Acute Care Services Surge: Implications for Hospital Stocks

Current Demand Trends in Acute Care Services

Strong demand for acute care services is evident, with UHS reporting a 4.5% year-over-year increase in adjusted admissions and favorable operating trends. HCA highlights a rise in patient acuity and strategic initiatives for complex care. CYH anticipates a 3.1% increase in payment rates, further supporting robust demand.

"The increase in operating income in comparison to last year's second quarter for acute care hospitals is a further step towards a more extended margin recovery, we hope to sustain for the next several periods. In our acute segment, physician expense, which is a significant headwind in 2023, has stabilized at approximately 7.5% of revenues. Based on the generally favorable operating trends in the first half of the year, we are increasing the midpoint of our 2024 EPS guidance by 17% to $15.80 per diluted share from $13.50 per diluted share previously." --- (UHS, earning call, 2024/Q2)

"Together with other changes to payment policies, payment rates for hospital inpatient acute care services are expected to increase approximately 3.1%." --- (CYH, sec filing, 2024/Q2)

"So you have a larger, more acute cohort, as a result of that. The second aspect of our acuity is our strategic initiatives to grow complexity around programs that we know produce, higher revenues per patient and really are part of our network strategy to be comprehensive in the services that we offer, hopefully creating a one stop shop for a patient if they need, you know, more complex and deeper care." --- (HCA, conference, 2024/06/05)

"Our Acute Hospitals continue to experience strong demand for their services in the first quarter with adjusted admissions increasing 4.5% year-over-year on a same-facility basis." --- (UHS, earning call, 2024/Q1)

"We did get some clarity from CMS and I think that's helpful for all the acute acute care providers because the expectation is if CMS is paying as an admission, that Medicare Advantage would pay as an admission as well." --- (CYH, conference, 2024/05/14)

Operational Challenges and Solutions in Acute Care

Augmedix and CYH have leveraged AI and technology to address clinical documentation and improve care design, respectively. UHS highlights the importance of patient observation and EMR benefits, while HCA focuses on resolving staffing challenges. CYH also reports strong operational improvements in ED and hospital programs.

"Augmedix's extensive experience in acute care settings with its other products helped it to fine-tune its AI technology to address the unique challenges of clinical documentation in the ED such as multiple interactions, documenting medical decision making, re-evaluations and" --- (HCA, press release, 2024/04/24)

"new opportunities and to improve care design, delivery and outcomes, utilizing technology and joint venture partners that are focused on moving health care forward." --- (CYH, earning call, 2024/Q1)

"We talked about the EMR in behavioral I think will be a long term benefit. The other thing is one of the biggest challenges in behavioral is what we describe as patient observation and that is in the behavioral business it is absolutely imperative that we have eyes on our patients, I'm going to say almost constantly 20 fourseven." --- (UHS, conference, 2024/05/29)

"I think from a staffing standpoint, obviously, you know about some of the challenges that many providers faced during and right in the aftermath of the pandemic. And so, we've been very focused on addressing nurse" --- (HCA, conference, 2024/05/28)

"As Tim noted, we have seen strong operational improvements in the 29 ED and hospitals programs that we have brought in-house since last fall and 2 anesthesia programs brought in-house thus far." --- (CYH, earning call, 2024/Q1)

Regulatory Impacts on Acute Care Services

Regulatory changes could lead to reimbursement reductions and restructuring in healthcare financing, potentially affecting business operations and financial conditions. However, some hospitals, like UHS, report no significant impact on volumes or referral sources from regulatory oversight. Insurer regulations, such as medical-loss ratios, may also indirectly impact acute care services.

"We cannot predict whether additional reimbursement reductions will be made or whether any such changes or other restructuring of the financing and delivery of healthcare would have a material adverse effect on our business, financial conditions, results of operations, cash flow, capital resources and liquidity. Critical Accounting Policies" --- (CYH, sec filing, 2024/Q1)

"So no we've really seen no impact on our volumes no impact from referral sources not necessarily any additional incremental regulatory oversight." --- (UHS, earning call, 2024/Q2)

"We may also be impacted by regulatory requirements imposed on insurers, such as minimum medical-loss ratios and specific benefit requirements." --- (CYH, sec filing, 2024/Q1)

Competitive Landscape in Acute Care Services

High turnover rates in the acute care industry, as noted by UHS, impact staffing and operational efficiency, shaping the competitive landscape. HCA's expansion of its urgent care platform, particularly through acquisitions like CareNow, highlights strategic moves to strengthen their market position.

"Obviously we still view that turnover rate as high. But to be fair that's -- the hospital and acute care industry has had turnover rates in the high-20s and low-30s and nationally for a long time." --- (UHS, earning call, 2024/Q2)

"I think a surrogate, if you will, for primary care is our urgent care platform, which has proliferated in the last 4 or 5 years, really started materially in Dallas with the acquisition of the CareNow chain there." --- (HCA, conference, 2024/05/28)