HHS Announces Provider Relief Fund Period 1 Reporting Grace Period and Phase 4 Distribution

New Phase 4 and ARP Distributions

Eligible providers may apply for the $17 billion Phase 4 distribution beginning on September 29, 2021. HRSA will provide the application and additional eligibility information before that date. In the meantime, HRSA has provided the following details regarding the Phase 4 payment methodology:

• Payments will be based on providers’ lost revenues and expenses related to the pandemic between July 1, 2020, and March 31, 2021 (consistent with the Coronavirus Response and Relief Supplemental Appropriations Act).
• 75% of the Phase 4 allocation will be calculated based on COVID-19-related expenses and lost revenue.
• Lost revenues and expenses of “small” providers will be reimbursed at a higher rate compared to “medium” and “large” providers. HHS will determine the amount of the base payments and supplemental payments after analyzing applications received.
• 25% of the Phase 4 allocation will be paid as a bonus payment based on the amount and type of services provided to Medicare, Medicaid and Children’s Health Insurance Program (CHIP) patients.
• HRSA will price Medicaid and CHIP claims data at Medicare rates, with limited exceptions, and certain rural providers will automatically receive a minimum bonus payment.

Providers will apply for the $8.5 billion ARP rural payments using the same application as Phase 4. HRSA will pay ARP rural distributions to qualified providers based on the amount of Medicaid, CHIP and/or Medicare services they provide to patients living in rural areas.

PRF Period 1 Reporting Grace Period

HRSA also announced a 60-day grace period for PRF recipients that are unable to meet the September 30, 2021, reporting deadline. Providers that do not submit required reports by the deadline will be allowed to “come into compliance” with their reporting requirements by reporting prior to November 30, 2021. According to HRSA, these providers will not face collection activities or similar enforcement actions during the grace period. The deadline to use Period 1 PRF funds remains June 30, 2021. HRSA also notes that providers must return unused funds as soon as possible after submitting their report, and no later than December 30, 2021.

Phase 3 Payment Details and Forthcoming Appeals Process

For providers still questioning Phase 3 distributions, HRSA released detailed information regarding its Phase 3 payment methodology. Consistent with prior messaging (see, e.g., the General Information FAQ on appeals posted on July 15, 2021), providers who believe HRSA’s Phase 3 payment decisions were inconsistent with the released methodology will have an opportunity to request a reconsideration. PRF applicants who would like to receive updates regarding the reconsideration process under development should contact PRFReconsiderations@hrsa.gov.

Continued Attention on Acquisition Activity

Many PRF recipients have reported certain acquisition activity in connection with general distribution applications and Period 1 reports. HRSA’s latest announcement suggests a continued interest in this data “[t]o help ensure these provider funds are used for patient care.” Specifically, in an apparent new condition on Phase 4 and ARP funding, recipients will be required to notify HHS of any merger with, or acquisition of, another healthcare provider during the period of availability. HRSA notes that acquisition activity may subject recipients to heightened audit risk to verify that funds were used for COVID-19-related costs.

Next Steps

In light of these announcements, as healthcare providers finalize Period 1 reports, they should:

• Evaluate the utility of the grace period as part of their overall PRF reporting and compliance strategy
• Review the Phase 4 and ARP rural distribution eligibility criteria and payment methodologies and assess whether these distributions impact contemplated PRF allocations and reporting.

In addition, healthcare providers pursuing Phase 4 or ARP payments, or who are considering Phase 3 reconsideration, should continue to monitor HRSA guidance for process updates and work with their outside advisors to prepare corresponding submissions.

For additional resources, access McDermott’s Provider Relief Fund Toolkit, updated September 2021.