The roughly 15,000 COVID-19 patients Tenet Healthcare Corp. treated across its hospitals in the third quarter—a more than 60% uptick from the second quarter—made July and August even more difficult than the earlier months of the pandemic, the company's CEO said.
Dallas-based Tenet has relied on contract labor, agility and clear communication to stay on top of the crisis, CEO Ron Rittenmeyer told analysts on a Wednesday morning earnings call.
"We realize and operate every day with the assumption that COVID spikes will be part of what we face until a vaccine becomes widely deployed," he said. "We've learned how to deal with these spikes and have done so effectively."
Despite the surge, Rittenmeyer said Tenet has kept its staff COVID infection rate to just under 3.8%, compared with a national average of 13.4%. No confirmed COVID-19 cases have resulted from the more than 688,000 surgeries performed in Tenet's ambulatory surgery centers between mid-March through September, he said.
Tenet reported a net loss from continuing operations attributable to shareholders of $197 million in the quarter ended Sept. 30, down from a $227 million net loss in the prior-year period. For-profit Tenet's $4.6 billion in net operating revenue in the quarter was effectively flat year-over-year. Expenses declined by just under 1% year-over-year to $4.3 billion.
Tenet's adjusted earnings before interest, taxes, depreciation and amortization were $551 million in the third quarter of 2020, down from $639 million in the prior-year period. The $551 million factors in that Tenet reversed $70 million in federal COVID-19 grants it initially recognized in the second quarter due to revised HHS guidance issued in September.
The September guidance directs providers to use net operating income instead of revenue to account for the grants. It also caps lost revenue providers can claim to their net 2019 gain, or net zero if the provider had a negative net operating income last year. In October, HCA Healthcare—which reported $1.1 billion in profit in the second quarter—announced it was giving back all $1.6 billion in grants it had received because it's the "socially responsible thing to do," CEO Sam Hazen said in a statement.
Rittenmeyer criticized the new guidance on the call, saying it does not account for things like different reimbursement levels, capital investments made during the shutdown and "incredible losses" experienced during shutdowns.
"We continue to discuss these details with HHS in hopes of a more balanced outcome," he said.
Tenet said it has only been able to recognize $453 million of the $890 million in federal COVID relief grants it has received from HHS to date, $178 million of which was received in the third quarter.
Through October, Tenet said it had received about $1.5 billion in accelerated Medicare payments, money it will need to repay in stages beginning one year from when it was received.
Like HCA, Tenet reported a big year-over-year increase in net revenue per adjusted admission: 17%. Dan Cancelmi, Tenet's chief financial officer, explained on Wednesday's call that's due to three things: higher acuity patients, a stronger mix of commercial patients and revenue growth from Tenet's contracted physicians, who have been able to capture 3% to 5% higher negotiated rates.
Of Tenet's total COVID cases, only about 20% have been commercially insured patients, which carry higher reimbursement, Cancelmi said. Considering the disproportionately high cost of treating COVID patients, Cancelmi cautioned "the profitability isn't necessarily there that a lot of people think is there."
Dr. Saum Sutaria, Tenet's chief operating officer, explained that Tenet's long-term strategy is focused on building out service lines like trauma programs, a surgical spine program across some south Florida hospitals and surgical oncology in San Antonio, Texas.
"That's helping drive the strength of the recovery," he said. "COVID cases may come and go. Even on a commercial basis, because the cost of those cases are high, I would never want to substitute a COVID commercial case for the types of businesses that we're building."
Surgical cases across Tenet's United Surgical Partners International were back to 96% of their prior-year levels in September, even as other volume metrics had dipped from the summer.
Admissions were at 88% of their prior-year volumes in September, compared with 90% in July. Outpatient visits were 86% of their prior-year levels in July, but down to 83% in September. Emergency department visits, which have been the slowest to return for hospitals, were 80% recovered in July, but down to 74% in September.
