The Centers for Medicare and Medicaid Services (CMS) announced that it is “reevaluating amounts that will be paid under its Accelerated Payment Program and suspending its Advance Payment Program to Part B suppliers effective immediately.”  CMS explained that it is pumping the brakes because it has already made almost $100 billion in accelerated or advanced payments and also has over $125 billion left in the “Public Health and Social Services Emergency Fund” (Provider Relief Fund) “available to hospitals and other healthcare providers on the front lines of the coronavirus response ….”  CMS’s shift to making more grants from the emergency fund rather than more accelerated or advanced payments—which potentially turn into high-interest debt—may help providers in the long run.  CMS has issued an updated fact sheet on this policy change.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act directs the Department of Health and Human Services (HHS) to expand the Medicare Accelerated Payment Program for the COVID-19 pandemic beyond its original purpose of simply alleviating occasional cash-flow crunches due to disruptions in claims submission or processing.  CMS issued guidance allowing hospitals to draw up to six months of accelerated payments and other providers and suppliers up to three months of advance payments.  In response to a flood of applications, CMS has already made $60 billion in accelerated payments to hospitals and another $40 billion to doctors, other practitioners, and medical equipment suppliers.

Meanwhile, both the CARES Act and the newly enacted Paycheck Protection Program and Health Care Enhancement Act have collectively added $175 billion to HHS’s Provider Relief Fund to compensate hospitals and other providers for COVID-19-related costs and lost revenues.  Last week, CMS released a fact sheet detailing distributions of the fund’s first $100 billion.  These include a first tranche of $30 billion to all Medicare providers, based their proportionate shares of 2019 fee-for-service Medicare revenue.  On April 24, HHS started distributing another $20 billion to children’s hospitals and other providers with a relatively low share of Medicare revenue.  CMS has also earmarked $10 billion for hospitals and providers in pandemic hot spots and yet another $10 billion for rural providers.  About $30 billion of the original $100 billion is left over to pay for the care of uninsured COVID-19 patients at Medicare rates.  CMS has not yet disclosed specific plans for the additional $75 billion that Congress appropriated last Friday.

The key difference between the funds received from the Provider Relief Fund and those from the Accelerated and Advanced Payment Program is that the latter must be repaid, typically within one year, or less, or a penalty interest rate applies.  On the other hand, the grant funds come with several attached strings, including a restriction against surprise billing for COVID-19 treatment and HHS auditing and oversight to ensure the funds are used for appropriate purposes.  Most hospitals and providers have received accelerated payments along with grants, as the pandemic has broadly strained healthcare finances.