Coping with the Financial Challenges of COVID-19: Federal Resources Available to Medical Groups

The spread of COVID-19 has not only required massive mobilization by physician groups and health systems to reorganize the delivery of care and take extreme infection control precautions to protect patients, the public and healthcare workers; it has also severely disrupted the financing of medical care.

Congress passed the fourth spending bill in response to COVID-19 on April 23rd, titled the Paycheck Protection Program and Health Care Enhancement Act of 2020 (HR 266) ,and immediately began planning for a likely fifth rescue package. In total, the four spending packages enacted since January approach $3 trillion. Through emergency declarations and Congressional action, the federal government has also taken unprecedented steps to waive regulations, change payment rules, and direct newly authorized funding.

Many Regulations Temporarily Waived; More Regulatory Flexibility Needed

The CAPP member medical groups are grateful for the swift and sweeping action that federal officials have taken to waive rules that have long-inhibited the use of telehealth to serve Medicare beneficiaries. For beneficiaries enrolled in Medicare Advantage plans, CMS is now allowing diagnoses to be collected from telehealth visits, which will support accurate risk adjustment payments. However, CMS has not yet clarified that telephonic visits could also be the source of updated diagnostic coding for risk adjustment. CAPP member medical groups urge CMS to take this important step to allow telephonic visits to be a source of diagnoses for Medicare Advantage risk adjustment, in recognition of the limitations many seniors face with smartphone technology and broadband access.

CAPP is making an effort to  compile information sources for physician groups who want to use new regulatory flexibilities to deliver care safely to all who need it, and who themselves may need financial support to fulfill their mission during the pandemic. The AMGA has assembled COVID-19 resourcesMcDermott+ Consulting is tracking these and other details for federal COVID-19 spending.

The Families First Coronavirus Response Act, signed into law on March 19, increased the federal matching percentage for state Medicaid programs by 6.2 percentage points to offset the impact that the economic shutdown is having on state budgets and the demand for Medicaid. America’s Essential Hospitals is tracking changes to Medicaid. Public-Private Strategies has helpful resources for small and medium-size businesses.

Federal Rescue Funding Opportunities for Physician Groups and Other Providers

Public Health and Social Services Emergency Fund (CMS)
$100 billion included in CARES Act; $75 billion in H.R. 266
Of the $175 billion allocated, approximately $105 billion spent or committed as of May 4, 2020
Status (as of 5/4/2020)
$30 billion distributed based on share of total 2018 Medicare fee-for-service revenue (most providers eligible);
$20 billion distributed based on share of 2018 net patient revenue (must provide net patient revenue if no Medicare cost report filed);
$10 billion to hospitals located in COVID-19 hotspots;
$400 million in Indian Health Services
Fund for Coronavirus Patients Who are Uninsured (HRSA)
$1 billion included in Families First Coronavirus Response Act
Status (as of 5/4/2020)
Program administered by HRSA, with claims to be paid at Medicare rates until exhausted.
Accelerated Payment Program and Advance Payment Program (CMS loan)
Enables borrowing against anticipated 2020 Medicare revenue;
$100 billion advanced by April 26, 2020

  • $59.6 billion to Part A providers
  • $40.4 billion to Part B providers
Status (as of 5/4/2020)
CMS suspended the Advance Payment Program for Part B providers on April 26, 2020
Paycheck Protection Program (Small Business Administration) loan program (grant in certain circumstances) open to small and medium-size entities
$660 billion in total; up to $10 million per borrower
Apply through current or participating bank
Status (as of 5/4/2020)
First $350 billion exhausted;
$310 billion tranche open as of 5/4/2020
Federal Reserve Main Street lending facility
$600 billion in partnership with commercial banks; mid-size to large businesses eligible
Status (as of 5/4/2020)
Eligibility loosened 5/1/2020

Capitation Helps to Cushion the Revenue Loss in Short Term, but Deferred Demand Must be Met Soon

Many physician groups are in a severe cash crunch, and unable to forecast its duration. Planned care and procedures have been postponed, and almost all face-to-face, non-COVID-19 care has moved to telehealth when feasible. Since most providers are paid on a fee-for-service basis, the deferral of non-COVID care has meant a significant loss of revenue for all sizes and types of physician practices and health systems.

Physician practices that receive a high share of revenue in the form of capitation are not experiencing dramatic revenue loss but must redeploy staff and manage expenses while patient demand is temporarily deferred. They will face a surge in non-COVID-19 demand as patients seek care when it is safe to do so. At the same time, the care of COVID-19 patients has required a costly mobilization of supplies, protective equipment, and skilled, specialized staff. It has required re-engineering facilities and re-deploying technology and other resources. The sickest COVID-19 patients require long, resource-intensive ICU stays. While better positioned to manage the disruption in care delivery, groups and systems that receive a high share of capitated revenue still rely on fee-for-service payments for a portion of their revenue.

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COVID-19 hospital incident command teamElderly sick woman resting in bed