COVID-19: Billions in CARES funds roll out based on Medicare payments

Lisa LaMotta Editor-in-Chief, Risk & Regulatory, PwC US April 17, 2020

Federal aid from the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act is starting to arrive in hospitals’ coffers. The first $30 billion tranche of the $100 billion earmarked to help support hospitals fighting the COVID-19 pandemic is being paid out via the Medicare fee-for-service electronic funds transfer pathway, a process that will likely expedite the funds to hospitals but may not be delivering aid to the hospitals in the hardest-hit areas of the country. 

CMS Administrator Seema Verma announced April 7 that those hospital systems that already receive Medicare payments electronically will not have to apply for funds and will receive them automatically; those that currently receive paper checks will need to fill out an application.

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Hospitals and others have expressed concern that the money is not enough to stave off financial disaster. Healthcare providers, in particular, have been challenged financially even as they scramble to prepare for surges in COVID-19 patients. In recent weeks, hospitals from Massachusetts to Kentucky to Oregon have announced furloughs, pay cuts, layoffs and cuts in executive pay.

Some rural hospitals, with less than two months’ cash on hand, fear they may have to close their doors before the pandemic peak hits their communities. Modern Healthcare reported that a quarter of rural hospitals may be at risk of closing.

A Kaiser Family Foundation issue brief released last week estimated that the cost for the federal government to pay hospitals for treating the uninsured could take up a significant amount of the $100 billion fund, ranging from $13.9 billion to $41.8 billion, depending on how the pandemic eventually rolls out across the country.

“The methodology proposed by HHS to distribute the initial $30 billion fails to account for the number of COVID-19 cases hospitals are treating and does not address the higher losses faced by hospitals and health care providers in the hardest hit states,” wrote Sens. Robert Menendez and Cory Booker of New Jersey in a letter to HHS Secretary Alex Azar and CMS Administrator Seema Verma

The New Jersey congressional delegation was not the only cohort dissatisfied by the decision to disburse the funds based on Medicare payments instead of need. 

The Medicaid and CHIP Payment and Access Commission sent a letter to CMS asking that disbursement of the remaining $70 billion in funds from the CARES Act take into account the “real and pressing concerns of safety-net providers that are on the frontlines of serving the nation’s poorest and most vulnerable people.” The letter pointed out that facilities deemed disproportionate share hospitals (DSH) of Medicaid payments tend to have lower Medicare revenues and therefore would be unlikely to receive any monies from the first tranche of payments. 

Medicaid directors from Florida and Arizona also wrote to CMS urging the agency to allow states to “make retainer payments to essential Medicaid providers through Section 1115 waivers during this emergency,” noting that “providers who serve our 72 million members are at risk of closing their doors in a matter of days or weeks due to extraordinary costs.”

The Medicaid directors proposed a set of “guardrails” to “ensure that Medicaid does not shoulder this crisis for the entire health care system.”

HHS has said it will “focus on providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans” when distributing the remaining $70 billion in funds. 

Other monetary assistance

Beyond the funds distributed through the CARES Act, CMS has expanded its Accelerated and Advance Payment Program to increase cash flow for Medicare providers. Providers have the ability to tap up to 125% of their payment amount for a six-month period depending on what type of facility they are. 

To be eligible for the loan, a Medicare provider must have submitted claims in the past 180 days before the date of request, must not be in bankruptcy, must not be under active medical review or program integrity investigation, and must not have any outstanding delinquent Medicare overpayments. 

While the money from the CARES Act is considered a grant and does not have to be repaid, the funds provided through the CMS Accelerated and Advance Payment program are considered a loan and repayment will begin within 120 days after issuance. 

CMS also updated its “Frequently Asked Questions” document to reflect changes in practice and reimbursement during the public health emergency, enacting another swath of rapid deregulation. Both CMS and the FDA have been aggressively removing some of the regulatory hurdles that were in place in order to increase the manufacturing of testing, speed the development of therapeutics and vaccines, and make it easier for providers to treat COVID-19 patients. 

The 38-page document largely addresses how providers can handle everything from telehealth to ambulatory services for the homebound to new testing sites. It stresses that most of these regulations are meant only for the duration of the public health emergency, but leaves the door open in some instances for these new regulations to become permanent. 

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