Hospitals see drop in surgeries

HCA Holdings Inc.’s report of a drop in expensive surgeries may signal a broad slowdown for hospitals because of rising unemployment and tepid consumer spending.

Patients at HCA, the biggest U.S. hospital chain, sought less-expensive procedures during the quarter, according to the company. Per-patient income from Medicare, the government plan for the elderly, also fell. Until more hospitals report earnings, the possibility of a wider decline in spending will weigh on the industry, said Arthur Henderson, an analyst at Jefferies & Co. in Nashville, Tennessee, where HCA is based.

“What I’m particularly worried about is that this could be another systemic issue related to the economy that could spell trouble going forward,” Henderson said in a telephone interview. HCA “can fix a company-specific issue, but they’re going to have a lot tougher time fixing a macro systemic issue.”

It’s not clear whether the economy was responsible for the shift in procedures among Medicare patients or whether HCA lost customers to competitors, Henderson said. Positive reports in the future could lift all hospital stocks, Henderson said.

Surgery admissions at HCA’s hospitals fell 1.6 percent for the quarter, on a same-facility basis, while total admissions rose 1.9 percent. Medicare revenue per admission declined 1.3 percent. Cardiovascular surgeries declined 3.7 percent and general surgeries were down 2.5 percent, Chief Financial Officer Milton Johnson said in a conference call Monday.

At HCA, Medicare patients make up about 42 percent of customers, the highest rate among publicly traded acute-care hospitals, according to data compiled by Bloomberg Industries. The company also has the lowest revenue per patient, adding to the impact from fewer high-cost surgeries.

“We didn’t like the quarter, clearly,” said Richard Bracken, chairman and chief executive officer at HCA, in a conference call with analysts. “We are looking to continue to manage expenses appropriately.”

Lower costs of services would be good news for managed care companies, according to David Windley, an analyst at Jefferies & Co. UnitedHealth Group Inc. and WellPoint Inc. are the largest U.S. health insurers.

“HCA missed their numbers, but that’s good news for managed care companies, who will be more profitable as utilization of medical services fall,” Windley said in a telephone interview.

HCA reported second-quarter profit, excluding $75 million to pay off debt, of 51 cents a share, 9 cents less than the average estimate of 23 analysts surveyed by Bloomberg. Revenue climbed 4 percent to $8.06 billion, also missing estimates.

Admissions of uninsured patients increased 11 percent in the second quarter from a year earlier and accounted for 7.4 percent of same-facility admissions, the company said.

HCA operates 164 hospitals and 111 free-standing surgery centers.