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Fitch: CARES Act Grants Will 'Partially Offset' COVID Business Disruption

Analysis  |  By Jack O'Brien  
   July 23, 2020

Fitch's comment was released the same day HCA Healthcare reported its Q2 2020 earnings, which included more than $800 million in government stimulus income.

Fitch Ratings released a comment Wednesday afternoon that the Coronavirus Aid, Relief, and Economic Security (CARES) Act grants to hospitals and health systems will "partially offset" the business disruption caused by the COVID-19 pandemic during Q2 2020.

The ratings agency noted that the stimulus funding from the government is not likely to affect the credit ratings of hospital companies.

"We do not consider the funds to be recurring in nature and seek to maintain a clear view of the effects of the pandemic on companies' financial results," the comment read. "Given the trajectory of the pandemic and recent volumes of newly infected patients, the effects of business disruption could linger beyond the time frame during which the CARES Act grants bolster hospital industry revenues."

Related: Due to COVID-19 Outbreak, Fitch Places 15 Hospitals on Rating Watch Negative

Fitch's comment was released the same day HCA Healthcare reported its latest earnings, which included more than $800 million in government stimulus income from the CARES Act and nearly $600 million net of tax.

Fitch noted that two other for-profit providers, Tenet Healthcare and Universal Health Services, have received $689 million and $200 million in CARES Act grants, though neither company has released Q2 earnings results yet.

Related: See Which Providers Received the Most CARES Act Relief Fund Payments

Last week, Fitch issued preview notice that stated nonprofit hospital 2020 financial medians are expected to represent 'peak performance.'

The ratings agency also stated that a financial recovery for nonprofit hospitals is unlikely until a vaccine is produced. 

Related: Fitch: Nonprofit Hospital 2020 Medians Represent 'Peak Performance,' Recovery Unlikely Until COVID Vaccine

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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