HCA Holdings, Inc. (HCA)
May 21, 2013 10:30 am ET
R. Milton Johnson - President, Chief Financial Officer, Principal Accounting Officer and Director
Albert J. Rice - UBS Investment Bank, Research Division
Albert J. Rice - UBS Investment Bank, Research Division
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R. Milton Johnson
Thank you, A.J., and thanks to all of you for taking the time today to hear more about HCA. We believe that HCA occupies a very unique space in America's health care delivery system. We're pleased with our past and more recent performance, and excited about our future opportunities. For those of you who do not know a lot about HCA, I'll spend a few minutes reviewing our portfolio and our overall operating strategies and then, provide some summary information on our recent performance and general observations on the health care reform agenda. So some thoughts about our company.
HCA is America's leading largest private hospital and health care management organization. We have an unmatched asset base, scale of operations, strong operating performance and future potential in a changing health care environment. We are well diversified across 30-plus markets in 20 U.S. states and the U.K. Generally, our assets are positioned in the southern half of the US. We operate in large population centers. We're in 14 of the 25 fastest growing MSAs of -- with more than 500,000 people. We operate in an industry and markets where key macro dynamics: population growth, the health care utilization curve, and perhaps, health care policy reform will continue to drive demand and growth. We operate a sophisticated portfolio of hospitals, many with a large earnings profile. We see about 20 million patient encounters each year. 1 out of every 22 emergency room visits in America goes to an HCA hospital, generally, 20% to 30% market share in key markets. We are among America's largest ASC providers, behavioral provider. We have our own GPO HealthTrust Purchasing Group, with about $18 billion to $20 billion in purchases annually. We have a large ITNS operation and a clinical research organization.
So the takeaway from our footprint is domestically focused, except in the U.K. And we have a large diversified footprint that helps us stabilize our performance by minimizing the influence of any single market or region. And this portfolio is not easily replicable and can expand efficiently.
Our facilities do not function as an independent delivery setting, but in an integrated way, providing care to patients across a continuum of settings and services. A market may typically have 1 or more large tertiary care facilities surrounded by general hospitals providing more primary care than ordinary care. These outlying hospitals are often in the faster-growing suburban communities.
In addition to our hospitals, we have an array of outpatient and ambulatory centers providing convenient access to diagnostics and treatment and surgical services. We also operate freestanding emergency rooms that provide critical access to emergent care for communities whose populations are not large enough to sustain a hospital and open trauma centers to support our network. In addition to our facilities in many markets, we provide access to a network of employed and affiliated physicians and physician extender in both practice settings and employer work sites.
We provide a range of services: inpatient, outpatient, behavioral, rehabilitation, freestanding ERs, urgent care centers and physician practices. We're not a single-agenda focused company, not dependent on 1 market or 1 service line. We have flexibility to provide care across multiple settings. In addition to our health care sites, each market is supported by local and regional consolidated service centers to improve the efficiency of operation. Regional line support services include supply chain, revenue cycle, accounting support, credentialing and workforce management. This regional support strategy provides a competitive advantage to our facilities by providing high-quality, highly-efficient services through scale, standardization and expertise that cannot be reproduced by a standalone hospital or a small local system.
Now consider that this type of network is replicated within each of our markets, this gives you a sense of our approach to operations. This approach, we believe, has distinct advantages: it standardizes performance across markets, allows us to deploy technology and human resources very efficiently in a timely fashion and effectively allows us to harness our scale to improve our cost structure.
As we look ahead, the impact of the Affordable Care Act is on everyone's mind. Let me start by stating that some of the things are better known than others, and just let me make a few observations. The impact of the Affordable Care Act will be incremental and will vary by state, market and even hospital. We anticipate that 2013 will be a year of preparation as consumers become educated about their options, particularly, with health care insurance exchanges and as payers and providers develop new products and negotiate rates. There will be no volume from the nearly insured until 2014 and will grow through to 2015 and 2016, as more lines enter into the exchanges. We are unable to be more precise about impacts by year at this time because there are still many uncertainties. For example, the states' decisions about whether to expand Medicaid eligibility, a degree of employer opt out. How many employers will opt to pay penalties and drop coverage? We anticipate more smaller employers will than larger employers, but time will tell the total number of lives it will affect. The speed and level of consumer uptake on the exchanges, and of course, the reimbursement level on the individual exchange. Greater clarity into the health care reform's impact on HCA will be provided over the next several months. Currently, payers are currently filing products for exchanges. The states, again, some just still deciding on whether to expand Medicaid coverage. And the open enrollment period begins in the fourth quarter of 2013 and then, utilization patterns will emerge. We will continue to build and refine our model, and we'll provide our early thoughts later this year or no later than early 2014, probably at the latest date, when we release our guidance, earnings guidance, for the year 2014, which most likely would be in early February of 2014.