Some $30 billion of the money has been distributed thus far, under a formula that sent it to hospitals based on the services they provided last year to Medicare patients. The administration hoped that approach would let them disburse an initial batch of funding quickly, but it also meant the money didn’t necessarily go to hospitals treating large numbers of patients suffering from covid-19, the disease the virus causes.
Now, as the Department of Health and Human Services prepares to distribute more of the remaining funds, officials say it will be targeted based on need and toward hospitals in cities that have seen large numbers of covid-19 patients, such as New York and Detroit. But lawmakers and aides say they are in the dark about how much money will be in the next disbursement and who will get it. Answers from Trump administration officials have been confusing and at times misleading, they say.
And Democrats are insisting on at least doubling the money Congress has provided so far, demanding an additional $100 billion for the health-care system. They are refusing to approve money the Trump administration wants for small businesses unless their demands are met.
“We want to know more about where exactly the money from this fund is going around the country, but there’s a lack of transparency,” Ways and Means Committee Chairman Richard E. Neal (D-Mass.) said in a statement to The Washington Post. “It’s an eternal waiting game — we know providers in hotspots haven’t yet received the funding they need, but HHS has not yet provided information about the money’s disbursement that would allow us to assess the gap and understand what else is needed to support these providers.”
The Trump administration defends its approach.
“The first priority is, we want to get this money out fast,” Seema Verma, administrator of the federal Centers for Medicare and Medicaid Services, said in a conference call with reporters Wednesday. “Using Medicare was the fastest. We had that data.”
As for what will be next, Verma said administration officials will “be providing more specificity at the end of this week” for how a second batch from the $100 billion will be allotted. She said that “the second round of funding will address all providers, as well as address hot spots.”
“We know that providers are dealing with issues on both ends … providers that have a significant impact with increased expenses,” Verma said, as well as a loss of income from postponing or canceling elective surgeries or other non-emergency care. “In this next tranche, we are trying to [deal with] all that,” Verma said, adding that the next distribution will give extra help to hospitals where cases have surged.
At a meeting on Tuesday with about a dozen health-care industry leaders, White House officials briefed them on how they anticipated the next batch of money would be distributed, according to one industry participant.
The administration officials said the second batch will also be approximately $30 billion, given out in two pieces, according to the participant. The larger amount, $20 billion, will be allocated based on each hospital and health-care provider’s proportion of total revenue, according to Internal Revenue Service data, said the participant, who spoke on the condition of anonymity about information that is not public. By basing payments on total revenue — including money from private insurers, Medicaid and other sources — this $20 billion will reach hospitals that do not take many — or any — patients on Medicare.
White House officials said at the meeting that the remaining approximately $10 billion in the second batch will be devoted to hospitals with especially large numbers of covid-19 patients, according to the participant.
Congressional Democrats and agency officials recognize the administration is trying to move quickly to handle huge sums of money in a law passed just three weeks ago. They also say that infighting within HHS appears to be muddling the process and that the agency’s guidance changes daily.
In a letter this week to Health and Human Services Secretary Alex Azar, signed by Senate Finance Committee Chairman Ron Wyden (D-Ore.) and other top Senate Democrats, the senators called on the administration to release details on the initial $30 billion in payments, including methodology and who received the money.
“The administration failed to deliver much needed relief to many essential providers due to this approach,” the lawmakers wrote of how the first $30 billion was spread out. They also demanded more transparency about how the rest of the money would be distributed, including criteria for what would constitute a “hot spot.”
Administration officials have said the $30 billion was distributed based on the proportion that each hospital received in 2019 of all the money Medicare paid out through its original, fee-for-service program, in which providers of care are reimbursed for the volume of services they provide.
While hospital industry representatives say that was a simple method that allowed some money to go out swiftly, they have pointed out that it disadvantaged hospitals in parts of the country, such as California and portions of Florida, where Medicare Advantage — the private managed-care section of the program — is particularly popular.
A significant problem, some hospital executives say, was that this method didn’t distribute the money based on need. In addition, hospitals that treat more uninsured patients or those on Medicaid, as well as hospitals that don’t treat many Medicare patients at all — such as children’s hospitals — would get less money.
The second tranche of funds will be directed to those facilities, officials have said. But even those hospitals that were assisted in the first tranche didn’t get money based on how many covid-19 patients they treated.
“If you had 1,000 covid patients or only had one, you might get the same amount of money,” said John Fox, the president and chief executive of Beaumont Health, the largest hospital system in Michigan.
Beaumont has had on average about 1,200 covid-19 patients in its hospital systems in recent days and is treating about a third of the patient load from the most heavily infected area of the state, Fox said.
“If you’re going to help with the pandemic, send it to where the pandemic is,” Fox said.
Beaumont received $75 million from the stimulus package, Fox said. But the hospital is losing about $100 million a month, because it had to cancel elective surgeries and pay for more equipment and staffing to handle the surge of coronavirus patients.
The federal assistance “is not even close” to covering Beaumont’s losses, Fox said.
In a statement this week, Rick Pollack, president and chief executive of the American Hospital Association, urged “prompt release of the remaining funds to aid the facilities most affected by the pandemic” and said he was encouraged by efforts by congressional Democratic leaders to provide more funding for health systems as lawmakers consider a second stimulus.
The president of the Greater New York Hospital Association, Kenneth E. Raske, wrote in a memo to members regarding the first tranche of funding that “this distribution methodology is woefully insufficient to address the financial challenges facing hospitals at this time, especially those located in hot spot areas such as the New York City region.”
Raske said his group has been “totally engaged with the Trump Administration on this issue.” He said that several member chief executives had spoken with Azar and that he had spoken with White House senior adviser Jared Kushner. “While an exact distribution methodology for the next tranche of funds has not yet been identified, we have been assured that COVID-19 hot spots will be prioritized.”
The challenge for the Trump administration as it seeks to get that second tranche out the door will be determining which hospitals need it most, and most urgently.
Those decisions will probably be guided by several factors, including how much revenue a hospital gave up by canceling elective surgeries and the amount of cash on hand it needs to keep basic operations running, said Christopher Kerns, a vice president at Advisory Board, which provides research and consulting services to hospitals.
Many hospitals operate on narrow margins, and the extra cost of caring for covid-19 patients is stretching those margins even further, Kerns said. The hospital in probably the most precarious position now is one that doesn’t treat many Medicare patients, has less than 180 days’ cash on hand and is considered a safety-net hospital because it treats poorer patients on Medicaid or those without insurance, Kerns said.
Over the longer term, hospitals face another crisis: how to make up for all that lost revenue once they can perform elective surgeries again. Experts said that until a vaccine is developed, hospitals are unlikely to stop social distancing inside their facilities and will have a difficult time ramping up to their pre-coronavirus volume of elective surgeries and more routine treatment.
“The first stimulus helped with cash-flow needs in the short term, but those challenges will continue across 2020 and maybe beyond that,” Kerns said.
The overall financial portrait of the health-care industry lays bare the inadequacy of $100 billion to address the pandemic, experts say.
The industry’s total revenue is about $100 billion per month, according to the Advisory Board. That’s equal to the total amount available for hospitals and others providers of care under the Cares Act, the stimulus legislation Congress approved last month.
A big chunk of the costs for some hospitals will be treating covid-19 patients who have no health insurance. The Kaiser Family Foundation estimates that could cost up to $42 billion, and that is supposed to come out of the $100 billion fund.
A typical hospital system with 1,000 beds and the ability to perform outpatient surgeries is predicted to lose around $140 million — half its operating revenue — over a three-month period, according to the Advisory Board. Different hospitals may lose more or less. But the result is that even as President Trump presses to “reopen” the country, hospitals are pressing to be able to start doing elective procedures again so they can start making up their losses.
Even if that were able to happen quickly, patients are expected to postpone elective surgeries on their own, perhaps out of fear of coming to a hospital treating covid-19 patients, or because they’ve lost their job and their health insurance, experts said. Hospitals will have to keep treating covid-19 patients and keep them separated from people who aren’t infected, which will keep them from getting back to business as usual until a vaccine is developed — probably more than a year from now.