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Paycheck Protection Program and Healthcare Enhancement Act Infuses Additional Funding Into COVID-19 Healthcare Efforts

April 24, 2020

US President Donald Trump signed the Paycheck Protection Program and Healthcare Enhancement Act (HR 266) into law on April 24. HR 266 appropriates $483 billion in new spending, including $321 billion for the Payment Protection Program, an additional $75 billion for the Public Health and Social Services Emergency Fund, and $25 billion to support expanded testing across the United States.

This interim coronavirus (COVID-19) response package—also being referred to as “Phase 3.5”—was necessitated when the $350 billion appropriated by Congress in the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s Paycheck Protection Program (PPP)—originally intended to last until June 30—was exhausted on April 16. Read our LawFlash on the CARES Act’s effect on the healthcare industry.

Senate Republicans initially pushed for a quick infusion of approximately $250 billion into the PPP, while Congressional Democrats argued that Phase 3.5 should also include more money for hospitals, state and local governments, and other purposes.

This LawFlash covers the key components of the healthcare funding aspects the act.

PAYCHECK PROTECTION PROGRAM AND HEALTHCARE ENHANCEMENT ACT

The Paycheck Protection Program and Healthcare Enhancement Act (Enhancement Act) funnels an additional $75 billion into the original $100 billion Public Health and Social Services Emergency Fund (Provider Relief Fund) and provides $25 billion in additional funds to support virus testing and mitigation.

RELIEF FOR HOSPITALS

An additional $75 billion in relief, added to the $100 billion in the Provider Relief Fund, is directed to cover “necessary expenses” to “prevent, prepare for, and respond to coronavirus.” The money must be used “to reimburse eligible providers for healthcare related expenses or lost revenues attributable to coronavirus.”

Key Terms

The Enhancement Act language adding funds to the Provider Relief Fund mimics that in the CARES Act and uses the same definitions and limiting language found therein.

As noted above, the key component of receiving Provider Relief Funds is that the funds must be dedicated solely to the purposes of preventing, preparing for, and responding to COVID-19.

“Eligible healthcare providers” under the Enhancement Act include public entities, Medicare- or Medicaid-enrolled suppliers and providers, and for-profit and non-profit entities the secretary of the US Department of Health and Human Services (HHS) may further describe that provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.

The CARES Act described funds appropriated as “available for building or construction of temporary structures, leasing of properties, medical supplies and equipment including personal protective equipment (PPE) and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities and surge capacity.”

The term “payment” is defined in the statute for this specific Provider Relief Fund to include a prepayment, prospective payment, or retrospective payment and is made in the most efficient payment systems practicable to provide emergency payment.

First Tranche, Second Tranche, and Additional Payments

We now know that the HHS directly transmitted $26 billion in bank accounts on April 10 proportionate to providers’ share of Medicare fee-for-service reimbursements in 2019. An additional $10 billion was transmitted on April 17, using a simple formula, working with data the agency already had to get money out directly. This release of the first tranche was accompanied by the release of Terms and Conditions, as well as an Attestation, in which providers then had to go into a portal established by HHS, agree to abide by the Terms and Conditions, and either sign the Attestation or reject the money.

When HHS distributed the first $30 billion originally allocated to primarily Medicare providers, it left a large swath of providers around the country continuing to ail. In response to significant pressure mounted by safety net providers, children’s hospitals, and other providers that do not solely rely on Medicare funding but treat uninsured and Medicaid patients around the country, HHS only this week released a second tranche of funding to providers.

Twenty billion dollars of additional funding will be released on April 24 with a focus on providers, such as children’s hospitals, that have a relatively small share of revenue coming from the Medicare program. The distribution of this second tranche of funding is described as an “advance payment” based off revenue data they submit in hospital CMS cost reports. These hospitals will be required to verify their cost data or, for those entities that do not submit cost reports, they will need to submit their revenue via a portal link. The notice from HHS on the second tranche of funding indicates that funding will occur in rolling payments beginning April 24.

An additional $10 billion will be allocated to COVID-19 high-impact areas. Additionally, HHS indicates that an allocation will be made for those that provide treatment to the uninsured, $10 billion for rural health clinics and hospitals, and $400 million to Indian Health Service providers.

Application and Other Statutory Provision Requirements

The Enhancement Act echoes the CARES Act language in indicating that all providers must “submit an application that includes a statement justifying the need of the provider for the payment” accompanied by an eligible tax identification number (TIN). We assume, based on the experience to date, that the term “application” is broad given that some funding is made without advanced application. Rather, the registration of TIN numbers, validation of data and expenditures, and careful review of the Terms and Conditions and the Attestation are required for all transfers of dollars out of the Provider Relief Fund.

Statutory provisos in the Enhancement Act warn that

  • the funds may not be used to reimburse expenses of losses that have been reimbursed from other sources;
  • entities must submit reports and maintain documentation to ensure compliance with the conditions and in the form required by the HHS secretary;
  • no later than three years after final payment, the Office of Inspector General (OIG) shall transmit a final report on audit findings to the Committee on Appropriations of the House of Representatives;
  • audits may be conducted by the OIG or the Comptroller General; and
  • no later than 60 days from enactment of the Enhancement Act, the HHS secretary shall provide a report to the Committee on Appropriations of the House and the Senate detailing the obligation of funds, including obligations to eligible healthcare providers; these reports must be updated and submitted to the committees every 60 days until funds are expended.

ALLOCATIONS FOR TESTING

The Enhancement Act also allocates $25 billion for necessary expenses for the following:

  • Research, development, and expansion of COVID-19 testing, including testing to determine if a person has COVID-19 and serology testing to determine if the person has coronavirus antibodies
  • Manufacturing, procurement, and distribution of tests, testing equipment, and supplies, including PPE needed to administer tests, and the development of rapid, point-of-care testing
  • Scaling up of academic, commercial, public health, and hospital labs to conduct surveillance and contact tracing

State and Federal Allocation of Funds, Responsibilities

Under the Enhancement Act, US states would be responsible for the testing of individuals, and would receive $11 billion of the total for testing and other activities, including contact tracing. The federal government would be responsible for the research and development of more advanced testing and for ensuring the availability of tests, surveillance, and epidemiology on a national scale, including the development of a national testing strategy.

The Enhancement Act requires states and other local government actors to submit plans for their respective COVID-19 testing to HHS for the remainder of 2020. These plans must describe—on a month-to-month basis—plans for testing, including the number of diagnostic, serological, and other tests needed, as well as estimates for laboratory and testing capacity including workforce, equipment, and supplies.

The federal portion is allocated as follows:

  • At least $1 billion is allocated to the Centers for Disease Control for its COVID-19-related activities
  • At least $1.8 billion to the National Institutes of Health for research and development of COVID-19 testing, including rapid testing
  • At least $1 billion to the HHS Biomedical Advanced Research and Development Authority
  • $22 million for the Food and Drug Administration
  • $600 million is awarded to the Health Resource Services Agency to provide for federally qualified health centers
  • $225 million for rural health clinics

The secretary, at his discretion, may use the allocated money to build up the Strategic National Stockpile with COVID-19 tests and PPE. Finally, the Enhancement Act authorizes up to $1 billion for COVID-19 testing for the uninsured.  

CORONAVIRUS COVID-19 TASK FORCE

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. We also have launched a resource page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:

Washington, DC
Michele Buenafe
Joyce Cowan
Kathleen McDermott
Scott Memmott
Andrew Ruskin
Albert Shay
Howard Young
Jacob Harper
Ariel Landa-Seiersen
Dani Elks

Houston
Donna Clark
Greg Etzel
Susan Feigin Harris
Scott McBride
Kathleen Rubinstein, Senior Health Policy Analyst
Summer Swallow
Banee Pachuca
Sydney Reed

San Francisco
Reece Hirsch

Los Angeles
Brian Jazaeri

Boston
Mark Stein

Chicago
Lauren Groebe