Barclay Damon: COVID-19: HHS Announces Targeted CARES Act Distributions for Medicaid and CHIP Providers

June 17, 2020

COVID-19: HHS Announces Targeted CARES Act Distributions for Medicaid and CHIP Providers

To help providers stay afloat during the COVID-19 pandemic, the Department of Health and Human Services (HHS), as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, has allocated approximately $15 billion in funds for targeted distribution to providers that predominantly serve the Medicaid population and have been impacted by COVID-19.

To receive these targeted distribution funds, providers must complete an application and meet certain requirements, which are discussed in detail below. Importantly, applications and corresponding information must be submitted to the HHS by July 20. Payments will be disbursed on a rolling basis as information is validated.

Provider Eligibility

Providers that participate in state Medicaid Programs and the Children’s Health Insurance Program (CHIP) that have not received a payment from the CARES Act’s Provider Relief Fund general distribution are eligible to receive funds through Medicaid targeted distribution. Notably, a receipt of general distribution funds will render a provider ineligible no matter the size of the payment received. Providers that were eligible for the general distribution payment but rejected it are also ineligible. Receipt of another type of targeted distribution, however, will not affect a provider’s eligibility (e.g., high-impact area, rural, Indian health service, or skilled nursing facility targeted distributions).

A finding of eligibility requires applicant-providers to meet six requirements. Specifically, the applicant-provider must have:
Not received payment from the CARES Act’s $50 billion general distribution Either directly billed or own an included subsidiary1 that has billed Medicaid for health care-related services between January 1, 2018 and December 31, 2019 or owns an included subsidiary Either filed a federal income tax return for fiscal years 2017, 2018, or 2019 or be an entity exempt from the requirement to file a federal income tax return2Provided patient care after January 31, 2020 Not permanently ceased providing patient care directly or indirectly through its subsidiaries If an individual, reported gross receipts or sales from providing patient care on Form 1040,Schedule C, Line 1, excluding income reported on a W-2 as a (statutory) employee
Importantly, “patient care” is defined to include health care, services, and supports to individuals who may currently have or be at risk for COVID-19 (with every patient being viewed by the HHS as a possible case of COVID-19) provided in a medical setting, at home, or in the community. Notably, providers that are excluded from Medicare or Medicaid are ineligible to apply.3

Medicaid Targeted Distribution Application Process

To apply for the Medicaid targeted distribution, providers must complete an application and upload certain specified documents to the CARES Act Provider Relief Fund Payment Attestation Portal. The application requires the provider to upload the following information:
Most recent federal income tax return (for 2017, 2018, or 2019) or a written statement explaining why the applicant is exempt from filing a federal return4The applicant’s employer’s quarterly federal tax return on IRS Form 941 for Q1 2020, employer’s annual federal unemployment (FUTA) tax return on IRS Form 940, or a statement explaining why the applicant is not required to submit either form The applicant’s full-time equivalent (FTE) worksheetIf required by Field 15, the applicant’s gross revenue worksheet
HHS instructions state the application forms should be completed by any person authorized by the applicant-provider organization to do so, but recommends that the form be completed by the provider’s chief financial officer or another accounting professional.

Recipients of Medicaid Targeted Distribution

Payments provided to Medicaid targeted distribution recipients will be based on the provider’s submission and will be at least 2 percent of the recipient-provider’s total reported gross revenue from patient care (i.e., gross revenues * percent of gross revenues from patient care) for calendar year 2017, 2018, or 2019, as selected by the applicant and with submitted tax documentation. Critically, the final amount each provider will receive is to be determined following data submission and will be based on information such as the number of Medicaid patients the provider serves. Payments will be disbursed by the HHS on a rolling basis.

Providers receiving Medicaid targeted distributions are required to attest to certain terms and conditions or reject the payment within 90 days of receipt, with noncompliance being grounds for recoupment of some or all of the payments received. Some of the various terms and conditions recipient-providers are required to attest to include:
That the recipient-provider provides or has provided, diagnosis, testing, or care for individuals with possible or actual COVID-19 after January 31, 2020 That payment will only be used for prevention, preparation, and response to COVID-19 and will only be used to reimburse the recipient-provider for health care-related expenses or lost revenues attributable to COVID-19 That payment will not be used to reimburse expenses or losses that have been reimbursed from other sources or that other sources are under an obligation to reimburse
Additionally, recipient-providers are required to maintain appropriate records and cost documentation and must meet certain specified reporting requirements.

Providers are encouraged to thoroughly review the relevant documents provided by the HHS prior to submitting an application.

“Included subsidiary” is defined to include an entity that is a disregarded entity for federal income tax purposes and reports its gross revenues on the applicant’s federal income tax return’s line for “gross receipts or sales” or “program service revenue.” 

Providers should note the billing Taxpayer Identification Number (TIN) must be included in the state-provided list of eligible Medicaid and CHIP providers. If this is not so, the application will be required to pass additional HHS validation. 

Specifically, the provider must: (1) not be currently terminated from participation in Medicare or precluded from receiving payment through Medicare Advantage or Part D; (2) not be currently excluded from participation in Medicare, Medicaid, or other federal health care programs; and (3) not currently have their Medicare billing privileges revoked. 

In explaining why the entity is not required to file a federal tax form, the HHS directs not-for-profit entities to submit a Form 990 and directs all entities to submit the most recent audited or management prepared financial statements for the TIN entity. In instances where the financial information of a TIN entity is reported as part of a parent organization, the provider may need to provide consolidated audited financial statements breaking out the revenue and expenses for the TIN entity.