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Analysis

Citing COVID-19 Impact, HCA Suspends Dividend and Withdraws Guidance

By Jack O'Brien  
   April 21, 2020

HCA stated that it "expects to evaluate resumption of the quarterly dividend program at a future date."

HCA Healthcare is withdrawing its financial guidance for 2020 and suspending its quarterly dividend, according to its latest earnings report released Tuesday morning.

The Nashville-based for-profit hospital operator cited the adverse impact of the ongoing coronavirus disease 2019 (COVID-19) pandemic as motivation to withdraw its outlook for the rest of the year.

HCA stated that the company has taken several steps in recent weeks to mitigate the effects of the outbreak, most notably establishing of a pandemic pay program for employees. The company also referenced its execution of a $2 billion 364-day term loan facility and request for accelerated Medicare payments as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

During the company's earnings call Tuesday morning, CEO Sam Hazen said that HCA leadership decided to adjust the company's current capital allocation strategy due to uncertainties related to the COVID-19 outbreak. 

"First, we reduced capital spending by delaying certain projects and postponing various initiatives. Second, we suspended share buybacks under existing programs. And third, out of an abundance of caution, we suspended the dividend," Hazen said. "We will continue to review the capital allocation strategy as we always do, and plan to determine the appropriate adjustments as we get better visibility into our business."

Hazen continued: "As we look ahead to the next phases of this pandemic which starts with the reboot of core operations. We have developed various scenarios to inform the ranges of management actions necessary to respond appropriately to them, these scenarios are built around three major variables."

Related: HCA Healthcare CEO Implements Pandemic Pay Program for Employees

HCA stated that it "expects to evaluate resumption of the quarterly dividend program at a future date," according to a press release.

For Q1, HCA recorded total revenues above $12.8 billion, net income of $581 million, and an adjusted EBITDA of $2.2 billion.

However, most of HCA's financial metrics for Q1 were largely achieved prior to the start of the pandemic.

Related: HCA Providing up to 1K Ventilators to Combat Coronavirus Outbreak

"The suspension of HCA Healthcare, Inc.’s cash dividend is credit positive because it will free up approximately $150 million per quarter of liquidity," Jonathan Kanarek, vice president at Moody's Investors Service, said in a statement. "This, along with several recent significant actions including the reduction in costs and capital spending, suspension of share repurchases, increase in credit facility availability, and receipt of both grant funding and accelerated Medicare payments under the CARES Act will enhance HCA’s financial flexibility during the COVID-19 pandemic."

HCA's latest earnings report was released less than a week after the company announced that it will provide ventilators as part of the Dynamic Ventilator Reserve, a public-private partnership between the American Hospital Association (AHA) and the federal government.

Related: HCA, Nurses Scrap Over Union Organizing During Coronavirus Outbreak

For complete financial information, review HCA's filing with the Securities and Exchange Commission.

Editor's note: This story has been updated with comments made by CEO Sam Hazen during the company's earnings call and from Jonathan Kanarek, vice president at Moody's Investors Service.

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: KONSKIE, POLAND - December 01, 2018: Hospital Corporation of America (HCA) logo displayed on smartphone - Image / Editorial credit: Piotr Swat / Shutterstock.com


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