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Bailout funds go to the wealthiest hospitals

May 26, 2020

Topics: Quote of the Day

By Jesse Drucker, Jessica Silver-Greenberg and Sarah Kliff
The New York Times, May 25, 2020

A multibillion-dollar institution in the Seattle area invests in hedge funds, runs a pair of venture capital funds and works with elite private equity firms like the Carlyle Group.

But it is not just another deep-pocketed investor hunting for high returns. It is the Providence Health System, one of the country’s largest and richest hospital chains. It is sitting on nearly $12 billion in cash, which it invests, Wall Street-style, in a good year generating more than $1 billion in profits.

And this spring, Providence received at least $509 million in government funds, one of many wealthy beneficiaries of a federal program that is supposed to prevent health care providers from capsizing during the coronavirus pandemic.

So far, the riches are flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.

After the CARES Act was passed in March, hospital industry lobbyists reached out to senior Health and Human Services officials to discuss how the money would be distributed.

Representatives of the American Hospital Association, a lobbying group for the country’s largest hospitals, communicated with Alex M. Azar II, the department secretary, and Eric Hargan, the deputy secretary overseeing the funds, said Tom Nickels, a lobbyist for the group. Chip Kahn, president of the Federation of American Hospitals, which lobbies on behalf of for-profit hospitals, said he, too, had frequent discussions with the agency.

The department then devised formulas to quickly dispense tens of billions of dollars to thousands of hospitals — and those formulas favored large, wealthy institutions.

Hospitals that serve a greater proportion of wealthier, privately insured patients got twice as much relief as those focused on low-income patients with Medicaid or no coverage at all, according to a study this month by the Kaiser Family Foundation.


Distribution of CARES Act Funding Among Hospitals

By Karyn Schwartz
KFF, May 13, 2020

The Department of Health and Human Services (HHS) has now begun distributing $72.4 billion of the $175 billion allocated for grants to health care providers in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program and Health Care Enhancement Act.

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.



By Don McCanne, M.D.

Compared to our highly dysfunctional, fragmented system of financing health care, heavily dependent on private health insurance, a single payer model of an improved Medicare program that covered everyone would be vastly superior, being much more efficient, effective, and equitable than our current system.

So now that we have a catastrophic pandemic that mandates a response by government, how does our government that favors the private sector respond? Do they support expanding Medicare to fill in the deficiencies during this crisis? No. Instead they dispense the bulk of their grants to wealthy hospitals with more market power that receive much of their revenues from private insurers that pay much higher rates than the government programs. And financially precarious hospitals that receive much lower revenues because of their commitment to patients on government plans or who are uninsured, they are granted…a pittance.

If we believe that health care should be made affordable and accessible for everyone, the only way we can do that is by establishing a universal government program, ideally single payer Medicare for All. But in a representative democracy, that means that we, the people, must do our part in electing legislative and administrative stewards who are committed to such a program. Obviously over the last century we have failed to do so. Isn’t it about time we shaped up?

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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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