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Fact Check: Are Health Systems Still Facing Major Losses After the Federal CARES Act?

August 13, 2020 / The Denver Post
Normal ECG line representing claims that are true

The Coronavirus Aid, Relief, and Economic Security (CARES) Act – passed in March 2020 – included federal funding for the nation’s hospital system to help close major budget shortfalls. But even with the federal support, hospitals in Colorado are still facing major losses due to COVID-19 and state-level funding cuts tied to the pandemic.

CLAIM:  The Denver Post reports that federal payments under the CARES Act “don’t come close to covering Colorado hospitals’ COVID-19 losses.”

FACT:

This is true. The Denver Post conducted interviews with health care providers after reviewing the local distribution of CARES Act funding.

Surging hospital capacity to be ready for the pandemic, the cost of treating COVID-19 patients, and a ban on other kinds of medical procedures to preserve hospital beds, equipment and protective gear have all contributed to mounting losses, health system officials explained. Even after the lifting of the ban on so-called elective procedures – which included many treatments for life-threatening illnesses including cancer and heart disease – patient volumes have been slow to recover.

The Denver Post compared CARES Act payments to healthcare providers and the losses they have experienced during March and April. For example: One hospital system that lost $176 million during those two months received $97.5 million. Another hospital, which specializes in treating children and therefore did not have many COVID-19 patients, still lost about $100 million and received just $22.1 million.

“Though the federal assistance has not fully covered our losses, we do appreciate the support,” said one hospital official in an interview. The newspaper reported that more federal support may be coming in future rounds of COVID-19 relief, with groups “representing hospitals, doctors and nurses [asking] Congress to appropriate at least $100 billion more to offset the costs of extra protective equipment, staffing and temporary facilities in areas dealing with outbreaks, and to compensate providers for reduced revenue from canceling procedures and seeing fewer patients.”

The Denver Post’s reporting is supported by a recent analysis on hospital finances nationwide from healthcare consultancy Kaufman Hall.

The analysis, published in July, included two forecasts: One that assumes “a slow but steady decrease in COVID-19 cases” and one that assumes “periodic surges in COVID-19 cases” through the end of 2020.

In both scenarios, hospitals are forecast to have negative margins. Under the most optimistic of conditions, those losses may range between -1% to -3% over the rest of the year. But under less optimistic conditions, the losses could dramatically worsen into a range of -4% to -11%.

The analysis concluded:

“For any organization, a positive operating margin is essential for long-term survival. Few organizations can maintain themselves for an extended period when total expenses are greater than total revenues.

For hospitals, positive financial margins allow them to invest in new facilities, treatments, and technologies to better care for patients, and to build reserves to meet unexpected expenses or revenue shortfalls. …

To date, the financial impact of COVID-19 has been significant, even with Federal emergency funding, and the financial damage is likely to continue. …

Now more than ever, hospitals will need support from governments, and will need to rethink their strategic–financial plans for what is likely to be a highly challenging environment even as COVID-19 cases diminish.”