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Rich hospitals get government handouts

May 14, 2020

Topics: Quote of the Day

KFF, Press Release, May 13, 2020

Hospitals that in normal times derive most of their revenue from patients with private insurance received more than twice as much federal coronavirus relief funding per bed than the hospitals that get the smallest share of private insurance money, finds a new KFF analysis of the first $50 billion in relief grants.

Institutions representing the top 10 percent of hospitals based on share of private insurance revenue received $44,321 in coronavirus relief per hospital bed, the analysis finds. That was more than double the $20,710 per hospital bed for the hospitals in the bottom 10 percent based on private insurance revenue.

The lopsided awards are the outgrowth of a distribution formula – determined by the Department of Health and Human Services in an attempt to get relief money out quickly – that favored hospitals with the highest share of revenue from patients with private insurance. These grants were provided using funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program and Health Care Enhancement Act, which both deferred to the HHS on how the money should be distributed.

Previous KFF analysis documented that private insurance typically reimburses at twice the rate of Medicare, with some hospitals commanding even higher reimbursement. This new study shows that the hospitals that are benefiting the most from that higher reimbursement are now getting the most taxpayer money in the form of coronavirus relief funds. Meanwhile hospitals that make most of their money treating people who are on Medicare and Medicaid, and therefore are typically paid at much lower rates, are getting relatively less help.

The analysis finds that the hospitals receiving more money are less likely to be teaching hospitals (10% vs 38%) and more likely to be for-profit (33% vs 23%). They had higher average operating margins (4.2% vs -9.0%) and provided less uncompensated care as a share of operating expenses (7.0% vs. 9.1%).

With additional relief money expected, our analysis of more than 4,500 hospitals focused on those with the highest and lowest shares of revenue from private payers to inform policy decisions regarding how to allocate any remaining grants to providers as well as any potential new funding from Congress. In its latest proposed coronavirus relief bill, the House has added details that would take steps to minimize the advantages for providers with more revenue from privately insured patients.


From the full report:


Our analysis shows that the size of the relief fund grants varies dramatically per hospital bed based on a hospital’s payor mix. Hospitals with the lowest share of private insurance revenue received less than half as much funding for each hospital bed compared to the hospitals with the greatest share of revenue from private insurance. These hospitals’ large share of private reimbursement may be due either to having more patients with private insurance or charging relatively high rates to private insurers or a combination of those two factors. All things being equal, hospitals with more market power can command higher reimbursement rates from private insurers and therefore received a larger share of the grant funds under the formula HHS used. An alternative methodology for distributing the funds based on patient volume or that increased the size of the grant for providers that are more reliant on public payors such as Medicaid would have distributed the funding more evenly and less skewed by higher revenues from private insurers.

Our analysis focused on hospitals, but all entities that receive Medicare reimbursement were eligible for the $50 billion in relief funds. Those entities include hospice providers, skilled nursing facilities and individual physicians. Importantly, providers who did not have any Medicare reimbursement in 2019 were not eligible for grants from the $50 billion allocation. Some of these providers are pediatricians and obstetricians who do not serve Medicare patients. Others are providers who specialize in serving Medicaid patients and provide crucial services such as non-emergency medical transit, substance use disorder treatment, home-and community-based services, behavioral health services and dental care. HHS has stated that Medicaid-only providers will receive a separate allocation of funding, as will skilled nursing facilities and dentists.

Our analysis shows that hospitals with the highest share of private insurance revenue received a disproportionately high share of total funds. We would expect to see similar patterns for physicians and other entities that receive private insurance reimbursement. For example, community health centers that often see a relatively small share of patients with private insurance would have received less money than a private physician’s office that sees the same total patient volume but has more patients with private insurance. With HHS expected to release additional relief fund grants and Congress considering additional stimulus, this analysis demonstrates that the formula used to distribute funding has significant consequences for how funding is allocated among providers.



By Don McCanne, M.D.

Private insurers generally pay hospitals at twice the rate that Medicare pays and at an even greater multiple than what Medicaid pays. It is no surprise that the private hospitals, especially those that are for-profit, have been very effective in concentrating their market power to enable them to siphon off the more lucrative privately insured patients. Hospitals that see a much greater proportion of Medicaid and uninsured patients obviously are faced with greater financial stresses during this COVID-19 pandemic.

Congress recognized the financial crisis that coincides with this pandemic and has authorized supplemental funds to support these institutions. So how did CMS distribute these funds? The high-income hospitals with a preponderance of privately insured patients received an average of $44,321 per bed while those struggling with predominantly uninsured and Medicaid patients received less than half that amount – an average of $20,710 per bed.

Most conservatives agree that the government does have a role in ensuring that the poorest amongst us can meet their most basic needs, and that includes health care; the private sector can meet the needs of the rest of us, in their vision. So what is our conservative government doing with our tax money in response to this crisis? They are giving much more of it to those concentrated in the private market while leaving those caring for the more needy underfunded. Outrageous.

Conservatives keep telling us that we don’t want the government involved, so why are we subsidizing private hospitals and indirectly the private insurers who pay the bills, including the private Medicare Advantage plans, while neglecting to some extent the traditional Medicare program and even more so the Medicaid program? And the uninsured? Kill the Affordable Care Act is their stated goal.

Conservatives in other nations support their universal health care programs. Why can’t conservatives and neoliberals do the same here? This is a fitting time to enact and implement single payer Medicare for All. We should all join together in achieving this noble goal.

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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