By Melanie Evans
HCA Healthcare Inc.'s decision to pay back $6 billion in federal
pandemic aid and loans offers the company financial flexibility it
lost when it took the infusion of cash, executives said.
HCA, one of the nation's largest hospital chains, on Thursday
said it would return the roughly $1.6 billion it received in direct
relief from the government and repay its relief loans totaling $4.4
billion ahead of schedule. Chief Executive Sam Hazen called the
move "appropriate and the socially responsible thing to do."
On Friday, the company's finance chief told analysts on a
conference call the repayment would allow HCA to reconsider moves
it made in the spring to conserve cash.
"We've historically had a very balanced allocation of capital
between our internal capital spending, acquisition capital,
dividends and share repurchase," Chief Financial Officer William
Rutherford said. "With the return of our Cares Act, we do see some
flexibility to evaluate when is the right time to return to some of
those historical allocation policies."
Under relief packages this spring, including the Coronavirus
Aid, Relief, and Economic Security Act, Congress approved $175
billion in direct aid for health-care providers and offered
pandemic relief loans, which hospitals must eventually repay.
Hospital revenue plunged with pandemic preparations that halted
some surgeries to prepare for Covid-19 patients.
But HCA and other hospital chains rebounded more quickly than
expected from spring losses, moving to restart elective procedures
in late April and early May. Hospitals continued surgery through
new outbreaks of the virus, though with some interruption where
cases surged.
Hospital analysts said few in the sector have announced plans to
return pandemic relief. Encompass Health Corp., which operates
rehabilitation hospitals, home care and hospice services,
previously returned funds it received.
Mr. Hazen, HCA's CEO, said in an interview the experience of
managing surgery halts and restarts throughout the summer, as well
as the company's overall rebound in operations from the spring, led
to its decision to repay the relief aid.
HCA, which operates 186 hospitals nationwide, halted surgery at
hospitals in Florida, Georgia, South Carolina, Tennessee and Texas
as Covid-19 cases surged across the South and West this summer.
The company refined its protocols and tracked local rates of
positive Covid-19 tests, hospital occupancy and scheduled
procedures to decide when to postpone some surgeries, Mr. Hazen
said. "We didn't want every hospital trying to figure it out on
their own," he said.
He added: "We had well north of sixty percent of the company
under a voluntary, corporate office-imposed suspension of elective
care so we could manage staffing needs, manage PPE needs and manage
physical bed needs."
The company now draws on that experience to prepare for possible
waves of Covid-19 patients in the fall, Mr. Hazen said.
HCA said Friday it has started to resume some corporate
investment in ambulatory surgery centers and freestanding emergency
rooms, after it sharply curtailed its capital plan this spring,
including suspending dividends and share buybacks.
The suspended programs were voluntary but necessary after the
company opted to accept the federal aid, Mr. Hazen said. "As a
corporate citizen, there are implicit strings attached when you're
taking federal money," he said.
The federal aid didn't prohibit dividends or share purchases,
the company said.
Some hospitals faced pressure from existing lenders to hold off
on acquisitions or dividends until federal loans were repaid, one
health-care attorney said. HCA said its lenders didn't set new
capital limits related to the pandemic loans.
In a preview of its results, HCA said revenue totaled $13.3
billion in the third quarter, compared with $12.7 billion the same
quarter a year ago. The company released income before income taxes
for the third quarter of about $950 million, compared with $979
million in the same period a year ago.
Federal relief funds lifted HCA Healthcare's second-quarter
profit. Returning the $1.6 billion of relief will reverse $822
million of second-quarter stimulus income, the company said. The
remaining roughly $778 million hadn't officially been claimed.
The move to return the relief aid is the latest by HCA to
reverse or scale back cash-conserving measures from earlier in the
year.
There are other signs the $1 trillion hospital sector is
starting to recover from the pandemic's hit, but it hasn't fully
bounced back, even with relief. Hospital hiring resumed in the
summer after job losses in April and May, seasonally adjusted data
from the Labor Department show. Still, preliminary figures for
September show hospitals shed about 6,000 jobs.
The pandemic also factored into nearly all of the 14 downgrades
to hospital credit ratings by S&P Global Ratings in the second
quarter.
Write to Melanie Evans at Melanie.Evans@wsj.com
(END) Dow Jones Newswires
October 09, 2020 16:54 ET (20:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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