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Hospital Revenue Is Falling Faster Than Expected, JPMorgan Says

Cristin Flanagan
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Hospital Revenue Is Falling Faster Than Expected, JPMorgan Says

(Bloomberg) -- Hospitals pared Thursday gains after an analyst’s warning. Revenue at non-profit hospitals fell roughly 50% over the past week or two, and the $2 trillion stimulus package will not go far enough to stymie their losses, according to JPMorgan’s analysis.

The publicly-traded bellwether hospital, HCA Healthcare Inc., may have to withdraw its guidance and face a “really bad” next few quarters, analyst Gary Taylor cautioned. Peers with high levels of debt might have liquidity issues, he wrote in the research note. The drop in elective procedures has been steeper than he initially expected and hospitals and other health providers could face losses in earnings before interest, taxes, depreciation and amortization in the second quarter.

Hospitals were trading higher earlier today, but pared their gains into the close. Community Health Systems Inc. closed down 7.6% after gaining as much as 17%. HCA’s 12% rally was cut to a 2% gain. While Tenet Healthcare Corp. closed 2.7% higher, despite rising as much as 18% at one point. The sector has lost more than a third of its value so far this year, nearly doubling the 19% drop for the S&P 500.

With U.S. hospitals generating $100 billion of revenue a month, the $100 billion provider relief fund could be gone in two months if revenues are halved, according to Taylor. The fund is also not limited to hospitals but spread out to doctors and nursings homes as well. The Medicare inpatient reimbursement bump for patients with Covid-19 and other Medicare and Medicaid increases “may or may not translate into rate improvements” according to the analyst.

Nobody was willing to guess how long the downturn will last, according to Taylor, though he now leans toward at least three months of “maximum disruption” in the second quarter. He also cautioned on the risk of a resurgence of Covid-19 in the fourth quarter and into early 2021.

(Updates shares in third paragraph)

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