Medicare Relief in Limbo for Operators That Took Over Nursing Homes in Early 2020

The federal government has released billions of dollars in aid to health care providers, including nursing home operators, as they try to weather the clinical and financial strains of a pandemic that shows no signs of easing in the United States.

But for providers that took over facilities in the months leading up to the COVID-19 crisis, potentially vital Medicare funds sit stuck in purgatory, with only the promise of disbursements from proposed future stimulus rounds.

“If you have purchased a nursing home or assisted care facility in January of this year, you’re not receiving any of the provider relief funds,” Chad Wilbanks, president of the Austin, Texas-based consulting firm The Wilbanks Group, said.

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The problem rests primarily with the initial round of $30 billion in Medicare-based relief authorized under the $2 trillion CARES Act, according to attorney Randy Glenn of the Austin law firm Glenn Rogers.

In order to expedite the cash injection during the early peak of the COVID-19 crisis in April, the Department of Health and Human Services (HHS) sent funds to each Medicare provider directly, with no approval process and surprisingly little fanfare.

Crucially, HHS based the payment amount on each provider’s 2019 Medicare reimbursements, wiring the money to the bank accounts associated with the taxpayer identification number (TIN) on record for each facility, Glenn said.

As a result, nursing home operators that transferred their Medicare licenses to other companies in late 2019 or early 2020 woke up one April morning with substantial cash relief for buildings no longer under their control.

And the new providers actually responsible for the care of vulnerable residents have no legal way of securing that money: Under HHS regulations, the erroneous payments must be returned to the federal government, and the former companies cannot send the money to the current operators.

“In order to ensure program integrity and transparency, HHS made Provider Relief Fund payments to healthcare providers based on the latest data available for a TIN,” the agency wrote in an July 8 update to its relief FAQ. “As previous owners are not permitted to transfer funds to the new owner, they were instructed to return the funds to HHS. At this time, HHS will not reissue returned payments to the new owners.”

Glenn currently represents four clients that control a total of 20 facilities that fell through the Medicare relief cracks, though his firm is in the process of trying to locate more operators that may be stuck in a similar conundrum.

Glenn personally knows of at least one former operator that sent the money to the new provider before HHS issued formal guidance forbidding the practice, he said.

“This is a nationwide issue, and it goes across all Medicare contractors, not just skilled nursing facilities,” Glenn said.

Federal officials were open in their willingness to sacrifice accuracy for speed in the initial disbursement of relief funds, which hit operator bank accounts in April.

“Our goal in all of the decisions we’re making is to get the money from the Provider Relief Fund out the door as quickly as possible while targeting it to those suffering the most from the pandemic,” HHS secretary Alex Azar said in a statement in mid-April. “We will continue using every regulatory and payment flexibility we have to help providers continue doing their vital work until we’ve defeated this virus.”

But that plan does not include a mechanism for fixing the errors in the current round of active relief programs, an HHS spokesperson confirmed, directing SNN to the July 8 FAQ update.

“Providers that have not received payments under the Provider Relief Fund due to issues related to change of ownership will be eligible to apply for future allocations,” the agency affirmed. “Additional information will be posted on this site as available.”

In Glenn’s view, the federal government has the tools to solve to the problem more quickly, with a paper trail of Medicare licensure transfers and the associated TINs.

“It’s all traceable. It’s very simple to solve this problem and get the money where it needs to go, and where the legislators intended for it to go,” he said. “But no one’s picking up the ball at HHS just to do it. It seems vey simple to get the money in the right hands.”

Glenn presented the matter as an issue of fairness: Under standard transfer rules, new operators generally agree to be held liable for any overpayments made during the previous year by the old guard.

“It’s kind of a double whammy there, if you ask me,” he said. “They’re taking on the responsibility for 2019, but they’re not getting the benefit of these payments in 2020.”