Less than a month after passing the $2.0 trillion Coronavirus Aid, Relief, and Economic Security Act of 2020 (the “CARES Act”), Congress has passed and the President has signed a second round of aid (the Paycheck Protection Program and Health Care Enhancement Act, the “PPPHCEA”) that stakeholders in the health care industry can use to continue the fight against COVID-19 and stay in business until social distancing orders are loosened. Importantly, the PPPHCEA includes an infusion of an additional $75 billion to the Public Health and Social Services Emergency Fund (the “Provider Relief Fund”). Below we provide a summary of the latest updates issued by the U.S. Department of Health and Human Services (“HHS”) as to how money from the Provider Relief Fund will be distributed to health care providers and suppliers. For a summary to date of relief offered to the health care industry through the CARES Act and the PPPHCEA, please refer to our up-to-date summary here.

Public Health and Social Services Emergency Fund

The CARES Act authorized HHS to directly cover costs of hospitals, health systems and other providers related to COVID-19; the bill earmarked $100 billion for this purpose. $30 billion was initially allocated for payment through the Provider Relief Fund with an additional $20 billion set to be released starting on April 24, 2020 as part of the general allocation; HHS has also announced targeted allocations of $20.4 billion, which include supporting hospitals in areas hardest hit by the pandemic, ensuring treatment for uninsured individuals, and protecting rural providers and the Indian Health Service. HHS has yet to clarify exactly how the remainder of the $100 billion included in the CARES Act and the additional $75 billion included in the PPPHCEA will be allocated.

General Allocation

The initial $30 billion of generally allocated funds was delivered via direct deposit to eligible providers between April 10, 2020 and April 17, 2020, with an additional $20 billion being delivered on a rolling basis starting on April 24, 2020. Within 30 days of receiving such payments, which were issued as grants with no repayment obligations, providers were required to log onto the CARES Act Provider Relief Fund Payment Attestation Portal and execute an attestation confirming receipt of the funds and agreeing to the terms and conditions provided by HHS (the “Terms and Conditions”) found here.

Providers should be cautious in agreeing to the Terms and Conditions, as HHS Secretary Alex Azar stressed that HHS, including the Office of Inspector General will audit and pursue significant fraud to ensure that funds are appropriately distributed. “Congress has entrusted us with an immense amount of money to send to providers and we will be clear and careful about how we’re doing it,” Azar said during a press call on the afternoon of April 22, 2020.

To be eligible to receive the initial payment under the Provider Relief Fund, providers must have received Medicare fee-for-service (“FFS”) reimbursements in 2019, have treated “individuals with possible or actual cases of COVID-19” after January 31, 2020, and agree not to seek collection of out-of-pocket payments from a “presumptive or actual” COVID-19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider. HHS has interpreted “possible or actual” COVID-19 patients, which eligible providers must have treated after January 31, 2020, to include any patient seen after January 31, 2020. It is not clear if that interpretation will apply to “presumptive or actual” COVID-19 patients, the language used in the patient charge limitation provision. It is noteworthy that, in setting the requirements for the above-noted limitation on patient charges, HHS first said that it applied, again, to “possible or actual” COVID-19 patients (which, as noted, meant all patients). When providers noted that this charge limitation was too broad, HHS revised the application of the limitation to “presumptive or actual” from “possible or actual” COVID-19 patients. As of this writing, it is not clear how HHS will apply the “presumptive or actual” COVID-19 patient language in the limitation.

HHS calculated the amount paid to each eligible provider by determining the portion of the total $484 billion of 2019 FFS that the provider billed, and multiplying that percentage against the initial $30 billion distribution; the calculated amount was then paid to billing organizations based on their Taxpayer Identification Number. In updated guidance, HHS clarified that the total share of the $50 billion disbursed from the Provider Relief Fund was to be based on each eligible provider’s share of 2018 net patient revenue, and the additional $20 billion that will begin to be distributed April 24, 2020 should augment each provider’s allocation to align with 2018 net patient revenue. This shift from FFS payments to net patient revenue across all sources was flagged by HHS as a better indicator of the size of provider entities and should ensure that money is more equitably shared among providers. Entities with adequate cost report information on file with CMS will automatically receive payment starting on April 24, 2020, while providers with inadequate cost report information will need to submit revenue numbers through a portal provided by HHS.

Other Terms and Conditions provided by HHS include a number of certifications that the eligible provider must attest to in order to retain the payment, including the following:

  1. Provider billed Medicare in 2019;
  2. Provider is not currently terminated from Medicare;
  3. Provider is not currently excluded from Medicare, Medicaid or any other Federal health care program;
  4. Provider does not have its Medicare billing privileges revoked;
  5. Provider will only use the payment to prevent, prepare for, and respond to COVID-19;
  6. Provider will use the payment to reimburse provider for health care related expenses or lost revenues attributable to COVID-19; and
  7. Provider will not use the payment to reimburse expenses or losses for which the provider has received reimbursement from another source.

In addition, HHS has specified that the grants issued under the Provider Relief Fund cannot be used to pay salary in excess of $197,300 for any individual.

As the payments were sent directly to providers without any affirmative action, providers who are ineligible for the Provider Relief Fund grants must contact HHS and return the money within 30 days of receipt; a failure to promptly return the money will be deemed an agreement to the Terms and Conditions.

Targeted Allocations

In addition to generally allocating funds, HHS announced targeted allocations to help both COVID-19 patients and certain types of hospitals providing care for infected individuals. Starting on April 27, 2020, providers who have treated uninsured COVID-19 patients on or after February 4, 2020 can register for reimbursement at Medicare rates. Providers can start submitting claims in early May 2020 and should begin to receive reimbursement in mid-May. Additional details regarding this program can be found here.

As for hospitals treating COVID-19 patients, $10 billion has been earmarked by HHS to be distributed to hospitals in locales that have been disproportionately impacted by the COVID-19 pandemic; hospitals in such areas were contacted directly by HHS and required to provide the hospital’s tax identification number, national provider identifier, total number of ICU beds as of April 10, 2020, and total number of admissions with positive diagnosis for COVID-19 between January 1, 2020 and April 10, 2020. An additional $10 billion will be allocated to rural health clinics and hospitals, while $400 million will be allocated for Indian Health Service facilities, each on the basis of operating expenses of such facilities. HHS also stated that additional allocations may be made to non-hospital providers, including skilled nursing facilities, dentists and providers that solely take Medicaid.

Conclusion

Congress continues to act to financially support health care providers, but given the extent of the COVID-19 pandemic, additional Federal action may be required to ensure that the health care industry can continue to address this historic outbreak. Look for additional alerts as laws and guidance become available here.

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Proskauer’s cross-disciplinary, cross-jurisdictional Coronavirus Response Team is focused on supporting and addressing client concerns. We will continue to evaluate the CARES Act, related regulations and any subsequent legislation to provide our clients guidance in real time. Please visit our Coronavirus Resource Center for guidance on risk management measures, practical steps businesses can take and resources to help manage ongoing operations.

Photo of Edward S. Kornreich Edward S. Kornreich

Past long-standing chair of Proskauer’s Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

Ed works primarily on health care transactions, regulatory compliance, health care payment and governance issues for varied…

Past long-standing chair of Proskauer’s Health Care Department, Ed Kornreich is a recognized authority on the legal, regulatory and business issues related to health care services.

Ed works primarily on health care transactions, regulatory compliance, health care payment and governance issues for varied providers (both for-profit and not-for-profit), vendors, GPOs, distributors and entrepreneurs. His approach combines sensitivity to meeting regulatory business goals with a comprehensive and realistic assessment of the health care environment, and he is particularly experienced in dealing with the complex issues related to integrated health care systems.

After working for the Legal Aid Society, Ed entered private practice, where he helped represent a major public hospital corporation in a series of reimbursement disputes with the state and federal governments, and counseled New York area hospitals and nursing homes on reimbursement and operational issues. Thereafter, Ed served as General Counsel of St. Luke’s-Roosevelt Hospital Center, one of the largest teaching hospitals in New York. After leaving St. Luke’s-Roosevelt Hospital Center, Ed joined Proskauer as a Partner in 1990.

Ed frequently writes and lectures on Medicare and Medicaid reimbursement, health care integration, not-for-profit law and corporate governance issues, and the application of federal and state anti-kickback and “Stark” laws to health care transactions.

Photo of Richard Zall Richard Zall

Rick Zall is chair of Proskauer’s Health Care Group. Rick advises health care companies, investors and lenders in their most challenging transactions, including mergers and acquisitions, joint ventures, financings and complex commercial agreements.

With a deep understanding of the health care industry, Rick…

Rick Zall is chair of Proskauer’s Health Care Group. Rick advises health care companies, investors and lenders in their most challenging transactions, including mergers and acquisitions, joint ventures, financings and complex commercial agreements.

With a deep understanding of the health care industry, Rick is known for providing practical, creative solutions in order to successfully close deals for his clients.

Rick advises clients on state and federal health care regulatory compliance matters, including the corporate practice of medicine, digital health, telemedicine, HIPAA, fraud and abuse, Medicare and Medicaid payment reimbursement, MACRA, and value based payment.

Rick advises clients on state and federal health care regulatory compliance matters, including the corporate practice of medicine, digital health, telemedicine, HIPAA, fraud and abuse, Medicare and Medicaid payment reimbursement, and value based payment.  As businesses globally are impacted by the Coronavirus (COVID-19) pandemic, Rick is a member of the firm’s Coronavirus Response Team helping clients respond and solve issues across myriad fronts, from understanding CARES Act programs to compliance with applicable state and local guidelines for employers to follow.

Rick is a respected thought leader in the health care industry and frequently presents at key industry events. He has served in government, is a co-founder of the New York Primary Care Development Corporation (PCDC), and earlier in his career was CEO of a private equity-backed medical management company. Rick has also directed two industry studies for the Robert Wood Johnson Foundation and serves as principal outside counsel and board secretary to the Clinton Health Access Initiative (CHAI).

Photo of David Manko David Manko

David has more than two decades of experience representing clients in the health care industry. His experience includes complex business transactions such as mergers, acquisitions, joint ventures and other contractual relationships. He is particularly adept at structuring health care transactions that implicate regulatory…

David has more than two decades of experience representing clients in the health care industry. His experience includes complex business transactions such as mergers, acquisitions, joint ventures and other contractual relationships. He is particularly adept at structuring health care transactions that implicate regulatory issues such as the Corporate Practice of Medicine, the Stark Law and the Anti-Kickback Statute. Recently, David has been highly involved in representing sponsors and targets in private equity transactions involving health care technology companies, physician practices, MSOs and other service providers. He also has experience unwinding transactions that have not achieved the objectives of one or both parties.

In 2017, Chambers USA recognized David as a regulatory and transactional healthcare lawyer “who earns impressive reviews from peers and clients alike.” Says one commentator, “he is a master negotiator and is second to none in his responsiveness,” adding that “he turns around whatever needs to be done promptly and efficiently.”

Photo of Jason Madden Jason Madden

Jason Madden is an associate in the Health Care Department. His practice focuses on representing health care clients, including hospitals, physician groups, not-for-profit corporations, private equity firms and other financial institutions. Jason provides legal advice on a wide range of regulatory, transactional and…

Jason Madden is an associate in the Health Care Department. His practice focuses on representing health care clients, including hospitals, physician groups, not-for-profit corporations, private equity firms and other financial institutions. Jason provides legal advice on a wide range of regulatory, transactional and litigation matters, including fraud and abuse compliance; HIPAA and data privacy; mergers, acquisitions and financings; and general corporate and business planning.

In addition, Jason actively participates in pro bono matters, representing not-for-profit organizations on a variety of matters, and is an active member of the American Health Lawyers Association (AHLA). Jason also volunteers at the Manhattan and Brooklyn Family Courts, and helped lead the Legal Aid Society’s Associate Campaign.

Photo of Ryan Blaney Ryan Blaney

Ryan Blaney represents health care, life science, and technology clients in a range of regulatory, enforcement, internal investigative and transactional matters, with particular expertise in privacy law, life sciences and digital health. He also has expertise in regulatory compliance, counseling clients on a…

Ryan Blaney represents health care, life science, and technology clients in a range of regulatory, enforcement, internal investigative and transactional matters, with particular expertise in privacy law, life sciences and digital health. He also has expertise in regulatory compliance, counseling clients on a range of matters, including health care fraud and abuse, third party reimbursement, data breach issues, data privacy and security, and FDA regulatory matters. He has substantial experience in pharmaceutical lifecycle management and competition issues, including the Hatch- Waxman Act and Biosimilars Price Competition and Innovations Act.

Ryan serves information technology companies, public and private health care companies, hospitals and physician organizations, manufacturers, medical device companies, and health plans. He guides venture capital groups, private equity funds, investment banks, and other investors on health care regulatory issues in connection with financing, mergers and acquisitions, and restructuring.

Ryan’s work is greatly informed by his experience as a teacher. Prior to attending law school, Ryan earned a master’s degree in education and taught at an under-resourced Catholic middle school. He is known for his ability to communicate clearly and to coordinate large teams working on complex matters. Outside of his health law practice, Ryan has been repeatedly recognized for his public service and pro bono work. He has successfully handled numerous education-related cases, helped establish three nonprofit organizations and defended qualified recipients of disability benefits.