Health CARES – The CARES Act Impact on Hospitals

As reported in Seyfarth’s April 2, 2020 COVID-19 Update, the Coronavirus Aid, Relief, and Economic Security Act (Pub. L. 116-136) (“CARES Act” or “Act”), passed on March 27, 2020 provides hospitals and other Medicare and Medicaid facilities several short-term benefits including coverage and payment benefits specific to the COVID-19 virus, enhanced reimbursement generally, consistency regarding patient information privacy, and liability protection. In addition, the Centers for Medicare and Medicaid Services (“CMS”) has issued several blanket waivers which are intended to allow facilities to focus more on patient care and less on technical regulatory compliance. While these opportunities may be attractive-and in some cases essential-for hospitals, many of them are temporary. Hospitals with established standards of operation and compliance infrastructures based on pre-pandemic law should approach these opportunities in a manner that allows for a clear path to get back to business as usual when the public health emergency is over.

Coverage and Payment Provisions - Commercial Payers

Section 3202 of the Act provides mandatory payment rates for evaluation of a patient in the emergency room to determine the need for COVID-19 testing, the administration of the test and the test itself. Coverage of these items and services at no patient cost sharing is mandated by the Families First Coronavirus Response Act (Pub. L. 116-127) (“Families First Act”) as amended by the CARES Act. The mandatory payment rates are those agreed between the payer and hospital before the declaration of public health emergency; or, if no prior negotiated rate exists, the “cash price” published on the facility’s website; or a rate negotiated by the parties after the declaration of public health emergency. The term “cash price” is not defined in the Act, but is likely intended to mean the price charged to a patient who does not have coverage for the test and related services.

By allowing providers to set their price, but giving payers the ability to negotiate, the Act sets up a potential reimbursement quagmire if payers are unwilling to pay the “cash price” posted on the website. Concerns over price-gouging should be addressed by the transparent nature of the pricing - to the extent a provider’s cash price is much higher than others’, that disparity can be exposed. Likewise, any concerted action to set a standard price among providers raises anti-trust concerns. Providers may set a firm, good faith cash price, subject to negotiation only in exchange for an agreement that extends beyond the current public health emergency.

These coverage and payment provisions can provide welcome assistance to hospitals whose emergency rooms are inundated by suspected COVID-19 patients, but they will only be in effect during the public health emergency. Under the CARES Act and Families First Act, the public health emergency will terminate 90 days after it was declared or when the Secretary of Health and Human Services (“HHS”) declares that it no longer exits, whichever occurs first. To the extent the need for evaluation and testing continue after the public health emergency is over, parties may consider amending their in-network arrangements to provide long term coverage and payment provisions in accordance with the Act.

Coverage and Payment Provisions - Federal Health Programs

With respect to Federal health program payments for COVID-19 patients, Section 3710 of the CARES Act promises hospitals a 20% add-on payment for services provided to COVID-19 patients. Specifically, under Medicare’s hospital inpatient prospective patient system (“IPPS”) established under the Social Security Act, HHS will increase by 20% the weighting factor of the discharge diagnosis-related group (“DRG”) assigned to a patient diagnosed with COVID-19. Under Section 3710, such add-on payments will not be considered in HHS’s annual adjustments to DRG weighting factors as required by the budget neutrality provisions of the IPPS. Finally, Section 3710 allows implementation of the add-on payment through program instruction. The add-on payment will be based on reported diagnosis codes and condition codes, or other such means as may be necessary, so documentation, coding and claims submission for these patients will be vitally important to obtaining reimbursement.

The CARES Act also promises increased Federal health program payments in the form of delayed implementation of scheduled reductions in Medicare and Medicaid payments. Section 3709 exempts the Medicare program as a whole for the remainder of this year from any payment reduction under any sequestration order. This exemption should result in hospitals avoiding the 2% Medicare pay cut that was supposed to go into effect in May. With respect to Medicaid, Section 3813 of the Act suspends until December 1, 2020 the scheduled allotment and payment reductions to disproportionate share hospitals (“DSH”) that were also set to go into effect in May. Congress has delayed implementation of these reductions, which were presumed to be offset by increased coverage under the Affordable Care Act (“ACA”), several times since their initial 2014 effective date. The latest postponement under the CARES Act is a welcome development to hospitals for which the anticipated offset under the ACA has not materialized.

Section 3719 of the CARES Act provides enhanced benefits under the current advance payment program for hospitals. Specifically, it allows the receiving hospital to request: an expansion of the period for which an advance payment is calculated (based on net reimbursement from unbilled services and unpaid claims) to six months; up to 100% of the advanced reimbursement; deferred recoupment for 120 days; and 12 months to repay the advance. Importantly, unlike other payment and coverage provisions in the CARES Act, these options are not expressly limited to the duration of the public health emergency.

Coverage and Payment Provisions - Uninsured Individuals

Sections 3716 and 3717 amend the Families First Act by clarifying that uninsured individuals can receive a COVID-19 test and administration with no cost-sharing in any state Medicaid program that elects to offer such enrollment option and by eliminating the requirement that such 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.”

In addition to offering coverage of COVID-19 tests and administration through Medicaid, HHS announced on Friday that a portion of the $100 billion appropriated under the CARES Act for health care providers will be used to “cover providers costs of delivering COVID-19 care for the uninsured.” More details on such coverage have yet to be released.

Information Privacy

The CARES Act also provides increased flexibility for disclosure of patient information for purposes of treatment, payment and health care operations under the Health Insurance Portability and Accountability Act (“HIPAA”) and the Health Information Technology and Clinical Health Act (“HITECH”). Section 3221 of the Act allows information protected under 42 U.S.C. 290dd-2(b) and the “Part 2 Regulations” (45 C.F.R. Part 2), related to substance use disorders, to be used or disclosed by a covered entity and business associate for treatment, payment and health care operations as those terms are defined under HIPAA. Consent of the individual must be obtained beforehand but can be effective for future uses and disclosures, absent revocation. These provisions benefit hospitals and other providers by bringing necessary consistency to the treatment of patient information while still giving the patient ability to revoke consent to such disclosures. Importantly, Section 3221 is not limited to the treatment of COVID-19 or the timing of the public health emergency.

In addition, Section 3224 of the CARES Act requires the Office for Civil Rights, which administers HIPAA, to issue guidance on what is allowed to be shared of a patient record during the public health emergency related to COVID-19. OCR responded on April 2 with guidance on business associates’ ability to use and disclose protected health information for public health activities and health oversight activities.

Liability Protections

Section 3215 of the Act Makes clear that health care providers who provide volunteer medical services during the public health emergency related to COVID-19 have liability protections if they are acting within the scope of their license. The liability protections do not apply to willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious flagrant indifference to the rights or safety of the patient. The Act preempts state law on this issue unless such state law provides greater protections. While there is Federal legislation being considered that would extend liability protections to the non-volunteer context, that area is currently governed by state law.

Small Business Administration Loans

Both 501(c)(3) tax-exempt entities and for profit hospitals have the opportunity to access Paycheck Protection Program (“PPP”) and Economic Injury Disaster Loans (“EIDL”) though the Small Business Administration (“SBA”). The SBA is still issuing guidance on these loans, particularly with respect to the less than 500 employees requirement, but applications are being processed now. For more information see COVID-19 Business Stimulus Funding Update: Small Businesses, Large Businesses, Mid-Size Businesses, Nonprofits, and Tax Provisions.

Agency Guidance

In addition to the CARES Act, CMS has issued guidance to enhance hospitals’ ability to focus on the pandemic response by lowering regulatory compliance burdens. Most recently, on March 30, CMS issued blanket waivers under Section 1135 of the Social Security Act, 42 U.S.C. § 1320b-5 with respect to imposition of sanctions under the Stark law, 42 U.S.C. § 1395nn, 42 C.F.R. Part 411, Subpart J. The waivers suspend the imposition of sanctions related to remuneration and referrals that would otherwise violate the Stark law, including, remuneration from a hospital to a physician that is above fair market value for services personally performed by the physician under 42 C.F.R. § 411.357(d); payments by a physician to a hospital that is below fair market value for the lease of office space or equipment under 42 C.F.R. §§ 411.357(a) and (b); remuneration from a hospital to a physician that exceeds the limits under 42 C.F.R. §§ 411.357(k) and (m); and remuneration that is subject to a compensation arrangement that is not reduced to writing and signed.

These waivers are limited to payments and referrals that are solely related to “COVID-19 purposes”, but these COVID-19 purposes include services that are not related to the diagnosis and treatment of COVID-19 and medical practice or business interruption due to the COVID-19 outbreak. In addition, hospitals should comply with all other elements of the exception for which a certain requirement is expressly waived. For example, while payments need not be consistent with fair market value, the arrangement should be commercially reasonable. Finally, the waivers will only last until HHS declares the public health emergency no longer exits or 90 days after the declaration, whichever occurs first. Hospitals should structure arrangements that take advantage of the waivers in a way that allows easy unwinding once the public health emergency is over.