Congress passes funding compromise with only $3 billion in provider aid

• Congress added only $3 billion to the Provider Relief Fund — far less than the $35 billion recently proposed.
• Hospitals will get a three-year delay in pending Medicaid Disproportionate Share Hospital cuts.
• A surprise-billing compromise includes last-minute tweaks favorable to hospitals.

Although some hospital priorities were included in the year-end federal funding and coronavirus relief package Congress passed Dec. 21, only $3 billion was added for the Provider Relief Fund (PRF).

The small increase in the PRF included in the $900 billion COVID-relief package followed weeks of hospital lobbying for a big boost in the fund, which has expended most of the $175 billion previously appropriated by Congress.

“With all the advances in the legislation, it falls short on funding for the provider relief fund and hopefully that can be revisited next year,” Chip Kahn, president and CEO of the Federation of American Hospitals, said in a written statement.

The PRF increase was far less than the $35 billion included in a Dec. 14 bill offered by a bipartisan group of senators and representatives as part of a proposed $748 billion COVID-19 relief package.

“I was surprised because all of the preliminary drafts were more,” in terms of PRF funding, Blair Childs, a senior vice president for Premier, said in an interview.

Childs expects an early-2021 legislative push by hospitals for a larger boost in the PRF.

Without such a boost, not-for-profit hospitals’ median absolute operating cash flow was expected to decrease in 2021 by about 10% to 15%, according to a Dec. 11 Moody’s report.

More federal assistance could be critical because the latest wave of COVID-19 hospitalizations has led many hospitals to voluntarily suspend elective procedures and many patients to avoid nonemergent care in those settings. Hospitals’ operating-margin index, as tracked by Kaufman Hall, narrowed to -1.1% year-to-date in November without federal aid and to 2.5% YTD with funding. Emergency department visits were down 15.5% YTD in November.

The new legislation also requires HHS to distribute at least 85% of unobligated PRF money through an application-based portal to providers based on their 2020 financial losses.

Also included is a requirement for HHS to revert to a June definition of lost revenue in its PRF reporting requirements for providers. That definition incorporated any revenue lost to COVID-19, and hospitals could “use any reasonable method of estimating” that figure, according to the HHS rules.

In September, HHS released a new formula for defining lost revenue. A November AHA letter to HHS said the change had led many to consider returning the PRF grants, citing specific examples in which hospitals and health systems planned to return between 28% and 100% of their  grants.

Many hospitals that were concerned about the September rule changes have yet to return their PFR funds, according to an industry adviser.

“Given the changes in terms and conditions, a lot of providers waited on returning the funds until they could figure out exactly what the rules are,” said Emily Felder, senior policy adviser and counsel for Brownstein, Hyatt, Farber and Schreck. Hospitals are required to file reports in February 2021 on the PRF grants they spent in 2020.

The change included in the new legislation will require HHS to establish a process to return funds to hospitals that surrendered them in response to the September rule change, according to a hospital advocate who asked not to be quoted.

A related change in the bill will allow hospitals to transfer PRF grants within a health system.

“My understanding is that was really key as well, as much so as the additional money,” Felder said.

Other key provisions of the new bill for hospitals include:

• A three-year continuation, through 2023, of the delay in scheduled cuts to Medicaid Disproportionate Share Hospital payments
• A two-year delay in the planned 2021 increase in the required thresholds of value-based payment participation that physicians need to qualify for a Medicare bonus
• $284 billion for another round of Paycheck Protection Program (PPP) loans to support small business during the pandemic

The delay in the Medicaid DSH cut extended the planned cuts by two years — through FY27 — but reduced the cumulative cut from $36 billion to $32 billion, according to a hospital advocate.

The bill does not include legal-liability protections that hospitals and other businesses had sought related to COVID-19.

COVID-19-related lawsuits are “not an imminent thing, so we can come back and continue to work on it,” Childs said. “Definitely, there is a serious threat there.”

The incoming Biden administration is expected to oppose any statutory liability protections for hospitals and other employers. And any protections that Congress does enact could face regulatory restrictions implemented by the new administration, Felder said.

Extension of the sequester suspension

A partial win for hospitals was the extension of an earlier suspension of the 2% sequester cut in Medicare payments, with the suspension now continuing from Dec. 31 to March 31, 2021. Provider advocates had urged that it be suspended through the end of the declared public health emergency (PHE). Given the ongoing spread of the virus, most expect the PHE will be extended well past March.

“It’s disappointing,” Childs said about the three-month suspension of sequestration. That shorter period likely also will require hospitals to push for another coronavirus relief bill in 2021, he said.

“Given that the PHE is certain to continue into 2021, it is a safe assumption that America’s health care providers will continue to face the overwhelming financial challenges and pressures associated with higher overhead costs due to personal protective equipment and other safeguards, lost revenue due to delayed elective procedures and/or forgone routine visits, and hazard pay to staff,” hospital, physician and post-acute care groups wrote in a Dec. 17 letter.

Felder was optimistic that the incoming Congress will add more money to the PRF and extend the sequester suspension “because the pandemic is surging again; there’s a clear need for additional resources.”

Compromise on surprise billing

The bill included a compromise on the contentious issue of surprise medical bills. The package was opposed outright by many physicians and medical group advocates but conditionally embraced by hospital advocates.

The final deal was tweaked to address some of the last-minute concerns raised by hospitals, including barring arbitrators from considering Medicare and Medicaid rates when determining an out-of-network payment for a service.

The deal defines and limits patient cost-sharing, while allowing for payment disputes between payers and providers to be settled reasonably — without arbitrary rate-setting.

Congress quickly passed the nearly 6,000-page bill on the same day it—and its details on many healthcare provisions—was publicly released.