The CARES Act (Coronavirus Aid, Relief and Economic Security Act, H.R. 748) was signed into law Friday, March 27, 2020, intended to stimulate the national economy by providing ~$2 trillion to certain taxpayers and small businesses and other benefits for specific industry segments.

The COVID-19 pandemic has made tangibly apparent the crucial role of healthcare providers, first responders, scientists, suppliers and others along the broader healthcare delivery continuum in the public health and welfare of our public. As such, the CARES Act provides significant benefit to the healthcare industry. The more notable provisions for hospitals are summarized here.

1. Reimbursement for Expenses and Lost Revenue:

$100 billion will be available to hospitals and other providers through the Public Health and Social Services Emergency Fund to reimburse providers for certain expenses and lost revenue related to their preparation for and response to the COVID-19 pandemic. Careful quantification of lost revenues and operating expenses associated with the pandemic will be critical. HHS shall be tasked with oversight of this provision.

2. Medicare Sequestration Suspended:

Medicare sequestration, which is estimated to cut hospital reimbursements by ~$85 billion through 2029, shall be suspended effective May 1, 2020 through December 31, 2020. Once reinstated, however, sequestration shall continue through 2030.

3. Add-on Payment for COVID-19 Discharges:

Hospitals shall receive a 20% add-on payment for all COVID-19 inpatient discharges. Accurate coding of diagnosis codes, condition codes and other related issues will be critical in order to obtain the incremental reimbursement.

4. Accelerated Payment Program Expanded:

To improve short-term liquidity, Medicare’s accelerated payment program shall be expanded through the duration of the pandemic. Hospitals may request HHS make accelerated payments; increase the payment otherwise made to 100% (125% for CAH); continue accelerated payments up to 6 months; allow up to 120 days before recoupment of any accelerated payments; and allow repayment over 12 months from the date of the first accelerated payment. The Act expands eligibility to other hospital designations, including CAH.

5. Medicaid DSH Reductions Postponed:

Medicaid DSH reductions planned for fiscal years 2020 and 2021 shall be delayed. The 2021 reductions will be delayed until December 1, 2020 and reduced from $8 billion in cuts to $4 billion. There shall be no further cuts after FY2025.

6. In-Hospital Attendant Services:

To avoid discharge delays and aid in the transition home-based care, the Act permits Medicaid programs to pay for home- and community-based attendant services rendered in the hospital, including assistance with activities of daily living. Such services must be included in the patient’s plan of care.

7. Access to Post-Acute Services:

To avail needed capacity for acute care hospitals, the Act intends to improve Medicare access to post-acute care facilities during the pandemic. The Act’s post-acute provisions will likely operate in tandem with the recently announced CMS Section 1135 post-acute care waivers. A) Long-term care hospitals shall be permitted to maintain their designation in the event more than 50% of its cases are less intensive; B) Site-neutral payment rates for COVID-19 discharges will be waived; and C) the IRF three-hour rule shall be waived.

8. Loans in Lieu of Layoffs:

Intended to help manage unemployment, hospitals with fewer than 500 employees may be eligible for loans of up to $10 million to pay for employee-related expenses (wages, healthcare benefits, etc.). Loans may be forgiven if layoffs are avoided through the duration of the pandemic.

9. Regional Coordination Encouraged:

$250 million will be appropriated to the Hospital Preparedness Program to encourage local and regional collaboration among health systems regarding emergency preparedness and operations during situations such as this.

What can hospital executives do now?

LBMC shall publish subsequent posts on the CARES Act once more is known, particularly related to eligibility and qualification criteria and application procedures.  Until then, we suggest that hospital executives do the following:

  • Communicate with your Medicare Fiscal Intermediary immediately to inquire about application procedures for accelerated payments.
  • To qualify for the add-on payments, assure that coding personnel and attending physicians are aware of the need to carefully document and code COVID-related diagnoses and condition codes.
  • Assess if/how available long-term hospital providers in your area (LTACH, IRF, etc.) might avail needed capacity in your facility.
  • Carefully quantify the economic impact to your organization, including expense and lost revenue directly associated with the pandemic. Beyond deferral of elective cases, be sure to include decremental volume in your physician clinics and ambulatory programs.
  • Do not delay in applying for available loans described above. It should be anticipated there will be an abundance of applicants, so being an early applicant may avoid “backlog” delays.
  • Lastly, continue to maintain a well-managed revenue cycle. It is widely anticipated that healthcare providers will experience a decline in volume and liquidity through the course of this pandemic. There is likely no worse time than now to let existing receivables grow stale or to accumulate a backlog of open and uncoded charts and unbilled claims.

In Closing

Beyond those specifically for hospitals, the Act also has provisions specific to other healthcare providers, including DME, clinical laboratories, home health, hospice, and community health, and expanded telehealth coverage.  LBMC shall publish a summary of the Act’s implication for these and other healthcare provider types in the coming days.

For more information or to see how LBMC can advise you, please contact Mark Armstrong at