Senators Question Use of COVID-19 Relief Funds by Private Equity Companies

Strategic Insights -

Senators led by Tammy Baldwin are voicing concerns over the allocation of COVID-19 relief funds by the Department of Health and Human Services (HHS) to private equity companies, which have reportedly used the funds to pay dividends, management fees, and bonuses to executives while cutting pay, furloughing, or firing frontline health care workers. The Senators are asking HHS Secretary Alex Azar to prohibit the use of these funds for such purposes and to require all recipients to provide documentation accounting for all payments made to executives and private equity owners. They also want recipients to provide information on the use of funds, including expenses on personal protective equipment, supplies, and wages.

Key Takeaways:

  • The Public Health and Social Services Emergency Fund, established by the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act, has provided $175 billion in relief for health care providers to combat the COVID-19 pandemic.
  • A Bloomberg News analysis found that private equity companies have borrowed $1.5 billion through the CARES Act programs, despite having billions in cash on hand.
  • The analysis identified Apollo Global Management and Cerberus Capital Management as two private equity companies that have received significant loans: $500 million and $400 million, respectively.
  • The Senators are concerned that these funds are being used to pay dividends, management fees, and bonuses to executives while cutting pay, furloughing, or firing frontline health care workers.
  • The Senators are asking HHS to require all recipients to provide documentation accounting for all payments made to executives and private equity owners.
  • The Senators also want recipients to provide information on the use of funds, including expenses on personal protective equipment, supplies, and wages.
  • The Senators are led by Tammy Baldwin, with signatories including Richard Blumenthal, Sherrod Brown, Kamala Harris, Patrick Leahy, Ed Markey, Chris Murphy, Bernie Sanders, and Elizabeth Warren.
  • The Senators believe that the use of these funds to pay dividends and bonuses is inconsistent with the goal of the Fund and is unacceptable.

Statistics:

  • $175 billion: Amount of relief provided to health care providers through the Public Health and Social Services Emergency Fund.
  • $30 billion: Amount of Provider Relief Funds allocated based on 2019 Medicare reimbursements.
  • $20 billion: Amount of supplement allocated to reflect 2018 total reimbursements.
  • $50 billion: Additional funds announced for targeted distribution to providers in areas significantly impacted by the COVID-19 outbreak.
  • $1.5 billion: Amount borrowed by private equity companies through the CARES Act programs.
  • $500 million: Amount received by Apollo Global Management.
  • $400 million: Amount received by Cerberus Capital Management.

Sources:

  • https://www.baldwin.senate.gov/imo/media/doc/Senators%20to%20HHS-%20Provider%20Relief%20Fund%20Distribution%20Concerns%20signatures.pdf
  • Bloomberg News analysis
  • HHS website
  • New York Times report
  • Letter from Senators to HHS Secretary Alex Azar