Update (June 21, 2021): Healthcare providers receiving Provider Relief Fund payments will have to report to the government on using such payments before certain newly announced spending deadlines. The first spending deadline is June 30, 2021, with a 90-day reporting period beginning July 1, 2021, to report on funds received in the first half of 2020. For the most recent updates on future deadlines and further guidance on Provider Relief Fund reporting, visit our Provider Relief Fund reporting page.
Update: On Oct. 1, 2020, the U.S. Department of Health and Human Services, through the Health Resources and Services Administrative (HRSA), announced $20 billion in new Phase 3 General Distribution Funding for providers from the Public Health and Social Services Emergency Fund (Provider Relief Fund). For more information, please see our Oct. 2, 2020, alert.
Update (July 20, 2020): On July 17, 2020 the Department of Health and Human Services (HHS) announced it is extending the application deadline for the Medicaid and CHIP Distribution discussed in this article to August 3, 2020. HHS also announced the distribution of the second round of funding for the Hospital Hot-Spot Distribution will begin during the week of July 20, 2020. More information about these announcements are included in a July 20, 2020 McGuireWoods alert.
Update (July 13, 2020): On July 10, 2020, the Department of Health and Human Services (HHS) expanded the Medicaid and CHIP Distribution discussed in this article for non-Medicaid dental providers, and distributed an additional $3 billion to safety-net hospitals under the program discussed in this article. More information about this expansion is included in a July 12 McGuireWoods alert.
Update (June 11, 2020): This article was originally published on June 9, 2020. It has been updated to reflect new guidance released on June 10, 2020, by the Department of Health and Human Services (HHS), through the updated Provider Relief Fund frequently asked questions (FAQ), user guide, instructions, and downloadable application regarding the delivery of the $35 billion in relief funding and to reflect the launch of an enhanced Provider Relief Fund Payment .
Please find previous McGuireWoods alerts discussing the CARES Act Provider Relief Fund here: April 10, April 14, April 23, April 27, April 29, May 6, May 7 and May 22.
On June 9, 2020, HHS announced that it will distribute $25 billion from the Public Health and Social Services Emergency Fund (Provider Relief Fund) to healthcare providers who focus on treating low-income and minority patients to combat the 2019 novel coronavirus (COVID-19). HHS anticipates that approximately $15 billion will be distributed to eligible providers that participate in state Medicaid programs, Children’s Health Insurance Program (CHIP) and/or Medicaid/CHIP-managed care programs who have not received a payment from the Provider Relief Fund General Allocation (Medicaid and CHIP Distribution). Critically, for the Medicaid and CHIP Distribution, providers must take action as soon as this week to receive these funds. HHS will send a second distribution of approximately $10 billion by direct deposit this week to safety-net hospitals that serve a disproportionate number of Medicaid patients or provide large amounts of uncompensated care (Safety-Net Distribution).
HHS also announced a $10 billion second round of funding to hospitals in COVID-19 hotspots (Hospital Hot-Spot Distribution). On May 7, HHS distributed $12 billion to 395 hospitals that had at least 100 COVID-19 admissions before April 10, 2020, as discussed in a prior McGuireWoods legal alert. Hospitals that would like to participate in this second round of funding will need to submit information by June 15, 2020 at 9:00 p.m. (ET).
By way of background, the Provider Relief Fund was formed through $175 billion in appropriations in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Paycheck Protection Program and Health Care Enhancement Act to reimburse eligible providers for healthcare-related expenses and lost revenues attributable to COVID-19. As discussed in the previous McGuireWoods alerts linked above, the Provider Relief Fund’s $50 billion general distribution was allocated to Medicare facilities and providers impacted by COVID-19. The June 9th announcement marks the first time that Provider Relief Fund distributions have been designated specifically for Medicaid or CHIP providers since the Provider Relief Fund package was announced in April 2020. That said, because most healthcare providers participate in both programs, approximately 62 percent of all Medicaid and CHIP providers received payments from the Provider Relief Fund’s general distribution because they are also reimbursed by Medicare. HHS intends the Medicaid and CHIP Distribution to make the Provider Relief Fund available to the remaining 38 percent, or an estimated one million additional healthcare providers. Providers who received any amount from the $50 billion Provider Relief Fund’s general distribution (even if insignificant or de minimis) are disqualified from receiving any portion of the Medicaid and CHIP Distribution.
Below are key takeaways from HHS’ announcement for Medicaid and CHIP providers, safety-net hospitals and hospitals in COVID-19 hotspots.
Medicaid and CHIP Distribution and Enhanced Provider Relief Fund Payment Portal
1. Eligible Providers. HHS’ updated FAQs provided further clarity surrounding the eligibility requirements. To be eligible for the Medicaid and CHIP Distribution, healthcare providers:
a. must not have received payments from the $50 billion Provider Relief Fund general distribution (although a provider’s eligibility is not affected by a prior payment in a Provider Relief Fund Targeted Distribution like the High Impact Area, Rural, Indian Health Service, and Skilled Nursing Facility Targeted Distributions);
b. must have directly billed a state Medicaid/CHIP program and/or a Medicaid managed care plan for healthcare-related services between Jan. 1, 2018, and Dec. 31, 2019;
c. must have either (i) filed a federal income tax return for fiscal years 2017, 2018 or 2019, or (ii) be an entity exempt from the requirements to file a federal income tax return and have no beneficial owner that is required to file a federal income tax return (i.e., a state-owned hospital or healthcare clinic);
d. must have provided patient care after Jan. 31, 2020;
e. must not have permanently ceased providing patient care directly, or indirectly through included subsidiaries; and
f. if the applicant is an individual, have gross receipts or sales from providing patient care reported on Form 1040, Schedule C, Line 1, excluding income reported on a W-2 as a (statutory) employee.
Examples of providers serving Medicaid and CHIP beneficiaries that may be eligible include pediatricians, OB-GYNs, dentists, opioid treatment and behavioral health providers, assisted living facilities and other home and community-based services providers. HHS clarified that if a provider rejected the $50 billion General Distribution payment, but was eligible for such payment, the provider is not eligible for the Medicaid Targeted Distribution. As discussed below, eligible providers must take action through an application portal to access these funds.
2. Expected Payments. Eligible Medicaid and CHIP providers can expect to receive at least 2 percent of their reported gross revenue from patient care for CY 2017, 2018, or 2019. The final amount each provider receives will be based on the data providers submit through the enhanced Provider Relief Fund Payment Portal, including information about the number of Medicaid patients providers serve. HHS clarified in the FAQs stating that an organization’s prescription sales cannot be captured in the data submitted as “gross sales or receipts” or “program service revenue”; only patient care revenues from providing diagnoses, testing or care for individuals with possible or actual cases of COVID-19 may be included. However, HHS stated that patient care revenues do include drug rebates paid to providers enrolled in the 340B program. HHS also provided guidance in its instructions with respect to a provider’s acquisitions (stock or asset purchase) and including such transactions in its gross sales or receipts. HHS states that gross revenues from such transactions should be adjusted in Field 15 of the Gross Revenues Worksheet. Providers should carefully read the instructions to ensure any gross revenues attributable to acquisitions are properly documented in the application.
Payments will be made to the applicant providers who have a billing TIN included on the list submitted by states to HHS or whose application received additional validation by HHS if not on the list. Notably, payments will be made to providers on a rolling basis, as information is validated.
3. Application. Providers can now apply for the Medicaid and CHIP Distribution by visiting the new enhanced Provider Relief Fund Payment Portal. More information about eligibility and the application process is available on HHS’ CARES Act Provider Relief Fund: General Information page, with more details likely to come.
Providers are permitted to submit only one application, and unlike applications for the Provider Relief Fund general distribution payments, they are unable to edit or resubmit the application once it is submitted through the enhanced Provider Relief Fund Payment Portal. Providers will need to upload the following documentation to the enhanced Provider Relief Fund Payment Portal:
a. the applicant’s most recent federal income tax return for 2017, 2018 or 2019 or a written statement explaining why the applicant is exempt from filing a federal income tax return;
b. the applicant’s Employer’s Quarterly Federal Tax Return on IRS Form 941 for Q1 2020, Employer’s Annual Federal Unemployment (FUTA) Tax Return on IRS Form 940, or a statement explaining why the applicant is not required to submit either form (e.g., no employees);
c. the applicant’s FTE Worksheet; and
d. if required by Field 15, the applicant’s Gross Revenues Worksheet.
Because providers cannot resubmit or edit their applications, HHS has published instructions and a downloadable version of the application for the Medicaid and CHIP Distribution to assist providers in collecting the appropriate documentation.
4. Application Procedure. In addition to the new forms discussed above, providers are required to create a username with Optum and attest as the program administrator in order to submit the application through the portal. Only one person can serve as the program administrator per TIN.
5. July 20 Deadline: To determine their eligibility for funding under Medicaid and CHIP Distribution, the instructions note that providers must submit their information by July 20, 2020. Note, however, that the FAQs previously stated that the submission deadline was July 3, 2020, which has now been updated to be consistent with the instructions. HHS has seemingly given providers more time to complete the application since there is no resubmission option.
6. Terms and Conditions.
a. Although additional guidance is likely forthcoming, HHS has published the Medicaid and CHIP Distribution Terms and Conditions (Terms and Condition) for recipients who received payments as part of the Medicaid and CHIP Distribution. As with the Terms and Conditions for other Provider Relief Fund distributions, recipients will be required to certify compliance with the Terms and Conditions. The Terms and Conditions also provide that any provider retaining payment for at least 90 days without contacting HHS regarding remittance of those funds will be deemed to have accepted the Terms and Conditions, although the enhanced Provider Relief Fund Portal may have additional information.
b. The Terms and Conditions are generally consistent with the certifications made for the other Provider Relief Fund distributions, including certifications that the recipient provides or provided after Jan. 31, 2020, diagnoses, testing or care for individuals with possible or actual cases of COVID-19 and that the payment will be used only to prevent, prepare for and respond to COVID-19 and will reimburse the recipient only for healthcare-related expenses or lost revenues attributable to COVID-19. Providers should be aware that HHS may require them to submit financial documentation and records to HHS and that payments received may be publicly disclosed by HHS. Providers should ensure they stay informed on HHS’ guidance and the necessary Terms and Conditions to maintain compliance with the applicable requirements.
We anticipate further guidance to be provided similar to the HHS updates provided to the original general distribution.
Safety-Net Distribution
1. Qualifying Hospitals. The Safety-Net Distribution will be allocated to hospitals that serve a disproportionate number of Medicaid patients or provide large amounts of uncompensated care. Qualifying hospitals will have:
a. a Medicare disproportionate payment percentage of 20.2 percent or greater;
b. average uncompensated care per bed of $25,000 or more (e.g., a hospital with 100 beds providing $2.5 million in uncompensated care in a year); and
c. profitability of 3 percent or less, as reported to CMS in its most recently filed cost report.
Further, since HHS is relying on 2018 CMS cost report data to calculate eligibility, those hospitals that opened in 2019 will not be eligible for payments under the Safety Net Distribution.
2. Terms and Conditions. HHS has published Terms and Conditions similar to the Medicaid and CHIP Distributions Terms and Conditions that hospitals must attest to in order to receive payments from the Safety-Net Distribution.
3. Expected Payments. Qualifying hospitals will receive a minimum distribution of $5 million and a maximum distribution of $50 million. HHS will send the payment to these hospitals by direct deposit.
McGuireWoods will continue to monitor developments regarding the Safety-Net Distribution and other targeted allocations from the Provider Relief Fund.
$10 Billion Distribution for Hospitals in COVID-19 Hotspots
1. Hospitals Requested to Update COVID-19 Information. On June 8, 2020, HHS sent communications to all hospitals asking them to update information on their COVID-19 positive-inpatient admissions for the period Jan. 1, 2020, through June 10, 2020. HHS announced that it will use this information to determine a second round of funding to hospitals in COVID-19 hotspots. During the first round of targeted distributions to hospitals in COVID-19 hotspots, HHS provided information about amounts after receiving applications when they funded the first 395 hospitals, as discussed in a McGuireWoods legal alert.
2. June 15 Deadline: To determine their eligibility for funding under this $10 billion distribution, hospitals must submit their information by June 15, 2020 at 9:00 p.m. (ET).
In recent weeks, HHS also made targeted distributions to skilled nursing facilities ($4.9 billion) and to around 300 tribal hospitals, clinics and urban health centers ($500 million). In addition, HHS released a series of updates to its Provider Relief Fund FAQs document. As providers approach the 90th day from receipt of the Provider Relief Fund payments, they should evaluate these updates to ensure they continue to adhere to the changed terms of the Provider Relief Fund program. Finally, HHS reiterated in its June 9 announcement that it will continue to work on a distribution targeting dentists. McGuireWoods will monitor further developments regarding such funding.
Please contact the authors or any of the McGuireWoods COVID-19 Response Team members for additional information on the Provider Relief Fund and its availability to healthcare providers and for assistance with the documentation and application process. McGuireWoods anticipates further developments in the days and weeks to come, and stands ready to help clients navigate urgent and evolving legal and business issues arising from the COVID-19 pandemic.
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