Report: Rich Hospitals Got Richer With Federal COVID-19 Funds, While Poor Ones Suffered

CHE Staff

HHS' formula for the Provider Relief Fund based payouts on 2019 revenues, but did not require refunds if losses failed to materialize.

CHE Staff

Federal relief funds provided by Congress in 2020 to shore up hospital finances as COVID-19 hit fell disproportionately to the richest health systems, allowing some to finish the year healthier than ever, while some smaller, hard-hit rural hospitals struggled or even closed.

That was the finding of a report by Kaiser Health News and The Washington Post, which found a flaw in a key assumption of the 2020 Provider Relief Fund—which based aid to hospitals on 2019 revenues but did not require funds to be repaid if losses did not materialize. The report said the Biden Administration is re-evaluating how such funds should be distributed.

For some hospitals, the report said, finances did unravel quickly during the pandemic. Cancelled elective surgeries and spiraling costs for personal protective equipment (PPE) threw things out of balance, causing the rating agency Moody’s to downgrade 28 hospitals between March and December.

In February, the American Hospital Association asked Congress to replenish the near empty fund, after its consultants found that the median gain in 2020 was 2.7% for half its hospitals thanks to the aid, below the 2019 margin of 3.1%. But that figure belied the stark differences between the winners and losers, the KHN/Post report found.

Giants like Baylor Scott & White Health, the largest nonprofit hospital system in Texas, which received $454 million in federal relief funds after laying off 1,200 employees, finished the year with a $815 million surplus, more than it had in 2019. Other winners included Pittsburgh’s UPMC, Mayo Clinic, and NYU Langone Health.

The for-profit health system HCA Healthcare returned unneeded federal funds when it became clear the worst had passed. But others spent the money or held on to it in case new costs emerged in 2021.

Critics of the 2020 HHS funding formula say it worked against hospitals that rely on revenue sources such as Medicaid, why by definition means those safety-net hospitals that serve the poor.

While some hospitals have been downgraded, others shut their doors for good.

Williamson Memorial Hospital in West Virginia’s coal country closed about a year ago. Its CEO wrote in a Facebook post that the institution had been trying to climb out of bankruptcy protection, but “unfortunately, the decline in volumes experienced from the current pandemic were to[o] sudden and severe for us to sustain operations.”