Dive Brief:
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HCA Healthcare is investing billions of dollars into expanding its emergency and high acuity service lines, targeting a 29% market share in healthcare services by the end of the decade, up from its current market share of 27%, executives said at the health system’s investor day on Thursday.
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The hospital operator will focus its expansion in existing markets, including in Austin, Denver and Nashville, Tennessee, where it is headquartered, CEO Sam Hazen said during the presentation.
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Assuming equivalent admissions and associated revenue grows modestly following the investments, HCA executives are targeting a 4% to 6% growth in adjusted earnings before interest, taxes, depreciation and amortization, also known as EBITDA, beginning in 2024.
Dive Insight:
On HCA’s first investor day in 20 years, executives focused on the operator’s expansion plans and capital projects.
HCA has $5.3 billion earmarked for projects to be completed in the next two years, said COO Jon Foster on Thursday.
Roughly half of the funds — $2.7 billion — are dedicated to expanding and renovating existing facilities. Approximately $1 billion is being set aside for new inpatient facilities, with another $1 billion to fund outpatient facilities, Foster said.
HCA will focus growth initiatives on expanding services in existing markets. “For us, to be successful, we have to build networks that have local scale, they have to have local scope of services in facilities and we have to integrate them into a cohesive network,” Hazen said.
HCA is also increasing its investment in emergency services, noting that emergency room care can drive inpatient admissions and surgeries. Already, HCA holds the most or second-most inpatient market share in about 80% of its markets, Foster said. Through expanding emergency services, HCA hopes to become the dominant provider for all care in its markets.
The health system has added over 100 freestanding emergency departments in the last decade and has another 51 facilities under development, said Richard Hammett, president of HCA’s Atlantic Group.
In May, HCA announced plans to acquire 41 urgent care clinics in some of its primary markets in Dallas, Austin, San Antonio, Houston and El Paso, Texas.
The operator also plans to expand outpatient locations, Foster said. HCA hopes each inpatient hospital will have 20 outpatient locations in the next few years.
Some analysts left HCA’s investor day optimistic about the for-profit hospital chain’s strategic plan, while others thought the operator missed a chance to assuage worries about rising professional fees.
“HCA is a resilient, smart, and gritty company that finds ways to consistently deliver growth and address challenges,” Jeffries analysts said in a note. “Our expectation is that HCA will be positioned to deliver EBITDA growth at the high end, if not above, its 4%-6% long term guidance range, at least for the next few years.”
Analysts from TD Cowen said HCA “missed an opportunity to describe its specific strategies to hurdle the high year to date professional fee inflation” that have broadly pressured hospital earnings.
“Year to date professional fee growth has masked 8% underlying EBITDA growth well in excess of HCA’s algorithm. Incremental visibility on strategy and outlook is the most critical current debate,” TD Cowen analysts said.
Last month, HCA missed Wall Street profit estimates for the third quarter, and executives said the for-profit expected to bleed $50 million per quarter moving forward after acquiring a majority stake in physician staffing firm Valesco.
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