CARES Act offers $100B in relief to hospitals/health systems…what comes next?

by Anne Phelps, principal, US Health Care Regulatory leader, Deloitte & Touche LLP

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27. The law—the largest stimulus package in US history—provides $2.2 trillion in financial relief to individuals, businesses, and the health care community. Specifically, the CARES Act includes a $100 billion cash infusion to hospitals and health systems directly or indirectly affected by the COVID-19 pandemic. The funding is equivalent to about one month of total US hospital operating revenue.¹ While the CARES Act is the third piece of legislation enacted by the White House related to the novel coronavirus, it is the biggest and most far-reaching. Further federal funding is expected.

During an April 9 Dbrief webinar, we laid out some of the key provisions of this new law and tried to address some of the questions we’ve been hearing from our health care clients. Here’s what we don’t yet know: Will the funding only apply to hospitals that participate in Medicare and Medicaid? What will the application look like? We are awaiting those details, and guidance is expected any day. We also expect that checks will be in the mail in days or weeks rather than months.

In the meantime, here’s what we do know:

Hotspot hospitals are spending tremendous amounts of money and resources to treat COVID-19 patients. In other parts of the country, many hospitals are standing by with few or no COVID-19 patients but are also experiencing significant revenue losses as elective and non-life-threatening procedures are deferred. According to the law, health care entities that provide “diagnoses, testing, or care for individuals with possible or actual cases of COVID-19” are eligible for federal funding. Along with reimbursing hospitals for direct care expenses, money can also be used to offset costs related to the preparation of COVID-19 patients. This might include additional training for clinicians and other care providers, expanding capacity, or retrofitting facilities. The law also dedicates funding to life sciences companies that are developing vaccines and therapies to prevent or treat the illness, and manufacturers that produce devices used to care for COVID-19 patients.

The US Department of Health and Human Services (HHS) has been given broad discretion on how the funds are to be distributed. On April 10, HHS offered more detail about how the $100 billion would be distributed. On the same day, the agency began sending out its initial $30 billion directly to hospitals, health systems, and other facilities that received Medicare fee-for-service payments in 2019. Payments are be based on their total share of Medicare FFS payments that year. The funding isn’t a grant or a loan and does not need to be repaid. However, there is an attestation that must be signed, and hospitals must agree to terms and conditions, which include record-keeping requirements. Hospitals and health systems are also barred from engaging in balance billing for COVID-19 related treatments. The ban applies to patients covered by commercial, government or employer-sponsored coverage. As this and subsequent allocations of the $100 billion are sent out, we are urging our hospital and health system clients to create an audit trail by ensuring all COVID-19-related expenses are cataloged and documented using appropriate codes.

In addition to the $100 billion funding available through HHS, hospitals also can receive a 20 percent increase in Medicare reimbursement for diagnoses related to COVID-19 hospitalizations. Moreover, Section 3709 of the CARES Act temporarily suspends Medicare sequestration from May 1 until the end of the year. That means hospitals and health systems can expect a 2 percent increase in fee-for-service Medicare payments compared to what they otherwise would have received. Medicare recipients are also allowed to request a 90-day supply of medication rather than 30 days to help reduce the need to leave the home to pick up drugs.

In light of what we currently know about these funding and policy relief opportunities, finance departments should closely track services that have been deferred and revenue that is not coming through the door because of the virus. The more you can document, likely the better off you are going to be when it comes to funding.

What funding is available and what action should be taken?

This first wave of funding is already being distributed to Medicare providers. The second round of funding might expand to other types of facilities, while the last piece could be dedicated to expenses incurred by the uninsured. There are two other major buckets of federal relief funding for hospitals, health systems, and other health care stakeholders. They are: 

• The Public Health and Social Services Emergency Fund: HHS is directing funding provided through the Public Health and Social Services Emergency Fund (PHSSEF) to eligible hospitals, health systems, and other providers to offset the cost of treating COVID-19 patients and revenue losses related to deferred care. There are a number of categories through which hospitals can apply retrospectively (for the patients they have treated) and prospectively (for the patients they anticipate will come through their doors). Eligible providers will need to prepare a statement justifying the need and will also have to submit reports and maintain documentation.
• FEMA: A March 13 national-emergency declaration allowed for further emergency funding through the Federal Emergency Management Agency (FEMA). FEMA’s Public Assistance program provides federal grants to communities recovering from disasters. On March 23, the agency announced a simplified online application process. States can apply for reimbursement to offset emergency costs during the COVID-19 response. This includes costs incurred by private non-profit organizations.  

What might come next?

Congress is crafting another economic stimulus package that will likely target small businesses. We could also see additional funding for hospitals and other health providers that continue to treat COVID-19 patients, as well as health facilities that remain empty.

There has also been concern about the number of people who have lost their jobs and their health coverage. Over a period of just four weeks, more than 22 million people in the US applied for unemployment benefits.² While some people have lost health coverage, others might become uninsured if they can’t afford COBRA premiums without a regular paycheck (under COBRA, enrollees must pay 102 percent of the full cost of coverage, including the employer’s share). Lawmakers on Capitol Hill are discussing strategies to help people maintain some type of health coverage, including a House bill introduced April 14 that would help workers maintain employer-based coverage.³ This is an issue that might be addressed more specifically in the next stimulus package.

I have been amazed by the resilience of our health care community. I expect that once we emerge from this crisis, this sector will be more connected and far better prepared to meet future challenges. The road ahead is going to be long, but we will get to the other side and hopefully thrive there.

Endnotes

^{1.        Responding To COVID-19: Using the CARES Act’s hospital fund to help the uninsured, achieve other goals, Health Affairs, April 11, 2020}

^{2.        Worst-Case Fears of 20%-Plus U.S. Jobless Rate Are Now Realistic, Bloomberg, April 14, 2020}

^{3.        Democrats offer bill to help unemployed stay on employer-based insurance, The Hill, April 14, 2020}

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