With the passage of the CARES Act, $100 billion has been appropriated to the Public Health and Social Services Emergency Fund (“PHSSEF”), to be administered by a small agency within the Department of Health and Human Services (“HHS”).

HHS states that the purpose of the payment is twofold: to give providers relief regarding healthcare-related expenses or lost revenue attributable to COVID-19, and to ensure uninsured Americans can receive testing and treatment for COVID-19.

An April 10, 2020 HHS press release indicates that providers could see up to $30 billion of the $100 billion appropriation hitting provider accounts that same day.   This initial distribution of the relief funds will go to hospitals and providers across the United States that have received Medicare fee-for-service (“FFS”) reimbursement in 2019. Facilities and providers are allotted a portion of the $30 billion based on their share of 2019 Medicare FFS reimbursements. These are payments, not loans, to healthcare providers, and will not need to be repaid. However, providers in receipt of funds will be required to sign certain terms and conditions within 30 days after their receipt of such funds. The portal for agreeing to the terms and conditions will open beginning the week of April 13, 2020 and will be linked from hhs.gov/providerrelief. If a provider does not wish to retain the funds or determines that they do not meet the terms and conditions for retention of the funds, the provider will be expected to contact HHS and repay the full amount received through the program.

Program Eligibility

The program terms and conditions provide that a recipient must certify the following to retain the funds:

• It billed Medicare in 2019;
• It currently provides diagnoses, testing, or care for individuals with possible or actual cases of COVID-19;
• It is not currently terminated from participation in Medicare;
• It is not currently excluded from participation in Medicare, Medicaid, and other Federal healthcare programs; and
• It does not currently have Medicare billing privileges revoked

The requirement that recipients currently provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 could seemingly be interpreted quite broadly, as many providers could be interacting with and screening patients who possibly have COVID-19. The CARES Act does not seem to further restrict this broad language, so many providers could be eligible to retain these funds.

Recipients of these funds must further certify that the Payment will only be used to prevent, prepare for, and respond to coronavirus, and that the funds will be used as reimbursement only for healthcare related expenses or lost revenues that are attributable to coronavirus. Further, fund recipients must not “double dip” by using these funds to reimburse for expenses or losses that are reimbursable from other sources. Providers in receipt of these funds will not be allowed to seek collection of out of pocket payments from a COVID-19 patient that are greater than what the patient would be required to pay if they were receiving care from an in-network provider. In other words, balance billing for COVID-19 patients will not be permitted if a provider retains the disbursed funds. If a patient is uninsured these funds are expected to be used reimburse providers at the standard Medicare rates.

In addition to requirements for use of the funds, the terms and conditions specify certain uses that HHS will not consider appropriate for use of the funds, including but not limited to: certain executive pay; gun control advocacy; lobbying; abortion (with some exceptions); embryo research; and promotion of legalization of controlled substances.

Estimating the Payment

HHS guidance indicates that a provider can estimate their payment by dividing their 2019 Medicare FFS (not including Medicare Advantage) payments they received by $484 billion and multiply that ratio by $30 billion. Providers can obtain their 2019 Medicare FFS billings from their organization’s revenue management system.

The HHS guidance provides an example of the above calculation: A community hospital billed Medicare FFS $121 million in 2019. To determine how much they would receive, use this equation: $121 million/$484 billion x $30 billion = $7.5 million.

As noted above, Medicare Advantage payments will not be counted in determining the disbursement amounts. Unlike CMS’s program for advance payment which disburses funds based on individual provider NPIs, the funds through this program will be disbursed according to an entity’s TIN, which means the payments will be made to an organization rather than its individual providers.

Reporting Requirements

For now, the terms and conditions only specify a reporting procedure for those who receive more than $150,000 through this program. In these quarterly reports, providers will be expected to outline what the funds were used for and what other sources of federal relief the provider has received due to COVID-19 and in what amounts.  At some point, the HHS secretary could specify a reporting procedure that all fund recipients will need to comply with to account for their use of the funds, regardless of the amount received by the provider. In any event, all providers should expect a fair amount of retrospective oversight for their use of the funds.

Future Disbursements

After the initial disbursement of approximately $30 billion, HHS will turn to disbursement of the additional $70 billion available through the CARES Act appropriation. Although details on this second disbursement are not available to date, a House of Representatives Ways and Means fact sheet indicates that “HHS and the Administration are rapidly working on future targeted distributions to hospitals and providers that will focus on providers in hotspot COVID areas, rural providers, and providers with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population.”

Other COVID Relief Programs

This program is separate and distinct from the Medicare program for advance payments that was structured to assist providers with cash flow concerns during COVID-19. The advance payment program is a short-term loan, whereas the emergency fund allocation discussed here does not need to be repaid. This Emergency Fund appropriation through the CARES Act is also separate from the CARES Act Hospital Preparedness Program, and various SBA loan programs available to healthcare providers.

How to Prepare for Emergency Fund Disbursements and Program Compliance Requirements

Currently, providers need not apply for the disbursements, as HHS is automatically disbursing the initial payments. However, providers may wish to prepare justifications for retention of the funds by: (i) reviewing and documenting interactions with and programs for patients who have, or potentially have COVID-19 symptoms; (ii) reviewing the reporting eligibility criteria and other terms and conditions for use of the funds; (iii) assuring that the funds will not be used for any purposes prohibited in the terms and conditions; (iv) documenting how provider losses or expenses have stemmed from COVID-19, particularly losses in Medicare revenue; and (v) documenting the receipt and use of any other COVID-19 related financial relief. Until HHS indicates how it will recoup funds that are not used, or are used in violation of the program requirements, providers may want to avoid casual or haphazard spending of the funds as a precaution against recoupment.