- HCA plans to return all the federal COVID-19 relief it's received since the beginning of the pandemic, the Nashville-based for-profit operator said Thursday, suggesting the hospital sector could be recovering from the worst of COVID-19's financial effects.
- The system, one of the largest in the U.S., is returning some $1.6 billion in federal COVID-19 relief grants and $4.4 billion in accelerated Medicare loans it received as part of the sweeping Coronavirus Aid, Relief and Economic Security Act, following a strong third quarter and cost control efforts.
- The move comes as major hospital groups continue to lobby for more relief amid the ongoing pandemic. But another piece of COVID-19 aid legislation is highly unlikely amid Washington gridlock and the looming November presidential election.
The CARES Act and the Paycheck Protection Program and Health Care Enhancement Act passed earlier this year allocated $175 billion in provider grants as emergency financial relief. In addition, CMS forwarded $100 billion in Medicare payments as loans to struggling facilities.
Provider lobbies like the American Hospital Association continue to seek more coronavirus aid from the federal government, citing COVID-19 uncertainty as outbreaks bubble up across the country. Last week, 23 states and Washington, D.C., reported a rise in new coronavirus infections, and the situation could worsen going into the winter months, public health experts say.
And unlike other healthcare sectors, hospitals posted job losses in September following two months of gains, according to the Bureau of Labor Statistics.
HCA says it hasn't had to lay off any employees, and has taken a conservative approach allowing it to weather the pandemic and return or repay roughly its $6 billion in aid early now that it has more experience managing the pandemic. That represents all the company's share of provider relief funds and Medicare payments it received, CEO Sam Hazen said on a Friday morning call with investors.
The operator says it's going to work with HHS to return the grants and the advanced Medicare loans. HCA is simply accelerating the deadline to pay back its $4.4 billion in loans — they would have come due in 2021 regardless after a stopgap government spending bill pushed back the deadline.
The return of the grants, however, which were largely no-strings-attached, is more surprising, and suggests management confidence in HCA's operations.
The move "signals strong cash flows and forward outlook, driven by HCA's impressive cost controls in Q2 and now Q3, and recovering business trends," Jefferies analysts said in a Friday morning note.
The 186-hospital system also released preliminary financial results for the third quarter on Thursday. HCA expects revenue in the third quarter to ring in at $13.3 billion, up almost 5% from the same time last year, and income prior to income tax to be about $950 million, down slightly from $979 million same time last year.
HCA expects adjusted earnings before interest, taxes, depreciation and amortization of about $2 billion, compared to $2.3 billion in the third quarter of 2019.
Estimated revenue is up from Wall Street's consensus, but HCA's forecast misses on EBITDA. That's largely due to HCA reversing $822 million in CARES grants it recognized in the second quarter, Jefferies analysts said. The remaining $778 million hadn’t officially been claimed.
Same-facility admissions, same-facility equivalent admissions and same-facility emergency department visits fell about 4%, 9% and 20%, respectively, in the quarter compared to 2019. Outpatient capacity also flagged, with outpatient surgeries down about 6%.
HCA said the volume decline was due to COVID-19 outbreaks early in the quarter in key markets, especially Texas and Florida, which represent about half of its beds.
July and August were especially intense, HCA management said on a Friday morning call with investors. Along with surges in Texas and Florida, HCA saw spillover cases from Arizona, where it doesn't operate, that affected operations in Georgia, South Carolina and Tennessee. Moving forward, the system expects that intensity to continue in some areas like Florida, which has fully reopened its economy.
HCA's treated about 60,000 patients with COVID-19 since the beginning of the pandemic, including 40,000 in the third quarter alone. It suspended elective care in more than 100 hospitals for weeks in the quarter to free up capacity for COVID-19 cases, but thinks it'll recover most of that volume in future months, Hazan said on the call.
Of the volume deferred in March and April, HCA has recovered or rescheduled about two-thirds of those cases.
Despite admissions decline in the third quarter, HCA expects same-facility revenue per equivalent admission to rise about 15% year over year due to higher patient acuity and favorable payer mix.
The 20-state chain expects to release full financial results for the quarter on or around Oct. 26. But the rosy first look caused shares in other major for-profits to rise slightly in premarket trading Friday. Tenet was up about 4%, while Universal Health Services and HCA itself were up about 2%.
Drastic warnings from providers on financial losses broadly haven't come to pass. AHA estimated hospitals' operating profits would fall by almost $51 billion in April, the month with the most dramatic volume loss. But hospitals probably lost about half that, according to research from a congressional advisory board, and federal aid covered the worst of it.
HCA reported $1.1 billion in profit in the second quarter amid aggressive cost-control efforts, up about 38% on a year-over-year basis despite flagging admissions.