According to a report from the New York Times, a substantial amount of federal funds that were designated to support hospitals overwhelmed by the coronavirus pandemic ended up being shipped off to major hospital chains already flush with cash in the bank.
The report begins by noting that Providence Health System, one of the country’s largest and richest hospital chains, was the recipient of $509 million in government aide even though the company is loaded with so much money it invests its excess cash and reaps big rewards.
According to the Times, the Seattle-based hospital chain “invests in hedge funds, runs a pair of venture capital funds and works with elite private equity firms like the Carlyle Group,” adding, “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 report states before adding, “So far, the riches are flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.”
According to research group Good Jobs First, a review of federal data reveals that twenty large healthcare chains were the recipients of more than $5 billion in recent weeks with the Federal government preparing to pump another $100 into the pipeline.
“Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond-rating firms S&P Global and Fitch. A Providence spokeswoman said the grants helped make up for losses from the coronavirus,” the Times reports. “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.”
Noting that many of those same hospital groups, including Providence, are nonprofits, and thus “generally don’t have to pay federal taxes on their billions of dollars of income,” the Times notes smaller hospitals without the pull in Washington D.C. with the help of lobbyists are barely hanging on as COVID-19 patients overwhelm their capabilities.
The Times reports that the Health and Human Services department “devised formulas to quickly dispense tens of billions of dollars to thousands of hospitals — and those formulas favored large, wealthy institutions.”
“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,” the reports states, adding, “Hospitals that serve a greater proportion of wealthier, privately insured patients got twice as much relief as those focused on low-income patients with Medicaid or no coverage at all, according to a study this month by the Kaiser Family Foundation.”
According to Niall Brennan, president of the nonprofit Health Care Cost Institute, “If you ever hear a hospital complaining they don’t have enough money, see if they have a venture fund. If you’ve got play money, you’re fine.”
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