By Chad Terhune
June 9, 2020
Spared the worst of COVID-19, the largest for-profit hospital chains in the United States are pursuing a speedy recovery backed by billions of dollars in federal aid, while other hospitals say they have been harder hit and left wanting.
HCA Healthcare Inc, the biggest chain, has received $5.3 billion in loans and grants thus far from the federal government to offset lost business and higher expenses from the coronavirus pandemic. Tenet Healthcare Corp, the second-largest chain by revenue and beds, has disclosed more than $2 billion in similar loans and grants.
Meantime, the two chains, which own hundreds of hospitals, outpatient surgery centers and clinics, are telling investors that COVID-19 wasn’t as severe as expected in most of their markets, and that business is ramping back up. Shares in Tenet have doubled since the market lows in mid-March, while HCA shares have soared more than 70%.
The two companies and other big health systems appear to be benefiting disproportionately from the initial government relief as some other hospitals struggle to stay afloat, according to industry analysts and health-policy experts.
Many smaller competitors face virus-related financial losses. Twelve rural hospitals in the United States – many on shaky financial ground already – closed this year, including four in April, according to the National Rural Health Association.
“These large for-profit hospitals have access to capital that smaller facilities and safety-net hospitals don’t have,” said Karyn Schwartz, a senior fellow at the Kaiser Family Foundation who is tracking the federal relief effort.
Roseland Community Hospital, a 134-bed hospital in Chicago, took on $4 million in debt to conduct COVID-19 testing on thousands of low-income people and to purchase more hospital equipment while receiving less than $1 million in federal grants so far, Tim Egan, Roseland’s chief executive, told Reuters.
“We have been in this war on the frontlines for months without reinforcements while hospitals which are not under the same strain and stress are getting a lot of money,” he said.
Federal officials told Reuters that hospitals and other providers receiving relief funds will have to submit documentation showing money was used appropriately. They say additional money will be allocated to safety net hospitals and clinics hurt by the pandemic.
William Rutherford, HCA’s chief financial officer, said during an online investment conference on May 19 that “we didn’t necessarily see the surge” in demand for services that had been anticipated in most markets.
Similarly, while Tenet faced an influx of COVID-19 patients in Michigan, Massachusetts, California and Florida, Chief Executive Ron Rittenmeyer told analysts and investors last month that they were never overwhelmed. The company remained profitable in the first quarter, though it took about a $73 million hit due to COVID-19.
However, both companies said that federal aid has been critical as they rapidly adapted their operations to serve COVID-19 patients and minimize harm to employees.
In a statement to Reuters, HCA said the “funding our hospitals have received to date represents only a fraction of our anticipated lost revenue and increased expenses resulting from the pandemic.”
Tenet referred to previous statements its executives have made to investors. The company has said its federal funding was appropriate and said that more is needed because all of its hospitals stepped up to serve an unpredictable number of COVID-19 patients while revenue dropped significantly.
The financial challenges for hospitals may persist as some Americans postpone medical care and others lose employer health benefits during the economic downturn, industry experts say.
As shutdowns of many normal hospital services extended into April, Tenet said its admissions declined by about 30% for that month compared to a year ago, while procedures at its surgery centers dropped by 80%.
At HCA, inpatient admissions dropped by 30% and hospital surgeries by 50% during the first half of April, according to the company.
“I think a substantial portion of that will be recaptured,” HCA’s Rutherford told investors in May…