Buoyed by strong admissions and revenue growth, the leaders of HCA Healthcare Inc. have boosted their 2024 capital projects budget by about $500 million from last year to continue to grow their network, particularly for outpatient services.
Nashville-based HCA plans to spend between $5.1 billion and $5.3 billion this year, versus $4.7 billion in 2023, on inpatient, outpatient and technology additions or upgrades. Speaking after he and his team reported fourth-quarter results—net income of $1.86 billion on more than $17 billion in revenues—CEO Sam Hazen had a simple message on capex: More of the same.
“We’re pretty consistent in our allocation of capital. It’s not disproportionately oriented to any one category of our business,” Hazen said. “It’s allowed us to meet the demand expectations that exist in the market and it’s also responded to our physicians in a way that created the capacity or allowed for the clinical technology that they need […] We’re stepping it up because we have a growing occupancy on the inpatient side and then we have opportunities in the outpatient side to expand our networks.”
HCA finished 2023 with 186 hospitals and 124 freestanding surgery centers in its portfolio. Those facilities handled nearly 975,000 equivalent admissions in the fourth quarter, an increase of 4.6 percent from late 2022. Revenue per equivalent admissions popped even more, climbing 6.8 percent year over year—and showing the other side of the higher utilization dynamic that has dinged the outlooks of several health insurers of late.
HCA’s work to build on that momentum this year will tilt a little more toward new outpatient sites. Hazen said a large development pipeline there will lead to more spending and more opening in 2024 and 2025 compared to the past two years. On the hospital side, the number of beds to be added to HCA’s system—the company counted nearly 49,600 licensed beds at the end of 2023—will be in line with last year’s roughly 300.
CFO Bill Rutherford—who last week announced he will retire May 1 and be succeeded by Senior Vice President of Finance Mike Marks—said he expects admissions growth this year will be between 3 percent and 4 percent, not quite last year’s pace but still comfortably ahead of HCA’s historical experience. Helping drive demand, he said, were strong health insurance exchange enrollment growth in many of the states where HCA does a lot of business.
HCA’s growth last quarter outpaced that of Tenet Healthcare Corp., where the number of ambulatory surgery cases climbed 3.9 percent year over year but adjusted hospital admissions ticked up only 0.1 percent from late 2022.
Chairman and CEO Saum Sutaria, whose team recently closed on the sale of three South Carolina hospitals and signed a deal to sell four others in California, last week told analysts his spending priorities haven’t changed: First up, Tenet’s USPI outpatient surgery division will get some $250 million of capital and that will be followed by investments in hospital growth projects.
“Specifically on USPI, we talk about historically $200 million to $250 million, now closer to $250 million, in capital allocation every year,” Sutaria said. “But the fact is, if you go back over the last five years and just look at what we’ve spent and average it out […] it’s been quite a bit higher than $200 million to $250 million. We […] obviously are comfortable going above the $200 million to $250 million if those opportunities exist.”