On June 9, 2020, the U.S. Department of Health and Human Services (HHS) announced that it will distribute $25 billion from the Public Health and Social Services Emergency Fund (Provider Relief Fund) to healthcare providers who focus on treating low-income and minority patients to combat the 2019 novel coronavirus (COVID-19). HHS anticipates that approximately $15 billion will be distributed to eligible providers that participate in state Medicaid programs, Children’s Health Insurance Program (CHIP) and/or Medicaid/CHIP-managed care programs who have not received a payment from the Provider Relief Fund General Allocation (Medicaid and CHIP Distribution). Critically, for the Medicaid and CHIP Distribution, providers must take action as soon as this week to receive these funds. HHS will send a second distribution of approximately $10 billion by direct deposit this week to safety-net hospitals that serve a disproportionate number of Medicaid patients or provide large amounts of uncompensated care (Safety-Net Distribution).

HHS also announced a $10 billion second round of funding to hospitals in COVID-19 hotspots (Hospital Hot-Spot Distribution). On May 7, HHS distributed $12 billion to 395 hospitals that had at least 100 COVID-19 admissions before April 10, 2020, as discussed in a prior McGuireWoods legal alert. Hospitals that would like to participate in this second round of funding will need to submit information by June 15, 2020, at 9 p.m. (ET).

By way of background, the Provider Relief Fund was formed through $175 billion in appropriations in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Paycheck Protection Program and Health Care Enhancement Act to reimburse eligible providers for healthcare-related expenses and lost revenues attributable to COVID-19. As discussed in the previous McGuireWoods alerts linked above, the Provider Relief Fund’s $50 billion general distribution was allocated to Medicare facilities and providers impacted by COVID-19. Today’s announcement marks the first time that Provider Relief Fund distributions have been designated specifically for Medicaid or CHIP providers since the Provider Relief Fund package was announced in April 2020. That said, because most healthcare providers participate in both programs, approximately 62 percent of all Medicaid and CHIP providers received payments from the Provider Relief Fund’s general distribution because they are also reimbursed by Medicare. HHS intends the Medicaid and CHIP Distribution to make the Provider Relief Fund available to the remaining 38 percent, or an estimated one million additional healthcare providers. Providers who received any amount from the $50 billion Provider Relief Fund’s general distribution (even if insignificant or de minimis) are disqualified from receiving any portion of the Medicaid and CHIP Distribution.

Below are key takeaways from HHS’ announcement for Medicaid and CHIP providers, safety-net hospitals and hospitals in COVID-19 hotspots.

Medicaid and CHIP Distribution and Enhanced Provider Relief Fund Payment Portal

1. Eligible Providers. As noted above, to be eligible for the Medicaid and CHIP Distribution, healthcare providers (1) must not have received payments from the $50 billion Provider Relief Fund general distribution and (2) must have directly billed a state Medicaid/CHIP program and/or a Medicaid managed care plan for healthcare-related services between Jan. 1, 2018, and May 31, 2020. Examples of providers serving Medicaid and CHIP beneficiaries that may be eligible include pediatricians, OB-GYNs, dentists, opioid treatment and behavioral health providers, assisted living facilities and other home and community-based services providers. As discussed below, eligible providers must take action through an application portal to access these funds.
2. Expected Payments. Eligible Medicaid and CHIP providers can expect to receive at least 2 percent of their reported gross revenue from patient care. The final amount each provider receives will be based on the data providers submit through the enhanced Provider Relief Fund Payment Portal, including information about the number of Medicaid patients providers serve.
3. Application. HHS stated that it would launch an enhanced Provider Relief Fund Payment Portal on June 10, 2020, which will allow eligible Medicaid and CHIP providers to report their annual patient revenue. More information about eligibility and the application process is available on HHS’ CARES Act Provider Relief Fund: General Information page, with more details likely to come.
4. Terms and Conditions.
   1. Although additional guidance is likely forthcoming, HHS has published the Medicaid and CHIP Distribution Terms and Conditions (Terms and Condition) for recipients who received payments as part of the Medicaid and CHIP Distribution. As with the Terms and Conditions for other Provider Relief Fund distributions, recipients will be required to certify compliance with the Terms and Conditions. The Terms and Conditions also provide that any provider retaining payment for at least 90 days without contacting HHS regarding remittance of those funds will be deemed to have accepted the Terms and Conditions, although the Provider Relief Fund Portal may have additional information.
   2. The Terms and Conditions are generally consistent with the certifications made for the other Provider Relief Fund distributions, including certifications that the recipient provides or provided after Jan. 31, 2020, diagnoses, testing or care for individuals with possible or actual cases of COVID-19 and that the payment will be used only to prevent, prepare for and respond to COVID-19 and will reimburse the recipient only for healthcare-related expenses or lost revenues attributable to COVID-19. Providers should be aware that HHS may require them to submit financial documentation and records to HHS and that payments received may be publicly disclosed by HHS. Providers should ensure they stay informed on HHS’ guidance and the necessary Terms and Conditions to maintain compliance with the applicable requirements.

HHS has not yet announced whether there will be additional conditions on the payments, including any attestation or submission deadlines associated with the Medicaid and CHIP Distribution. We anticipate further details regarding accessing the portal and conditions to the funding to be provided as the enhanced Provider Relief Fund Portal opens on June 10 and thereafter. McGuireWoods will monitor further developments.

Safety-Net Distribution

1. Qualifying Hospitals. The Safety-Net Distribution will be allocated to hospitals that serve a disproportionate number of Medicaid patients or provide large amounts of uncompensated care. Qualifying hospitals will have:
   1. a Medicare disproportionate payment percentage of 20.2 percent or greater;
   2. average uncompensated care per bed of $25,000 or more (e.g., a hospital with 100 beds providing $2.5 million in uncompensated care in a year); and
   3. profitability of 3 percent or less, as reported to CMS in its most recently filed cost report.
2. Expected Payments. Qualifying hospitals will receive a minimum distribution of $5 million and a maximum distribution of $50 million. HHS will send the payment to these hospitals by direct deposit.

McGuireWoods will continue to monitor developments regarding the Safety-Net Distribution and other targeted allocations from the Provider Relief Fund.

$10 Billion Distribution for Hospitals in COVID-19 Hotspots

1. Hospitals Requested to Update COVID-19 Information. On June 8, 2020, HHS sent communications to all hospitals asking them to update information on their COVID-19 positive-inpatient admissions for the period Jan. 1, 2020, through June 10, 2020. HHS announced that it will use this information to determine a second round of funding to hospitals in COVID-19 hotspots. During the first round of targeted distributions to hospitals in COVID-19 hotspots, HHS provided information about amounts after receiving applications when they funded the first 395 hospitals, as discussed in a McGuireWoods legal alert.
2. June 15 Deadline: To determine their eligibility for funding under this $10 billion distribution, hospitals must submit their information by June 15, 2020 at 9 p.m. (ET).

In recent weeks, HHS also made targeted distributions to skilled nursing facilities ($4.9 billion) and to around 300 tribal hospitals, clinics and urban health centers ($500 million). In addition, HHS released a series of updates to its Provider Relief Fund frequently asked questions document. As providers approach the 90th day from receipt of the Provider Relief Fund payments, they should evaluate these updates to ensure they continue to adhere to the changed terms of the Provider Relief Fund program. Finally, HHS reiterated in its June 9 announcement that it will continue to work on a distribution targeting dentists.