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Volume 20.27

Recently the U.S. Centers for Medicare & Medicaid Services (“CMS”) sent the following notice to Critical Access Hospitals (“CAH”) and Rural Health Clinics (“RHC”):

“To prevent the duplication of benefits from the federal government – i.e. once via the SBA’s PPP loan forgiveness and a second time in reimbursement for Medicare’ share of providers’ reasonable costs, funded by the loan forgiveness – providers must offset the amount of the SBA’s PPP loan forgiveness from the operating expenses they report on their Medicare cost report.”

Due to the high percentage of Medicare and Medicaid patients served, these CAH and RHC providers may be repaying as much as 70-80% of their SBA loan, to the Medicare and Medicaid programs.  CAH and RHC providers differ from many providers in that they are reimbursed on a cost-incurred basis rather than a prospectively determined rate.  However, we do not believe that it was the legislative intent to give loan forgiveness only to recover most of those funds through a Medicare/Medicaid recovery.  These hospitals and clinics have suffered significant financial difficulties because of lost revenues and, when services could be provided, additional costs associated with the COVID-19 PHE.  Revenue losses by these providers will, in most cases, far exceed the Provider Relief Funding that was provided for COVID-19 PHE expenses and lost revenues.

Most healthcare provider’s reimbursement is prospective in nature; meaning that costs incurred in prior years are utilized for purposes of setting current reimbursement rates.  Any offset of provider’s costs, because of PPP loan forgiveness, would potentially reduce future rates from those required to fund ongoing operating costs.  Accordingly, such a reduction of allowable Medicare costs for these providers makes no sense.   Future reimbursement rates should not be based on costs which have been reduced due to temporary financial assistance and funding.

SBA loan forgiveness should not be used to offset otherwise allowable costs.  This was never intended to occur and, in fact, if CMS does not remedy this, Congress should.

We can understand why Provider Relief Funding for reported additional COVID-19 expenses, expenses beyond those which would otherwise have been incurred, may be considered for offset against Medicare allowable costs; however, Provider Relief Funding used to offset lost revenues, along with SBA loan forgiveness, should not be considered as an offset to allowable costs.  Furthermore, additional thought should be given to any potential Provider Relief Funding offset to allowable costs as many COVID-19 PHE expenses will continue as a part of healthcare delivery beyond the end of the COVID-19 PHE.

Hopefully, CMS will recognize that any offset to allowable expenses for Medicare reimbursement and reporting purposes is not an appropriate course.  Rather, CMS should consider separate reporting for COVID-19 PHE expenses funded by Provider Relief Funds on cost report submissions.  This would facilitate further consideration of the financial impact on healthcare providers because of the COVID-19 PHE without reducing Medicare reimbursement, either retroactively or prospectively.

We strongly encourage providers and healthcare associations to develop and express positions to CMS and their elected representatives regarding this matter before other providers find themselves in the same position as CAH and RHC providers.  The position taken by CMS to reduce Medicare reimbursements to rural providers, as outlined in the notice, appears to directly conflict with the direction of the Executive Orders signed by the President yesterday, which specifically call on the Department of Health and Human Services to improve rural health care by:

  • Proposing a Centers for Medicare & Medicaid Services (CMS) rule to extend parts of Medicare’s broader coverage of telehealth beyond the end of the current public health emergency.​
  • Proposing a payment model to improve rural healthcare through the Center for Medicare and Medicaid Innovation.
  • Launching a rural health action plan with a range of actions that different components of HHS will take to:
    • build sustainable models for rural communities,
    • focus on preventing disease and mortality,
    • leverage innovation and technology, and
    • increase access to care.
  • Reaching a memorandum of understanding with the Federal Communications Commission and the Department of Agriculture to promote rural access to telehealth via broadband.