Dive Brief:
- Congressionally allocated pandemic relief funds were appropriately targeted to help vulnerable hospitals offset financial losses associated with the COVID-19 pandemic and did not significantly boost some hospitals’ profits more than others, a new study from Health Affairs concluded.
- Hospital pandemic relief funds have come under scrutiny, with some reports, including a RAND study, suggesting that high-performing hospitals capitalized on funds to post record operating margins.
- The Health Affairs study analyzed financial data from 900 hospitals between 2018 and 2022 and found that, over the full course of PRF payments, the relief funds were “well calibrated,” specifically helping the most vulnerable hospitals avoid “substantially lower margins” during the pandemic, according to the report.
Dive Insight:
At the onset of the pandemic, hospital lobbyists and analysts advocated for additional monetary relief and policy solutions to help hospitals stay afloat as the pandemic triggered heightened supply and labor costs and temporarily put elective surgeries on hold.
As a result, Congress greenlit PRF payments for providers beginning in April 2020. As of June 2022, the program provided $178 billion in funds. However, the distribution of funds faced criticism almost immediately from lawmakers and industry groups, according to the Health Affairs report.
Critics were concerned about eligibility criteria and advocated for a more equitable distribution of relief funds that prioritized providers that were under-resourced before the pandemic, such as hospitals that treated more Hispanic, uninsured or Medicaid-covered patients, or hospitals in medically underserved areas.
In the final phase of general PRF distribution, beginning in December 2021, regulators addressed these concerns, distributing 75% of remaining funds based on pandemic-related lost revenue and high expenditures, and setting aside 25% for bonuses to providers who had large volumes of Medicaid, Children’s Health Insurance Program and Medicare patients.
After examining hospitals’ monthly operating margins, revenue, expenses and the level of PRF distribution received through 2022, the study concluded that “the funds provided to hospitals were appropriately targeted and did not make some hospitals significantly more profitable than others; rather, PRF distributions helped offset financial losses associated with the pandemic.”
“We also found that the funds appear to have been targeted to hospitals with higher levels of financial vulnerability before the pandemic, which needed more support to withstand the crisis,” the report added.
Specifically, the study found that the relief funds helped offset losses to operating margins but did not significantly increase profits. The paper also noted that the latter half of the relief effort funds were directed toward more vulnerable institutions.
The RAND analysis of PRF’s impact on hospital margins, published last month, found the relief program had inappropriately bolstered operating margins for some for-profit hospitals and may have been unnecessary for all recipients.
Within days of the RAND report’s publication, The American Hospital Association issued a statement condemning the study as “narrow and incomplete,” noting the researchers had only analyzed the impact of PRF through 2021 — prior to the Omicron surge and the final phase of relief funding, which the Health Affairs study noted placed a particular emphasis on equity in distribution.
In comparison, the Health Affairs study analyzed the full duration of the program.
“Over time, policy makers’ efforts to establish more-targeted eligibility criteria and allocation formulas for PRF payments seem to have addressed some of the early controversies over the distribution of the money,” the study concluded.
