Which hospitals got the most CARES Act Funding?
Last year, the federal government provided relief funding for health providers through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, to offset financial losses caused by the pandemic. These funds were desperately needed, but unfortunately they didn’t always go to the hospitals that needed them most. Two recent studies examine the impact of this massive funding influx on hospital finances.
The general fund
The largest portion of the CARES Act funding was through the “general distribution,” which gave out $50 billion starting in May 2020. Because these funds were distributed based on providers’ total patient net revenue, the hospitals that received the most funding tended to be those serving the most privately insured patients (who receive more revenue from those insurers).
Hospitals with more financial assets during the pandemic received much more than hospitals that were struggling financially. According to a recent piece in the Journal of Health Politics, Policy, and Law by University of Chicago professor Colleen Grogan and colleagues, hospitals that had two months worth of cash on hand during the COVID-19 crisis received $88,000 per bed on average, compared to $23,000 per bed on average for hospitals with less than a week of cash on hand.
Besides the general fund, the federal government also allocated $22 billion in targeted funds for hospitals hit hardest by Covid-19, known as the “High-Impact Distribution.” The high-impact payments were based on the number of Covid-19 inpatient admissions to help hospitals most affected by Covid-19 in Spring 2020. But these payments had no adjustments for hospitals’ financial situations, which in some ways exacerbated inequalities.
In a recent piece in JAMA Health Forum, researchers at the RAND Corporation looked at the levels of funding among the 952 hospitals that received CARES Act funding in the “high-impact” wave. They found that hospitals with more Covid-19 cases did get more funding; a hospital with 10% more Covid-19 cases than another would have received 3.5% more funding, all other things equal.
However, researchers also found that hospitals that had more financial assets prior to Covid-19 received higher CARES Act payments than hospitals with fewer assets. The greater a hospital’s endowment, the greater their CARES Act payments as well. For every 10% increase in total assets, hospitals received 1.4% more in CARES Act funding.
On the other hand, Grogan and colleagues found that the high-impact distribution was one of the more equitable funds. Hospitals with three days or less of cash on hand received slightly higher per bed payments from the high-impact distribution ($9,637), compared to those with more than two months of cash on hand ($6,737). This may indicate that non-liquid assets make up a larger part of hospital assets among the hospitals that received more from the high-impact distribution.
Notably, the JAMA Forum piece found that critical access hospitals (small rural hospitals) got less financial assistance than non-critical access hospitals — although one in four rural hospitals were at risk of closing even before Covid-19. That may be because hospitals had to have at least 100 Covid-19 cases by April 10, 2020 to be eligible for these funds, so some small hospitals were not eligible even if they had a high Covid-19 burden relative to their size. For example, Modern Healthcare reported that Loretto Hospital in Chicago was 15 patients short of the cutoff, even though COVID-19 cases accounted for 70 percent of their admissions by April 10.
Putting it together
What do we find when we look at the targeted funds and general fund distributions together? According to Grogan’s analysis, hospitals with two months of cash on hand received almost $120,000 per bed in total CARES Act funds, on average. Hospitals with only a couple days worth of cash received about $50,000 per bed on average. Even among rural hospitals, those with more cash available received more than those with fewer financial assets.
Despite the significant failings in how CARES Act money is being distributed, some might argue that the hospital bailouts have done exactly what they were intended to do: replace hospital revenue that was lost when most hospitals had to stop performing lucrative elective surgeries. In other words, the goal of the bailouts was to restore the status quo.
Grogan and colleagues make this point in their article. They write, “The United States could have responded to hospital vulnerability during the COVID-19 crisis when it was clear that Black and Brown patients were suffering disproportionately from COVID-19 by providing higher-on-average relief payments to financially vulnerable hospitals. Instead, it did the opposite. It privileged concerns about revenue loss over other articulated concerns, and those hospitals with the most financial security received the most relief.”
The next hospital bailout
The real question is, can we fix this problem in the next set of funding? The American Rescue Plan, passed a few months ago, allocates $25.5 billion more in provider relief funding. About a third of these funds are allocated for hospitals that serve rural patients with government insurance. The rest are for hospitals with that lost revenues and expenditures between July 2020 and March 2021, with smaller hospitals and hospitals serving patients with government insurance receiving larger payments.
This all sounds good, but there are still ways that these funds could exacerbate inequality — after all, many wealthy hospitals lost revenue but have assets to buffer these losses. Larger payments for smaller hospitals and hospitals that serve fewer privately-insured patients are promising, but it’s concerning that this distribution still does not take into account hospitals’ financial assets. We’ll be keeping an eye on how these funds are given out in the coming months…