The Provider Relief Fund distribution formula may have left some higher-need hospitals at a disadvantage, study finds

Critical access hospitals generally received lower allocations from a targeted-distribution pool compared with hospitals that had a better asset mix.

Provider Relief Fund (PRF) distributions during the early stages of the COVID-19 pandemic may have been “disproportionately” allocated to hospitals that were better off financially before the pandemic, according to a new study.

As published in JAMA Health Forum, researchers with the RAND Corporation examined 952 hospitals and found that critical access hospitals (CAHs) received lower levels of financial assistance from the “High-Impact Distribution” subset of the PRF compared with some other categories of hospitals. Among those were academic-affiliated hospitals that had higher levels of assets or higher endowments pre-pandemic

Of hospitals in the study, 24% received fewer than $5 million from the high-impact fund, while 8% received more than $50 million. Funding came from a $22 billion pool for more than 1,000 hospitals in areas that were hit especially hard by the pandemic. The allocation formula took into account a hospital’s number of COVID-19 cases and its Medicare volumes relative to hospitals nationwide.

In a blog post questioning the relevance of the study findings, the American Hospital Association asked why the study authors seemed to suggest that a hospital’s pre-pandemic financial situation should have been more of a factor in the allocation.

“The JAMA study authors question the approach of high impact payments going ‘disproportionately to those that eventually had the most cases,’ ignoring that this was the stated intent of these payments by the federal government,” wrote Ashley Thompson, AHA senior vice president of public policy analysis and development.

Characteristics associated with funding differences

The study authors found that a 10% increase in assets prior to the pandemic was associated with a 5.3% increase in payments through the high-impact pool. A 10% increase in endowment funds correlated with a 2.6% payment increase.

Even though the distributions were based on Medicare volumes, a high Medicaid payer mix was associated with higher levels of funding, compared with hospitals that had a high commercial payer mix.

Categories that received higher shares of funding included nonprofit hospitals (13% more) and teaching hospitals (42% more), while CAHs received 40% less than other hospitals.

It should be noted that CAHs also were eligible for a separate pool of funding targeted to rural hospitals during the early months of the pandemic. Totaling about $11 billion, those allocations were disbursed to nearly 9,000 facilities.

Next up for the PRF

A Phase 4 general distribution totaling $17 billion was announced in September, with the application period closing Nov. 3 (TINs needed to be submitted through the application portal by Oct. 26). HHS modified the formula to funnel more funds to smaller hospitals, which would include many CAHs.

In addition, CAHs were among the facilities eligible to apply for a new pool of $8.5 billion allocated to rural hospitals.