June 14, 2020 - Douglas Myser

Small hospitals bilked in bailout funds. This past spring, Providence Hospital received at least $509 million in government funds, one of the many wealthy beneficiaries of a federal program that is supposed to prevent health care providers from capsizing during the coronavirus pandemic. With states restricting hospitals from performing elective surgery and other nonessential services, their revenue has shriveled. The Department of Health and Human Services has disbursed $72 billion in grants since April to hospitals and other heath care providers through the bailout program, which was part of the CARES Act economic stimulus package. The department plans to eventually distribute more than $100 billion more. So far, the riches are flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison. Small hospitals bilked in bailout funds.

Twenty large recipients, including Providence, have received a total of more than $5 billion in recent weeks, according to an analysis of federal data by Good Jobs First, a research group. Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond rating firms S&P Global and Fitch.  A Providence spokeswoman said the grants helped make up for losses from the coronavirus. Those cash piles come from a mix of sources, no strings attached private donations, income from investments with hedge funds and private equity firms, and any profits from treating patients. Some chains, like Providence, also run their own venture capital firms to invest their cash in cutting edge start ups. The investment portfolios often generate billions in annual profits, dwarfing what the hospitals earn from serving patients. Small hospitals bilked in bailout funds.

Many of these hospital groups, including Providence, are set up as non-profits, which generally don't have to pay federal taxes on their billions of income. By contrast, hospitals that serve low-income patients often have only enough cash on hand to finance a few weeks of their operations. After the CARES Act was passed in March, hospital lobbyist reached out to senior health and human services officials to discuss how the money would be distributed.

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