Healthcare Provider Business Considerations under the CARES Act

By Kristine Tomzik, Jan Elezian, & Michael Kotch

On March 27, 2020, President Trump signed into the law the Coronavirus Aid, Relief and Economic Security Act, otherwise known as the CARES Act. (PL 116-136)

Under terms of the law, two specific healthcare provisions were made:

1) The Provider Relief Fund [1]

2) Temporary expansion of the CMS Accelerated and Advanced Payment Program

There are significant differences between the two programs. Before a health care entity or provider accepts payment under either program, it is important to understand how each are different and any short-term and long-term operational and financial impacts.

1) Provider Relief Fund

The Provider Relief Fund was appropriated a combined total of $175 billion: a) $100 billion from the CARES Act and; b) an additional $75 billion from the Payment Protection Program and Health Care Enforcement Act.

Payments received through the Provider Relief Fund are grant payments to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19.

Payments from the Provider Relief Fund do not require repayment, if properly treated.

Before accepting Provider Relief Fund payments, the following are some of the key terms and conditions health care entities and providers are expected to comply with:

  • The recipient receiving the money can be a health care entity or provider.

  • Certification the recipient billed Medicare in 2019.

  • Certification the recipient is not terminated, precluded, excluded or revocation of billing privileges from participation in Medicare, Medicare Advantage, Medicare Part D, Medicaid or other federal health care programs.

  • Certification the recipient payment will only be used to prevent, prepare for and respond to coronavirus; and the payment shall reimburse only for health care expenses or lost revenues that are attributable to the coronavirus.

  • Certification the recipient payment will not be used to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.

  • Submission of reports as the Secretary determines are needed to ensure compliance with the conditions of HHS payments.

  • Maintenance appropriate financial records and cost documentation to substantiate the reimbursement of costs under the payment.

  • Certification the recipient will not seek to collect from the patient out-of-pocket expenses in an amount greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network recipient.

  • Certification the payment will not be used toward executive pay.

  • Certification the payment will not be used toward lobbying efforts.

Many or all of these terms and conditions may apply to a health care provider or entity. Compliance with the aforementioned terms and conditions requires entities and providers have financial systems that can separate both Provider Relief Fund payments, COVID-19 related expenses or revenue losses and provide a detailed accounting report.

These financial systems and processes require:

  • A way to keep Provider Relief Fund payments separate from other payment sources.

  • The ability to separate COVID-19 related costs, i.e. diagnoses, testing and treatment of patients who possibly or actually have the COVID-19 virus, and revenue loss from other causes.

  • The ability to identify if the entity or provider is out-of-network and if the patient was charged out-of-pocket expenses in excess of what would otherwise be charged for in-network services and issue timely refunds.

  • A billing and claim system that can identify which COVID-19 bills for Medicare beneficiaries do not get billed to Medicare, a Medicare Supplement, Medicare Advantage or other payer source.

  • A process to separate health care expenses and revenue losses paid by the Provider Relief Fund from being falsely documented as allowable costs on Medicare Cost Reports or as an unallowable debt write off.

  • A process to data mine and generate reports required by Secretary to meet format, content and submission date requirements.

2) Accelerated and Advanced Payment Program

CMS granted a temporary expansion of the Accelerated and Advanced Payment Program (APP) that allows Medicare Part A and Part B providers to request a short-term loan. The APP provides health care entities, providers and suppliers with emergency funding to assure adequate cash flow in times when claims submission or claims processing is disrupted during times of a public health emergency or a presidential declaration of a state of emergency.

It is important for providers to understand this is a loan repayment program and is not forgivable.

As such, Medicare Part A and Part B providers must apply for this loan through their Medicare Administrative Contractor, or MAC.

To qualify for a loan under the CMS APP, Part A or Part B providers must meet all of the following eligibility criteria:

  • Have billed Medicare for claims within 180-days immediately prior to the signature date on the Part A or Part B providers request form.

  • Not be in bankruptcy.

  • Not be under active medical review or program integrity investigation.

  • Not have any outstanding, delinquent Medicare overpayments.

The amount of payment, recoupment and repayment terms differ by Part A and Part B provider type:

  • In general, most Part A and Part B providers will be able to request up to 100% of their Medicare reimbursement amount for a 3-month period.

  • APP recoupment will not begin for 120-days after the date the payment was issued.

  • During the 120-day pre-recoupment period, Part A and Part B providers can submit claims as usual after receiving the payment and will receive full payment.

  • Beginning on the 121stday, the Medicare recoupment process begins meaning Part A and Part B providers will not receive a claims payment, rather the claims payment amount will be used to paydown the APP loan balance.

  • The repayment period differs by Part A and B provider type:

  1. Part A providers such as inpatient acute care hospitals, children’s hospitals, certain cancer hospitals and critical access hospitals have up to 1-year from the date the APP payment was made to repay the balance.

  2. All other Part A and Part B providers have 210-days from the date the APP payment was made to repay the balance.

  • If repayment cannot be made during the appliable timeframe above, Part A and Part B providers will have to negotiate repayment terms with their MAC and be subject to the current US Treasury interest rate of 10.25%.

Before accepting APP payments, the following are noteworthy short-term and long-term financial and operational considerations:

  • What percentage of Medicare payments make up the provider’s total revenues?

  • Depending on the borrowed amount requested, how much of the amount of Medicare claim withholds can be offset during the 120-day pre-recoupment period?

  • Are the forecasted total revenue projections, excluding Medicare, during the repayment period, i.e. day 121 to day 210 or day 121 to day 365, sufficient to cover operational expenses and manage cash flow during the Medicare recoupment timeframe?

  • What is the probability the APP loan payment will be repaid within applicable time frame?

  • What contingency plans are in place or need to be put into place to cover operational expenses and manage cashflow in the event the APP loan cannot be repaid in its applicable timeframe and a repayment plan with interest has to be negotiated with the MAC?

  • Does the current billing system have the capability to manage pre-120 day Medicare claim filings and posting as well as post 121-day Medicare claim filings and 0 reimbursement APP repayment or are modification or upgrades needed?

  • What internal controls, audit and monitoring processes are in place to safeguard against and identify the receipt of improper Medicare payments during the repayment period?

  • What, if any, short-term and long-term operational changes may need to be made during the APP life-cycle?

  • What internal controls and reconciliation processes are in place to validate?

CMS began accepting APP applications from Part A and Part B providers on March 28, 2020.

However, on April 26, 2020, CMS announced it was suspending the AAP in order to evaluate all new and pending Part A and Part B applications for accelerated payments in light of the historical direct payments made available through the HHS Provider Relief Fund.

CMS has not announced whether the APP extension will continue and if so, the date when it will resume.

[1] On April 24, 2020, President Trump signed into law the Paycheck Protection Program and Health Care Enforcement Act (PL-139) allocating additional funds the Provider Relief Fund.

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