Of the $175 billion originally allocated for Provider Relief Fund grants, a little over half has been distributed according to prior total patient revenue, suggesting HHS tried to replace revenue lost from suspending procedures. hospitals
Another $22 billion went to hospitals that saw large numbers of COVID patients. Smaller amounts were targeted at safety-net hospitals, rural hospitals, skilled-nursing facilities and children’s hospitals.
Karyn Schwartz, a senior fellow with the Kaiser Family Foundation, said she agrees that knowing whether hospitals’ reimbursement for COVID treatment covers their costs could be helpful information for policymakers in determining how the remaining roughly $57 billion in Provider Relief Fund grants would be best allocated. “I think knowing how costly it is to treat these patients is important in terms of understanding how important it is to allocate the money that way versus something else,” she said.
Matt Hutt, an accountant who heads AAFCPAs’ healthcare division, said by his estimation, in order for Medicare’s 20% add-on payment to cover the cost of COVID care, it would have needed to be a 35% add-on. Going forward, he said it’s important to tie Provider Relief Fund grants to the losses providers are seeing on COVID care.
“That’s really what the funds should be used for: the impact that COVID had on your business,” he said.
The problem with that, however, is the numbers used to calculate margin can be “warped,” Johns Hopkins associate professor Bai said. While revenue from COVID treatment is clear-cut, the cost component is open to interpretation. Large, well-connected providers would likely hire savvy consultants to make their margins look worse than they are, she said. Instead, Bai said the decline in charges or outpatient claims would be a more objective way to distribute the money.
Even if, hypothetically, systems were making money on COVID patients but still losing money in every other aspect of their business due to lower demand, that would put the healthcare system in jeopardy, said Rick Kes, healthcare industry senior analyst with RSM. “The sustainability of our healthcare system is maybe the overriding issue.”
Opinions abound on how the remaining federal aid should be allocated. Michael Abrams, managing partner and co-founder of healthcare consultancy Numerof & Associates, said tying the disbursement to fee-for-service revenue, as has been done with much of the money so far, rewards providers who haven’t shifted toward value-based payment models. He thinks HHS should offer incentives for value-based payment with the remaining money.
“I just hate the idea of bailing out an industry that is increasingly on a course that departs from what the country needs,” Abrams said.