Hospitals with larger margins received more federal bailout funds

The formula HHS used to allocate $50 billion in COVID-19 relief aid favored hospitals with the highest share of private payer revenue and those with larger operating margins, according to an analysis by the Kaiser Family Foundation

Congress has allocated $175 billion in relief aid to hospitals and other healthcare providers to cover expenses or lost revenues tied to the COVID-19 pandemic. When HHS distributed the first $50 billion to hospitals in April, hospitals with the highest share of private insurance received more than twice as much per bed as hospitals with the smallest share of private payer revenue, according to KFF's analysis of more than 4,500 hospitals. 

Hospitals in the top 10 percent based on share of private insurance revenue received $44,321 per bed, while those in the bottom 10 percent received $20,710 per hospital bed. 

When compared to the hospitals with the lowest share of private insurance revenue, hospitals with the highest share were less likely to be teaching hospitals and more likely to be for-profit. The hospitals with the highest share also had larger operating margins and provided less uncompensated care as a share of operating expenses. 

For the analysis, KFF assumed that the $50 billion was allocated to hospitals based on total net patient revenue. However, that money was delivered in two disbursements. The first $30 billion was distributed based on historical Medicare fee-for-service reimbursements, and the remaining $20 billion was allocated based on hospitals' share of net patient revenue. 

HHS intended for the entire $50 billion to be allocated proportional to providers' share of 2018 net patient revenue. KFF noted that some hospitals have such a high share of Medicare fee-for-service payments that they would have to give back some of the first $30 billion for the $50 billion to be allocated based on total net patient revenue. In an FAQ document published May 6, HHS said it "does not intend to recoup funds as long as a provider's lost revenue and increased expenses exceed the amount of Provider Relief funding a provider has received." KFF did not account for that lack of recoupment in its analysis.  

More articles on healthcare finance:
Democrats unveil $3 trillion COVID-19 relief package
CMS offers hospitals $1.9B in incentive payments
Hospitals blast CMS decision to double down on price transparency

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