The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, contains many beneficial provisions for healthcare providers dealing with the operational and business challenges of the COVID-19 pandemic. The CARES Act is the third piece of legislation enacted to address COVID-19 and follows the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, which equipped federal agencies with emergency funding, and the Families First Coronavirus Relief Act (FFCRA), which requires certain employers to provide paid sick leave and family and medical leave to eligible employees for specified reasons related to COVID-19.

The CARES Act builds on regulatory flexibilities allowed by federal and state agencies, including waivers and modifications of certain Medicare, Medicaid and Children’s Health Insurance Program requirements pursuant to § 1135 of the Social Security Act. Federal and state agencies are continually updating their guidance, which fundamentally shifts the healthcare regulatory landscape during the COVID-19 emergency.

The CARES Act provides assistance to healthcare providers in five primary categories: (1) direct financial grants, (2) healthcare general changes, (3) Medicare reimbursement, (4) Medicaid program changes, and (5) loans and financial assistance. This article provides an overview of the assistance offered by category.

1. Direct Financial Grants

The CARES Act provides $100 billion to the Public Health and Social Services Emergency Fund (PHSSEF) to reimburse healthcare providers for expenses and lost revenue attributable to COVID-19. PHSSEF is administered by the U.S. Department of Health and Human Services (HHS) assistant secretary for preparedness and response (ASPR). The grants can cover lost revenue as a result of COVID-19 and certain capital expenditures for COVID-19 preparedness.

To date there has been no guidance on how to apply for the funds, whether the funds will be allocated among different types of providers or whether grants will be made on a first-come, first-served basis. Providers seeking PHSSEF grants should begin documenting all their expenses (e.g., higher wages, surge capacity development costs, costs of redeploying staff, higher-priced medical supplies) and lost revenue (e.g., closing of clinics, postponed elective procedures, etc.) associated with the COVID-19 pandemic. We believe that providers will be required to submit an application for PHSSEF funds and anticipate guidance to be forthcoming shortly. But being among the first to apply may be the key to getting funds.

2. Healthcare General Changes

The CARES Act healthcare provisions unrelated to the Medicare and Medicaid programs address coverage, treatment and funding, and confidentiality and data sharing.

Coverage

• Diagnostic Testing. Many insurers will be required to reimburse COVID-19 diagnostic testing providers at the rate negotiated with such providers in effect from before the public health emergency throughout the period of the emergency, if they had an agreement in place. If the health plan or issuer does not have a negotiated rate with a provider, the third-party payer must reimburse the provider at the provider’s cash price for such service as listed on the provider’s website, or it may negotiate a rate. Providers, however, must, during the emergency period, disclose the cash price for COVID-19 tests on their websites. See CARES Act § 3202.
• Coronavirus Preventive Services. Group health plans and health insurance issuers offering group or individual health insurance are required to cover (without cost-sharing) any qualifying coronavirus preventive service. Preventive services generally include most items, services or immunizations that are intended to prevent or mitigate COVID-19. See CARES Act § 3203.
• HSA – Telehealth. CARES Act § 3701 permits a high-deductible health plan with a health savings account (HSA) to cover telehealth and other remote services prior to their reaching their deductible. See CARES Act § 3701.
• HSA – Over-the-Counter Product Coverage. Section 3702 of the CARES Act permits individuals to use funds in their HSAs and Flexible Spending Accounts to purchase over-the-counter medical products, including those needed in quarantine and for social distancing, without a prescription from a physician. Menstrual care products are also included. See CARES § 3702.

Treatment and Funding

• Telehealth Network and Telehealth Resource Centers Grant Programs. The CARES Act modifies the telehealth network and telehealth resource center grant programs under Public Health Service Act § 330I to further encourage new types of grant recipients to apply, especially if they already possess the types of equipment that can quickly improve patient access to healthcare services. Specifically, § 3212:
  • Extends grants from four to five years.
  • Removes limits on maximum grant amounts.
  • Decreases the proportion of grant funds that can be expended for equipment to 20%. It had been 40% historically.
  • Makes for-profit entities grant eligible.
  • Makes certain limited-scope telehealth initiatives grant eligible.
  • Relaxes various other former telehealth grant requirements.
  • Allocates $29 million for fiscal years 2021 to 2025 to fund telehealth network and telehealth resource center grants.
• Supplemental Funding of Federally Qualified Health Centers (FQHCs). An additional $1.32 million was appropriated for fiscal year 2020 for the detection of SARS-CoV-2 or the prevention, diagnosis and treatment of COVID-19. See CARES Act § 3211.
• Rural Healthcare Services Outreach, Rural Health Network Development and Small Healthcare Provider Quality Improvement Grant Programs. The CARES Act provides $397.5 million from 2021 through 2025 for grants to improve quality, access and outcomes for rural underserved populations. Grants may run for up to five years. See CARES Act § 3213.
• Volunteer Immunity. The CARES Act provides immunity for volunteer healthcare professionals under both federal and state law for harm caused by an act or omission in the provision of healthcare services during the COVID-19 emergency period, if the act or omission occurs (1) in the course of providing healthcare services; (2) in the healthcare professional’s capacity as a volunteer; or (3) in the course of providing healthcare services that are within the scope of the license, registration or certification of the volunteer and do not exceed the scope of license, registration or certification of a substantially similar health professional in the state in which such act or omission occurs.

The immunity does not apply if (1) the harm was caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious flagrant indifference to the rights or safety of the individual harmed, or (2) the healthcare professional rendered the services under the influence of alcohol or an intoxicating drug. See CARES Act § 3215.

Confidentiality and Data Sharing

• Confidentiality and Disclosure of Records Relating to Substance Use Disorder. This section substantially revises the federal substance use disorder (SUD) legislation at 42 U.S.C. § 290dd-2, which is the enabling legislation for the regulations governing the confidentiality of alcohol and substance use patient records and information under 42 CFR. Part 2, commonly referred to as Part 2. Unrelated to COVID-19, the legislation modernizes Part 2 and reflects extensive advocacy efforts by addiction treatment, patient advocacy and behavioral health provider organizations, including the Partnership to Amend 42 CFR Part 2. See CARES Act § 3221.
• The CARES Act does not address all questions concerning the application of its changes to Part 2 as we know it, but requires HHS, in consultation with the Substance Abuse and Mental Health Services Administration, to revise Part 2 within 12 months to comply with the CARES Act amendments. Highlights of the the CARES Act Part 2 changes include:
  • The CARES Act allows redisclosures of SUD information for which disclosure consent has been received for treatment, payment and healthcare operations, subject to Health Insurance Portability and Accountability Act (HIPAA) requirements. These redisclosures had previously been prohibited. An opt-out clause allows patients to rescind consent.
  • The CARES Act extends the Part 2 prohibition of disclosures for criminal proceedings against the patient, or to investigate the patient, to civil, administrative and legislative proceedings. However, the CARES Act permits the patient to consent to disclosures for these proceedings.
  • The CARES Act amends the penalties for violating the SUD disclosure statute. Penalties are no longer under the federal criminal code. The CARES Act places penalty authority within HHS.
  • The CARES Act adds a nondiscrimination prohibition. A recipient of SUD patient information is now prohibited from using that information to discriminate against the patient regarding treatment, employment, housing, access to courts or the provision of workers’ compensation or government benefits.
  • The CARES Act extends the HIPAA privacy protections, including breach notification, to SUD programs that are not currently subject to HIPAA.
• HIPAA Pandemic Guidance. HHS is obliged under the CARES Act to issue guidance on the sharing of patients’ protected health information during the public health emergency, including information on compliance with HIPAA during emergencies. See CARES Act § 3224.

3. Medicare Reimbursement

Four primary provisions of CARES address Medicare: (1) Medicare advance payments, (2) Medicare sequestration relief, (3) COVID-19 reimbursement enhancements and (4) expanded Medicare coverage for telehealth.

Medicare Advance Payments

Recognizing the need for hospitals, especially those in rural areas, to maintain stable cash flow to maintain their workforce and supplies, and to generally continue to operate during this time, the CARES Act expands the existing Medicare Accelerated and Advance Payment Program (APP) by allowing qualifying providers and suppliers to request advance lump-sum or periodic payments. This is in essence an advance payment on future Medicare billings. On March 30 the Centers for Medicare & Medicaid Services (CMS) announced the APP parameters. CMS has authorized APP payments for any Medicare Part A or Part B provider or supplier that meets all the following criteria:

• Has billed Medicare for claims within 180 days prior to the provider’s/supplier’s signature on the request form.
• Is not in bankruptcy.
• Is not under active medical review or a program integrity investigation.
• Does not have any outstanding delinquent Medicare overpayments.

Guidance on these requirements, including definitions clarifying the meaning and scope of “active medical review” or “program integrity investigation,” is not yet available from CMS. Most providers and suppliers may request 100% of their Medicare payment amount for three months. Inpatient acute care hospitals, children’s hospitals and certain cancer hospitals can request 100% of their Medicare payment for six months. Critical access hospitals can request up to 125% of their Medicare payment for a six-month period. Providers and suppliers will need to request the authorized amount by filling out an APP request form; the form is provided on each Medicare Administrative Contractor’s (MAC) website. Find your MAC here. Or consult the CMS Fact Sheet, which lists each MAC and the toll-free COVID-19 hotline hours of operation for each MAC, for questions about what amount you can request. See CARES Act § 3719.

Sequestration Relief

The CARES Act eliminates, temporarily, the 2% sequestration cut that otherwise would have gone into effect in May and continued for the remainder of 2020. This in effect increases Medicare payments an additional 2%. See CARES Act § 3719.

COVID-19 Reimbursement Enhancements

• Inpatient Hospital COVID-19 Payments. Section 3710 of the CARES Act provides hospitals with an increased payment for COVID-19 patients through a Medicare hospital inpatient prospective payment system adjustment. The payment increase will be in effect during the emergency period. The increase was accomplished through a 20% increase in the diagnosis-related group (DRG) weighting factor for patients with a COVID-19 diagnosis. CMS will identify COVID-19 discharges through diagnosis codes, condition codes and other means. See CARES Act § 3710.
• Durable Medical Equipment Rates. The CARES Act § 3712 increases Medicare reimbursement for durable medical equipment (DME) suppliers in rural areas for the remainder of 2020 and in nonrural noncompetitive bidding areas through the end of the public health emergency. DME furnished in rural and noncontiguous areas will be paid at a rate that is one-half based on the current fee schedule and one-half based on the preadjusted rates; DME furnished in nonrural areas will be at a blended rate that is 75% based on the current fee schedule and 25% based on the pre-adjusted rates. See CARES Act § 3712.
• Laboratory Rate Reduction Delay. The CARES Act also delays scheduled payment reductions to clinical laboratories under the Protecting Access to Medicare Act of 2014, along with the upcoming required private payer information reporting. See CARES Act § 3718.
• Medicaid Federal Medical Assistance Percentage. The CARES Act provides a clarification to ensure that states can access the enhanced Medicaid Federal Medical Assistance Percentage under the Families First Coronavirus Response Act. See CARES Act § 3720.
• COVID-19 Vaccine. Section 3713 provides that Medicare Part B will cover COVID-19 vaccinations without any cost-sharing. This change applies to both fee-for-service Medicare and Medicare Advantage plans. See CARES Act § 3713.

Medicare Telehealth Changes

• Telehealth for New Patients. The CARES Act § 3703 removed the Medicare restriction that only established patients of a physician can receive telehealth services. During the emergency, new patients can also be seen using telehealth platforms. See CARES Act § 3703.
• FQHC Telehealth Services. During the emergency period, CARES Act § 3704 allows FQHCs and Rural Health Clinics (RHCs) to serve as distant sites (e.g., where the physician is located), thereby enabling their affiliated physicians to treat Medicare patients via telehealth. Medicare will reimburse for these telehealth services based on payment rates similar to the national average payment rates for comparable telehealth services under the Medicare Physician Fee Schedule. It would also exclude the costs associated with these services from both the FQHC prospective payment system and the RHC all-inclusive rate calculation. See CARES Act § 3704.
• Home Dialysis and Hospice Face-to-Face Visit Waivers. During the emergency period, CARES Act §§ 3705 and 3706 waive the requirements for certain face-to-face visits between (1) home dialysis patients and physicians and nurse practitioners and (2) hospice patients and physicians and nurse practitioners. Physicians may utilize telehealth in lieu of these face-to-face encounters for certain patients. See CARES Act § 3705.
• Home Health Telehealth Potential Expansion. The CARES Act § 3707 allows telehealth services to be used for home health patients, including for remote patient monitoring. Additional guidance will be required before additional use can be made of telehealth for home health services. See CARES Act § 3707.

Home Health Flexibility.

• Nurse Practitioners and Physician Assistants Certifying Home Health Need. The CARES Act also eliminates certain Medicare home health requirements. Section 3708 loosens the conditions of payment by allowing physician assistants, nurse practitioners and other professionals, under physician supervision, to order home health services for beneficiaries. This is a permanent change that will prove very helpful to home health agencies. See CARES Act § 3708.
• Disabled Persons Hospital Transition. Section 3715 of the CARES Act allows Medicaid programs to pay for direct support professionals – caregivers trained to help with activities of daily living and to assist disabled individuals in the hospital to reduce length of stay and free up beds. These services, however, cannot be a substitute for services that the hospital is obligated to provide through its conditions of participation or under federal or state law, or under another applicable requirement. See CARES Act § 3775.
• Inpatient Rehabilitation Facility Flexibility. Section 3711 of CARES provides acute care hospitals, during the emergency period, with greater ability to transfer patients into alternative care settings so the hospitals can utilize their resources to treat COVID-19 cases. Specifically, Section 3711 waives the inpatient rehabilitation facility three-hour rule, which requires that a beneficiary be expected to participate in at least three hours of intensive rehabilitation at least five days per week to be admitted. The section also allows long-term care hospitals (LTCHs) to maintain their LTCH designation even if more than 50 percent of their cases are less intensive. This provision also temporarily pauses the current LTCH site-neutral payment methodology. See CARES Act § 3711.
• Ninety-Day Prescription Refills. The CARES Act § 3714 requires Medicare Part D plans to provide up to 90-day prescription fills/refills of a prescription medication, in most cases, if requested by a beneficiary during the emergency period. See CARES Act § 3714.

4. Medicaid Program Changes

• Coverage With No Cost-Sharing for COVID-19 Testing. Section 3716 of the CARES Act clarifies FFCRA § 6004 to ensure that uninsured individuals can receive COVID-19 tests and related services with no cost-sharing in any state Medicaid program that elects to offer such enrollment option. The FFCRA defines an uninsured individual as one who is not enrolled in a federal healthcare program or a plan on the group or individual market. The CARES Act clarifies that the term “uninsured persons” includes individuals who are enrolled for benefits under a state program or another federal healthcare program, but whose benefits under such program do not provide for no cost-sharing coverage of a COVID-19 vaccine or in vitro diagnostic testing product. The CARES Act § 3717 clarifies FFCRA § 6004 to provide that COVID-19 diagnostic products during the emergency period are Medicaid-covered services without cost-sharing even if they have not been approved, cleared or authorized by the U.S. Food and Drug Administration (FDA).
• Federal Medical Assistance Percentage (FMAP). Section 6008 of FFCRA implemented a 6.2% increase in the Medicaid matching rate, retroactive to January 1, 2020. The enhanced rate continues through the quarter during which the public health emergency period ends. The CARES Act amended FFCRA to provide that a state that increased premiums before March 18, 2020, was not precluded from accessing the increased FMAP if within 30 days after the enactment of FFCRA the state restored recipient premiums to the level in effect as of January 1, 2020.
• Delay of Disproportionate Share Hospital (DSH) Reductions. Section 3813 of the CARES Act (1) eliminates the fiscal year (FY) 2020 Medicaid DSH allotment reductions and (2) delays FY 2021 allotment reductions from taking effect until December 1, 2020, and lowers that reduction to $4 billion from the prior $8 billion. The DSH allotment reductions of $8 billion remain for succeeding years.

5. Loans and Financial Assistance

With the dire economic conditions occasioned by the rapid spread of COVID-19 nationally and globally, and the corresponding shutdown of parts of the economy, many businesses are quickly running short of capital to make payroll, pay rent, cover other critical overhead and remain in operation.

In response, the CARES Act offers financial relief. Additionally, the U.S. Small Business Administration (SBA) is offering small businesses and certain nonprofits federal disaster relief in the form of low-interest loans for specific working capital purposes. These loans may, in some cases, allow businesses to bridge this period of uncertainty, giving them the ability to pay their employees, restock inventory and generally withstand their loss of revenue. Note that this emergency lending program is separate and distinct from the SBA guaranteed payroll loans authorized under the CARES Act, described below.

• SBA Paycheck Protection Program. Section 1102 of the CARES Act established the Paycheck Protection Program (PPP), which provides $349 billion of federally guaranteed small business loans to cover (1) qualified payroll costs, including sick leave; (2) rent; (3) utilities; and (4) interest on mortgage and other debt obligations for businesses with fewer than 500 employees (or that otherwise meet SBA business size regulations). The CARES Act § 1106 forgives up to 100% of a loan covered under § 1102 for the costs incurred and payments made by a provider during an eight-week covered period after the loan origination date for (1) certain payroll costs, (2) interest on any real or personal property mortgage incurred prior to Feb. 15, 2020, (3) rent on any lease in force prior to Feb. 15, 2020, and (4) utility payments for electricity, gas, water, transportation, telephone or internet access for which service began before Feb. 15, 2020. Amounts forgiven are considered canceled indebtedness under Section 7(a) of the Small Business Act and are not includible in the provider’s gross taxable income. Borrower guaranty and service fees and prepayment fees are waived for the PPP. In addition, the provision waives the requirement that the borrower show it is unable to obtain credit elsewhere.

The U.S. Department of the Treasury has indicated that these loans will have a maturity of two years and an interest rate of 0.5%. Loans can be for amounts up to the lesser of $10 million or two and a half months of regular payroll expenses (subject to a cap of $100,000 of annual salary per employee). Repayments can be deferred for six to 12 months. There is no recourse against loan recipients for nonpayment unless the recipient has used loan proceeds for impermissible uses. No personal guarantees or collateral are required. Finally, borrower guaranty and service fees and prepayment fees are waived.

For more information on this program, see BakerHostetler’s FAQs for Small-Business Healthcare Providers about the Paycheck Protection Program.

• Air Carrier Loans. Providers with aircraft operations may be eligible for CARES Act loans, loan guarantees and other investments associated with air carrier operations. See CARES Act § 4003.
• SBA Disaster Loan Program. Section 1110 of the CARES Act also expands the types of entities eligible to receive up to $1.5 million in direct loans from the SBA and loan guarantees for substantial economic injury caused by the COVID-19 pandemic. “Substantial economic injury” is defined as an injury that causes a business concern to be unable to meet its obligations as they mature or to pay ordinary and necessary operating expenses. Loan proceeds may be used for (i) necessary working capital until the provider is able to resume normal operations, (ii) managing expenditures necessary to alleviate the specific economic injury, (iii) providing paid sick leave to employees, (iv) maintaining payroll, (v) meeting increased costs to obtain materials, (vi) making rent or mortgage payments, and (vii) repaying obligations that otherwise cannot be satisfied due to revenue losses. The current loan form is available on the SBA website. See CARES Act § 1110.