Thanks to HCA ( HCA), the ailing hospital industry is now sporting a healthy glow. HCA materially boosted its fourth-quarter expectations on Wednesday, sending the long-suffering hospital sector into a powerful relief rally. HCA plans to report quarterly profits of between 68 cents and 72 cents a share -- well ahead of the 55-cent consensus estimate -- when it formally releases earnings next month. But at least one industry expert was quick to attribute much of that upside to items that are unusual in nature. Fulcrum analyst Sheryl Skolnick pointed to a reduction in the company's bad-debt reserves as a particularly important factor. She also highlighted a reduced tax rate that may not be sustainable. Together, HCA indicated that the two items boosted earnings by 10 cents a share. A major reduction in the company's share count, following a recent Dutch auction buyback, also helped out. All told, Skolnick estimates that "more like 16 cents" -- or basically all -- of the upside surprise came from unusual items. Meanwhile, she continues to see operational challenges at the company. "Saying admissions were weak would be kind," said Skolnick, who has a neutral rating on HCA's stock and has long been cautious on the group. But "the sense that I have is that this is a company that is determined to find ways of not missing numbers." HCA's stock surged 8.1% to $42.90 on the upbeat report, while rivals rose between 1% and 3%.
HCA actually saw same-facility admissions decline by 1.4% during the latest quarter. However, the company still managed to grow revenue by 6.1% to hit Wall Street's target of $5.9 billion. Peter Young, a business consultant at HealthCare Strategic Issues, wonders why. "No one else in the hospital industry is experiencing this type of net revenue increase, hence my sustainability concern," Young said.