The Provider Relief Fund is 'nearly exhausted.' How has HHS been using the billions hospitals gave back?

Providers have returned billions of Provider Relief Fund grants they had been allocated back to the Department of Health and Human Services (HHS) over the course of the pandemic. But it's still up in the air as to whether the Biden administration plans to redistribute those funds to providers still feeling the pandemic’s bite.

The $178 billion total allocated by Congress is likely “nearly exhausted” as of July, Urban Institute Health Policy Center Senior Fellow Teresa Coughlin wrote in a recent brief tracking the funds.

As of a February report from the U.S. Government Accountability Office (GAO) cited in the brief, HHS had distributed $86.3 billion to providers through general distributions, $55.8 billion to providers in targeted distributions intended to address specific areas of concern (e.g., nursing homes or children’s hospitals) and $36 billion supporting public health efforts ranging from the COVID-19 Uninsured Program to vaccine development.

HHS’ approach with the distributions has come under criticism from academics and the industry, either due to formulas that disadvantaged hospitals treating minorities or for shifting funds allocated to providers by Congress to other response efforts.

While those three buckets meet the $178 billion total allocation, what’s still unaccounted for is $9.8 billion GAO said had been returned as of February (up from $8 billion as of March 2021), Coughlin wrote. Providers chose to return funds if they were unable or did not need to spend them within a year as required, or if they did not want to follow other terms or conditions tied to the grants.

So far it is “unclear” how much additional grant money providers have returned since February, Coughlin wrote.

The government also has yet to detail exactly how those returned funds have or will be used, she continued. HHS wrote on its website that payments returned to the fund would be allocated “to future distributions of the Provider Relief Fund."

GAO reported in October 2021 that HHS said it would use returned funds for subsequent allocations with any leftovers used for “future contingencies and emerging needs.”

Although publicly available data don’t paint an explicit picture of how HHS has repurposed the funds, Coughlin told Fierce Healthcare that the government’s public health initiatives are the most likely benefactors.

“Following the allocation history it seems that returned grants to date have been directed to help finance public health efforts (e.g., vaccine development, procurement, etc.) as well as funding COVID-related care for the uninsured (some of these funds did indeed go to providers) and COVID-19 vaccine coverage for the underinsured,” she said in an email statement.

Fierce Healthcare has reached out to HHS for comment on the current quantity and distribution of returned funds and will update this story with any response.

There is interest across the hospital industry for additional congressional relief funds, particularly in light of recent financial struggles tied to high labor expenses, muted volume recovery and higher acuity patients.

The American Hospital Association (AHA) has previously petitioned the government for an additional $25 billion to be allocated for general distribution, while America’s Essential Hospitals sought $7 billion in targeted funding for safety net hospitals.

AHA has also been quick to highlight in statements and policy papers that the Provider Relief Fund grants distributed to providers by HHS could not be used for COVID-19-related expenses incurred during delta and omicron waves. (AHA declined to provide further comments on allocation of any remaining or returned funds described in the Urban Institute’s brief.)

HHS most recently announced a $1.75 billion Provider Relief Fund payment distribution in April, at which time it said there was more than $4.5 billion left in Phase 4 payments still to be distributed and roughly 8% of applications yet to be processed. This continued distribution of funds since February’s GAO report makes it “likely that the Provider Relief Fund is largely depleted as of July 2022,” Coughlin wrote.

Still, Coughlin wrote that the Provider Relief Fund will remain in play “for the foreseeable future” as providers return received funds over the course of the next year and HHS continues to audit and recover overpayments.

“Given the controversy surrounding the fund, as well as the significance these grants have for many providers, following provider relief funding will be important—both to ensure that funds were used properly and to help inform future policymaking,” she wrote.