By Anastasia Gnezditskaia
The recent Senate stopgap funding bill that cut over $27 billion in aid for COVID-19 and monkeypox programs will impact hospitals in numerous negative ways.
In practical terms, the funding reduction will affect the availability of coronavirus tests for uninsured patients, which will no longer be free in many places. Hospitals and clinics will gradually stop receiving reimbursements for COVID testing and treatment, particularly for the uninsured. And funding cuts will make free COVID vaccines less available.
Hospitals will receive fewer federally-funded monoclonal antibody treatments, according to the statement by the Health and Human Services.
“We had to cut the supply of monoclonal antibody treatments that we had distributed in the past to every state. That distribution to each state was reduced by 35 percent,” said Secretary Xavier Becerra. “We’re also having to scale back our plans to purchase more doses of AstraZeneca’s preventive therapies for Americans who are immunocompromised. This increases the risk of having an insufficient supply of this treatment by the fall of this year.”
The impact on hospitals
COVID-related federal funding kept hospitals across the US afloat during the first year of the pandemic, making up for income loss even for those medical centers that were struggling previously, according to a study published in the JAMA Health Forum.
During the public health emergency, the total amount the federal government provided in subsidies to hospitals across the country, largely through the Provider Relief Fund and the Covid-19 Uninsured Program, was $175 billion, according to the Jama Report. This funding provided “an important lifeline to keep financially weak hospitals up and running,” said Ge Bai, a professor in the Bloomberg School’s Department of Health Policy and Management and the co-author of the report.
As a result of the funding efforts – especially for rural, and smaller hospitals, which often operate on the edge of financial viability – the average overall profit margin stayed stable or improved during the first year of the pandemic due to COVID-19-related subsidies.
From 2019 to 2020, the average overall profit margin increased from 3.7% to 7.2% for government hospitals, 1.9% to 7.5% for rural hospitals, and 3.5% to 6.7% for small hospitals.
So how will these rural and smaller hospitals fare when the funding dries up?
“Most health systems across the country are struggling to at least some degree financially as a result of increased labor and supply costs and stagnant reimbursement,” said John Budd, principal at ECG Management Consultants. “Even organizations like Mayo Clinic have posted large quarterly losses this year. While larger systems like Mayo will be able to weather these declines many smaller systems and rural hospitals may face continued or worsening financial distress.”
Smaller hospital systems, rural hospitals and those that serve low-income and uninsured patients across the country will thus face a much stronger impact compared to the larger systems.
This might result in an increasing number of hospital closures, already underway in the previous years, with 136 rural hospitals having closed between 2010 and 2021, according to UNC Cecil G. Sheps Center data.
Ups and downs of federal funding
Like many other forms of emergency funding, health emergency financing goes through boom and bust cycles. It all started when Congress poured funds into state and local public health departments in response to the pandemic, paying for masks, education campaigns to convince people to get vaccinated and contact tracers.
Yet, according to recent Harvard University study, “boom and bust” cycles of public health funding have “catastrophic and often hidden” costs for the health systems and states.
The initial larger funding inflow meant that money arrived ahead of the actual administrative guidance for hospitals and other healthcare players. This was particularly the case with a federal COVID-19 testing strategy, as testing-related agency guidance was not always transparent.
“Many of the leaders that I spoke to found that pandemic-related funds were dispersed ahead of the government having the appropriate administrative points hammered due to the acute need for urgent funding. This meant a lack of clarity around timelines and what may or may not be forgiven. I think organizations are better prepared for it now but this has certainly been learned through frustration over the last two years,” says Budd.
Last year, several Congressional lawmakers led by Democratic Senator Patty Murray of Washington attempted to create core public health funding, at $4.5 billion annually, in proposed legislation, aiming to avoid up-and-down cycles and to make funding more dependable.
Other sources of funding
With federal COVID relief funding on decline, smaller health systems have to come up with ways to make up the lost financing.
“Many rural hospitals are working with their state legislators to find alternative funding sources and are looking toward grant funding to help meet their needs,” said Budd.
The states of Georgia, Arizona and Alabama and several others have instituted state-level grant programs for rural hospitals. Georgia provided several million dollars in grants to rural hospitals this summer.
In addition, the USDA has issued rural healthcare grant programs of its own. One recovery program provides immediate relief to address the economic conditions arising from the COVID-19 emergency. Grant funds of up to $1 million must be used in relation to the COVID-19 pandemic and to support immediate health care needs, to help prepare for a future pandemic event, or to increase access to quality health care services.
Another impact program finances solutions to solve regional rural health care problems with grants of up to $10 million to be used in relation to the COVID-19 pandemic.
These grants will help smaller health systems to a degree, although the ultimate financial fallout has yet to be felt.
