Tenet Healthcare Corp. has scrapped its 2020 guidance, furloughed about 500 full-time positions and plans to issue another $500 million in debt to boost liquidity amid the coronavirus pandemic that's plunged hospitals nationwide into financial uncertainty.
While the 65 hospitals that comprise the Dallas-based chain aren't currently overwhelmed with COVID-19 patients, the company is shouldering higher than usual costs because of scarce personal protective equipment. What's more, volumes have plummeted across its outpatient surgery center business.
"I really do think it's important that people realize we are clearly feeling the pressure that the entire healthcare delivery system is feeling and facing," Tenet CEO Ron Rittenmeyer said on an investor call Thursday morning.
Tenet is currently treating about 450 COVID-19 patients and has another roughly 1,200 patients under investigation for the virus across its facilities. The company has withdrawn its previously announced guidance for first quarter and full-year 2020. Tenet will report its first quarter results as scheduled in early May and will share an update on its full-year outlook at that time, Rittenmeyer said.
The 500 full-time equivalent positions furloughed—none of whom are involved in patient care—will continue to receive health benefits, Rittenmeyer said. Tenet postponed its 401k match for most employees, except for those who've been furloughed, he said.
Where Tenet is really feeling the crunch is in its ambulatory surgery business, United Surgical Partners International, because of deferred elective procedures. Many of those facilities are open just one or two days per week for medically necessary services, although patient access is limited by a shortage of personal protective equipment, Dr. Saum Sutaria, the company's chief operating officer, said on the call.
Tenet's Chief Financial Officer, Dan Cancelmi, listed a number of methods the company is using to try to raise cash. Most prominently, the company announced Thursday it's pursuing a $500 million offering of senior notes that mature in 2025. The proceeds will either be used to pay off Tenet's outstanding debt or maintained as cash on hand, Cancelmi said.
"Although we currently do not need this additional liquidity, we view this as a prudent investment to bolster our liquidity as we move through and see how the next few months unfold," he told analysts on the call.
The company is also conserving $350 million in excess cash as of the end of March that normally would go toward reducing borrowings on its credit line at quarter-end. That's on top of the normal balance of $200 million, Cancelmi said.
Tenet also has another roughly $1 billion in available capacity under its revolving credit facility, and is working to increase capacity under that facility by $500 million to $2 billion, Cancelmi said.
Tenet continues to anticipate closing on the sale of its Memphis hospitals later this year, which will generate another $350 million in cash proceeds, Cancelmi said.
Tenet also expects to benefit from several provisions of the Coronavirus Aid, Relief, and Economic Security Act, which President Donald Trump signed into law on March 27. The company is pursuing about $1.5 billion in advance payment from Medicare under a provision that allows providers to request up to 6 months advance payment based on historical payments. Although that money must be repaid, Cancelmi said it will help significantly with near-term liquidity.
Tenet also plans to take advantage of the $100 billion in direct grants to providers that have lost revenue and seen higher costs as a result of COVID-19. The CARES Act also includes a payroll tax match, which Tenet also plans to take advantage of.
While the CARES Act helps, Rittenmeyer said he believes the government could go further to help medical providers.
"I join the industry in asking for significant focus on grant money to invest in the dual crisis of not only COVID-19 but delayed medical procedures," he said.
