HCA Healthcare Acquires Galen, Expands Nursing Schools

Leading hospital operator HCA Healthcare, Inc. (NYSE:HCA) has bought a majority ownership of Galen College of Nursing. The deal was announced in March 2019.

With this acquisition, HCA Healthcare will be adding to its existing pool of two nursing schools, Research College of Nursing and Mercy School of Nursing, as well as seven advanced nursing simulation training centers.

For HCA Healthcare, Galen is a perfect fit with its excellent reputation in nursing education. Nurses which are crucial in providing efficient patient care, are one of the business driving factors for HCA Healthcare and therefore form the lifeblood for the company..

This deal will also help HCA Healthcare to address the labor issue related to nurses in the industry as a decline in the number of nurses leads to increase in hospital readmissions and stretches the length of stay.

In order to better face the nursing shortage, which is expected to persist through 2025 (according to the Bureau of Labor Statistics), HCA Healthcare, one of the largest nurse employers in the nation, has designed its employee benefits accordingly to attract and retain nurses.

Per the American Association of Colleges of Nursing, the United States is projected to experience a shortage of Registered Nurses (RNs) that is expected to intensify as Baby Boomers age and the need for health care grows. Compounding the problem is the fact that nursing schools across the country are struggling to expand capacity to meet the rising demand for care given the national move toward healthcare reform.

We believe that HCA Healthcare’s investments in nursing schools will provide it easy and ready access to skilled registered nurses, even when other hospitals in the industry continue to face financial pain from high labor cost, as turnover among nurses remains high and there are not enough new nurses entering the workforce. It should be noted that salaries and benefits constitute nearly 50% of the total operating expense for HCA Healthcare.

The expanding nursing facilities by HCA Healthcare will help in cost control and aid margins. We also believe this will boost the company’s growth. Moreover, its top line is benefiting from rise in admissions, surgeries and emergency room visits.

HCA Healthcare’s revenues have witnessed a five-year CAGR of 6.4%, with the same for equivalent admissions, surgeries and emergency room visits being 3.8%, 1.8% and 4.7%, respectively.

Over the past year, the stock has gained 17.5% compared with its industry’s growth of 17.9%. Other companies in the same space like Tenet Healthcare Corp. (NYSE:THC) and Universal Health Services, Inc. (NYSE:UHS) have grown 81.5% and 16.8% whereas Community Health Systems Inc. (NYSE:CYH) has declined 28.3% in the same time period.

HCA Healthcare carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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