On May 21, 2020, the U.S. Department of Health and Human Services (HHS) issued additional guidance, by again updating its FAQs, for Medicare providers and suppliers (collectively, providers) receiving relief from the Public Health and Social Services Emergency Fund. Of the $175 billion appropriated by Congress, HHS has allocated $50 billion for general distribution to providers impacted by COVID-19, $12 billion for hospitals in COVID-19 high-impact areas, $10 billion for rural providers, and $4.9 billion for skilled nursing facilities. HHS has continued rolling updates to its FAQs since our May 15 post and the key updates since that time are set forth below. On May 22, HHS also announced another 45-day extension for Provider Relief Fund recipients to attest to payments received and accept the Terms and Conditions governing the use of those funds. However, the interplay of that extended deadline with a previously stated deadline of June 3 to submit revenue information remains uncertain.
Uncertainty regarding June 3 deadline
In a May 20 press release, HHS advised providers that they have until June 3 to accept the Terms and Conditions and submit their revenue information in the General Distribution Portal to support receiving an additional payment from the $50 billion general distribution. HHS instructed that all providers who automatically received an additional general distribution payment prior to 5:00 p.m. EST on April 24 must provide HHS with an accounting of annual revenues by submitting tax forms or financial statements and agree to the Terms and Conditions. In addition, for those providers that have not already received an additional general distribution payment, the submission of tax forms or financial statements serves as an application for additional funding. Providers that do not submit revenue information by June 3 will no longer be eligible to receive additional funding from the $50 billion general distribution. HHS has instructed providers to follow these steps:
- Confirm receipt of previous funds through the Provider Relief Fund payment Attestation Portal, including agreeing to the Terms and Conditions; and
- Submit revenue information through the General Distribution Portal for consideration to receive additional general distribution funds.
Although the interplay between the June 3 deadline and the new 90-days-from-receipt deadline remains unclear at this time, it appears that the June 3 deadline remains in place, at least for providers that did not automatically receive an additional general distribution payment. We expect HHS to release additional guidance on this issue.
Updated general distribution FAQs
The updated general distribution FAQs shed additional light on a range of issues relating to the Provider Relief Fund, including the following:
- Internal distribution of funds throughout systems/organizations. In its most recent update to the FAQs, HHS made clear that Provider Relief Fund recipients have discretion in allocating the relief funds as they see fit, provided the funds are used in accordance with the Terms and Conditions. However, the FAQs note that while a parent organization “can accept and allocate funds at its discretion to its subsidiaries” the parent organization that initially received the funds remains ultimately responsible for substantiating that the funds were used appropriately.
- Rejection of payment after sale of practice or hospital and other transactional matters. If as a result of the sale of a practice or hospital, the Tax Identification Number (TIN) that received a general distribution payment did not provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 on or after January 31, 2020, the provider must reject the payment. The FAQs have also been updated to provide guidance on a number of common health care transaction scenarios, including accounting for pre-acquisition revenue, changes of ownership, mergers, etc.
- Guidance on “Filing TINs” v. “Billing TINs.” The updated FAQs now provide guidance on entering TINs into the General Distribution Portal where a parent organization submits a tax return under a TIN that does not bill Medicare (Filing TIN), and the subsidiaries of the parent bill Medicare, but do not file tax returns (Billing TIN). In that scenario, the FAQs state that the parent should complete the application by listing the Billing TINs of the respective subsidiaries without entering its own TIN used to file the tax return. Further, in the application the parent entity should “submit a statement on the first page of the uploaded tax return file stating (i) the parent entity’s Filing TIN and that it does not bill Medicare and (ii) a schedule of the billing subsidiaries, their Billing TINs, and gross sales or receipts.”
- Parent organizations with both patient revenue and non-patient revenue. If an organization applying for Provider Relief Fund payments has both patient revenue and non-patient revenue (e.g., from insurance, retail, or real estate operations), the FAQs instruct the organization to complete the application by listing the Billing TINs and the sum of all “gross sales or receipts” or “program service revenue” of all eligible subsidiaries (i.e., those subsidiaries that provide or provided after January 31, 2020, diagnoses, testing or care for individuals with possible or actual cases of COVID-19). Revenues from subsidiaries that are not directly providing diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 should be excluded from reporting.
- Estimating 2% of patient revenue. HHS is distributing an additional $20 billion in general distribution funds to providers to augment their initial allocation so that the $50 billion sum is allocated proportional to providers’ share of 2018 net patient revenue. The allocation methodology is designed to provide relief to providers who bill Medicare fee-for-service with at least 2% of that provider’s net patient revenue, regardless of the provider’s payer mix. Payments are determined based on the lesser of: (1) 2% of a provider’s 2018 (or most recent complete tax year) net patient revenue; or (2) the sum of incurred losses for March and April. If the initial general distribution payment that a provider received between April 10 and April 17 (from the first $30 billion distribution) was determined to be at least 2% of the provider’s annual patient revenue, the provider will not receive additional general distribution payments. To estimate the expected total general distribution amount, HHS has instructed providers to use the following equation: [(individual provider revenues / $2.5 trillion) x $50 billion].
- Estimating lost revenues for March and April. The FAQs state that to estimate lost revenue, providers “may use a reasonable method of estimating the revenue during March and April compared to the same period had COVID-19 not appeared.” As examples, HHS noted that it would be reasonable to compare March and April revenues to the same period last year, or that, if a budget was prepared without taking into account the impact of COVID-19, the estimated lost revenue would be the difference between budgeted revenue and actual revenue for March and April.
- Accepting one of two payments. Providers that received two general distribution payments may choose to accept one payment and reject the other. Rejecting one payment does not result in a provider forfeiting the ability to accept future distributions. The updated FAQs also cover the particulars on how to return payments (e.g., mailing address information, provider support hotline, etc.)
- Publication of payment data. HHS has posted a public list of providers and their respective payments and the data is updated weekly. Providers cannot choose to be omitted from the list. Providers that retain the funds past 45 days of receipt of payment via ACH or within 60 days of check payment issuance, but do not submit an attestation for the funds, will nevertheless be included in the public list of providers and payments. The data points include current total amounts attested to by providers from each of the Provider Relief Fund distributions, including the general distribution, rural distribution, and high-impact areas distribution. HHS noted that if a provider has received more than one payment but has not accepted all of the payments (by attesting and agreeing to the Terms and Conditions), only the dollar amount associated with the accepted payment or payments will appear in the payment data. Further, because Provider Relief Fund payments are being made to providers or groups of providers that are organized within a TIN, certain providers may not be listed if they are organized within a larger billing entity that received payment.
Updated rural targeted distribution FAQs
- Defining a “rural” facility. HHS used the Federal Office of Rural Health Policy’s definition, which includes the following:
- All non-metro counties;
- All census tracts within a metropolitan county that have a Rural-Urban Commuting Area (RUCA) code of 4-10 (the RUCA codes allow the identification of rural census tracts in metropolitan counties); and
- 132 large area census tracts with RUCA codes 2 or 3 (these tracts are at least 400 square miles in area with a population density of no more than 35 people per square mile).
- Identifying facilities for rural targeted distributions. Rural distribution payments were made to rural acute care general hospitals and Critical Access Hospitals (CAHs), Rural Health Clinics (RHCs), and Community Health Centers (CHCs) located in rural areas. Candidate facilities for the rural targeted distributions were identified using the December 2019 CMS Provider of Services file. Due to data limitations, CMS noted that facilities that were not included in the December 2019 Provider of Services file were not included in the rural targeted distribution.
- Formula for rural distribution payments. HHS explained in the updated FAQs that hospitals and RHCs will each receive a minimum base payment plus a percentage of their annual operating expenses. The base payment will account for RHCs with no reported Medicare claims, such as pediatric RHCs, and CHCs lacking expense data, by ensuring that all clinical, non-hospital sites receive a minimum level of support no less than $100,000, with additional payment based on operating expenses. Rural acute care general hospitals and CAHs will receive a graduated base payment between $1–3 million (depending on operating expenses) plus approximately 2% of total operating expenses reported on their most recent, publicly available cost reports.
Updated high-impact area targeted distribution FAQs
- Allocation of the funds. Of the $12 billion distribution from the Provider Relief Fund, $10 billion was allocated based on a fixed amount per COVID-19 inpatient admission. The remaining $2 billion was distributed based on each hospital’s portion of Medicare Disproportionate Share Hospital payments and Medicare Uncompensated Care payments. Last updated on May 12 in the FAQs, HHS noted that it has made 336 high-impact area distribution payments to 395 hospitals and health systems that provided inpatient care for 100 or more COVID-19 patients through April 10.
- Need for providers to update high-impact data. HHS reminded providers to keep updating capacity and COVID-19 census data to ensure that HHS can make timely payments in the event that the provider becomes a high-impact provider.
HHS continues to issue new instructions and guidance related to Provider Relief Fund payments on a rolling basis, and Reed Smith continues to track these developments closely. Recipients of Provider Relief Fund payments are encouraged to monitor HHS’s announcements and guidance as often and as carefully as possible. Please contact us, or the Reed Smith lawyer with whom you frequently work, to ensure compliance with applicable laws in applying for and utilizing CARES Act funds.