New York Times: Wealthiest Hospitals Got Billions in Bailout for Struggling Health Providers
By Jesse Drucker, Jessica Silver-Greenberg, and Sarah Kliff 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.
With states restricting hospitals from performing elective surgery and other nonessential services, their revenue has shriveled. The Department of Health and Human Services has disbursed $72 billion in grants since April to hospitals and other health care providers through the bailout program, which was part of the CARES Act economic stimulus package. The department plans to eventually distribute more than $100 billion more.
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.
Twenty large recipients, including Providence, have received a total of more than $5 billion in recent weeks, according to an analysis of federal data by Good Jobs First, a research group. Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond-rating firms S&P Global and Fitch. A Providence spokeswoman said the grants helped make up for losses from the coronavirus.
Those cash piles come from a mix of sources: no-strings-attached private donations, income from investments with hedge funds and private equity firms, and any profits from treating patients. Some chains, like Providence, also run their own venture-capital firms to invest their cash in cutting-edge start-ups. The investment portfolios often generate billions of dollars in annual profits, dwarfing what the hospitals earn from serving patients.
Many of these hospital groups, including Providence, are set up as nonprofits, which generally don’t have to pay federal taxes on their billions of dollars of income.
By contrast, hospitals that serve low-income patients often have only enough cash on hand to finance a few weeks of their operations.
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.
One formula based allotments on how much money a hospital collected from Medicare last year. Another was based on a hospital’s revenue. While Health and Human Services also created separate pots of funding for rural hospitals and those hit especially hard by the coronavirus, the department did not take into account each hospital’s existing financial resources.
“This simple formula used the data we had on hand at that time to get relief funds to the largest number of health care facilities and providers as quickly as possible,” said Caitlin B. Oakley,a spokeswoman for the department. “While other approaches were considered, these would have taken much longer to implement.”
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.
“If you ever hear a hospital complaining they don’t have enough money, see if they have a venture fund,” said Niall Brennan, president of the nonprofit Health Care Cost Institute and a former senior Medicare official. “If you’ve got play money, you’re fine.”
In a letter this month to the Department of Health and Human Services, two House committee chairmen said the Trump administration appeared to be disregarding Congress’s intent in how it was distributing the aid….