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Here’s how much for-profit hospitals have received in bailout funding so far

The nation’s largest for-profit hospital chains have received about $2.2 billion, money they don’t have to pay back. Healthcare Dive is tracking how much major health systems have received in federal relief.
May 26, 2020

The nation’s largest for-profit hospital chains have received a total of about $2.2 billion in federal grants so far, which is intended to provide financial relief to hospitals and providers amid the outbreak of the novel coronavirus and the havoc it has wreaked on their operations.

The money comes from $175 billion earmarked for providers, allocated by Congress through the Coronavirus Aid, Relief, and Economic Security Act and the Paycheck Protection Program and Health Care Enhancement Act. It was meant to serve as a lifeline for providers as they’ve been forced to all but stop a significant portion of their business, specifically those service lines that tend to be more profitable like orthopaedic procedures.

HHS’ distribution methods have met stringent criticism, as some are concerned that too little is being funneled to Medicaid providers. One report shows that the formulas may tend to favor for-profit operators and hospitals with higher margins.

Healthcare Dive is tracking how much major health systems have received so far in federal relief. In this analysis, Healthcare Dive examines the taxpayer dollars that have flowed to major for-profit operators and how that compares to recent financial performance.

Which for-profit systems got the most?

HCA, the largest among the for-profits, received the most in CARES funding, about $1 billion, which it disclosed to Healthcare Dive on Friday. The funding is about 2% of HCA’s total 2019 revenue.

Tenet, CHS and UHS followed behind with grant allocations of $517 million, $420 million and $239 million, respectively, all of which was disclosed in either 10-Qs or through presentations.

How CARES funding compares to revenue

Nami Sumida/Healthcare Dive

Of the total $100 billion in CARES funding, these four operators have so far received 2.2% of the pot.

Together, they represent a significant piece of the nation’s healthcare system with hundreds of hospitals and even more outpatient facilities, including a large footprint in ambulatory surgery centers, which have been hard hit as elective procedures have been halted. Some also have operations abroad.

The fallout from the virus continues to bruise operations. They all reported that patient volumes contracted at the tail end of the first quarter as they, states and municipalities across the country shuttered their operations and economies to brace for the virus.

Still, none of them have acute care hospitals in New York, which has shouldered the brunt of the outbreak in the U.S., with nearly 23% of the country’s more than 1.6 million cases.

HCA, which garnered net income of $3.5 billion last year, operates 180 hospitals in 21 states and six in England. The system reported it had cash and cash equivalents of $731 million as of March 31.

Still, a spokeswoman told Healthcare Dive the CARES funding is “important” but “insufficient” to make up for lost volume and the investment in pandemic preparedness. The system believes continued federal support will be critical.

Nashville-based HCA was the only for-profit operator not to see same-facility admissions decline in the first quarter compared to the prior-year quarter. HCA reported same-facility admissions barely increased by 0.6%, while the others experienced steeper declines of 4.5% for Tenet, 5.2% at CHS and 3.6% at UHS.

Inpatient admission growth by quarter (same-facility)

HCA
Tenet
CHS
UHS
Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
HCA 1.9% 0.9% 2.1% 3.2% 4.7% 0.6%
Tenet 2.7% -0.1% 3.3% 3.6% 2.6% -4.5%
CHS -0.5% -0.1% 2.3% 2.4% 0.1% -5.2%
UHS 2.9% 5.2% 5.2% 6.6% 1.5% -3.6%
Nami Sumida/Healthcare Dive

On the other hand, HCA and Tenet have considerable outpatient exposure as they operate a large footprint of ambulatory surgical centers, a segment hard hit as elective procedures all but stopped. For HCA, outpatient surgeries fell 6% while Tenet’s ambulatory surgical cases slid 8.5%. Tenet has almost double the amount of surgery centers as HCA. Tenet’s ambulatory arm, United Surgical Partners International (USPI), operates 265 ASCs while HCA has 123 surgery centers.

Overall, Dallas-based Tenet received $517 million, about 2.8% of its 2019 revenue. It reported cash and cash equivalents of $613 million as of March 31.

CHS, which is trying to move away from being known as a rural hospital provider, received $420 million in CARES grants, about 3.2% of its 2019 revenue. The grant allocation was more than the provider made that year, as it posted a net loss of $675 million. Over the last five years, CHS has posted a loss for all but one. Still, it reported cash and cash equivalents of $246 million as of March 31.

UHS has a considerable footprint in behavioral health facilities, which far outnumber its acute care hospitals: 185 inpatient behavioral facilities versus 26 inpatient facilities in the U.S.

UHS has received $239 million, or nearly 2.1% of its 2019 revenue. It had cash and cash equivalents of about $55 million as of March 31.

How CARES funding compares to net income

Select a health system:
Nami Sumida/Healthcare Dive

How was the funding doled out?

The funding is meant to help providers recoup some revenue losses amid the pandemic, but is unlikely providers will recoup all their losses, particularly if the threat from the virus is prolonged.

In drafting the legislation, Congress was vague in how the money was to be doled out to providers, leaving that for regulators to decide.

“They didn’t say specifically which types of providers should be getting the money or if it should be going more to certain types of providers than others, they really left that up to the secretary,” Karyn Schwartz, senior fellow at Kaiser Family Foundation, told Healthcare Dive.

The money is supposed to be spent on healthcare-related expenses and lost revenue related to COVID-19.

To get the first tranche out the door quickly, HHS decided to send $30 billion to providers’ bank accounts based on Medicare fee-for-service payments they had received.

In the second allocation, HHS tied the size of an organization to the size of funding by granting money based on net patient service revenue. This had the effect of giving advantage to wealthier systems with a more lucrative payer mix.

From there, HHS has also provided funds to rural areas and those hard hit by the virus, such as New York providers.

However, determining how to use that money is proving to be a tricky task.

For example, healthcare-related expenses is a broad term, so can entities use that funding on an EHR system they were planning on buying anyway?

Plus, the funding formulas are based on data from prior years, so it’s likely the organization today doesn’t look the same as it did a year or two ago, especially if a system was part of a recent merger.

It is possible then that some entities didn’t receive enough funding based on their current operations and size, leading some systems to struggle to figure out if they should be getting more. Those that have shed properties wonder if they have to return some of the funds.

“The industry is complicated and certainly people have struggled to know exactly what they should do,” Timothy Fry, a healthcare lawyer at McGuireWoods, told Healthcare Dive.

Still, more money is on the way. The entire fund has not been doled out. Plus, HHS has designated a new tranche for providers that care for the uninsured but how much and when that money goes out has yet to be announced.

HHS has also hinted there may be a need for more targeted allocations. Advocates are hoping that will be funneled to primarily Medicaid providers and hard-hit dentists.

Who are the winners and losers?

The policy decisions behind the funding formulas have raised concerns about providers being left behind.

While many applaud HHS for the speed in which money was delivered to provider bank accounts across the country, some note Medicaid providers are at a disadvantage, which could have long-lasting effects on access to care for low-income individuals.

“Nothing has been targeted toward the Medicaid provider world,” Edwin Park, research professor at Georgetown University, told Healthcare Dive.

The providers who see more patients with private insurance, or have a payer mix skewed towards managed care, are at an advantage because in the healthcare industry it is commonly known that private payers reimburse hospitals at higher rates compared to government payers, according to a previous KFF analysis.

“It’s tricky because if they give the exact same dollar to every single provider, then you would have people saying, ‘Why should this giant hospital get the same amount as this solo practitioner doctor down the street?,’” KFF’s Schwartz said.

The Health and Economic Recovery Omnibus Emergency Solutions, or HEROES Act, passed by the Democratic-led House earlier this month does attempt to even the playing field by applying a formula that gives greater weight to Medicaid funding than the current one. Still, it’s unlikely to move through the Senate or be signed by the president.

But as state budgets are likely to face deficits, advocates worry the problem may only be compounded.

“In general, the hospitals that see more folks with Medicare or Medicaid are going to be those that probably have less of a buffer during this time,” Schwartz said.