Boston Medical Center staff inside a tent at its emergency department triage area, used to evaluate and treat patients with serious symptoms on March 20.
Photo: David L. Ryan/The Boston Globe/Getty ImagesInitial payouts from $100 billion of federal pandemic relief for hospitals and doctors have set off a scramble for remaining dollars, with those flooded with coronavirus patients calling for priority.
Many hospitals and medical groups face steep losses, clobbered by higher expenses to care for Covid-19 patients, sharply falling revenue because of canceled surgeries and routine visits to slow the contagion—and some squeezed by both scenarios.
Federal health officials last week released the first $30 billion of the $100 billion pot. However, money was awarded without accounting for pandemic hot spots, such as New York and Detroit, where numbers of critically ill Covid-19 patients have soared. Instead, the disbursement was pegged to past Medicare billings. The decision sparked an uproar, the latest example of rising tensions among recipients over the race by Congress and the Trump administration to award relief funds quickly, as economic damage from the pandemic mounts.
Now, hospitals and doctors in hot spots say they should be the primary beneficiaries of the remaining $70 billion. “Quite simply, funding should follow the Covid-19 patients,” Kenneth Raske, president of the Greater New York Hospital Association, a trade group for New York hospitals, said in a letter to members this week.
But elsewhere, health-care providers say their need is also dire as revenue evaporates. “Rural health care was in a state of crisis before this pandemic,” said Dr. Susan Turney, chief executive of the Marshfield Clinic Health System in Marshfield, Wis. “With everything we’re facing right now, we really need to have funding that will stabilize our health system, so we can continue to survive.”
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Hospitals at risk of closure should be the highest priority for funding, ahead of those with financial stability to remain viable, even in a coronavirus hot spot, said Maggie Elehwany, vice president of government affairs for the National Rural Health Association. “When these hospitals close, they close for good.”
On Tuesday, Maryland lawmakers, including Democratic Sen. Chris Van Hollen, urged Health and Human Services Secretary Alex Azar to reconsider the disbursement formula because it failed to take into account needs based on Covid-19 numbers.
Seema Verma, head of the Centers for Medicare and Medicaid Services, said in a call with reporters Wednesday that more of the funds could be awarded as early as this week. The formula would seek to ensure funds are distributed to hospitals in hot spots and others that didn’t get as much funding under the formula used to distribute initial awards.
Hospitals and physicians are closing departments, cutting salaries and furloughing and laying off employees, saying funding is urgently needed. U.S. ambulatory care shed 40,700 jobs in March, the Labor Department’s preliminary data show. The figures are seasonally adjusted.
The Mayo Clinic said this week it would begin to furlough an unspecified number of employees in May and suspend planned construction and could see a $3 billion drop in revenue this year. Its operating loss totaled $124 million in March. Tenet Healthcare Corp., a national hospital chain, told analysts it has furloughed 500 employees and postponed its match to workers’ retirement accounts. Both attributed the moves to higher expenses from pandemic preparations and lost revenue from fewer nonessential medical procedures.
The $2.2 trillion economic-stimulus package, passed by Congress in late March, included several measures to funnel cash to hospitals and doctors. However, some disbursements will be paid out over time or must be repaid, such as an advance on expected future Medicare payments. Medicare has fronted providers $87 billion in advance payments, which are loans, as of Wednesday, Ms. Verma said.
The $100 billion fund, however, offered direct financial aid to hospitals, physician practices and other health-care providers and gave HHS wide latitude in how to distribute the money.
Hospitals and medical groups pressed HHS to distribute the money immediately and lobbied for competing methods to award funds. The American Hospital Association, a trade group, proposed $25,000 per hospital bed, with slightly more for hot spot hospitals. The Association of American Medical Colleges, which includes teaching hospitals, urged payouts for hospitals that typically treat complex patients and those with an influx of coronavirus cases.
HHS instead paid out the first $30 million based on past Medicare billings, excluding payments paid under Medicare managed care. The method won praise for its speed and ease from hospitals and industry consultants but also incensed some hospitals, doctors and medical groups that say need hasn’t been prioritized.
“It was a relatively easy way to get money out but a highly imperfect way too,” Eric Zimmerman, a health-care attorney with McDermott, Will and Emery.
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Ms. Verma said the agency sought to act quickly at the urging of health-care providers, “so using Medicare reimbursement was the fastest way because we have that data.”
Providers in hot spots will see a specific portion of coming funding, she said, but the next round will also aim to help providers in financial distress after closing down services to protect public health. “There are providers across the country that aren’t able to work,” Ms. Verma said.
Pediatricians, children’s hospitals and safety-net hospitals were largely left out of the first round because they get little from Medicare and instead see many patients with Medicaid, said trade groups representing the providers. Medicaid wasn’t considered in the initial distribution formula.
Boston Medical Center said it has so far cared for about 500 patients with Covid-19, with nearly 190 in the safety-net hospital as of Wednesday.
Kate Walsh, Boston Medical Center’s chief executive, said it received about $12.8 million of the first $30 billion in hospital relief. Meanwhile, the hospital is losing $5 million a week in revenue and is expected to end the fiscal year on Sept. 30 with an operating loss of at least $50 million, after accounting for federal aid, Ms. Walsh said. Covid-19 patients often require intense and lengthy hospital says. Hospitals in less hard-hit communities can recover from pandemic disruption more quickly.
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Ms. Walsh urged HHS to pay out funds to those in hot spots and those with larger shares of their beds dedicated to Covid-19 patients. She also urged HHS to consider needs of hospitals that typically care for greater numbers of patients covered by Medicaid, which typically pays lower rates than commercial insurance.
Yet more aid is urgently needed for all hospitals amid continued response to the pandemic and a continuing halt to scheduled procedures, the American Hospital Association said in a letter to Sec. Azar Thursday. “The resulting drop in volume and revenue is threatening the financial stability of many hospitals,” the letter said.
The remaining $70 billion target some to hot spots, which didn’t see prioritized funding in initial payouts, but HHS should include all hospitals in distribution of remaining funds, the letter said.
Marshfield Clinic’s operating income plunged by an estimated $70 million in March after it halted elective surgery and routine care, the nonprofit hospital system said. Its six hospitals across northern Wisconsin are mostly in rural areas and haven’t seen an influx of coronavirus cases, as hospitals elsewhere have, a spokesman said.
But traffic at its outpatient clinics plunged 70% after Marshfield halted elective procedures March 18, and hospital stays dropped 40%, Dr. Turney said.
Marshfield has also boosted its spending to prepare for expected coronavirus cases. The combined financial strain forced the system to furlough workers. Rural hospitals are major employers in their communities, according to Dr. Turney. “We support the grocery stores and the gas stations and the banks. It could have a big downward spiral.”
Marshfield Clinic received $18 million of the initial stimulus distribution, Dr. Turney said, “which is less than one cycle of payroll.”
Nearly 140 medical groups and associations sent an April 7 letter asking Mr. Azar, the HHS chief, to allocate a month of pay for doctors and other clinicians. “We urge the Department to provide immediate financial relief,” said the letter, signed by groups such as the American Medical Association and the American Academy of Emergency Medicine.
Write to Melanie Evans at Melanie.Evans@wsj.com and Stephanie Armour at stephanie.armour@wsj.com
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