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Devil Is in the Details: Staying Compliant While Accepting New HHS Distributions

This Featured Article is contributed by AHLA's In-House Counsel Practice Group.
  • May 08, 2020
  • Sarah Swank , Nixon Peabody LLP
  • Harsh P. Parikh , Nixon Peabody
  • Alexandra Busto , Nixon Peabody LLP
  • Laurie T. Cohen , Nixon Peabody LLP

The federal government’s response to the novel coronavirus (COVID-19) pandemic has been unprecedented. On April 24, 2020, the president signed into law the Paycheck Protection Program and Health Care Enhancement Act (H.R. 266), which provides additional $75 billion for frontline health care providers and $25 billion to support testing. The bipartisan Coronavirus Aid, Relief, and Economic Security Act (CARES Act) initially appropriated $100 billion to the Public Health and Social Services Emergency Fund (Provider Relief Fund). Congress authorized the United States Department of Health and Human Services (HHS) to distribute these funds quickly to health care providers around the country.

Paycheck Protection Program and Health Care Enhancement Act (H.R. 266)

$75 billion allocated for health care providers. The legislation’s mechanism for distributing $75 billion to eligible health care providers generally mirrors the CARES Act.

  • Eligible provider. As with the CARES Act, an eligible health care provider under the new law includes public entities and Medicare- or Medicaid-enrolled suppliers and providers, as well as other for-profit and not-for-profit entities that HHS may specify within the United States, including territories. To be eligible, a provider must provide “diagnoses, testing, or care for individuals with possible or actual cases” of COVID-19. HHS states it is broadly interpreting eligibility of individuals with being evaluated or cared for due to COVID-19 with the intent that patients do not receive surprise bills. The Provider Relief Fund website for the CARES Act fund distribution states that “HHS broadly views every patient as a possible case of COVID-19.” Under this broad definition, providers across the country are waiting to see if they are eligible for support from the Provider Relief Fund under additional or new HHS direct funding, grants, advances, and other programs.
  • Form of the funds. Funds must be used to cover necessary health care related expenses or lost revenues that are attributable to coronavirus. HHS can make payments in the form of a pre-payment, prospective payment, or retrospective payment.
  • Use of the funds. Funds can be used for building or construction of temporary structures, leasing of properties, medical supplies and equipment including personal protective equipment (PPE) and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities, and surge capacity.
  • Distribution of funds by HHS. The new law requires that HHS develop on a rolling basis programs to distribute this funding. The agency is directed to review applications and make payments to eligible health care providers taking into account the most efficient payment systems practicable to provide emergency payment. HHS has significant discretion on using either grants or other mechanisms to distribute the additional funds.
  • Applications. The legislation envisions that eligible health care providers with a valid Tax ID number will submit to HHS an application that includes a statement justifying the need of the provider for the payment from the Provider Relief Fund. Note that in distributing the $50 billion designated as general allocation funds directly deposited into accounts rather than through an application process, HHS requires providers to submit an attestation confirming eligibility for receipt of the funds.
  • No double dipping. Congress makes clear that the funds may not be used to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse, which is consistent with prior stimulus legislation.
  • Documentation. Providers should carefully track all expenses and losses that monies from the Provider Relief Fund are expected to cover, along with appropriate documentation.
  • OIG Audits. As part of the stimulus bill, the HHS Office of Inspector General (OIG) is directed to audit the Provider Relief Fund within three years after final payments are made. The OIG must transmit a final report on audit findings to the Committees on Appropriations of the House of Representatives and the Senate. The OIG may conduct interim audits of the provider.
 
$25 billion for COVID-19 testing. The latest stimulus package also includes $25 billion to the Provider Relief Fund to support testing efforts related to the novel COVID-19 coronavirus. The White House guidance includes the ability to test as part of the staged reopening of states Guidelines—Opening Up America Again.
  • Use. This funding can broadly be used to research, develop, validate, manufacture, purchase, administer, and expand capacity for COVID-19 tests, which can effectively monitor and suppress COVID-19. Examples for the use of funds can include:
    • support for testing of both active infection and prior exposure, including molecular, antigen, and serological tests;
    • manufacturing, procurement, and distribution of tests;
    • equipment and supplies, including PPE needed for administering tests;
    • development and validation of rapid, molecular point-of-care tests, and other tests;
    • workforce and epidemiology support;
    • scale up academic, commercial, public health, and hospital laboratories, to conduct surveillance and contact tracing;
    • support development of COVID-19 testing plans; and
    • other related activities related to COVID-19 testing.
  • Breakdown of the $25 billion. The following provides a high level overview of the congressional appropriations for testing, which also includes programs under the discretion of HHS, focused funding such as federal qualified health centers, primary care grants, national stockpile, point-of-care and mobile testing, and construction of new testing centers.
  • States, localities, and tribes. $11 billion of the Provider Relief Fund must specifically target states, localities, or tribes to cover expenses that:
    • develop, purchase, administer, process, and analyze COVID-19 tests;
    • support workforce and epidemiology;
    • scale up COVID-19 testing by public health, academic, commercial, and hospital laboratories, and community-based testing sites, health care facilities, and others; and
    • conduct surveillance, trace contacts, and other related activities related to COVID-19 testing.
  • Of the $11 billion:
    • $2 billion allocated to states, localities, and territories according to the formula that applied to the Public Health Emergency Preparedness cooperative agreement in fiscal year 2019.
    • $4.25 billion allocated to states, localities, and territories according to a formula methodology that is based on relative number of cases of COVID-19.
    • $750 million allocated in coordination with the Director of the Indian Health Service, to tribes, tribal organizations, urban Indian health organizations, or health service providers to tribes.
  • CDC. $1 billion transferred to the Centers for Disease Control and Prevention for surveillance, epidemiology, laboratory capacity expansion, contact tracing, public health data surveillance and analytics infrastructure modernization, disseminating information about testing, and workforce support necessary to expand and improve COVID-19 testing.
  • NIH. $1.8 billion transferred to the National Institutes of Health to
    • develop, validate, improve, and implement serological testing and associated technologies;
    • accelerate research, development, and implementation of point of care and other rapid testing related to coronavirus;
    • develop, validate, improve, and implement testing and associated technologies;
    • accelerate research, development, and implementation of point-of-care and other rapid testing; and for partnerships with governmental and non-governmental entities to research, develop, and implement these activities.
  • BARDA. $1 billion is provided to the Biomedical Advanced Research and Development Authority for necessary expenses of advanced research, development, manufacturing, production, and purchase of diagnostic, serologic, or other COVID-19 tests or related supplies, and other activities related to COVID-19 testing at the discretion of HHS.
  • FDA. $22 million to the Food and Drug Administration to support activities associated with diagnostic, serological, antigen, and other tests, and related administrative activities.
  • CHC/RHC. $825 million is directed for community health centers and rural health clinics.
  • Uninsured. $1 billion may be used to cover costs of testing for the uninsured.
  • Demographic information. The law requires the Secretary of HHS to issue a report on COVID-19 testing within 21 days after its enactment. HHS’ report is required to include data on the number of positive COVID-19 cases, hospitalizations, and deaths disaggregated by race, ethnicity, sex, geographic region, and other relevant factors. The report must be updated every 30 days until the end of the public health emergency. Demographic data has been a topic of concern as certain populations appear to be hardest hit.

CARES Act Funding Programs

The CARES Act has already begun to provide needed relief to the health care industry. These federal dollars, however, come with strings attached. Recipients must satisfy and attest to certain eligibility requirements, including prohibition on surprise billing for presumptive or actual COVID-19 patients. Providers must also maintain appropriate cost report documentation and claims information, utilize internal controls to track and manage losses that the funds are to be used to cover, and meet certain record retention, access, and audit requirements. The CARES Act also requires many providers to submit quarterly reports to the government. Executives and counsel for health care providers should closely scrutinize these requirements to minimize future risks.

CMS Accelerated and Advance Payment Program

The government’s cash infusion to support the health care industry during the COVID-19 public health emergency began with the Centers for Medicare and Medicaid Services’ (CMS) expedited payments to Medicare providers through an expansion of the Accelerated and Advance Payment Program. CMS advanced more than $100 billion to Medicare providers by increasing the scale of its existing program.

Section 3719 of the CARES Act permitted the Secretary of HHS to expand the Accelerated and Advance Payment Program to almost all hospitals during a national emergency. Going beyond its congressional authorization, CMS expanded these temporary loan programs to all Medicare Part A and B providers and suppliers. In a matter of a few days, CMS approved over 21,000 applications, totaling $59.6 billion in accelerated payments to Part A providers such as hospitals and skilled nursing facilities, and almost 24,000 applications to advance $40.4 billion to Part B suppliers, including physicians, physical therapists, and psychologists.

The accelerated payments effectively operate as interest-free “bridge” loans that flow through to the provider from its local Medicare Administrative Contractor (MAC). Once a provider receives its advanced payment, the provider continues to submit claims and receive full payment from Medicare for those claims. Then, 120 days after issuance, repayment commences. At that point, the MAC begins to withhold 100% of future payments due to the provider until the advanced amount is repaid. Hospitals have up to one year to repay the balance, while other providers have 210 days before interest would accrue. On April 26, 2020, in light of the available general direct payments, CMS announced it will reevaluate the amounts that will be paid under its Accelerated and Advance Payment Program and is suspending its Advance Payment Program to Part B suppliers.

Provider Relief Fund

The bipartisan CARES Act initially appropriated $100 billion for the Provider Relief Fund. Congress earmarked the funds to be distributed for “health care providers for health care related expenses or lost revenues that are attributable to coronavirus.” However, the CARES Act did not establish a particular process for distributing the Provider Relief Fund. Instead, the legislation directed HHS to establish “the most efficient payment systems practicable to provide emergency payment” through the Provider Relief Fund.

Provider Relief Fund — General and Targeted Allocations

Providers have already begun to receive distributions of the $50 billion through HHS’ general allocation. Between April 10, 2020, and April 17, 2020, HHS made an initial distribution of $30 billion based on the provider’s share of total 2019 Medicare Fee-For-Service reimbursements. The remaining $20 billion of the general allocation will be distributed on a weekly and rolling basis starting on April 24, 2020. The formula for distributing the remaining $20 billion is based on each provider’s 2018 net patient revenue from all sources, not just Medicare revenue.

HHS is distributing the remaining $50 billion through targeted allocations:

  • High impact areas. $10 billion for COVID-19 high impact areas; providers must submit number of ICU beds and total COVID-19 admissions as of April 10, 2020, in order to receive the automatic distribution.
  • Rural providers. $10 billion for rural providers will be sent out next week based on operating costs. This amount will assist approximately 2000 rural hospitals around the country.
  • Indian Health Services. $400 million for Indian Health Services facilities based on operating costs.
  • COVID-19 uninsured fund. $10 billion to cover both COVID-19 testing and COVID-19-related treatment visits for uninsured patients, funded by a program run by the HHS Health Resources and Services Administration (HRSA). UnitedHealth Group, through a contract with HRSA, is administering the new program. Providers who have conducted testing for the novel virus or provided treatment for uninsured COVID-19 individuals on or after February 4, 2020, may request reimbursement through an online portal. This new program is subject to the availability of funding—so providers and their billing companies are encouraged to submit claims as soon as possible.
The following services are eligible for reimbursement through claim submissions through the newly launched online portal:
  • specimen collection, and diagnostic and antibody testing;
  • testing-related visits including telehealth;
  • treatment, including office visits, telehealth, ER, inpatient, outpatient/observation, skilled nursing facility, long-term acute care (LTAC), acute inpatient rehab, home health, DME (e.g., oxygen, ventilator), emergency ambulance transportation, non-emergent patient transfers via ambulance, and FDA-approved drugs as they become available; and
  • FDA-approved vaccine, when available.

Strings Attached — Terms and Conditions

Federal revenue often comes with some strings attached, and HHS has already emphasized its plans to conduct “significant anti-fraud and auditing work.” Notably, HHS is requiring providers that accept the general allocation to submit an attestation certifying to certain terms and conditions within 45 days of payment. Specifically, the provider must attest to its compliance with the following requirements:
  • Medicare Participation. The provider billed Medicare in 2019; is not currently terminated from participation in Medicare; is not currently excluded from participation in Medicare, Medicaid, and other federal health care programs; and does not currently have Medicare billing privileges revoked.
  • Use of Funds for COVID-19 Prevention, Preparation, and Response: The funds will be used to prevent, prepare for, and respond to coronavirus, and reimburse the provider for health care related expenses or lost revenues that are attributable to coronavirus.
  • No Double Dipping: The provider will not use the payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.
  • No Surprise Balance Billing: For all care for a “presumptive” or actual case of COVID-19, the provider will not seek to collect more than in-network cost-sharing amounts from out-of-network COVID-19 patients. From a compliance perspective, for any such patients that are outside the scope of the surprise balance billing prohibition, the patients’ medical record should document that the encounter/services were not “presumptive or actual case of COVID-19.”
  • Records/Financial Management System: The provider will maintain appropriate records and cost documentation as required by 45 C.F.R. § 75.302 and 45 C.F.R. §§ 75.361–.365.
  • Uninsured Reimbursement Terms and Conditions: Reimbursement for testing or treatment of uninsured individuals for COVID-19 through the HRSA uninsured program will require providers to agree to post-payment audits and other terms and conditions.

Compliance Checklist — Reports and Financial Management

In addition to the certification requirement applicable to all providers, Section 15011 of the CARES Act obligates all entities receiving more than $150,000 from any federal program related to coronavirus to make quarterly reports to the government. Specifically, the quarterly report must be submitted to HHS and the Pandemic Response Accountability Committee within 10 days following the end of each calendar quarter, and must contain:
  • The total amount of funds received from any federal agency;
  • The amount of funds received that were expended or obligated for each project or activity;
  • A detailed list of all projects or activities for which large covered funds were expended or obligated, including:
    • the name of the project or activity,
    • a description of the project or activity, and
    • the estimated number of jobs created or retained by the project or activity, where applicable; and
  • Detailed information on any level of sub-contractors or sub-grantees. Recipient must include all information required to comply with the Federal Funding Accountability and Transparency Act of 2006, such as
    • the name and location of the entity receiving the award;
    • the amount of the award;
    • information on the award, including transaction type, funding agency;
    • the location of the entity receiving the award; and
    • the names and compensation of highly compensated officers.
All recipients of federal funds—including providers receiving HHS funds—must also adhere to particular financial management system and record retention requirements under 45 C.F.R. §§ 75.302, 75.361–75.365 including:
  • Financial Management System. It is important to have in place accounting and internal systems that create accountability and demonstrate control over monitoring accounts to ensure legal compliance and satisfaction of HHS’ terms and conditions, as well as allow for the production of reports to substantiate and trace funds. Recipients must maintain appropriate written procedures and mechanisms to identify, track, and monitor funds to enable disclosure of use, results, and include approved data elements that can be supported by source documentation and traceable to application.
  • Retention, Transfer, and Access of Records. Recipients must retain financial records and supporting documentation pertinent to the provider’s use of HHS funds for at least three years. Recipients must also provide access to, transfer, or continue to retain the relevant records upon HHS’ request.

Future Fund Distributions

As noted, the new relief package adds $75 billion to the Provider Relief Fund to prevent, prepare for, and respond to coronavirus, and $25 billion for testing and related other services. The details regarding the distribution of the additional funds have not yet been released. Health care providers will need to wait and see if they will be eligible for prospective, retrospective, or other funding.

The $25 billion in funding for COVID-19 testing is based on the White House guidance that includes the ability to test as part of the staged reopening of states. This funding is specifically intended to increase testing capacity and supplies in each state, and the availability of such could provide critical aid in each state’s respective approach to relaxing stay-at-home orders and other existing social distancing restrictions.

As individual states begin to lift stay-at-home orders, medical offices resume in person visits, and hospitals and surgery centers reschedule elective procedures, the Provider Relief funds may be used less as a means to replace lost revenue. Instead, such providers will have new and ongoing expenses to replace and maintain an adequate supply of personal protective equipment and to enhance infection control practices, including potential physical space changes. Long-term care providers, who are caring for the most vulnerable patients, will also need and benefit from assistance to enhance their infectious disease preparedness and response efforts. Lastly, community health centers and rural health centers are also expected to receive targeted funding for testing, and to assist with treating those patients testing positive for the coronavirus.

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