- HCA Healthcare reported profit of $581 million for the first quarter of 2020, down almost 45% year over year as the coronavirus pandemic continues to stress provider finances.
- The Nashville-based for-profit hospital operator missed Wall Street expectations for both earnings and revenue, chalking up the results to significantly lower patient volume in the last two weeks of the quarter ending March 31. Revenue was $12.86 billion, up 2.7% year over year.
- HCA, which has cared for 5,500 patients testing positive for COVID-19 so far, withdrew its 2020 guidance due to financial uncertainty from the pandemic. Its stock fell roughly 5% premarket on the results.
Providers across the country are facing draining revenues as they suspend lucrative elective procedures to free up beds, staff and equipment for COVID-19 patients. HCA's finances in the first three-fourths of the quarter mirrored its recent strong growth, but the financial headwinds of the coronavirus hit mid-March, quickly reversing positive trends.
Equivalent admissions, emergency room visits and inpatient surgeries on a same-facility basis all dipped slightly by 0.4%, 1% and 1.8%, respectively, though same-facility revenue per equivalent admission increased 1.6%. Same-facility outpatient surgeries plummeted by 5.9% year over year, and company leadership expects that volume slump to continue in second quarter, though admissions have stabilized somewhat over the past week.
"We do believe the impact to the company will be most pronounced during this current response phase, as volume continues to decline throughout April," HCA CFO Bill Rutherford said on a Tuesday morning call with investors. HCA, which has 186 hospitals and 2,000 sites of care in 21 states and the U.K, has temporarily closed some outpatient facilities, clinics and other departments due to the persistent volume decline.
The nation's largest hospital operator entered this crisis with a healthy balance sheet, closing out 2019 with revenue of $51.3 billion, up 10% from 2018 and close to the high end of its guidance. But HCA has abruptly turned from the growth strategy it's pursued over the past two years to solidify its financial footing amid the pandemic.
"These strategies in the past have benefited our shareholders, but given the uncertainty around this pandemic we thought it prudent to adjust the company's capital allocation strategy," CEO Sam Hazen said.
Among other moves, HCA has suspended its authorized share repurchase program, put off planned capital expenditures by more than $1 billion through the year, paused its quarterly dividend program, opened a $2 billion short-term credit facility to bolster liquidity and requested accelerated Medicare payments from CMS allowed in the Coronavirus Aid, Relief, and Economic Security Act stimulus package.
HCA expects $4 billion in expedited payments overall, and has already received the majority of the payments that will have to be repaid over eight months beginning in August. CARES also allocated billions of dollars for hospitals that began flowing in early April and includes a 20% hike in Medicare reimbursement for hospitals that care for COVID-19 patients, which should help HCA's position, executives said.
"The CARES Act will help provide some relief," Rutherford said. "But we do not know what future funds, if any, we will receive at this point."
Economic volatility has hit the healthcare sector hard. Publicly traded hospitals including HCA and rivals Community Health Systems and Tenet have seen their stocks plummet from highs earlier this year. Tenet, which reports May 4, withdrew its first quarter guidance earlier this month due to uncertainties stemming from the coronavirus, and has also furloughed about 10% of its workforce to date.
HCA sketched out its reboot and recovery plan on the investor call, noting as local and state governments elect to reopen their economies its restarting procedures will vary by market.
"We expect to bring on capacity in a conservative manner as markets allow," Hazen said. HCA executives expect the reboot phase will be accomplished across most of the company by the end of the second quarter, June 30.
Earlier this month, HCA launched a portal to aggregate COVID-19 data on testing results, critical-care beds, ventilator use and more on Google Cloud. The system also said it was donating 1,000 ventilators to hard-hit hospitals and giving more than $1 million in COVID-19 relief grants to local community organizations.
Unlike some other systems, HCA says it doesn't have any immediate plans to lay off staff, instead redeploying workers who see reduced hours, though IT and services subsidiary CereCore has laid off more than 70% of its contractors as IT improvements were put on the backburner. Employees who can't be moved are eligible for a special pandemic pay program that pays out 70% of their base pay for up to 7 weeks.
In early April, management announced a 30% cut in pay for senior leadership until the pandemic is over. Hazen is also donating 100% of his salary for April and May to a fund for struggling employees. The CEO made almost $27 million in compensation last year, which was Hazen's first as the 52-year-old chain's top executive.