A multibillion-dollar institution in the Seattle area invests in hedge funds, runs a pair of venture capital funds and works with elite private equity firms like the Carlyle Group.
But it is not just another deep-pocketed investor hunting for high returns. It is the Providence Health System, one of the country's largest and richest hospital chains. It is sitting on nearly $12 billion in cash, which it invests, Wall Street-style, in a good year generating more than $1 billion in profits.
And this spring, Providence received at least $509 million in government funds, one of many wealthy beneficiaries of a federal program that is supposed to prevent health care providers from capsizing during the coronavirus pandemic.
With states restricting hospitals from performing elective surgery and other nonessential services, their revenue has shriveled. The Department of Health and Human Services has disbursed $72 billion in grants since April to hospitals and other health care providers through the bailout program, which was part of the coronavirus economic stimulus package. The department plans to eventually distribute more than $100 billion more.
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So far, the money is flowing in large part to hospitals that had already built up deep financial reserves to help them withstand an economic storm. Smaller, poorer hospitals are receiving tiny amounts of federal aid by comparison.
CASH RESERVES
Twenty large recipients, including Providence, have received a total of more than $5 billion in recent weeks, according to an analysis of federal data by Good Jobs First, a research group. Those hospital chains were already sitting on more than $108 billion in cash, according to regulatory filings and the bond-rating firms S&P Global and Fitch. A Providence spokeswoman said the grants helped make up for losses from the coronavirus.
Those cash reserves come from a mix of sources: no-strings-attached private donations, income from investments with hedge funds and private equity firms, and any profits from treating patients. Some chains, like Providence, also run their own venture capital firms to invest their cash in cutting-edge startups.
Many of these hospital groups, including Providence, are set up as nonprofits, which generally don't have to pay federal taxes on their billions of dollars of income.
Hospitals that serve poorer patients typically have thinner reserves to draw on.
Even before the coronavirus, roughly 400 hospitals in rural America were at risk of closing, said Alan Morgan, chief executive of the National Rural Hospital Association. On average, the country's 2,000 rural hospitals had enough cash to keep their doors open for 30 days.
After the coronavirus stimulus package was passed in March, hospital industry lobbyists reached out to senior Health and Human Services officials to discuss how the money would be distributed.
LOBBYING FOR FUNDS
Representatives of the American Hospital Association, a lobbying group for the country's largest hospitals, communicated with Alex Azar, the department secretary, and Eric Hargan, the deputy secretary overseeing the funds, said Tom Nickels, a lobbyist for the group. Chip Kahn, president of the Federation of American Hospitals, which lobbies on behalf of for-profit hospitals, said he, too, had frequent discussions with the agency.
The department then devised formulas to quickly dispense tens of billions of dollars to thousands of hospitals -- and those formulas favored large, wealthy institutions.
One formula based allotments on how much money a hospital collected from Medicare last year. Another was based on a hospital's revenue. While Health and Human Services also created separate pots of funding for rural hospitals and those hit especially hard by the coronavirus, the department did not take into account each hospital's existing financial resources.
"This simple formula used the data we had on hand at that time to get relief funds to the largest number of health care facilities and providers as quickly as possible," said Caitlin Oakley, a department spokeswoman. "While other approaches were considered, these would have taken much longer to implement."
Hospitals that serve a greater proportion of wealthier, privately insured patients got twice as much relief as those focused on low-income patients with Medicaid or no coverage at all, according to a study this month by the Kaiser Family Foundation.
'PLAY MONEY'
"If you ever hear a hospital complaining they don't have enough money, see if they have a venture fund," said Niall Brennan, president of the nonprofit Health Care Cost Institute and a former senior Medicare official. "If you've got play money, you're fine."
In a letter this month to the Department of Health and Human Services, two House committee chairmen said the Trump administration appeared to be disregarding Congress' intent in how it was distributing the aid.
"The level of funding appears to be completely disconnected from need," wrote Reps. Frank Pallone Jr., D-N.J., and Richard Neal, D-Mass.
It is the latest instance in which enormous and hastily enacted federal bailout programs have benefited those who don't appear to need the money. A package of $170 billion in federal tax breaks, for example, will go overwhelmingly to many of the country's richest people and biggest companies. A program to rescue small businesses initially directed hundreds of millions of dollars in loans to publicly traded companies while many smaller firms were frozen out.
That pattern is repeating in the hospital rescue program.
"If you accumulated $18 billion and you are a not-for-profit hospital system, what's it for if other than a reserve for an emergency?" said Dr. Robert Berenson, a physician and a health policy analyst for the Urban Institute, a Washington research group.
Business on 05/27/2020