April 23, 2020

CARES Act Provider Relief Funding

By Scott Manson, Managing Director, Advisory Services

CARES Act Provider Relief Funding Advisory

On April 10, 2020, the Department of Health and Human Services (HHS) began delivery of an initial $30 billion in relief funding to healthcare providers, as part of the national response to COVID-19. The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides for a total of $100 billion to be distributed. The amount of the initial $30 billion tranche that individual providers will receive is based on their 2019 traditional Medicare fee-for-service payments. Based on the example provided by HHS, the initial payment will be just under 6.2% of each provider’s 2019 fee-for-service payments. Medicare managed care payments are not included in the computation. For example, a provider with $1 million in 2019 fee-for-service payments can expect to receive approximately $62,000.

HHS has partnered with UnitedHealthcare to deliver the initial $30 billion distribution. Providers will receive payment via an electronic funds transfer from Optum Bank, with “HHSPAYMENT” as the payment description. Providers who normally receive reimbursement from the Centers for Medicare and Medicaid Services (CMS) by check will receive a paper check in the mail within the next few weeks. There have been anecdotal reports of providers not receiving funds as expected, due to recent provider changes in banks, bank accounts, etc. Providers may contact UnitedHealthcare at (866) 569-3522 and provide their tax identification number to inquire about the expected payment.

The first tranche of relief funding was disbursed using Medicare payment history and provider information in order to distribute funds as quickly as possible. Some providers have been dissatisfied with the allocation method, claiming that some geographic areas with significant COVID-19 cases, fewer Medicare fee-for-service beneficiaries, and reduced elective procedures revenue are receiving lower payments per COVID-19 case. Other providers in states with fewer COVID-19 cases, more Medicare fee-for-service beneficiaries, and no drop-off in elective procedure revenues received payments of up to ten times or more per COVID-19 case. HHS has indicated that it is working rapidly on additional targeted distributions to providers that will focus on areas particularly impacted by the COVID-19 outbreak, rural providers, and providers of services with lower shares of Medicare fee-for-service reimbursement or who predominately serve the Medicaid population.

HHS has indicated that these are payments, not loans, to healthcare providers and will not need to be repaid. The payments are conditioned on the healthcare provider’s acceptance of HHS’s 10-page Relief Fund Payment Terms and Conditions within 30 days of receiving payment. A provider not returning the funds to HHS within 30 days of receipt will be viewed as accepting the terms and conditions of the payment. In essence, the terms of the payments appear very similar to government grants.

According to the terms and conditions, the provider recipient certifies the payment will only be used to prevent, prepare for, and respond to coronavirus, and shall reimburse the recipient only for healthcare-related expenses or lost revenues attributable to coronavirus. Providers need to consider whether their current accounting systems are set up to readily track these expenses and lost revenues.

The terms further state that the recipient will not use the payment for reimbursement of expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse. Providers will need systems in place to keep track of and analyze other reimbursements from federal, state, local, and other sources to determine that they are in compliance.

Also, the recipient shall submit reports as the Secretary (HHS) determines are needed to ensure compliance with conditions imposed on this payment, and such reports shall be in such form, with such content, as specified by the Secretary in future program instructions directed to all recipients. Not later than ten days after the end of each calendar quarter, any recipient that is an entity receiving more than $150,000 total in funds under the CARES Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, or any other Act primarily making appropriations for the coronavirus response and related activities, shall submit a report to the Secretary and the Pandemic Response Accountability Committee. Many providers will exceed or already have exceeded the $150,000 threshold. Providers should study the terms and conditions closely for compliance with limits on executive pay, exclusions for lobbying expenses, and other restrictions.

The funds are much needed and appreciated by healthcare providers, but they do not come without strings attached. Providers who are not accustomed to grant accounting, cost accounting, or cost reporting will need to quickly start keeping detailed accounting records in order to generate the compliance reports on at least a quarterly basis and as determined by the Secretary of HHS.

Please contact your Marcum healthcare professional with any questions or assistance or contact Scott Manson at 847.282.6458 or email Scott.

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