Bad debt expenses
In 2015, HCA Holdings’s (HCA) bad debt expense—represented by the provision for doubtful accounts—totaled $3.9 billion. It rose by ~23.5% YoY (year-over-year). To learn more about HCA’s bad debt expenses, read Trends in HCA Holdings’ bad debt expense.
HCA Holdings witnessed a sequential decline in the provision for doubtful accounts from $1.2 billion in 3Q15 to $1.1 billion in 4Q15. About 30% of the total bad debt expense in 2015 was associated with deductibles and copays that insured patients have to pay as part of sharing medical costs with their health insurance company. The deductible and copay liability has been increasing at ~10%–11%. It’s slightly higher than the long-term average of 7%–8%. The remaining 70% is due to the uninsured population seeking medical services. To learn more about insured patient cost sharing, read Making sense of health insurance companies’ payment options.
Public exchange admissions
HCA Holdings witnessed a 46% YoY rise in same facility exchange admissions from 7,700 in 4Q14 to 11,238 in 4Q15. However, this was lower than 11,445 admissions reported in 3Q15. The company also experienced an increase of about 48.4% in same facility exchange emergency room visits from 25,600 in 4Q14 to ~38,000 in 4Q15. This was less than 40,200 reported by HCA Holdings in 3Q15. About 400 admissions from the exchange volume shifted to the uninsured category in 3Q15 and 4Q15. Also, about 30% of the total exchange volume belongs to the special enrollment category. It involves members enrolled in a time period outside of the open enrollment period. According to Healthcare.gov, the open enrollment period is “the yearly period when people can enroll in a health insurance plan.” Special enrollment patients generally account for 25%–55% higher medical expenses than other patients.
However, since the total exchange-driven admissions account for only 2% of HCA Holdings’s total admissions, it hasn’t resulted in any material impact on the company’s bad debt expenses. Peers such as LifePoint Hospitals (LPNT), Tenet Healthcare (THC) and Community Health Systems (CYH) could witness greater bad debt expense if they increase their exposure to the exchange-driven patient volume.
You can also invest in Vanguard Health Care ETF (VHT) and reduce excessive company-specific risks of investing directly in HCA Holdings. HCA Holdings accounts for about 0.8% of VHT’s total holdings.