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Health Care Providers Confirm Stunning Drop in Care Volume

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Executives from two huge health care delivery companies — HCA Healthcare Inc. and Quest Diagnostics Inc. — say that the COVID-19 pandemic has reduced U.S. use of different types of health care by about 30% to 70%.

The executives say they expect pent-up demand for care to increase volume in the second half of the year, but aren’t really sure what to expect.

(Related: UnitedHealth to Fix COVID-19-Related ‘Financial Imbalances’: CEO)

HCA runs 186 hospitals and about 2,000 other sites of care. It provides about 4% of U.S. staffed hospital beds, according to data from Definitive Healthcare and the American Hospital Association.

Quest is the largest single provider of laboratory services in the United States. It accounts for about 9% of the U.S. medical lab market, according to figures in a company presentation slidedeck created in 2018.

Earnings

Company executives talked about the COVID-19 pandemic during conference calls the companies held to go over earnings for the first quarter of the year with securities analysts.

HCA is reporting $698 million in net income for the first quarter on $13 billion in revenue, compared with $1.2 billion in net income on $13 billion in revenue for the first quarter of 2019.

Quest is reporting $106 million in net income for the latest quarter on $1.8 billion in revenue, compared with $176 million in net income on $1.9 billion in revenue for the year-earlier quarter.

HCA executives say their company has a great deal of cash on hand and has a strong level of liquidity, or ability to come up with the cash needed to meet obligations.

Quest says that, if current conditions keep up, it might need to get flexibility from lenders to keep its current “revolving credit facilities,” or corporate versions of credit cards, in place, but that it’s confident that it will get that flexibility.

The World Since March 15

Executives from both company said their companies’ conference calls that patient volume fell off a cliff in the middle of March, after many state and local governments began making serious preparations for a surge in hospital patients with COVID-19, reacting to an influx of hospital patients with confirmed cases of COVID-19, and telling people to stay in their homes, to keep people from giving each other severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), the virus that causes COVID-19 pneumonia, heart problems and kidney problems.

Patient volume is down partly because hospitals reconfigured their operations, to prepare for a spike in the number of COVID-19 patients who might need to be on ventilators; partly because hospitals and physicians’ offices are trying to avoid many procedures, to reduce the risk that patients and health care providers will give each other SARS-CoV-2; and partly because patients themselves have been reluctant to run the risk of contracting SARS-CoV-2 at a medical facility.

At Quest, for example, revenue growth was up 4% for the two-month period from Jan. 1 through Feb. 29, relative to revenue for the comparable period in 2019; fell less than 10%, year-over-year, for the first two weeks of March; plunged almost 40% in the third week of March; and sank about 50% in the fourth week of March.

“So far in April, we have indications that volume declines have stabilized in the 50% to 60% range,” Mark Guinan, the company’s chief financial officer, said during the Quest conference call.

Company executives said they saw declines in volume for a wide range of tests, including tests used to track cancer.

They said that they are preparing to launch a testing program that should be able to process about 200,000 SARS-CoV-2 antibody tests per day, and the use of other types of tests should start to recover.

“While there is uncertainty in the near term, we look forward to gradually improving conditions,’ Steve Rusckowski, Quest’s chief executive officer, said.

Rusckowski noted that the COVID-19 pandemic may be creating opportunities to acquire small lab companies and handle lab testing for hospitals that have been running their own labs.

Sam Hazen, HCA’s CEO, noted that HCA hospitals have cared for about 5,500 patients with confirmed cases of COVID-19 so far this year.

He said HCA is feeling, and may continue to feel, the impact of COVID-19-related lockdowns on employment as well as the effects of efforts to prepare for and handle patients with COVID-19.

Like Quest’s chief financial officer, HCA’s CFO, Bill Rutherford, said patient volume fell off a cliff in mid-March.

Admissions to facilities that HCA owned both this year and last year were up about 5%, year-over-year, for the period from Jan. 1 through March 15, Rutherford said.

“Then for the last half of March, we saw an approximate 20% decline in admissions as compared to the prior year period,” Rutherford said. “Almost all of our key volume indicators reflected growth through March 15, and contractions in the last half of March as compared to the prior year period.”

In the last half of March, volume fell 30% at emergency rooms, 20% for in-patient surgeries, and 30% for outpatient surgeries, Rutherford said.

For April, volume has been down about 50% for emergency rooms, 30% for inpatient admissions, 50% for inpatient surgeries, and 70% for outpatient surgeries, Rutherford said.

“We have started to see these volume declines stabilize over the past week” Rutherford said.

Rutherford said he’s hoping volume might start to recover in the second half of the second quarter — after around May 15.

Hazen, the HCA CEO, declined to talk about how patient volume might look as the health care system starts to recover from the current lockdowns and pandemic response.

“We don’t know what the full effect and the damage to the economy are going to be,” Hazen said. “We don’t understand clearly what the uninsured levels are going to be. And we anticipate the effects to vary by market.”

Hazen said HCA also has to make sure that it continues to have enough surge capacity to handle the possibility of a second wave of COVID-19 cases.

Hospitals and Health Insurers

Hospital executives and health insurance company executives often have harsh words from one another.

David Wichmann, the CEO of UnitedHealth Group Inc. said last week, during his company’s first-quarter earnings call, that UnitedHealth would take action to correct imbalances caused by COVID-19-related disruption.

Hazen, HCA’s CEO, said during the HCA call that he believed UnitedHealth “took a very significant leadership position” in easing some of the usual health insurance claim review procedures and rules.

Other components of the health insurance industry have also made changes that have helped make getting paid more efficient, Hazen said.

“We will continue to work with them, I think in a very collaborative way, to address issues that we have, as well as issues that they have,” Hazen said.

— Read COVID-19 May Cut Dental Services Spending for 3 Years: Actuarieson ThinkAdvisor.

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