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HHS update on regulation reform and the CARES Act Provider Relief Fund [PODCAST]

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The Hospital Finance Podcast

In this episode, we are joined by Brenna Jenny, Deputy General Counsel and the Chief Legal Officer for the Centers for Medicare and Medicaid Services within the Department of Health and Human Services, to discuss the state of regulation reform and the CARES Act Provider Relief Fund.       

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Highlights of this episode include:

  • A review of ongoing regulatory reform initiatives at HHS.
  • How the Trump administration has tried to bring consistency to how agencies issue binding regulations.
  • What has HHS done to oversee the distribution of money from the CARES Act Provider Relief Fund?
  • What motivating principles have been behind the distribution of funds in the CARES Act and Paycheck Protection Program and Healthcare Enhancement Act?
  • What restrictions does HHS impose on Provider Relief Fund payments?
  •  And more…

Mike Passanante: Hi, this is Mike Passanante and welcome back to the award-winning Hospital Finance Podcast®. On today’s episode, we’ll be talking about the state of regulation reform and the CARES Act Provider Relief Fund with Brenna Jenny, Deputy General Counsel and the Chief Legal Officer for the Centers for Medicare and Medicaid Services within the Department of Health and Human Services. She joined HHS from the Department of Justice where she served as a counsel in the civil division. Before joining DOJ, Brenna worked at the law firm of Sidley Austin and clerked for a judge on the United States Court of Appeals for the Eighth Circuit. Brenna is a graduate of Dartmouth College, and she earned her Master’s in Public Health at the Harvard School of Public Health and her Juris Doctor from Harvard Law School. Brenna, welcome to the show.

Brenna Jenny: Thanks, Mike.

Mike: Brenna, one of the main roles of the Department of Health and Human Services is to regulate the industry. How has HHS, under the current administration, pursued that mission?

Brenna: From the start, this administration has pursued a robust regulatory reform agenda. During just his second week in office, the president issued an executive order directing all agencies to alleviate unnecessary regulatory burdens. Under this executive order, each agency was tasked with identifying regulations to repeal, replace, or modify and, more broadly, to implement regulatory reform policies and initiatives.

Mike: Excellent. Can you talk about some of HHS’s ongoing regulatory reform initiatives?

Brenna: Sure. One major one is our Deputy Secretary has been leading what we call the Regulatory Sprint to Coordinated Care which aims to reduce regulatory burdens that hinder innovation. Pursuant to this initiative, in October of 2019, HHS issued long-awaited notices of proposed rulemaking regarding reforms to the anti-kickback statute and the physician self-referral law, also known as the Stark law. The goal of the proposed reforms is to ensure that the anti-kickback statute and the Stark law do not impede value-based arrangements or coordination of care. The comment period for the proposed rules closed on December 31st, and we are currently hard at work synthesizing the public feedback that we received.

Mike: Brenna, many healthcare regulations are complex. Are there things the department can do to reduce uncertainty in how these laws are applied?

Brenna: Yes. And one way we have tried to do that also actually relates to the Stark law. In the most recent Physician Fee Schedule Final Rule, we included significant revisions to the Stark law advisory opinion process. HHS offer the advisory opinions in order to provide clarity on how we interpret and apply the Stark law. We know that, for providers, there’s a lot riding on compliance with the Stark law. The changes we made in this rule are designed to streamline and speed up the Stark law advisory opinion process. And, in particular, to do so, we moved to a user-fee structure. Some people might not know much about our Stark law advisory opinion process, but HHS will actually issue an advisory opinion on whether a particular arrangement would violate the Stark law. If we conclude that an arrangement would not violate the Stark law, then HHS is bound by that determination and cannot impose sanctions on any of the parties to the arrangement. Under our new process, HHS will also not impose sanctions on any other arrangement that is indistinguishable in all material respects from the arrangement analyzed in a prior advisory opinion. And providers can seek an opinion on whether their arrangement is indistinguishable from a prior arrangement.

Mike: Does HHS frequently issue advisory opinions relating to the Stark law?

Brenna: We don’t. I would say our Stark law advisory opinion process is fairly underutilized right now. Not counting the handful of narrow advisory opinions issued in 2004 on the specialty hospital moratorium, CMS has issued only 15 advisory opinions in about 20 years. In contrast, our Office of Inspector General which enforces the anti-kickback statute has been averaging about 15 kickback advisory opinions each year. The relative scarcity of Stark law advisory opinions was one factor, I would say, motivating our reforms to the process. We hope the new process is easier to take advantage of and that the healthcare industry will reach out for guidance on the Stark Law. If HHS can issue more advisory opinions, it will provide greater regulatory clarity to the industry and reduce the Stark law’s burden.

Mike: Brenna, another priority of the administration has been to reform the administrative state. How is HHS contributing to that effort?

Brenna: The administration has tried to bring some consistency to how agencies issue binding regulations. One of the most significant initiatives was an executive order issued in October of last year restricting the use of agency guidance documents. Before I get to that executive order, a little background. The heart of modern administrative law is the requirement that agencies must provide the public with notice and an opportunity to comment before a new rule imposing new obligations becomes final. This is referred to as notice-and-comment rulemaking. If agencies want to merely explain existing obligations, they can do so by issuing guidance documents which do not need to go through notice-and-comment rulemaking. But too often, agencies have worked around the requirements of notice-and-comment rulemaking by embedding new regulatory obligations in guidance documents. 

This executive order requires agencies to issue regulations governing their use of guidance. These regulations must seek to ensure that guidance does not purport to create new legal obligations. For example, all guidance documents are required to clearly state on their face if they lack the force and effect of law. But even where a guidance document does not include new requirements and merely interprets or summarizes an existing requirement, sometimes that guidance is buried in a subpage of a subpage of a website, and it’s not always easy for regulated parties to find it. So this executive order has a simple solution; it requires agencies to post all of their guidance on a single searchable website. Guidance that is not posted is deemed rescinded. Finally, the public must also be given an opportunity to petition any agency to modify or rescind one of its guidance documents. HHS is working on implementing this executive order, and you should watch for further developments soon.

Mike: I imagine there’s been some distraction from this regulatory reform agenda lately as a result of COVID-19. Let’s talk about some of the work HHS has done recently to oversee distribution of money from the Coronavirus Relief Fund.

Brenna: This has been a major undertaking, to say the least. Congress appropriated $175 billion in the CARES Act and Paycheck Protection Program and Healthcare Enhancement Act to HHS to disperse to eligible healthcare providers. These are not loans. They’re direct payments. The money must be used to prevent, prepare for, or respond to coronavirus, and must be used to cover a provider’s healthcare-related expenses or lost revenue attributable to coronavirus. But otherwise, Congress gave providers a lot of discretion in how to use the money. And Congress also gave the secretary of HHS a lot of discretion in how to distribute the money.

Mike: So let’s dig into that a little bit more. What have been the motivating principles for how HHS has distributed the money so far?

Brenna: We want our distribution of this money to be fast, transparent, and fair. Within just two weeks of the president signing the CARES Act into law, we started distributing money. I can provide an overview of those distributions, but I encourage everyone to go to our CARES Act website for more information about each round of payment. Just go to hhs.gov/coronavirus and then select CARES Act Provider Relief Fund. First, we made a general distribution of $50 billion. Any provider that billed Medicare fee-for-service in 2019 was eligible to receive a payment. We allocated the $50 billion proportional to provider share of 2018 net patient revenue. The goal was to give each provider a payment of approximately 2% of its net patient revenue regardless of payer mix.

We have also done a series of targeted distributions. First, we made an allocation to almost 400 hospitals who, at the time, had the majority of the country’s COVID-19 inpatient admissions. And we’ve announced that we will be making a second round of high-impact-area payments. We also devoted an allocation to rural healthcare providers who often operate on thinner profit margins. We also had distributions to skilled nursing facilities, tribal hospitals and clinics, and safety net hospitals. Finally, we are doing a distribution of about $15 billion to Medicaid and CHIP providers that did not receive money in the general distribution. Although our website refers to this as a targeted distribution, it’s really a general distribution for providers who are not eligible to receive money in the initial general distribution wave because they did not bill Medicare fee-for-service. Like the initial general distribution, the goal of this payment tranche is to give Medicaid and CHIP providers approximately 2% of their net patient revenue. Providers must submit their gross revenues from patient care into our secure portal by July 20th. Providers can find a link to this portal also on our CARES Act website.

Mike: And what restrictions does HHS impose on Provider Relief Fund payments?

Brenna: Every provider that wishes to formally accept money received from a Provider Relief Fund distribution must first accept the terms and conditions associated with that payment, and they must do so within 90 days of receiving the money. Providers can find the terms and conditions on our website, but among other things, they include certain restrictions on eligibility and specify permissible uses of the funds. To give more guidance to healthcare providers, we have also been posting a series of frequently asked questions on our website. We have dozens and dozens of questions organized by topic, and they’re often inspired by questions we’ve been receiving from providers out in the field. I encourage everyone to review those if you have questions about your obligations under the terms and conditions.

Mike: And what can providers use CARES Act money for?

Brenna: The money must be used to reimburse a provider for healthcare expenses or lost revenue attributable to coronavirus, and the money must be used to prevent, prepare for, or respond to coronavirus. So to break that down a little further, first, the term “healthcare-related expenses attributable to coronavirus” is a broad term that can cover a range of items and services purchased to prevent, prepare for, or respond to coronavirus. This includes supplies and equipment, workforce training, building temporary surge capacity, or reporting COVID-19 test results to state and federal governments. Providers may have incurred eligible expenses before they receive a Provider Relief Fund payment, and it’s fine to use the payment to cover those expenses. The term “lost revenues that are attributable to coronavirus” means any revenue that you as the healthcare provider lost due to coronavirus. This may include revenue losses associated with fewer outpatient visits, canceled elective procedures, or increased uncompensated care. Providers can use Provider Relief Fund payments to cover any cost that the lost revenue otherwise would have covered so long as that cost prevents, prepares for, or responds to coronavirus. HHS encourages the use of funds to cover lost revenue so that providers can respond to this pandemic by maintaining healthcare delivery capacity. That means it’s permissible to use the money to cover things like employee payroll or health insurance or rent or equipment leases, even if the provider had to close his doors temporarily during a COVID-19 outbreak.

Mike: Are there any common questions you’ve been getting about the Provider Relief Fund payments?

Brenna: We’ve been getting a lot of questions as the FAQ page will demonstrate, but two areas in particular come to mind. The first is reporting requirements. The terms and conditions refer to two types of reports, one very specific and one fairly general. The specific one is a reference to quarterly reports that must contain certain information. This is actually a requirement from the CARES Act itself, and it’s not a reporting requirement that HHS created. We recently put out an FAQ on this clarifying that HHS will be working to create a report with information that satisfies this requirement, and so providers do not need to submit separate quarterly reports to HHS. However, the terms and conditions also reference a general reporting requirement, namely that providers must submit reports to the secretary as may be specified in future program instructions. We will be expecting providers to submit reports about how they’ve used the money, and we’re going to be releasing guidance in the near future on the timing and content of those reports. But the key point is nothing is due imminently. And please don’t try to send me your report. I’ve had some providers try to do this, but we need to channel everything through the proper process. Second, we’ve received a lot of questions about what to do in the context of a change in ownership, either one that happened before or after receipt of a Provider Relief Fund payment. I will say this has proven to be a very complicated fact-specific area, but there are restrictions on a recipient’s ability to transfer Provider Relief Fund money to someone else. So I strongly encourage everyone in this position to carefully review the FAQs on our website, and if you do not think your question is answered, please contact our provider helpline at 866-569-3522.

Mike: Brenna, thank you for all of the insight and for joining us today on the Hospital Finance Podcast.

Brenna: Thanks a lot, Mike, for having me.


The Hospital Finance Podcast

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