Phase 4 Updates to New Funding Available for Healthcare Providers Affected by the COVID Pandemic


On Friday, September 10, 2021 the Department of Health and Human Services (HHS), through the Health Resources and Services Administration (HRSA), announced $25.5 billion in new funding for healthcare providers affected by the COVID-19 pandemic.

The $25.5 billion that will be made available for healthcare providers will include $17 billion through a Phase 4 General Distribution of the Provider Relief Fund (PRF). An additional $8.5 billion from the American Rescue Plan (ARP) through a rural distribution will assist providers who serve rural Medicare, Medicaid and/or Children’s Health Insurance Program (CHIP) patients.

The application portal for these funds officially opened on September 29, 2021 and is available here. Both distributions can be requested through a single application that will be due by October 26, 2021 at 11:59pm ET.

Numerous resources for these distributions, including instructions, sample forms, terms and conditions (Phase 4 and ARP Rural), an interactive user guide, etc. have also been released by HRSA and are available at the website under “future payments.”

Phase 4 General Distribution

HRSA provided detailed eligibility requirements for the Phase 4 distribution on their website. Providers may be eligible to receive Phase 4 distributions if they:

  • Previously received PRF payments
  • Continue to provide patient care
  • Are not terminated from or excluded from participation in Medicare, Medicaid and other Federal health care programs, or had Medicare billing privileges revoked

Additionally, health care providers that did not previously receive distributions from the PRF program may now be eligible if all of the eligibility requirements are met.

Payments to providers from the $17 billion allocation will be calculated in two separate components:

1. Base Payment
Approximately 75% of the funding ($12.75 billion) will be allocated based on reported changes in patient revenues and expenses for the period from July 1, 2020 to March 31, 2021, as compared to the same quarters in 2019. Definitions of “Operating Revenues from Patient Care” and “Operating Expenses from Patient Care,” which are used in the calculation of the base payment are available on the HRSA website.

The calculation will be a percentage of the change in quarterly patient revenues and expenses, summed across all three quarters. These base payments will be grouped into small, medium and large provider groups based upon annual net patient care revenues with the small and medium providers receiving a larger percentage.

The small, medium and large provider groupings and the percentages used for each will be determined after the application period. No provider will receive more than the change in quarterly patient revenues and expenses. Applicants that have not previously received a PRF distribution will receive the greater of 2% of annual net patient care revenue or the calculated base payment.

2. Bonus Payment
Approximately 25% of the funding ($4.25 billion) will be based upon Medicare, Medicaid, and CHIP claims from January 1, 2019 through September 30, 2020. This portion of funding will be completed “automatically” using information HRSA already has available. These claims will be “priced” at predominantly Medicare rates and the claims times rates applied will ultimately be used to calculate the bonus payment.

HRSA will utilize analytical procedures to identify and flag outliers during the application process. These include:

  • Providers that began providing patient care during 2019 or 2020.
  • Pharmacies and durable medical equipment (DME) suppliers.
  • Anomalies in the financial information submitted. For example, higher losses than a similar entity type.
  • Duplicate or related applications.

These outliers may result in higher payments in the scenario of new providers; capped payments for pharmacies, DME suppliers, and certain anomalies; or no payments for certain anomalies and duplicate applications.

American Rescue Plan Rural Distribution

Healthcare providers are eligible for the ARP Rural Distribution based on similar eligibility requirements as Phase 4, but limited to rural health clinics, providers treated as located in a rural area, OR a provider that “operates in or serves patients living in the HHS Federal Office of Rural Health Policy’s (FORHP) definition of a rural area." 

This is important to understand because it means eligible providers merely need to treat patients that are from a rural area, rather than be physically present in the rural area, to be eligible. The guidance in the ARP bill requires that a provider apply for these funds. Accordingly, to access this component of the distribution, there is a “Yes/No” question on the application, “Select ‘Yes’ if your organization would like to be considered for an additional ARP rural payment.”

"...eligible providers merely need to treat patients that are from a rural area, rather than be physically present in the rural area, to be eligible"

The ARP Rural Distribution totaling $8.5 billion will be allocated to providers based upon services provided to Medicare, Medicaid and CHIP beneficiaries in a rural market. Similar to the Bonus Payment component of Phase 4, HRSA will utilize the information it has available to make these calculations based upon the tax identification number (TIN) of the applicant. Eligible billing TINs that have at least one Medicare, Medicaid or CHIP claim for a rural beneficiary will receive a minimum payment to be determined based on the total applications. 

One important distinction of the ARP Rural Distributions from any other previous PRF distributions is that they must be maintained and used by the original TIN recipient. In other words, these amounts may not be transferred to another entity, regardless of relationship.

How Phase 4 General and ARP Rural Distribution Will Affect Your Organization

Both the Phase 4 General and ARP Rural Distributions require an attestation to certain terms and conditions (T&C). These T&C are very similar to previous general distribution T&C in that the funds must be used to prevent, prepare for and/or respond to coronavirus and that the expenses or lost revenues claimed must not be reimbursed or obligated to be reimbursed by another source. There are a few new updates to the T&C, however, including: 

  • Recipients of greater than $10,000 agree to notify HHS of a merger with or acquisition of any other healthcare provider during the Payment Received Period, 
  • Recipients must maintain advance payments in an interest-bearing account, and 
  • As noted above, the ARP Rural must be maintained by the Recipient. 

On a recent webinar, HRSA indicated they expect to distribute the ARP Rural Distributions in November, prior to Thanksgiving. The Phase 4 Distributions are slated to happen in December, with additional payments anticipated being made into 2022 for more complex applications.

While the periods of time utilized for each of the components of the application for funding vary, the Period of Availability to use the Phase 4 and Rural ARP Distributions is consistent with other PRF distributions and is based upon the date the payments are received. For payments that are received between July 1, 2021 and December 31, 2021, the provider will have until December 31, 2022 (or over one year from the date of receipt) to use the funds. 

For non-complex entities and individuals, the following information will be needed for the application: 

  • A list of all billing TINs under the filing TIN that provide patient care and are owned by the filing TIN.
  • Internally-generated financial statements that substantiate operating revenues and expenses from patient care in 2019 Q1, Q3, and Q4; 2020 Q3 and Q4; and 2021 Q1.
  • Federal income tax return, audited financial statements or internally-generated financial statements, as applicable by entity type.

More complex entities may require additional worksheets and organizational structure documents. 

What Should You Do Now?

 There are a few things your healthcare entity can do now to prepare for this new round of funding.

  1. If you have not previously registered for the Provider Relief Fund portal or obtained a One Healthcare ID, that should be the first step. 
  2. Utilizing the One Healthcare ID, log into the portal and start the application by validating the TIN. This process can take 1 – 2 business days or longer. A validated TIN is required to proceed to the actual application, so this process can be started before information is gathered.
  3. Review the application requirements and gather information necessary for submission.
  4. Enter the information into the application and include any necessary attachments. Review or have someone review the information for accuracy prior to submission.
  5. Attest to the payment once received after reviewing the applicable T&C.
  6. Track uses of funds so that the information is available when the reporting to HHS will ultimately be required, which is expected to be between January 1, 2023 and March 31, 2023 for payments received prior to January 1, 2022.

We encourage healthcare providers to apply for this round of funding. Many have experienced impacts past the Period of Availability of previous PRF payments. Additionally, the pandemic has proven to be unpredictable and future impacts are not known. This funding could help support healthcare providers for both these historical impacts, as well as those still unknown.

Our healthcare industry advisors are here to assist you in navigating any Provider Relief Fund questions or concerns you have.

Grace Period for Reporting Period 1

The HHS also announced a 60-day grace to help providers come into compliance with their PRF Reporting requirements if they fail to meet the deadline on September 30, 2021, for the first PRF Reporting Time Period. While the deadlines to use funds and the Reporting Time Period will not change, HHS will not initiate collection activities or similar enforcement actions for noncompliant providers during this grace period.

Action steps providers need to take regarding the funds

Gather supporting documentation, such as most recent tax documents and financial statements for the second half of calendar year (CY) 2020 and the first quarter of CY 2021.

In addition to the new funding and grace period announcement released by HHS, HHS also provided some updates to the FAQ document dated August 30, 2021. The key items in this FAQ update include:

  • Expanded guidance surrounding the period of eligibility surrounding capital facilities projects to include specific guidance that in order for capital facilities projects’ costs to be reimbursed using PRF payments, the project must be fully completed by the end of the period of availability associated with the payment received period.
  • Added guidance surrounding projects that are a bundle of services and purchases of tangible items that cannot be separated, such as capital projects, construction projects, or alteration and renovation projects, to indicate that these project costs cannot be reimbursed using PRF payments unless the project was fully completed by the end of the period of availability associated with the payment received period.
  • Removal of “obligated” from each of those instances, resulting in expenses needing to be “incurred” in the period of availability in order to be considered allowable. Previously there were various instances in the FAQs where “obligated/incurred” was used when referring to the determination of the timing of allowable expenses.
  • Updated the FAQ surrounding the single audit reporting deadline, to memorialize its extension from being three months beyond the normal due date to being six months beyond the normal due date.
  • Removed any remaining confusion about whether deductions from revenue (e.g. contractual adjustments, charity care adjustments, bad debt, and any other discounts or adjustments) should be considered when arriving at the amount of patient-care related revenues used in the lost revenue calculation by clarify that gross charges should be reduced by these deductions in order to arrive at the patient-care related revenue.

The PRF application and reporting process can be complex. It’s important to keep an accurate record of your financials for the specific reporting periods. Don’t hesitate to reach out for help applying for ARP and/or PRF or any reporting issues.

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