Evaluating HCA Holdings’ performance across service lines
HCA Holdings: Key takeaways from its 3Q14 earnings release (Part 9 of 10)
Overall performance
HCA Holdings (HCA) has a market share of about 24% in all its key markets. Meanwhile, the company is attempting to increase its market share across all service lines in 60% of its markets.
The above graph shows the trend in HCA Holdings’ operating and net profit margins over the past five quarters. The healthcare industry, represented by the Health Care Select Sector SPDR Fund (XLV), is characterized by high debt and low profit margins.
HCA Holdings, or HCA, experienced a sudden increase in newly insured patient volumes, causing operating margins to spike to 16.4% in 2Q14. Margins fell to 14.2% in the third quarter of 2014.
Net profit margins were highest at 5.6% in 3Q14, indicating a lowering of interest expense and improved leverage ratios. Other for-profit hospital operators including Community Health Systems (CYH), Universal Health Services (UHS), and LifePoint Hospitals (LPNT) saw respective net profit margins of 1.29%, 4.10%, and 2.36%.
Service lines
On a year-over-year basis, 10 out of 14 domestic divisions at HCA witnessed admissions growth. The three major service lines—orthopedics, cardiovascular, and oncology—experienced solid growth, especially in outpatient volumes. All other divisions experienced growth both in inpatient admissions and outpatient admissions. Emergency medical service transport rose by 4.4%, while trauma, or emergency room, admissions increased by 8.9% in 3Q14 over 3Q13.
Neonatal admissions, or admissions of newborn babies, rose by 8.9% in 3Q14 compared to last year. Admissions in behavioral services and rehabilitation services also rose by 9.7% and 12.4%, respectively.
As it invests in varied service lines and strengthens its local networks, HCA is experiencing a substantial increase in patient volumes that is leading to higher profits.
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