Newly Enacted End of Year Legislation Has Impact on Healthcare Providers

Bass, Berry & Sims PLC

On December 27, President Trump signed into law the Consolidated Appropriations Act, 2021 (Act), which was passed by Congress the evening of December 21, after weeks of negotiation. The lengthy legislation, totaling in at 5,593 pages, provides for over $2.3 trillion in funding, $900 billion of which is allocated for COVID-19 relief.

The Act contains several key provisions relevant to the healthcare industry, and particularly, healthcare providers.

Specifically, the Act allocates additional COVID-19 funding, including the following approximate amounts:

  • Provider Relief Fund (Relief Fund): $3 billion
  • Vaccine Manufacturing and Procurement: $19.7 billion
  • Vaccine Distribution: $8.75 billion
  • COVID-19 Testing and Tracing: $22.4 billion
  • National Strategic Stockpile: $3.25 billion
  • Mental Health and Substance Abuse Services and Support: $4.25 billion

Act Clarifies Use of Relief Fund Payments

In addition to adding another $3 billion to the $175 billion previously allocated to the Relief Fund by the Coronavirus Aid, Relief, and Economic Security (CARES) Act  and the Paycheck Protection Program and Health Care Enhancement Act (Enhancement Act), the Act aims to clarify use of Relief Fund payments, as follows:

  • For budgets established and approved before March 27, 2020, the Act allows providers to calculate lost revenues using a budgeted-to-actual revenue comparison (as previously permitted by Relief Fund guidance released in June 2020), rather than actual year-over-year comparisons as currently required by Relief Fund guidance.
  • Parent organizations may allocate all or any portion of Targeted Distribution payments among their eligible subsidiaries, though reporting responsibility for any such reallocated payment will remain with the original recipient.
  • Not less than 85% of the Relief Fund balances available and any funds recovered from providers going forward must be for “any successor to the Phase 3 General Distribution” to make payments based on applications that consider financial losses and changes in operating expenses occurring in the third or fourth quarter of 2020, or the first quarter of 2021.

Act Expands How PPP Funds Can be Used

The Act expands the list of expenses for which Paycheck Protection Program (PPP) borrowers may use PPP funds — including certain operational and supplier costs, as well as costs incurred to comply with COVID-19 health and safety guidelines — whether the PPP loan was issued before, on or after enactment of the Act.  The Act also creates a simplified application vehicle for PPP borrowers seeking PPP loans of $150,000 or less (and provides for automatic forgiveness of such loans upon meeting a limited set of requirements, including, among other things, signing a one-page certification and agreeing to retain relevant records for the prescribed length of time) and establishes a second draw loan for smaller, harder-hit PPP borrowers.  PPP borrowers eligible for a second draw PPP loan must have 300 or less employees, and demonstrate they have used or will use the full amount of their first PPP loan and that they have experienced a 25% or more reduction in “gross receipts” during the first, second, third or (for certain applicants) fourth quarters of 2020 relative to the same quarters in 2019.  For additional information, please see the analysis here.

Additional Components of the Act

Finally, the Act includes several other components relevant to the healthcare industry, some of which are separate from the COVID-19 pandemic. These include:

  • The “No Surprises Act:” Legislation that aims to hold patients harmless for surprise medical bills, including by limiting patient financial responsibility and cost sharing amounts to what would be paid to in-network providers and by establishing a dispute resolution process to settle disputes relating to out-of-network claims. This legislation also will also give patients more transparency by, among other things,  requiring health plans to include pertinent deductible and out-of-pocket limit information on member ID cards.
  • Medicare Payment Changes: In an apparent attempt to alleviate financial hardships on providers caused by the pandemic and certain payment cuts that were implemented through revisions to the Medicare Physician Fee Schedule (MPFS), the Act includes a75% payment bump to the entire MPFS for services furnished from January 1, 2021 through December 31, 2021 and extends the physician work geographic index floor (in areas where labor costs are less than the national average) from December 19, 2020 to January 1, 2024. In addition, the Act extends the temporary suspension on Medicare sequestration for a three-month period ending March 31, 2021.  Further, the Act implements a moratorium on payment of a certain add-on code (G2211) for inherently complex evaluation and management visits through January 1, 2024 in order to reduce the budget-neutrality adjustment.
  • Alternative Payment Models: The Act delays the mandatory radiation oncology model, which is now set to begin no earlier than January 1, 2022, and extends the Independence at Home demonstration program through December 31, 2023. It also implements a temporary freeze on the current payment and patient count threshold for physicians and other eligible clinicians participating in Advanced Alternative Payment Models.
  • Telehealth Services: The legislation allocates approximately $250 million in additional funding to the Federal Communications Commission’s COVID-19 Telehealth Program, as originally authorized under the CARES Act, and expands access to mental health services furnished through telehealth provided certain conditions are met.

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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