By Jeff Overley

Law360 (April 22, 2020, 9:45 PM EDT) -- The U.S. Department of Health and Human Services on Wednesday explained how it will divvy up $70 billion in relief funding for health care providers that have seen their wallets get walloped by the coronavirus crisis.

The funding comes from a $100 billion pot of rescue dollars for providers that Congress included in the Coronavirus Aid, Relief and Economic Security Act, known as the CARES Act. HHS earlier this month began dishing out $30 billion, and the $70 billion discussed Wednesday rounds out the $100 billion.

Here, Law360 runs through five categories of highlights, including anti-fraud warnings and reimbursement for uncompensated care.

'Significant' Anti-Fraud Scrutiny is Promised

In a media briefing Wednesday afternoon, HHS Secretary Alex Azar stressed that federal watchdogs will be tracking CARES Act cash to ensure that recipients qualify for the greenbacks and spend them scrupulously.

"Congress has entrusted us with an immense amount of money to send to providers, and we will be clear and careful about how we're doing it," Azar said, pointing to a 10-page list of terms and conditions with eligibility criteria and spending restrictions.

Key requirements include certifications that payments will only be used for medical expenses or lost income attributable to COVID-19, which triggered the widespread cancellation of nonemergency surgeries that are lucrative sources of hospital revenue. Recipients must also limit expenses for out-of-network coronavirus patients to in-network rates.

"There will be significant anti-fraud and auditing work done by HHS, including the work of the Office of the Inspector General," Azar said.

Attorneys have stressed in recent weeks that government investigators and U.S. Department of Justice attorneys will put doctors and hospitals under the microscope to ensure that CARES Act expenditures are on the up and up.

HHS Adjusts Formula for $50B in Payments

Of the $100 billion, $50 billion is a "general allocation" that includes the $30 billion announced previously and another $20 billion announced Wednesday.

Generally speaking, the initial $30 billion distribution was pegged to a provider's Medicare revenue — a problem for providers who don't treat many seniors. To make up for that disparity, the $20 billion distribution is being allocated so that the overall $50 billion ends up being based on net patient revenue in 2018 from all sources.

As one example, Azar said that a large children's hospital only received $233,000 in the initial distribution, but that it's now poised to get an additional $32 million.

Providers will submit their revenue information through a portal that HHS is launching this week at hhs.gov/providerrelief. Although all recipients must submit the information, some will get payments before doing so based on cost data that HHS already has on file.

Special Funding for High-Impact Areas

Another $10 billion will go to "hospitals in areas that have been particularly impacted by the COVID-19 outbreak," according to an HHS summary released Wednesday.

HHS singled out New York — which has about 260,000 of the nation's roughly 840,000 confirmed cases — as one area that will likely receive a sizable slice of the $10 billion. Senate Minority Leader Chuck Schumer, D-N.Y., said Wednesday on Twitter that the Empire State will get $4.4 billion of the $10 billion.

During Wednesday's briefing, Azar said that data from so-called disproportionate share hospital payments — money that helps to offset the costs of caring for low-income Americans — will be factored in "to help address areas with [the] greatest financial need and the disproportionate burden of the virus on minority communities."

Hospitals have received emails telling them to apply for the high-impact money before Friday, the HHS secretary said.

Cash Infusion for Rural Communities

An additional $10 billion will go to rural hospitals. The money will start being funneled out next week based on hospital operating expenses, Azar said.

"Supporting rural facilities is important, because as all providers see a hit to their margins, rural hospitals are already closer to the brink," Azar said, explaining that rural hospitals typically have profit margins about half as large as those of urban hospitals.

The $10 billion doesn't include an extra $165 million infusion that HHS also announced Wednesday to support new telehealth services, purchases of personal protective equipment and expanded COVID-19 testing at rural hospitals.

Money for Uninsured, Tribes

Much of the remaining $30 billion is expected to be used to reimburse hospitals at Medicare rates for treatment of uninsured patients. The Trump administration elected to directly cover such costs instead of creating a special enrollment period under the Affordable Care Act, which is facing an existential legal challenge, supported by the administration, at the U.S. Supreme Court.

The nonpartisan Kaiser Family Foundation has projected that treatment costs for uninsured coronavirus patients could range from $14 billion to $42 billion. Azar on Wednesday declined to supply an estimate, but he noted that Congress is poised to approve another $75 billion for hospitals on top of the $100 billion.

There is likely to be "more than sufficient money," Azar told reporters.

Claims will be submitted starting in early May at coviduninsuredclaim.hrsa.gov, a webpage that HHS launched Wednesday.

Separately, $400 million of the $100 billion will go to the Indian Health Service and will be allotted based on facility operating expenses. Azar noted that the Navajo Nation — which spans parts of Arizona, New Mexico and Utah — has been particularly hard hit by COVID-19.

"This recognizes the strain experienced by IHS providers, especially with the outbreak in the Navajo Nation," the secretary said.

Skilled nursing facilities, dentists and providers that only serve Medicaid patients will also be eligible for shares of the $100 billion, HHS said Wednesday.

--Editing by Amy Rowe.

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