COVID Funds to Hospitals Disproportionately Doled Out: Study

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A study published October 22 in JAMA Health Forum found that COVID-19 relief funds may have disproportionately gone to hospitals that were in better financial condition than to hospitals that were in greater need, though the funds did appear to have gone to the hospitals that would eventually have the most COVID-19 cases.

In 2020, the US Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to support an economy weakened by the COVID-19 pandemic. This two-trillion-dollar stimulus package included $175 billion to finance an increase in payments by Medicare to hospitals and healthcare professionals as reimbursement for expenses related to the COVID-19 pandemic and for lost revenue.

There was clearly a need. Beginning at least as early as February 2020, there was a precipitous decline in hospital admissions, much of it due to cancellation of elective procedures. Some of the reduction was likely caused by stay-at-home orders and public fear of infection. Hospital revenues dropped, leaving many hospitals in a weakened financial state. Admissions for non-COVID illnesses had rebounded by summer, but by that point, the pandemic was well underway, creating havoc in an industry not ready to cope with it.

The CARES Act was intended to provide funds to assist hospitals that were hit especially hard financially by the pandemic. Yet, not all hospitals were in dire financial straits, and the allocation of funding did not take this into account. The Centers for Medicare & Medicaid Services used a formula for the dispersement of funds. Dispersement was based on a given hospital’s share of fee-for-service Medicare payments in 2019.

According to the researchers, use of the formula for allocating funds may not have been the best way to determine a given hospital’s eligibility, because it did not take into account the financial state of the hospitals or their patient populations before the pandemic.

Where Did the Money Go?

A team of researchers at the RAND Corporation analyzed data from the Hospital Cost Report Information System as well as financial data, such as hospital revenues and operating expenses. COVID-19 funding was obtained from the CARES Act relief fund payment records, and COVID-19 cases were gathered from CDC data. The final analysis included 952 hospitals and covered 92% of the disbursement of CARES Act funds as of October 22, 2020.

The analysis suggested that hospitals that had greater assets prior to the pandemic received more CARES Act funding than hospitals in worse financial shape. Teaching hospitals also received high levels of aid. Critical-access hospitals and rural hospitals received less. However, hospitals that would eventually have more COVID-19 cases did receive higher levels of funding.

In the article, the researchers point out that “many critical access and rural hospitals faced financial pressures even before the COVID-19 pandemic.” The researchers note that they “did not assess other CARES Act funding provided to rural facilities ($11.1 billion) and safety-net hospitals ($13.1 billion), which may have benefited hospitals with fewer financial resources….

“Using a more nuanced approach than Medicare fee-for-service, such as based on total hospital assets or operating margins, may have differently allocated resources,” the researchers write. They point out that such an approach “would have likely delayed funding, because Medicare Hospital Cost Reports are available at a 2-year delay.”

For future disbursements, the researchers recommend a different approach. They suggest that “as the COVID-19 pandemic evolves, future work should examine the outcomes of differential CARES Act funding on hospital investments, technologies, and behavior.”

JAMA Health Forum. Published onlilne October 22, 2021.

Avery Hurt is a freelance science and medical writer.

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