Hca Healthcare, Inc. · NYSE:HCA
Hca Healthcare — Q2 2011 Earnings Presentation
18 slides from Hca Healthcare's earnings presentation, Sep 12, 2011
Slide 1: Second Quarter 2011 Review
Exhibit 99.2 Second Quarter 2011 Review September 12, 2011
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation may contain certain forward-looking statements provided by Company management. These statements are intended to be covered by the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statem
Slide 3: Introduction
Introduction • Purpose of this presentation is to summarize the supplemental analysis performed and findings reached on our second quarter • Medicare revenue growth in second quarter fell short of expectations and was inconsistent with historical trends • Medicare revenue declined in second quarter
Slide 4: Medicare revenue growth in Quarter 2011 declined unexpectedly
nd Medicare revenue growth in Quarter 2 2011 declined unexpectedly $191 $190 $154 $147 $145 $141 $127 $131 $126 $116 $115 $111 $112 $93 $67 $71 $50 ($4) 2007 2008 2009 2010 2011 Annual 3.4% (4Q’06) 3.3% 3.6% 1.9% (0.55%) Medicare IPPS Updates Medicare (Traditional & Managed) Revenue Growth, numbers
Slide 5: Medicare case mix decline in Quarter 2011 was unexpected
Medicare case mix decline ndinQuarter 2 2011 was unexpected Trend of Medicare CMI 1.7000 1.6500 1.6000 1.5500 Traditional Medicare Managed Medicare 1.5000 1.4500 1.4000 4 2007 2008 2009 2010 2011
Slide 6: Additional analysis of Q2 included three major areas
Additional analysis of Q2 included three major areas • Data Integrity Review • Regulatory and Past Period Adjustments Review • Case Mix Review 5
Slide 7: Supplemental data integrity review disclosed no issues
Supplemental data integrity review disclosed no issues HCA has a robust compliance effort in all areas of compliance risk, including DRG coding Analysis Findings • DRG coding audit conducted, • No changes in coding process, with independent review, of and no significant differences both shared servi
Slide 8: Regulatory changes & prior year cost reports and claims affected Medicare revenue
Regulatorychanges & prioryearcostreportsandclaimsaffectedMedicarerevenue Analysis Findings • Reviewed impact of regulatory • Regulatory changes include the changes 72 hourrule (effective 6/30/10), with adverse impact of $21 million in Q2 (no year over year impact going forward); and CT scan reimburs
Slide 9: Extensive review of Medicare case mix conducted
Extensive review of Medicare case mix conducted • CMI analysis by DRG typeidentified -- DRGs and facilities that appeared to account for primary CMI shifts • Surveyed facilities for root cause of change and outlook • Tested impact of CMS grouper changes implemented on October 1, 2010 8
Slide 10: Decline in Medicare case mix resulted in $28 million adverse impact
Decline in Medicare case mix resulted in $28 million adverse impact Drivers of CMI decline Implications for Q3 and Q4 • Shift in volume from • Downward pressure on CMI surgical to medical, likely to continue, driven by primarily in cardiovascular falling surgical volume service line • CMI decline wi
Slide 11: No geographical pattern to the decline in Medicare case mix in Q2
No geographical pattern to the decline in Medicare case mix in Q2 Northeast -2.2% Northwest 0.4% (incl. Anchorage) Utah -1.8% Northern Virginia 4.5% San Jose -3.9% Denver 0.1% Richmond -1.7% Kansas City 0.3% Southwest VA -1.6% Las Vegas -0.5% Wichita 5.5% Southern California 4.1% Nashville -4.0% Cha
Slide 12: Losses in Medicare IP cardiovascular surgical cases partially offset by medical gains
Losses in Medicare IP cardiovascular 1 surgical cases were partially offset by gains in medical cases across multiple service lines HCA change in number of Medicare cases Increase (Q2 2011 to Q2 2010) Decrease Surgical Medical 1 -769 Cardiovascular 540 Surgery2 109 n/a Pulmonary 0 49 Other3 -1 63 Ga
Slide 13: Medicare IP cardiovascular surgical cases drove a decline in CMI
1 MedicareIPcardiovascuarsurgicalcasesdrovea declinein CMI 1 Total IP cardiovascular surgical declined by 1,156 for all payers, with Medicare accounting for two-thirds (769 cases) of the decline HCA change in number of Medicare cases Increase (Q2 2011 to Q2 2010) Decrease % of negative CMI Impact Su
Slide 14: Cardiovascular declines were driven by several factors
Cardiovascular declines were driven by several factors • Overall demand for cardiovascular services has been declining about 3% per year for several years • Appears to be an acceleration of this negative trend nationally that impacted HCA markets in Q2 2011 • In HCA, 20 hospitals across 10 divisions
Slide 15: HCA has had slight growth in its share of inpatient cardiovascular surgical case volume
HCA has had slight growth in its share of inpatient cardiovascular surgical case volume Changein HCAandnon-HCAIP cardiovascular surgicalcasevolume1,2, all payers 100 HCA hospitals 95 Non-HCA hospitals 90 ’08-10 CAGR(%) 85 -2.3% 80 -3.2% 0 ’08-10 share Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 change 2008
Slide 16: Overall market share for HCA is stable with some service line variation
Overall market share for HCA is stable with some service line variation Total Market Discharges 4,975,899 Total HCA Discharges 1,193,717 Growth HCA Point Discharges (Over Prior 12 months) HCA Share Trend Service Line Market HCA Market HCA Total Total All SLs 4,975,899 1,193,717 0.4% 0.3% 24.0% 0.0%
Slide 17: Conclusion
Conclusion • Medicare revenue decline in second quarter due to several factors (numbers show year over year change, Q2 2011 to Q2 2010) and estimates of future impact refer to Q3 and Q4 2011: May impact future Not expected to quarters, in whole Unlikely to impact impact future Issue or part future q
Slide 18: Recent debt refinancings provide financial flexibility and enhance earnings
One further topic: Recent debt refinancings provide financial flexibility and enhance earnings Run Rate Annual Estimated EPS Impact Interest 1 2 Transaction Savings/(Costs) 2011 2012 Extended $3.0B Bank Term Loans (May) ($36 mm) ($0.03) ($0.04) Called all $1.0B of 2014 and $108mmof 20172nd lien note