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Tenet pulls 2020 guidance in wake of COVID-19 impact

Dive Brief:

  • Tenet Healthcare is withdrawing its first quarter and full-year guidance for 2020 because of the financial effects of the COVID-19 pandemic. The for-profit hospital operator plans to report its first quarter results as scheduled early next month and plans “to provide insights on guidance at that time.”
  • Tenet has about $350 million of excess cash and cash equivalents as well as $1 billion of available borrowing capacity as of Monday. The recently passed emergency funding legislation is another source of potential liquidity, according to financial documents filed Thursday.
  • Tenet said its hospital system is not currently being overwhelmed but it has rescheduled “a substantial amount” of elective procedures at hospitals and closed or reduced hours at ambulatory surgery and outpatient centers.

Dive Insight:

In addition to being physically overwhelmed, hospitals face bleak financial outcomes in the coming quarters as most have been forced to curtail or eliminate lucrative elective procedures while still incurring expenses for securing equipment and staff to treat the outbreak.

“I really do think it’s important that people realize that we are clearly feeling the pressure that the entire healthcare delivery system is feeling and facing,” Tenet CEO Ron Rittenmeyer said during a conference call with investors Thursday morning. He added that executives are “comfortable that we have this in control as much as possible.”

Hospitals received an allocation of $100 billion from the relief legislation to keep their facilities running, but they say it’s only the first step in what is needed. Also, it’s unclear how HHS will distribute the funds. The American Hospital Association this week suggested using Medicare Administrative Contractors to give every hospital $25,000 per bed, with more for those in hot spots.

Dallas-based Tenet operates 65 hospitals across nine states and about 500 other facilities, including urgent care and ambulatory surgery centers. It posted a net loss of $243 million for 2019, but had reported volume growth for four consecutive quarters. The chain had been focusing on scaling up its ambulatory surgery business United Surgical Partners International.

But the novel coronavirus pandemic has completely upended hospital operations across the country. Staffing capability has been limited by clinicians with pre-existing conditions being instructed to not work in facilities and overall increased risk to those on the front lines, the company said. Tenet has furloughed about 500 employees not involved in direct patient care.

Other factors Tenet mentioned as leading the guidance withdrawal were the expected increase in the uninsurance rate, unemployment that reduces consumer spending, overall financial market disruption and potential lawsuits from patients or employees exposed to COVID-19 at its facilities.

Tenet CFO Dan Cancelmi said accelerated payments from Medicare that CMS announced over the weekend will help with near-term liquidity. The company is pursuing $1.5 billion in advance payments based on its annual Medicare revenue.

Cancelmi also said the company had seen ongoing payments from health plans. “So far we have not seen a material deterioration in the processing of our claims by the health plans or Medicare or Medicaid processors, so we appreciate their cooperation during this situation,” he said.

The chain said it continues to seek personal protective equipment for its providers and has seen higher prices and shipment delays.

Tenet officials said they hope to be able to reschedule deferred care by late next month and later in the summer, in advance of potential second wave in the fall. “We believe strongly that we will be able to gear up as soon as we are released to do that and we will hit the ground running,” Rittenmeyer said.

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