The Big Picture
Over the past few weeks, the Department of Health and Human Services (HHS) has issued press releases and accompanying guidance announcing that providers—including Medicare, Medicaid, Children’s Health Insurance Program (CHIP) and dental care providers—that have not received the full amount of their Provider Relief Fund General Distribution payment (2% of net patient revenue) should apply by August 28. All of these providers are now considered eligible for General Distribution: Phase 2 payments (provided they meet the eligibility criteria enumerated in the application instructions).
General Distribution Background and Updated Overview of Provider Relief Fund Distributions to Date
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) and Paycheck Protection Program and Health Care Enhancement Act (P.L. 116-139, known as “Stimulus 3.5”) established $175 billion in direct-to-provider funding—the Provider Relief Fund. HHS has broad discretion for how this provider funding is distributed, and in the past few months has announced new allocations one by one.
As shown in the figure below, over time, HHS has reclassified these payments into a schema of two types of distributions: the General Distribution, through which providers receive at least 2% of annual patient revenue, and Targeted Distributions, through which providers may receive payments above and beyond their General Distribution payment (these include, for example, payments for rural providers, hot spot hospitals and safety net hospitals).
The General Distribution is made up of two funding streams: one for any provider that billed Medicare in 2019 (“Medicare General Distribution” or the “General Distribution: Phase 1”) and one for Medicaid/Children’s Health Insurance Program (CHIP)/dental providers that did not bill Medicare in 2019 and therefore were entirely left out of the Medicare General Distribution (“Medicaid, CHIP, and Dental Provider General Distribution” or “General Distribution: Phase 2”). The idea is that regardless of which “door” a provider enters, it is eligible for at least 2% of patient revenue. However, because of the sequencing of these General Distribution payments and other methodological issues, many providers received less than the 2% of patient revenue payment in Phase 1.
Acknowledging this, HHS has now altered the eligibility criteria for Phase 2, to continue to include Medicaid/CHIP/dental providers that did not bill Medicare in 2019 plus providers that missed out on their 2% of net patient revenue payment in Phase 1. HHS’s announcement is expected to benefit many high-volume Medicaid providers that did not previously complete the Phase 1 application but because they had received a de minimis amount of funding from the first Phase 1 payment were, until HHS’s most recent announcement, ineligible to apply for Phase 2 funding.
Figure 1. Overview of Provider Relief Fund Distributions to Date
Other Recent Provider Relief Fund Announcements
Also captured in the overview above, HHS recently announced two additional, Targeted Distribution allocations of the Provider Relief Fund:
- Approximately $5 Billion for Nursing Homes and Long-Term Care Facilities. On August 7, HHS issued a press release providing new information about the $5 billion Provider Relief Fund allocation for nursing homes and long-term care facilities, first announced on July 22. (This allocation is in addition to the previously distributed $4.9 billion skilled nursing facility allocation.) Specifically, an initial $2.5 billion distribution will support increased testing, staffing, personal protective equipment (PPE) needs and COVID-19 isolation facilities. The balance will be distributed based on nursing home performance, particularly a nursing home’s ability to minimize COVID-19 spread and COVID-related fatalities among its residents, with consideration of the prevalence of the virus in the nursing home’s local geography. According to HHS, the initial $2.5 billion distribution will occur in mid-August and be followed by the performance-based distributions throughout the fall.
It is unclear how this new method of distributing the funds correlates to the information provided in the initial July 22 press release about the distribution, which was issued by CMS. At that time, CMS indicated that the funding would be distributed to “Medicare-certified long-term care facilities and states veterans’ homes,” contingent upon their completion of a new, CMS and Centers for Disease Control and Prevention (CDC)-developed Nursing Home COVID-19 Training program. HHS likely will provide additional information about the methodology for determining eligibility and payment for these funds via its Provider Relief Fund General Information page and/or frequently asked questions (FAQs).
- $1.4 Billion for Freestanding Children’s Hospitals. On August 14, HHS announced a third tranche of funding for safety net hospitals—this time specifically targeted at freestanding children’s hospitals. HHS indicated that the distribution is aimed at ensuring “that certain free-standing children’s hospitals, not affiliated with larger hospital systems, also receive the financial relief they urgently need to offset revenue losses,” suggesting that the distribution is meant to provide funding to hospitals that were left out of the prior safety net hospital distribution. These freestanding children’s hospitals—defined as those that either are exempt under the CMS inpatient prospective payment system or are HRSA-defined Children’s Hospital Graduate Medical Education facilities—will receive a payment in the amount of 2.5% of net patient revenue beginning this week. A state/regional-level breakdown of validated children’s hospital distributions is available here. HHS notes that an additional 24 children’s hospitals are being reviewed and the file will be updated once that validation is complete.