Becker's Hospital Review

19 CFO / FINANCE Elective surgery pause in Texas is bad credit news for hospital operators By Ayla Ellison T exas Gov. Greg Abbott's proclamations sus- pending elective surgeries at hospitals across the state is credit negative for for-profit hospital companies, according to Moody's Investors Service. Between June 25 and July 9, Mr. Abbott issued an executive order and series of proclamations requir- ing hospitals in 113 of Texas' 254 counties to post- pone surgeries and procedures that are not immedi- ately medically necessary. e language of the executive order does not include ASCs, and it gives hospitals some flexibility over which surgeries they consider medically necessary. "ese two factors differ from the nationwide pause on elec- tive surgeries that was mandated in March/April, like- ly resulting in a less severe drop in surgeries in Texas than hospitals experienced earlier on," Moody's said. Since elective surgeries are a primary source of prof- it for acute care hospitals, delaying elective proce- dures in those counties, some of which are among Texas' most populous, will weaken revenue and profit of hospital companies operating in those ar- eas, according to Moody's. Among the major for-profit hospital operators, HCA Healthcare derives the largest percentage of business from Texas. e Nashville, Tenn.-based company derives about 26 percent of its revenues from services in Texas. About 23 percent of Dallas-based Tenet Healthcare's hospital beds are in Texas, while King of Prussia, Pa.- based Universal Health Services derives about 16 per- cent of its revenue from business in the state. Among the major for-profit hospital operators, Franklin, Tenn.-based Community Health Systems is the least exposed. e company relies on Texas for about 12 percent of its revenue, according to Moody's. "We believe that these larger for-profit hospital systems are better positioned now than they were in March/April to handle a surge in COVID-19 patients," Moody's said. "ese companies are geo- graphically diverse and have experienced surges in COVID-19 patients in other markets, even though Texas was not a hotspot earlier on." In Texas, hospitals have the option to direct pa- tients to affiliated ASCs. Tenet and HCA both operate a significant number of ASCs in the state, Moody's said. n Tower Health cuts 1,000 jobs By Alia Paavola W est Reading, Pa.-based Tower Health cut 1,000 jobs in June, citing a $212 million loss in revenue through May due to the COVID-19 pan- demic, according to the Philadelphia Inquirer. The layoffs affected about 900 employees, or 7 percent of Tower Health's 12,355-person workforce. The remaining positions being eliminated were not filled, reported Philly Voice. Tower Health said the reduction in workforce was necessary after it lost revenue due to the suspension of elective care. In April, Tower Health furloughed 1,000 employees. It is not clear how many of the furloughed workers are losing their jobs permanently, Philly Voice reported. The system has received $66 million in funding from the Coronavirus Aid, Relief, and Economic Security Act. n CHS to divest 480-bed Florida hospital By Ayla Ellison F ranklin, Tenn.-based Community Health Systems announced June 25 that it signed a definitive agreement to sell Bayfront Health St. Peters- burg (Fla.) to Orlando (Fla.) Health. Under the agreement, Orlando Health will assume the long-term lease and operations of the 480-bed hospital. The lease transfer requires approval by the St. Petersburg City Council, and the transaction is subject to regulatory approvals. The transaction, expected to close by the end of the third quarter, is one of the divestitures discussed on CHS' first quarter earnings call in late April. At that time, CHS said the divestitures that were in the works are expected to close before the fourth quarter and will mark the end of a portfolio rationalization strategy the company began nearly three years ago. The hospital divestitures have helped CHS reduce its debt load. The com- pany carried nearly $13.9 billion in long-term debt when it announced its divestiture plan at the end of 2017. CHS' long-term debt totaled $13.5 bil- lion as of March 31. n Inova to build hospital in Virginia By Alia Paavola F alls Church, Va.-based Inova Health System plans to build a new hospi- tal in Springfield, Va., the organization announced May 26. The hospital will sit on an acquired plot of land next to Inova's Health- Plex — Franconia/Springfield. Inova said that COVID-19 has affected it financially, but it is still committed to expanding access to healthcare in the communities it serves. "We are working to balance the current needs and challenges of the pandemic with Inova's commitment and ability to serve our communities for decades to come," said Inova President and CEO J. Stephen Jones, MD. Inova said it is still working out the details of the hospital, including bed count and size. n

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