Why do health systems like HCA Healthcare need CARES Act funds?
There has been a lot of discussion lately around health systems receiving government support through the CARES Act. Many recent articles have not included a full portrayal of the significant challenges health care providers faced during the COVID-19 pandemic, and will likely continue to experience in the coming months. Many providers and health industry groups like the American Hospital Association and the Federation of American Hospitals conveyed these challenges to elected officials and policy makers, and we saw the government act quickly to provide critical support to health care providers across the country.
In short, the CARES Act has provided funding to help make up a portion of the lost revenue and additional expenses healthcare providers have experienced during the COVID-19 outbreak. This funding has played an essential role in allowing health care providers to continue to provide high quality care to patients and communities across the country.
How did the COVID-19 pandemic affect hospitals and their ability to care for communities?
The impact of this pandemic is unlike anything the health industry has experienced in generations. Health systems across the country were materially impacted, even if they actually saw only limited COVID-19 activity:
- There were significant investments made in preparations for the COVID-19 outbreak. Most every system started preparing in January by developing new ICU and surge capacity, securing PPE through the supply chain, and ensuring ventilator capacity as well as other items essential to caring for COVID-19 patients.
- With orders issued by various government agencies to cease elective activity, many services and areas of facilities were essentially shut down for some period of time. In addition to steep revenue drops associated with canceled scheduled services, hospitals had to maintain their plant operations and support other fixed costs during this time.
- Emergency Room activity, which is the primary access point for many patients, was significantly disrupted and remains so today.
- And, many systems continued to support their healthcare workers during this time through pay extensions or other avenues.
What has been the impact of the pandemic on HCA Healthcare?
HCA Healthcare began preparing months before we saw our first COVID-19 patient. The impact of the pandemic began in early March in our facilities and is continuing today. We saw the peak of the pandemic in the middle of April when inpatient admissions dropped by 30%, inpatient surgical cases dropped close to 50%, and outpatient surgical procedures in our hospitals dropped by 70%, while ASD surgical cases dropped by roughly 90%. We saw similar drops in our emergency rooms where hospital-based ER visits were down more than 50% and our FSER volume was all but eliminated. The ER volume remains depressed today.
Why did HCA Healthcare receive such a large portion of the CARES Act funds?
The CARES Act funding for HCA Healthcare has been significant, but it only represents a portion of our lost revenue and incremental expenses that we have experienced thus far. It is important to note that HCA Healthcare’s 180 U.S. hospitals provide about 5 percent of all inpatient hospital services in the country, yet we have received about 2 percent of the CARES Act funds distributed to hospitals. To date, HCA Healthcare has received approximately $1 billion in grants from the provider relief fund. The CARES Act also expands the existing Medicare accelerated payment program. We have received $4.3 billion in accelerated payments for services we will provide to Medicare patients. These amounts will be repaid as we care for Medicare patients and is money our hospitals would receive normally, just expedited due to the health crisis. While we are beginning to see some volume recover as communities across the country open back up, the impact of this pandemic continues, and what the future impact will be is still unknown.
How has HCA Healthcare used the CARES Act funds it has received?
We needed to make important and difficult decisions as we navigated through this unprecedented event and we did so with the two guiding principles Sam Hazen often mentions: protect our employees and protect our ability to serve our communities in the future. These difficult decisions included implementing a number of expense management measures, including: reducing our planned capital expenditures; suspending our share re-purchase program; suspending our dividend; and implementing pay cuts for our management teams ranging from 10 to 30%, including all corporate employees, executive leadership and division and facility leadership. Additionally, once the pandemic escalated with the future of its trajectory being unknown, we made the most difficult decision to forgo annual wage increases for our colleagues.
Each decision was made with a determination and focus to have no HCA Healthcare employee lose their job during this pandemic. I am thankful to say that, to date, we have not laid off or furloughed any colleagues, in contrast to many other healthcare organizations and hospital systems. Other decisions were made to support our colleagues including, implementing a pandemic pay program to continue paying our employees 70 percent of their base pay when work hours were unavailable because of volume declines. We also continued to pay employees who were required to be quarantined. To date more than 120,000 colleagues have participated in these programs at a cost of over $140 million. We provided hotels for colleagues who had concern about returning to their homes and families after caring for COVID-19 patients. We expanded our employee health resources, including health screeners and contact tracers, as well as expanding our emotional and mental health support through a 24/7 resource line designed specifically to support our 98,000 nurse colleagues.
The CARES Act money helped us do all the above while also reacting to the economic strains the pandemic placed on the organization. The funds that have been distributed have been vital for HCA Healthcare to fulfill our commitments to our patients, employees and communities. It is predicted that the effects of this pandemic will likely continue for some time. The ultimate impact is unknown. As healthcare leaders we must continue to plan for uncertainty, which may bring the need for more difficult decisions as we build financial resilience during this uncertain time.
Would HCA Healthcare consider refusing future CARES Act money?
As we continue to assess the need for CARES Act funding inside of HCA Healthcare, there may be a point where we no longer accept CARES Act funds as our business trends return.