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HCA Healthcare Makes Cost-Control Efforts Amid Coronavirus Woes

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HCA Healthcare, Inc.’s (HCA - Free Report) unit CereCore has laid off more than 70% of its contractors, per the company’s internal sources.

This strategic move comes at a time when the company is forced to cut costs amid the loss of revenues from the COVID -19 breakout.

The company’s Information Technology and Services division bore the brunt of this workforce reduction. The action was taken in the wake of several IT projects being put on the back-burner due to the prevalent uncertainty about the extent of the impact from the coronavirus pandemic.

The company’s unit CereCore provides EHR implementations, IT and application support, IT managed services, technical staffing, strategic IT consulting and advisory services to hospitals and health systems nationwide.

The step comes after the company’s management informed that many of HCA Healthcare’s outpatient facilities, clinics and departments are closed. Consequently, there is a persistent decline in the number of patients, which is rendering the company’s staff idle.

To sustain further jobs in the company, management announced a 30% cut in pay until the COVID-19 insecurity subsides. The company’s board of director also gave up their compensations for the rest of 2020.

Year to date, the stock has lost 43.2% compared with its industry’s decline of 44%.

Like other sectors, the hospital space is also not immune to the coronavirus onslaught. Hospitals in the United States are witnessing drained revenues, due to suspended elective procedures in a bid to keep adequate number of beds available for patients in case of a potential surge in coronavirus-infected cases.

With the pandemic spread spiralling out of control, fears of recession also loom large. Such an economic downslide may cause job cuts, inducing fewer people to be covered under private insurance and higher insurance from the government health insurance schemes of Medicare and Medicaid.

Since profitability of the government-sponsored health insurance plans is lower than those falling under employer-sponsored plans, the margins of the hospital companies are likely to face erosion. Majority of individuals without sufficient health insurance covers might induce bad debts for hospitals from unpaid medical bills.   

Another player, Tenet Healthcare Corporation (THC - Free Report) , also withdrew its initial guidance for the first quarter of 2020 and the full year due to the coronavirus or COVID-19 effect on global economy.

Also, MEDNAX Inc. (MD - Free Report) recently withdrew its initial guidance for the first quarter of 2020 as well as the full year due to the coronavirus or COVID-19 effect on global economy.

Till the uncertainty abates, we believe the volatility in HCA Healthcare stock will persist.

HCA Healthcare carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A better-ranked stock in the same space is Community Health Systems, Inc. (CYH - Free Report) . The stock carries a Zacks Rank #2 (Buy). It surpassed estimates in the last reported quarter by 183.3%.

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