Urban Institute: COVID-19 provider relief fund likely to grow past $26.8B as money gets returned

A new study estimates there remains $26.8 billion in a pot of money meant to shore up hospitals’ revenue holes caused by the COVID-19 pandemic, and more money could be on the way.

The Urban Institute released an analysis Tuesday estimating what is left of a $178 billion fund passed by Congress last year under the CARES Act. The analysis, commissioned by the Robert Wood Johnson Foundation, called for the Biden administration to better target which providers are still facing problems fighting the virus.

Urban’s analysis of publicly available information found that $7.1 billion of the provider relief fund has not been allocated as of this month. Another $19.7 billion has been allocated to certain providers but hasn’t been sent out.

Researchers also found $8 billion in grants providers returned because they were not spent.

The analysis comes amid heavy criticism from lawmakers and provider industries that the Department of Health and Human Services (HHS) did not properly allocate the relief monies at the onset of the pandemic.

Last April, HHS first sent out $30 based on the Medicare claims a provider received in order to quickly get out monies. But some providers that relied more heavily on Medicaid or other sources of revenue were left out in the cold.

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HHS attempted to rectify this by allocating $16 billion to safety net providers based on revenue received from Medicaid. But this targeted allocation also hurt these providers, as Medicaid tends to reimburse less than commercial plans and Medicare, and “providers receive little to no reimbursement for treating uninsured patients,” the analysis said.

HHS started to make targeted distributions from then on to certain provider groups, including rural clinics and skilled nursing homes.

The agency also had a large gap in allocations from October 2020 through September of this year, when HHS announced another $17 billion in funding rollouts. The announcement came after intense pressure from lawmakers concerned about the speed of distribution.

Questions have continued to plague HHS over how the funding is allocated.

Urban referenced a study from the Medicaid and Children’s Health Insurance Program (CHIP) Payment and Access Commission, which advises Congress on the programs, that showed many Medicaid and CHIP providers “have not received any grants from the fund.”

However, several major hospital systems and groups have said the relief did help to prop up finances when revenues fell precipitously at the onset of the pandemic when facilities were forced to shutter elective procedures to preserve capacity to fight COVID-19.

The relief fund could get more money though in the near future. Urban documented that as of February 2021 there is $8 billion in returned funds.

Nearly three-quarters of the returned funds were given out in the first $30 billion tranche of funding, which hospitals did not have to apply for and were given out not based on their experienced with COVID-19.

“Several major nonprofit and for-profit healthcare systems that received funds reported they did not need the money because they had gained experience managing operations and expenses as the pandemic progressed, or they recovered sooner than expected,” the analysis said.

Providers also in June had to start returning to HHS any money they got before June 2020.

“By May 31, 2020, about a third of Provider Relief Fund grants ($65 billion) had been released,” Urban said. “Given the unfocused allocation formula used to distribute Phase 1 grants, more providers will likely have to return some of their early grant funding.”