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Dr. Tom Inglesby, director of the Center for health Security at Johns Hopkins University, talks with USA TODAY health policy reporter Jayne O’Donnell.

USA TODAY

Struggling hospitals and those hardest hit by COVID-19 should get more federal funding than nonprofit hospital systems with large endowments, patient safety advocates and other critics say.

An analysis for USA TODAY by OpenTheBooks.com shows the 20 nonprofit hospitals ranked by investments reported more than $116 billion in investments, including endowments. And although flush with money, critics say the tax-exempt systems also failed to adequately invest in basic emergency planning before the pandemic.

“Many large hospitals already have the ability to reprogram or redirect funds,” said Adam Andrzejewski, founder and CEO of Open the Books, a nonprofit transparency advocacy group. “They need to explain to patients and front-line health workers why they have or have not done so.” 

The first $30 billion in COVID-19 hospital assistance money was based on Medicare billings, so those 20 nonprofit systems ranked by Open the Books were among the hospitals receiving the biggest share.

The federal government’s decision this month to send $22 billion to rural hospitals and those hardest hit hardest by COVID-19 partially satisfied critics who charge Washington is rewarding wealthy tax-exempt hospitals that planned poorly for viral emergencies. But as nearly $50 billion more is about to be divvied up, advocates for struggling hospitals say help for well-endowed nonprofit hospital systems should be scrutinized. 

“The money going to hospitals is not free, it comes off the backs of American workers, over 10% of whom are unemployed,” says Dr. Marty Makary, a Johns Hopkins University public health professor, patient safety advocate and author. “The hospitals who need it should be prioritized, not those with billion-dollar endowments and large cash reserves that provide little charity care. Not all hospitals function similarly.” 

A report out Tuesday by the American Hospital Association estimated a total financial impact of $202.6 billion in losses from COVID-19 expenses and lost revenue for hospital systems from March 1 to June 30 of this year, an average of over $50 billion in losses a month.

“Many hospitals are still on the brink,” Rick Pollack, AHA’s CEO said in a statement. “We need further support and resources to ensure that we can continue to deliver the critical care that our patients and communities are depending on while also ensuring that we are prepared for the continuing challenges we face from this pandemic as well as other potential emergencies.”

Last month, AHA announced a collaboration between hospitals and health systems to lend ventilators and ventilator supplies to hospitals in need. Spokeswoman Marie Johnson said members are discussing whether the agreement will continue beyond this year.   

Open the Books updated its 2019 analysis of the government payments and assets of the 82 largest nonprofit hospitals and found net assets for the top 20 hospital systems rose from $172.6 billion between 2017 and 2018 to $183.7 billion between 2018 and 2019. That’s an increase of $11.1 billion and a year-over-year increase of more than 6%.  

Andrzejewski said the research shows “a gross misapplication of health care resources.”

“Previous to the pandemic, financial reserves soared and executive compensation was at an all-time high,” he said. 

Avik Roy, president of The Foundation for Research on Equal Opportunity, said he hopes “the next round of funds is more closely targeted to the hospitals that are suffering because they’re doing the right things,” not “giant regional hospital monopolies with high prices and strong balance sheets.” 

Because the initial $30 billion was needed so quickly, it had “only a loose relationship to which hospitals actually needed the money,” said Roy, a senior aadviser to the Bipartisan Policy Center. 

Dan Mendelson, who founded consulting firm Avalere, has had hospital clients of all sizes. He agrees their financial situations should be considered by Washington. 

“It is really important money is targeted to areas of high need and distributed in a way that is sensitive to the fact that some hospitals have significant assets and others don’t,” he said. 

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As many hospitals cut staff and more than 9,200 health care workers have been diagnosed with COVID-19, Dr. Kevin Kavanagh, founder of the patient safety group health Watch USA, said the government shouldn’t bail them out after they “put us all at risk.”

He calls it “a step in the right direction” that rural hospitals and those with the most COVID-19 patients were getting money Friday, but said “nonprofit facilities with net assets in the billions should have to first leverage these assets before receiving public funds.” 

Thomas Meier, treasurer of the Kaiser Foundation Hospital and health Plan, the insurance arm of Kaiser Permanente, said the CARES Act funds “will promote stability in the health care system and be a critical part of how we can continue to operate and deliver care during this unprecedented time.”  

While Meier didn’t comment directly on whether the system would tap reserves, he noted the CARES Act won’t cover all of Kaiser Permanente’s costs, which it will manage accordingly. Kaiser Permanente ranked sixth in investments with $8 billion. 

While relieved by the latest disbursement, groups representing small, often rural and public hospitals urge regulators continue to consider need and how much hospitals do for communities in return for their nonprofit status. 

“Every available dollar possible should go to rural hospitals as it will be a much larger dollar in three to six months,” said Jimmy Lewis, CEO of HomeTown health, which represents rural hospitals in Georgia. Compared to funds for hospitals with hefty investments, “it’s going to be more impactful.”

The public pressure goes beyond current funding. Policies should require the wealthiest nonprofit hospitals use more of their assets to help other hospitals with emergency preparedness, some say. 

“There are hospitals that are so big with endowments that they became cash harbors at the expense of a pandemic plan,” said Lewis. “They thought about a pandemic, but not a real pandemic like this.”

Hospitals’ large investment portfolios are often used to fund operations, building projects and new technology. Endowments only rarely can be spent on anything a hospital chooses and donors typically “stipulate that only the appreciation on assets can be used by the hospitals to fund ongoing operations,” said Mendelson.

Lewis said hospitals with large endowments should be required to maintain stockpiles of medical equipment that can be used in emergencies to protect patients around their states who are served by struggling smaller hospitals.

“Just in time” ordering of supplies by hospitals, which is recommended for efficiency, led to most having just a week or so stock of masks and other protective equipment. Hospitals started moving toward just in time ordering as profit margins shrank, costs rose and reimbursement rates were cut. Keeping a limited amount of supplies on hand lowers costs. 

“There was tremendous pressures on hospitals to contain costs and contain overhead so they worked diligently … to only stock the inventory necessary,” said Chip Kahn, president and CEO of the Federation of American Hospitals. “It’s not that they didn’t do emergency planning.” 

Why not ‘tap reserves’?

Dr. Tom Inglesby, director of Johns Hopkins University’s Center for health Security, said the Center for Medicare and Medicaid Services could “require and support hospitals” to share supplies that supplement the federal government’s Strategic National Stockpile for public health emergencies. That stockpile was quickly depleted.  

“Hospitals can make investments on their own, they don’t need to wait for the government to ask them to do this,” said Inglesby. “But given that this is a black swan event, if we want to build capacity in the country for that, we need policy that encourages or requires hospitals to have more capacity.”

Dr. Kavita Patel, a Washington, D.C., primary care physician who was a health policy official in the Obama administration, also questions funding well-heeled hospitals that planned poorly. 

“Hospitals that didn’t have the things they needed that are now getting more money, you have to ask, ‘What are they going to do with it?'” said Patel. “You shouldn’t be able to say you can’t tap into your reserves.”

Other hospital systems declined to comment on whether or if they would tap their reserves, 

“The relief provided by the CARES Act for healthcare providers has been critical to ensure financial stability during this unprecedented time,” Ascension, ranked No. 1 with $19 billion in investments, said in a statement. “By suspending elective surgery and other procedures in order to be ready to handle the crisis, we and other providers have been able to put our full attention and resources to ‘flattening the curve’ as we work to beat this pandemic and give our country a chance to return to normal.”

Candie St. Jean is a nurse case manager at Cooley Dickinson hospital in western Massachusetts, where the union has been fighting to have the ratio of nurses to patients reduced. The hospital is owned by Boston-based Partners Healthcare, which is ranked third by Open the Books with more than $9 billion in investments.

When the coronavirus hit the state, St. Jean and other union representatives were negotiating a new contract with Partners and requested a tool to help determine proper staffing levels based on the severity of patents’ conditions. Instead, a plan was developed for how many ICU beds were possible even though “there were never enough nurses to care for patients if we had gotten to that number,” said St. Jean.  

St. Jean said the ratio can be as high as six or seven patients to one nurse at night on the medical/surgical unit where COVID-19 patients are moved when they leave the intensive care unit.  

In a statement, Cooley Dickinson said the hospital “is appropriately staffed to care for all patients, both now during the COVID-19 crisis and previously. Staffing patterns are comparable to the excellent hospitals throughout our state.” 

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“Our health care system is using its financial resources to protect our health care workers against layoffs or furloughs so that they are able to care for patients,” Partners spokesman Rich Copp said in an email. “We have invested in tens of millions of dollars in personal protective equipment for our health care workers, and we have launched multiple COVID-related initiatives in the communities hardest hit by the pandemic, including added testing and clinics.”

All hospitals need more money as losses will be higher than federal funding to date will cover, Copp and Kahn of the Federation of American Hospitals agree.

“The numbers speak for themselves. It doesn’t matter what kind of hospital you’re talking about, public, nonprofit or a tax-paying hospital,” said Kahn, whose association represents for-profit health systems. “All hospitals are suffering reductions in service that would be an economic impossibility to contend with without the (government) assistance.”

Follow O’Donnell on social media @JayneODonnell or email jodonnell@usatoday.com

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