After a long wait, HHS sends out details on the next Provider Relief Fund distributions

• HHS announced $25.5 billion in upcoming distributions from the Provider Relief Fund.
• The application period for funding begins Sept. 29.
• HHS also is offering a 60-day grace period for the ongoing reporting period for distributions received during the early months of the pandemic.
• Smaller providers are in line to receive higher payment amounts as part of the pending general distribution.
• Mergers and acquisitions that took place during the relevant period must be reported on applications and likely will subject the applicant to an audit.
• Details have been published on the methodology that was used to compute Phase 3 general distribution payments.

Hospitals and other healthcare providers got news they have long awaited Friday, with the U.S. Department of Health and Human Services (HHS) announcing the latest distributions from the Provider Relief Fund.

The $25.5 billion in distributions marks the first allocation since December and January and the first overseen by the Biden administration. In recent months, hospital advocates have urged HHS to expedite release of the funds, especially with the delta variant of the coronavirus impacting hospital operations in many parts of the country.

The Health Resources and Services Administration (HRSA) will make $17 billion available based on providers’ expenses and revenue losses stemming from the COVID-19 pandemic. As established in the 2021 COVID-19 relief legislation, the remaining $8.5 billion is designated for rural healthcare providers.

The application portal for the distributions will open Sept. 29.

HHS also seeks to accommodate providers that are in the midst of reporting on their use of funds received by June 30, 2020. Although the Sept. 30, 2021 deadline remains in place, HHS “will not initiate collection activities or similar enforcement actions for noncompliant providers” during a 60-day period that will extend through November.

Smaller providers stand to reap more

The $17 billion Phase 4 general distribution will be based on pandemic-related expenses and lost revenue incurred between July 1, 2020 and March 31, 2021. As part of the administration’s efforts to promote equity and support smaller providers, HRSA will reimburse smaller providers at a higher rate.

Specifically, medium and small providers will receive a supplementary payment that will be highest for small providers. Total payment will not exceed 100% of a provider’s losses and expenses.

HHS stated that HRSA will “determine the exact amount of the base payments and supplements after analyzing data from all the applications received to ensure we stay within our budget and funds are distributed equitably.”

In addition, 25% of the general distribution — about $4.25 billion — will be reserved for bonus payments to organizations based on the volume and type of services they provide to Medicare, Medicaid and Children’s Health Insurance Program beneficiaries.

Most Medicaid and CHIP claims data will be priced at Medicare rates for the purposes of determining the bonus payment. The approach is designed “to ensure equity for those serving low-income children, pregnant women, people with disabilities and seniors,” HHS stated.

Billions earmarked for rural providers

Rural healthcare providers are eligible to apply for funds from both the Phase 4 general distribution and the $8.5 billion rural distribution.

Payments from the rural pool will be based on the amount and type of Medicare, Medicaid and CHIP services provided to patients in rural areas as defined by the Federal Office of Rural Health Policy. Providers are eligible to receive a payment if they served any such patients during the relevant time frame.

As with the bonus payment in the general distribution, most Medicaid and CHIP claims data will be priced at Medicare rates.

Requirements to report M&A activity

HHS is specifying that providers must give notification if they were involved in a merger or acquisition with another provider between July 1, 2020 and March 31, 2021. The reason is to “help ensure that these provider funds are used for patient care.”

HHS notes that reporting a merger or acquisition likely will increase the chance that the provider’s distribution will be audited “to confirm their funds were used for coronavirus-related costs, consistent with an overall risk-based strategy.”

Details on Phase 3 payments

HHS on Friday also released the methodology for determining Phase 3 payments, most of which were sent out by the Trump administration in December 2020 and January 2021.

“Providers who believe their PRF Phase 3 payment was not calculated correctly according to this methodology will now have an opportunity to request a reconsideration,” HHS stated, adding that details on that process will be forthcoming.

The amount was based on data from a provider’s application, specifically the greater of:

• 88% of revenue losses net of expenses
• 2% of net patient revenue

The relevant number was then reduced by the amount of prior PRF payments made to the provider and its listed subsidiaries.

“This approach reflected a decision to take self-reported revenue losses and expenses into account while also ensuring, for consistency and fairness, that applicants that had not received the 2% of annual patient care revenue figure that had been used in the first two phases of the general distribution had the opportunity to do so in Phase 3,” HHS stated.

HHS also applied “risk mitigation/cost containment safeguards in order to ensure the adequate stewardship of funds appropriated.” Those steps entailed adjusting payments “where applications triggered a flag for concerns,” such as:

• Significant deviations between claimed quarterly and annual revenues or expenses
• Reported figures that fell outside the expected range relative to similar providers
• Applications that needed manual review or offered insufficient financial documentation