Revenue-Based COVID-19 Funds Failed to Help Some Hospitals in Need

September 09, 2021 - Congress allocated $178 billion to the Provider Relief Fund to help hospitals overcome the financial and operational challenges of the COVID-19 pandemic. But the primary distribution method for the aid may have put some hospitals and communities in need at a disadvantage, according to a new study.

The study published in the September 2021 edition of Health Affairs analyzed Provider Relief Fund distribution records from HHS to determine how disbursements to specific hospitals related to key characteristics of the facilities and their communities. The dataset accounted for just under half of known disbursements to hospitals, researchers from the Program in Health Policy at Harvard University reported.

Some of the Provider Relief Fund payments correlated to “real-world need,” such as serving a community with a very high share of Black residents or having a very high ratio of Medicaid revenue to beds. Hospitals with these characteristics tended to receive higher funding from the government during initial distributions from 2020 to 2021, the study found.

However, hospitals serving a very high shared of Hispanic residents or in a medically underserved area received decreased funding or there was no difference in funding amounts.

“Lacking a broader array of measures to guide allocation decisions, hospitals serving vulnerable populations might not have received support commensurate with need. Our findings, as well as newspaper reporting, suggest that this may have been particularly true for hospitals with a large share of Hispanic residents in their communities,” study authors Jason D. Buxbaum and Summer Rak stated.

Both Black and Hispanic populations were disproportionately impacted by COVID-19. These populations were hospitalized for the virus at rates 2.9 and 2.8 times higher, respectively, compared to non-Hispanic White Americans. The populations also experienced higher mortality rates from the disease.

However, hospitals serving more Hispanic patients did not receive as much money from Provider Relief Fund, mostly likely because of the primary distribution method, researchers stated.

HHS relied on a revenue-based distribution method to allocate the bulk of Provider Relief Funds at the start of the pandemic. The formula used Medicare-related administrative data, including net patient revenue and tax information, to determine an eligible hospital’s disbursement from the general distribution round.

About 20 percent of hospitals received relief only through the revenue-based distribution round, the study found. Additionally, net patient revenue explained about 46 percent of the variation in funding disbursement.

In contrast, most hospitals in the analysis received additional funding from targeted distributions. In addition, to the large general distribution, HHS also allocated some of the Provider Relief Funds to specific hospitals, such as rural, high-impact, and safety-net facilities.

“Our work suggests that the high-impact payment formulas were a vital component of the Trump administration’s approach to relief disbursement,” Buxbaum and Rak said. “On average, relief received by a hospital that was in the top decile of all hospital communities for share of Black residents would have been more than 50 percentage points lower in October 2020 but for the high-impact funding. High-impact funding also meaningfully increased support for hospitals with very little commercial revenue and for hospitals in communities with many nursing home beds.”

They advised the federal government to “use a basket of capacity measures, such as inpatient beds, standardized charges, adjusted discharges, and net patient revenue, rather than just a single measure of capacity,” when disbursing future payments.

The approach could help more communities in need, such as those in California, Texas, and Florida—all of which contain more than half of all Hispanic Americans, researchers stated. Communities in these states missed out on some high-impact funding because they experienced a later surge in positive cases and HHS at the time did not consider COVID-19 cases after mid-June 2020 for the purposes of targeted funding.

Hospitals and health systems are still waiting on tens of billions of dollars in Provider Relief Fund money, prompting industry groups and lawmakers to push for additional distribution rounds. According to media reports, there is about $44 billion sitting the Provider Relief Fund.