Considerations When Accepting Grants Through the $100 Billion Public Health and Social Services Fund
This Briefing is brought to you by AHLA’s Physician Organizations Practice Group.
- April 30, 2020
- Jenny G. Givens , Gray Reed & McGraw LLP
The initial tranche of payments from the $100 billion Public Health and Social Services Fund (Relief Fund), authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act, began hitting providers’ accounts on Friday, April 10, 2020. Although Seema Verma, Administrator for the Centers for Medicare & Medicaid Services (CMS), announced in an April 7, 2020 press briefing that $30 billion of the $100 billion Relief Fund would be distributed to providers that week, CMS left many questions unanswered, such as who exactly would be receiving the initial funds, and how the funds would be apportioned. Verma only indicated that payments from the Relief Fund would be based on Medicare revenue, treated as grants (i.e., there is no repayment obligation), provided with “no strings attached,” and that providers who receive the funds can “essentially spend [the funds] in any way that they see fit.” Verma also clarified that the funds would not be distributed on a “first-come first-serve basis.”
In an April 10 press release, the U.S. Department of Health and Human Services (HHS) reported that it partnered with UnitedHealth Group/Optum (UHG) to distribute the initial $30 billion in payments to providers via ACH to the provider’s account on file with UHG or CMS. As part of the press release, HHS included a link to a summary page providing insight into how the payments were determined. According to the summary, payments were based on the provider’s 2019 fee-for-service payments in proportion to all fee-for-service payments made by CMS in 2019, (approximately $484 billion) x $30,000,000,000. HHS provided the following example:
A provider can estimate their payment by dividing their 2019 Medicare FFS (not including Medicare Advantage) payments received by $484,000,000,000 and multiply that ratio by $30,000,000,000. Thus, a community hospital that received $121,000,000 in Medicare FFS reimbursements can expect to receive $7.5 million.
The press release also provided a link to the Relief Fund Payment Terms and Conditions (Terms and Conditions) applicable to a provider’s acceptance of the funds. Despite Verma’s report that the funds were being provided as grants with “no strings attached,” there are actually a number of conditions to which providers must agree if they intend to keep the funds. Within 30 days of receipt of payment, providers are required to sign an attestation certifying that they will comply with the Terms and Conditions. Providers who are not willing to agree to the Terms and Conditions are asked to contact HHS within 30 days and remit the full payment to HHS. Providers who do not respond within 30 days are deemed to have accepted the Terms and Conditions. The Terms and Conditions are discussed further below.
What About Providers Who Receive Reimbursement Mostly from Payer Sources Other Than Medicare Fee-For-Service?
CMS’ method of distributing the first $30 billion came as somewhat of a surprise to health care attorneys, given that the CARES Act requires providers to submit an application and provide justification of their need for the funds. It certainly left many providers questioning the method HHS used to calculate and make the distributions, particularly those providers who treat large Medicaid or Medicare Advantage populations. At an April 7, 2020 press briefing, Verma recognized that providers with mainly private pay and/or Medicaid populations (e.g., children’s hospitals, nursing homes, certain physician practice groups like OB/GYNs, and pediatricians) will receive priority in the next round of funding.
On April 22, 2020, HHS updated its April 10 summary to announce that a second tranche of funding in the amount of $20 billion would be distributed starting April 24, 2020, the day on which President Trump signed into law the Paycheck Protection Program and Health Care Enhancement (PPPHCE) Act, a $480 billion stimulus package that, among other things, allocated an additional $75 billion to replenish the Relief Fund. HHS collectively refers to the initial $30 billion and the additional $20 billion as the $50 billion “General Distribution.” This second round of funding is based on 2018 patient revenues and will be allocated using two different methodologies. First, HHS will distribute a portion of this general fund to providers who submit cost reports. Similar to the initial $30 billion distribution, these payments will be sent to these providers automatically (there is no need to request the funds). However, they will be required to submit information regarding their revenues for verification purposes. Providers without adequate cost report data may request funding by submitting financial information to HHS through the General Distribution Portal made available on April 25.
Unfortunately, when they go to the General Distribution Portal to request funds, many providers will learn that they were once again overlooked. The General Distribution Portal alerts providers that only those providers who received an automatic payment as part of the General Distribution (i.e., providers who submitted a cost report related to 2018 services and providers who billed Medicare fee-for-service in 2019) are eligible to apply for funds made available through the request process. Thus, despite Verma’s comments reassuring private pay and Medicaid providers that they will be prioritized during the second round of funding, pediatricians, OB/GYNs, and other physicians who care for a large Medicaid population as well as physicians, ambulatory surgery centers, and suppliers who render care mostly to individuals with health benefits through commercial plans will not be receiving a grant as part of the General Distribution.
While HHS issued a General Distribution Frequently Asked Questions (FAQs) stating that providers who are not eligible for a grant through the General Distribution may still receive funds through other mechanisms, including Targeted Distributions (addressed below), it does not appear that any of the above mentioned providers will meet the Targeted Distribution requirements unless they: (1) treat uninsured individuals for COVID-19 related issues, (2) are located in a rural area, or (3) are located in a “COVID-19 high impact area.” Providers should keep in mind that HHS has not yet specified how it intends to distribute the additional $75 billion allocated by the PPPHCE Act to replenish the Relief Fund.
How Will the Remaining $50 Billion Be Distributed?
The HHS summary also indicated how the remaining $50 billion of funds will be allocated (Targeted Distributions):
|Targeted Distributions||Funds to Be Allocated||Application and Distribution Procedures and Date of Funding|
|Hospitals in COVID-19 High Impact Areas
(high percentage of COVID-19 cases)
|$10 billion||HHS contacted hospitals directly providing instructions to apply for these funds through a portal that closed on April 25. Hospitals that submitted applications are not guaranteed funding.
|Rural Providers||$10 billion||These funds will be distributed beginning the week of April 27. It is not clear if rural hospitals will be required to submit an application or financial data but the funds will be distributed proportionately based on each facility’s operating expenses.
|Indian Health Services Facilities||$460 million||These funds will be distributed beginning the week of April 27 based on operating expenses.
|Reimbursement of Providers Who Treat the Uninsured for COVID-19 Related Conditions||Unknown||Providers will need to register for this program through the Health Resources and Services Administration (HRSA). The registration portal opened on April 27 and providers may begin submitting claims on May 6. This only applies to claims for services rendered after February 4, 2020.
(skilled nursing facilities, dentists, and providers who treat solely Medicaid beneficiaries)
|Unknown||No additional details provided.|
Between the $50 billion General Distribution and the above Targeted Distributions, approximately $70.5 billion of the $100 billion is spoken for, leaving $29.5 billion remaining to compensate providers for COVID-19 related care rendered to the uninsured and the “Additional Allocations.”
What Are the Terms & Conditions to Which Providers Must Attest?
With its attestation, the provider certifies that it:
- Provides (or after January 31, 2020 provided) diagnoses, testing, or care for individuals with possible or actual COVID-19;
- Is not excluded from participating in a federal health care program;
- Is not terminated from participating in Medicare and has not had its Medicare billing privileges revoked;
- Will maintain appropriate records and cost documentation regarding its use of funds and will submit various reports to the Secretary and if the provider receives over $150,000 submit quarterly reports detailing, among other things, the total amount of funds received through all stimulus and other bills making appropriations for responding to the coronavirus, a list of projects or activities for which large covered funds were expended, and the amount expended on each;
- Will use the payment solely for the prevention of, preparation for, and responding to the coronavirus and to reimburse the provider for health care expenses and lost revenues attributable to the coronavirus;
- Will not seek to collect patient out-of-pocket expenses in an amount greater than what the patient would have been required to pay to an in-network provider (i.e., balance billing or “surprise bills” are not permissible);
- Will not use the funds, among other things:
- To reimburse expenses/losses that have been reimbursed from other sources;
- For lobbying, publicity, or propaganda purposes; to advocate gun control or to promote the legalization of Controlled Substances;
- To pay the salary of an individual at a rate in excess of Executive Level II;
- For abortions or for embryo research;
- To enter into a contract with an organization that has an unpaid federal tax liability or has been convicted of a federal felony criminal violation within the prior 24 months; or
- To engage in the trafficking of persons.
The above-listed prohibitions are not exhaustive. Providers seeking to take advantage of the funding should analyze the requirements in detail to ensure compliance with the Terms and Conditions.
Interestingly, it appears from the HHS summary page that only those providers who received a grant from the General Distribution are required to attest to the Terms and Conditions. This is likely an oversight on HHS’ part, and providers should anticipate clarification in the near future.
How Can Providers Spend the Relief Funds?
The Terms and Conditions focus heavily on what providers are precluded from doing with the funds, and many of those activities are self-explanatory. With respect to the fifth requirement above, the CARES Act gives the following examples of preparing for and responding to the coronavirus: building or construction of temporary structures; leasing of properties; medical supplies and equipment, including personal protective equipment (PPE) and testing supplies; increased workforce and training; emergency operation centers; retrofitting facilities; and surge capacity. This list is not intended to be comprehensive. However, neither the CARES Act nor HHS provided examples of appropriate uses of the funds to reimburse providers for lost revenues. With that said, it seems reasonable for a hospital or surgery center to utilize its Relief Fund grant to reimburse itself for losses related to the cancellation of elective surgeries, particularly since this was mandated by the government. On the other hand, it would likely not be reasonable for a medical practice to use the grant to reimburse itself for lost revenues related to a physician leaving the practice prior to January 31, 2020 if that departure was entirely unrelated to the coronavirus outbreak.
Providers should be cognizant that they are also certifying that they provide and/or provided after January 31, 2020 diagnoses, testing, or care for possible or actual patients with COVID-19. In the case of surgery centers, if they closed prior to January 31, despite incurring significant losses due to the elective procedure mandate, they may not meet all the eligibility criteria.
The seventh requirement prohibits providers from using the funds “to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.” HHS did not elaborate on this point, but the intent clearly is to prohibit providers from “double dipping.” For example, if a provider obtained a loan under the Paycheck Protection Program and uses 75% of those funds to cover its payroll expenses from April 1 through June 8, and uses the remaining 25% to pay its utilities over the same time period, the provider cannot use the Relief Fund grant for reimbursement of the same expenses. However, the provider could use the funds for reimbursement of payroll expenses from March 1 through March 31, to purchase protective equipment, and/or to implement a telehealth system to allow the provider to continue rendering services to patients for the duration of the pandemic.
Providers should clearly document exactly how the funds were used and when. In fact, providers may want to consider setting up different accounts for the funds obtained from the various programs under the CARES Act to easily track how the funds were used. Larger providers may benefit from setting up a cost center for coronavirus-related expenditures, such as physician subsidies paid as a result of the increase in uninsured patients, expanded call coverage costs, equipment purchases, or perhaps even arranging for daycare for frontline staff so that they can be available to treat patients. Providers should also consider setting aside a portion of the funds in the event their overall losses and expenses related to the coronavirus are less than the Relief Fund grant, and the provider is required to refund the overpayment.
If a Provider Will Not Be Treating, Diagnosing, or Preparing to Respond to the COVID-19 Outbreak, and Never Treated a Patient for or Suspected of Having COVID-19, Is the Provider Required to Return a Grant Received as Part of the General Distribution?
There are many providers who received payments from the Relief Fund that do not, and never did, intend to diagnose, treat, or otherwise prepare for the management of patients with COVID-19. Some of these providers have effectively closed their practices due to the risk associated with in-person office visits and decreased volumes resulting from patients delaying care until the pandemic subsides. These providers are often questioning whether they are required to return the funds, even though their practices have experienced substantial losses in revenue due to the pandemic.
The initial Terms and Conditions published by HHS on April 10, 2020 required providers to certify that they “currently” provide diagnoses, testing, and care for individuals with possible or actual COVID-19. On April 13, 2020, HHS published revised Terms and Conditions that removed the term “currently” and added “or provided after January 31, 2020.” This change caused a larger population of providers to be eligible to retain their Relief Fund grants. The HHS summary was also updated on April 13 to clarify that providers who “ceased operations as a result of the COVID-19 pandemic” are eligible to receive funds as long as they tested or cared for possible or actual cases of COVID-19. In fact, HHS took this a step further and noted that it “broadly views every patient as a possible case of COVID-19.” Thus, providers who closed their offices after January 31, 2020 and who treated patients assuming that any patient who walked through the door could have COVID-19, are likely eligible to retain the funds, even if they do not believe they ever treated a patient with COVID-19. Providers should document information to make a reasonable case for retaining the funds, such as when they closed their offices and what steps they took to protect themselves, their staff, and their patients from exposure to COVID-19 prior to closing, as well as similar steps taken as they reopen their practices.
HHS is currently fielding a number of questions related to the Terms and Conditions and will likely issue additional guidance in the near future. Providers may be best served to hold off deciding whether they are required to return a grant until the deadline for contacting HHS to return the funds approaches.
Does the Program Established to Reimburse Providers for Care Rendered to the Uninsured Reimburse Providers for Care That Is Unrelated to COVID-19?
No. Reimbursement under this program is available solely for COVID-19-related care and testing. HRSA, the agency responsible for administering this program, issued a FAQ that specifies the types of services it will cover.
Reimbursement will be made for qualifying testing for COVID-19 and treatment services with a primary COVID-19 diagnosis, including the following:
- Specimen collection, diagnostic and antibody testing.
- Testing-related visits including in the following settings: office, urgent care or emergency room or via telehealth.
- Treatment, including office visit (including via telehealth), emergency room, inpatient, outpatient/observation, skilled nursing facility, long-term acute care (LTAC), acute inpatient rehab, home health, DME (e.g., oxygen, ventilator), emergency ground ambulance transportation, non-emergent patient transfers via ground ambulance, and FDA-approved drugs as they become available for COVID-19 treatment and administered as part of an inpatient stay.
- FDA-approved vaccine, when available.
- For inpatient claims, date of admittance must be on or after February 4, 2020.
The following services will not be covered: those that are not covered by traditional Medicare, any treatment without a COVID-19 primary diagnosis (excluding pregnancy when COVID-19 is listed as secondary), hospice services, and outpatient prescription drugs.
Are the Grants Made as Part of the General Distribution Expected to Cover the Cost of Caring for the Uninsured with Non-COVID-19-Related Conditions?
As noted above, providers are required to use the Relief Fund Grants to prepare for and respond to the coronavirus and to reimburse themselves for health care expenses and lost revenues related to COVID-19. As a result, providers need to be conscientious about using amounts obtained through the General Distribution to reimburse themselves for losses related to the uninsured generally. To the extent a provider uses the funds to reimburse itself for lost revenues related to COVID-19 (e.g., lost revenues from the cancellation of elective procedures) and then shifts the funds to subsidize care for the uninsured, this should be permissible. Thus far, the administration does not appear to have allocated any additional funds to providers to help compensate them for care rendered to the uninsured that is not related to COVID-19.
The current COVID-19 pandemic and the resulting economic conditions have created a larger segment of the population that requires health care but may not be in a financial position to receive such care. It goes without saying that hospitals are the safety net provider for the uninsured population and, because they are required to treat the uninsured when they are experiencing an emergency, hospitals are often forced to absorb the cost of care rendered to these individuals. Physicians have the option of declining to treat individuals who do not have insurance or the ability to pay out of pocket for services (provided they are not hospital-based practices and turning away the patient would not be considered patient abandonment). Nevertheless, they may struggle with turning away patients who they cared for over the years and some may feel an ethical obligation to continue to treat their patients. According to the April 3, 2020 Employment Situation Summary published by the U.S Bureau of Labor Statistics, the unemployment rate increased by 0.9 percentage points to 4.4% in March, which was “the largest over-the-month increase in the rate since January 1975 . . . .” The number of unemployed persons rose by 1.4 million to 7.1 million. This employment rate was calculated prior to many major cities entering “shelter-in-place” orders and, according to former Federal Reserve Chairwoman Janet Yellen, the unemployment rate is now at least 13%, the highest since the 1940s. The Federal Reserve Bank of St. Louis is forecasting that unemployment could rise to 30% during the pandemic. This means that hospitals, more than ever, are caring for the uninsured, and many of these individuals require intensive care with a large price tag.
As a result of the pandemic, hospitals have been forced to cancel their lucrative elective procedures to conserve PPE and beds for the treatment of patients with COVID-19. While many states are starting to allow facilities to resume elective procedures, they are also imposing limitations on procedures that may decrease the number of beds available to COVID-19 patients or the amount of PPE on hand. In addition, as a condition to receiving funds through the General Distribution, providers are required to treat any individuals receiving care out-of-network as though the they are in-network—meaning providers are required to waive patients’ cost-sharing/coinsurance obligations. This requirement could significantly impact providers, potentially decreasing reimbursement by 15% to 25%, depending on the health plan. Hospitals that are out-of-network with one or more payers—which has historically enabled them to receive higher reimbursement, a significant portion of which comes from patients’ coinsurance—now must forego the full amount to which they would have been entitled, regardless of a patient’s ability to pay that amount.
As a result, providers are needing to utilize payments from the Relief Fund to purchase supplies and equipment, retain staff, arrange for accommodations for patients in the event of a surge, and to subsidize losses incurred from the cancellation of procedures. Rather than reopen the Health Insurance Marketplace (Exchange), the Trump administration announced in early April that it plans to compensate providers for COVID-19-related services rendered to the uninsured using a portion of the Relief Fund. According to the Kaiser Family Foundation, the cost to the federal government to reimburse hospitals for uninsured patients at Medicare rates could range from $13.9 billion on the low end to $41.8 billion on the high end. Some politicians have argued that the government’s policy does not take into account that the uninsured require health care services completely unrelated to COVID-19. A coalition of 12 U.S. governors wrote a letter dated April 13, 2020 to HHS Secretary Azar and Administrator Verma urging the administration to open the Exchange for a special enrollment period of at least 30 days, to allow individuals to purchase insurance through the Exchange (which would provide broad health care coverage). Interestingly, these governors did not propose that the administration utilize a portion of the Relief Fund to subsidize the cost of the insurance premiums, a move that would likely be necessary for individuals to participate in the Exchange. If a special enrollment period was opened and the funds were used to subsidize the cost of insurance, the general public could potentially obtain health care coverage that provides individuals with access to preventative care and acute illnesses or injuries as well as shift to insurers some of the burden currently on the government and hospitals.
If hospitals and hospital-based practices are forced to use the payments they already received to cover the cost of care rendered to the uninsured with non-COVID-related conditions, they may not have the funds to cover their basic expenses to continue operations. This problem will likely extend well beyond the public health emergency, as it will take time for the economy to recover and for unemployment rates to reach pre-COVID levels.
What Is the Impact of the Relief Fund on the Medicare Accelerated/Advance Payment Program?
The Accelerated/Advance Payment Program (APP), which was expanded under the CARES Act, allows Medicare providers to request an advance from CMS against their future payments based on the provider’s historical billings. CMS announced on April 26 that, due to the availability of funds under the Relief Fund, it is suspending the APP with respect to Part B providers/suppliers and is reevaluating the accelerated payments to Part A providers.
What Happens if A Provider Retains the Grant and Is Later Determined Not to Be Eligible for the Grant or HHS Disagrees with the Provider’s Use of Funds?
This is the key question. The Terms and Conditions state that the funds are subject to recoupment, but the full extent of repercussions are not entirely clear at this time. Like the APP, which treats a provider’s failure to timely repay the loan as an overpayment that accrues interest at 10.25%, it is possible that the provider’s retention of funds for which the provider is not eligible could also be viewed as an overpayment. Because payments from the Relief Fund are treated as grants that are administered by HRSA, it is also possible that that laws governing government grants would apply.
If providers are not certain as to whether they are eligible to retain the grant, they should contact a health care attorney or contact HHS for assistance. At the very least, the provider should document why the provider believes it meets the eligibility criteria. Additionally, providers should consider using the funds solely to cover expenses for preparing to care for individuals who are potentially infected with COVID-19, and delay using any portion of the grant to reimburse the provider for lost revenues or to make distributions to its owners.
The laws and guidance related to the management of the coronavirus pandemic are rapidly evolving and there are reports of discussions on another stimulus bill that is already under way.