Implications Of The Coronavirus Aid, Relief, and Economic Security (CARES) Act – Healthcare Providers

Alerts / March 27, 2020

On Mar. 25, the Senate passed H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The House of Representatives passed the CARES Act on Mar. 27, and President Trump signed the bill later in the day, where it has now become law upon his signature. For a discussion of retirement plan provisions, provisions affecting individual taxpayers, provisions relating to small business loans, and an overall alert on its provisions, see our alerts CARES Act to Provide Significant Employee Benefit Plan Relief for Participants and Plan Sponsors (Mar. 26), Individual Income Tax Implications of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Mar. 26), Federal Government Assumes Small Business Losses Through Forgivable Paycheck Protection Program Loans (Mar. 26), and President to Sign $2 Trillion CARES Act with Significant Tax and Workforce Relief for Businesses and Individuals (Mar. 27).

As healthcare providers, including hospitals, physicians, nurses, first responders and other healthcare professionals, have been, and will continue to be, on the front lines of the COVID-19 pandemic, the CARES Act is welcome economic relief at a time when the healthcare system is dealing with unprecedented disruption, demand for services and financial challenges. Additionally, the CARES Act helps ensure access to healthcare for COVID-19 patients during the emergency period. Below are some of the applicable provisions of the CARES Act. The implementation and payment mechanisms will be fleshed out in guidance from the applicable federal agency tasked with overseeing its respective area.

  • Emergency Fund/Medicare Accelerated Payment Program: The CARES Act establishes a $100 billion “Public Health and Social Services Emergency Fund” to reimburse eligible healthcare providers for expenses or lost revenue attributable to the coronavirus. A healthcare provider may apply to the Secretary of Health and Human Services for funding. Additionally, recognizing the need for hospitals, especially those in rural areas, to maintain stable cash flow to maintain workforce and supplies, and to generally continue to operate during this time, the CARES Act expands the existing Medicare accelerated payment program by allowing qualifying hospitals to request up to six months’ advanced lump-sum or periodic payment. Most qualifying hospitals will be able to request 100% of prior period payments, and for critical access hospitals, it is 125%. The payment would be based on net reimbursement represented by unbilled discharges or unpaid bills, but this payment represents a loan that must be paid down beginning in four months and can be paid over 12 months, interest free.
  • DRG Add-On: The CARES Act increases inpatient reimbursement by 20% for hospitals treating Medicare beneficiaries with coronavirus during the emergency period.
  • Medicaid Financing: The CARES Act delays $8 billion in scheduled reductions to DSH payments by eliminating the $4 billion in Medicaid DSH cuts in FY 2020 and reduces the cuts for FY 2021 to $4 billion from $8 billion. Further, implementation of the FY 2021 cuts will be delayed until Dec. 1, 2020.
  • Sequestration: The CARES Act temporarily suspends the mandatory Medicare sequester order to reduce reimbursement globally by 2% until the end of the year.
  • Durable Medical Equipment/Clinical Lab Test Payments: The CARES Act suspends the scheduled reductions in Medicare payments for DME during the emergency period. Further, scheduled reductions in Medicare payments for clinical diagnostic tests furnished to beneficiaries in 2021 have been eliminated, and there is a delay by one year of the upcoming required reporting of private payer data by labs.
  • Telehealth: The CARES Act allocates several hundred million dollars to telehealth and relaxes the regulations to encourage the use of telehealth. For example, during the emergency period, it eliminates the requirement in the Coronavirus Preparedness and Response Supplemental Appropriations Act of 2020 (Public Law 116-123) that a physician or other professional must have treated the patient in the past three years – the CARES Act now allows reimbursement for treatment of patients through telehealth even where the physician or other professional has not had an established relationship with a Medicare beneficiary in the past three years. Additionally, the CARES Act expands the use of telehealth in certain areas and settings, such as Federally Qualified Health Centers and Rural Health Clinics settings, and for home dialysis patients and recertifications of hospice care.
  • Health Plans: With respect to coverage of testing in accordance with the Families First Coronavirus Response Act (Public Law 116–127), the CARES Act requires health plans to reimburse the testing provider (including hospitals and labs) either at the pre-declaration contract negotiated price or, if a contract is not in place, at the cash price for coronavirus tests (which must be publicly listed on the internet) or at a negotiated lesser cash price. During the emergency period, each provider of a diagnostic test for COVID-19 must publicly list its cash price for testing on its public website.
  • Supply Chain: The CARES Act has several provisions to increase access to medical supplies needed to fight the virus. One billion dollars in funding is included for the Defense Production Act to bolster domestic supply chains, enabling industry to quickly ramp up production of personal protective equipment, ventilators and other urgently needed medical supplies, and billions of dollars more for federal, state and local health agencies to purchase such equipment. Sixteen billion dollars is also included to replenish the Strategic National Stockpile.
  • Post-Acute Care: The CARES Act waives certain requirements for post-acute care providers that permit expansion during the emergency period without penalty, including allowing acute care providers to transfer patients into alternative settings as needed to reallocate resources to treat COVID-19 patients. For example, patients in post-acute care are no longer required to receive three hours of therapy per day. The site-neutral payment policy is suspended during the emergency period. Lastly, the rule requiring a 50% patient mix based on acuity is relaxed so that a long-term care hospital does not lose its designation as a long-term care hospital due to a change in its patient mix.
  • Health Centers: The CARES Act provides additional monies for fiscal year 2020 for health centers in the form of supplemental awards of $1,320,000,000.
  • Home and Community-based Support Services: Under the CARES Act, Medicaid programs can pay for direct support professionals and caregivers trained to help with activities of daily living who can assist disabled individuals in hospital settings in order to reduce length of stay, so they can either be discharged or moved to alternative settings.

In addition, the CARES Act addresses other health-related concerns that have been exacerbated by COVID-19, including elimination of cost-sharing by patients and beneficiaries for COVID-19 testing and vaccines.

Authorship: Charlene McGinty, Amy Fouts and Stanford Moore

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