Normalization is a fact despite HCA Healthcare’s massive recovery catapulted post-pandemic recession triggered by Medicare Sequestration reimbursement cuts will impact earnings going forward
Hospital and healthcare facilities operator HCA Healthcare (NYSE:HCA) stock has fallen (-25%) among underperforming payers this year. Clearly, not all healthcare stocks are safe havens in a falling market fueled by bearish fears. Payers, including health insurance companies such as Humana (NYSE: HUM), Aetna (NYSE: CVS), UnitedHealthcare Group (NYSE: UNH), and Cigna (NYSE: CI), are still trading through 2022. Vertically integrated healthcare development in the form of mergers with payers to form their own healthcare ecosystem. HCA is the world’s largest hospital owner and operator, with 182 hospitals, and approximately 2,200 places of care, including surgery centers, freestanding emergency rooms, urgent care facilities, and physician clinics.
MarketBeat.com – MarketBeat HCA Kryptonite Operator
HCA is not only a pure healthcare provider, but it dominates an area where integrated health systems do not want to take ownership of hospitals. Hospitals are the kryptonite of the healthcare industry from a profitability standpoint. Most hospitals in the US are classified as non-profit organizations because they are notorious for losing money. They write off about 70% of the bills they pay. However, the large scale and world class management has made HCA Healthcare one of the most profitable healthcare providers on the planet. Despite inflationary pressures and the brunt of labor costs, HCA managed to generate net income of about $1.15 billion in its latest quarter. However, growth has started to slow down after the pandemic recovery period as rising inflation also affects hospital costs. Additionally, the Medicare sequestration deduction increased to (-2%) as of July 2022, essentially reducing provider reimbursement as hospitals are projected to lose (-$3 billion) according to the America Hospital Association (AHA).
thriving after the pandemic
During the pandemic, hospitals faced a sharp drop in revenue as inpatient and elective surgeries were put on hold due to the spread of COVID-19. The top priority was to move COVID patients to emergency rooms, which quickly ran out of place. The federal government subsidized some of the losses, but many community hospitals went bankrupt. As reopenings began and social distancing mandates were lifted, hospitals saw a boom in business, as previously delayed surgeries and treatments began once again. Suppressed demand made financially sound hospitals even more money on recovery-like catapults. Back to normalcy for 2022.
recession has begun
On July 22, 2022, HCA Healthcare reported its fiscal Q2 2022 earnings for the quarter ended June 2022. The company reported earnings-per-share (EPS) profit of $4.21 excluding non-recurring items versus consensus analyst estimates for a profit of $3.71. A $0.50 green. Revenue grew 2.7% year-over-year (YoY) to $14.82 billion, beating analyst estimates of $14.73 billion. Adjusted EBITDA totaled $3.042 billion in Q2 2022, declining from 2021 to EBITDA of $3.219 billion. Net income fell by $1.155 billion, or $3.90 per diluted share, from $1.450 billion, or $4.36 per diluted share, in the year-ago quarter. Equal facility admissions fell (-1.2%) in the quarter, but same facility emergency room visits increased 7.3% annually. The same facility inpatient surgery fell (2.3%) and outpatient surgery fell (-1.4) YoY. Sam Hazen, CEO of HCA Healthcare, commented, “Several aspects of our business were positive given the challenges we face along with other inflationary pressures on the labor market and costs.” The Inflation Reduction Act benefits hospitals as more patients continue their Affordable Care Act (ACA) coverage plans. HCA has also managed to reduce its contract labor cost sequentially. It expects a return to pre-pandemic seasonal trends with a more modest increase in inpatient admissions.
Here’s what the charts say
Using Rifle charts on the weekly and daily time frames enables an accurate view of the price playing field for the HCA. There was a break below the Fibonacci level of $165.73 on the weekly Rifle chart. The weekly Rifle broke from chart lows to peak at $222.41 before slowing buying momentum. The weekly 5-period moving average (MA) is trending downwards at $197.45 with a flat 15-period MA at $205.18. The weekly stochastic rejected at the 80-band and reversed back down. The weekly market structure low (MSL) starts on a breakout through $211.99. The daily Rifle chart is trading with a 5-period MA with resistance at $198.91, followed by a 15-period MA at $207.01. The daily 50-period MA resistance lies in the middle at $205.59. The daily stochastic is still oscillating below the 20-band close. The daily lower Bollinger Bands (BB) is sitting near the $184.68 Fib level. Attractive pullback levels sit at $188.33 Fib, $184.33 Fib, $177.16 Fib, $173.72, $170.46 Fib, $167.51 Fib and $160.23 Fib.