Billions in COVID Relief Go to Biggest Hospital Chains as Smaller Rivals Await Aid

By Chad Terhune

June 10, 2020

(Reuters) - 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.

'SHARE THE LOVE'

Labor unions representing HCA and Tenet workers question why senior executives haven't sacrificed more of their own pay to help frontline workers.

"We are the ones taking all the risk," said Shirley Caston, an endoscopy technician at HCA's Research Medical Center in Kansas City, Missouri. "The company should share the love."

Caston, a member of the local Service Employees International Union, told Reuters that her hours were cut temporarily during the pandemic. Although the company is paying employees 70% of their regular pay for the lost time, the 63-year-old said she still lost several hundred dollars in a recent paycheck.

In April, HCA's chief executive, Samuel Hazen, announced he would donate two months of his salary, or about $240,000, to a company relief fund for workers and other senior executives would take a 30% pay cut during the pandemic. Hazen's donation amounted to about 1% of his total compensation of $26.8 million last year.

In a statement to Reuters, HCA said the company has spent $138 million to provide continued paychecks for more than 120,000 employees facing reduced hours, which it said avoided layoffs and furloughs.

Rittenmeyer, Tenet's CEO, said he's donating half of his salary for six months to an employee assistance program. That amounts to about $390,000, or 1.6% of his $24.3 million in total annual compensation last year.

Tenet put about 10% of the company's employees, or 11,000 people, on furlough when the pandemic hit, and some are still waiting to be called back.

Rittenmeyer "needs to show more shared sacrifice," said Michael Pryce-Jones, senior corporate governance analyst at the International Brotherhood of Teamsters, which represents some Tenet workers. "It's not just the paycheck people are going without. It's the risk some workers are taking with COVID-19."

Caston and other employees at HCA and Tenet echoed complaints from frontline workers nationwide that their employers were not investing enough in protective equipment.

The company "seems to forget that it cannot make money for shareholders if workers like me do not have the equipment we need to care for patients," Caston said.

Both HCA and Tenet told Reuters they had gone to great lengths to ensure staff have the appropriate protective gear, in accordance with government guidelines.

ASKING FOR MORE

Overall, Congress has allocated $175 billion to hospitals, doctors and other medical providers to compensate them for higher expenses during the COVID-19 response and for the revenue lost through suspension of surgeries, cancer screenings and routine care.

Federal officials paid an initial $50 billion from the relief fund in proportion to providers' share of net patient revenue, which analysts said favored larger hospitals and health systems.

The U.S. Department of Health and Human Services said the next $50 billion in relief, which has been partially distributed, is focused more on providers significantly affected by COVID-19 cases, rural hospitals and those serving low-income patients on Medicaid.

In a statement to Reuters, HHS said that "While we understand there is great urgency to distribute this funding, HHS is also balancing concerns that these distributions be allocated fairly, transparently and with appropriate oversight."

The agency added that it was working to "address the unique needs" of hospitals that serve large numbers of low-income people on the federal and state Medicaid program.

Tenet, based in Dallas, has received more than $500 million in grants that don't have to be repaid, and Nashville, Tennessee-based HCA said it has received $1 billion.

The bulk of their federal aid is advances on future Medicare payments that must be repaid starting in August. HCA received a $4.3 billion advance from Medicare; Tenet received $1.5 billion.

Amid a national outpouring of goodwill toward doctors, nurses and others caring for COVID-19 patients, a bipartisan group of more 90 U.S. lawmakers has proposed that Congress waive repayment industrywide.

"The hospital industry has a great interest in getting as much as possible with the fewest strings attached," said Dan Skinner, an associate professor of health policy at Ohio University.

Executives at for-profit hospitals say they deserve more money still for dealing with another possible surge in infections and other uncertainties.

During a presentation to investors last month, Rittenmeyer, Tenet's CEO, said the federal aid has been helpful, but "we believe that more is needed from the government."

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