The Biden administration used billions in hospital Covid-19 funds to pay drugmakers

WASHINGTON — The Biden administration quietly took nearly $7 billion from a fund meant to help hospitals and clinics affected by the pandemic and used it to buy Covid-19 vaccines and therapeutics, according to a document obtained by STAT.

The move is similar to the Trump administration’s decision to divert $10 billion from the same fund to Operation Warp Speed, which STAT reported exclusively in March.

Now, the hospital money, known as the Provider Relief Fund, has run dry, and has no new money left to allocate, according to the agency that administers it. Providers have only been able to submit requests for expenses incurred through March 2021 — before both the Delta and Omicron surges battered the health care system.


With the new $7 billion shift, which has not been previously reported, the diversion to drugmakers totals nearly $17 billion, or roughly 10% of the overall money Congress allotted for the fund for hospitals and physician practices. Congress set aside that money to help health care providers pay for pandemic-related expenses including staffing, personal protective equipment, care for uninsured patients, and vaccine distribution.

The new details about the Biden administration’s spending decision come as hospitals across the country are struggling with a crushing surge of Covid-19 hospitalizations and deaths due to the Omicron variant. And their representatives in Washington are furious.


“We would be deeply troubled and frustrated to find out that billions of dollars have been siphoned off from the fund, especially since no funds have been allocated to the Delta or Omicron surges,” American Hospital Association executive vice president Stacey Hughes said.

Though some large, wealthy, hospitals have boasted strong balance sheets recently, the hospital sector is diverse. Not all facilities have mammoth rainy day funds to weather surge after surge, and staffing costs are skyrocketing.

A spokesperson for the Department of Health and Human Services said using the money to pay drugmakers for contracts was a reasonable use of the hospital and clinic funds because the vaccines and therapeutics purchased were given to providers at no cost.

“All Provider Relief Fund dollars have been used for Provider Relief Fund purposes,” the spokesperson said.

However, there is no transparency into which contracts the money was used for, and where those products were distributed.

Government watchdog reports offer clues to the timeline of the spending. As of March 1, 2021, $10 billion had been used to pay drugmakers. By Aug. 31, that number jumped to $14.8 billion. And per the document obtained by STAT, the total is $16.7 billion through Dec. 23.

HHS says explicitly on its website that any grants that providers decide to send back to the federal government, for whatever reason, would be given back out to providers. And hospitals such as the Mayo Clinic did indeed return about $9 billion in grant funds, after their financial performance rebounded faster than expected.

At least some of that returned money was instead used for vaccine and therapeutics contracts, an HHS spokesperson said.

Beyond just hospital funds, the Biden administration is also planning to divert another $1 billion in money that lawmakers specifically set aside for Covid-19 testing activities. That funding will instead go to buy more vaccines and therapeutics, STAT has learned.

Congress set aside about $97 billion to bolster testing and contact tracing throughout the pandemic, and only about $4 billion of that money is unallocated, according to a summary of materials provided to Sens. Richard Burr (R-N.C.) and Roy Blunt (R-Mo.) that STAT obtained.

The revelations come as lawmakers are aiming to pass a government funding package by Feb. 18, and debating whether more Covid-19 relief funds should be added to the package. The AHA has asked lawmakers for an additional $25 billion in provider relief funds, and an independent group of 700 hospitals asked for an additional $20 billion. Safety-net hospitals are asking the administration to set $20 billion aside for workforce costs.

The White House has so far taken the position that it does not need further Covid-19 relief funds, and has not yet made a request from Congress, though a future ask is possible.

“In terms of money, we have the money that we need to fight Omicron.  As the President has always said, we’ll do everything that we need to do to beat this pandemic.  And if we do need more money at — more funding, at some point, we will request that money,” White House Coronavirus Response Coordinator Jeff Zients said on Jan. 12.

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