U.S. hospitals are burning through cash so quickly on the front lines of the nation’s fight against the coronavirus pandemic that the more than $100 billion they’re set to get from the federal emergency stimulus package might not be enough.
The $2.2 trillion package lets hospitals get an advance on expected Medicare reimbursements and helps make up for lost revenue from suspended, profitable elective surgeries. The rescue funds are intended to help hospitals keep the lights on, and to expand services and buy protective equipment as they race to care for COVID-19 patients.
While the federal funds will help prop up hospitals in the immediate future, financial analysts are warning that more money will be needed to stem a drain on reserves or losses. Moody’s Investors Service has already said the outbreak likely will hurt cash flow this year, even after the recent stimulus package. S&P Global Ratings cut its outlook for the not-for-profit acute health care sector to negative.
“There’s intense stress on the balance sheet – across the board,” Wells Fargo Securities senior analyst George Huang said in a telephone interview. “Hospitals are burning through cash very quickly. The longer it goes on, the increased likelihood hospitals will need more cash infusion. I think there’s likely a need for further aid down the road.”
The White House and Congress have begun circling the idea of a fourth round of stimulus to combat the economic fallout from the coronavirus outbreak. Both President Donald Trump and House Speaker Nancy Pelosi have begun floating ideas for such a measure, just days after he signed the $2.2 trillion bill.
Illinois Senator Dick Durbin, a Democrat, said he’s spoken with hospitals executives and told reporters on March 26 that some operators are “hanging on by a thread.”
“Our hospitals are facing a moment of challenge and testing the likes of which they have never seen,” Durbin said.
NewYork-Presbyterian Hospital, located in the epicenter of the outbreak in the U.S., told bond investors that it expects operating losses between $104 million and $454 million in 2020, according to a regulatory filing. The hospital had budgeted for income of $246 million this year before the outbreak hit. Yale New Haven Health said in a filing that it needs to draw $100 million from its credit agreement with Wells Fargo & Co. to boost its cash on hand.
Many non-profit and public hospitals tap the $3.9 trillion municipal bond market, which has been whipsawed over the last month as investors pulled record amounts out. The pandemic may compound existing financial strains in certain parts of the health care sector and municipal-bond investors may become “much more skeptical,” said Paul Ferdinands, a restructuring lawyer at King & Spalding.
High-yield hospital bonds have lost 6.4% this year, according to Bloomberg Barclays indexes.
“Of all the sectors in the municipal market, the health-care sector has the most long-term volatility because of the pandemic,” said Matt Fabian, an analyst at Municipal Market Analytics. “The federal government is pouring support into the health care sector and will likely continue to do so.”
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