Pandemic Relief Funds Boosted Surpluses for Some Large Hospitals

Washington Post

June 21, 2021 10:11 am

The Biden administration is giving hospitals and other providers even more time to use coronavirus relief money and apply for more.

Yet many of the larger, wealthier hospitals have been back to normal operations for months — and they posted banner profits in 2020.

Hospital visits plummeted but have since rebounded.

Hospital admissions declined precipitously in the early months of the pandemic, as providers cut down on elective procedures and many patients stayed away for fear of the virus, but by summer 2020 they were at 90 percent of levels in previous years. By the end of last year, overall health spending was up 3.4 percent compared to 2019.

An analysis from Kaufman Hall found that hospital operating margins rose by more than 100 percent between April 2020, at the start of the pandemic, and April 2021. The report noted, however, that hospitals have seen a big increase in expenses, and margins remain thin.

Ge Bai, an expert on health-care finance at Johns Hopkins, questioned whether the extension on funding this late in the game was a good use of taxpayer money.

“Right now, the hospitals have already resumed their normal operations, and most of the hospitals are capable of overcoming short-term financial difficulty,” Bai said.

Some hospitals have reaped large profits. 

Between a faster-than-expected recovery in patient volumes and an influx in funding, some big hospital systems found themselves flush with cash during the pandemic.

HCA Healthcare, one of the nation’s largest hospital chains, finished 2020 with increased profits compared to the previous year. The health-care giant ended up returning $6 billion in relief from the government.

Other wealthy hospitals such as Baylor Scott & White Health, the largest nonprofit hospital system in Texas; Mayo Clinic; Pittsburgh’s UPMC; and NYU Langone Health all recorded hundreds of millions in surpluses, according to a Kaiser Health News report.

A Kaufman Hall report found that with the federal funding, the hospital operating margins were 2.7 percent. Without funding, they would have been 0.3 percent.

Yet hospitals still petitioned the federal government for an extension to apply for relief money.

Hospitals and other providers were told that they needed to use their coronavirus relief money by June 30, but under pressure from industry and lawmakers, the Biden administration announced earlier this month changes that will allow more time to most providers who received money after June 30, 2020.

Some providers say the extension was necessary given burdensome reporting requirements and delays from HHS in getting funds out the door.The administration is facing pressures from lawmakers to get money out quickly but also provide more oversight. The agency has yet to distribute about $24 billion from the original allocation.

HHS Secretary Xavier Becerra told Congress last month that the administration would work on ensuring “the money goes to those who need it most.”

The hospital industry welcomed the extension.

Rick Pollack, the president of the American Hospital Association, welcomed extra time, calling the relief money a “lifeline” and pointing out that the nation’s hospitals are continuing to respond to thousands of new cases a day.

“Hospitals and health systems continue to incur expenses related to these COVID-19 cases and hospitalizations, such as ensuring an adequate workforce, acquiring equipment and supplies such as personal protective equipment, pharmaceuticals and safety equipment, administering vaccines and maintaining testing and additional screening for patients and visitors,” Pollack said.

But some say the relief funds weren’t distributed evenly.

HHS is facing scrutiny over the $178 billion relief effort, which often favored larger and wealthier providers.

A February report from a congressional advisory commission found that fewer than 1 in 5 providers who accept payment from Medicaid and the Children’s Health Insurance Program, the safety-net insurance for children, but not Medicare have received relief funds. The report found that many pediatric and behavioral health providers were left out of relief funding.

Many hospitals that are smaller, poorer or more rural also face bleak financial prospects after the pandemic. Some of these struggling hospitals have been scooped up by larger, more successful hospitals over the past year. The trend worries experts and lawmakers who say that coronavirus relief to large hospitals was never meant to fuel increased hospital consolidation.

Critics point to HHS’s formula for distributing funds, especially early in the pandemic, as one reason for the uneven recovery. 

The first $46 billion of relief from the Cares Act targeted funding based on patient revenue. This advantaged hospitals with a greater share of privately insured patients and hurt providers that serve large numbers of uninsured or Medicaid patients. 

Experts say that HHS used this formula because it was a way to get initial funds out quickly.

“There was a lot of pressure to get money out the door, and this was the fastest way for the federal government to do that,” said Tricia Neuman, the director of the Kaiser Family Foundation’s Medicare program.

But it came with drawbacks. A Kaiser Family Foundation study found that the hospitals with the greatest share of private insurance revenue received more than double the federal relief funding compared to those where private insurance made up little of overall revenue. 

While later allocations did more to target funding toward safety-net and rural hospitals, Bai points out that well-resourced hospitals and larger systems were often still at an advantage with policy teams, lawyers and other resources to apply for grants.

“Eventually we have a winner-take-all situation, meaning that if you are larger, you get more. If you’re smaller you get less,” Bai said.