3 key takeaways from HCA, Tenet’s latest public comments

The COVID-19 crisis has disrupted standard hospital operations all across the country, and the nation’s providers are now approaching the eight-month mark since a public health emergency was declared in the U.S. 

Questions remain about what long-term effects this pandemic will have on providers, including pressure on payer mix as record job losses risk severing people from their commercial coverage, which providers prize for its higher reimbursement. It’s also uncertain when volumes will return or exceed pre-pandemic levels, and whether systems can manage both high caseloads of elective care and COVID-19 patients.

During a virtual conference this week, top brass from some of the nation’s largest health systems attempted to answer some of those questions in their latest public comments on the state of affairs. Executives at Tenet and HCA weighed in on how they’re navigating the new normal, what trends they’re experiencing and what they expect in the coming months. 

Healthcare Dive assembled some of the key takeaways from the two 30-minute discussions Baird’s senior research analyst Matthew Gillmor had with Tenet CEO Ron Rittenmeyer, Tenet COO Saum Sutaria and HCA CFO William Rutherford. 

Volumes

Both Tenet and HCA report they experienced surges in COVID-19 patients far later in the year than in April, when the nation was gripped by the onset of the pandemic and the toll it was taking on New York City and the East coast in particular. 

Both Tenet’s Rittenmeyer and HCA’s Rutherford said their health systems didn’t see such a surge until July, and treated more COVID-19 patients in that summer month than in April. 

Surges have hit parts of the country at different times. Tenet and HCA have operations that are largely spread out through the South

Still, systems across the nation were forced to cease elective procedures in the early weeks of the pandemic in order to prepare for a potential future rise in cases. HCA and Tenet were left to manage on their own when the surges hit their hospitals.  

Tenet’s Rittenmeyer said the system didn’t have to shut down any operations, despite still experiencing some markets with very high case numbers. 

Rutherford said HCA was able to manage through those “peaks and valleys,” but at times voluntarily suspended some elective procedures in certain markets during the July peak. The high caseloads were especially prevalent in South Texas and South Florida, he said.

Because HCA was able to manage on its own — without a mandated shutdown — the volume declines were not as significant as in April, in part due to a more targeted voluntary pause led by HCA. Rutherford said this is an important anecdote as it demonstrates to lawmakers that they can manage future surges without total shutdowns.

As questions linger about pent up demand, investors are curious about whether the rebound in volumes are simply deferred cases from earlier this year or actual new cases.  

Tenet’s Sutaria provided a glimmer of hope. He said the vast majority of visits in both hospitals and at ambulatory surgery centers are new cases, ones that they can’t link to a prior deferral. Sutaria said from the beginning the company was disciplined about rebooking cases. 

HCA estimated that at the end of the most recent quarter, about half the outpatient cases that were deferred have already come back. 

Higher acuity versus lower acuity patients

As patients have returned to the traditional healthcare setting, executives with both firms acknowledged that returning patients are higher acuity. In other words, patients presented as sicker or with more complex issues. 

“We have seen into the emergency departments a higher acuity set of patients coming back in with disease progression that’s more than it should have been,” Sutaria said during Wednesday’s presentation with Baird. 

This could be for myriad reasons, but HCA’s CFO said higher acuity patients may have had more medically urgent conditions and felt the need to come in, while lower acuity patients continue to prolong care. 

The challenge facing health systems now is how to prod those low-acuity cases back into the system. 

Tenet’s Sutaria argued health systems can’t wait until patients are comfortable to return. Instead, hospitals need to think about how to create options for them. In one example, Sutaria said that a system could develop a telehealth option for the ER. That additional step allows a provider to talk to the patient and, based on symptoms and conditions, alert them if they need to come into the physical location. 

HCA said it will be watching patient acuity closely over the coming months to try to get a sense of where it might settle over the long term. It will also be important to watch patient demand for services, as patient acuity and payer mix play an important role in hospital profitability. 

“Maybe we’re seeing lower acuity healthcare visits that [aren’t] going to be that big of an economic loss if we can maintain demand for higher acuity,” Rutherford said. 

Possible portfolio plays

Both organizations said that even in the midst of a pandemic, they’re still thinking strategically about their portfolios. 

Tenet’s Rittenmeyer said he’s thinking about the system’s portfolio more aggressively than he has in the past, without divulging further specifics. 

However, he acknowledged the focus on growing Tenet’s outpatient ambulatory surgery business, United Surgical Partners International (USPI). Tenet has upped its stake in the unit since its original investment in 2015. It now owns 95% of the unit, which is an important piece of the company’s overall strategy.

“We do believe that we will be very focused on continuing to expand the USPI portfolio,” Rittenmeyer said. “We’ve been actively engaged in looking at options and opportunities.” 

USPI commands a sizable share of ambulatory surgery centers across the country, operating 265 ASCs, compared to HCA’s 123. 

HCA’s Rutherford said CEO Sam Hazen has been challenging his team to look for “accelerants for growth,” whether that through acquisitions, new service areas or capital investments. 

So far the pandemic has not dampened M&A activity as some analysts had originally anticipated, according to a Kaufman Hall report on the second quarter activity. During the second quarter, 14 transactions were announced, though a slow down from the first quarter’s 29 deals, but only slightly down from the second quarter of 2019.