Publicly traded hospitals with high debt are the most susceptible to losses in share price due to the COVID-19 pandemic, JPMorgan analysts wrote in a research note, according to Bloomberg.
"The next 30 days will be critical," as these hospitals deal with an expected boost in admissions, more diagnostic tests requests, an increased need for intensive care unit capacity and higher staffing levels, wrote analysts Gary Taylor and Chris Schott.
More facilities opting to cancel elective surgeries also will compress hospital revenue, the analysts said.
Two of the most indebted hospital companies, Franklin, Tenn.-based Community Health Systems and Dallas-based Tenet Healthcare, are not just susceptible to the pressures of COVID-19; they are the most at risk if the U.S. is tipped into a recession, JPMorgan said.
CHS has more than $12 billion of debt on its balance sheet. Tenet has more than $14.5 billion in debt on its balance sheet
The next key debt hurdle for CHS will be $5 billion that comes due in 2023, which could be more difficult to pay with a recession, according to Bloomberg Intelligence analyst Mike Holland. Bloomberg Intelligence is the research arm of Bloomberg.
Tenet could be hurt more than its peers if elective procedures are canceled in favor of emergency room visits, Baird analysts said, since it performs more higher-paying elective surgeries than its peers.
And if more Americans lose their jobs, hospitals could see more patients using Medicare and Medicaid, government insurance programs that reimburse hospitals at a lower rate than most commercial insurers
Even cash-rich Nashville, Tenn.-based HCA Healthcare, could feel pressure from COVID-19 on its earnings before interest, taxes, depreciation and amortization, according to JPMorgan.
"One important point to remember [is] that like politics, hospitals are local," Mr. Holland told the publication.
They "have large asset portfolios with meaningful geographic diversity," that could protect them if individual facilities get overburdened, he said.
While admissions could feel some weakness, "it's not going to crush these leveraged providers," said Mr. Holland.
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