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 The money from the Federal Emergency Management Agency (FEMA) is
going to some large health systems that have billions of dollars in
cash reserves and investments, according to government records
reviewed by Reuters.
FEMA has received nearly 2,200 aid requests from hospitals and thus
far has approved about 15% of them, for a total of $894 million, the
agency told Reuters. Hospitals can request more money as U.S.
infections surge, and FEMA officials expect total aid awards to rise
significantly.
Some health policy experts say that large and well-capitalized
nonprofit systems - which typically pay no taxes - do not need the
additional relief money. Among the aid applicants are some of the
nation’s best-known health systems, including the Cleveland Clinic,
Providence and Stanford Health Care.
“These are very financially successful hospitals that have already
received a huge amount of taxpayer money to help with COVID-19,”
said Eileen Appelbaum, co-director of the Center for Economic and
Policy Research in Washington. “This feels like greed for them to go
to FEMA for even more money.”
Some nonprofit hospitals said federal aid hasn’t covered all of the
lost revenue and higher expenses caused by the pandemic. The FEMA
program, they said, recognizes their major investments in staff and
equipment to handle the crisis.
“The COVID-19 pandemic has greatly impacted hospitals and health
systems around the country, including ours,” said Angela Smith,
spokeswoman for the Cleveland Clinic.
FEMA funds are typically dispersed after hurricanes, floods or other
natural disasters in a specific region. Nonprofit hospitals
nationwide can apply now because President Donald Trump declared the
pandemic a national emergency in March.
For-profit hospitals, which have faced similar challenges from the
pandemic, can’t tap the FEMA money because federal law governing
disaster relief excludes for-profit businesses.
FEMA is reimbursing nonprofit hospitals for money spent on personal
protective equipment, ventilators, employee overtime, temporary
workers, testing supplies and other expenses covered as “emergency
protective measures.” The agency reimburses hospitals for 75% of
their eligible costs.
“The dollars could be very big for hospitals. FEMA funds are
uncapped,” said Brad Gair, a former FEMA official and now senior
managing director at consulting firm Witt O’Brien’s.
The program does not consider whether applicants need the money,
Gair said.
“If a well-off hospital has eligible expenses, it gets money,” Gair
said. “There is always a question about the fairness of that, but
FEMA doesn’t look at the hospital’s bottom line.”
Nonprofit hospitals account for about 60% of hospitals nationwide,
and years of mergers have created health giants with immense market
power and vast resources.
These hospitals get tax exemptions on the condition that they
provide charity care and other community benefits. Some lawmakers
and economists, however, increasingly criticize large nonprofit
hospitals for not doing enough to help low-income patients and their
communities while spending surplus cash on lavish building projects,
high executive pay and expensive marketing, such as naming rights on
professional sports facilities. Some critics say they’re often
indistinguishable from their for-profit peers.
Major nonprofit health systems counter that they collectively
provide billions of dollars in charity care annually and that the
community benefit they provide outweighs the value of their tax
exemptions.
Keith Turi, an assistant FEMA administrator, said the agency runs an
“eligibility-based program” with no cap, which means smaller
hospitals are not competing for limited funds with large and wealthy
health systems.
Even so, handing out aid to hospitals that don’t need it is a waste,
said Tim Egan, chief executive of Roseland Community Hospital, a
nonprofit, 134-bed facility serving low-income patients in Chicago.
Egan said his facility has struggled financially as its payroll shot
up by $5 million this year to cover coronavirus care. But big
nonprofit hospitals, he said, are swimming in money by comparison.
“These FEMA dollars should be earmarked for 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’re pulling their
multimillion-dollar yacht up to the dock, our boat is leaking.”
MASSIVE CASH RESERVES
This year, hospitals and other medical providers have already
received about $145 billion in federal grants under the Coronavirus
Aid, Relief and Economic Security (CARES) Act. In addition, Medicare
has provided nearly $80 billion in low-interest loans and increased
reimbursements for patients hospitalized with COVID-19 by 20%, which
may yield another $3 billion for hospitals.
After big CARES Act payouts earlier this year attracted scrutiny
from advocates and lawmakers, some hospital chains returned the
money. Nonprofit health system Kaiser Permanente and for-profit
chain HCA Inc acknowledged they didn’t need the aid and returned it.
Some of the hospital systems applying for FEMA aid have vast
financial reserves that have provided a cushion against
pandemic-related losses and expenses.
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 Providence, based in Renton,
Washington, runs 51 hospitals and nearly 1,000
clinics. It reported an operating loss of $214
million for the first nine months of this year
as expenses rose 4% and patient volume dropped
by 10%. But the health system’s
reserve of cash and investments ballooned to $14.5 billion by Sept.
30 – an increase of $2.2 billion from nine months earlier. A
spokesman said that was due in large part to $1.6 billion in
coronavirus loans from Medicare that must be repaid. Providence also
got $682 million in CARES Act grants and $9 million initially from
FEMA. The hospital chain said it plans to file more requests with
FEMA for an undetermined amount.
Providence said it will follow all federal rules in seeking the
disaster aid. FEMA officials have reminded applicants not to seek
funding for work or expenses covered by the CARES Act or other
sources. “We are being diligent in our effort to
avoid double dipping,” Providence said in a statement.
Providence said it needs the money to offset coronavirus-related
costs as the pandemic "enters what appears to be its most dangerous
phase.”
Cleveland Clinic has experienced a similar shortfall as surgeries
were canceled and emergency-room visits plummeted. The health
system, which runs 18 hospitals, said that patient revenue was $890
million lower than expected during the first nine months of this
year and that it spent more than $190 million on pandemic-related
expenses. It reported an operating loss of $108 million through
September. But the system’s net income - including
strong investment gains - tripled to $604 million in the most recent
quarter, compared to a year ago. Cleveland Clinic has $11.8 billion
in cash reserves and investments.
The system has also benefited from $423 million in CARES Act grants
and a $849-million loan from Medicare, which it has paid back. Last
month, FEMA awarded Cleveland Clinic $46 million to help with the
costs 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 file for additional FEMA funds as it incurs more
pandemic-related costs.
Two of the largest aid
requests in FEMA records reviewed by Reuters came from two other
hospital systems with billions of dollars in financial reserves:
NewYork-Presbyterian Hospital, which sought $259 million, and
Stanford Health Care, which requested $127 million. A spokeswoman
for the New York hospital system said it plans to seek more money to
cover its major expenses in staff and equipment. A Stanford Health
spokeswoman said federal grants only offset “a small portion of the
costs that our hospital has incurred.”
Dan Skinner, an associate professor of health policy at Ohio
University, said the “idea that some of these institutions require
disaster funding is laughable” given the size of their investment
portfolios and rainy-day funds.
He said the debate over coronavirus aid tends to lump together all
hospitals and obscures the wide disparities in financial need
between small, community hospitals and deep-pocketed health care
chains. Moody’s Investor Service wrote earlier this month that
smaller hospitals struggling with coronavirus costs may have to
merge with larger health systems.
“There is so much public goodwill toward hospitals during the
pandemic,” Skinner said. “I feel some of these hospitals are
manipulating that.”
HOSPITAL REVENUE DOWN ONLY SLIGHTLY
U.S. hospitals lost considerable revenue during the early days of
the pandemic, in March and April, as many Americans postponed
routine care. Surging infections also forced hospitals to delay
elective procedures - a key revenue source - to devote more staff
and resources to the pandemic.
Since then, business has rebounded and hospital revenue was only off
by 1.7% through the first nine months of 2020 compared to the same
period last year, according to the Peterson-Kaiser Family Foundation
Health System Tracker.
 “Hospitals had bounced back to financial stability, but now there
may be another hit" as coronavirus hospitalizations surge again,
said Venson Wallin, an industry consultant and managing director at
the BDO Center for Healthcare Excellence & Innovation. “We are on a
roller coaster.”
Banner Health, a Phoenix-based nonprofit which runs 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 amounts not yet determined, after receiving about $1
billion in federal grants and loans this year.
Its most recent federal tax return, for 2018, shows that Banner’s
chief executive, Peter Fine, made $10.3 million in 2018. He received
$25.5 million the year earlier, boosted by a one-time retirement
plan payment. A spokesman said Banner may seek FEMA aid if 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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