Article on Provider Relief Funds Misses Mark
Jun 23, 2022
A recent article in the Washington Post “COVID bailout rescued some hospitals while enriching others” is wrong. The reality is that all of America’s hospitals and health systems, regardless of size, location and ownership type have provided essential care to their patients and communities during this historic pandemic, all while facing tremendous financial challenges and pressures.
To begin with, many hospitals came into the pandemic in dire financial shape, with over two in three hospitals either operating with negative margins or barely breaking even. During the pandemic, due to government-imposed restrictions or to conserve resources to care for COVID-19 patients, many hospitals had to postpone or cancel non-emergent care, further threatening their financial stability. They were also paying much more for needed personal protective equipment and to set up additional sites of care and eventually vaccination clinics.
As highlighted in a recent report from the AHA, hospitals and health systems are experiencing tremendous growth in a variety of input costs, including expenses for workforce, drugs, supplies and equipment, as well as the impact of skyrocketing economy-wide inflation. In fact, labor expenses per patient increased 19% through 2021 compared to 2019 levels. Labor costs, which include costs associated with recruiting and retaining staff, benefits and incentives, account for more than 50% of hospitals’ total expenses. These surges in input costs, along with ongoing challenges from the COVID-19 pandemic, Medicare sequester payment cuts phasing back in, inadequate Medicare payment updates that fail to account for inflation and the downturn in the financial markets, have continued to strain the resources the hospital field needs to care for their patients and communities.
To their credit, Congress recognized the indispensable role hospitals play as the backbone of our health care system and swiftly took steps in the early days of the pandemic to provide needed support to ensure hospitals would remain resilient. These funds were for hospitals to use to prevent, prepare for, and respond to the novel COVID-19 virus, including by setting up alternative care sites, procuring testing, administering vaccines and supporting their workforce. The federal government appropriately worked to get this critical relief out quickly as our health care system was facing a historic crisis during this once-in-a-century pandemic.
These funds, all of which providers are held accountable for under law, have allowed hospitals to continue to serve all who need care. If hospitals received more funds than their COVID-19-related expenses and lost revenue, there will be a reporting and auditing process and the excess funding will be returned to the government.
It is important to stress that each hospital and health system came into the pandemic with their own unique financial situation, but that each and every one of them played an integral role in caring for patients and protecting their communities. Cherry-picking financial data is not reflective of the many immense struggles and challenges facing the hospital field, including a historic workforce shortage crisis, along with spiking input costs for supplies, equipment, drugs and labor, and near-historic levels of inflation.
In addition, some hospitals found that being part of larger health systems was an important part of their efforts to meet the many pandemic challenges. Health systems were able to adapt and even draw from within their own teams to secure the staffing resources needed when specific geographic areas were experiencing surges. Flexing and reallocating staff when needed allowed them to stand-up expanded intensive care units to meet the influx of COVID-19 patients and to create vaccination clinics, to give a few examples. These systems can also provide the ability to offer financially distressed hospitals, including many in metropolitan and rural areas, a vital lifeline that can enable them to stay afloat, maintain access to care for patients and expand the breadth of services and programs offered to their communities.
Reserves helped hospitals continue to provide care as the pandemic stretched into months and years, and through multiple waves of hospitalizations, including the massive omicron wave at the end of 2021 and beginning of 2022. Hospital reserves also provided a cushion to help ensure hospitals remain vigilant as they prepare for the health care needs of their communities for the years and decades to come. This means investing in new technology, modernizing their facilities and creating new programs to serve their patients.
Arguing that the critical support from the Provider Relief Fund was somehow unjustified because not all hospitals are now at the financial brink makes no sense. Instead, we should be looking for opportunities to ensure that we keep all hospitals and health systems strong and our patients and communities healthy. The hospital field does far more than any other part of the health care sector to support our neighbors: Our doors are always open, 24/7.
Rick Pollack is the president and CEO of the American Hospital Association.