Recent CHOW but No Relief Funds? Issues to Consider and Potential Roadmap to Funding

Footnotes for this article are available at the end of this page.

Health care providers that underwent a change of ownership (CHOW) in 2018, 2019, or early 2020 may have yet to receive the billions of dollars of Relief Funds that the Department of Health & Human Services (HHS) distributed in April 2020.  The first tranche of funds, a $30 billion portion of the $100 billion stimulus fund intended to provide relief to healthcare providers during the COVID-19 crisis, was distributed between Friday April 10, 2020 and Friday April 17, 2020. Distribution was proportionate to providers’ share of Medicare fee-for-service reimbursements in 2019.

Providers then began receiving additional funds from the general allocation relief fund on Friday, April 24, 2020.  The additional funds are derived from the $20 billion left from the $50 billion total.  As opposed to the initial tranche that was distributed based on 2019 reimbursement, HHS is allocating this second tranche of funds based on eligible providers’ 2018 net patient revenue as determined by the providers’ Medicare cost reports.

For health care providers that underwent a CHOW in the past few years, post-CHOW filings and updates may determine whether the providers will receive Relief Funds directly from HHS.  With respect to the first tranche of $30 billion, if the seller has remained on record with CMS, the seller may have received the relief funds.  If funds have yet to be received, confirm that CMS received a CMS-855 filing along with a CMS-588 form.  If fully processed, CMS will have issued a “tie-in notice” to the purchaser and properly updated the provider number with the purchaser’s bank account.   Even if a CHOW was properly processed by CMS, given the haste of the distribution of the first tranche of relief funds, the funds could have inadvertently been distributed to the provider of record in a prior year, rather than to a purchaser post-CHOW. It may be incumbent upon the parties to the CHOW to transfer funds from one party (the seller) to the other (the purchaser).  The terms of the purchase agreement may dictate the transfer. A recent CHOW could also impact the distribution of funds if the seller was deemed ineligible to receive funds per the CARES Act and HHS considered the seller, rather than the purchaser, in making distribution decisions given that distributions were made based on 2019 reimbursement.

For the second tranche of $20 billion, the amount remaining from the $50 billion total, HHS has acknowledged that it may not have adequate cost report data for entities that acquired a Medicare-participating provider through a CHOW after 2018 cost reports were due. HHS has accordingly provided a mechanism so that these providers remain eligible for the additional funds. In order for these providers to access the additional general allocation funds, they must submit revenue information to the General Distribution Portal.  The General Distribution Portal opened on April 24, 2020 and is accessible here.  Note that only providers that have already received a payment from the Provider Relief Fund may apply for additional funds;1 providers that have not received any payment from the fund should not use the General Distribution Portal.

The Provider Relief Fund Application Portal collects four pieces of information for use in allocating the remaining General Distribution funds:

  • The provider’s “Gross Receipts or Sales” or “Program Service Revenue” as submitted on its federal income tax return;
  • The provider’s estimated revenue losses in March 2020 and April 2020 due to COVID;
  • A copy of the provider’s most recently filed federal income tax return; and
  • A listing of the tax ID numbers for any of the provider’s subsidiary organizations that have received relief funds, but that do not file separate tax returns.

HHS, through its FAQ responses, provides that the funding is not processed on a first come, first served basis. HHS is processing applications in batches every Wednesday at 12:00 noon EST and it may be beneficial to provide the required information sooner rather than later.

Providers that have not received any payment from the general allocation fund and therefore have been advised not to use the General Distribution Portal, may still receive funds in other distributions.  HHS may distribute these in many ways and has specifically acknowledged that some providers, such as skilled nursing facilities, dentists, and providers that solely take Medicaid, may receive further, separate funding.

If providers have gone through a CHOW in the past few years and have not yet received relief funds, the CHOW may explain why such funds have not been distributed and the steps outlined above may lead to access of the providers’ portion of the $50 billion.

For more information, please contact Hedy S.Rubinger or Alexander B. Foster.

 

[1] See conditions in HHS’ FAQ document.