HCA expects labor pressures to ease in 2022 as omicron dampens Q4'21 admissions

HCA Healthcare Inc. executives anticipate revenue growth in 2022 as COVID-19 cases level off and labor costs normalize.

While reported equivalent admissions, which include outpatient care, were up 2% from the fourth quarter of 2020, they were still down 5.6% from the same period in 2019. Hospitals typically see a seasonal boost to patient numbers in the fourth quarter, but CEO Samuel Hazen said this had been dampened in 2021 by the "ramping down and ramping up" of the delta and omicron COVID-19 variants, respectively.

"We're hopeful as we wind down the omicron variant that we can get back to some normal period of business," Hazen said during a Jan. 27 earnings call. "In 2021, we really haven't had a normal run of what our business trends would be. We had maybe three to four months where we could say there was no COVID influence of any significance."

COVID-19 patients accounted for about 5% of admissions during the fourth quarter, a decline from 13% in the previous quarter. For 2022, executives expect COVID-19 cases to fall to between 3% and 5% of total admissions, while total same-facility admissions will grow between 2% and 3%.

"We expect this demand to be supported by a growing economy and more insurance coverage for people through their employer or the exchanges," Hazen said.

The company also continued to see labor challenges during the quarter. Contracted full-time employees were up around 10% compared to the first quarter of 2021, and the costs to procure these individuals rose "significantly," CFO Bill Rutherford noted on the call.

HCA anticipates these costs will drop as the latest COVID-19 surge dissipates. This moderation of contract labor should in turn help the company absorb some of the increased wage trends during 2022, Hazen added.

"We have advanced our wages for our employees, we've advanced some of our benefits, we've provided certain shift bonuses throughout the year — and that has yielded some increased rate of wage growth for our employee base," the CEO said.

Hazen spoke to analysts as the Nashville, Tenn.-based hospital system reported fourth-quarter revenue of $15.06 billion, slightly missing consensus estimates of $15.41 billion. Executives said they anticipate full-year 2022 revenue growth to rise to between $60 billion and $62 billion from a full-year 2021 total of $58.75 billion.

The fourth quarter "brought forth themes of decelerating growth," SVB Leerink analyst Whit Mayo said in a Jan. 28 note. However, there were many positive underlying fundamental data points, including a rise in outpatients and hospital admissions, as well as cost controls and payor mix, Mayo said.

"We walk away reasonably comfortable on the initial guidance range and see probably more sources of upside than downside relative to the underpinning variables used to construct the outlook," said the analyst, who rates the stock an "outperform."

"We view Thursday's pull back as the beginning of an attractive recovery play, though investors will likely have to wait out persistent labor pressure through at least the first half," RBC Capital Markets analysts Ben Hendrix and Michael Murray said in a Jan. 28 note.

HCA's share price closed down 4.7% Jan. 27. at $228.70.