Dallas-based Tenet Healthcare, one of the nation’s largest investor-owned hospital operators, is furloughing staff, delaying benefits such as 401(k) matches, bolstering its cash and deferring $250 million in Social Security payroll tax payments to weather the coronavirus pandemic.
Tenet CEO Ron Rittenmeyer said Thursday that the moves were "done consciously, thoughfully ... to ensure we were focused on maximizing our cash position.”
“We’re comfortable that we have this in control as much as possible," he said in an conference call with analysts.
Tenet outlined the impact COVID-19 is having on its business and finances in an investor presentation. To reduce expenses, Tenet said it has:
- Furloughed 500 corporate and nonpatient care workers, with “ongoing evaluation of additional actions.” Temporarily laid off workers aren’t being paid, but the company will continue health care benefits and pay their 401(k) retirement match. It postponed the annual 401(k) match until later this year for other eligible employees who are still working. Tenet has 110,000 employees.
- Deferred or cut spending on capital improvements, technology and human resources.
- “Flexed down” its business in response to dropoffs in patients seeking elective surgeries. United Surgical Partners International, one of Tenet’s business units, has seen its patient volumes drop the most.
Coronavirus impact
Chief operating officer Saum Sutaria said Tenet is seeing hot spots in COVID-19 cases in Detroit and South Florida, but added that its 65 hospitals “are not overwhelmed." Tenet has 450 confirmed cases in its hospitals and 1,200 other patients awaiting results.
The most significant impact is in the company’s surgical centers, where restrictions on nonmedically necessary elective surgeries shut down or significantly reduced operations. Tenet operates 500 surgical hospitals, ambulatory surgery centers, urgent care and imaging centers and other care sites and clinics.
“We are clearly feeling the pressure that the entire health care delivery system is facing,” Rittenmeyer said.
Tenet is planning to gear back up at its surgery centers with extended and weekend hours or “whatever it takes to get our doctors back to work” when elective procedures are permitted again, he said.
“We believe the normal demand, coupled with the pent-up demand that exists ... will remain and rebound once the shelter-in-place orders are lifted and fear is reduced,” according to the company’s investor presentation.
It’s also planning for the possibility of COVID-19′s return in the fall.
“We’ve taken the test. We now know the answers and the questions," Rittenmeyer said. "I think we’ll be prepared if there’s a second wave in October. There’s no way to know if there will be.”
Capital to operate
Tenet had $500 million in cash in hand as of March 31 and $1 billion in available credit, chief financial officer Daniel Cancelmi said.
The company also is tapping capital markets for additional liquidity by issuing $500 million in notes and seeking a $500 million increase in its bank borrowing. It’s also expecting $350 million from the sale of two Memphis hospitals and their associated physician practices and six urgent care centers.
Cancelmi credited health insurance plans and Medicare and Medicaid processors for keeping claims moving. “So far, we have not seen a material deterioration in the processing of our claims," he said.
How CARES Act helps
The $2 trillion CARES Act approved by Congress last week includes a variety of programs to boost health care providers.
Cancelmi said Tenet will seek a $1.5 billion advance on its Medicare payments, one of the key provisions in the act designed to bolster hospitals’ cash flow. The money would be deducted from future Medicare reimbursements. It also expects to save $127 million this year from other Medicare and Medicaid changes.
Another part of stimulus package would let Tenet defer $250 million in Social Security payroll taxes for the rest of this year. Tenet will need to repay those taxes in December 2021 and 2022.
The package also sets aside $100 billion in grants for incremental costs and lost revenue caused by the pandemic. Those grants don’t have to be repaid. Tenet said it will seek an unspecified share of the grants.
