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Idaho hospitals’ land of confusion over relief funds

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Idaho hospitals grappling with COVID-19 now have to worry about changes in funding rules. Photo courtesy of St. Luke’s Health System

Far from the idylls of Idaho, the U.S. Department of Health and Human Services is the main agency managing the CARES Act healthcare provider relief funds to the nation’s caregivers. Among those that received funds are Idaho’s 43 critical access and acute care hospitals.

Throughout the complex three-phase dispersal of relief funds, HHS evolved its guidance on how the money could be spent with results that may do harm to Idaho’s health care system. Starting in September along with the announcement of the third phase of funding, HHS significantly changed the rules for the use of relief funds — after a lot of that relief money had already been budgeted or spent.

“Many smaller (Idaho) hospitals have invested capital on items that they would otherwise not purchased to support the health of their communities had it not been for the COVID-19 pandemic,” remarked Larry Tisdale, CFO of the Idaho Hospital Association. “They thought they could spend the money.”

Relief fund allocation

During phase one, HHS originally dispersed funds with the guidance that they would cover the extra expenses inflicted by providers responding to the pandemic emergency. This money was crucial for hard-hit hospitals in cities like Boston and New York; and for area slammed by COVID-19 clusters like the upper Wood River Valley in Idaho. It was the emergency funding sent out to the early-impacted hot spots.

Starting in the second phase in early summer, it was increasingly apparent that revenue loss was a growing problem even for large health systems like Saint Alphonsus in Idaho and Oregon.

The lost revenue problem was especially dire for small hospitals like Idaho’s 24 rural critical-access facilities gone anemic from the lack of “elective procedures.” In health care jargon, elective means anything that’s not an emergency, including procedures like malignant tumor removal. To address the revenue deficit, HHS allocated relief funds to make up for revenue lost due to the pandemic with a pot of money dedicated to rural providers.

Through the first two phases of relief funding, HHS told providers that funds could be used to cover extra pandemic-related expenses and revenue losses — and promised to publish guidance on how to sort that out.

Ex post facto rule changes

Mostly concurrent with the announcement of the third phases of relief funding on September 19, HHS clarified its guidance on who was eligible to receive funding, how that funding would be calculated, and how providers would be required to report on how they used the money. Not reporting by HHS 90-day deadlines would result in clawbacks of funds.

The 90-day deadlines were not a new requirement, even though those presented a significant burden for small hospitals without a large administrative staff. Where the September guidance was a significant departure was in how HHS said how to calculate what money could be spent, despite money already dispersed. HHS even titled the revised guidance the “Post-Payment Notice of Reporting Requirements.”

“A lot of Idaho hospitals, especially the smaller hospitals, are (now) sitting on relatively large sums of money that they believed were going to help them through this,” Tisdale explained.

The number of guidance changes and restrictions on how the relief funds could be used — applied retroactively to money budgeted or spent before September — triggered panic throughout the nation’s hospitals. Several members of the U.S. Senate sent a letter protesting both the changes and the ever-evolving guidance from HHS that created an environment of uncertainty throughout the health care sector as to whether to even use the relief funds, for fear of a federal clawback.

photo of senator mike crapo

Mike Crapo

Idaho Senators Jim Risch and Mike Crapo were signatories to that letter, a copy of which was provided to the Idaho Business Review by Crapo. The letter did not pull its punches: “This change in reporting requirements for funds received from the Provider Relief Fund will create uncertainty and financial hardship for hospitals in our states, particularly in rural areas. In the midst of the COVID-19 pandemic, our health care providers need more certainty, not less.”

An additional letter to Sec. Azar from over 230 members of the U.S. House of Representatives, a copy of which was provided to the Idaho Business Review by Idaho Congressman Russ Fulcher, went into deeper detail on some of those changes. For example, the letter expanded on one of the changes as follows: “On June 19, HHS released a frequently-asked question defining lost revenue as any revenue lost due to COVID-19 and said providers should ‘use any reasonable method of estimating the revenue during March and April 2020 compared to the same period had COVID-19 not appeared.’ Providers applied for and budgeted the use of PRF funds based on this HHS guidance.

“However, on September 19, HHS changed the definition of lost revenue, placing many struggling providers in an untenable situation. Now, funding is only accessible for COVID-19-related expenses and lost revenue up to the amount of a provider’s 2019 net patient operating income. This change will dramatically reduce the amount of lost revenue providers can claim, create a massive administrative burden, and may force many struggling providers to return some of their payments.”

photo of russ fulcher

Russ Fulcher

Both Fulcher and Rep. Mike Simpson were signatories of the letter.

Tisdale explained part of the reason the new operating income definitions are onerous, especially for the small critical access hospitals of Idaho: “(They are) in a position that if they had expanded a service late in 2019 with operating expenses and projected revenues, they could use those as a benchmark for the lost revenue. (By including the entire calendar year) the new guidance throws that out the window. For example, if you hired two positions and bought a piece of equipment late in the year that you are now depreciating and operating, and you lost revenue because of COVID-19, you just get no help at all.”

HHS backdowns and revisions

HHS did revise its September guidance on Oct. 22, though given the agency’s multiple guidance documents and clarifications, it is not clear whether congressional pressure played any role in this.

Crapo assured the Idaho Business Review that he and his staff were following the issue actively. On Nov. 6, he emailed that: “I share concerns that HHS’s initial revised definition and calculation of lost revenue would have had a negative impact on rural Idaho providers.  The Provider Relief Fund was intended to help hospitals and other providers during these uncertain economic times and those acting in good faith to use the COVID-19 relief funds appropriately should not face retroactive and burdensome requirement changes.

“Hospitals are on the frontlines of the response to the pandemic, and requiring facilities to repay funds will create more disruption.  Our letter highlighted some of these concerns and HHS has since amended its reporting requirements to increase flexibility and allow providers to use funds toward any year-over-year revenue losses.”

It is not clear that the HHS Oct. 22 revisions will help much. For example, with regards to using all of 2019 as the basis to calculate lost revenue, HHS changed that to: ” For purposes of relief payments for lost revenues attributable to COVID-19, recipients must submit information showing a negative change in year-over-year net patient care operating income.”

This revision may provide some improvement over the Sept. 19 rule; but because of deadline restrictions on reporting, the change is not a complete reversion to the previous guidance of earlier in the year that allowed the use of just-prior conditions as the expense-and-revenue benchmark.

The once and future guidance revisions

Though the three phases of the HHS allocations of relief sounds straightforward, in reality that simple-sounding scheme really encompasses thirteen divisions of the CARES PRF money, each of which has its own terms and conditions guidance documents, some of which now have retroactive changes. Eight of those 13 allocation programs, each with a different deadline, affect hospitals directly. One additional program from phase two also affects rural facilities, which covers two-thirds of all of Idaho’s hospitals.

The HHS guidance documents online comprise literally hundreds of screen views. The Idaho Business Review stopped counting at 200 screen views after scrolling through less than a quarter of the four webpages we identified containing PRF guidance documentation.

The number of clarifications published by HHS is part of that documentation. To convey a measure of the number of changes and uncertainty encompassed by the PRF guidance, we include here a list of the dates on just the PRF clarification-FAQ entries on the agency’s PRF webpages: May 6, May 12, May 20, May 21, May 29, June 3, June 8, June 12, June 19, June 22,  June 30, July 8, July 10, July 14, July 22, July 23, Aug. 4, Aug, 10, Aug. 27, Sep. 3, Oct. 5, Oct. 8, Oct. 9, Oct. 22, Oct. 28, Nov. 2, and Nov. 5.

That is a list of 27 days that HHS posted clarifications of its guidance of 13 different sets of terms and conditions. Many of those dates saw multiple entries on the clarification FAQs. The results of this ever-shifting landscape of rule changes is the drain on hospital staffs which now need to consult the HHS online resources daily, a burden that is disproportionately difficult for Idaho’s small and rural hospitals.

Tisdale concluded: “The more these HHS clarifications come out, the less help the hospitals get. It’s really frustrating. They’ve gone from a time when they thought there was some sustainable help, to now when they feel like they just need to send most, if not all of the money, back to the federal government based on their new guidance … In a lot of ways, Idaho hospitals are being left worse off than if COVID-19 funding had not come along. And those sorts of problems were what we had hoped that the provider relief funds would solve, not create.”

About Catie Clark