As the outbreak of the Coronavirus (COVID-19) affects every sector of the US economy, the US Congress and the White House came together to provide funding, supplies and regulatory relief to address the crisis. The US Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 25, 2020. The US House of Representatives followed suit and passed the bill on March 27, 2020. The President signed it into law shortly after.The CARES Act represents the third stimulus bill passed by Congress in response to the COVID-19 pandemic. With $2 trillion in allocations, it is the largest stimulus bill in US history.
The sweeping legislation directs $100 billion to an emergency fund accessible by eligible healthcare providers and provides additional low-interest and small business loan support to businesses combatting the COVID-19 outbreak. Other key provisions boost Medicare and Medicaid reimbursement for COVID-19-related inpatient services and generally, expand testing and treatment coverage, and provide additional regulatory relief for rural providers.
This article offers an overview of the CARES Act’s major federal healthcare program provisions. It is not an exhaustive summary of all the healthcare provisions in the new law, and we encourage readers to review the law to identify additional provisions that may be of interest to their organizations.
EMERGENCY FUNDS AND LOAN OPPORTUNITIES
Public Health Fund for Providers
The CARES Act includes $100 billion for the Public Health and Social Services Emergency Fund for eligible healthcare providers for healthcare-related expenses or lost revenues associated with COVID-19. Providers eligible for this fund include public entities, Medicare or Medicaid enrolled suppliers and providers, for-profit entities and nonprofit entities in the United States that provide diagnoses, testing or care for individuals with possible or actual cases of COVID-19. The law authorizes the Secretary of Health and Human Services to review applications and make determinations about who will receive funds and for what purpose on a rolling basis. The law states that providers must submit to the Secretary applications that include statements justifying the need for the funds. While providers across the country are anxious to obtain funds to assist them through the crisis, the US Department of Health and Human Services (HHS) will need to set out criteria it will use to allocate the funds.
The CARES Act also provides supplemental awards and grants to support healthcare providers. The bill provides $1.32 billion in supplemental funding to community health centers (CHCs), and reauthorizes Health Resources and Services Administration (HRSA) grant programs that promote the use of telehealth technology and strengthen rural healthcare.
Other grant opportunities included in CARES are summarized in the appendix.
Small Business Administration 7(a) Loans
The CARES Act provides economic relief to small businesses through Small Business Administration (SBA) loan guarantees and subsidies. The SBA program primarily provides financial assistance to small businesses through the 7(a) loan program. The CARES Act increases the maximum 7(a) loan amount from $5 million to $10 million. The law also expands eligible uses of 7(a) loans to include payroll support, employee salaries, mortgage payments, insurance premiums and any other debt obligations, and makes other important changes. Under the CARES Act, entities eligible for 7(a) loans include small businesses, nonprofits and veteran organizations with fewer than 500 employees.
Economic Injury Disaster Loans
The CARES Act allocates $10 billion for emergency economic injury disaster loans (EIDLs). EIDLs are available to businesses with fewer than 500 employees in states where the governor has declared a state of emergency under the Stafford Act. These loans can be up to $2 million and may be used by small businesses to pay off debt, payroll and other bills that can’t be paid because of the disaster. The Act stipulates that, in issuing these loans, the SBA may waive any personal guarantee on loans less than $200,000 and offer loans solely based on credit score. Loan recipients may request an advance on a loan of less than $10,000, which the SBA must make available within three days.
Paycheck Protection Program
In additional to the EIDL grants and increased SBA 7(a) loans, the CARES Act establishes a third loan program for small businesses called the Paycheck Protection Program (PPP). PPP loans are designed to help small businesses avoid closure or layoffs, and can be used to cover payroll, utilities, insurance premiums, and rent and mortgage interest payments on a facility. This program concludes on June 30, 2020, and is tailored for businesses that typically would not qualify for a loan at an average local or national bank. The loans require no collateral, credit test or personal guarantees from a business, only proof that the business was open and operational on February 15, 2020. In order to attract lenders, the government is offering a 100% guarantee on loans through the end of 2020.
The CARES Act establishes a forgiveness policy for all loans granted by the SBA as part of the COVID-19 response. All recipients of SBA 7(a) loans—including those granted through the PPP—are eligible for loan forgiveness equal to the amount the borrower spends in the eight weeks after the loan is originated. Loan forgiveness will not be included in income tax and can be applied to payroll costs up to $100,000. Employers must provide payroll information from this year and the same time last year to demonstrate that they are maintaining wages. Employers will not be penalized for rehiring employees who were recently let go.
The CARES Act attempts to alleviate some of the financial strain on hospitals, physicians and other providers through a series of Medicare payment policies that increase reimbursement and waive existing constraints.
The new law increases reimbursement to hospitals by providing an add-on payment for inpatient hospital discharges related to COVID-19. Under the Inpatient Prospective Payment System, a diagnostic related group (DRG) payment covers all charges associated with an inpatient stay from the time of admission to discharge. CMS assigns each DRG a weighting factor that reflects the estimated relative cost of hospital resources for the discharges assigned to that DRG compared to discharges assigned to other DRGs. During the emergency period, the new law increases the weighting factor of DRGs for patients diagnosed with COVID-19 by 20%. These patients will be identified through the use of diagnosis codes, condition codes or similar means. This provision provides direct financial relief to inpatient hospitals by increasing payments for patients diagnosed with COVID-19, whose treatment is anticipated to be more complex and resource-intensive.
Accelerating Payments to Providers
The law expands the CMS accelerated payment policy in an effort to get payments to hospitals more quickly. Currently CMS has an accelerated payment policy for extraordinary circumstances that allows hospitals to receive an advance on Medicare payments if they have experienced financial difficulties due to a delay in payments or in other exceptional situations. The CARES Act makes revisions to this program, including:
- Increasing the prepayment amount from 70% to 100% (125% for critical access hospitals) of expected Medicare payments
- Increasing the length of time accelerated payments may cover from three to six months
- Delaying the start of recoupment of any overpayments from 90 to 120 days
- Extending the due date for any outstanding balances from 90 days to one year.
The CARES Act also expands the types of hospitals (including critical access, children’s and cancer hospitals) that are eligible to apply for accelerated payments during the COVID-19 national emergency.
Temporarily Suspending Current Payment Policies that Reduce Reimbursement
The CARES Act curtails the current 2% reduction to Medicare payment by temporarily suspending Medicare sequestration. The Budget Control Act of 2011, as amended, established that Medicare spending is subject to across the board reductions of up to 2% from 2013 through 2029. The CARES Act suspends Medicare sequestration payment reductions from May 1, 2020, through December 31, 2020. To make up for the budget savings lost during this temporary suspension, sequestration is now extended through 2030.
For the emergency period, the CARES Act also temporarily suspends the current site-neutral policy that requires certain long-term care hospital (LTCH) stays to be paid an amount based on Medicare’s acute care hospital payment rates under the Inpatient Prospective Payment System or 100% of the cost of the case, whichever is lower. For the roughly 30% of LTCH stays currently subject to the site-neutral policy, this waiver will temporarily restore payments to higher LTCH Prospective Payment System rates.
Additionally, from March 6, 2020, to the end of the emergency period, the CARES Act averts price reductions to durable medical equipment by suspending revisions to the Medicare durable medical equipment payment methodology for areas other than those that are rural and noncontiguous.
Relieving Regulatory Burden
The CARES Act expands the use of telehealth by easing restrictions on specific healthcare providers, changing insurance coverage and creating additional grant funding opportunities during the current public health emergency. Current telehealth laws and regulations allow Medicare to pay providers for telehealth services under certain circumstances, and the use of telehealth is limited by certain regulatory requirements. The first emergency COVID-19 supplemental (Coronavirus Preparedness and Response Supplemental Appropriations Act), signed into law March 6, 2020, lifted one of these regulatory requirements: the “originating site” rule, which requires a patient receiving the service to be physically located either in a healthcare facility or in a designated rural area. That legislation removed this restriction during the public health emergency period, allowing beneficiaries to receive telehealth services in other locations, including their homes.
The first and second COVID-19 supplemental legislative packages also included restrictions on telehealth services, including a requirement that a physician have a pre-existing relationship with the beneficiary in order to be reimbursed for telehealth services. The Centers for Medicare and Medicaid Services (CMS) released telehealth guidance on March 17, 2020, announcing that it would not enforce that requirement, however. The CARES Act codifies the CMS policy, stating that a physician is not required to have that treatment relationship with the patient to be reimbursed for telehealth services for the duration of the emergency period.
Supporting Underserved Communities
The CARES Act includes several provisions intended to increase access to telehealth in rural and underserved areas. In addition to the previously mentioned originating site restriction, current law includes a “distant site” requirement, which dictates where the eligible provider must be located in order to be reimbursed under Medicare. Rural health clinics and federally qualified health centers are not eligible distant sites, but the CARES Act allows them to serve as such during the public health emergency. This provision allows providers using telehealth at these facilities to be reimbursed at rates similar to the national average payment rates for comparable telehealth services under the Medicare Physician Fee Schedule.
The CARES Act reauthorizes and provides $29 million per year for four years for a HRSA grant program supporting the use of telehealth technologies for services relating to mental health, at-home care, and preventive care in rural and underserved communities. The Act also fixes an access issue for beneficiaries who have a high-deductible health plan with a health savings account, by allowing coverage of telehealth services before the beneficiary meets the deductible.
All of these policies attempt to increase access to telehealth services while reducing the need for in-person visits during this public health emergency. They also give providers mechanisms to continue treating patients at a time when their typical face-to-face case load is diminished. These policies could have longer term implications, too. Stakeholders have long advocated for legislation making some of these changes—including lifting restrictions on originating and distant sites. These temporary changes could serve as a case study on telehealth’s impact on the healthcare system.
The CARES Act makes minor changes to the Medicaid statute to give state plans increased flexibility to cover certain services during the COVID-19 public health emergency.
The Act allows state Medicaid programs to pay for direct support professionals to assist disabled individuals in the hospital to reduce length of stay and free up beds. Direct support services have traditionally been reserved for home and community-based settings, but Congress recognized that the hospital may be a more appropriate setting during the public health emergency.
The CARES Act clarifies a section of the Families First Coronavirus Response Act that gives states the option to extend Medicaid eligibility to their uninsured populations for COVID-19 diagnostic testing. The CARES Act ensures that uninsured individuals can receive a COVID-19 test and related service with no cost-sharing in any state Medicaid program that elects to offer such enrollment option.
The CARES Act also gives states an additional grace period for certain requirements in Families First. For example, Families First dictates that if a state has raised its Medicaid premiums since January 1, 2020, it is ineligible to receive the 6.2% Federal Medical Assistance Percentages (FMAP) increase specified in the law. The CARES Act amends this provision to allow states 30 days from March 18, 2020, to come into compliance with the requirement and still remain eligible for the FMAP increase, as long as the state imposed the higher premium before Families First was enacted.
Together, these flexibilities aim to help speed up the rate of COVID-19 testing and treatment, and reduce the burden on hospitals.