A recent study by UC Berkeley’s Petris Center found that many of California’s smaller or rural hospitals are struggling to survive the COVID-19 pandemic because of lacking federal aid.
Written by Richard Scheffler, Daniel Arnold and Brent Fulton from campus’s School of Public Health, as well as rising campus senior Surina Khurana, who works for The Daily Californian, the report analyzes the distribution of hospital funding in California from Congress’ Coronavirus Aid, Relief and Economic Security, or CARES, Act. The findings show that this funding distribution may not be sufficient to support smaller or rural hospitals.
Beginning March 19 with an executive order from California Gov. Gavin Newsom, hospitals were barred from performing elective procedures in order to free space for the anticipated surge of COVID-19 patients. This resulted in a substantial loss of revenue for hospitals. Of the total revenue lost by California hospitals, only 24% is covered by CARES Act payments.
The CARES Act provided grants to hospitals covering 2% of their individual revenue, meaning larger hospitals received much more money, the study states. While this makes sense proportionately, it essentially rewards successful hospitals with more aid, according to Arnold, who is the research director of the Petris Center.
“There were other ways they could have done it. They could have done more of an analysis of what are the hospitals that are most financially unstable to begin with,” Arnold said. “It was more like a blind instrument of just 2% across the board.”
According to Arnold, research over the past two decades has shown that rural and smaller hospitals are at greater risk of closure than larger hospitals are.
Thus, the CARES Act seems to be helping hospitals that are already financially stable and inadequately supporting hospitals that need the aid most, according to Arnold.
“What hospitals are really at risk of closing?” Arnold said. “Perhaps a better formula would have been to direct money to those hospitals.”
The variance in revenue appears to benefit hospitals that have more patients on private insurance, rather than government-funded Medicare or Medicaid, Arnold added.
Prior studies have shown that hospitals with more market power can negotiate higher prices from private insurers, allowing them to earn greater revenue than smaller hospitals do, and in turn, get more aid from the CARES Act.
Arnold suggested that future aid packages should be adjusted to allocate more funding to those at higher risk of bankruptcy, which would likely be small or rural hospitals.
“Generally, the idea (of the study) is to show what’s happening now,” Arnold said. “If there are future payments, … we were hoping this would shed some light.”