And so begins the scrutiny of CARES Act General Fund distributions to hospitals and health systems

May 11, 2020 6:48 pm
  • On May 6, an initial list of providers who received payments from the CARES Act General Distribution of the Provider Relief Fund was posted by the Department of Health & Human Services.
  • Less than 24 hours after the list was published, an article was published profiling the “top 10” organizations who received CARES Act funds.
  • While HHS has rapidly disbursed payments from the Provider Relief Fund, key questions remain about the data requested to support those disbursements.

The U.S. Department of Health and Human Services (HHS) the week of May 4 posted an initial list of providers who received payments from the CARES Act Provider Relief Fund general distribution. And less than 24 hours later someone published an article (link specifically not included) profiling the “top 10” organizations who received funds. Even before that, there have been anecdotal articles questioning HHS’s distribution of the funds to providers subject to sanction  and physician practices owned by health plans (though they are legally entitled to relief funds). And it’s not just the media that’s taken interest.

HHS’s efforts to answer Congress’s questions (or providers’ questions for that matter) could charitably be described as inadequate (glad it’s not just me struggling to get answers to relatively simple questions like, “Should providers report the data based on gross charges or net patient service revenue?”)

In an attempt to get answers (at least for Congress), the Chairmen of the House Ways and Means (Congressman Richard Neal) and Energy and Commerce Committees (Congressman Frank Pallone, Jr.) sent a letter on May 7 to HHS Secretary Alex Azar and CMS Administrator Seema Verma. Among other things, the letter requests information on items like the amount of money available for the uninsured relief fund, provider applications and documentation required to justify the various distributions, and the methodology contemplated for distributing the remaining relief funds (including the $75 billion allocated in the fourth COVID-19 relief bill).


Over the past weeks, HHS has demanded that recipients provide a range of data elements in return for their CARES Act Provider Relief Fund payments. Some of this data (COVID-19 admissions data) was used to distribute the “High-Impact Area” payments. HHS states that the data it is requesting through the CARES Act Provider Relief Fund Payment Portal will be used to allocate remaining general distribution funds and other Provider Relief Fund distributions. However, it does not say specifically how the funds will be used. At a minimum, based on the language related to claw-backs in the CARES ACT General Distribution FAQs updated on May 6, it appears the lost revenue data may be used to determine if a provider has been overpaid from the Provider Relief Fund.  

Guidance vague at best

HHS’s specific guidance on what data should be provided is vague at best. In addition to the circumstances in which HHS will recoup relief funds, the revised CARES ACT General Distribution FAQs provides some clarification on what to do if providers believe they have been overpaid and the amount of cost sharing to bill a COVID-19 patient when they are out of network (which may still be too vague to be useful in many circumstances).

However, the update did not address the more pressing questions related to what providers should report for lost revenue. First, the FAQ makes multiple references to “a provider’s annual gross receipts, sales, or program service revenue.”

HHS, as of May 8, had not responded to requests from HFMA, it’s individual members or other associations representing the industry to clarify whether HHS is asking for providers to report only lost patient revenue, or if the lost revenue amounts reported should include other operating revenue and investment income. Second, for the patient revenue component of the data, HHS has also not responded to requests to clarify whether patient revenue should be reported as net patient service revenue or gross charges.

Given the overall general distribution fund payment allocation is based on net patient revenue, it may be reasonable to assume HHS is asking for net patient revenue when it asks for lost revenue as a result of COVID-19. However, where HHS asks for historical revenue data, it asks for “Gross Receipts or Sales” or “Program Service Revenue” from the provider’s relevant tax document for the most recent year.

Asking for historical data that may include non-patient revenue has created confusion as providers prepare and file their reports to HHS. The answer to a FAQ about what state entities without a parent organization that files a federal tax return (e.g. a state university medical center) may offer a hint. Providers in this situation are instructed to “use Net Patient Revenues from its most recent audited annual financial statements as a substitute for ‘Program Services Revenue’ when prompted.” However, this is for historical data and not specific to estimated losses. Therefore it does not provide a definitive answer.

Why good documentation is required

The vagaries of HHS’s instructions only heighten the need for good documentation. Obviously, the estimated losses need to be ticked and tied to internal data sources. The rationale behind choosing the methodology to estimate lost revenue (and associated assumptions in the methodology) should also be documented. It will be important to preserve records of any attempts (even if they weren’t successful) to obtain clarity from HHS on these issues and clearly outline the rational the organization used to select what categories of revenue were included in the absence of clear guidance from HHS. While this may not insulate organizations whose estimates a subsequent HHS or OIG auditor calls into question, it will provide better footing from which to mount a defense.



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