Profits at U.S. hospital chains may come under stress from nursing shortage

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An emergency sign illuminates outside of George Washington University Hospital

By Manas Mishra

(Reuters) – A persistent shortage of nurses and related costs could pinch profits of U.S. hospital operators and take the shine off gains from increased hospitalization due to the Delta variant.

Wall Street analysts expect the largest publicly listed hospital operator, HCA Healthcare Inc, to report a near doubling in quarterly earnings, but the profits could come under pressure from higher costs. The company is due to report earnings on Friday.

For HCA, “elevated nursing costs and labor pressures will remain in third-quarter 2021,” said Mizuho Securities analyst Ann Hynes in a research note.

Hospitals nationwide are finding it difficult to fill nursing jobs and have to pay more to recruit and retain nurses, a cost that they cannot afford in an era of tight margins.


“Because there is a shortage, people are willing to pay astronomical amounts to get the nursing staff that are so critical for taking care of patients,” said Tammy Lundstrom, chief medical officer at Trinity Health, a not-for-profit hospital system.

HCA Healthcare and smaller rival Tenet’s quarterly sales https://fingfx.thomsonreuters.com/gfx/mkt/mypmngqbkvr/nLM8w-hca-and-smaller-rival-tenet-s-quarterly-sales-so-far-.png

THE FUNDAMENTALS

** Nashville, Tennessee-based HCA is expected to report a 8.7% increase in revenue to $14.47 billion from $13.31 billion a year ago.

** The mean analyst estimate for Tenet’s earnings is $1.02 per share, while the mean analyst estimate for HCA’s earnings is $4 per share.

** HCA currently trades at 13.8x NTM P/E vs median of 12.9x NTM P/E for the wider health care provider sector.

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WALL STREET SENTIMENT

** The current average analyst rating on HCA shares is “buy”

** Seven analysts rate HCA “strong buy”, 13 rate it “buy” and six rate it “hold”

** Wall Street’s median 12-month price target is $278.64

** HCA’s shares have risen over 80% in the past 12 months

(Reporting by Manas Mishra in Bengaluru; Editing by Sweta Singh and Arun Koyyur)

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