Hospitals that ended the year with profits were entitled to federal aid because of the extraordinary latitude Congress and HHS set in how hospitals could classify their pandemic costs.
Last fall, when HHS attempted to limit how much aid hospitals could keep based on their profits — so the money could be redirected to struggling hospitals — the effort was swiftly beaten back by the industry and Congress. HHS officials declined requests for an interview but noted in a statement that Congress had ordered it to revert to its “broader definition of permissible use of PRF funds.”
“The Biden Administration continues to review programs and policies including considerations for the unallocated funding under the PRF program and the $8.5 billion recently appropriated under the recently signed American Rescue Plan Act,” the statement said.
Avoiding a Drawdown of Reserves
The bailouts were initiated last spring to help health care providers ride out a once-in-a-century public health calamity. The money designated to hospitals and other health care providers from the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent legislation totaled $178 billion.
It was intended to offset all costs of treating infected patients, including purchasing ventilators, masks, gowns and other personal protective equipment. Congress further authorized hospitals to use the money to compensate for a drop in revenue when they shut down elective surgeries and non-emergency treatments to prepare for the anticipated deluge of COVID-19 patients.
The money, referred to as the Provider Relief Fund, helped many poorer hospitals avert cash crunches, layoffs and bond rating downgrades. A survey by the consulting firm Kaufman Hall found that the median hospital gain during 2020 would have been 0.3% without the federal support. With it, half of hospitals posted gains of 2.7% or more, below the 2019 median margin of 3.1%, according to the firm, which also produces analytic work for the American Hospital Association.
In February, the association urged Congress to replenish the nearly empty relief fund, saying, “hospitals have never experienced such a widespread, national health crisis.”
Some hospitals’ finances deteriorated significantly during the pandemic. From the end of March through December, the rating agency Moody’s downgraded 28 hospitals, primarily because of weaknesses such as higher debt or more competition, said Lisa Goldstein, associate managing director at Moody’s.
Others suffered worse fates, like Williamson Memorial Hospital, which shut down last April. The hospital, in West Virginia’s coal country, had been trying to climb out of bankruptcy protection, but “unfortunately, the decline in volumes experienced from the current pandemic were to[o] sudden and severe for us to sustain operations,” its CEO wrote on Facebook.