$1.5B Medicare Cash Influx to Skilled Nursing Facilities Has Strings Attached — and Some May Not Keep It

Late last week, some operators of skilled nursing facilities — along with many other providers that perform Medicare-reimbursed health care services — woke up to a sudden influx of cash in their corporate bank accounts. But they may not necessarily be able to keep it.

Without much fanfare, the Centers for Medicare & Medicaid Services (CMS) has begun doling out the first $30 billion chunk of approximately $100 billion set aside for health care providers in the coronavirus stimulus package passed last month.

CMS administrator Seema Verma touted the flexibility that operators would be given once they received their shares of the COVID-19 stimulus cash.

“There are no strings attached, so the health care providers that are receiving these dollars can essentially spend that in any way that they see fit,” Verma said during a White House press conference last week.

But operators may have seen a few strings to consider, according to an analysis of the fine print from the law firm Arnall Golden Gregory.

“The terms confirm that the funds are to ‘reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus,” AGG partner Hedy Silver Rubinger and associate Alexander Foster wrote. “Documentation of all COVID-19-related expenses, as well as lost revenue that is attributable to COVID-19, will be required for reports to be submitted to CMS.”

Unlike other forms of coronavirus assistance from the federal government — such as a Medicare payment-advance program that has seen CMS float more than $51 billion in short-term loans to operators — the $100 billion in Medicare funding takes the form of grants that do not need to be repaid.

This first round was open to any provider that received Medicare fee-for-service reimbursements in 2019; future distributions from the total $100 billion available will be sent to facilities, such as nursing homes with significant proportions of long-term care residents, that derive income from Medicaid and other payer sources.

Based on that information, investment firm Mizuho Securities USA projected that skilled nursing facilities stood to gain $1.5 billion in total assistance during the first round of funding.

But in order to keep the cash, operators will need to maintain thorough documentation of how they use the money, AGG warned — while not running afoul of any of the rules governing the program.

“Providers should be aware that within 30 days of receiving relief funds, they must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment,” Rubinger and Foster noted.

For instance, the funds can only be used by facilities that care for people with confirmed or suspected cases of COVID-19. Operators can only put the money toward “health care related expenses or lost revenues that are attributable to coronavirus,” and thus cannot use it to cover any other expenses “that have been reimbursed from other sources or that other sources are obligated to reimburse.”

If a provider determines that his or her organization can’t abide by those rules, it’s required to return the money within 30 days, though AGG noted that complete guidance regarding the refund process has yet to be released.

All or nothing?

As currently written, the rules describe an “all-or-nothing” proposition in which operators can either agree to all of the terms and take the money, or decline and send the entire grant back. But as the government releases more details about the process over the coming days, Rubinger predicted that CMS will allow operators to keep portions of the cash while requesting a refund for anything that exceeds providers’ COVID-19 costs.

“Given that there’s going to be quarterly reporting and other requirements, common sense tells me that there will be an accounting at the end of this,” Rubinger said.

For that reason, Rubinger said operators need to begin preparing detailed records of how COVID-19 has affected their finances — whether they’ve already received their Medicare grants, or if they’re waiting on the Medicaid tranche to kick in.

“For the skilled nursing industry right now, the most important thing they can be doing is really starting to keep very close track of their both soft and hard expenses related to COVID,” Rubinger said.

Hard costs consist of direct expenses such as COVID-19 testing, personal protective equipment (PPE), and temporary staffing obligations; soft costs can include a wide variety of tasks performed at both the building and corporate level, such as the additional time spent finding PPE suppliers or sifting through the dense web of emergency regulations for nursing homes with consultants and lawyers.

“Our clients are spending way more on legal with this than they probably initially anticipated, in terms of amending admission agreements and trying to address conflicting state and federal guidance that they’re receiving — and determining what’s law and what’s just a suggestion,” Rubinger said.

The additional documentation serves a dual purpose. In addition to preventing potential financial headaches with CMS, having records of all COVID-related spending — particularly related to attempts to secure testing and PPE — will help with any future litigation around the coronavirus.

“That is going to be a key to success in all of this — to have a record,” Rubinger said.

Medicaid relief incoming

CMS did not indicate exactly when the second round of funding, based on reimbursements from Medicaid and other sources, would begin. More than 60% of the nation’s nursing home residents rely on Medicaid, which pays for long-term stays, for their primary insurance coverage.

Leaders at the Medicare & CHIP Payment and Access Commission (MACPAC) late last week wrote a letter urging Verma to release that next wave of cash as soon as possible.

“Using the expedited Medicare fee-for-service electronic funds transfer pathway does not account for the real and pressing concerns of safety-net providers that are on the front lines of serving the nation’s poorest and most vulnerable people, but may not have high Medicare revenue,” MACPAC chair Melanie Bella wrote. “Given that the purpose of the relief fund is to reimburse providers for health care expenses related to COVID-19 not covered by other revenue sources, these providers should be prioritized when distributing the remaining $70 billion in federal funds.”