HCA announces plan to go public again

Four years after undergoing a $21 billion leveraged buyout, hospital operator HCA, Inc., is seeking yet another return to the public domain.

The nation’s largest non-governmental hospital operator, with 162 hospitals and 106 surgery centers in 20 states and the United Kingdom, announced plans last week to file for an initial public offering. Company officials plan an initial target of $2.5 billion, but could raise as much as $4.6 billion.

According to published reports, money from the IPO  – which, if concluded, would be the largest in the country in two years – would be used to reduce HCA’s estimated $26 billion in debt.

HCA announced plans for the IPO shortly after reporting first-quarter results that rose by 10 percent over last year’s results. The company reported net income of $476 million on revenues of more than $7.5 billion. Operating margins rose 80 basis points to 9.1 percent, while bad-debt provision dropped 30 percent to 7.5 percent of revenues – thanks mainly to a $473 million increase in charity care and uninsured discounts and steady supply costs.

In a note to investors in March, Barclays Capital analyst Adam Feinstein echoed many others in anticipating the IPO. He said the timing is right for HCA to go public because healthcare reforms enacted by Congress will help lower its charity care and uncollectible bill losses.

Merrill Lynch, Citigroup and J.P. Morgan Securities will lead a consortium of investment banks managing the IPO. Others include Barclays Capital, Credit Suisse, Deutsche Bank Securities, Goldman, Sachs & Co., Morgan Stanley and Wells Fargo Securities.

Founded in 1968 in Nashville as the Hospital Corp. of America, the company grew to 463 hospitals in 1987, then went private in a $5.1 billion leveraged buyout in 1989. The company went public again in 1992 and merged two years later with the Louisville, Ky.-based Columbia Hospital Corp. to become Columbia/HCA Healthcare.

In 2006, Kohlberg Kravis Roberts, Merrill Lynch Global Private Equity and Bain Capital led a leveraged buyout of the company, putting up $5.3 billion of their own money and raising the rest with loans from Bank of America, Merrill Lynch & Co., J.P. Morgan Chase & Co. and Citigroup, Inc.

In 2000, HCA paid $840 million in criminal and civil penalties to settle federal charges that it had overbilled the government and states for healthcare costs.