High-Impact CARES Act Funds Were Disproportionately Distributed

Hospitals that had stronger pre-pandemic finances received a disproportionate amount of high-impact funds through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, a JAMA Health Forum study revealed.

In March 2020, Congress passed the CARES Act to provide funding to hospitals that were struggling financially due to the COVID-19 pandemic. The billion dollars of funding aimed to reimburse hospitals and providers for healthcare-related expenses or revenue losses from reduced healthcare utilization.

As of May 31, 2020, Congress had distributed $65.2 billion in funds, the study noted. The first round of funds was based on 2018 Medicare fee-for-service revenue, but the CARES Act set aside $22 billion to go to hospitals in high-impact areas that faced severe COVID-19 repercussions from the first surge. Congress distributed these funds in two rounds.

To understand the pre-pandemic differences between the hospitals that received high-impact funds, researchers used 2018 data from the Healthcare Cost Report Information System. They analyzed utilization rates, costs, charges, facility characteristics, financial assets, and investment incomes. They also used CDC data to identify the number of COVID-19 hospitalizations at each hospital through June 1, 2021.

Using this data, the researchers drew associations between hospital characteristics and the amount of high-impact CARES Act funds the hospitals received.

The study included analyses of 952 hospital-level entities and revealed that the funds were disproportionately distributed among different hospitals.

Hospitals received a mean of $22.1 million during the first round of high-impact funding and $11.5 million in the second round.

Nearly a fourth of the hospitals received less than $5 million while 7.8 percent received more than $50 million, according to the study. More than half of hospitals received between $5 million and $30 million and less than 10 percent received $30 to $50 million in funds.

Hospitals that were more financially stable prior to the pandemic were likely to receive more in CARES Act funding.

A 10 percent increase in hospital assets pre-pandemic was associated with a 5.3 percent increase in CARES Act funding, researchers found. A 10 percent increase in endowment funds also correlated with a 2.6 percent increase in CAREs Act payments. Hospitals that had higher pre-pandemic Medicaid revenue received more funding as well.

Additionally, high numbers of eventual COVID-19 cases were associated with increased high-impact CARES Act funding.

Nonprofit hospitals and teaching hospitals were more likely to receive funding, while critical access hospitals received 40 percent less CARES Act funding.

“This disparity in funding may be of particular interest because many critical access and rural hospitals faced financial pressures even before the COVID-19 pandemic,” researchers wrote. “Policymakers should continue to ensure that these types of hospitals are sufficiently funded, potentially with additional rounds of funding.”

Policymakers should also monitor how CARES Act funding has impacted hospital investments, technologies, and behavior in order to distribute future funds more evenly, the study suggested.

The study focused only on the high-impact funds distributed through the CARES Act, which left out the first round of general distributions and other targeted funds that benefitted rural hospitals, safety-net hospitals, and other underserved health systems with little financial resources.

According to an Xtelligent Healthcare Media analysis, providers in medically underserved areas—areas with few primary care providers, high infant mortality rates, high poverty rates, or a large elderly population—received higher total CARES Act payments compared to providers in resource-rich areas.

“The average payment for providers in medically underserved areas was over $20,000 higher than those in resource-rich environments,” the analysis stated. “Not only does this data indicate that those areas in the greatest need received more payments, but they also received higher valued payments.”