Report finds inequities in hospital and COVID-19 relief funding levels

Oct. 26, 2021

In a cross-sectional study among 952 hospital-level entities, wide ranges existed in CARES Act funding, according to an article in the Journal of the American Medical Association (JAMA), with 24% of hospitals receiving less than $5 million in funding and 8% receiving more than $50 million.

The JAMA article asserts that academic-affiliated hospitals with higher pre–COVID-19 assets and hospitals that had higher COVID-19 cases received higher levels of funding, while critical access hospitals received lower levels of financial assistance.

The COVID-19 pandemic has caused immense disruption to healthcare utilization and, in turn, hospital finances. Between February and April 2020, there was a decline of 20% for primary admissions, which slightly rebounded to 16% by early July 2020.The decline in volume could be due to multiple factors, including the suspension of elective and noncritical care in multiple states. Data from employer-sponsored claims data have found in the first 2 months of the COVID-19 pandemic dramatic reductions in the use of preventive and elective care.

From April to June of 2020, estimates of hospital procedures were still on the decline for most procedure types. Recent survey data collected in June 2020 indicate that an estimated 41% of US adults delayed or avoided medical care owing to concerns about COVID-19.6.

It has been reported anecdotally that because of the decline in hospital admissions, many hospitals may be forced to furlough employees or initiate salary cuts in an effort to reduce costs. Prior to the pandemic, labor and capital costs accounted for approximately 41% and 4% of hospital operating costs, respectively, and around a third of operating costs were from operating rooms, laboratories, diagnostic radiology, general routine inpatient care, intensive care units, outpatient clinics, and emergency departments. Early in the pandemic, data from the US Bureau of Labor Statistics showed that the number of hospital employees had decreased by 135 000 between March and April 2020, which constitutes a 2.6% decline.

In response to decreased patient volume and weak financial positions, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided funding for health care professionals that included an increase in payments by Medicare to eligible health professionals. The Provider Relief Fund provided $175 billion to reimburse eligible hospitals and health professionals for health care–related expenses or losses in revenue that were the result of COVID-19. As of May 31, 2020, 380 000 payments were made that totaled $65.2 billion.

Of that $65.2 billion, the CARES Act budgeted $22 billion in targeted distributions for more than a thousand hospitals in high-impact areas that were most heavily affected by COVID-19 in the first surge of the pandemic.11 These funds were distributed automatically in 2 rounds under the COVID-19 High-Impact Distribution budget line item.

As of October 21, 2020, more than 97% of budgeted funds had been disbursed in response to the first surge of COVID-19 cases. Payments were dispersed according to a formula set by the Centers for Medicare & Medicaid Services, based on the hospital’s share of fee-for-service Medicare payments out of total Medicare payments in 2019 for the initial disbursement, and a function of the most recent annual gross receipts minus the initial disbursement. These funds were meant to support hospitals particularly hard hit financially by COVID-19 through well-documented decreases in volumes of care. However, it is not clear if historical measures of Medicare payments are the most appropriate indicator for hospital financial assistance need.

While it is known what the funding allocation formulas are, it is unclear how these funds were targeted to hospitals in relation to their pre–COVID-19 finances, which is an important policy question to inform future resource allocations. Existing studies have found that initial funding allocations disproportionally went to hospitals with more cash on hand. This cross-sectional study examines the disbursement of CARES Act funding to hospitals and how funding allocations vary by hospital financial status and patient composition prior to the pandemic.

JAMA release

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