HCA Healthcare to Return $6 Billion in Government Virus Aid

(Bloomberg) -- HCA Healthcare Inc. plans to return $6 billion in emergency virus-relief aid received earlier this year, after the immediate business squeeze caused by the pandemic waned for the largest publicly traded U.S. hospital operator.

The company will return its federal relief funds, which include $4.4 billion in accelerated Medicare payments and a $1.6 billion distribution from the Provider Relief Fund. Under the latter program, Congress allocated $175 billion for hospitals and other medical providers, largely in grants that don’t need to be repaid.

The relief grants allocated under the CARES Act were initially sent to help medical providers deal with lost revenue and additional expenses related to Covid. In guidance last month, the government said lost revenue would be calculated as a drop in year-over-year net operating income.

The change would require providers to show declines in bottom-line profits, rather than top-line revenues, attributable to the virus, so companies that reduced expenses as volumes fell may have to return some money, Spencer Perlman, director of health care research at Veda Partners, wrote in an Oct. 6 report.

A company spokesman said HCA could retain all of the provider relief grants through mid-2021, and possibly some permanently, and it could hold on to the accelerated Medicare payments for 29 months, based on the company’s current understanding of the guidance.

Since the initial outbreak of Covid-19 in the U.S., the company has gained experience managing through the pandemic, and “we believe returning these taxpayer dollars is appropriate and the socially responsible thing to do,” Chief Executive Officer Sam Hazen said in a statement.

HCA’s repayments will be funded through available cash and future cash flow. The company’s balance sheet is also less leveraged than its closest peers, with total debt of 3.23 times earnings, according to data compiled by Bloomberg.

HCA also reported preliminary results for the third quarter, with adjusted earnings before interest, taxes, depreciation and amortization of $2.03 billion, missing analyst estimates. The results reflect a reversal of $822 million in stimulus income recorded during the second quarter, the Nashville, Tenn.-based company said in a statement.

HCA said hospital volumes in the third quarter were still down compared to the prior year, with same facility equivalent admissions expected to decline by 9%. The company plans to report full results on or about Oct. 26.

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