Health CARES – How the CARES Act Impacts Health Care Providers

Congress passed and the President signed the CARES Act on March 27, 2020. The Act impacts hospitals, post-acute providers and long term care facilities in numerous ways. The following is an outline of key provisions and their anticipated impact. Both the disease process and the legal response are fluid and evolving. In addition to acts of Congress, providers should follow pronouncements by Federal agencies, e.g., the Center for Medicare and Medicaid Services (“CMS”) and the Office for Civil Rights (“OCR”), as well as State licensing boards.

1. Summary and Overview

The CARES Act is the third major piece of legislation passed by Congress in response to the health and economic impacts of the COVID-19 pandemic. It follows in the wake of and makes amendments and clarifications to the Families First Coronavirus Response Act (“Families First Act”) and the Coronavirus Preparedness and Response Supplemental Appropriations Act (“Supplemental Appropriations Act”).

With respect to health care providers, the Act provides targeted relief in the form of increased coverage for testing and treatment of COVID-19; increased payments and flexibility under Federal health care programs both generally and for treatment of COVID-19; expanded coverage for telehealth and funding for enhanced telehealth infrastructure; and protection for rural providers. In addition, both non-profit and for profit health care providers may be eligible for SBA loans under the Paycheck Protection Program or the Economic Injury Disaster Loan (EIDL) and grant program.

2. Coverage for Testing and Treatment of COVID-19

Section 3202, Pricing of Diagnostic Testing. This section contains mandates for commercial payers regarding payment rates for diagnostic testing.
- Payers covering diagnostic testing under Families First Act, Div. F, Sec. 6001(a) (as amended by CARES Act 3201), must pay:
  - The negotiated rate in a contract with the hospital entered before the declaration of the public health disaster; or
  - If there is no prior negotiated rate, (I) The rate published on the provider’s website (see below); or (II) an alternate rate negotiated between the parties.
- Providers furnishing COVID-19 testing must publish the “cash price” for the test on a “public internet website for such provider.” The term “cash price” is not defined in the Act, but presumably is intended to be the price to a patient without insurance. By eliminating the payer’s ability to require a lower price, Congress may be encouraging providers to set actual price on website.
Section 3203, Rapid coverage of preventive services and vaccines for coronavirus. Payers must cover (with no cost sharing) qualified preventive items, services and vaccines intended to prevent or mitigate COVID-19, in accordance with ACA rules on preventive care, within 15 days of recommendation.
Section 3713, Eliminating Medicare Part B Cost-Sharing for the COVID-19 Vaccine. This section would enable beneficiaries to receive a COVID-19 vaccine in Medicare Part B with no cost-sharing.
Section 3716, Clarification Regarding Uninsured Individuals. This section amends Families First Act by clarifying that uninsured individuals can receive a COVID-19 test and related service with no cost-sharing in any state Medicaid program that elects to offer such enrollment option.
Section 3717, Clarification Regarding Coverage of Tests. Amends Families First Act by eliminating requirement that cost-free test must be “approved, cleared, or authorized under section 510(k), 24 513, 515 or 564 of the Federal Food, Drug, and Cosmetic 25 Act.”

3. Increased Payments and Flexibility

Section 3709, Adjustment of Sequestration. This section temporarily suspends the 2% reimbursement cut under the Medicare sequester which was set to go into effect in May. Cuts under the sequester are extended by one-year to 2030.
Section 3710, Medicare IPPS. Effectively increases hospital reimbursement for treatment of COVID-19 patients by increasing DRG weighting factor by 20%.
Section 3719, Providing Hospitals Medicare Advance Payments. Qualified facilities would be able to request up to a six month advanced lump sum or periodic payment. This advanced payment would be based on net reimbursement represented by unbilled discharges or unpaid bills. Most hospital types could elect to receive up to 100% of the prior period payments. Qualifying hospitals can defer repayments for four months and have at least 12 months to complete repayment without interest.
Section 3813, Delay of Disproportionate Share Hospital (DSH) Reductions. This section would delay scheduled reductions in Medicaid DSH payments through November 30, 2020.
Section 3711, Increasing Access to Post-Acute Care during Emergency Period. This section would provide acute care hospitals flexibility, during the COVID-19 emergency period, to transfer patients out of their facilities and into alternative care settings in order to prioritize resources needed to treat COVID-19 cases.
Section 3715, Providing Home and Community-based Support Services in Acute Care Hospitals. This section would allow state Medicaid programs to pay for direct support professionals, caregivers trained to help with activities of daily living, to assist disabled individuals in disproportionate share hospitals.
Section 3801, Extension of Physician Work Geographic Index Floor. This section would increase payments for the work component of physician fees in areas where labor cost is determined to be lower than the national average through December 1, 2020.
Section 3215, Limitation on liability for volunteer health care professionals during COVID-19 emergency response. Makes clear that doctors who provide volunteer medical services during the public health emergency related to COVID-19 have liability protections.

4. Post-Acute and Long Term Care Providers

Inpatient Rehabilitation Facilities (IRFs)

Section 3711, Increasing Access to Post-Acute Care during Emergency Period. This section would waive the 3-hour rule for IRFs which requires a patient to be on 3 hours of inpatient rehabilitative therapy, 5 days per week.

Long Term Acute Care Hospitals (LTACHs)

Section 3711, Increasing Access to Post-Acute Care during Emergency Period. This section would allow an LTCH to maintain its designation even if more than 50% of its cases are less intensive. It would also temporarily pause the current LTCH site-neutral payment methodology.

Nursing Facilities

Section 3811, Extension of Money Follows the Person Demonstration Program. This section would extend the Medicaid Money Follows the Person demonstration that helps patients transition from the nursing home to the home setting through November 30, 2020.
Section 3812, Extension of Spousal Impoverishment Protections. This section would extend the Medicaid spousal impoverishment protections program through November 30, 2020 to help a spouse of an individual who qualifies for nursing home care to live at home in the community.

5. Telemedicine and Rural Providers

Section 3703, Expanding Medicare Telehealth Flexibilities. This section waives all Medicare requirements for telehealth services under 42 U.S.C. 13295m(m) during the period of emergency. In doing so, the section eliminates the requirements, added by Supplemental Appropriations Act, that (a) the telemedicine provider have either furnished a Medicare covered item or service the patient during the past three years or be in the same medical practice of such provider; and (b) that a telephone used for telehealth have audio and video capabilities that are used for two-way, real-time interactive communication.
Section 3212, Telehealth network and telehealth resource centers grant programs. Amends 42 U.S.C. 254c-14, to reauthorize Health Resources and Services Administration (HRSA) grants $29 million per year for fiscal years 2021-2025 for programs that promote the use of telehealth technologies for health care delivery, education, and health information services. Original program ended in 2006. Among other items the Act eliminates requirement that recipients be non-profit and adds substance abuse as treatment priority for grant funds.
Section 3706, Allowing for the Use of Telehealth during the Hospice Care Recertification Process in Medicare.
Section 3707, Encouraging the Use of Telecommunications Systems for Home Health Services in Medicare. HHS to issue clarifying guidance on use of telecommunications systems, including remote patient monitoring, to furnish home health services.
Section 3213, Rural health care services outreach, rural health network development, and small health care provider quality improvement grant programs. This section amends 42 U.S.C. 254c to reauthorize HRSA grant programs to strengthen rural community health by focusing on quality improvement, increasing health care access, coordination of care, and integration of services. The Act changes eligible services from “essential” to “basic” health services. The effect of this change is currently unclear, but presumably intended to capture more services.

6. Information Privacy

Section 3221, Confidentiality and disclosure of records relating to substance use disorder. Aligning the 42 CFR Part 2 regulations, which govern the confidentiality and sharing of substance use disorder treatment records, with Health Insurance Portability and Accountability Act (HIPAA).
Section 3224, Guidance on protected health information. Requires the Department of Health and Human Services (HHS) to issue guidance on what is allowed to be shared of patient record during the public health emergency related to COVID-19.

7. SBA Loan Programs

The following is a brief overview of the SBA loan programs under the CARES Act which apply to qualifying small businesses across industries, including health care. For detailed information on these programs and options for medium and large businesses, see Seyfarth's previous Legal Updates here and here.

Paycheck Protection Program (PPP)

For profit companies and 501(c)(3) nonproﬁt organizations may be eligible under the PPP if they have no more than 500 employees. Both full and part time employees are included. The Act applies the SBA aﬃliation rules for all companies other than accommodation and food service classiﬁcation (code 72), but future guidance from SBA may waive the affiliation rules for other businesses, e.g., health care.
The maximum loan amount is the lesser of $10,000,000; or 2.5 times average monthly payroll costs for the trailing 12 months^[1] plus any pre-existing emergency loan (see 7(b) below) to be reﬁnanced.
PPP loans may only be used for specified purposes. Principal amounts (but not interest) may be forgiven if used for some of these purposes as set forth in the following table. For federal income tax purposes, any amount that would be included in such borrower’s gross income due to such loan forgiveness is excluded from gross income.

Use of Loan Proceeds	Forgiveness
Payroll	Payroll
Employer group health
Interest on mortgage obligations	Interest on covered mortgage obligations
Rent, utilities	Covered rent obligations and utilities, during the period ending June 30, 2020
Interest on other debt incurred before February 15, 2020

Loans are available at 0.50% interest rate. Collateral and guarantee requirements are waived. Repayment may be deferred for up to 2 years (after application), if the loan is not otherwise forgiven. Loans made are nonrecourse, except to the extent that the proceeds are used for unpermitted purposes.
Underwriting is based on COVID-19 impact, not ability to repay which should streamline the application process.

Emergency Economic Injury Disaster Loans and Grants - EIDL

EIDL Loans. Entities eligible for PPP loans may also be eligible for an EIDL loans. EIDL loans waive certain SBA requirements, such as personal guarantees on advances and loans below $200,000; being in business for one year before the disaster (as long as they were in operation on January 31, 2020); and inability to obtain credit elsewhere, but are not subject to forgiveness or other attractive aspects of PPP loans.
Emergency Grants. Entities eligible for an EIDL loan can also apply for a grant of up to $10,000 which can be paid within 3 days; can be used for any allowable purpose, including payroll, paid sick leaves, cost of materials, rent or mortgage, or other obligations that cannot be met; and does not have to be repaid.

[1]Or, if not in business during the period from February 15, 2019 through June 20, 2019, then for the period from January 1, 2020 through February 29, 2020.