U.S. hospitals: Critics say the pandemic-driven Provider Relief Fund widened the gap between haves and have-nots

The unintended consequences of the $178 billion bailout to keep hospitals and doctors afloat Distribution of federal relief funds in North Carolina highlights inequities in the massive effort to protect the health-care system from financial ruin Christopher Rowland Washington Post

Randolph Health, a 145-bed community hospital in central North Carolina, declared bankruptcy in March 2020 and might have closed for good if it had not received $14.5 million in federal emergency pandemic grants. The cash didn’t cover all its covid-related losses, but at least Randolph could make payroll.

“Every penny of that was critical and we were just thankful,” said Reynolds Lisk, a former Randolph board member who was born in the hospital in 1957 and fought to save it. “It literally enabled us to continue to operate.”

The money flowing from Washington was barely enough to keep Randolph afloat — but those funds proved to be a windfall for Atrium Health, a regional nonprofit hospital chain headquartered in Charlotte.

Atrium got $617 million in government relief from April 2020 to December 2021. The money, along with a soaring stock market and surging payments for patient care, helped it reap more than a billion dollars in surplus revenue last year. Atrium bulked up with two mergers and announced plans for a third during the pandemic. It boosted its CEO’s compensation by 24 percent, to $9.8 million.

The vastly different experiences illustrate the unintended consequences of a $178 billion bailout that Congress dumped into the national health-care system at the start of the pandemic in an urgent attempt to keep hospitals and doctors afloat. Two years later, data show that the money indeed served as a lifeline for many hospitals that might not have withstood the onslaught of the coronavirus — but the funds also exacerbated the gap between the industry’s haves and have-nots, disproportionately rewarding wealthy hospitals that did not need the money as urgently. Many institutions reported strong profits and pursued growth strategies without pause.

“The rich got richer,” said North Carolina State Treasurer Dale Folwell, a Republican who is a critic of the business practices of Atrium and other hospital chains in the state. “It’s a transfer of wealth to them from taxpayers.”

The hospital aid was part of nearly $6 trillion that Congress approved in three bills over the past two years as Washington scrambled to keep up with the pandemic. The loans, grants, direct checks and other emergency assistance added up to more than the entire federal budget in the fiscal year before the coronavirus arrived, creating a unique and lasting strain on policymakers to ensure that the funds have been put to good use. The investments helped respond to the virus and pull the economy out of its worst crisis since the Great Depression — but tracking it all down to figure out how it was used has emerged as a major problem.

Folwell’s office released a report Wednesday documenting hundreds of millions of dollars that North Carolina’s largest hospital systems accepted from the federal government’s Provider Relief Fund, contrasting it with their strong financial performance during the crisis. Folwell said in an interview with The Washington Post that the hospitals should have plowed the windfall into more charity care, lowered prices or dipped into reserves to cover pandemic costs and sent the money back to the government.

Atrium said the money it received from the Provider Relief Fund was crucial to providing covid care, plugging holes in its operating budget and avoiding furloughs of medical staff at the peak of the crisis. Atrium used the money in innovative ways, it said, by creating a “hospital at home” program to care for covid patients remotely, and sending roving clinics into disadvantaged neighborhoods of Charlotte to provide tests and vaccines. It provided care to large numbers of low-income Medicaid patients, it said, even while experiencing sharp declines in revenue.

Hospitals were required to use the federal money for covid-related costs. But receipt of the money had a beneficial effect across their balance sheets, permitting hospitals across the country to log stronger profits and avoid serious damage to reserves of cash and investments, said Ge Bai, a professor of accounting and health policy and management at Johns Hopkins University who advised the North Carolina treasurer’s office in preparation of its report.

“Now that the dust settles, we realize many hospitals got more than what they needed,” she said.

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