By Leroy Leo
(Reuters) -HCA Healthcare tightened its full-year forecast and missed Wall Street estimates for quarterly profit on Tuesday, as the hospital operator's staffing joint venture was hit by high physician compensation and subsidies.
Shares of the company dropped 8.3% to $221.03 in early trading. It also sent shares of smaller rivals such as Tenet Healthcare (NYSE:THC) and Community Health (NYSE:CYH) Systems down more than 3%.
Valesco, HCA (NYSE:HCA)'s joint venture with a unit of bankrupt Envision Healthcare, has been under pressure from an increase in physician expenses across the sector, which partly led to the bankruptcy filing of medical staffing firm American Physician Partners last month.
Last month, CFO William Rutherford said HCA has had to provide "increased subsidies" to stabilize the staffing programs, especially as they need emergency room doctors and anesthesiologists.
Stephens analyst Scott Fidel in a note said that the pressure from Valesco offset the strong performance of the hospital operator, which showed better-than-expected 4.1% growth in same-facility equivalent admissions.
HCA, the largest for-profit hospital operator in the U.S., generated third-quarter revenue of $16.21 billion, which surpassed estimates of $15.82 billion, as per LSEG data.
The company reported a 9.5% year-on-year increase in expenses on salaries and benefits to $7.56 billion, which accounted for nearly 46.6% of its third-quarter revenue.
On an adjusted basis, its profit came in at $3.91 per share for the third quarter, missing analysts' average estimate of $3.98 per share.
The hospital operator also tightened its forecast for 2023 profit to $17.80 to $18.50 per share, with its midpoint now lower than that of the company's earlier forecast of $17.70 to $18.90 per share.