Labor costs, payer mix dig into HCA's Q3 operating margins

Nashville, Tenn.-based Hospital Corporation of America expects tightened operating margins for the third quarter due to higher labor costs and an increase in uninsured admissions.

HCA anticipates third quarter revenues of $9.856 billion compared to $9.220 billion last year. Its expected $921 million income before taxes is down, however, from the $929 million profit in the third quarter of 2014.

HCA said operating margins declined in the third quarter due to higher labor costs, driven by reduced productivity and an increase in contract labor. Labor costs increased as a percent of revenues to 46.9 percent compared to 45.7 percent.

A less favorable payer mix also hurt results, the company said. Same facility uninsured admissions made up 8 percent of total admissions this quarter — up from 7.3 percent last year.

The hospital operator still reported "strong" patient volume in the third quarter, with same facility admissions up 2.9 percent compared to the third quarter of 2014.

HCA anticipates net income of $1.17 per diluted share for the quarter. That's a penny up from the $1.16 per share in the third quarter last year, but falls below the average analyst estimate of $1.22 per share.

HCA expects adjusted EBITDA of $7.8 billion for the year, and it tightened guidance since last quarter for adjusted earnings per diluted share to $5.20 to $5.25. Analysts expected $5.28 per share.

HCA is scheduled to release full third quarter results Oct. 27.


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