The Department of Health and Human Services (HHS) is in the process of completing a $50 billion general distribution (General Distribution) from the $100 billion available to health care providers through the Public Health and Social Services Emergency Fund (Provider Relief Fund) as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act.
HHS intends for this $50 billion General Distribution to replace a percentage of a provider’s annual gross receipts, sales or program service revenue. HHS will distribute additional money via targeted distributions (Targeted Distributions) that include, among other things, financial support for providers disproportionately impacted by COVID-19, rural providers and providers who have treated uninsured patients.
The $50 Billion General Distribution
The initial $30 billion tranche of General Distribution funds paid to providers was based on each provider’s share of the $484 billion of Medicare fee-for-service payments made to all providers in 2019. This initial payment to providers, which HHS distributed between April 10 and April 17, 2020 amounted to approximately 6.2% of each provider’s share of the Medicare fee-for-service payments it received in 2019. While providers did not have to apply for funds from the initial $30 billion distribution, they were instructed to sign an attestation and agree to HHS’ terms and conditions for that distribution to keep those funds.
On April 24, HHS began distributing the second $20 billion tranche of General Distribution funds to providers using a different formula. Payments from this tranche of funds are calculated so that a provider’s allocation from the entire $50 billion General Distribution will be proportional to such provider’s 2018 net patient revenue. Since total revenues of Medicare facilities and providers in 2018 were approximately $2.5 trillion, a provider can estimate its expected General Distribution revenue using the following formula: (Individual Provider 2018 Revenue/$2.5 trillion) x $50 billion = Expected General Distribution Revenue.
In general, if a provider’s revenue from Medicare fee-for-service is less than 33% of its net patient revenue, there should be an additional payment made from the second $20 billion tranche of General Distribution funds. If Medicare fee-for-service revenue accounts for a greater percentage of the provider’s net patient revenue, HHS may recoup the difference, although HHS’s plans in this regard have not yet been announced.
Additional Terms and Conditions Related to the $20 Billion Tranche of General Distribution Funds
Providers seeking funds from the $20 billion tranche of General Distribution funds must sign an attestation and agree to the HHS terms and conditions related to the $20 billion General Distribution. A provider should not attest if the payments it has received exceed its estimated total distribution. Providers who believe they have received an overpayment should contact the CARES Provider Relief hotline at 866-569-3522.
The HHS terms and conditions for the $20 billion General Distribution track the terms and conditions for the prior $30 billion General Distribution. There are two additional terms and conditions:
- The recipient must submit general revenue data for calendar year 2018 when applying to receive a payment, or within 30 days after receipt of a payment.
- The recipient must agree that HHS can publicly disclose any payments a provider receives from the Provider Relief Fund, and acknowledge that such disclosure may allow third parties to estimate the recipient’s gross receipts or sales, program service revenue or other equivalent information.
HHS Provider Relief Fund General Distribution Portal Application Guidance
Any provider who received a payment from the Provider Relief Fund as of 5 p.m. EST on April 24 is eligible to apply for additional funding from the second $20 billion tranche of General Distribution by submitting revenue information through the Provider Relief Fund General Distribution Portal (Portal). HHS sent some providers an advanced payment in connection with the second $20 billion tranche of funds based on the revenue data they submitted in their Medicare cost reports. Providers who received these funds in advance must submit their revenue information through the Portal for verification. Providers without adequate cost report data on file will need to submit their revenue information through the Portal in order to apply for additional General Distribution funds.
Providers who did not receive funding as of 5 p.m. EST on April 24 are not eligible to use the Portal to apply for funding. However, those providers may be eligible for payments from the Provider Relief Fund through other mechanisms, such as the Targeted Distributions (including potential future Targeted Distributions not yet announced).
HHS is collecting the additional information through the Portal to aid distribution of the additional $20 billion in Provider Relief Funds. Providers must provide the following information:
- “Gross Receipt of Sales” or “Program Service Revenue” as submitted on its federal income tax return, which HHS will use to understand the provider’s usual operations
- Estimated revenue losses in March and April 2020 due to COVID-19, which will help HHS quantify the impact of COVID-19
- A copy of the most recently filed income tax return, which will allow HHS to verify all self-reported information
- A listing of the taxpayer identification numbers (TINs) for any subsidiary organizations that have received relief funds but do not file separate tax returns, which HHS will use to ensure that it does not overpay or underpay providers who file tax returns covering multiple legal entities
Providers must estimate lost revenue from March and April 2020. Providers can estimate March losses by comparing year-over-year revenue, and they can estimate April losses by using data from the first few weeks of April to estimate total monthly losses, or by extrapolating total monthly losses using data from March. HHS also states that providers can estimate lost revenue by using the difference between budgeted revenue and actual revenues.
In our view, providers should only use budgeted revenues to estimate revenue losses if they have evidence that they were on pace to meet or exceed their budgeted revenues before COVID-19 affected their operations. The fact that HHS is allowing providers to estimate lost revenues by comparing to prior period revenues or by comparing to budgeted revenues suggests that HHS does not intend for providers to account for lost revenues that may be made up in the future when providers are able to start performing elective surgeries.
If a provider received a Provider Relief Fund payment by 5 p.m. EST on April 24 and filed a federal income tax return for 2017, 2018 or 2019, that provider must submit a separate Portal application. Each entity that files a federal income tax return is required to file an application, even if it is part of a provider group. If a group of corporations files one consolidation return, only the tax filer must apply. Each provider submitting an application must list the TINs of each subsidiary that (a) has received provider Relief Fund payments as of 5 p.m. EST April 24 and (b) has not filed federal income tax returns for 2017, 2018 or 2019.
HHS has not announced a deadline to apply for these funds. Though HHS will not assess distributions from the additional $20 billion in Provider Relief Funds on a first-come, first-served basis, in response to our telephone inquiry, an HHS representative advised us that distributions will be made until the available funds run out. While all applicants will receive equal consideration regardless of when they apply and HHS will apportion the relief funds to providers to optimize the beneficial impact of the funds, in our view providers should apply for these funds as soon as possible to guarantee they receive a distribution.
HHS expects to distribute funds within 10 business days after receipt of a provider’s revenue submission. HHS will not take direct inquiries from providers, and there is no appeals or dispute resolution process to contest a distribution.
HHS provided a number of General Distribution Portal FAQs related to the additional $20 billion in Provider Relief Funds along with an online course that guides providers through the application process (Cares Act Provider Relief Fund Application Guide).