Wealthy hospitals are collecting US disaster relief for COVID-19 costs

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(Reuters) – After many of the country’s richest nonprofit hospitals raised billions of dollars in U.S. coronavirus aid, disaster relief funds are now tapping into which critics say they don’t need.

FILE PHOTO: The Cleveland Clinic Medical Center can be seen in Cleveland, Ohio, USA on October 4th, 2020. REUTERS / Aaron Josefczyk / file photo

The Federal Emergency Management Agency (FEMA) money goes to some major health systems that have billions of dollars in cash and investments, according to the Reuters government.

FEMA has received nearly 2,200 requests for aid from hospitals and has so far approved about 15% of them for a total of $ 894 million, the agency told Reuters. Hospitals can ask for more money if US infections rise, and FEMA officials expect the total amount of aid to increase significantly.

Some health policy experts say that large and well-funded not-for-profit schemes – which typically don’t pay taxes – don’t need the additional aid funds. Grant applicants include some of the most well-known healthcare systems in the country, including the Cleveland Clinic, Providence, and Stanford Health Care.

“These are financially very successful hospitals that have already received a huge amount of tax dollars to help with COVID-19,” said Eileen Appelbaum, co-director of the Center for Economic and Policy Research in Washington. “It feels like greed to them to go to FEMA for more money.”

Some nonprofit hospitals said federal aid did not cover all of the revenue losses and increased expenses caused by the pandemic. The FEMA program recognizes their huge investments in manpower and equipment to face the crisis.

“The COVID-19 pandemic has had a major impact on hospitals and health systems across the country, including ours,” said Angela Smith, spokeswoman for the Cleveland Clinic.

FEMA funds are typically distributed after a hurricane, flood, or other natural disaster in a particular region. Nonprofit hospitals across the country can now apply because President Donald Trump declared the pandemic a national emergency in March.

Commercial hospitals that have faced similar challenges from the pandemic will not be able to tap into FEMA money as federal Disaster Relief Act excludes for-profit businesses.

FEMA reimburses nonprofit hospitals for money spent on personal protective equipment, ventilators, employee overtime, temporary workers, testing supplies, and other expenses covered as “emergency protection”. The agency reimburses the hospitals 75% of the eligible costs.

“The dollars could be very high for hospitals. FEMA funding is not limited, ”said Brad Gair, a former FEMA official and now a senior managing director at Witt O’Brien’s consultancy.

The program doesn’t take into account whether applicants need the money, Gair said.

“When a wealthy hospital has eligible expenses, it gets money,” said Gair. “There’s always a question of fairness, but FEMA doesn’t look at the hospital’s bottom line.”

Nonprofit hospitals make up about 60% of hospitals nationwide, and years of mergers have created health giants with immense market power and resources.

These hospitals receive tax exemptions on condition that they provide charitable care and other community services. However, some lawmakers and economists are increasingly criticizing large nonprofit hospitals for not doing enough to help low-income patients and their communities while spending excess money on lavish construction projects, high executive salaries, and expensive marketing, such as naming rights to professional sports facilities . Some critics say they are often indistinguishable from their for-profit counterparts.

Large nonprofit health systems counter that they collectively donate billions of dollars each year to charity and that the benefits to the community outweigh the value of their tax exemptions.

Keith Turi, a FEMA assistant administrator, said the agency operates an “approval-based program” with no cap, meaning smaller hospitals don’t compete with large and affluent healthcare systems for limited funds.

Even so, giving help to hospitals that don’t need it is a waste, said Tim Egan, executive director of Roseland Community Hospital, a 134-bed nonprofit that serves low-income patients in Chicago. Egan said his facility is struggling financially as its payroll shot up $ 5 million this year to cover coronavirus treatment. But large nonprofit hospitals, he said, are swimming in money by comparison.

“Those FEMA dollars should go to safety net hospitals that are really underwater,” Egan said. “We may be in the same storm, but we are not in the same boat. While they are pulling their multi-million dollar yacht to the dock, our boat is leaking. “

MASSIVE BARRESERVES

This year, hospitals and other medical providers have already received approximately $ 145 billion in federal grants under the Coronavirus Aid, Relief and Economic Security (CARES) Act. In addition, Medicare has nearly $ 80 billion

After large payouts under the CARES law were scrutinized by attorneys and lawmakers earlier this year, some hospital chains returned the money. The Kaiser Permanente nonprofit health care system and for-profit chain HCA Inc admitted they didn’t need the help and returned it.

Some of the hospital systems applying for FEMA aid have large financial reserves that have cushioned pandemic-related losses and expenses.

Providence, based in Renton, Washington, operates 51 hospitals and nearly 1,000 clinics. The company posted a $ 214 million operating loss for the first nine months of this year as spending increased 4% and patient volume decreased 10%.

But the health system’s reserves of cash and investments rose to $ 14.5 billion by September 30 – an increase of $ 2.2 billion from nine months earlier. A spokesman said this was in large part due to $ 1.6 billion in coronavirus loans from Medicare that have to be repaid. Providence also received $ 682 million in CARES Act grants and $ 9 million originally from FEMA. The hospital chain announced that it would file additional applications with FEMA for an indefinite amount.

Providence said it will follow all federal regulations to apply for disaster relief. FEMA officials have reminded applicants not to apply for funding for work or expenses covered by the CARES Act or other sources.

“We are working carefully to avoid double dipping,” Providence said in a statement.

Providence said it needed the money to offset coronavirus-related costs as the pandemic “enters its seemingly most dangerous phase”.

The Cleveland Clinic has seen a similar shortage as operations have been canceled and emergency rooms broken. The healthcare system, which operates 18 hospitals, said patient revenues were $ 890 million lower than expected in the first nine months of this year and more than $ 190 million was spent on pandemic-related expenses. As of September, the company posted an operating loss of $ 108 million.

But the system’s net income – including strong investment gains – tripled to $ 604 million last quarter year over year. The Cleveland Clinic has $ 11.8 billion in cash and investments.

The system has also benefited from $ 423 million in CARES Act grants and a $ 849 million loan from Medicare, which it repaid. Last month, FEMA granted the Cleveland Clinic $ 46 million to support the cost of a facility expansion for COVID-19 patients and the purchase of ventilators and other supplies. The system said in a statement that it plans to apply for additional FEMA funding as there are more pandemic-related costs.

Two of the largest requests for assistance on FEMA records reviewed by Reuters came from two other hospital systems with billions in reserves: New York-Presbyterian Hospital, which requested $ 259 million, and Stanford Health Care, which requested $ 127 million. A spokeswoman for the New York hospital system said it plans to apply for more money to cover its main staff and equipment expenses. A Stanford Health spokeswoman said federal grants only “offset a small fraction of the cost our hospital has incurred.”

Dan Skinner, associate professor of health policy at Ohio University, said the “idea that some of these institutions need disaster funding is ridiculous given the size of their investment portfolios and rainy day funds.”

He said the coronavirus aid debate tends to lump all hospitals together, masking the huge disparities in financial distress between small, community hospitals and deep health care chains. Moody’s Investor Service wrote earlier this month that smaller hospitals struggling with coronavirus costs may have to merge with larger healthcare systems.

“There is so much public goodwill towards hospitals during the pandemic,” Skinner said. “I feel like some of these hospitals are manipulating this.”

HOSPITAL REVENUES ARE ONLY EASY

US hospitals lost significant revenue in the early days of the pandemic in March and April as many Americans postponed routine care. Rising infections also forced hospitals to postpone elective procedures – a major source of income – in order to dedicate more staff and resources to the pandemic.

Since then, business has recovered, with hospital revenues only declining 1.7% in the first nine months of 2020 compared to the same period last year, according to the Peterson-Kaiser Family Foundation’s Health System Tracker.

“Hospitals had bounced back to financial stability, but now there could be another blow,” as coronavirus hospital admissions rise again, said Venson Wallin, industry advisor and director of the BDO Center for Healthcare Excellence & Innovation. “We are in a roller coaster”

Banner Health, a Phoenix-based nonprofit that operates 29 hospitals in six states, holds $ 5.4 billion in cash and investments, according to an April report by Fitch Ratings. Banner has filed applications with FEMA for undisclosed amounts after receiving approximately $ 1 billion in federal grants and loans this year.

The latest federal tax return for 2018 shows that Banner’s CEO Peter Fine earned $ 10.3 million in 2018. The previous year, he received $ 25.5 million, reinforced by a one-time retirement plan payment. A spokesman said Banner could seek FEMA aid if the CARES Act funds “do not cover all eligible expenses incurred as a result of the pandemic”.

Reporting by Chad Terhune; Editing by Michele Gershberg and Brian Thevenot

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