DaVita, a dialysis company, has said it isn’t sure how to use federal relief funds it recently received.
Photo: jeff kowalsky/Agence France-Presse/Getty ImagesHealth-care companies say they are unable to use hundreds of millions of dollars of federal pandemic-relief funds already disbursed, citing uncertainty about rules governing the use of the $30 billion package.
Health care is one of several industries that received immediate infusions of cash from the federal treasury. But the government’s desire to quickly help those in desperate need might have resulted in unexpected inefficiencies, such as giving hundreds of millions of dollars to companies that might misapply the assistance or don’t qualify for it. Some could find they have to return it.
Encompass Health Corp., which operates 133 hospitals and 83 hospice facilities, said in a regulatory filing that it placed the $213 million of stimulus funds it received in a special account, where it remains untouched despite a decline in new patients over the past month.
“Several of the terms and conditions,” the company said in a filing Thursday “are unclear and pose interpretation questions the Company is attempting to resolve, including specifics on the allowable uses for the relief funds.”
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Until it receives better guidance from the government, it doesn’t plan to spend the money, Encompass said. The company didn’t reply to requests for comment.
Encompass and other hospitals are facing a financial crunch. Their costs for workers’ protective gear and for treating patients with Covid-19—the disease caused by the new coronavirus—are up while deferrals of elective surgeries have cut deeply into many hospitals’ revenue.
Three days after the $30 billion was delivered via direct deposit to recipients’ accounts, the federal government issued a 10-page document listing the terms and conditions for how it could be used. Generally, the money was to “be used to prevent, prepare for, and respond to coronavirus” and to cover health-care expenses and make up for lost revenue. The rules require providers to not seek out-of-pocket payments from Covid-19 patients above what would normally be sought by an in-network provider.
The federal relief funds are grants, not loans, but recipients needed to agree to use the money in certain ways. For instance, the funds can’t be used to pay salaries above a certain level, and providers must document their costs thoroughly. If they aren’t able to meet the guidelines, recipients are required to return the stimulus money by mid-May. Some hospitals are charging ahead to spend it and hoping they are interpreting rules appropriately.
“I plan to read the rules again, but the intent seems pretty clear,” said Brian Williams, chief executive of Labette Health, a 99-bed hospital in Parsons, Kan., which he said received $1.65 million. He said it was the first time dealing with funds directly from the Department of Health and Human Services.
“I plan to use it to keep 100% of my hospital staff employed. That covers basically one payroll,” he said.
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Several large companies that operate long-term care facilities and other outpatient services expressed confusion about how to spend the funds.
DaVita Inc. said it wasn’t sure if it would be able to keep all of the $240 million it received. The Denver-based company, which owns and operates a network of more than 2,700 outpatient dialysis centers, said it might need to return some of the money. It all depends, the company said, on “the guidelines and rules of the program, which have not yet been announced.”
DaVita hasn’t provided an update since the government issued its 10-page guidance. “Our hope is that the CARES Act works as intended, to help defray the significant health care-related expenses and lost revenue attributable to Covid-19,” said Courtney Culpepper, a DaVita spokeswoman.
Federal officials didn’t respond to requests for comment. In a call with reporters on Monday, Seema Verma, head of the Centers for Medicare and Medicaid Services, said the government’s priority with the $30 billion was to “getting dollars out very quickly.” She has acknowledged in the past the method for determining which companies received funds was a blunt tool intended to emphasize speed over precision.
Some of the larger investor-owned companies declined to comment on how they were using the money. A spokeswoman for Tenet Healthcare Corp. said it planned to discuss how it was using the funds in early May. HCA Healthcare Inc. said it would address the funds on its earnings call Tuesday morning. An analyst with investment bank Jefferies estimated those two companies received a combined $900 million, based on the amount of Medicare payments they received last year.
The funds were parts of the first $30 billion from $100 billion in federal pandemic relief for health-care providers. Recipients said they received direct deposits on April 10. The funds were mostly welcomed enthusiastically, as hospitals and health-care providers have been stung by the one-two punch of needing to shut down profitable services such as elective surgery and the high costs of caring for patients with Covid-19.
To get the money from the U.S. Treasury to health-care providers quickly, the government gave out funds based on 2019 Medicare billings. Hospitals in areas hit hard by the pandemic, such as New York City and Detroit, said that they didn’t receive enough.
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Write to Russell Gold at russell.gold@wsj.com
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