10-QPeriod: Q3 FY2022

HCA Healthcare, Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 1, 2022For Securities:HCA

Summary

HCA Healthcare, Inc. reported revenues of $14.971 billion for the third quarter of 2022, a decrease of 2.0% compared to $15.276 billion in the third quarter of 2021. This revenue decline was primarily driven by a 3.2% decrease in revenue per equivalent admission, influenced by a significant reduction in COVID-19 patient volumes compared to the prior year. Net income attributable to HCA Healthcare, Inc. saw a substantial decrease to $1.134 billion ($3.91 per diluted share) from $2.269 billion ($7.00 per diluted share) in the prior year's third quarter. This decrease is largely due to the absence of a significant $1.047 billion gain on sales of facilities recorded in the third quarter of 2021, alongside increased operating expenses, particularly in 'other operating expenses' which rose to 19.1% of revenues from 16.6% due to higher costs for directed payment programs, professional fees, and utilities, along with increased provisions for professional liability risks. Despite the year-over-year decline in net income, operating cash flows increased by $743 million to $3.020 billion, driven by positive changes in working capital. The company also continued its share repurchase program and declared a quarterly dividend. Management anticipates that existing liquidity and access to capital markets will be sufficient to meet its needs for at least the next 12 months.

Financial Highlights

47 data points
Beta

Revenue

$14.97B

Net Income

$1.13B

7.6% Net Margin

EPS (Diluted)

$3.91

Total Assets

$51.48B

Cash & Equivalents

$999.00M

Free Cash Flow

$1.89B

Financial Statements
Beta
Revenue$14.97B
Operating Expenses$13.27B
Interest Expense$446.00M
Net Income$1.13B
EPS (Basic)$3.97
EPS (Diluted)$3.91
Shares Outstanding (Basic)285.96M
Shares Outstanding (Diluted)289.85M

Key Highlights

  • 1Consolidated revenues for Q3 2022 were $14.971 billion, down 2.0% year-over-year, primarily due to lower COVID-19 volumes compared to Q3 2021.
  • 2Net income attributable to HCA Healthcare, Inc. decreased significantly to $1.134 billion ($3.91/share) from $2.269 billion ($7.00/share) in Q3 2021, largely due to the absence of a large gain on sale of facilities in the prior year.
  • 3Revenue per equivalent admission declined by 3.2% consolidated, reflecting the impact of reduced COVID-19 cases and potentially payer mix shifts.
  • 4Same facility equivalent admissions increased by 2.3%, while inpatient and outpatient surgeries also saw increases of 3.2% and 1.1% respectively, indicating underlying volume growth in non-COVID services.
  • 5Operating expenses, particularly 'other operating expenses,' increased as a percentage of revenue, driven by higher costs for directed payment programs, professional fees, utilities, and increased professional liability provisions.
  • 6Cash flow from operations improved significantly by $743 million to $3.020 billion in Q3 2022, demonstrating strong operational cash generation.
  • 7The company repurchased $3.36 million shares of common stock in Q3 2022 and continues to focus on capital allocation, including dividends and share buybacks.

Frequently Asked Questions

The substantial decrease in net income was primarily due to the absence of a significant gain on sales of facilities ($1.047 billion) recognized in Q3 2021. Additionally, while revenues saw a slight decline, operating expenses, particularly 'other operating expenses,' increased as a percentage of revenue, contributing to lower profitability.

HCA Healthcare experienced increases in 'other operating expenses' due to higher costs for directed payment programs, professional fees, and utilities. The company also noted increased provisions for professional liability risks. Management acknowledges inflationary pressures on labor and supplies and intends to manage costs by reducing reliance on premium rate labor, though future impacts depend on labor market conditions.

Revenues declined 2.0% in Q3 2022, largely attributed to a decrease in COVID-19 patient volumes compared to the prior year. However, same-facility equivalent admissions and surgeries showed positive growth, suggesting underlying demand for non-COVID services remains robust. The company's ability to manage payer mix, optimize revenue per admission, and control costs will be key to future revenue performance.

HCA Healthcare has a substantial debt balance of $37.710 billion as of September 30, 2022. While the company is actively refinancing and managing its debt, including issuing new senior secured notes and redeeming older ones, it remains a highly leveraged entity. The company believes its cash flows from operations and access to capital markets will be sufficient to meet its debt service requirements and liquidity needs.