The Trump administration quietly spent billions in hospital funds on Operation Warp Speed

WASHINGTON — The Trump administration quietly took around $10 billion from a fund meant to help hospitals and health care providers affected by Covid-19 and used the money to bankroll Operation Warp Speed contracts, four former Trump administration officials told STAT.

The Department of Health and Human Services appears to have used a financial maneuver that allowed officials to spend the money without telling Congress, and the agency got permission from its top lawyer to do so. Now, the Biden administration is refusing to say whether the outlay means there will be less money available for hospitals, physicians, nursing homes, and other providers.

Several provider groups said they had not heard that $10 billion for providers was spent on Warp Speed contracts until STAT’s reporting. 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. One of the top hospital lobbyists in D.C., who also did not know about the outlay, emphasized how much some hospitals still need the funding.

“Hospitals in need of the funding would be outraged to know that some of the money was siphoned off, even for important uses, because Congress was clear that this money was for providers and clinicians,” said Chip Kahn, CEO of the Federation of American Hospitals.

Former White House budget office director Russ Vought, one of the key officials involved in the deliberations, defended the decision. He told STAT the expenditure was necessary to support the successful development and purchase of Covid-19 vaccines and therapeutics.

“We had to draw from the Provider Relief Fund and had the authority to do so. It was the right thing to do in order to move as quickly as possible because lives were on the line. Thankfully we did. We would do it again,” Vought said in an email.

The Operation Warp Speed program was created by the Trump administration, not Congress, so officials pulled funding from existing pools of money. But by late summer last year, the Warp Speed accounts were running dry, a former senior HHS official said.

Officials didn’t want to slow down support of vaccines and therapeutics, so they scrambled to find more funds. The $175 billion fund lawmakers created to help health care providers recover from the pandemic proved a tempting target.

Politics played a role as well — the money was running out in the contentious run-up to the presidential election. Lawmakers were widely expected to pass an additional Covid-19 relief bill in July last year, but negotiations ultimately dragged out until December.

The Trump White House’s attitude was that agencies shouldn’t ask Congress for more money until they spent the Covid-19 relief money they had already received, the former HHS official said. That same attitude also motivated the administration’s active lobbying effort to deny states more funds to help distribute vaccines.

Congress gave HHS permission to move money between accounts to respond to the pandemic, but the authority came with a catch — the agency had to notify Congress, and specifically, its appropriations committees, at least 10 days in advance of a transfer. Evan Hollander, a spokesperson for House Appropriations Committee Democrats, said the Trump administration did not notify the committee of any such transfer, and did not request additional funding for Operation Warp Speed.

“It is unfortunate the Trump administration preferred to divert billions of dollars from the Provider Relief Fund instead of submitting a request to Congress for the necessary funds,” House Appropriations Committee Chair Rosa DeLauro (D-Conn.) said in a written statement.

A Democratic Senate Appropriations Committee aide was unaware of the Trump administration notifying congressional committees formally under the transfer notification process.

GOP aides for both the House and Senate Appropriations Committees did not return requests for comment.

Officials apparently chose instead to spend the money directly out of the providers’ account, without making any formal transfer, which didn’t trigger congressional notification requirements. The HHS Office of the General Counsel concluded that certain Operation Warp Speed costs were an allowable use of the money, according to a spokesperson for the Health Resources and Services Administration, which administers the Provider Relief Fund.

Vought, the former White House budget office director, said the administration “made all the congressional notifications it was required to make.”

The expenditure was initially intended to be a sort of loan that could be backfilled after Congress provided more funds for vaccines, two former HHS officials said. But HRSA said the money has not been repaid.

“Approximately $10 billion was obligated for costs related to vaccines and therapeutics between October and December 2020. It was not a ‘loan,’” a HRSA spokesperson said.

It isn’t immediately clear whether the $10 billion outlay means that less money is available to health care providers. HRSA and HHS did not respond to inquiries about that, or about which specific contracts the funds were used for, or about any determinations made by the Office of the General Counsel.

The exact math about how much money is left in the provider fund is also murky. The Government Accountability Office found that at the end of December, HHS had $33.4 billion left. On Feb. 16, a HRSA spokesman told STAT there is $24 billion available. There were no new awards publicly announced in the meantime that account for the $9.4 billion discrepancy.

HHS’ lag in distributing funds doesn’t mean some providers don’t need it, hospitals argue. HHS is still in the process of sending out money to help providers with their losses from the first half of 2020, but hasn’t yet sent money for losses over the second half of the year, which saw a massive surges in hospitalizations. HHS hasn’t sent out any funds targeted to providers in Covid-19 hot spots since July.

Catholic Health Association CEO Sister Mary Haddad said while she realizes the urgency in developing Covid-19 vaccines, she is concerned by the possibility that funds were diverted from those delivering health care services.

“Our members have stepped up to care for those in need during the pandemic and have suffered unprecedented financial losses during the past year,” she said. “It is our hope that all … funding intended by Congress to support those on the frontlines of this pandemic will be made available.”

Hospitals are aggressively lobbying Congress to add more money to the fund, and the American Hospital Association commissioned an estimate saying that the industry’s revenue could be down between $53 billion and $122 billion in 2021 compared with pre-pandemic levels.

On the contrary, the Trump administration officials said an argument could be made that a $10 billion investment in Operation Warp Speed was more consequential. Their view was that if vaccines and therapeutics were available faster, it would reduce hospitalizations.

What the Trump administration chose to do isn’t illegal, but it is in a gray area. In other circumstances, officials could have faced criminal liability for spending money appropriated for one purpose on something entirely different.

But several attorneys said HHS officials likely had wiggle room in the language of the Covid-19 relief bills to spend funds on Operation Warp Speed contracts. Lawmakers gave HHS broad authority to decide how to distribute money in the Provider Relief Fund, though so far the publicly announced grants have gone to more traditionally defined health care providers.

Ted Waters, a managing partner at Feldesman Tucker Leifer Fidell, said courts generally defer to expert federal agency interpretation on use of funds unless there’s a clear conflict. A supportive HHS Office of the General Counsel opinion could help protect individuals from liability, said Harvard Law School professor and federal budget expert Howell Jackson.

Timothy Westmoreland, a professor at Georgetown Law, said the law seems to specify that the funding is for health care services provided in clinical settings, but auditors may not press the issue.

“This is not ordinary legislation and these are not ordinary times,” Westmoreland said in an email.

A lack of clarity around funding streams for Operation Warp Speed is just the latest transparency concern about the program. NPR reported that some contracts are structured in a way that exempts them from public disclosure. Rep. James Clyburn (D-S.C.), chair of the Select Subcommittee on the Coronavirus Crisis, in August requested information about potential conflicts of interest in the program, saying the selection process for vaccine candidates was “opaque.”

“We’d like to reiterate that while their [Office of the General Counsel] may have determined it was a permissible use of funds, being transparent is important,” GAO Director of Health Care Mary Denigan-Macauley said.

Lev Facher contributed reporting.