The $ 175 billion Provider Relief Fund is already under close scrutiny from lawmakers. House Democrats are investigating complaints that the taxpayer dollars were rushed out the door without proper oversight and disproportionately benefited large, well-funded hospitals like the Cleveland Clinic, one of the nation’s wealthiest hospital chains, which received more than $ 150 million in provider relief funds.
Cleveland Clinic charted its expansion into a booming hospital chain in the late 1980s by relying on advice from McKinsey — though a company spokesman did not answer questions about whether the firm continues to work for the hospital.
POLITICO identified 10 hospitals and chains that have had contracts with McKinsey in recent years and received federal relief funds. But the actual number of hospitals that have worked with the firm and are receiving the federal money could be much larger, because hospitals only have to list a small group of top contractors on public tax filings.
The Provider Relief Fund contract is one of at least three federal contracts awarded to McKinsey in recent weeks related to coronavirus. Ultimately, the three contracts will be worth between $ 13.5 million and $ 34 million, records show.
One hospital chain that has paid millions of dollars to McKinsey is California-based Dignity Health and its parent company CommonSpirit Health, which have collectively received at least $ 211 million from HHS.
Dignity and its parent company — now the second-largest nonprofit chain of hospitals in the U.S. — have hired McKinsey for multiple projects in recent years. In 2016 as Dignity and Catholic Health Initiatives explored a merger, McKinsey advised on “strategic, cultural, financial, legal, operational, and structural” issues, according to a 2018 report from the California Attorney General. (In 2015, CHI paid McKinsey $ 17 million in consulting services, according to an IRS 990 tax filing.)
CommonSpirit Health then paid McKinsey more than $ 26 million in 2017 in management and consulting services, according to a 990 form. This year, McKinsey featured CommonSpirit Health’s CEO in a report on how African-Americans have been hit hard during the Covid-19 pandemic. CommonSpirit didn’t respond to requests for comment on whether they still work with McKinsey.
Another provider that received HHS money and used to work with McKinsey is Intermountain Healthcare, the largest healthcare provider in Utah, which has in the past used McKinsey to work on its supply chain. Intermountain received more than $ 98 million in provider relief funds. McKinsey also featured Intermountain president and CEO Marc Harrison in a 2017 report on the future of healthcare. An Intermountain spokesperson said McKinsey no longer does any work for the company.
SSM Healthcare, a not-for-profit health care system which operates in the Midwest, received almost $ 118 million from the coronavirus bailout fund and has paid McKinsey more than $ 8 million since 2013, tax records show. SSM would not comment to POLITICO about its contracts with McKinsey. But a 2017 presentation by a regional SSM president said McKinsey helped the company with “revenue cycle, labor management and supply chain” issues.
And the Pennsylvania-based Geisinger hospitals received $ 60 million in relief money, while their parent company hired McKinsey in 2016 to help boost the hospital’s margins while increasing its care — part of what the hospital called a “next-generation operating model” in a 2017 public bond offering. Geisinger paid more than $ 21 million to McKinsey in 2017, according to tax filings.
Other hospitals and hospital chains that have received money from the hospital bailout fund and have histories of working with McKinsey include North Carolina-based Novant Health, which paid $ 11 million in fees to McKinsey in 2016 and has also done work with the firm in the last two years, according to a spokesperson; Virginia-based Sentara Healthcare, which spent $ 1.9 million retaining services from McKinsey in 2016; the New York City-based Hospital for Special Surgery, which paid McKinsey $ 3.2 million in 2016; for-profit Tenet Healthcare, which worked with McKinsey, according to a 2017 personal financial disclosure form of Trump administration official Gurjeet Singh Guram; and Highmark Health, which paid $ 17 million to McKinsey in 2015 — making McKinsey the hospital’s biggest outside contractor that year.
The federal government has dozens of contracts with McKinsey, arguably the country’s most prestigious consultancy, at any one time. But the provider relief fund has become a sensitive subject in Washington: the $ 175 billion fund, part of the CARES Act, was intended to swiftly be distributed to hospitals to help stem losses associated with coronavirus. But questions about how to distribute the money most equitably have slowed the distribution process, frustrating lawmakers.
“The Administration’s efforts to establish the Provider Relief Fund to date has been at best, a series of missteps, and at worst, a disregard of Congress’ intent for the program,” Reps. Frank Pallone (D-N.J.) and Richard Neal (D-Mass.), chairs of the House Energy and Commerce and House Ways and Means committees, wrote in an early May letter to HHS.
Concerns about how and where the money is going are slowly mounting: Hospitals that have billions of dollars in their bank accounts nonetheless received millions from the fund, The New York Times reported in May. And POLITICO reported that a Trump White House aide with longstanding ties with UnitedHealth has helped oversee the bailout program at HHS, where UnitedHealth has been contracted to distribute the money.
Ethics specialists said McKinsey should take steps to completely separate its responsibilities to the federal government from its work for hospitals, including ensuring that consultants aren’t playing any role in auditing or overseeing their Former clients.
“It’s a question of, what is McKinsey doing [for HHS], and how are they shielded off from the rest of the firm? Do the people doing this work have a past relationship with these hospitals?” said Jennifer Ahearn, policy director at the watchdog group Citizens for Responsibility and Ethics in Washington.
Nonetheless, given the need to manage billions of dollars that are being doled out via complicated formulas, HHS had to select a firm that has health care experience, even if it created potential conflicts, said Robert Berenson, a doctor and fellow at the Urban Institute.
“You wouldn’t want to bring in a firm that doesn’t work with health care,” Berenson said.
But Duff McDonald, a business journalist who wrote “The Firm: The Story of McKinsey and Its Secret Influence on American Business,” said after World War II, McKinsey advised on large government privatization contracts and helped steer the business to their large clients.
“Here we are, in a moment that you could quite reasonably characterize as our moment of our greatest collective need in our lifetimes, and McKinsey’s move is to become a parasite on the government fund flows that are going to those who desperately need it, whether they’re individuals or healthcare organizations,” McDonald said.