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 60% 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.”
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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 [email protected]
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