Provider Relief Fund: New $20 Billion Available Starting Oct. 5 and Reporting Guidance Issued

October 2, 2020

Update (June 21, 2021): Healthcare providers receiving Provider Relief Fund payments will have to report to the government on using such payments before certain newly announced spending deadlines. The first spending deadline is June 30, 2021, with a 90-day reporting period beginning July 1, 2021, to report on funds received in the first half of 2020. For the most recent updates on future deadlines and further guidance on Provider Relief Fund reporting, visit our Provider Relief Fund reporting page.

Update (Jan. 4, 2021): Our recent alert provides details about the Provider Relief Fund provisions in the recent spending bill, which include changes to the definition of “lost revenue,” new flexibility for utilizing relief fund payments, $3 billion in additional appropriations and a new successor General Distribution phase for eligible healthcare providers. These provisions modify certain text below and may lead to additional HHS guidance.

Update (Nov. 3, 2020): The U.S. Department of Health and Human Services (HHS) recently issued updated reporting requirements, a policy update memo and answers to frequently asked questions (FAQs) addressing mandatory final reports from recipients of support from the Public Health and Social Services Emergency Fund (Provider Relief Fund). For further details, please see our alert

Previous McGuireWoods alerts discussing the CARES Act Provider Relief Fund cover general distributions (see alerts on April 10, April 14, April 23, April 27, May 7, May 22, June 11, July 13, July 20 and Aug. 10); targeted distributions (see alerts on April 23, May 6, June 11, July 13, July 20 and Aug. 10); Medicaid, CHIP and dental distributions (see alerts on June 11, July 13, July 20 and Aug. 10); and the uninsured program (see April 29 alert).

On Oct. 1, 2020, the U.S. Department of Health and Human Services, through the Health Resources and Services Administrative (HRSA), announced $20 billion in new Phase 3 General Distribution Funding for providers from the Public Health and Social Services Emergency Fund (Provider Relief Fund). Beginning Oct. 5, 2020, providers that previously received funding, previously ineligible providers that began practicing in 2020, and an expanded group of behavioral health providers will be eligible to apply for additional relief funding. Providers will have until Nov. 6, 2020, to apply for Phase 3 Funding, but HHS cautions that providers should apply early for this funding.

Further, HHS recently unveiled its reporting guidelines for providers that received one or more payments exceeding $10,000 in the aggregate from the various Provider Relief Fund distributions (including this new Phase 3 Funding). As discussed below, the reporting guidelines suggest a streamlined reporting format for most providers. Notably, however, the guidelines include new guidance for calculating lost revenues attributable to the 2019 novel coronavirus (COVID-19) that appears to differ from HHS’ previously published FAQs that many providers used in applying for earlier Provider Relief Fund distributions (as discussed in a previous McGuireWoods legal alert).

The Provider Relief Fund was created through an appropriation totaling $175 billion in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Paycheck Protection Program and Health Care Enhancement Act to reimburse eligible expenses and lost revenues attributable to COVID-19. Information, guidance and application instructions can be found on the HHS Provider Relief Fund Page for Providers.

This alert summarizes the key takeaways from the Phase 3 Funding with the application opening Oct. 5, 2020, and updated reporting requirements with respect to these funds currently due Feb. 15, 2021.

  1. Phase 3 Funding: HHS’ latest $20 billion distribution gives providers that have experienced financial losses and changes in operating expenses another opportunity to seek relief under the Provider Relief Fund, including those that have already received 2 percent of patient care revenue from prior general distributions. The Phase 3 Funding Requirements are summarized below.
    1. Eligibility Requirements: Providers eligible for Phase 3 Funding include: (i) providers that received, rejected or accepted earlier general distribution funding from the Provider Relief Fund; (ii) behavioral health providers (described further below); and (iii) healthcare providers that began practicing Jan. 1, 2020 through March 31, 2020, including providers receiving reimbursement from Medicare, Medicaid, and CHIP, dentists, assisted living facilities, and behavioral health providers. Providers that already received payments of approximately 2 percent of patient care revenue may still submit additional information to HHS potentially to receive additional payment from the Phase 3 Fund. Providers will be required to attest to receiving Phase 3 Funding and accept the Terms and Conditions.
    2. Expanded Behavioral Health Providers: HHS recognizes that COVID-19 has increased mental health and substances abuse issues, causing behavioral health providers to shoulder increased treatment burdens. While some behavioral health providers were previously eligible for previous Provider Relief Fund distributions, others were not as they may not have accepted Medicare, Medicaid, or been eligible for any of the targeted Provider Relief Fund distributions. HRSA worked with the Substance Abuse and Mental Health Services Administration (SAMHSA) to develop a list of additional behavioral health providers eligible to receive Phase 3 Funding. We anticipate that, consistent with past distributions, behavioral health providers will need to be validated by HRSA prior to submitting an application for additional funding.
    3. Payment Methodology: HHS encourages providers to apply early for Phase 3 Funding, suggesting that HHS anticipates that not all those that apply will receive funding in contrast to past distributions. Providers that have not yet received up to 2 percent of their patient care revenue will receive Phase 3 Funding before providers that have already reached this threshold. HRSA will then allocate the remaining balance to calculate additional payments to providers to account for: (i) a provider’s change in operating revenues from patients care; (ii) a provider’s change in operating expenses from patient care, including expenses incurred related to COVID-19; and (iii) payments already received through previous Provider Relief Fund distributions.
    4. Application Deadline: Providers will have from Oct. 5, 2020, through Nov. 6, 2020, to apply for Phase 3 Funding. As with prior Provider Relief Fund distributions, we expect the portal will be available on Oct. 5, 2020, through the HHS Provider Relief Fund Page for Providers. Again, HHS encourages providers to apply early and asks providers not to wait until the deadline to apply.
  2. Reporting Guidance: HHS’ Sept. 19, 2020 reporting guidance provides additional details on the post-payment reporting process and outlines the requirements for providers to submit reports regarding the Provider Relief Fund distributions, supplementing HHS’ previous notice of reporting guidance published on Aug. 14, 2020 (as discussed in a previous McGuireWoods legal alert) All providers receiving Provider Relief Fund payments in excess of $10,000 in the aggregate will need to submit such reports by Feb. 15, 2021.
    1. Providers that Receive Between $10,000 and $499,999: Providers that received between $10,000 and $499,999 in the aggregate from the Provider Relief Fund must report healthcare-related expenses attributable to COVID-19 net of other reimbursed sources in two categories: (i) general and administrative expenses; and (ii) other healthcare released expenses. HHS states that these are the actual expenses incurred over and above what has been reimbursed through other sources.
    2. Providers That Receive $500,000 or More: Providers that receive $500,000 in the aggregate or more from the Provider Relief Fund must report their healthcare-related expenses in the same two categories discussed above and must also include the following subcategories of expenses:
      1. General and Administrative Expenses:
        1. Mortgage and Rent: Monthly payments related to mortgage or rent for a facility.
        2. Insurance: Premiums paid for property, malpractice, business insurance, etc. relevant to operations.
        3. Personnel: Workforce-related actual expenses paid to prevent prepare for, or respond to COVID-19, such as training, staffing, temporary employee or contractor payroll, etc.
        4. Fringe Benefits: Extra benefits supplementing an employee’s salary, including hazard pay, travel reimbursement, employee health insurance, etc.
        5. Lease Payments: New equipment or software lease.
        6. Utilities/Operations: Lighting, cooling/ventilation, cleaning, or additional third-party vendor services.
        7. Other General and Administrative Expenses: Costs not captured above that are generally considered part of overhead structure.
      2. Healthcare-Related Expenses Attributable to COVID-19:
        1. Supplies: Expenses paid for purchase of supplies used to prevent, prepare for, or respond to COVID-19, including PPE or hand sanitizer.
        2. Equipment: Expenses paid for purchase of supplies used to prevent, prepare for, or respond to COVID-19, including ventilators, updates to HVAC systems, etc.
        3. Information Technology (IT): Expenses paid for IT or interoperability systems to expand or preserve care delivery during the reporting period, including electronic health record licensing fees, telehealth infrastructure, etc.
        4. Facilities: Expenses paid for facility-related costs used to prevent prepare for, or respond to COVID-19, including the lease or purchase or permanent or temporary structures, or to modify facilities to accommodate patient practices due to COVID-19.
        5. Other Healthcare Related Expenses: Expenses not captured above that are generally considered part of overhead structure.
    3. Updated Lost Revenues Attributable to COVID-19: In addition to reported expenses, providers will need to report 2020 lost revenue attributable to COVID-19. HHS appears to have modified how providers should calculate “lost revenues” attributable to COVID-19 from its prior guidance used by providers in applying for earlier Provider Relief Fund distributions. The FAQs consistently stated that providers may calculate their lost revenues attributable to COVID-19 with “any reasonable method of estimating revenue during March and April 2020 compared to the same period had COVID-19 not appeared,” including using the difference between “budgeted revenue and actual revenue.” HHS defined lost revenues in the reporting guidelines as showing a “negative change in year-over-year net operating income from patient related sources.” Accordingly, it appears that lost revenue must be calculated by comparing 2019 and 2020 net operating income, including expenses, rather than by measuring lost revenue or decline from budget. We expect HHS will receive questions about this potential change and may issue further guidance or clarification.
    4. Reporting Deadlines: HHS published a fact sheet outlining the reporting requirements and deadlines for recipients that received Provider Relief Fund payments in excess of $10,000. The portal for reporting usage of funds is expected to open Jan. 15, 2021, with the initial report due by Feb. 15, 2021. Recipients that do not spend the full amount of Provider Relief Fund payments by the end of calendar year 2020 will have an additional six months to use any remaining amounts. Such providers will have until July 31, 2021, to submit a final report that includes patient care-related revenue amounts earned Jan. 1-June 30, 2021.
    5. Eligible Entities: HHS notes that the reporting guidelines do not apply to the following distribution recipients: (i) Nursing Home Infection Control; (ii) Rural Health Clinic Testing; and (iii) HRSA Insured Program reimbursement. Such providers may receive separate guidelines at a later date.

HHS has continued to update its Provider Relief Funds FAQs for the prior distributions. We expect further updates will be made to account for the Phase 3 Funding. As providers continue to prepare their applications, work to understand their requirements under the Terms and Conditions and document their eligibility and appropriate use of funds, McGuireWoods stands ready to assist with any questions about this updated information. McGuireWoods will also continue to monitor developments regarding reporting and auditing received Provider Relief Fund payments before the 2021 reporting deadlines.

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