COVID-19 Relief Needed to Keep Medicaid Community-Based Providers Afloat

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Editor’s Note: In a new blog post for The Commonwealth Fund, summarized below, Manatt Health explains how the current distribution model for the Provider Relief Fund (PRF) has disadvantaged Medicaid community-based providers. To read the full blog post, click here.


As part of its COVID-19 response, Congress established the $175 billion PRF under the CARES Act to compensate for lost revenues and help providers respond to the pandemic. The law set these two broad uses, leaving it to the U.S. Department of Health & Human Services (HHS) to determine how to distribute funds among providers.

Since April, HHS has allocated funding to different groups of providers in waves and over time has reclassified payments into two types of distributions. These include general distribution (providers receive at least 2% of annual patient revenue) and targeted distribution (certain providers receive additional payments—for example, payments to hospitals in “hot spots” and to safety-net hospitals). On October 1, HHS announced a new Phase III of the general distribution, indicating that payments will take account of providers’ revenue losses and expenses attributable to COVID-19 and the PRF payments they have received to date. However, HHS has not announced the exact payment methodology.

To date, community-based providers (which include noninstitutional providers such as behavioral health clinics and pediatricians) have been disadvantaged by this distribution model in three ways:

  1. The general distribution methodology to date disadvantages Medicaid providers. Basing payments on patient revenue means the highest per-patient payments go to providers with a large proportion of privately insured patients and the lowest go to providers with a high percentage of Medicaid patients. In other words, the least well-resourced providers receive the smallest general distribution payments. Through the recently announced $20 billion Phase III general distribution, HHS will make additional payments to Medicare, Medicaid, Children’s Health Insurance Program, dental, assisted living facility and behavioral health providers based on revenue losses and expenses attributable to COVID-19. Some providers will receive an additional payment above 2% of net patient revenue, but the exact payment methodology has not been announced. We do not yet know whether HHS will apply targeting principles to ensure the new distribution will prioritize community-based Medicaid providers.
  2. Medicaid community-based providers are left out of targeted distributions. The general distribution’s shortcomings are exacerbated by the fact that Medicaid community-based providers have not received additional targeted relief. HHS acknowledged that “targeting funds to Medicaid and safety-net providers is essential because they operate on thin margins” and that “it’s also important because the populations they serve, low-income and minority Americans, have suffered disproportionately from COVID-19.” Medicaid community-based providers, however, have yet to receive targeted support.
  3. PRF is administratively complex and difficult to navigate. Since April, HHS has issued dozens of announcements and guidance changes—including altered eligibility criteria—and established terms and conditions and application portals. While perhaps unavoidable given how quickly HHS needed to act, the volume of and changing rules have created a difficult system for even large, well-resourced provider systems to navigate.

Moving Forward: How to Protect Access to Medicaid Community-Based Providers

In addition to increasing the PRF’s available funds, the following actions could help ensure that Medicaid community-based providers have the resources to stay open during the pandemic and beyond:

  • Design the Phase III general distribution methodology to prioritize add-on payments (i.e., payments in addition to the 2% of patient revenue) to providers that are experiencing the greatest financial hardship and have the smallest operating margins.
  • Establish a targeted distribution for community-based providers with a high proportion of Medicaid patients based on metrics, such as the number of patients a provider serves.
  • Release meaningful provider-level PRF payment data to allow states and policymakers to assess where need is the greatest.
  • Simplify future communications and application processes.

Medicaid providers serve 20% of the U.S. population, including four of every ten children, and Medicaid finances nearly half of all births. Medicaid community-based providers have been on the front lines providing treatment for people suffering from the opioid crisis and will be key to distributing a COVID-19 vaccine once it is available. Their patients are among the hardest hit by COVID-19. That harm will extend well beyond the pandemic if they are forced to close their doors.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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