On May 15, 2020, the U.S. Department of Health and Human Services (HHS) updated and clarified the distribution of Provider Relief Funds and how to estimate the second allocation of payments.

The California Medical Association (CMA) strongly recommends that physicians review the new FAQ. HHS has without notice changed its website and these rules several times over the last two weeks, which has caused a great deal of  confusion. There are important changes to the allocation formula, which will alter expected payment amounts. Also, please remember that only Medicare fee-for-service (FFS) physicians who received a share of the  first $30 billion distribution before April 25 are eligible to receive a portion of the second $20 billion distribution. 

HHS continues to state that a third distribution is forthcoming for other providers, such as Medicare Advantage providers, Medicaid providers, pediatricians,  OBGYNs, allergists and psychiatrists.

Congress created the Provider Relief Fund in the Coronavirus Aid, Relief, and Economic Security (CARES Act) in late March and has appropriated $175 billion to cover physician and hospital lost revenue and additional unreimbursed expenses related to the COVID-19 pandemic. The fund also covers care provided to uninsured COVID-19 patients. These payments do not need to be repaid. 

On April 10, 2020, HHS began automatically distributing $30 billion directly to physicians, hospitals and other health care providers based on historical Medicare FFS payments. Physicians received approximately 6.2%—or three week’s equivalent—of their 2019 Medicare FFS payments.  Only Medicare providers received funding. 

On April 24, 2020, HHS announced a second tranche of $20 billion in funding for a total distribution of $50 billion. This $50 billion is now being referred to by HHS as “the general distribution.”  Hospitals directly received their payments. ONLY physicians who received payments from the first distribution are eligible for the second distribution. Moreover, physicians must apply for their share of this second $20 billion distribution through the application portal. You must submit your most recent tax return and estimated revenue losses from March and April 2020.

HHS also made two “targeted distributions” of an additional $20 billion to hospitals in hot zones and rural areas. And finally, at least another $10 billion is set aside to reimburse providers for care provided to uninsured COVID-19 patients.  Physicians may apply for the uninsured funds now. 

Physicians who receive these payments must attest to receipt of the funds and agree to the Terms and Conditions. CMA urges all physicians to have an attorney or financial expert review the terms and conditions. Physicians should also keep thorough records of how the funds were spent because there will be audits by the government. 

The most important May 15 update is  that eligible physicians should expect to receive the LESSER of 2% of a their 2018 net patient revenue OR the sum of incurred revenue losses for March and April 2020. If the first general distribution payment providers received between April 10 and April 17 was at least 2% of their annual patient revenue, those providers will not receive a second allocation from the general distribution. This means that the total funding a provider receives from the first distribution and the second distribution COULD be less than 2 percent of their total 2018 net patient revenues IF the sum of your incurred revenue losses for March and April 2020 is less than 2 percent of your 2018 revenue. This is a new and different funding allocation formula.

Example:

• Distribution  1:  You received approximately 1% of your 2018 net patient revenues.
• Your total incurred losses for March and April are ~1.9 percent of your 2018 net patient revenues.
• Distribution  2: Your payment would only be 0.9 percent (not an additional 1 percent) since your losses for March and April came out to less than 2 percent of your total 2018 net revenue.

In contrast to earlier instructions, HHS will calculate payments  for the second distribution taking into account payments made in the first distribution to be sure the total does not exceed the formula listed above. This also helps to avoid overpayments. While HHS says it does not plan to recoup funding, they are planning to perform audits.

The HHS FAQ also provides new details on how to calculate net patient revenue and estimate revenue losses for March and April. It also provides instructions on where to find your practices’ gross receipts on your tax forms.

HHS states it will notify providers whether or not they have qualified for additional funding in the second distribution within 10 business days of receiving their applications. HHS is sending payments once a week on a rolling basis.   

If practices believe they received erroneous payments, they should contact HHS and report overpayments or underpayments.

See the CMA COVID-19 Financial Toolkit for Medical Practices for more information, including details on how to apply for the second general distribution, with links to the HHS Provider Relief Fund application portal, a user video, AMA application guide, and instructions for applying for the uninsured fund.