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Catching Up on Recent Developments Surrounding CARES Act Stimulus Funds

In the last several weeks both CMS and HHS have released new developments impacting both the Provider Relief Funds and the Advanced and Accelerated Payment Program.

As with all stimulus funds arising under the CARES Act, these recent developments continue to demonstrate that these programs remain highly fluid and subject to change at a moment’s notice — sometimes materially, as is evident below. They also continue to leave many questions unanswered and issues subject to determination.

HHS’s Issuance of Long Awaited Reporting Requirements for Provider Relief Funds Brings Material Changes and Still Leaves Many Open Questions ...

On September 19, 2020, the U.S. Department of Health and Human Services (“HHS”) issued new guidance regarding post-payment reporting requirements for Providers who received Provider Relief Fund payments (Recipients). As a condition for receipt of Provider Relief Fund payments, Recipients are required to agree to abide by certain Terms and Conditions, including, among others, that the Recipient only use the funds to reimburse health care related expenses and lost revenues attributable to coronavirus, and to comply with reporting requirements as specified by the Secretary of HHS in program instructions. The reporting requirements apply to any Recipient that received payments exceeding $10,000 in the aggregate, a significant reduction from the original trigger of $150,000 that was contemplated in the terms and conditions when the Provider Relief Fund payments were granted.

Under the guidance, Recipients (excluding recipients of Nursing Home Infection Control distributions, the Rural Health Clinic Testing distributions, or to reimbursements from the Health Resources and Services Administration (“HRSA”) Uninsured Program) must report on their use of the Provider Relief Fund payments to HRSA, including:

  • Demographic Information: Recipients must provide HRSA with certain demographic information, such as Tax Identification Number, National Provider Identifier, and other similar financial and tax information;

  • Expenses Attributable to the Coronavirus: Recipients are required to report to HRSA health care related expenses attributable to coronavirus1 that are not reimbursed by another source2 (e.g., payment received from insurance, patients, and other federal, state or local governmental sources) from two categories: 1) general and administrative (G&A) expenses; and 2) health care related expenses.3 Recipients who received $500,000 or more in Provider Relief Fund payments must report additional details regarding certain subcategories of both G&A and health care related expenses.

  • Lost Revenue Attributable to Coronavirus: Recipients must provide HRSA with certain financial information. From a revenue standpoint this includes: 2019 and 2020 total revenue/net charge from patient care related sources; 2019 and 2020 revenue from patient care payor mix; and other 2020 state, federal or local financial assistance received. From an expense standpoint this will include 2019 and 2020 G&A expenses and health care related expenses. HRSA will take this reported information and calculate the Recipients lost revenues attributable to coronavirus. However, now HHS indicates that lost revenues will be determined from a negative change in year-over-year net patient care operating income (i.e. net patient care revenue minus patient care related expenses net of health care related expenses attributable to coronavirus). This new method for calculating lost revenues is a significant departure from the previous FAQ issued by HHS, under which lost revenues were calculated either by the change in year-over-year total revenue, or the difference between the Recipients budgeted revenue and actual revenue for the period. The result of the new method for calculating lost revenues may mean that Recipients will have a smaller universe of lost revenue from which to apply Provider Relief Fund (“PRF”) payments.

    Moreover, HHS also indicated that once lost revenues are calculated Recipients can only apply PRF payments toward lost revenues “up to the amount of their 2019 net gain from health care related sources,” or if the Recipient experienced a negative net operating income from patient care in 2019, the recipient “may apply PRF amounts ... up to a net zero gain/loss in 2020.” These “caps” on uses of PRF amounts for health care related losses are new under this guidance. Up to included two “caps” Recipients who had calculated lost revenues based on the previous FAQ will need to evaluate how the new guidance impacts their calculations.

The Provider Relief Fund reporting portal will open for Recipients on January 15, 2021, with the first reporting deadline for all Recipients on February 15, 2021. Recipients with unused funds after December 31, 2020, will be given an additional six months in which to use the remaining amounts, but must submit a second and final report no later than July 31, 2021. This second report must include patient care related revenue and expense earned from January 1, 2021, through June 30, 2021. Stay tuned for additional guidance as HHS has indicated it intends to launch webinars and future FAQs on these new reporting requirements.

Opening of Phase 3 Provider Relief Funds, New for Some, Possible Supplements for Others

On October 1, 2020, HHS announced it would be releasing an additional $20 billion in coronavirus relief funding for health care providers. Under the Phase 3 General Distribution allocation, HHS, through HRSA, made funds available to a wider range of providers, including: 1) providers who already received, rejected, or accepted Provider Relief Fund payments; 2) an expanded group of behavioral health providers including addiction counseling centers, mental health counselors, and psychiatrists; and 3) providers that began practicing January 1, 2020, through March 31, 2020.

All applications from eligible providers will be reviewed against the provider’s annual revenue from patient care and stimulus fund payments received to date. Applicants that have not yet received PRF amounts, or who have received payments totaling less than approximately 2% of patient care revenue will receive payment that, when combined with any prior general distributions received equals 2% of the provider’s patient care revenue.

Recipients who have already received Provider Relief Fund payments of approximately 2% of annual revenue from patient care from prior general and targeted distributions may submit information to see if they are eligible for a supplementary payment. However, such supplemental payments will not be determined until after all applications have been submitted and reviewed by HRSA and until other providers not yet receiving PRF amounts of at least 2% of annual revenue from patient care receive those amounts.

The remaining balance of the $20 billion budget will then be distributed by HRSA as an equitable add-on payment based on the applicant’s:

  • Change in operating revenues from patient care

  • Change in operating expenses from patient care, including expenses incurred in relation to COVID-19

  • Payments already received through prior PRF distributions

This Phase 3 General Distribution process appears to favor funding entities that have not yet received, any, or as much funding from prior Provider Relief Fund distributions — and as has become sort of a repetitive theme with stimulus funding, the public announcement seems to have overpromised and the details underdelivered in regard to funding for behavioral health services providers.

Recipients can begin applying for funds on October 5, 2020. HRSA will accept applications for Phase 3 General Distribution funding until November 6, 2020. HHS has urged eligible providers to apply early to help expedite the review process and payment calculations, and accelerate distribution of all payments.

Amendments to the Accelerated and Advanced Payment Program Mitigate the Impact to Providers.

On September 30, 2020, Congress passed a stopgap funding bill, the Continuing Appropriations Act, 2021 and Other Extensions Act, H.R. 8337, which temporarily funds the government through December 11, 2020, and avoids an October 1, 2020, shutdown. The bill was signed by the president on October 1, 2020, and became Public Law No: 116-159. Among the many funding extensions, the law extends a number of expiring health care programs and amends the requirements for the Centers for Medicare & Medicaid Services’ (“CMS”) Accelerated and Advance Payment Program (“AAP”) during the public health emergency.

The funding bill allows providers to extend the period of time before recoupment of the AAP payments to one year from the date of the original APP payment, instead of the original 120-day period. Further, during the first 11 months of the recoupment period the offset of Medicare claims was reduced from 100% to 25% of the full Medicare payment, and 50% during the succeeding six-month period. These changes effectively extend the time to repay Provider Relief Fund payments to 29 months from the date of receipt. This would be a significant extension over the current repayment periods for hospitals (four months deferred and 12 months for repayment), and for all other providers and suppliers (four months deferred and three months for repayment). In addition to extending the recoupment period, the bill also reduces the interest rate on any unpaid balance remaining after the recoupment period to 4%, down from the original 10.25%.

While the bill included language stating that the extended recoupment period is only available, “upon request of a hospital,” (or other provider) a subsequent announcement, as well as guidance and FAQs from CMS appear to indicate the only need for such a request is when the automatic recoupment is insufficient to repay the amounts loaned under AAP and the provider receives a demand for payment of the balance. In those demand letters, providers will be advised that if they are experiencing financial hardship they can request an “extended repayment schedule” for an additional three- or five-year period. In such instances, CMS indicates these requests must be made to the provider’s Medicare Administrative Contractor (“MAC”) and will be determined from existing regulatory requirements at 42 C.F.R. 401.607(c)(2).

This is a highly fluid situation and subject to additional change or clarification. HRSA has indicated that it plans to offer Question & Answer sessions via webinar, and will issue FAQs, prior to the first reporting deadline to aid Recipients in the reporting process.


1 HHS further notes that “expenses attributable to coronavirus may be incurred in both direct patient care overhead activities related to treatment of confirmed or suspected cases of coronavirus, prepare for possible or actual coronavirus cases, maintaining healthcare deliver capacity, which includes operating and maintaining facilities, etc.”

2 HHS further notes that “these are actual expenses incurred over and above what has been reimbursed by other sources.” The extent of the implications of this new language is not yet clear.

3 On October 9, 2020, HHS released an FAQ indicating that PRF amounts cannot be utilized to pay off loans received under the Advanced and Accelerated Payment Program.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 295
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About this Author

Ross E. Sallade, Polsinelli PC, Medicare Enrollment Lawyer, Diligence Reports Attorney
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Ross Sallade provides value to clients by tackling the complex legal regulatory, operational, reimbursement and enrollment matters that others might be reluctant to handle. Ross does so by drawing upon specialized knowledge for each matter which enables him to quickly evaluate urgent issues and provide practical recommendations. He also leverages a unique skill set that enables him to identify and work with the right federal and state regulators to pinpoint the heart of the issue and make recommendations to reach appropriate resolution. His previous experience...

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