The Federal Government Gives Large Dollars in Grants to Wealthy Hospital Chains

In another sign that federal grant dollars for COVID-19 relief may not have ended up in the hands of people and companies who needed them most, the largest and wealthiest hospitals in the country ended up with large amounts of federal money. In addition, large and wealthy healthcare chains and pharmacies also were given hundreds of millions of dollars when the intent of the legislation was to help struggling hospitals. Now, some healthcare companies and pharmacies are taking steps to return the money that they have received. However, other large hospitals have kept the money.

Hospitals Were Given Grant Money Based on an Automatic Formula

Companies were automatically given money in the CARES Act based on their level of patient reimbursements. This included Medicare fee-for-service reimbursements and hospitals' share of net patient revenue. The automatic formula did not discriminate between large and small hospitals or for-profit versus non-profit. This led to some results that many in the public found unseemly and seemed to be evidence of the rich getting richer at the expense of taxpayers.

The CARES Act allocated $175 billion in total for healthcare providers who have been inundated and overwhelmed with the costs of caring for an influx of patients. In general, the healthcare industry has suffered greatly throughout the pandemic as patients have not been able to pursue elective procedures and have stopped everything other than essential and emergency services. As a result, providers have been forced to concentrate their treatment in areas where they may not be profitable. Congress wanted to give them a lifeline in the face of severe economic challenges.

However, Congress passed the CARES Act in a hurry and did not take the time to tailor the economic aid for the providers who need it the most. Instead, in order to distribute the money in a hurry, Congress opted for the use of automatic formulas so that the government could write a check within days.

Now, the public is beginning to learn where this money went. The Department of Health and Human Services released its first list on May 7 of the hospitals that have received the money. HCA is the largest hospital chain in the country and has a history of questionable accounting methods while making outsize profits. HCA received a check for $1 billion from the federal government in CARES Act funding. In 2019, HCA had over $50 billion of revenues. The four largest hospital chains in the country received a total of 2.2% of the first tranche of funding.

Even Walmart and CVS Got Money from the Federal Government

The funding spigot for wealthy companies did not stop with the large hospital chains. Federal grant largesse also went to large pharmacy chains such as Walmart and CVS. Walmart has seen its sales rise considerably during COVID-19 as people have been stocking up on essentials. The nation's largest retailer received over $12 million in aid from the federal government, even though it would seemingly be the last company that would need federal aid. After news of the payment to the retail giant surfaced, Walmart announced that it would be returning the money to the federal government. This was followed by announcements from other large chains that they would also be giving the money back.

For their part, the large hospitals argue that their size and overall financial position does not mean that they still do not need the money. Regardless of whether they are independent or part of a chain, a hospital's ability to remain solvent and continue to provide care is critical when there is the possibility that the nation's healthcare system could be overwhelmed.

Some think that the large hospital chains should not be apologizing for accepting federal money. The Department of Health and Human Services decided upon the formulas, and the companies are just accepting what the law allows them to take. Had Congress wanted for only smaller or non-profit providers to receive the money, it should have specifically written that into the law.

There will be another tranche of money given to hospitals and healthcare chains. HHS should take the time to better target who receives these funds in the future rounds of funding. Support for hospitals will still be a must in the coming year, and the federal government needs to better direct the money to the hospitals that need it based on their current patient numbers.