The Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) (“CARES Act”) contains numerous provisions aimed at the response to the Coronavirus or COVID-19 pandemic, including $100 billion in reimbursement to hospitals and other health care entities for COVID‑19-related expenses and lost revenue (“Fund”).
The First Tranche of the Fund was distributed on April 10, 2020 to “eligible health care providers” or “EHCPs” based on Medicare Revenues, and according to the Health and Human Service’s (“HHS”)’ webpage on the Fund, there are plans to release additional Tranches as early as April 24, 2020 as further described below. Legislation expected to be signed this week (the Paycheck Protection Program and Health Care Enhancement Act) will likely add an additional $75 billion to the Fund.
Tranche Highlights and Recommendations
- A Second Tranche of $20 billion from the Fund will be released to entities starting April 24, 2020 proportional to an entity’s share of 2018 net patient revenue (the First Tranche used 2019 Medicare revenue to allocate distributions). The way HHS describes this process may result in a redistribution of amounts received under the First Tranche.
- Health care entities may need to submit or verify their revenue information to a portal opening this week for additional general distribution funds.
- An additional $10 billion of the Fund will be used to target “hot spots” based on data hospitals were to submit by noon on April 25, 2020, to the HHS TeleTracking portal (see our previous article on this topic here).
- $10 billion for rural hospitals and $400 million for Indian Health Services that will be allocated “based upon operating expenses.”
- The remaining $29.6 billion of the Fund will be distributed to Medicaid-only providers, dentists, skilled nursing facilities, care for the uninsured, and additional hot spot funds as needed.
- Health Resources and Services Administration (“HRSA”) is establishing a new process for health care entities to submit COVID-19 related claims for uninsured patients, which will be paid at Medicare rates and without cost-sharing on the part of the patient (we will be releasing a separate article on this topic).
General Allocation of $50 Billion ($30 Billion First Tranche and $20 Billion Second Tranche)
An initial $30 billion of the Fund was distributed to EHCPs between April 10 and April 17, 2020. This First Tranche of the Fund was allocated proportionately to an entity’s share of Medicare fee-for-service (Parts A and B) reimbursements in 2019. This formula was used to get money in the hands of entities as quickly as possible.
HHS announced that an additional $20 billion will be distributed beginning Friday, April 24, 2020 in a similar manner. This Tranche will be allocated based on providers’ share of 2018 net patient revenue.
EHCPs who submit cost reports will automatically be sent an advance payment based on their revenue data from the cost report. We note that “net patient revenue” is reported on Centers for Medicare and Medicaid Services cost report worksheet G-3, Line 3 and is defined as total revenue less allowances and discounts (such as provision for bad debts, contractual adjustments, charity discounts, teaching allowances, policy discounts and administrative adjustments) and should be consistent with financial statements prepared by the hospital’s CPAs. In contrast, EHCPs without adequate cost report data (including those who do not file cost reports) will need to submit their revenue information for additional general distribution funds. EHCPs who receive their money automatically based on cost report data will still need to submit their revenue information so that it can be verified. Reporting will be done through a portal opening this week at https://www.hhs.gov/providerrelief.
HHS stated that payments will go out weekly on a rolling basis as information is validated starting April 24, 2020, but it is unclear how that will be possible since it may not have 2018 net revenue information from all providers at that point. In addition, HHS’ guidance states that the entire $50 billion will now be allocated based on 2018 net revenue, which could indicate that HHS intends to recalculate amounts distributed to EHCP in the First Tranche. It may be that HHS intends to distribute the funds immediately and then have a follow-up audit and reconciliation process based on reported net patient revenue. This could mean that some EHCPs may need to repay or have future Medicare revenues offset against these amounts. Further, this could mean that certain EHCPs that received distributions in the First Tranche may not receive distributions in the Second Tranche.
EHCPs receiving allocations under these two Tranches of the Fund will be subject certain terms and conditions as posted on HHS’ website. Recipients will also be required to submit a report after the end of each calendar quarter containing, among other things, total amounts received from the government related to COVID-19 and details of projects and activities for which the funds were used. HHS indicated that there will be significant anti-fraud and auditing activity related to these amounts.
Targeted Allocations
In addition to the general allocation of the Fund described above, HHS will also be distributing targeted allocations as follows.
Allocation for High-Impact COVID-19 Areas. $10 billion of the Fund will be allocated for a targeted distribution to hospitals in areas that have been particularly impacted by the COVID-19 outbreak. This Tranche is only available to hospitals and not other entities that meet the definition of an “eligible health care provider” in the CARES Act.
In order to qualify for this Tranche of the Fund, hospitals will need to provide the following information to the HHS TeleTracking portal before noon on April 25, 2020:
- Tax Identification Number
- National Provider Identifier
- Total number of Intensive Care Unit beds as of April 10, 2020
- Total number of admissions with a positive diagnosis for COVID-19 from January 1, 2020 to April 10, 2020
A more detailed description of these reporting requirements is in a previous article, which is available here. This information will be used to determine what facilities will qualify for this targeted distribution based on where the impact from COVID-19 is greatest and will take into account facilities serving a significantly disproportionate number of low-income patients, based on the Medicare Disproportionate Share Hospital Adjustment.
Allocation for Uninsured Patients. Included in the update to the HHS Fund webpage was a description and link to a new HRSA webpage that outlines the basic framework for how HHS plans to reimburse providers for these services (available here). While many of the details are not yet known, the new webpage includes general information about how HHS will set-up and operate a new program for processing and paying providers for certain services provided to uninsured COVID-19 patients. The program will apparently work similar to a very scaled-down Medicare, with providers required to enroll in the new program starting April 27, 2020, submit claims starting May 6, 2020 in accordance with Medicare’s timely filing period, and receive payments based on Medicare rates starting in mid-May. A more detailed description of the program will be the subject of a separate article.
Allocation for Rural Providers and Indian Health Service. HHS will also be allocating $10 billion for rural health clinics (“RHCs”) and rural hospitals and $400 million for Indian Health Service facilities. HHS did not clarify how it is defining “rural” for this allocation, which is important as there are multiple definitions of rural used by HHS.
These amounts will be distributed as early as the week of April 27, 2020 proportionately to each facility on the basis of operating expenses. It is not clear how HHS will be estimating or gathering data on operating expenses for these facilities. We do note that “operating expenses” are reported on a hospital’s cost report at worksheet G-2, Line 3, but operating expenses are not reported on an RHC cost report.
Additional Allocations. There is approximately $30 billion of the Fund remaining after accounting for the above allocations (note that this does not account for amounts that will be made available for uninsured patients through HRSA’s program as HHS has not announced how much will be allocated to that program). In addition, COVID-19 relief bill version 3.5 is expected to add $75 billion to the Fund for a total of about $105 billion. HHS has not announced specifically how these amounts will be distributed, but has indicated that special consideration will be given to Medicaid-only providers, skilled nursing facilities and dentists.
See our previous articles on the CARES Act Fund available here, here and here.
If you have questions or would like additional information about this topic, please contact:
- David Snow at (303) 801-3536 or dsnow@wp.hallrender.com;
- Lori Wink at (414) 721-0456 or lwink@wp.hallrender.com;
- Joseph Krause at (414) 721-0906 or jkrause@wp.hallrender.com;
- Elizabeth Elias at (317) 977-1468 or eelias@wp.hallrender.com;
- Benjamin Fee at (720) 282-2030 or bfee@wp.hallrender.com; or
- Your regular Hall Render attorney.
Hall Render’s attorneys and professionals continue to maintain the most up-to-date information and resources at our COVID-19 Resource page, through our 24/7 COVID‑19 Telephone Hotline at (317) 429-3900 or by contacting your regular Hall Render attorney.
Hall Render blog posts and articles are intended for informational purposes only. For ethical reasons, Hall Render attorneys cannot—outside of an attorney-client relationship—answer specific questions that would be legal advice.
