HCA Holdings Inc. (HCA) Q2 2012 Earnings Call August 6, 2012 9:00 am ET Executives Richard Bracken – Chairman, Chief Executive Officer Victor Campbell – Senior Vice President Milton Johnson – President, Chief Financial Officer Sam Hazen – President, Operations Mike Marks – Chief Financial Officer, HCA Eastern Group Analysts Ralph Giacobbe – Credit Suisse Darren Lehrich – Deutsche Bank AJ Rice – UBS Kevin Campbell – Avondale Partners Frank Morgan – RBC Capital Markets Sheryl Skolnick – CRT Capital Markets Kevin Fischbeck – Bank of America Merrill Lynch Gary Taylor – Citi Gary Lieberman – Wells Fargo Securities Whit Mayo – Robert W. Baird Tom Gallucci – Lazard Capital Markets John Ransom – Raymond James Vicki Bryan – Gimme Credit Presentation Operator
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Before I turn the call over to Richard, let me 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 release 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 statements whether as a result of new information or future events. And as you heard, the call is being recorded with replay available later today. With that, let me turn the call over to Richard. Richard Bracken All right, thank you Vic and thanks to all for joining our call this morning. Let me just say at the outset that we were pleased with our overall performance in the second quarter. In general, we saw a continuation of trends that we’ve been reporting on in recent quarters; that is, favorable growth in patient volumes, effective expense management, and continued pressure on revenue rate growth. Regarding our revenue rate growth performance, patient acuity as measured by case mix index increased slightly, but we continued to see pressure from Medicaid revenue rate declines. For the quarter consolidated and reported adjusted EBITDA increased 10.5% to $1.569 billion from $1.42 billion in the prior year, and same facility adjusted EBITDA increased 5.2%. Our volumes continued to trend favorably to the prior period. On a same facility basis, admissions and equivalent admissions increased 2.5% and 3.9% respectively, and on an as-reported basis admissions increased 7.7%. And please recall that these as-reported numbers reflect the consolidation of the Health One acquisition last year. We believe that our comprehensive service line strategy continues to provide a very firm foundation for this composite growth.
As an example, behavioral health and inpatient rehab admissions each increased approximately 14% during the quarter. We have now experienced 19 consecutive quarters of positive equivalent admissions growth. Additionally, we continue to experience favorable growth trends in emergency visit volumes. As reported, emergency visit growth was 13.4% and 8.8% on a same facility basis. This performance is important in driving our overall admission levels since approximately 65% of our admissions come through our emergency department. Also, Sam will update in his remarks market share information.The Company reported favorable cash flows from operations in the second quarter totaling 1.46 billion. For the first six months of 2012, cash flow from operations totaled $2.257 billion. Capital expenditures totaled $449 million in the quarter and our leverage ratio, which was 4.46 times at the end of last year, has improved to 4.2 times at the end of the second quarter. I’d also like to mention Parallon’s recent agreement with LifePoint Hospitals to provide full revenue cycle outsourcing and full service purchasing and accounts payable sourcing services for their hospitals. We also extended our IT service agreement with LifePoint by four years and we are pleased with Parallon’s success over this past year and believe Parallon is well positioned to deliver solutions to improve cost efficiency and cash flow to other healthcare providers. Now before turning the call over to Milton, let me just add that we do expect a story, possibly two, to run in the New York Times as early as this week. Based on the feedback we’ve received and the questions we’ve been asked, we believe the stories will include several topic areas: first, our ownership structure; second, the quality of care including medical necessity for cardiac services at certain of our Florida hospitals and wound care; our use of the ACEP – American College of Emergency Physicians – evaluation and management guidelines in our emergency departments; and our approach to care for the uninsured. Obviously, we do not know the precise contents of the story but to give you some context as you consider the article, we are posting some related information on our website. Read the rest of this transcript for free on seekingalpha.com