CARES Act | Provider Relief Fund & Medicare Reimbursement

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was passed by Congress and signed by the President on March 27, 2020. The law contained over $2 trillion in economic relief in attempts to stem the negative impact of the spread of the COVID-19, which is the disease caused by the Coronavirus. This large financial relief package provides assistance to a wide range of sectors of the economy, including assistance for workers as well as direct loans for small businesses and local governments. Importantly, the package also includes a much needed $100 billion for hospitals, community health centers, and the health care system.

The spread of the virus has created unprecedented pressures in the healthcare system. The nation’s struggle to procure respirator masks and other personal protective equipment has been well documented, however the difficulties in the supply chain extended beyond these essential goods. The disruption also impacted the supply chain for medical devices and pharmaceuticals as the virus spread throughout China, severely impacting its industrial output. China ranks second among countries exporting drugs and biologics to the United States and first in medical devices. As of February 25, 2020, there are 20 FDA approved drugs that are solely dependent on raw materials coming from China.  

The release of the CARES Act funding is crucial as healthcare providers all over the country not only continue to struggle to acquire equipment to treat patients but to also to stay financially viable and pay healthcare staff. Healthcare providers have already reduced salaries and laid off workers as COVID-19 overwhelms emergency departments and ICUs while at the same time forcing the cancelation of most elective procedures around the nation. Targeted funding is necessary to ensure that frontline practitioners can continue to provide care.

CARES Act Provider Relief Fund

Of the $100 billion earmarked for the healthcare system, $30 billion was released urgently on April 10, 2020, as the CARES Act Provider Relief Fund. The funds are being deposited by way of direct deposit, and any healthcare provider or facility that received Medicare-fee-for-service reimbursements in 2019 is eligible. The distribution of funds will be based on the provider’s share of total Medicare fee-for-service reimbursements in 2019, which totaled approximately $484 billion in 2019 (disbursement can be estimated by dividing the healthcare provider’s 2019 fee-for-service payments by $484B and multiplying that ratio by $30 billion.  It is important to note that receipt of the funds is contingent on a provider’s agreement not to seek collection of out-of-pocket payments from a COVID-19 patient that are greater than what the patient would have otherwise been required to pay if an in-network provider had provided the care.  As long as these guidelines are followed, CARES Act Provider Relief Fund payments do not have to be repaid.

Medicare Reimbursement

The Act also adjusts Medicare to better react to the needs of healthcare providers during the emergency in the following ways: 

• Increases Medicare reimbursement rates for COVID-19 hospitalizations by 20 percent during the emergency period.
• Suspending the 2 percent Medicare sequestration through December 31, 2020
• Waives the face-to-face requirements for telehealth services during the emergency period
• Requires payers to cover COVID-19 tests performed by hospitals and laboratories

*Although separate from the $100 billion in funding from the CARES Act, CMS has also announced the availability of an additional $51 billion through the expansion of the Accelerated and Advance Payment Program. An accelerated/advance payment is a payment intended to provide necessary funds when there is a disruption in claims submission and/or claims processing. These expedited payments can also be offered in circumstances such as national emergencies in order to accelerate cash flow to the impacted health care providers and suppliers. Accelerated and Advance Payments are loans and must be repaid. 

In addition to these changes to the Medicare program, this package enables physician assistants and nurse practitioners to furnish home health services which should result in an increase the frontline healthcare capacity.  It also includes $1.3 billion in support for community health centers, a delay/reduction in payroll tax payments by 50 percent for all employers, including hospitals and health systems.  The package also includes $16 billion for the much needed purchase of medical supplies for the Strategic National Stockpile, which contains personal protective equipment.

While the funding provided through the CARES Act was timely, significant challenges remain in the fight against Coronavirus. The federal government has stated that it is ready and willing to do more to support healthcare, and more will be needed.  Healthcare provider’s financial stability will continue to be an issue, specifically among those typically treating patients that are now ordered to stay home. The financial solvency of providers is important not only during the pandemic but for the viability of the system after the pandemic as well.  It will be important to track how the funds are being disbursed and whether all healthcare providers, including critical frontline providers working in out-of-hospital settings, are receiving adequate equipment. The healthcare system has oriented itself towards slowing the spread of the virus, and the support of the individuals providing care should continue to be a top priority.