HCA joint venture to lose $50M a quarter

Nashville, Tenn.-based HCA Healthcare reported $1.63 billion in third-quarter operating income on revenues of $16.21 billion, but the company's results were "unfavorably impacted" by its Valesco physician staffing joint venture, which "performed below expectations," CEO Sam Hazen said during an Oct. 24 earnings call. 

In April, HCA went from a 50 percent owner to 90 percent owner of Valesco, a joint venture with  EmCare, a physician practice management firm affiliated with Envision Healthcare, which filed for Chapter 11 bankruptcy in May. HCA is consolidating operations at Valesco, but the move reduced the health system's consolidated margins by about 30 basis points in the second quarter, according to CFO Bill Rutherford. 

Valesco's increased staffing costs and lower-than-expected saler were part of the reason why HCA missed Wall Street profit estimates in the third quarter. The joint venture had a negative impact of about $100 million on HCA's adjusted EBITDA in the quarter as well on a year-to-date basis, Mr. Rutherford said

"Going forward, we anticipate the loss from this venture to approximate $50 million a quarter," Mr. Rutherford said. 

HCA is working on multiple fronts to address these losses, including making programming adjustments, reducing the cost structure and working with payers for improved reimbursement. 

"We are continuing our efforts to integrate this venture and anticipate implementing additional actions that should improve its operational results over the next few quarters, including less pressure for the company in the fourth quarter," Mr. Hazen said. "Because of this issue primarily, we have lowered the top side of our earnings guidance for the year to reflect the effects of these losses."

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