NC hospitals made record profits during pandemic with taxpayer dollars, report says
North Carolina’s largest health care systems made record profits during the pandemic thanks to billions of dollars in relief funds, according to a report from the Department of State Treasurer.
Seven health systems — Duke Health, UNC Health, Novant Health, Atrium Health, WakeMed, Vidant Health and Cone Health — reported $5.2 billion in net profits in 2021, the report says. All but one of these health systems had higher net profits than before the pandemic.
Together, those health systems accepted $1.5 billion in federal relief funds and $1.6 billion in advanced payments for future procedures from Medicare, often at the expense of rural hospitals in need, the report says.
Spokespeople for several of the named health systems said federal funds did not come close to covering what the hospitals spent on pandemic expenses.
At a press conference Wednesday morning, state officials said many of the state’s large, wealthier hospitals could have weathered the pandemic without federal funds.
Ge Bai, a professor of accounting at the Johns Hopkins Carey Business School who worked on the analysis, said this report revealed that North Carolinians are hit with a “double whammy.” First, she said, taxpayer dollars are given to hospitals that aren’t in need of the financial support. Then, she said, those health systems use the money to engage in mergers and acquisitions, allowing them to raise health care costs.
The federal government distributed money from the health care bailout program based on hospital revenue — not hospital need — awarding most of the funds to large health care systems that already had billions of dollars in cash and financial investments.
“As the wealthy systems gobbled up the lion’s share of COVID relief dollars among North Carolina hospitals, rural and disadvantaged hospitals starved,” the report says.
When the large health systems accepted billions from Medicare, most of the hospitals had enough money to operate for more than half a year without making any revenue.
Meanwhile, independent physicians and representatives from rural counties said small health care providers are struggling to stay afloat, putting them at risk of being acquired.
Rep. Allen McNeill, a Republican from Randolph County, said his community has struggled over the last decade to keep its local hospitals open.
“Our large health care system is getting rich while rural hospitals are closed,” he said.
The report also argues that hospital spending on charity care did not keep pace with profits.
The report notes that a third of the state’s hospitals spent less on providing free care for under-insured patients in 2020 while some hospitals intensified practices like suing patients over medical debt and encouraging patients to open medical credit cards with high interest rates.
State Treasurer Dale Folwell called on the seven hospital systems to pledge to spend more on charity care and curb price inflation.
“You should care about the massive transfer of wealth that is going on in this state from the citizens to these multibillion-dollar nonprofits,” he said. “They made $12 billion on the backs of taxpayers.”
Atrium Health
Atrium Health in Charlotte received the largest sum of federal COVID relief funds of any health system in the state.
Still, the report found that the system reported $1.2 billion in net profits in 2021. The report also found that the system’s cash and investments grew 34% after the hospital accepted COVID relief, from $7 billion in 2019 to $9.4 billion in 2021.
Dan Fogleman, a spokesperson for Atrium Health, said the the relief funds Atrium received only covered a fraction of what the health system lost as a result of the pandemic.
“It’s troubling that health systems like Atrium Health are being attacked while we are still caring for communities that are recovering from the pandemic,” he said.
He said the funds allowed the system to avoid layoffs, pay for PPE, provide mass vaccinations and community testing, increase beds and ventilators, and keep rural hospitals in their system open.
In October 2020, Atrium Health finished a merger with Wake Forest Baptist Health and in July 2021 finalized a deal to acquire a Georgia hospital system.
The report noted that Atrium’s profits would have been even higher in 2021, had they not completed the $220 million merger.
“One of my co-researchers made a comment (about) this particular entity that it really resembled a hedge fund with a hospital attached to it,” said Marilyn Bartlett, a senior policy fellow at the National Academy for State Health Policy’s Center of Health System Costs.
Duke Health
In 2021, Duke Health reported a 41% net profit margin, which the report noted is higher than that of most industries, including tobacco and investment banking.
The majority of this profit came from profits on the stock market, private equity and taxpayer-funded relief, not patient care, according to the report.
Even though the pandemic halved the health system’s operating revenue, the report said Duke Health did not suffer financially due to successful investments in the stock market.
In a statement, Duke Health officials said while the relief funds helped ease the financial impacts of the pandemic, they have not completely offset the lost revenues and additional expenses associated with responding to the pandemic.
“It is worth noting that Duke Health did not lay off or furlough any staff members despite the significant disruptions in normal business operations and the extraordinary demands presented by the pandemic,” the statement read.
UNC Health
According to the report, UNC recorded a record net profit of $891.1 million and a net profit margin of 18% in 2021.
The health system received $145.4 million from COVID relief funds and $305 million in advanced payments from Medicare, the report said.
Alan Wolf, a spokesperson for the health system, said several of the rural hospitals in the UNC Health network would have struggled to remain open if not for federal pandemic relief funds.
“The Treasurer’s charged and misleading report paints a baseless picture of excess relief funds as ‘profit,’” he said.
Wolf also said the report “seems to intentionally obscure” the fact that UNC Health has paid the federal government back $305 million in advance Medicare payments.
Novant Health
Novant Health “thrived financially during the pandemic,” according to the report.
Between 2019 and 2020, the health system saw record growth in its investments. Even as patient revenue declined in 2020, the analysis found that the health system still made $382.2 million in net profits.
A spokesperson for Novant Health said the system used federal funds to open testing centers, vaccination clinics and respiratory assessment clinics. They said those funds also helped make up for the loss in care volumes seen during the pandemic.
“Like other hospitals throughout the country, we still are experiencing a healthcare crisis — one that stems from a strained and overwhelmed system dealing with staffing shortages in nearly all areas of care, driving labor expenses higher and profit margins lower,” the spokesperson said.
WakeMed
In 2021, WakeMed Health’s $136 million net profit was nearly three times the size of its 2019 profit, according to the report.
Out of the seven health systems named in the report, WakeMed Health received the least federal relief money.
Kristin Kelly, a spokesperson for WakeMed, said the pandemic affected almost every aspect of hospital operation and revenue.
“Operational funds were used to pay for higher cost resources like PPE and medical supplies, medications, COVID testing, vaccine infrastructure, and rising labor demands — all necessary expenses to support patient care, safety, and staff needs during the pandemic,” she said.
This story was originally published June 22, 2022 at 10:16 AM with the headline "NC hospitals made record profits during pandemic with taxpayer dollars, report says."
