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.
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.
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.
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.
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.”
That pattern is repeating in the hospital rescue program.
For example, HCA Healthcare and Tenet Healthcare — publicly traded chains with billions of dollars in reserves and large credit lines from banks — together received more than $1.5 billion in federal funds.
Angela Kiska, a Cleveland Clinic spokeswoman, said the federal grants had “helped to partially offset the significant losses in operating revenue due to Covid-19, while we continue to provide care to patients in our communities.” The Cleveland Clinic sent caregivers to hospitals in Detroit and New York as they were flooded with coronavirus patients, she added.
Critics argue that hospitals with vast financial resources should not be getting federal funds. “If you accumulated $18 billion and you are a not-for-profit hospital system, what’s it for if other than a reserve for an emergency?” said Dr. Robert Berenson, a physician and a health policy analyst for the Urban Institute, a Washington research group.
Hospitals that serve poorer patients typically have thinner reserves to draw on.
Even before the coronavirus, roughly 400 hospitals in rural America were at risk of closing, said Alan Morgan, the chief executive of the National Rural Hospital Association. On average, the country’s 2,000 rural hospitals had enough cash to keep their doors open for 30 days.
At St. Claire HealthCare, the largest rural hospital system in eastern Kentucky, the number of surgeries dropped 88 percent during the pandemic — depriving the hospital of a crucial revenue source. Looking to stanch the financial damage, it furloughed employees and canceled some vendor contracts. The $3 million the hospital received from the federal government in April will cover two weeks of payroll, said Donald H. Lloyd II, the health system’s chief executive.
This content was originally published here.