CARES Act Provider Relief Fund Creating Desperately Needed Financial Relief

Officials have begun distributing the initial $100 billion in the form of general and targeted allocations.

The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted on March 27, 2020 to provide $100 billion to hospitals and healthcare providers struggling due to the outbreak of COVID-19. On April 24, pursuant to the CARES Act 3.5, Congress approved another $75 billion. Collectively, these funds are referred to as the “CARES Act Provider Relief Fund,” and will be distributed by the U.S. Department of Health and Human Services (HHS). Though HHS has yet to determine how it will be distributing the additional $75 billion, officials have already begun distributing the initial $100 billion in the form of general and targeted allocations.

The general allocations have been released in two “tranches.” The first tranche of $30 billion began distributing funds on April 10. The fund was distributed as a one-time payment to qualifying providers and facilities. The payment will not need to be repaid by the recipients if they comply with terms and conditions set by HHS, but the payment is considered taxable income. However, COVID-19 expenses should be deductible against the income from the payment. Recipients must certify that the payment will only be used for healthcare expenses related to preventing, preparing for, and responding to COVID-19, and/or reimbursing recipients that have lost revenue due to COVID-19.

Recipients need not apply for the first tranche of payments. The payment was automatically deposited to the bank account associated with the qualifying recipient’s Tax Identification Number (TIN). All facilities and providers that received Medicare fee-for-service (FFS) reimbursements in 2019 are eligible for this initial tranche. If a recipient ceased operation in response to COVID-19, they may still be eligible to receive funds, as long as the recipient provided diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.

Once a recipient receives a payment, they have 30 days to sign an attestation confirming the receipt of the funds and agreeing to the terms and conditions of the payment. If a recipient chooses to reject the funds, they must contact HHS within 30 days of receiving them and remit the full payment. Failure to reject the funds but keeping the payment without signing the attestation form will result in a default acceptance of the terms and conditions attached to the payment. As such, providers should be careful to review the terms and conditions within 30 days of receiving funds. Recipients can accept or reject the funds through the CARES Act Provider Relief Fund Attestation Portal.

The terms and conditions consist of eight COVID-19-specific attestations that a recipient must agree to in order to keep the funds. The eligible providers and facilities must agree to the following:

• The payment is defined as the funds received from the relief fund, and the recipient means only the healthcare provider, whether it is an individual or an entity, receiving the payment.

• The recipient must certify that it:
  • Billed Medicare in 2019;
  • Provided, or currently provides, after Jan. 31, 2020, diagnoses, testing, or care for individuals with possible or actual cases of COVID-19;
  • Is not terminated from participation in Medicare;
  • Is not excluded from participation in Medicare, Medicaid, or any other federal health care programs; and
  • Does not currently have any Medicare billing privileges revoked.
• The recipient must certify that the payment will only be used to prevent, prepare for, and respond to coronavirus, and shall reimburse the recipient only for healthcare-related expenses or lost revenues that are attributable to coronavirus.
• The recipient must certify that it 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.

• The recipient must submit reports required by the HHS Secretary in order to ensure compliance with the conditions imposed on the payment.
• Not later than 10 days after the end of each calendar quarter, a recipient that received more than $150,000 total in funds must submit a report to the HHS Secretary containing the following information:
  • The total amount of funds received from HHS;
  • The amount of funds received that were expended or obligated for any given project or activity;
  • A detailed list of all projects or activities for which large covered funds were expended or obligated, including the name and description of each project or activity and the estimated number of jobs created or retained by the project or activity; and
  • Detailed information on any level of sub-contracts or sub-grants awarded by the covered recipient or its subcontractors or subgrantees.
• The recipient must maintain appropriate records and cost documentation, and shall submit a copy of such records and cost documentation to the HHS Secretary upon request and agree to any audits.
• The recipient must certify that it will not 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. This prohibited practice is known as “surprise billing.”

In addition, recipients are also prohibited from using the funds for lobbying, providing abortions, embryo research, promoting the legalization of controlled substances, maintaining or establishing a computer network that does not block access to pornography, ACORN funding, or needle exchanges, and recipients also must adhere to other government-wide general provisions.

Essentially, recipients may use the funds to repay lost revenue attributable to COVID-19, and to pay for healthcare expenses attributable to COVID-19. The terms and conditions are extremely broad in defining what that actually means, so recipients should reach out to their health law counsel to put a compliance plan in place, including how to determine lost revenue and costs, and how to document the usage of every dollar spent of the payment. As is often the case when receiving federal funds, the key to proving compliance is documentation of how the funds are used and any internal discussions regarding good-faith attempts to interpret the applicable terms, conditions, and guidelines.

The amount of the payment is calculated based on the recipient’s 2019 Medicare FFS reimbursement. The formula to estimate a recipient’s payment is the amount a provider received by Medicare in 2019, divided by $484 billion, and then that number multiplied by $30 billion. It should be made clear that because these payments are made according to TINs rather than NPIs or other individual identifying numbers, only one payment will be sent per organization, even if there are multiple Medicare-billing providers working within that facility. Only solo practitioners who bill Medicare will individually receive a payment under their TIN used to bill Medicare.

On Friday, April 24, 2020, HHS began distributing the second tranche of the general allocation. This second tranche will encompass $20 billion given to recipients whose revenue does not primarily come from Medicare. However, this tranche only will pay providers and facilities that have submitted a 2018 CMS cost report. To those who had not submitted one, they had to have submitted revenue information before 3 p.m. on April 25. The same terms and conditions apply to the second tranche of payments as they did to the first, with the addition of two terms requiring the recipient to submit to HHS general revenue data for calendar year 2018, and agree to the public disclosure of the payment. Although HHS does not make it clear in their guidelines, only Part A providers submit CMS cost reports, so this $20 billion may be limited to only Medicare Part A providers.

In addition to the general allocations, there are four targeted allocations as well. First, an undisclosed amount of funds will be set aside to reimburse healthcare providers that have treated uninsured COVID-19 patients at the going Medicare rates. In order to receive these funds, a provider must apply in accordance with the specific guidelines. Second, on a rolling basis, $10 billion is being allocated to hospitals in areas that have been heavily impacted by COVID-19. The money will be distributed to those hospitals once they provide their TIN, NPI, total number of intensive care unit beds as of April 10, 2020, and the total number of admissions with a positive diagnosis for COVID-19 from Jan. 1, 2020 to April 10, 2020, all submitted via the authentication portal before midnight on April 23. HHS will use this information to determine the amount provided to each hospital. Third, during the last week of April, $10 billion will be allocated to rural health clinics and hospitals, based on operating expenses. And lastly, during the last week of April, $400 million will be allocated to Indian Health Services, based on operating expenses.

Because the additional $75 billion from CARES Act 3.5 has yet to be allocated by HHS, and because there are still some extra funds from the initial $100 billion, providers should consistently check the HHS website and RACmonitor and consult with their health law attorneys to stay up to date. However, if you are a Recipient, the most important thing to do right now is to document your compliance with the eligibility requirements and the terms and conditions, in addition to how you expend these funds in order to avoid a potential audit or to avoid potential exposure to the False Claims Act. 

Programming Note: Listen to Andrew Wachler report this story live during Monitor Mondays, May 4, 10-10:30 a.m. EST.