HCA Profit Rises 38% in Q3

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Revenue has  increased 4.2 percent year over year, to $10.3 billion in the third quarter of 2016. Could the ever present annual escalator clause found in managed care contracts be driving revenue increases?

Written by Ayla Ellison (Twitter | Google+)  | October 27, 2016 |  Print  | Email

Nashville, Tenn.-based HCA Holdings has raised its 2016 guidance after recording a 38 percent spike in profits in the third quarter.

The for-profit hospital operator said revenue increased 4.2 percent year over year, to $10.3 billion in the third quarter of 2016.

The financial boost in the third quarter was attributable, in part, to higher patient volumes. HCA said same-facility admissions rose 0.7 percent year over year, while same-facility emergency room visits increased 2.7 percent.

HCA ended the third quarter with net income of $618 million, up 38 percent from $449 million in the same period of 2015.

Based on its strong third-quarter results, HCA slightly increased per-share earnings for the year to a range of $6.50 to $6.80.

Editor’s Note: Below is an actual Escalator Clause found in a contract between a hospital system and an employer group health plan:

“On an annual basis, beginning (DATE), all fixed rates will be increased by 4%. All dollar amounts will be rounded to the nearest dollar. Hospital will provide Plan with a new rate schedule thirty (30) days prior to the effective date of the new rates. No additional increase will be applied to percentages.”

“Hospital agrees that if in a given calendar year, the aggregate increases of the rates in it’s ChargeMaster(s) are in excess of five percent (5%) of the prior year’s rates, then the percentage of charges reimbursement rates will be discounted so that no higher payment shall be paid than it would have paid had such percentage increase in rates above the maximum level set out herein not be implemented. All adjusted perctntages will be rounded. Hospital must provide thirty (30) days prior written notice of all ChargeMaster increases.”

Here is another example:

Effective (DATE), the Hospital will notify Blue Cross of any increase to the Hospital’s Charge Schedule and to the extent the Hospital’s weighted average charge increase(s) for services that were actually provided to PPO and Blue Choice Covered Persons exceeds 5% in any 12 month period, the inpatient and outpatient percent of covered charge amounts, will be decreased to neutralize the increase in reimbursement for the charge increase in excess of 5%. The Inpatient and Out patient weighted average charge increase will be determined and applied separately for inpatient and outpatient. The inpatient outlier threshold will be increased by the greater of 5% or the full amount of the charge increase. “

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