The Centers for Medicare and Medicaid Services (CMS) reported on April 26, 2020 that it approved 21,000 applications from Part A facility-based providers, including hospitals, for relief payments made available by recent legislative action handled through the Department of Health and Human Services (HHS). The application requests total $59.6 billion and most will be distributed through the Accelerated Payment Program.
In addition, CMS approved almost 24,000 applications to advance $40.4 billion in payments to physicians and other suppliers. This report is an update to the approximately 21,000 previously approved requests for $51 billion in payments for providers, physicians, and suppliers by the CMS Accelerated and Advance Payment Programs.
Due to the significant amount of additional funding, CMS now appears to be reevaluating and suspending the Accelerated and Advance Payment Program funding respectively.
CMS revealed that:
- No new applications for the Advance Payment Program, typically impacting Part B suppliers, will be accepted.
- All pending and new applications for the Accelerated Payment Program will be reevaluated.
Controversy remains over the repayment plan CMS outlined; there are still plans to impose interest on unpaid balances after a designated timeline depending on provider or supplier type.
Below, we highlight the different provider relief funding available and explore open questions related to repaying Accelerated and Advance Payment funding and steps your organization can take to address those issues.
Provider Relief Funding Overview
Providers and other suppliers are eligible for funding administered through the Provider Relief Fund as granted by Congress in recently passed bills, including:
The distribution of these funds has been underway since April 10, 2020, with the initial tranche of $30 billion based on a Medicare fee-for-service distribution model.
HHS is in the process of distributing additional funds from the first $100 billion appropriated as follows:
- $20 billion, beginning April 24, 2020, in addition to the initial $30 billion for a total $50 billion general allocation—the distribution formula is net patient revenue.
- $12 billion to COVID-19 high-impact areas—information needed to receive these funds were to be submitted to HHS by April 25, 2020.
- $10 billion to rural providers—these funds will be distributed using operating expenses as the basis.
- $400 million to Indian Health Service providers—these funds will be distributed using operating expenses as the basis.
- Additional allocations will go to safety net providers and health care providers that diagnose and treat uninsured COVID-19 patients.
Repayment of Accelerated and Advance Funding Payments
The repayment period for the relief funds advanced begins 120 days after an organization receives the payment.
For the first 120 days, claims should be submitted as normal. Claims will be processed, and payments will be transmitted to the provider or supplier. However, after the 120-day grace period, payment for individual claims will no longer be made. Instead, they’ll be retained by the program to begin repaying the amounts advanced.
The repayment period differs for different providers per the latest fact sheet:
- Inpatient acute care hospitals, children’s hospitals, certain cancer hospitals, and critical access hospitals have up to one year from the date accelerated payments were received to repay the amounts.
- All other Part A providers and Part B suppliers have 210 days from the date that the accelerated or advance payment was received.
At the end of those respective periods, a 30-day demand letter will be issued for any remaining unpaid amounts. The unpaid amount will be subject to an interest charge—a controversial decision as the projected interest rate is approximately 10%.
There’s been strong advocacy on behalf of hospitals, health care providers, and clinicians against imposing interest charges on these repayment amounts.
In a letter from the American Hospital Association sent April 6, 2020, several alternatives were suggested, including:
- Waiving the imposition or collection of interest utilizing HHS’s existing waiver authority
- Employing CMS authority to refrain from issuing a demand letter
- Announcing that HHS will use a 2% interest rate set by the secretary of Department of the Treasury
- Entering into a contract or repayment arrangement that uses a lower interest rate
In a follow-up letter signed by prominent industry groups on April 23, 2020, the organizations advocated to improve the Accelerated and Advance Payment Programs by:
- Increasing the amounts that can be advanced
- Extending the period before repayment begins to 12 months
- Reducing the amount of claims reduction from 100% to 25%
- Extending the repayment period before interest accrues from 12 months to a minimum of 36 months
- Waiving the interest rate or in the alternative setting an interest rate at no more than 2%
Groups that signed the letter include America’s Essential Hospitals, the American Hospital Association, Association of American Medical Colleges, Catholic Health Association of the United States, Federation of American Hospitals, National Association for Behavioral Healthcare, Premier Health Alliance, and Vizient, Inc.
Another letter sent by the American Hospital Association and the American Nurses Association, dated May 1, 2020, calls to provide loan forgiveness for accelerated payments.
Issues and clarifications surrounding the Accelerated and Advance Payment Programs continue to evolve.
These programs launched quickly and unevenly due to the lack of preparation by the Medicare Administrative Contractors (MACs) and orders from CMS.
While advocacy efforts could impact repayment terms, providers and suppliers should look at Medicare and overall patient utilization and forecasting to determine their status at the end of the repayment period.
Dynamic Utilization and Cash Forecasting Analysis
All providers should perform dynamic utilization and cash forecasting regarding their Medicare and total patient payer population for the post 120-day grace period immediately.
For example, physicians and other Part B suppliers should determine if their utilization in the 90-day repayment period—following the 120-day grace period—would be as high as during the three months ending December 31, 2019, the basis period for computing initial entitlements.
In many cases, the basis period will extend the repayment window unless well-positioned providers have the cash reserves to pay the balance due before interest is imposed.
Plan to prepare a careful analysis to determine how quickly your organization can expect to return to a sense of normal utilization once restrictions to access have been lifted. The analysis should use Medicare utilization projections with a conservative prospective, not historical view, to arrive at a realistic expectation of your standing at the end of the repayment period.
You’ll want to determine if you’ll have the extra cash to fund the final payment in the 30-day demand letter window if it’s not covered by the amount recouped through subsequent billings.
Keep in mind, once the public health emergency is lifted, many of the blanket and other waivers offered by CMS will expire—but the economic damage to the marketplace and general loss of employment, income, and savings could carry forward well into the next year and beyond.
It’s also important to remember the accelerated payments and grant funding received won’t restore previously failing organizations.
The money will only serve as a bridge to standard utilization when cash flow patterns resume.
We’re Here to Help
For more information about Medicare Accelerated and Advance Payments considerations including repayment analysis, contact your Moss Adams professional.