Richard Cheng

On March 27, 2020, the CARES Act was established, creating a $2.2 trillion budget to combat the adverse impacts of the COVID-19 pandemic. This national emergency has caused concern for nursing facilities and its associated businesses, as the economy incurs a significant downturn. The CARES Act contains numerous provisions to provide economic relief to a wide range of industries and businesses, including long term care.

While most operators in the industry are focused on the Small Business Paycheck Protection Program (“PPP Loan Program”), which allows companies with fewer than 500 employees (after taking into account employees of affiliates), or that otherwise fall into the size threshold for certain primary industry classifications, it is critical to recognize the availability of the Public Health and Social Services Emergency Fund (“PHSSE”). The PHSSE is one of the key provisions highlighted in the CARES Act.

The CARES Act allocates $100 billion to the fund to “reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.” Nursing facility operators may be eligible to receive compensation for costs incurred in the course of providing medical services, if such costs are not compensated by a third party payer. This fund allows operators participating in Medicare and Medicaid to apply for grants. In addition, this fund, amongst many others, could pay for the costs of building temporary facilities or leasing properties to expand bed capacity, along with obtaining medical supplies, equipment, testing supplies and training. The secretary of the Department of Health and Human Services has broad authority and discretion to determine payment eligibility and the amount of such payments.

A few key provisions should be highlighted as it relates to how this fund is anticipated to be managed and how healthcare providers may be held accountable:

  • Funding is not limited to costs or expense, but also for lost revenues; however, it may not be used to reimburse expenses or losses that have been reimbursed from other sources.
  • Examples include lost revenue from cancelled procedures, medical supplies, personal protective equipment testing and increased staffing or training.
  • Lost revenues is not defined, but nursing facility operators should estimate revenue and lost margins, including decreased census or lost opportunities, including replacing higher margin services with lower margin services.
  • While it appears that the funds will be directed primarily to hospitals, the term “eligible health care providers” likely applies to a broad range of health care providers and suppliers, including skilled nursing facilities, home health care agencies, hospices and any others that “provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.”
  • In order to be eligible for payment, a nursing facility operator must submit an application that includes a statement justifying the need of the operator for the payment. The bill directs the secretary of HHS to release guidance on the application process and required documentation. 
  • The term “payment” is defined as a “pre-payment, prospective payment, or retrospective payment as determined appropriate.” Operators should be mindful that prospective payments could come in the form of grants premised on estimated or projected costs and lost revenues. Initial payments made could be subject to subsequent audits or accounting to “true up” the actual or more accurate amount.
  • As more guidance develops, operators are urged to maintain documentation of COVID-19 related expenses.

DLA Piper continues to closely monitor the CARES Act and other governmental actions as this situation unfolds. For information on other ways COVID-19 is changing the healthcare industry and how your company can help serve patients, please contact your DLA Piper relationship partner or any member of our healthcare industry group. Please visit our Coronavirus Resource Center for additional materials related to COVID-19.

Richard Y. Cheng, J.D., CHC, is a partner in the healthcare industry sector of DLA Piper.