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New Provider Relief Fund Distributions: Safety Net Hospitals, Certain Rural Hospitals and Dentists

On July 10, 2020, the US Department of Health and Human Services (HHS) announced the allocation of $4 billion in additional targeted funding through the Provider Relief Fund (PRF) to safety net hospitals, specialty rural hospitals, urban hospitals with certain rural Medicare designations and hospitals in small metropolitan areas. HHS also announced a new PRF application process and portal for dentists who were ineligible for previous PRF distributions.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136) established the PRF to provide $100 billion to support healthcare providers affected by the Coronavirus (COVID-19) pandemic. The Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139) provided an additional $75 billion to the PRF. To date, HHS has allocated $116.75 billion of the $175 billion provided through the PRF.

Key Takeaways 

  • HHS expects to distribute approximately $3 billion in targeted funding to safety net hospitals by expanding the initial profitability qualifying criteria.

  • HHS expects to distribute an additional $1 billion in targeted funding for certain hospitals serving rural populations.

  • HHS announced an application portal and process for dentists who were previously ineligible for the Medicaid general distribution and Medicaid PRF distributions.

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Overview

With its July 10, 2020, announcement, HHS has now distributed or committed to distribute approximately $116.75 billion in payments. This figure includes $50 billion in general distributions for Medicare fee-for-service providers, and targeted distributions for Medicaid providers; safety net hospitals; hospitals in high COVID-19 impact areas (hotspots); rural providers; skilled nursing facilities; and tribal hospitals, clinics and urban health centers. HHS also distributes funding from the PRF on a rolling basis for the treatment and testing of uninsured COVID-19 patients. Providers submit claims, and HHS approves reimbursement. While no set allocation is dedicated for uninsured patients, as of July 13, 2020, approximately $350 million has been distributed to providers for the treatment and testing of uninsured COVID-19 patients, according to HHS.

Also on July 10, HHS announced a PRF portal for dentists who were previously ineligible to receive PRF funding. There is no specific allocation amount set aside for the dentists. The allocation amount will be determined by the applications submitted through the dental portal.

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Safety Net Hospital Expansion

On June 9, 2020, HHS announced a targeted distribution to safety net hospitals. At that time, HHS committed $10 billion to qualifying hospitals that had 1) a Medicare disproportionate payment percentage of 20.2% or greater; 2) an average uncompensated care per bed of $25,000 or more (for example, a hospital with 100 beds would need to provide $2.5 million in uncompensated care in a year to meet this requirement); and 3) profitability of 3% or less, as reported to the Centers for Medicare and Medicaid Services in the hospital’s most recently filed cost report.

On July 10, HHS announced a supplement by expanding the profitability margin criterion under the safety net hospital distribution. Now, acute care hospitals meeting the other two criteria are eligible for this distribution if they meet the revised profitability margin threshold of less than 3% averaged consecutively over two or more of the last five cost reporting periods. HHS distributed approximately $3 billion to hospitals that meet the new profitability standard.

761 hospitals qualified for the first safety net distribution. HHS reported that another 214 hospitals qualify for the additional $3 billion in funding under the revised criteria. A list of the specific hospitals that received this funding is not yet available.

As we have previously noted, hospital profitability can vary substantially from year to year. Therefore, the year HHS uses to determine eligibility dramatically affects who receives funds from the safety net hospital distribution. HHS sought to address this variability issue with this profitability criterion expansion. However, a hospital’s amount of uncompensated care can also vary significantly by year, and therefore the uncompensated care criterion still renders many safety net hospitals ineligible for the safety net hospital distribution.

Additional Rural Providers and Other Providers from Small Metropolitan Areas

In May 2020, HHS distributed $10 billion in funding to rural healthcare providers, including hospitals, health clinics and health centers. On July 10, HHS announced the expansion of the initial rural healthcare payment formula “to include certain special rural Medicare designation hospitals in urban areas as well as others who provide care in smaller non-rural communities.” HHS noted that these may include “some suburban hospitals that are not considered rural but serve rural populations and operate with smaller profit margins and limited resources as compared to larger hospitals.” According to HHS, these additional funds are directed to hospitals in small cities and rural areas that did not receive payment in the initial supplemental rural targeted distribution. In total, these new payments equal approximately $1 billion.

HHS reports that 479 hospitals received this new payment. Payments range from $100,000 to $4.5 million for rural designated providers and $100,000 to $2 million for the other providers. The payment formula varies depending on hospital location and Medicare designation.

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Dentists

Along with the safety net and rural hospital funding expansions, HHS announced a PRF application process and portal for dentists who were previously ineligible to receive funding through the Medicare general distribution or Medicaid PRF. This means that dentists who do not participate in Medicare or Medicaid will have access to PRF funding. This is the first time a PRF distribution has been made available to providers that do not participate in either federal program.

HHS is relying on data sources outside of Medicare and Medicaid to determine which dentists are eligible for this funding. HHS has developed a curated list of dental practice tax identification numbers from third-party sources and HHS datasets. Similar to the process for the Medicaid portal, dentists on the curated list will be able to continue the application through the portal, while dentists not on the list will not be able to complete the application process. Dentists not on the list can work with HHS to validate that they are eligible for funding.

Eligible dentists will receive a reimbursement of 2% of their annual reported patient revenue. Dentists have until July 24, 2020, to apply using the same portal that is currently open to Medicaid providers. The dental distribution has been added to the Medicaid Terms and Conditions document, but it is currently unclear whether dentists will have the same reporting requirements as outlined for Medicaid providers. Providers receiving future distributions, including the dental distributions, likely will be required to report data to HHS.

Future Allocations

This latest funding announcement might offer insight into how HHS may address future distributions. For example, the availability of the Medicaid portal to dentists may prove a bellwether: if HHS is successful in collecting data from providers, and the technology is successful in allowing two provider groups to enter information simultaneously, HHS may be more comfortable adding other providers to application portal more quickly. Similarly, although HHS has not yet confirmed if dentists will submit the same worksheet or data that is required by Medicaid providers, what dentists do submit to portal likely will be indicative of the information required by future distribution recipients.

Stakeholders have speculated about which groups might receive funds in future distributions. Children’s hospitals have been pushing for a targeted distribution, and they may be next in line. Some reports have suggested that HHS will create a new portal for providers that missed the opportunity to gain funding through the second tranche of the general distribution and are not eligible for the Medicaid distribution. With any new PRF allocation, providers likely will be required to submit significant data to HHS in order to receive the funding.

© 2020 McDermott Will & EmeryNational Law Review, Volume X, Number 199
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Katie Waldo Healthcare Attorney

Katie is an experienced government relations strategist who helps clients navigate the complex issues surrounding Medicare, Medicaid and the healthcare marketplace.

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