While Collecting Millions in COVID Relief, MaineHealth Bought Commercial Real Estate

The following report from Chris Woodard was originally published in NH Journal. It is re-published here with permission. To read more from NH Journal, visit NHJournal.com.

With reports of massive abuse of COVID-19 dollars in the headlines, Maine taxpayers are turning a critical eye toward MaineHealth and commercial real estate purchases the struggling organization made after receiving millions in pandemic relief.

MaineHealth, a non-profit healthcare system serving communities in Maine and New Hampshire, received $43.4 million from the Biden-backed American Rescue Plan in March 2021.

Two months later, in May 2021, MaineHealth invested in a grilled sandwiches shop, D’Angelo’s, which abuts a major MaineHealth facility. The location of the property and its proximity to big MaineHealth facilities suggests the idea behind the acquisition was to enable a future physical expansion, though as a MaineHealth press release noted at the time, “MaineHealth has entered into a three-year lease agreement with the D’Angelo shop, which will continue operating in that location, and has no other plans at this time for the property.”

MaineHealth also likely benefited from some of the $25 million disbursed by Maine’s DHHS in October 2022. Two months later, MaineHealth also bought a strip mall that abuts a major facility—presumably again to enable a future physical expansion.

The hospital’s press release noted that MaineHealth “intend[s] to honor the business leases currently in place” and said, “The cost of the acquisition is offset by the property’s revenue-generating commercial leases,” suggesting it had no immediate plans to use the property itself, but made the acquisition to tap into rent returns from businesses operating in the strip mall, at least initially.

It also received a roughly $1 million grant in 2021, a $2.7 million grant in 2022, and a $3.7 million grant in 2023 for COVID testing.

Add it all up based on MaineHealth’s own statements, and by February 2023, the system had benefited from a total of $102 million in COVID relief funds as of fiscal year 2022.

Critics note MaineHealth was hardly a beacon of financial health at the time. In fiscal year 2022, MaineHealth claimed a $44 million operating loss, of which less than 75 percent was related to healthcare services.

“If MaineHealth used COVID aid to help make these acquisitions, it would certainly represent an improper use of those funds,” said Jacob Posik, director of communications at Maine Policy Institute.

In an email to InsideSources, MaineHealth spokesman John Porter confirmed the system’s $44 million losses, but he denied any COVID relief was used to fund the commercial real estate investments.

“MaineHealth has received pandemic-related support funds from the federal government and the State of Maine, including funds from the American Rescue Plan. These funds are restricted to specific purposes related to providing care in the community during the pandemic and its aftermath. A full accounting is required under the law, and their use is subject to audit by the Office of Inspector General,” he said.

“These funds were not used to purchase the properties described,” Porter said.

“MaineHealth did acquire the properties referenced,” Porter added. “The funds used to acquire these properties were from cash on hand or loans from banks, with costs offset by lease proceeds.”

But critics note that money is fungible — money spent on healthcare costs frees up funds to spend on other things, such as buying sandwich shops. Therefore, they argue, MaineHealth’s commercial real estate purchases may not have been possible without the COVID cash.

And what was the system doing taking out loans amid the COVID emergency, and while it was losing $44 million?

Meanwhile, with $102 million in COVID relief funds and two questionably timed property purchases in the rear-view mirror, MaineHealth is now pushing LD 1407.

Watch dogs worry the legislation could allow the system to unilaterally raise prices paid by health insurers to the system, thus raising costs for patients within insurance pools.

That would occur by preventing any insurer-proposed pricing adjustments in a contract between an insurer and a hospital from taking effect for as long as 18 months where the provider objects.

Whereas COVID relief monies were a physical bailout, opponents of the legislation say, LD 1407 would instead be a regulatory one that would hamper insurers’ ability to function as a mechanism within the overall health care system capable of forcing down actual health care costs, which continue to be a problem for both insured and uninsured individuals.

In its testimony supporting the bill, MaineHealth asserted that “nearly all of Maine’s larger hospitals are struggling financially.” But how many have invested in commercial real estate after collecting their COVID aid?

Fairly or otherwise, organizations like MaineHealth that received millions in ARPA and COVID aid can expect more scrutiny as the scale of fraud nationwide grabs more headlines.

“Hundreds of billions of dollars in outright fraud occurred throughout the pandemic through various programs intended to help average American families or keep businesses afloat,” said Posik.

“The government printed trillions of dollars out of thin air and handed it out to anything with a pulse, and now the Americans feel the pain of those decisions in the form of persistent inflation and economic uncertainty,” he said.

(Disclosure: The Maine Wire is a project of the Maine Policy Institute.)