On Wednesday, April 22, the U.S. Department of Health and Human Services (HHS) issued a press release announcing additional allocations from the $100 billion Public Health and Social Services Emergency Fund (PHSSEF) for eligible healthcare providers under the CARES Act. The announcement follows the initial distribution of $30 billion of the PHSSEF to providers based on their share of total Medicare fee-for-service (FFS) reimbursements in 2019.

According to HHS, in allocating the PHSSEF, HHS seeks to move quickly and transparently to address both the economic harm to the health system as a result of the suspension of elective procedures and the economic impact on providers incurring additional expenses to care for COVID-19 patients. To this end, HHS has divided the PHSSEF into the following two main categories:

  • A $50 billion general allocation to Medicare facilities and providers based on eligible providers’ 2018 net patient revenue.
  • Targeted allocations for COVID-19 high impact areas, treatment of the uninsured, rural providers, Indian Health Service, and other providers.

Hospitals and providers should review the HHS guidelines for the general and targeted allocations to determine eligibility and to ensure compliance with the requirements for accepting these funds, particularly in light of HHS’ promise to prevent “fraud and misuse.”

$50 Billion General Allocation

HHS is allocating $50 billion for general distribution to Medicare facilities and providers impacted by COVID-19, based on eligible providers’ 2018 net patient revenue. HHS notes that the initial $30 billion was distributed immediately to providers between April 10 and April 17 based on the providers’ share of 2019 total Medicare FFS reimbursements.

This week, HHS will begin distributing the remaining $20 billion to providers with a relatively small share of their revenue from Medicare FFS “to augment their allocation so that the whole $50 billion general distribution is allocated proportional to providers’ share of 2018 net patient revenue.” In his remarks to the press announcing the additional allocations, HHS Secretary Alex Azar stated that this new distribution guideline will entail “significant rebalancing” for many providers. As an example, Secretary Azar stated that a large children’s hospital that received an initial distribution of $233,000 will receive an additional $32 million under the new general allocation.

According to HHS, on Friday, April 24, a portion of providers will automatically be sent an advance payment based on the revenue data they submitted to Centers for Medicare and Medicaid Services (CMS) in their cost reports. These providers will still need to submit their revenue information so that it can be verified. HHS states that providers without sufficient cost report data on file will need to submit their revenue information to a portal that will open this week at https://www.hhs.gov/providerrelief. HHS adds that payments will go out weekly, on a rolling basis, as information is validated, with the first wave being delivered at the end of this week (April 24).

All providers who receive funds from the general distribution must sign an attestation confirming receipt of funds and agreeing to the terms and conditions of payment and confirm the CMS cost report. It appears that the principal terms and conditions are largely the same as those published by HHS during distribution of the first $30 billion tranche, as noted in our prior alert. For example, for all care for a presumptive or actual case of COVID-19, the recipient must agree not to seek to collect from the patient out-of-pocket expenses in an amount greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network recipient.

In the press release, HHS adds that the terms and conditions also include other measures to “prevent fraud and misuse of the funds.”  Accordingly, HHS will require all recipients to submit documents sufficient to ensure that these funds were used for “healthcare-related expenses or lost revenue attributable to coronavirus.”  HHS adds that there will be “significant anti-fraud and auditing work” by HHS, including review by the Office of the Inspector General.

Targeted Allocations

HHS will allocate the remaining $50 billion of the PHSSEF to the following areas and groups:

COVID-19 High Impact Areas

HHS is allocating $10 billion to hospitals in areas that have been particularly impacted by the COVID-19 pandemic (e.g., hospitals in New York). HHS requires hospitals to apply for a portion of the funds by providing four simple pieces of information: tax identification number; national provider identifier; total number of intensive care unit beds as of April 10, 2020; and total number of admissions with a positive COVID-19 diagnosis from January 1, 2020 to April 10, 2020. This information must be submitted through an authentication portal by 3:00 PM ET, Saturday, April 25, and distribution of these funds will start next week, according to a subsequent HHS press release. HHS states that the portal is live and hospitals have already been contacted directly to provide this information.

In his remarks to the press, Secretary Azar stated, as an example, that if New York accounts for 40% of COVID-19 cases admitted over the given time period, New York hospitals would receive $4 billion under this targeted distribution.

However, HHS cautions that supplying this information does not guarantee receipt of funds from this targeted distribution.  HHS states that it will use the data received to distribute the targeted funds to where the impact from COVID-19 is greatest. HHS adds that it will take into consideration challenges faced by facilities serving a disproportionate number of low-income patients, as reflected by their Medicare Disproportionate Share Hospital (DSH) Adjustment. Secretary Azar said that HHS will make the formula based on this data public, and that the money will then be sent without further action required from providers.

Treatment of the Uninsured

According to HHS, a portion of the PHSSEF will be used to reimburse healthcare providers for COVID-19-related treatment of the uninsured. Under this targeted distribution, every healthcare provider who has treated uninsured COVID-19 patients on or after February 4, 2020 may seek claims reimbursement and will be reimbursed at Medicare rates, subject to available funding.

HHS outlines the following steps: enrolling as a provider participant, checking patient eligibility and benefits, submitting patient information, submitting claims, and receiving payment via direct deposit. HHS states that providers can register for the program on April 27 and begin submitting claims in early May 2020. More information may be found at coviduninsuredclaim.hrsa.gov.

On the provider relief fund page, HHS adds that, as a condition, providers are obligated to abstain from “balance billing” any patient for COVID-19 treatment.

Rural Providers

HHS is allocating $10 billion for rural health clinics and hospitals which, according to HHS, operate on particularly thin margins and are far less likely to be profitable than their urban counterparts. HHS states that this money will be distributed “as early as next week on the basis of operating expenses, using a methodology that distributes payments proportionately to each facility and clinic.” Secretary Azar added that this money will go to approximately 2,000 rural hospitals across the country, including their 1,100 affiliated Rural Health Clinics, and to the more than 1,300 freestanding Rural Health Clinics.

Indian Health Service

In recognition of the impact COVID-19 is having on Indian health, HHS states that $400 million will be allocated for Indian Health Service facilities and will be distributed as early as next week on the basis of operating expenses.

Other Providers

HHS states that there are some providers who will receive further, separate funding, including skilled nursing facilities, dentists, and providers that solely take Medicaid. Secretary Azar said that HHS is “quickly identifying all the providers who are in need.” No further details are provided on the additional allocations to these other providers.

We are continuing to monitor for additional guidance from HHS regarding the general and targeted allocations and their terms and conditions.

If you have any questions about the PHSSEF and guidance in the context of the COVID-19 pandemic, please contact the authors of this alert.