Hospital operators' outlook in focus on Medicaid concerns

By Khushi Mandowara

(Reuters) - U.S. hospital operators are expected to report strong revenue for the first quarter, while investors will also focus on results for cues on the impact to future earnings following an end to COVID-related insurance protection.

Beginning April 1, states were allowed to begin the process of re-determining if people qualify for Medicaid, the government-backed health insurance plans for low-income people, which was previously not allowed during the pandemic.

"There may be some coverage lapses for people who lose Medicaid coverage that may result in more uninsured patients obtaining care through hospital emergency rooms ... which of course would squeeze margins for caregivers" Morningstar analyst Julie Utterback said.

HCA Healthcare Inc, the largest publicly listed U.S. hospital operator, will report earnings on Friday, followed by earnings for smaller rivals Tenet Healthcare Corp and Universal Health Services Inc next week.

GRAPHIC: HCA margins have inversely tracked staff costs https://fingfx.thomsonreuters.com/gfx/mkt/akveqndwkvr/nHNrE-hca-margins-have-inversely-tracked-staff-cost.png

THE CONTEXT

HCA said in March that its profit forecast did not factor in an impact from Medicaid re-determination because of too many unknowns.

In the first quarter, analysts expect costs related to spending on temporary nurses and bonuses to retain staff to fall for HCA.

However, analysts have pointed to uncertainty around annual profit at hospital operators as states restart the process of re-determining coverage for Medicaid, which might result in millions of people losing coverage.

GRAPHIC: HCA's inpatient surgeries slide during pandemic https://fingfx.thomsonreuters.com/gfx/mkt/akveqndadvr/EF85d-hca-s-inpatient-surgeries-slide-during-pandemic.png

FUNDAMENTALS

** 19 analysts, on average, forecast HCA's first-quarter revenue to be $15.27 billion, according to Refinitiv, compared with $14.95 billion that the company reported a year earlier

** 12 analysts, on average, forecast HCA's first-quarter net profit to be $1.13 billion, compared with $1.27 billion last year

WALL STREET SENTIMENT

** Of the 24 analysts covering HCA, 19 rate it "buy" or higher, five rate "hold"

** The median price target for HCA is $288.50, a 5.6% upside to its last closing price

(Reporting by Khushi Mandowara in Bengaluru; Editing by Shounak Dasgupta)

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