Billions of dollars in Covid aid cushioned financial losses caused by the pandemic at some of the nation’s largest hospital chains. But those bailouts also helped sustain the big chains’ spending sprees as they expanded even more by scooping up weakened competitors and doctors’ practices.
More consolidation by several major hospital systems enhanced their market prowess in many regions of the United States, even as rural hospitals and underserved communities were overwhelmed with Covid patients and struggled to stay afloat.
The buying spree is likely to prompt further debate and scrutiny of the Provider Relief Fund, a package of $178 billion in congressional aid that drew sharp criticism early on for allocating so much to the wealthiest hospital systems, and that had no limits on mergers and acquisitions.
The Biden administration is now weighing which hospitals and health providers will get the remaining $25 billion.
“It was not the intent to be a capital infusion to the largest and most financially stable providers to allow them to simply grow their slice of market share,” said Representative Katie Porter, Democrat of California. She is calling for hearings and for the Federal Trade Commission to review whether the funds were properly used for patient care and operations.
The hospitals say the Covid aid played no role in these deals, some of which were in the works before the pandemic. Major hospital chains argue that their size and reach helped them better care for patients, allowing them to divert supplies and people to hard-hit areas during the health crisis.
“Consolidated systems have saved lives during Covid,” said Dr. Rod Hochman, the chief executive of Providence, a large chain, and chairman of the American Hospital Association, at a Senate hearing this week.
Lawmakers on both sides of the aisle are pushing for greater oversight of hospitals. In the hearing on Wednesday, Senator Amy Klobuchar, Democrat of Minnesota, asked for more resources so regulators could tackle “the vicious cycle” of hospital consolidation. “When mergers are anti-competitive, they must be stopped,” she said.
Major employers had warned Congress that bailouts to the health care industry could spur even more consolidation and lead to price-gouging in medical care. Some of the nation’s most powerful hospital chains, experts cautioned, would take advantage of the crisis, resulting in even higher prices for medical care that would wind up on the shoulders of private insurers, employers and individuals.
“The big well-resourced hospitals had, frankly, a banner year, and they are now in a position to swallow up these smaller, more vulnerable groups,” said Elizabeth Mitchell, the chief executive of the Purchaser Business Group on Health, which represents large employers like Boeing, Microsoft and Walmart that provide health benefits for their workers.
Congress provided capital to hospitals that did not need it, said Zack Cooper, a Yale health economist. An early critic, Mr. Cooper says he remains concerned about how the aid has fueled the expansion of already powerful systems. “Regulators should really be looking at the transactions occurring,” he said.
CommonSpirit Health, a Catholic nonprofit system that is one of the biggest hospital networks with about 140 hospitals in 21 states, received well over $1 billion in federal aid to counter any financial losses caused by the shutdowns of lucrative elective surgeries and higher Covid-related costs.
In January, one of its divisions merged with Virginia Mason health system in Seattle in a move that strengthened CommonSpirit’s sway in Washington State. It also picked up a small hospital network in Arizona and helped start a company to analyze patient data across 40 states.
“We have continued to prioritize growth,” Lloyd H. Dean, CommonSpirit’s chief executive, said at an investor conference earlier this year.
In Washington State, CommonSpirit’s newfound clout could lead to higher prices, said Glenn Melnick, a health economist at U.S.C. Sol Price School of Public Policy. It is already among the most expensive hospital systems in the nation, by one analysis. Big hospitals “get their tentacles in, and then they carve up the markets,” he said.
CommonSpirit says it ended 2020 with a small loss, in spite of the federal aid. In Washington State, it plans to expand access to care for low-income individuals, it said.
Several other big hospital chains that received some of the largest pandemic general-distribution grants, as identified by Good Jobs First, a research organization, are also buying up more facilities and staff.