COVID-19: Healthcare providers to get $100 billion in relief in $2.2 trillion aid package

Lisa LaMotta Editor-in-Chief, Risk and Regulatory, PwC US March 27, 2020

As jobless claims in a single week reached 3.3 million, the Senate passed a $2.2 trillion aid package this week aimed at addressing the human and economic fallout from the COVID-19 pandemic.

Beyond relief to families, small businesses and certain sectors adversely affected by COVID-19, the bill’s health focus revolved around aiding hospitals, broadening access to telehealth services, supporting health workers, increasing funds for the care of patients diagnosed with COVID-19 and preventing future weaknesses in the medical device and pharmaceutical supply chain.

The bill is the third large-scale effort from Congress to address the pandemic’s impact on the nation. As of early Thursday afternoon, the House had not voted on the bill.

The package includes billions for healthcare:

  • $100 billion in grants to hospitals, public entities, not-for-profit entities, and Medicare- and Medicaid-enrolled suppliers and institutional providers to cover unreimbursed healthcare-related expenses or lost revenues due to the public health emergency. 
  • $48.9 billion for the Department of Agriculture and the FDA to continue the agencies’ response to the pandemic. While a majority of that will go toward programs for nutrition and food distribution, the FDA will receive $80 million to continue efforts related to shortages of critical medicines, enforcement work on counterfeit and misbranded products, Emergency Use Authorizations, and pre- and post-market work on medical countermeasures, therapies, vaccines and research.
  • $27 billion for the Biomedical Advanced Research and Development Authority to support research and development of vaccines, therapeutics and diagnostics to prevent or treat the effects of the virus. 
  • $1.6 billion for the expansion of military hospitals.
  • $945 million to the NIH for COVID-19 research.
  • $415 million for military medical research and development of vaccines and antiviral pharmaceuticals.
  • $274 million to the Health Resources and Services Administration, including $185 million for rural critical access hospitals, rural tribal health and telehealth programs, and $90 million for the Ryan White HIV/AIDS Program. 
  • $200 million to the CMS to assist nursing homes in the prevention and spread of the virus. 
  • $200 million to the Federal Communications Commission to provide support to providers for telehealth services. 
  • $75 million to the National Science Foundation to support basic science research around SARS-CoV-2, the virus that causes COVID-19.
  • $10 million for the National Institute for Innovation in Manufacturing Biopharmaceuticals to support the development and manufacture of new medical countermeasures and biomedical supplies to combat COVID-19. 
  • $6 million for the National Institute of Standards and Technology to conduct research and measurements to support testing of COVID-19.

The package also includes numerous temporary provisions aimed at the healthcare industry, including, in brief:

  • Boosted access for telehealth, including an expansion in who can provide telehealth and under which circumstances;
  • A delay in the 2% sequester for CMS payments;
  • A 20% Medicare add-on for inpatient COVID-19 patients;
  • Flexibility in transferring post-acute patients to alternative sites of care in order to make room for COVID-19;
  • A pause in durable medical equipment reimbursement reductions;
  • No Medicare Part B or private plan cost-sharing for COVID-19 tests or vaccines;
  • 90-day refills for Part D drugs;
  • No reductions in Medicare payments for lab tests;
  • An expansion in the Medicare advance payment program;
  • A 6.2% FMAP increase for state Medicaid programs;
  • A delay in DSH reductions through Nov 30;
  • Limited liability for makers of personal protective equipment and ventilators during public health emergency, and;
  • Increased reporting requirements for manufacturers of drugs and medical devices on shortages.

HRI impact analysis

The aid for hospitals will be welcome as providers cancel procedures and step up spending on equipment and staff in preparation for COVID-19 patients. The shift in service mix is causing concern among some providers around cash flow and liquidity, with possible losses stretching months into the future. The bill allows employers to delay payment of the employer share of the Social Security tax, which could be beneficial to health systems facing liquidity crises.

The $100 billion in grants for hospitals and healthcare providers, to be doled out by HHS, is to be used to “prevent, prepare for, and respond to coronavirus, domestically or internationally, for necessary expenses to reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.”

But, the bill stipulates that the money cannot be used to “reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.”

What can the money for used for? The funds can pay for building temporary structures, leasing properties or medical equipment and supplies, hiring and training workers, paying for surge capacity, running command centers and retrofitting facilities, according to the text of the Senate bill.

The increased access to telehealth services not only is likely to drive demand during the COVID-19 pandemic but also will make both providers and consumers more comfortable with the technology. The reimagined pricing structure for the service could remain a staple for the service after the immediate need lifts. 

With increasing shortages of personal protective equipment (PPE) and other critical medical equipment like ventilators, the CARES Act has tasked the National Academies of Sciences, Engineering and Medicine to study the medical device and pharmaceutical supply chain.

The bill also expands Section 506C of the Federal Food, Drug, and Cosmetic Act, adding additional manufacturer reporting requirements for active pharmaceutical ingredients, in an effort to decrease the likelihood of shortages. The Strategic National Stockpile will receive $16 billion for PPE, critical medical supplies and other vital medicines. 

A focus on the drug and device supply chain, as well as the potential for shortages, could have long-term effects on the healthcare industry beyond the current crisis. While the pharmaceutical industry has spent the past decade-plus shifting manufacturing to places like China and India, a new awareness of the consequences of a supply chain far from home could potentially shift a portion of manufacturing back to the US and North America—increasing costs in the near term as infrastructure is moved.

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