Full Press Release Details
Risks Related to the COVID-19 Pandemic
We expect the COVID-19 pandemic to continue to affect our financial performance, and such pandemic could have
material adverse effects on our results of operations, financial condition, and/or our cash flows if it causes public health and/or economic conditions in the United States to deteriorate.
As a provider of healthcare services, we have been and continue to be significantly affected by the public health and economic effects of the COVID-19 pandemic, which the Secretary of the U.S. Department of Health and Human Services, or HHS, first declared a public health emergency in January 2020. Although vaccines and booster shots for the COVID-19 virus have become widely available in the United States, COVID-19 has continued to result in a significant number of hospitalizations, and the future course of the
pandemic remains uncertain.
We have been working with federal, state and local health authorities to respond to COVID-19 cases in the communities we serve, and our hospitals, medical clinics, medical personnel, and employees have been actively caring for COVID-19 patients. Although we
have implemented considerable safety measures, treatment of COVID-19 has associated risks, which may include the manner in which patients, physicians, nurses and other medical personnel perceive and respond to
such risks. These risks may include reduced operating capacity, impaired employee morale, labor unrest and/or other workforce disruptions. Moreover, during the pandemic, we believe that some individuals have elected to postpone medical care for an
undetermined period of time in a manner that has adversely impacted our patient volumes in comparison to pre-pandemic levels.
Although our hospitals have not generally experienced major capacity constraints to date arising from the treatment of COVID-19 patients, there are hospitals in the United States that have been overwhelmed in caring for COVID-19 patients, which has prevented such hospitals from treating all
patients who seek care. Moreover, in certain locations, government authorities and healthcare providers have re-imposed or may seek to re-impose restrictions on elective
medical procedures, have activated or may consider activating crisis standards of care, and have deployed or may seek to deploy military medical personnel, which could affect one or more of our hospitals or outpatient or other facilities. Moreover,
due to the concentration of our hospitals in certain states, we are particularly sensitive to the increase in COVID-19 cases in those states, where the pandemic could have a disproportionate effect on our
We have incurred, and may continue to incur, certain increased expenses arising from the
COVID-19 pandemic, including additional labor, supply chain, capital and other expenditures. Moreover, in recent months, the U.S. economy has experienced general inflationary pressures and significant
disruptions to global supply networks. In this regard, we have experienced disruptions in connection with the provision of equipment, pharmaceuticals and medical supplies, including protective personal equipment, to us, as well as inflationary
pressures in connection with labor, supply chain, capital and other expenditures. While we have implemented cost containment and other measure to try to counteract these developments, we may be unable to fully offset these increases in our costs and
otherwise effectively respond to supply disruptions. To the extent we continue to experience increased expenses and supply chain disruptions, our operations may be adversely impacted.
The Occupational Safety and Health Administration ( OSHA ) published an emergency
temporary standard as an interim final regulation in November 2021 which would require all employers with 100 or more employees (including the Company) to require their workforce to be fully vaccinated or, alternatively, to provide a negative COVID-19 test result on a weekly basis. Additionally, the Centers for Medicare & Medicaid Services, or CMS, issued an interim final rule in November 2021 that will require
COVID-19 vaccinations for workers in most Medicare- and Medicaid-certified providers and suppliers, including our hospitals. The rule applies to all staff, including clinical staff, individuals providing
services under arrangements, volunteers, and staff who are not involved in direct patient care, subject to approved religious and medical exemptions. On January 13, 2022, the U.S. Supreme Court stayed the OSHA standard pending disposition of
the petitions for review in the U.S. Court of Appeals for the Sixth Circuit after holding that it was likely that the challenge that OSHA lacked the authority to adopt this standard would succeed on the merits, and granted the U.S. government s
request for a stay of lower court injunctions of the CMS regulation, finding that the CMS rule fell within the authority granted to the HHS Secretary by Congress with respect to imposing conditions on the receipt of Medicaid and Medicare funds. It
remains possible that the OSHA rule could be upheld by the U.S. Court of Appeals for the Sixth Circuit, that OSHA will issue a narrower emergency temporary standard which would be approved by the Supreme Court, and/or that Congress will pass
legislation with respect to a vaccine or test program. Additionally, some states have implemented, or may implement in the future, vaccine mandates with respect to healthcare personnel. It is currently not possible to predict the impact
that these vaccine mandates may have on us. However, these vaccine mandates could result in employee attrition and the loss of personnel who are unvaccinated, which could adversely affect our business and results of operations.
Economic conditions and other factors resulting from the COVID-19 pandemic have affected, and may
continue to affect, our service mix, revenue mix, payor mix and/or patient volumes, as well as our ability to collect outstanding receivables. These factors may continue to adversely affect demand for our services, as well as the ability of patients
and other payors to pay for services rendered. We have observed deterioration in the collectability of patient accounts receivable from uninsured patients compared to pre-pandemic levels which, if sustained,
may adversely affect our financial results and require an increased level of working capital. In addition, our financial performance may continue to be affected by federal or state laws, regulations, orders, or other governmental or regulatory
actions addressing the current COVID-19 pandemic or otherwise affecting the U.S. healthcare system in connection with the pandemic. We may also be subject to lawsuits from patients, employees and others
exposed to COVID-19 at our facilities. Such actions may involve large demands, as well as substantial defense costs. Our professional and general liability insurance may not cover all claims against us.
While we are not able to fully quantify the impact that the COVID-19 pandemic will have
on our future financial results, we expect developments related to COVID-19 to continue to affect our financial performance. Moreover, the COVID-19
pandemic may have material adverse effects on our results of operations, financial position, and/or our cash flows if economic and/or public health conditions in the United States deteriorate as a result of the pandemic. The ongoing impact of the
pandemic on our financial results will depend on, among other factors, the duration and severity of the pandemic, the impact of the pandemic on economic conditions, the volume of canceled or rescheduled procedures at our facilities, the volume of COVID-19 patients cared for across our health systems, the timing, availability, and acceptance of effective medical treatments, the availability, acceptance of and need for vaccines (including additional dosages of
vaccines), the spread of potentially more contagious and/or virulent forms of the virus, including any variants of the virus for which currently available vaccines, treatments, and tests may not be effective or authorized, the availability of and
processing times for tests, and the impact of government actions on the hospital industry and broader economy, including through existing and any future stimulus efforts as well as vaccine and testing requirements.
COVID-19 developments continue to evolve quickly, and additional developments may occur which we are unable to predict. Furthermore, the COVID-19 pandemic has resulted
in, and may continue to result in, significant disruption of global financial markets, which could reduce our ability to access capital and negatively affect our liquidity in the future.
We are unable to predict the ultimate impact of the Coronavirus Aid, Relief and Economic Security Act
(the CARES Act ) and other stimulus legislation, or the effect that such legislation and other governmental responses intended to assist providers in responding to COVID-19, may have on our
In response to the COVID-19 pandemic, federal and state governments have passed
legislation, promulgated regulations and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency and to
provide financial relief. Together, the CARES Act, the Paycheck Protection Program and Health Care Enhancement Act (the PPPHCE Act ), the Consolidated Appropriations Act, 2021 (the CAA ), and the American Rescue Plan Act of
2021 (the ARPA ) authorize over $186 billion in funding to be distributed to eligible healthcare providers. These funds are intended to reimburse eligible providers, including public entities and Medicare- and/or Medicaid-enrolled
providers and suppliers, for lost revenues and health care related expenses attributable to COVID-19. Recipients are not required to repay these funds, provided that they attest to and comply with certain
terms and conditions, including limitations on balance billing, not using funds received from the PHSSEF to reimburse expenses or losses that other sources are obligated to reimburse and audit and reporting requirements.
The CARES Act also makes other forms of financial assistance available to healthcare providers, including through Medicare and Medicaid
payments adjustments, including a 20% add-on payment for hospital inpatient care provided to patients with COVID-19 and delays of Medicaid disproportionate share
hospital reductions. It also expanded the Medicare Accelerated and Advance Payment Program, which makes available accelerated payments of Medicare funds in order to increase cash flow to providers. CMS is no longer accepting applications from
hospitals and other Medicare Part A providers for accelerated payments, and it has suspended the advance payment program for physicians and other Medicare Part B health care providers. Providers are required to repay accelerated payments beginning
one year after the payment was issued. After such one-year period, Medicare payments owed to providers will be recouped according to the repayment terms. We received accelerated payments under this program in
April 2020, and by the end of 2021 all payments received by us had been recouped or repaid to CMS or assumed by buyers in connection with hospitals we have divested.
The CARES Act and related legislation suspended the Medicare sequestration payment adjustment from May 1, 2020 through March 31,
2022, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, but extended sequestration through 2030. Congress reduced the sequestration adjustment to 1% from April 1 through
June 30, 2022, and the adjustment will return to 2% on July 1, 2022. For the first six months of fiscal year 2030, the adjustment will increase to 2.25%, and for the last six months of fiscal year 2030, the adjustment will increase to 3%.
The ARPA, in addition to providing funding for healthcare providers, increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 (the PAYGO Act ). As a result, an additional payment reduction of up to 4% was required to take effect in January 2022. However,
Congress has delayed implementation of this payment reduction until 2023.
Beyond financial assistance, federal and state governments have
enacted legislation and established regulations intended to increase access to medical supplies and equipment and ease legal and regulatory burdens on healthcare providers. These efforts have included, for example, expanding access to and payment
for telehealth services and prioritizing review of drug applications to help with shortages of emergency drugs.
There is still a high
degree of uncertainty surrounding the implementation of the CARES Act and subsequent legislation passed in response to the COVID-19 pandemic. For example, PHSSEF payments to us are recognized as a reduction to
operating costs and expenses only to the extent that we are reasonably assured that the underlying terms and conditions of such payments are met. HHS interpretation of such underlying terms and conditions, including auditing and reporting
requirements, continues to evolve. In June 2021, HHS issued guidance that set forth deadlines for using and reporting on the use of PHSSEF funds, depending on the dates on which the funds were received. Additional guidance or new or amended
interpretations of existing guidance on such underlying terms and conditions may result in our inability to recognize additional PHSSEF payments or may result in the derecognition of amounts previously recognized, which (in any such case) may be
material. To the extent that any unrecognized PHSSEF payments that have been or may be received by us do not qualify for reimbursement based on our future operations, we may be required to return such unrecognized payments to HHS following the end
of the COVID-19 pandemic or other future time as may be determined by HHS guidance. Further, we may be subject to or incur costs from related government actions including payment recoupment, audits and
inquiries by governmental authorities, and criminal, civil or administrative penalties.
Some of the federal and state legislative and regulatory measures allowing for flexibility
in delivery of care and various financial supports for health care providers are available only for the duration of the COVID-19 public health emergency. Many states have ended their declared states of
emergency, and it is unclear whether or for how long the HHS declaration will be extended. The current HHS declaration expires April 16, 2022. The HHS Secretary may choose to renew the declaration for successive
90-day periods for as long as the emergency continues to exist and may terminate the declaration whenever the Secretary determines that the public health emergency no longer exists. Additionally, the federal
government may consider additional stimulus and relief efforts, but we are unable to predict whether any additional measures will be enacted or their impact. We are unable to assess the extent to which anticipated ongoing impacts on us arising from
the COVID-19 pandemic will be offset by benefits which we may recognize or receive in the future under the CARES Act and other stimulus legislation or any future stimulus measures. Further, there can be no
assurance that the terms of provider relief funding or other programs will not change in ways that affect our funding or eligibility to participate. We continue to assess the potential impact of the COVID-19
pandemic and government responses to the pandemic on our business, results of operations, financial position and cash flows.
Risks Related to Our
If we are unable to complete divestitures as we may deem advisable, our results of operations and financial condition could be
We previously implemented a portfolio rationalization and deleveraging strategy by divesting hospitals and non-hospital businesses. This program concluded at the end of 2020. Since the conclusion of this program, we have continued to receive interest from potential acquirers for certain of our hospitals, and may, from
time to time, consider selling additional hospitals, or our unconsolidated equity interests in hospitals, if we consider any such disposition to be in our best interests. However, there is no assurance that potential divestitures will be completed
or, if they are completed, the aggregate amount of proceeds we will receive, that potential divestitures will be completed within our targeted timeframe, or that potential divestitures will be completed on terms favorable to us. Additionally, the
results of operations for these hospitals and non-hospital businesses that we may divest and the potential gains or losses on the sales of those businesses may adversely affect our results of operations.
Moreover, we may incur asset impairment charges related to potential or completed divestitures that reduce our profitability. In addition, after entering into a definitive agreement, we may be subject to the satisfaction of pre-closing conditions as well as necessary regulatory and governmental approvals, which, if not satisfied or obtained, may prevent us from completing the sale. Divestitures may also involve continued financial
exposure related to the divested business, such as through indemnities or retained obligations, that present risk to us.
divestiture activities may present financial, managerial, and operational risks. Those risks include diversion of management attention from improving existing operations; additional restructuring charges and the related impact from separating
personnel, renegotiating contracts, and restructuring financial and other systems; adverse effects on existing business relationships with patients and third-party payors; and the potential that the collectability of any patient accounts receivable
retained from any divested hospital may be adversely impacted. Any of these factors could adversely affect our financial condition and results of operations.
The impact of past acquisitions, as well as potential future acquisitions, could have a negative effect on our operations.
Our business strategy has historically included growth by acquisitions, and we may complete additional acquisitions in the future. However, not-for-profit hospital systems and other for-profit hospital companies generally attempt to acquire the same type of hospitals as we
may desire to acquire. Some of the competitors for our acquisitions have greater financial resources than we have. Furthermore, some hospitals are sold through an auction process, which may result in higher purchase prices than we believe are
reasonable. Therefore, we may not be able to acquire additional hospitals on terms favorable to us.
In addition, many of the hospitals we
have previously acquired have had lower operating margins than we do and operating losses incurred prior to the time we acquired them. Hospitals acquired in the future may have similar financial performance issues. In the past, we have experienced
delays in improving the operating margins or effectively integrating the operations of certain acquired hospitals, including some hospitals acquired in connection with the Health Management Associates, Inc. ( HMA ) merger. In the future,
if we are unable to improve the operating margins of acquired hospitals, operate them profitably, or effectively integrate their operations, our results of operations and business may be adversely affected.
Moreover, hospitals that we have acquired, or in the future could acquire, may have unknown or contingent liabilities, including liabilities
associated with ongoing legal proceedings or for failure to comply with healthcare laws and regulations. Although we generally seek indemnification from sellers covering these matters, we may nevertheless have material liabilities for past