Tenet Healthcare withdraws 2020 outlook, announces furloughs in light of COVID-19 uncertainty

When Tenet Healthcare first released its 2020 outlook as part of its fourth-quarter and year-end earnings report, officials projected they would earn between $130 million and $245 million over the course of the year on revenues of at least $19.1 billion.

But now, in the wake of the COVID-19 pandemic—which has caused revenue generation from elective surgeries as well as outpatient and ER volume to drop—the Dallas-based hospital giant announced Thursday it would withdraw the previously announced first-quarter and full-year financial outlook for 2020. 

Tenet also said it is furloughing about 500 full-time corporate, non-patient care employees and flexing down its costs across the company as a result of the softening patient volumes. 

"From a top-line, at least from my position, we are very actively managing the patient needs and adapting to the changes. We're comfortable we have this in control as much as possible and we feel good about the performance of our team," Tenet CEO Ronald Rittenmeyer said in a conference call with analysts Thursday. 

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 Here's what else Tenet had to say about the impact of COVID-19 on business:

  • Deferred elective care: Tenet officials said they are looking at beginning elective procedures starting in early May, a projection that is subject to change based on how things play out, said Saum Sutaria, Tenet's chief operating officer.

"Our best prediction at this point and how we're doing our planning is we are thinking about sometime in the middle to the latter part of May—we'll open up an opportunity in the late part of May, June, July and in the latter part of the summer—for patients to receive both deferred care and other medically necessary care, as well as open up the emergency environment for people to access that again," Sutaria said. "You can't defer that stuff for very long."

The goal is to get to at least some deferred procedures during the summer months before a second wave of COVID-19 expected to hit in the fall.

  • Liquidity: When it comes to liquidity, the Dallas-based hospital giant said it has about $350 million of excess cash and cash equivalents and approximately $1 billion of borrowing availability under its senior secured revolving credit facility. Tenet officials are also seeking an amendment to its senior secured revolving credit facility, which will include increasing total borrowing capacity under the facility to $2 billion up from $1.5 billion. 

Tenet also expects it may be able to access funding made available under the economic stimulus package passed recently known as the CARES Act, as well as proceeds from the previously announced sale of its Memphis hospitals for approximately $350 million.

Tenet also announced a private offering of $500 million in aggregate principal amount of senior secured first-lien notes.

  • CARES Act relief: Tenet officials said the CARES Act passed recently by Congress and signed into law by President Donald Trump is expected to bring much-needed relief. That includes the expansion of Medicare's accelerated and advanced payment program for providers and suppliers due to disruption to the healthcare industry. Tenet estimates its hospitals, ASCs and physician practices will be eligible to apply for about $1.5 billion of accelerated payments based on recent Medicare business levels.

Tenet also expects to benefit from the $100 billion authorized under the act for direct grant aid to healthcare providers for incremental costs and lost revenues related to COVID-19. (And the funding received under this grant aid program will not have to be repaid.)

They also estimate funding of the company social security payroll tax match of 6.2% will be deferred for the remainder of 2020. Tenet expects this will result in the system not having to fund approximately $250 million of taxes in 2020.