- HHS allocated $3 billion in federal assistance for 215 hospitals based on their margins and the incomes of their patient base.
- Another $1 billion will go to 500 hospitals in rural or small metro areas.
- HHS clarified that tax-exempt healthcare providers’ relief payments generally are not taxable.
Hospitals in certain types of locations and those with low margins and large populations of low-income patients will get a share of $4 billion in new federal assistance to help them respond to the COVID-19 pandemic.
On July 10, the U.S. Department of Health and Human Services (HHS) said it will begin to release:
- $3 billion for hospitals that have thin margins and serve a relatively high percentage of vulnerable populations
- $1 billion for specialty rural hospitals, urban hospitals with certain rural designations from Medicare and hospitals in small metropolitan areas
“Close work with stakeholders informed how we targeted this new round of funds to hard-hit safety-net and rural providers,” HHS Secretary Alex Azar said in a statement.
The funding is the latest allocation from the $175 billion in provider funding available through the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act.
Acute care hospitals will be eligible for some of the $3 billion pool if the cost reports they filed to CMS indicate average profitability of less than 3% over two or more consecutive years out of the last five cost-reporting periods.
HHS expects to distribute over $3 billion to 215 acute care facilities, which will bring total coronavirus assistance payments to $12.8 billion for 959 safety-net hospitals.
The $1 billion pool aims to expand on $10 billion in earlier funding to almost 4,000 rural healthcare providers by including hospitals that are in urban areas but have certain special rural designations in Medicare, as well as others that provide care in smaller nonrural communities.
“These may include some suburban hospitals that are not considered rural but serve rural populations and operate with smaller profit margins and limited resources than larger hospitals,” according to an HHS statement. “They too, have suffered in this pandemic, which is why HHS is responding.”
HHS estimates more than 500 hospitals would qualify for the $1 billion, with payments ranging from $100,000 to $4.5 million for rural-designated providers and $100,000 to $2 million for other providers.
Hospitals welcome the new funding but remain anxious
The funding was applauded by hospital advocates who have been clamoring for HHS to release the unspent shares of the provider assistance approved by Congress.
“Hospitals with high Medicaid volume provide care to our most vulnerable patients and communities, many of which have suffered disproportionately from this virus,” said Rick Pollack, president and CEO of the American Hospital Association. “Even before the pandemic these hospitals operated under serious financial pressure, and these funds will help them continue to stay open and provide care to all who need it.
“Hospitals serving rural patients also face tremendous financial headwinds, with many being forced to close their doors in recent years. This additional funding from HHS will help these hospitals carry out their mission of providing care close to home for patients in communities across the country.”
Pollack said the expedited release of the remaining funds is especially needed in areas with a recent increase in COVID-19 cases and hospitalizations.
In recent weeks, the governors of Mississippi and Texas ordered the suspension of elective surgeries in some parts of their states, and some hospitals in Florida and Arizona voluntarily stopped elective procedures due to outbreaks.
Clarification offered on whether previous payments are taxable
HHS has continued to clarify details of its earlier hospital coronavirus payments on the department’s FAQ page.
Among the latest clarifications was that providers that receive payments from the Provider Relief Fund may not exclude this payment from gross income as a qualified disaster relief payment under the IRS code.
“A payment to a business, even if the business is a sole proprietorship, does not qualify as a qualified disaster relief payment” under IRS rules, the FAQ states.
The payment from the Provider Relief Fund should be included as gross income, according to details posted on the IRS website.
Also, tax-exempt healthcare providers generally are not subject to taxes on payments they receive from the Provider Relief Fund.
However, a payment is taxable if it “reimburses the provider for expenses or lost revenue attributable to an unrelated trade or business” as defined in Section 513 on the IRS website.