Early federal aid in the pandemic helped wealthy, urban hospitals far more than rural ones, Washington Post reports

In 2020, Congress authorized $178 billion in federal aid to help hospitals stay open. And while the money helped hospitals—many rural—stay afloat, data show that the funds "exacerbated the gap between the industry’s haves and have-nots, disproportionately rewarding wealthy hospitals that did not need the money as urgently," Christopher Rowland reports for The Washington Post. "Many institutions reported strong profits and pursued growth strategies without pause."

Rowland illustrates the phenomenon by contrasting the fortunes of a rural hospital in North Carolina and a larger regional hospital nearby. Randolph Health, a 145-bed rural hospital in central North Carolina, "declared bankruptcy in March 2020 and might have closed for good if it had not received $14.5 million in federal emergency pandemic grants. The cash didn’t cover all its Covid-related losses, but at least Randolph could make payroll," Rowland reports.

"The money flowing from Washington was barely enough to keep Randolph afloat — but those funds proved to be a windfall for Atrium Health, a regional nonprofit hospital chain headquartered in Charlotte. Atrium got $617 million in government relief from April 2020 to December 2021," Rowland reports. "The money, along with a soaring stock market and surging payments for patient care, helped it reap more than a billion dollars in surplus revenue last year. Atrium bulked up with two mergers and announced plans for a third during the pandemic. It boosted its CEO’s compensation by 24 percent, to $9.8 million."

A recent report from North Carolina's treasurer catalogued the hundreds of millions of dollars in federal aid given to the state's largest hospitals and contrasted it with their strong financial performance early in the pandemic. Treasurer Dale Folwell told the Post that the hospitals should have used the money for charity care, lower prices or even used reserves to cover pandemic costs and returned the money. But Cody Hand, a senior vice president of the North Carolina Hospital Association, told Rowland it would have put the "entire state bond rating in jeopardy" if larger hospitals had dug into their reserves to deal with increased demand.

"Now that the dust settles, we realize many hospitals got more than what they needed," said Ge Bai, a Johns Hopkins University professor of accounting and health policy management who advised the treasury department on the report.

Why did that happen? "The initial federal bailout formula, hastily put in place by the Trump administration to help hospitals cope with these burdens, bestowed a disproportionate share on wealthier hospitals. Distribution of the first $50 billion was calculated based on each hospital’s 2019 Medicare billings and 2018 overall patient revenue, including payments from private-insurance companies, which pay the highest rates," Rowland reports. "That put weaker safety-net hospitals, which serve higher numbers of uninsured people and low-income Medicaid patients, at a disadvantage. Medicaid typically pays hospitals less than Medicare and private insurance. Later distributions were tailored to favor hospitals hit with the most Covid patients, as well as those in rural communities and with large Medicaid populations. But those rounds of assistance were each smaller than the initial $50 billion, which automatically arrived in the bank accounts of hospitals and physician practices without even requiring an application."