On April 24, 2020, President Trump signed the U.S. Paycheck Protection Program and Health Care Enhancement Act (PPP Enhancement Act), approving an additional $100 billion for the Public Health and Social Services Emergency Fund (Provider Relief Fund) established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). We summarize the limited available information on how these funds will be distributed below.
Additional $75 Billion for Eligible Healthcare Providers
The CARES Act allocated $100 billion to the Provider Relief Fund to reimburse eligible healthcare providers for COVID-19 related expenses or lost revenues.1 The PPE Enhancement Act allocates an additional $75 billion for a similar purpose, bringing the total amount granted to $175 billion. Eligible healthcare providers include the following entities provided they diagnose, test, or care for individuals with possible or actual cases of COVID-19: public entities2; Medicare or Medicaid enrolled suppliers and providers; and other entities which the Secretary of the Department of Health and Human Services (HHS) may designate. As discussed in Goodwin’s April 16, 2020 Client Alert, HHS has clarified that it “broadly views every patient as a possible case of COVID-19.” Accordingly, providers who have not treated patients with confirmed cases of COVID-19 may be eligible to receive funds if they meet other eligibility requirements.
Providers must submit applications for additional funds. The application must include a statement justifying the need of the provider for the payment and a valid tax identification number. Recipients of the Provider Relief Funds must submit reports and maintain documentation as directed by the Secretary of HHS and will be subject to possible audit by the HHS Office of Inspector General (OIG).
As discussed in Goodwin’s April 13, 2020 Client Alert, $30 billion of the $175 billion specifically allocated to reimburse eligible healthcare providers was distributed to providers beginning on April 10, 2020. On April 22, 2020, HHS announced a further $20 billion would be distributed to providers who received a proportion of the initial $30 billion disbursement. Unlike the $30 billion distribution, this $20 billion will not be distributed based on providers’ share of Medicare fee-for-service reimbursements in 2019. Instead, the $20 billion will be distributed so that it and the prior $30 billion disbursement will be, in total, allocated proportional to providers’ share of 2018 net patient revenue.3 HHS adjusted the formula to help providers with a relatively small share of their revenue coming from Medicare fee-for-service (FFS), such as children’s hospitals.
As noted in the April 13 Alert, HHS will likely focus future distributions on eligible healthcare providers in areas heavily affected by the COVID-19 outbreak, rural providers, and providers of services with lower shares of Medicare FFS reimbursement or who predominantly serve the Medicaid population. HHS also intends to allocate a portion of the Provider Relief Fund to providers such as skilled nursing facilities, dentists, and providers that are solely reimbursed by Medicaid.
$25 Billion for COVID-19 Testing
In addition to the above, the PPP Enhancement Act allocates $25 billion to the Provider Relief Fund to research, develop, validate, manufacture, purchase, administer, and expand the capacity for COVID-19 tests to effectively monitor and suppress the spread of COVID-19. Activities deemed to fulfill this purpose include, among other things, the manufacturing, procurement and distribution of tests, testing equipment and testing supplies (e.g., personal protective equipment needed for administering tests) and the development and validation of rapid, molecular point-of-care tests. In addition, the funds can be used to scale up academic, commercial, public health and hospital laboratories, to conduct surveillance and contact tracing and support the development of COVID-19 testing plans, and other related activities related to COVID-19 testing. The $25 billion will be apportioned as follows, with unallocated amounts subject to HHS discretion:
- $11 billion will cover expenses states, localities, territories, tribes, and other government-related entities incur to develop, purchase, administer, process, and analyze COVID-19 tests. Of this amount, the following shall be allocated states, localities, and territories: (i) $2 billion according to the formula that applied to the Public Health Emergency Preparedness cooperative agreement in fiscal year 20194; and (ii) $4.25 billion according to a formula methodology that is based on relative number of cases of COVID–19.5 Additionally, $750 million of the $11 billion shall be provided to tribes, tribal organizations, and urban Indian health organizations in coordination with the Indian Health Service.
- $1 billion to the Centers for Disease Control and Prevention (CDC) for surveillance, epidemiology, laboratory capacity expansion, contact tracing, public health data surveillance and analytics infrastructure modernization, disseminating information about testing, and workforce support necessary to expand and improve COVID–19 testing.
- $1.8 billion to the National Institutes of Health (NIH) to develop, validate, improve, and implement testing and associated technologies. Among other things, it shall be further allocated to accelerate research, development and implementation of point-of-care and other rapid testing; and for partnerships with governmental and non-governmental entities to research, develop and implement the activities.
- $1 billion to the Biomedical Advanced Research and Development Authority for necessary expenses of advanced research, development, manufacturing, production, and purchase of diagnostic, serologic, or other COVID–19 tests or related supplies, and other activities related to COVID–19 testing.
- $22 million to the Food and Drug Administration (FDA) to support activities associated with diagnostic, serologic, antigen, and other tests and related administrative activities.
- $825 million to community health centers and rural health clinics for COVID–19 testing and related expense.
- Up to $1 billion may be allocated to cover the cost of COVID-19 testing for uninsured patients.
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1Such expenses include the building or construction of temporary structures, leasing of properties, medical supplies and equipment including personal protective equipment and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities, and surge capacity.
2 While the term “public entity” likely refers to a publicly-traded entity, further clarity on the definition of “public entity” is not currently unavailable.
3 Further details on the formula are currently unavailable.
4 The Public Health Emergency Preparedness cooperative agreement distributes funds according to section 319C-1(h) of the Public Health Services Act, which states HHS will provide $20 of federal funds for each $1 a state spends for the first fiscal year. For the subsequent fiscal years, HHS will provide $10 of federal funds for each $1 a state spends.
5 To be determined by HHS.