美國醫院公司 (HCA) 2010 Q1 法說會逐字稿

Welcome to the HCA first-quarter 2010 earnings release conference call.

Today's call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Mr.

Vic Campbell.

Please go ahead, sir.

All right.

Thank you very much, and good morning to everyone on today's call and also to those who are listening on our webcast.

As you can imagine, this is a pretty eventful morning here in Nashville.

With that said, our call today will take a little different structure than normal.

Our Chairman and CEO, Richard Bracken, is here with me as always this morning, and he will make a few remarks about this morning's announcement.

Then our CFO, Milton Johnson, will address the first quarter's operating and financial results.

With our S-1 filing this morning, we have now entered a quiet period as all of you are much aware of.

And, as a result, we will not have our normal quarterly Q&A following our prepared remarks.

Hopefully Richard and Milton's prepared comments will answer most if not all of your questions.

Now let me do my normal and remind everyone that should today's call contain any forward-looking statements, they are based on management's current expectations.

Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today.

Many of these factors are listed in today's press releases and in our various SEC filings.

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 any forward-looking statements, you should not place undue reliance on these statements.

The Company undertakes no obligation to revise or update any forward-looking statement whether as a result of new information or future events.

And, as you heard from the operator, this call is being recorded.

A replay of the call will become available later today.

And with that, let me turn the call over to Richard Bracken.

Okay.

Thank you, Vic, and welcome to each of you.

We are pleased to make three important announcements this morning.

First, we are announcing a favorable quarter of operating results.

In just a moment, Milton will review the quarter in detail for us, but let me just say from a broad perspective, despite the continued difficulties in our upcoming, we are pleased to report very solid performance for the quarter.

Secondly, as you may have noted in our release, we are announcing a $500 million distribution to our stockholders.

The decision to make this distribution reflects the Company's continued positive operating performance.

And finally this morning, we are announcing our intention to return to the public equity market with the filing of a Form S-1 Registration Statement with the SEC.

It is anticipated that approximately $2.5 billion of the proposed $4 billion offering will consist of newly issued shares sold by HCA with the balance consisting of shares sold by existing stockholders.

As a public company, we expect to have improved access to capital markets that we will be able to use to both reduce outstanding debt and reinvest into the growth of the Company.

And as Vic indicated because of our S-1 filing, we are now in a quiet period and limited in what we can say.

Accordingly, we have suspended the Q&A portion of our call today.

And Milton, I know, has tried to anticipate the major questions you might have and will attempt to address them in his prepared remarks.

I look forward to again being able to discuss our Company's operations, performance and strategy with you once the quiet period is completed.

So with that, Milton, I will turn the call over to you.

Thank you, Richard, and good morning to all of you.

Each of you should have received our earnings release for the Company's first-quarter 2010 results issued this morning.

Included in today's release is a new supplemental schedule which provides a comparative view of our GAAP net revenues and non-GAAP cash revenues in relation to the Company's expense items.

We feel this would be useful due to the effect of our increase in uninsured discounts on our reported revenues.

Now let me provide some general comments and highlights around the quarter.

First-quarter results were driven by continued solid volume trends and a focus on the management of cash expenses.

This is our 10th consecutive quarter we have experienced same facility equivalent admissions growth over the prior year.

Same facility admissions increased 0.9%, while same facility equivalent admissions increased 1.1% over the first quarter of 2009.

Weather, although disruptive in many of our markets, appeared not to have a meaningful impact on our overall quarterly volume trends.

Same facility emergency room visits, which are a meaningful source of inpatient admissions, increased 1% in the first quarter compared to the prior year.

Same facility Medicare admissions and equivalent admissions increased 2.4% and 3.2% respectively compared to the first quarter of 2009.

Our same facility Medicare admissions include both traditional and Managed Medicare.

Managed Medicare admissions increased 7.3% on a same facility basis.

This represents approximately 22.8% of our total Medicare admissions.

Same facility managed care and other admissions declined 3.7% in the first quarter compared to the prior year, while same facility managed care and other equivalent admissions declined 3.3%.

These trends are consistent with our recent experience.

Same facility uninsured admissions increased 6.8% in the first quarter compared to last year.

Uninsured admissions represent 6.4% of the Company's total admissions in the quarter compared to 6% in 2009.

Admissions, excluding the uninsured, reflected positive growth for the fourth consecutive quarter and eight of the past nine quarters.

Surgical trends in the first quarter were soft as elective surgeries declined by 2.3%.

Overall same facility surgeries declined 1.3% comprised of reductions in inpatient surgeries of 0.4% and outpatient surgeries of 1.8% compared to the prior year.

Now focusing on revenue, our same facility cash revenue per equivalent admissions increased 4.2% in the first quarter over the same period last year.

As a reminder, cash revenues is a non-GAAP financial measure and represents reported revenues less the provision for doubtful accounts.

The benefit of $106 million more UPL revenue was offset by an unfavorable shift in payer mix during the quarter.

As noted in the earnings release this morning, charity care and uninsured discounts increased by $473 million, primarily due to the Company's revised uninsured discount policy.

The resulting effect is a reduction in reported revenues from uninsured patients and a similar reduction in our provision for doubtful accounts or bad debt.

As a result of higher uninsured discounts and the corresponding reduction in revenues, salaries and benefits, supplies and other operating expenses will reflect as a higher percentage of reported revenues than in a comparable period prior period year.

To compensate for this effect, management also analyzes our operating expenses in relationship to cash revenues, which is reported revenues less bad debt expense.

I will direct your attention to our release, which contains a supplemental non-GAAP disclosures schedule titled "Operating Measures on a Cash Revenues Basis."

Same facility Medicare and Medicaid revenue per equivalent admission increased 1.7% and 5.1% respectively.

Medicaid revenues per equivalent admissions exclude UPL revenues.

Same facility managed care and other revenue per equivalent admission increased 4.6% in the first quarter compared to the prior year.

In addition to managed care revenue, this includes revenues from worker's compensation coverage and the CHAMPUS/Tricare coverage.

In May of 2009, we experienced a reduction in Tricare outpatient reimbursement, which adversely affects our revenue growth compared to the first quarter of 2009.

Growth in revenue per equivalent admissions for managed care only was 5.6%.

We currently have 97% of our 2010 managed care revenue under contract at a rate of increase in the 5.7% to 6% range, excluding the effects of any acuity.

The Company's consolidated case mix index increased 0.8% in the first quarter compared to the first quarter of 2009.

This was somewhat less growth than we have been experiencing and negatively impacted the growth of revenues per equivalent admission.

Adjusted EBITDA increased 8% to $1.574 billion in the first quarter compared to $1.457 billion in the first quarter of last year.

Adjusted EBITDA margin improved to 20.9% as a percent of revenues in the first quarter compared to 19.6% in the prior year.

As a reminder, adjusted EBITDA is a non-GAAP measure and is reconciled to net income attributable to HCA Inc.

in the Company's earnings release.

Looking at expenses, cash operating expense per equivalent admission increased 3.7% in the first quarter compared to the prior year.

Cash operating expenses is a non-GAAP measure, and it is comprised of salaries and benefits, supplies and other operating expenses.

Salaries and benefits were 40.7% of revenues in the first quarter compared to 39.3% last year.

However, as a percent of cash revenues, salaries were 44% versus 44.1% in the prior year's first quarter.

Salary expense per equivalent admission increased 5.2% in the first quarter on a same facility basis.

Productivity performance as measured by man-hours per equivalent admission declined 1.6% on the same facility basis compared to the prior year.

One contributing factor for declining productivity was softer than expected admissions in January of this year.

Same facility wage growth was slightly improved from recent trends at 2.6%.

Supply expense in the first quarter decreased 40 basis points to 15.9% of revenues from 16.3% last year.

Supply expense as a percent of cash revenues declined 110 basis points to 17.2% from 18.3% in the first quarter of 2009.

In the first quarter, other operating expense were 15.9% of revenues compared to 14.8% in the same period last year.

On cash revenues basis, other operating expense increased 70 basis points from the prior year to 17.3%, primarily reflecting $52 million of increased expenses associated with the Texas Indigent Care program, our UPL.

For the first quarter, same facility charity care discounts totaled $542 million, an increase of $53 million from the prior year, while same facility uninsured discounts increased by $418 million to $1.033 billion.

Bad debt plus charity care and uninsured discounts as a percentage of revenue plus charity and uninsured discounts were 23.5% in the first quarter compared to 22.4% last year.

We currently have 94% of our total self-paid book reserved.

Upfront collections were approximately $86 million, up 4.2% from the first quarter of 2009.

Net income attributable to HCA Inc.

increased 8.6% to $388 million in the first quarter compared to $360 million last year.

2010 first-quarter results include impairments of $18 million, while 2009 first-quarter results include losses on sale of facilities of $5 million and impairments of $9 million.

Our top-performing markets in the quarter were South Carolina, Dallas-Fort Worth, and San Antonio.

The Company's cash flows from operations in the first quarter increased by $286 million to $901 million from $615 million in 2009.

As noted in the release this morning, the increase was due primarily to a $239 million decline in income taxes paid.

Days in accounts receivable at the end of the quarter were 46 days compared to 47 days at the end of the first quarter of 2009.

Capital expenditures totaled $214 million in the first quarter compared to $337 million last year.

During the first quarter, we made a 1.75 billion distribution to shareholders funded by $100 million in cash and the remainder from borrowings on the ABL and cash flow revolver.

Taking into account this distribution, our pro forma debt to adjusted EBITDA ratio at the end of December 2009 was 5.0.

Our debt to EBITDA adjusted EBITDA ratio at March 31, 2010 was 4.8 times.

Our ratio at March 31 pro forma for the $500 million distribution we announced today was 4.9 times.

We plan to borrow under our cash flow revolver to fund the $500 million distribution.

The amount available under our senior secured credit facilities at March 31, 2010 was $1.851 billion.

This concludes my comments on the first quarter, and Vic, I will turn the call back to you.

Alright.

Milton and Richard, thank you very much.

Let me just thank all of you for being on the call this morning.

We appreciate your interest and support of this Company and look forward to seeing you soon.

With that, that will conclude today's call.

Thank you very much.

This concludes today's conference call.

Thank you for your participation.