Jefferson, Penn receive fraction of federal coronavirus stimulus cash to Pa. despite outsize impact

This story was produced as part of a joint effort among Spotlight PA, LNP Media Group, PennLive, PA Post, and WITF to cover how Pennsylvania state government is responding to the coronavirus. Sign up for Spotlight PA’s newsletter.

HARRISBURG — The University of Pittsburgh Medical Center got nearly twice the federal stimulus aid of its closest competitors, new numbers show, despite the fact that many of its hospitals are in parts of the state that were not among the hardest hit by the coronavirus.

The enormous handout to the state’s largest hospital chain is the result of a federal formula that rewarded companies based on revenue and medical claims, while not taking into account their financial reserves or how badly their businesses were damaged by the pandemic.

UPMC has so far received $228 million, broken up into grants to more than 30 of its hospitals, according to federal data compiled by Good Jobs First and analyzed by Spotlight PA and WITF.

» READ MORE: Coronavirus has cut deep into Philly-area hospitals’ finances

A few of those grants were for hospitals in Allegheny County, which has seen more than 1,800 COVID-19 cases, as well as hospitals in moderately affected parts of central Pennsylvania. Other multimillion-dollar grants went to hospitals in places like Blair, Erie, and Mercer Counties, which have largely been spared from the virus that has sickened more than 70,000 Pennsylvanians.

In contrast, Penn Medicine received almost $130 million split over eight grants to hospitals in hard-hit areas in and around Philadelphia, which has reported 17,900 cases — nearly 10 times that of Allegheny County.

Philadelphia-based Jefferson Health received the second-highest amount — $135 million for hospitals in Philadelphia and in New Jersey, which has seen 153,000 COVID-19 cases.

UPMC has said it was relatively unaffected by the virus, noting in mid-May “that only 2% percent of the system’s 5,500 beds were occupied by COVID-19 patients and the number of new COVID-19 patients was declining,” according to PennLive.

Officials have used those numbers to justify the company’s decision to continue performing lucrative elective medical procedures while its rival health systems largely followed state guidance to halt those procedures due to the emergency.

As the virus spread across Pennsylvania, UPMC refused to stop performing some elective procedures despite a request from Gov. Tom Wolf — and from nearly 300 of its own physicians.

» READ MORE: Pennsylvania is sitting on billions in coronavirus relief money. What’s the holdup?

Although the company was able to avoid some of the worst economic effects of the virus, such as furloughing employees, it “certainly lost significant patient volumes and revenue during that period, as did all other hospitals,” said UPMC spokesperson Susan Manko.

The CARES Act funding was explicitly designed to provide relief to health-care providers, and was allocated “strictly proportional to providers' share of net patient revenue and the amount of past Medicare and Medicaid billings,” Manko noted.

The government also targeted funds to rural hospitals, including UPMC’s facilities in places like Somerset, Bedford, and Kane.

The disconnect between how much funding health systems got and how much they were affected by the coronavirus points to a hastily devised federal funding plan that ended up giving larger payments to companies that have more private insurance revenue, greater margins, and less uncompensated care, according to the Kaiser Family Foundation.

At a time when many sectors of the economy are in free fall, the formula also didn’t consider a company’s financial reserves, often rewarding those that have significant investments.

That includes UPMC, which owns a $1.5 billion venture capital and commercialization arm called UPMC Enterprises, a publicly traded company called Evolent Health, and roughly $5 billion in other investments in the U.S. and overseas, according to its 2018 federal filing for tax-exempt organizations.

The federal formula also gave big bailouts to for-profit companies. Mechanicsburg-based Select Medical Holdings, which is publicly traded, got $93.7 million. That was the highest-dollar single grant for any company based in or operating in Pennsylvania, and the 37th-largest CARES grant out of more than 10,000 nationwide.

That money came to Select Medical without its executives ever asking for it, said spokesperson Shelly Eckenroth. Rather, it was paid out “based on past Medicare fee-for-service revenue,” Eckenroth said.

Select Medical wasn’t the only Fortune 500 health-care company from Pennsylvania to receive assistance. King of Prussia-based Universal Health Services also drew $122 million in CARES money, split between 40 grants funneled to its facilities across the country.

The money came with few requirements. The administrator of the federal Centers for Medicare and Medicaid Services, Seema Verma, described the stimulus as “no strings attached,” though there are some broad guidelines on providing testing and help for COVID-19 patients.

Though big payouts to wealthy companies might raise eyebrows, the aid is one vital way to lessen the pandemic’s “unprecedented” financial havoc, said labor economist Mark Price.

However, with little federal oversight, it’s up to states to make sure health systems use the money to help people — and seek to reappropriate any funds that were misused.

“That’s the only way you’re going to hold them accountable,” Price said. “You can’t really depend on them to do the right thing.”

Price said that what happens in the next six months will have a long-lasting impact on the health of the economy. The economic fallout — and whether there will be another surge in people sick with the virus — remains unknown.

“The real difficulty here is the uncertainty posed by the virus, more than anything else.”

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