HCA’s physician staffing joint venture to cost the company $50m a quarter

The controversial joint venture between HCA Healthcare and physician staffing firm EmCare, now known as Valesco Physician Services, is expected to lose the for-profit hospital operator $50 million a quarter for the foreseeable future, EVP and CFO Bill Rutherford told investors in an earnings call last month.

Valesco was expected to bring in $1 billion in annual revenue, with no EBITDA, HCA execs said in a Q1 earnings call this April. The venture has cost HCA approximately $100 million on its adjusted earnings this quarter, Rutherford said. Envision Healthcare, which EmCare fell under, filed for Chapter 11 bankruptcy protection earlier this year, Fierce Healthcare reported in May.

“There’s no doubt the issue for us in the quarter was the Valesco operations [which] were not clearing as much revenue as we anticipated,” he said during the Q3 earnings call on October 24.

The Nashville-based company acquired 90% ownership of the staffing firm earlier this year, which has ~5,000 physicians covering about 200 programs, HCA’s CEO Sam Hazen said during the call.

Still, Hazen said that acquiring Valesco was “the right decision for the company long term,” although some analysts on the call questioned the deal after hearing the venture’s ongoing losses.

“I’ve never seen a business be off this far,” Justin Lake, a healthcare services analyst at data firm Wolfe Research, said during the earnings call.

HCA plans to reduce Valesco’s expenses and cost structure, which would help put the company in “a much better position to assess and address some of these revenue trends,” Rutherford added.

“It is important to understand that we believe that decision to consolidate Valesco was strategically imperative in maintaining the overall competitive positioning and capacity offerings of the company,” Hazen said. “As has been the case historically with our teams, I’m confident that we will find a pathway forward to mitigate the impact it has had on our results.”

The Valesco losses come as other staffing firms face similar financial hurdles.

Last month, medical staffing company American Physician Partners filed for Chapter 11 bankruptcy protection, citing challenges such as the Covid-19 pandemic, increased labor costs, and the No Surprises Act, a 2022 law that protects patients from unexpected bills from out-of-network providers or facilities, according to the company’s bankruptcy filing.