.
This press release contains forward-looking statements based on current
management expectations. Those forward-looking statements include all
statements regarding our estimated results of operations in future
periods and all statements other than those made solely with respect to
historical fact. Numerous risks, uncertainties and other factors may
cause actual results to differ materially from those expressed in any
forward-looking statements. These factors include, but are not limited
to (i) increases in the amount and risk of collectability of uninsured
accounts and deductibles and co-pay amounts for insured accounts, (ii)
the ability to achieve operating and financial targets and achieve
expected levels of patient volumes and control the costs of providing
services, (iii) the highly competitive nature of the health care
business, (iv) the efforts of insurers, health care providers and others
to contain health care costs, (v) possible changes in the Medicare and
Medicaid programs that may impact reimbursements to health care
providers and insurers, (vi) the ability to attract and retain qualified
management and personnel, including affiliated physicians, nurses and
medical support personnel, (vii) potential liabilities and other claims
that may be asserted against the Company, (viii) fluctuations in the
market value of the Company's common stock, (ix) the impact of the
Company's charity care and self-pay discounting policy changes (x)
changes in accounting practices, (xi) changes in general economic
conditions, (xii) future divestitures which may result in additional
charges, (xiii) changes in revenue mix and the ability to enter into and
renew managed care provider arrangements on acceptable terms, (xiv) the
availability and terms of capital to fund the expansion of the Company's
business, (xv) changes in business strategy or development plans, (xvi)
delays in receiving payments for services provided, (xvii) the possible
enactment of Federal or state health care reform, (xviii) the outcome of
pending and any future tax audits and litigation associated with the
Company's tax positions, (xix) the outcome of the Company's continuing
efforts to monitor, maintain and comply with appropriate laws,
regulations, policies and procedures and the Company's corporate
integrity agreement with the government, (xx) changes in Federal, state
or local regulations affecting the health care industry, (xxi) the
ability to successfully integrate the operations of Health Midwest,
(xxii) the ability to develop and implement the payroll and human
resources information system within the expected time and cost
projections and, upon implementation, to realize the expected benefits
and efficiencies, and (xxiii) other risk factors detailed in the
Company's filings with the SEC. Many of the factors that will determine
the Company's future results are beyond the ability of the Company to
control or predict. In light of the significant uncertainties inherent
in the forward-looking statements contained herein, readers should not
place undue reliance on forward-looking statements, which reflect
management's views only as of the date hereof. The Company undertakes no
obligation to revise or update any forward-looking statements, or to
make any other forward-looking statements, whether as a result of new
information, future events or otherwise.
All references to "Company" and "HCA" as used throughout this document
refer to HCA Inc. and its affiliates.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Statements in this press release regarding HCA's business
which are not historical facts are "forward-looking statements" that
involve risks and uncertainties. For a discussion of such risks and
uncertainties, which could cause actual results to differ from those
contained in the forward-looking statements, see "Risk Factors" in the
Company's Annual Report or Form 10-K for the most recently ended fiscal
year.
Mark Kimbrough
615-344-2688