The graph shows the amount of CARES funding that went to rural hospitals in each state and the size of each state's rural population. Funding is represented by the blue bars and is measured on the left axis. The red line represents rural population and is measured on the right axes. (Daily Yonder graphic based on data from U.S. Health and Human Services)

As rural hospitals prepare for another round of federal funding to help them cope with the Covid-19 pandemic, some cash-strapped hospitals are seeking guidance from the U.S. Department of Health and Human Services on how they can use previous relief funds.

The details of that guidance could determine whether some hospitals wind up having to return some of the coronavirus funding they’ve already received.

The hospitals’ questions are technical and intricate, but the possible consequences are simple.

“It (rural hospital relief funding) was like a defibrillator after Covid,” said Brock Slabach, vice president for member services with the National Rural Health Association. “It shocked the system back to life. But, unfortunately, the system is still in intensive care.”

The Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March included $10 billion for rural hospitals to help them treat Covid-19 patients and cover revenue shortfalls from the cancellation of normal business.

With economic disruptions continuing into the fifth month, some hospitals wonder how long they can use CARES funding to replace the money they’ve lost from elective surgery and other procedures that were canceled because of the pandemic.

“Initially, we were making the assumption that this [CARES funding] would have to sustain us for a couple of months,” Slabach said.

“Now you could make the assumption that this could have to sustain you for six to eight months or longer. We don’t know how long this is going to last and right now, the time period during which you can use the money has not been defined.” 

So some healthcare organizations are seeking guidance from the federal government on how the money can be used and whether they might have to pay back any funds that aren’t expended quickly enough.

The CARES Act also provided a special pot of $10 billion for rural hospitals.

“Rural acute care general hospitals and CAHs [Critical Access Hospitals] received a minimum level of support of no less than $1,000,000, with additional payment based on operating expenses,” a spokesman with the Health Resources and Services Administration said.

According to the CARES Act, the money was to be used to “prevent, prepare for, and respond to coronavirus” and that the funding would reimburse hospitals only for “healthcare-related expenses or lost revenues that are attributable to coronavirus.” 

That term “healthcare-related expenses attributable to coronavirus” is a broad one, the spokesman said, and could cover a wide range of services such as supplies to treat Covid-19 patients; equipment used to provide healthcare services for Covid-19 patients; workforce training; developing emergency operations center; reporting Covid-19 test results to federal, state or local authorities; building temporary structures to treat Covid-19 patients; or even acquiring additional resource like equipment, supplies, staff or technology. 

The money could also be used to reimburse the hospitals for “lost revenue attributable to coronavirus,” which could mean any revenue that a healthcare provider lost due to the pandemic – so revenue lost because of fewer outpatient visits, or because of canceled elective procedures or an increase in uncompensated care. 

For rural hospitals that didn’t see any Covid-19 patients, however, how long those lost revenues can stretch out is what is important, said Slabach with the National Rural Health Association. 

“Our concern is centered around rural allocations,” Slabach said. “You can use that money if you have documentation that you used it to treat someone with Covid-19, or that you had reductions in revenue, perhaps from cancelled elective procedures. So, as a rural hospital you may have had your net revenues drop from $2 million a month to only $400,000 a month.” 

The CARES funding could cover those losses, but what isn’t clear is how long hospitals can project out those losses. 

In Lexington, Nebraska, the Lexington Regional Health Center received nearly $4.5 million in total funding from the CARES Act. But Wade Eschenbrenner, the hospital’s CFO, said guidelines from HHS still aren’t clear on how some of the money can be used. 

“Stimulus dollars received don’t directly go for patient care,” he said. “There is a mechanism to submit claims for uninsured patients, and we have. But nothing has processed as of yet, so we don’t really know who or what they will pay.” 

Additionally, the hospital is waiting on guidelines from HHS so they can proceed with their reporting. First quarter reporting to HHS was cancelled, he said, so now they are waiting to see what additional guidance they’ll get for future reporting requirements. 

For hospitals who received Paycheck Protection Program loans from the Small Business Administration, there are even more questions. The biggest of these is whether hospitals that use the PPP program to pay for salaries will have to return some reimbursements from the Centers for Medicare and Medicaid Services (CMS).  

“We need this [PPP] to be classified as [a] grant,” Eschenbrenner said. “Why would you allow a CAH be eligible for the PPP and then turn around and make the first responders give a big chunk the money back to CMS?”

The difference is crucial for a hospitals’ bottom line, Slabach said.

When hospitals are paid through CMS, Slabach said, they are paid on what it cost to provide care. If CMS views the PPP program as income to the hospital, then it could deduct that from the cost of care. 

Essentially, if a hospital gets a $2 million PPP loan, and tells CMS it cost them $10 million to provide care, CMS could say, you didn’t have $10 million in costs, because you didn’t have this $2 million in labor costs, so we’re only going to pay you on $8 million in costs. 

Slabach said the NRHA has requested that CMS view the money from the PPP loans as a grant, but no guidelines had been established as of July 10. 

Medicaid/Medicare is reimbursed to a hospital based on the percentage of patients who are on Medicare or Medicaid, so hospitals with a higher number of recipients, would stand to lose more money than a hospital with a relatively low percentage of recipients. 

According to the American Hospital Association, rural hospitals are more likely to see patients who are older, sicker and poorer than those seen in urban hospitals. 

On July 10, Health and Human Services Secretary Alex Azar said the federal government would be providing another $1 billion to some rural hospitals, as part of a larger $4 billion in funding to hospitals serving vulnerable populations. The funding would go to 500 hospitals, health clinics and health centers in rural areas, as well as to some healthcare facilities in urban areas that provide services to patients in rural areas. Payments will range from $100,000 to $4.5 million for rural designated providers and between $100,000 and $2 million for other providers. 

“We’ve been distributing the Provider Relief Funds as quickly as possible to those providers who have been hardest hit by the pandemic,” Azar said. “President Trump is supporting hospitals in continuing to provide Covid-19 care and returning to everyday procedures, especially hospitals that serve vulnerable and minority populations. Close work with stakeholders informed how we targeted this new round of funds to hard-hit safety-net and rural providers.”

“Rural hospitals are more likely to serve a population that relies on Medicare and Medicaid,” the AMA said in its 2019 Rural Report. “However, these programs reimburse less than the cost of providing care, making rural hospitals especially vulnerable to policy changes in payment of services. Specifically, in 2017 Medicare and Medicaid made up 56 percent of rural hospitals’ net revenue. Yet, overall hospitals receive payment of only 87 cents for every dollar spent caring for Medicare and Medicaid patients.”

This latest round of funding adds to the nearly $175 billion allocated to hospitals by Congress earlier this year. 

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