Sunday, October 30, 2016 9:02:29 PM
Oct 27 (Reuters) - HCA Holdings Inc's efforts to rein in costs has helped the company cement its position as the largest U.S. for-profit hospital operator, far outperforming its highly leveraged rivals amid a slowdown in demand.
The company on Thursday posted a higher-than-expected quarterly profit, buoyed by cost controls and a modest growth in patient admissions.
HCA's labor costs and expenses on salaries and benefits came in at 42.7 percent of net revenue in the third quarter - 104 basis points below that projected by Barclays analysts.
Barclays said the drop in labor costs was in contrast to that reported by rival Community Health Systems Inc in its preliminary results on Wednesday.
Investor sentiment on hospital operators has soured this year as concerns have mounted over slowing patient volumes, rising expenses and high debt.
HCA said equivalent admissions, which include both patients who stay in the hospital overnight and those who are treated on an outpatient basis, rose 1.3 percent in the third quarter.
Community Health reported a 1.5 percent fall in quarterly adjusted admissions on a same-store basis, while costs related to health insurance and state supplemental programs rose.
For Tenet Healthcare Corp, which relies heavily on the federal government for most of its revenue, the main concern is likely to be reimbursement pressure, analysts said.
The government, through President Barack Obama's healthcare reform law, is exerting greater power over the acute-care industry by making changes to Medicare payments, including payment cuts and treatment quality incentives.
Private insurers are also likely to follow suit.
Tenet, the third-largest U.S. for-profit hospital chain, is scheduled to report quarterly earnings on Monday.
"We see HCA valuation as appropriately moving away from the pack as the market segments those who can and those who can't run hospitals," Mizuho analyst Sheryl Skolnick wrote.
HCA, which has a market capitalization of about $30 billion, had nearly the same amount of debt as of June 30. Community Health had more than $15 billion in debt and Tenet had about $14 billion in debt.
Tenet has a market value of about $2 billion, while Community Health's value dropped to about $550 million after the rout in its shares on Thursday.
Up to Wednesday's close, Community Health's stock more than halved this year, while Tenet declined 29 percent. HCA's shares rose nearly 17 percent in the same period.
HCA earned $1.61 per share, excluding items, topping analysts' average estimate of $1.42 per share, according to Thomson Reuters I/B/E/S. The company also raised its full-year adjusted earnings forecast.
(Reporting by Ankur Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Sayantani Ghosh)
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