HHS Distributes $22B to COVID High-Impact Hospitals, Rural Providers

May 4, 2020
$12 billion will be going to provider organizations who have been significantly impacted by the pandemic, with another $10 billion going to rural providers

Doling out payments from the Provider Relief Fund as part of the CARES Act, the Department of Health & Human Services (HHS) is distributing $12 billion to nearly 400 providers that provided inpatient care for 100 or more COVID-19 patients through April 10.

According to a May 1 HHS announcement, these 395 hospitals accounted for 71 percent of COVID-19 inpatient admissions reported to HHS from nearly 6,000 hospitals around the country. Officials noted that the distribution uses the following formula to determine what each hospital receives: hospitals are paid a fixed amount per COVID-19 inpatient admission, with an additional amount taking into account their Medicare and Medicaid disproportionate share and uncompensated care payments.

For this batch of funding, $2 billion will be distributed to these hospitals based on their Medicare and Medicaid disproportionate share and uncompensated care payments.  Medicaid disproportionate share hospital payments are statutorily required payments intended to offset hospitals’ uncompensated care costs to improve access for Medicaid and uninsured patients as well as the financial stability of safety-net hospitals, according to MACPAC, the Medicaid and CHIP Payment and Access Commission.

Unsurprisingly, New York  is the state receiving the largest amount of funding, getting more than $5 billion of the total $12 billion this round, which will be dispersed among 90 providers. To date, the state has accounted for roughly one-third of the nation’s total COVID-19 deaths. These hospitals will begin receiving funds via direct deposit in the coming days, according to the federal department.  

Meanwhile, an additional $10 billion will be distributed to rural hospitals, many of whom were operating on thin margins prior to COVID-19, and who have also been particularly devastated by this pandemic. As healthy patients delay care and cancel elective services, rural hospitals are struggling to keep their doors open.

Recipients of the $10 billion rural distribution will include, rural acute care general hospitals and Critical Access Hospitals (CAHs), Rural Health Clinics (RHCs), and Community Health Centers located in rural areas.

Hospitals and RHCs will each receive a minimum base payment plus a percent of their annual expenses, and federal officials say that this expense-based method accounts for operating cost and lost revenue incurred by rural hospitals for both inpatient and outpatient services. The base payment will account for RHCs with no reported Medicare claims, such as pediatric RHCs, and CHCs lacking expense data, by ensuring that all clinical, non-hospital sites receive a minimum level of support no less than $100,000, with additional payment based on operating expenses. Rural acute care general hospitals and CAHs will receive a minimum level of support of no less than $1,000,000, with additional payment based on operating expenses, they added.

The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included $100 billion for hospitals, though there are those who believe that given how much money patient organizations will inevitably lose during this time—largely due to the margin lost from elective inpatient services deferred as hospitals make room for more COVID-19 patients—the funding will not be sufficient enough.

To this end, a recent survey from AMGA concluded that two-thirds of integrated health systems say their initial share of payments from the CARES Act will replace less than one week of revenue lost. Indeed, AMGA estimated that it will take as much as $318 billion to replace just half of the revenues hospitals and physicians will lose over four months.

In late April, however, another bill was passed, allocating $75 billion more to hospitals.

"These new payments are being distributed to healthcare providers who have been hardest hit by the virus: $12 billion to facilities admitting large numbers of COVID-19 patients and $10 billion to providers in rural areas, who are already working on narrow margins," HHS Secretary Alex Azar said in a statement. "HHS has put these funds out as quickly as possible, after gathering data to ensure that they are going to the providers who need them the most. With another $75 billion recently appropriated by Congress, the Trump Administration will continue doing everything we can to support America's heroic healthcare providers on the frontlines of this war on the virus."

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