The blog of the Urban Institute
June 10, 2020

Federal COVID-19 Provider Relief Funds: Following the Money

Congress acted quickly to help the nation’s health care system weather the COVID-19 pandemic by providing an unprecedented level of funding, first through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed March 27, followed by the Paycheck Protection Program (PPP) and Health Care Enhancement Act, passed April 24. Combined, the CARES Act and PPP put $175 billion in the CARES Act Provider Relief Fund (PDF), intended to help providers “prevent, prepare for, and respond to coronavirus” and to “reimburse… eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.”

Yet more than two months after the CARES Act was passed, the US Department of Health and Human Services (HHS) had distributed less than half the emergency aid, a delay that prompted an urgent bipartisan inquiry (PDF) from Senate and House leaders made on June 3 to HHS Secretary Alex Azar. On June 9, HHS announced new relief fund distributions totaling $25 billion. Even with these new distributions, 35 percent of the aid remains unallocated.

Chart: distribution of CARES act provider relief

In the meantime, hospitals have furloughed staff, and nearly 2,000 health centers across the country have temporarily closed.

Apart from the delay in releasing the aid, the allocation of aid that has been distributed has sparked controversy. On April 10, HHS released the first $30 billion based on a provider’s share of total Medicare fee-for-service reimbursements made in 2019. Distributing funds on that basis disadvantages many providers, including Medicare Advantage providers, pediatricians, obstetricians, and safety net providers with high shares of Medicaid and uninsured patients. More fundamentally, the allocation was largely divorced from provider need caused by the pandemic, the aid’s intended purpose.

These problems over the disbursement prompted an outcry from a range of stakeholders. To address some concerns, on April 24, HHS distributed another $20 billion so, when combined with the first $30 billion, funds overall were allocated in proportion to a provider’s share of 2018 net patient revenue, including Medicare, private insurance, and Medicaid.

While possibly helping some providers, safety net providers were still at a disadvantage because the Medicaid program tends to pay providers at lower reimbursement levels than private insurance or Medicare, and there is little to no reimbursement for treating uninsured patients. Yet 38 percent of providers nationwide who participate in state Medicaid and CHIP programs did not receive any funding from the first $50 billion in aid and are just now being offered relief through a $15 billion allocation announced June 9. In addition, HHS announced it will distribute $10 billion in aid to safety net hospitals that meet qualifying criteria.   

Since the release of the first $50 billion, HHS has made more targeted allocations to help providers hardest hit by COVID-19. On May 1, as part of a COVID-19 high-impact distribution fund, HHS distributed $10 billion to 395 hospitals nationwide that had provided inpatient care to at least 100 or more COVID-19 patients between January 1 and April 10, 2020.

Qualifying hospitals received a fixed amount ($76,975) per COVID-19 inpatient admission. Hospitals in 33 states met the high-impact fund eligibility criteria, with New York hospitals receiving 42 percent of the funds, followed by New Jersey (14 percent), Michigan (8 percent), and Illinois (6 percent) (PDF).

Although hospitals receiving this funding were undoubtedly on the front lines in the early days of the pandemic, there were concerns about the arbitrary April 10 cutoff and the 100-inpatient caseload requirement. Smaller hospitals with fewer intensive care unit beds, for example, may have cared for their proportional share of COVID-19 patients in their area but didn’t meet the 100-patient admission mark because of their size.

Likewise, hospitals in areas of the country hit harder by the virus somewhat later, but which met the 100 COVID-19-inpatient threshold after April 10 didn’t receive aid like their counterparts in areas of the country hit earlier by the virus.  Recently, HHS sought to address this issue by announcing a second round of $10 billion in funds for hospitals located in COVID-19 hotspots. By June 15, hospitals are to update their COVID-19 inpatient admissions for the period January 1, 2020 to June 10, 2020.  

In other targeted allocations of federal provider aid, HHS has allocated $10 billion to rural providers, including hospitals and rural health clinics. Another $4.9 billion is being distributed to Medicare-enrolled skilled nursing facilities, and $500 million is going to Indian Health Service facilities. Funds are also available to providers who have tested or treated uninsured COVID-19 patients after February 4, 2020. The level of funding available to these providers is not specified on HHS’s website, yet reimbursement for providers submitting claims was supposed to begin May 19.

Of the $175 billion in emergency aid Congress approved in March and April, 35 percent remains unallocated. Early on much of the aid that was released was distributed largely based on a provider’s revenue from Medicare and private insurance. This shortchanged providers with high shares of Medicaid and uninsured patients who are disproportionately low-income and people of color, the populations hardest hit by the pandemic. Just recently, HHS sought to correct the problem by targeting some funds to Medicaid and safety net providers.

As HHS moves to release more aid, it will be important to continue to track what criteria are used—such as the level of a hospital’s cash reserves or a hospital’s share of Medicaid and uninsured patients—in developing future allocations. Also, transparent, public information on the formulas used to distribute funds are needed to ensure that aid flows equitably to providers and that those hardest hit by COVID-19 receive the support they need.

A medical worker watches from the window at NYU Langone Health hospital as people applaud to show their gratitude to medical staff and essential workers on the front lines of the coronavirus pandemic on May 10, 2020 in New York City. (Photo by Noam Galai/Getty Images)

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