Stock Report: HCA Holdings, Inc. (HCA)

Stock Report: HCA Holdings, Inc. (HCA)  - HE II HCA 6 14 13


We have forecasts of physician office visits, maternity trends, and a deep understanding of the positives and negatives of Obamacare.  In addition we think we understand the long term drivers of volume, pricing, and costs for the Hospital industry.  HCA stands to benefit across all of them.



INTERMEDIATE TERM (the next 3 months or more)

We have identified a number of drivers in the near term and longer term that act as tailwinds to the hospital industry, and HCA in particular.

  1. Utilization:  Based on our analysis of the historical data around demographics, labor trends, confidence, pent up demand created by the Great Recession, insurance coverage, policy, and many other factors, we have built a regression forecast for medical utilization.   We believe medical utilization is improving and will drive improving admission trends among hospital operators including HCA.
  2. Maternity:  The worst decline in births in the last 40 years appears over.  At 25% of Hospital inpatient admissions, accelerating maternity trends will have a very positive impact on volumes and profits.
  3. Pent up demand and Acuity: Many people avoided medical costs over the last several years.  With unemployment claims falling, employment rising, we expect deferred care returns.  In addition, because some have waited, many untreated conditions have likely worsened, meaning patient acuity in the rebound is likely to be higher as well, which means a higher revenue per case for hospitals. 

LONG-TERM (the next 3 years or less)

  1. Consolidation among hospitals will provide pricing power and purchasing power. 
  2. Affordable Care Act will insure and pay for patients who were formerly  treated, but were considered charity care, and their bills written off as bad debt.  We expect an additional 8-13% of EBITDA growth for HCA from this tailwind alone.  There may be additional patient volume from individuals who are getting insurance given the huge gap in utilization between the uninsured, which is near zero, and the insured.



Stock Report: HCA Holdings, Inc. (HCA)  - HE II HCA chart 6 14 13


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