Early DiagnosisHCA warned in advance about its recent pain. Two weeks ago, the company predicted that third-quarter profits would fall well short of Wall Street forecasts and went on to lower its expectations for the full year as well. The company blamed weak operating fundamentals, rather than recent hurricanes, for most of the disappointment. Specifically, HCA revealed that admissions had slipped -- and, even worse, that bad debts had rocketed -- during the seasonally tough third quarter. The company's announcement raised concerns about HCA and the hospital sector overall. "HCA's feeble earnings growth expectations reflect rising uninsured admissions and bad debt levels," noted Prudential analyst David Shove, who has a neutral rating on HCA's stock and an unfavorable outlook on the group in general. And "HCA's 3Q05 preview shows us that industry trends remain feeble and earnings could be weak across the sector." Shove had previously expressed some hope that HCA might be making important progress on the bad debt front. This week, however, Barron's raised questions about whether HCA's past improvement in bad debt expense was ever real at all. Notably, Barron's reported, HCA began scaling back its provision for doubtful accounts even as its receivables from uninsured patients -- who rarely pay their bills -- kept climbing higher. Until the fourth quarter of 2004, Barron's said, HCA's allowance for doubtful accounts covered about 89% of the company's uninsured receivables. But after that, it said, that coverage began to fall off sharply and stood at just 77% of uninsured receivables in the second quarter of this year. By now, hospital investors have learned to pay close attention to a company's so-called "bad debt ratio," or the percentage of revenue that must be written off as a result of unpaid accounts. However, investors lacked some of the disclosures necessary to figure out that HCA's reserving method, rather than a drop in unpaid accounts, was actually helping that crucial metric.