From the early days of the pandemic, Congress and the Administration adopted a number of policies to ease financial pressure on hospitals and other health care providers. The infusion of funds responded to concerns about the potential fiscal impact of revenue loss due to fewer admissions and other services, coupled with higher costs associated with COVID-19. Nearly one year later, this brief describes the main sources of federal funds for health care providers and how those funds have been allocated. It also reviews what is known about the economic impact of COVID-19 on providers.

The $178 billion provider relief fund originally created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act has been a major source of financial assistance for hospitals and other health care providers. Through this fund, virtually all health care providers have now qualified for a general grant that amounted to at least 2% of their previous annual patient revenue. This approach used one formula to distribute funds across a diverse set of providers in a relatively short period of time, but it did favor some providers over others. As previous KFF analysis shows, hospitals with a larger share of revenue from privately insured patients received a disproportionately large share of these grants because private insurers tend to reimburse at higher rates than Medicare and Medicaid. Certain hospitalssafety net hospitals, childrens hospitals or hospitals that treated a large number of COVID-19 patients early in the pandemiclater qualified for additional grants totaling $37 billion (Figure 1). Rural providers also qualified for $11.3 billion in extra grants. In addition, $9.4 billion was allocated for skilled nursing facilities, which account for a disproportionate share of COVID-19 deaths.

As of February 10, 2021, about $26 billion remains in the fund. The Consolidated Appropriations Act, 2021 requires that 85% of remaining funds be made available to providers to help cover revenue losses or additional expenses due to COVID-19. This same law also changed the rules regarding how the provider relief funds can be used, making it easier for providers to keep their grants even if they were more profitable in 2020 than in previous years.

In addition to the Provider Relief Fund, the federal government has provided financial support to health care providers in response to the pandemic through other programs and policies.

Together, these programs and policies were adopted early in the COVID-19 pandemic in response to the dramatic drop in health care consumption and revenues. Recent studies show that health care spending has since rebounded and overall health spending was up slightly in the third quarter of 2020, as compared to 2019. Year-to-date health services spending was down by 2.4% as of the third quarter of 2020 (relative to year-to-date spending as of third quarter in 2019). Changes in year-to-date spending varied by type of service, with physician office revenue down 4.0% and hospital revenue down 1.7%.

The federal financial assistance for providers has helped them cope with the financial impact of the pandemic. With year-to-date hospital revenue down by 1.7% by the third quarter of 2020, the CARES ACT grants, based on a minimum of 2% of patient revenue, would offset revenue losses for the average hospital. Reports in the press and earnings statements for hospitals suggest that some hospitals have done well and were profitable in 2020. Analysis from the Medicare Payment Advisory Commission found that new federal funds made available to skilled nursing facilities and health professionals likely offset a majority of their financial losses caused by COVID-19.

When hospitals and other health care providers experienced steep drops in revenue early in the pandemic, Congress stepped in with an infusion of funds to bolster these providers. Health care spending has now largely stabilized, though health care providers may still be facing increased expenses to respond to the pandemic and remain a sympathetic constituency. However, many other parts of the economy continue to suffer, and COVID-19 is still negatively impacting the labor market. This suggests that it may be time to shift more resources to help individuals weather the COVID-19 pandemic, creating significant resource needs elsewhere as well.

This work was supported in part by Arnold Ventures. We value our funders. KFF maintains full editorial control over all of its policy analysis, polling, and journalism activities.

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Funding for Health Care Providers During the Pandemic: An Update - Kaiser Family Foundation