Hospitals with thin margins and poorer patients—like most rural hospitals—tended to get less relief from Congress

Many hospitals and health-care providers are foundering after having to cancel money-making elective procedures during the pandemic; rural hospitals, many of which were already on the brink, are having an especially hard time. The federal government is giving out billions to help health-care providers, but the formula Congress used to allocate the money ended up disproportionately helping providers that have many privately insured patients. Typically, rural providers have fewer such patients, relying disproportionately on Medicare and Medicaid.

Providers were promised $175 billion in the $2 trillion CARES Act. The Department of Health and Human Services has begun distributing $72.4 billion in grants to either defray costs of treating covid-19 patients or make up for lost revenue. HHS is allocating $50 billion of that for providers with a higher historical share of revenue from Medicare compared to total net patient revenue from all sources, Karyn Schwartz and Anthony Damico report for Kaiser Family Foundation. 

KFF looked at hospital data from 2017, the most recent year available. "The hospitals in the top 10 percent based on share of private insurance revenue received $44,321 per hospital bed, more than double the $20,710 per hospital bed for those in the bottom 10% of private insurance revenue," Schwartz and Damico report. The hospitals with the highest share of private-insurance revenue are less likely to be teaching hospitals and more likely to be for-profit. They also tend to have higher profit margins and treat a smaller share of uncompensated care. Most rural hospitals tend to have lower profit margins and higher percentages of uncompensated care.

"These hospitals’ large share of private reimbursement may be due either to having more patients with private insurance or charging relatively high rates to private insurers or a combination of those two factors," Schwartz and Damico report. Reimbursement rates vary widely by payer, but private insurers usually reimburse hospitals an average of twice as much as Medicare does per patient.

All providers that get Medicare money are eligible for the $50 billion, including hospices, skilled nursing facilities, and physicians. Though KFF's analysis focused on hospitals, Schwartz and Damico write that they would expect to see the same pattern with other providers. Providers who got no Medicare money in 2019 weren't eligible, and that includes providers who specialize in Medicaid patients. "HHS has stated that Medicaid-only providers will receive a separate allocation of funding, as will skilled nursing facilities and dentists," Schwartz and Damico report.