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Economic Recovery From COVID-19: CARES Act Takeaways for Long-Term Post-Acute Care Organizations

Posted by Maureen Hedrick on Apr 16, 2020 7:45:00 AM

Topics: skilled nursing facility consultants, Coronavirus, SNF Consultants, COVID-19, long term post-acute care, CARES Act


cares actLike all providers in the healthcare arena, long-term post-acute care (LTPAC) organizations have been engulfed in a whirlwind of dramatic change by the coronavirus (COVID-19) pandemic. This crisis not only presents enormous clinical challenges for LTPACs, but myriad financial impacts threaten many facilities’ very existence.

Federal relief was sorely needed – quickly – and on March 27, it arrived via the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) which was signed into law by President Trump. The CARES Act offers healthcare providers – LTPACs included – an array of relief measures designed to ease financial and regulatory burdens associated with this crisis.


Broadly speaking, this stimulus package includes $100 billion for the Public Health and Social Services Emergency Fund. The American Health Care Association has subsequently reached out to the Trump administration to ensure that LTPAC providers quickly receive a portion of these resources to help offset healthcare-related expenses or lost revenue directly attributable to COVID-19.

While the outcome of that request has yet to be formally determined, the CARES Act does provide four meaningful relief measures to LTPACs that should be strongly considered: Medicaid Section 1135 waivers; accelerated and advanced payment; sequestration suspension; and MDS submission extension. A brief explanation of these follows.


Section 1135 Waivers

On March 13, 2020, the president declared COVID-19 a national emergency, enabling the Centers for Medicare and Medicaid Services (CMS) to waive certain requirements in Medicare, Medicaid and Children’s Health Insurance Program (CHIP) under section 1135 emergency authority. CMS immediately began accepting and approving state section 1135 Medicaid waiver requests.

These waivers provide relief on two fronts:

  1. Waiver of the qualified hospital stay requirement. This requirement stipulates that a minimum of three consecutive midnights at a hospital facility is needed before any admissions to a skilled nursing facility – including short-stay skilled admissions from the community – are eligible for skilled benefits under Medicare A. This qualifying hospital stay requirement has been in place since 1965 (and Medicare’s extended benefit for skilled nursing care came on the heels of that); but under the waiver, skilled nursing facilities may now admit people who experience dislocations, or are otherwise affected by the COVID-19 emergency. One of the key benefits of this is enabling residents to be skilled in place rather than doing so in hospitals and tying up resources there that are otherwise needed (or could be needed) for COVID-19 patient care.
    As we move through the COVID-19 crisis, LTPACs and hospitals alike will feel the pain from a lack of revenue around elective procedures as such procedures generally are being put on hold. Accordingly, allowing for patients to be admitted directly from the community without a qualifying hospital stay is a sizable benefit. That said, all of the same technical requirements around Medicare must met. The patient must have a skilled diagnosis; they must have a physician certification; and we recommend that facilities have something on file that indicates that the patient/resident could not go to the hospital because doing so would take a hospital bed from a COVID-19 patient.
  2. Regeneration of a resident’s 100-day benefit without having had a 60-day break.  Under the CARES Act, residents who have exceeded their benefit period – typically, 100 days (rolling) under Medicare – can now receive a new benefit period without having met that 60-day break.

These section 1135 waivers are effective March 1, 2020 and will remain so until the current state of emergency is declared over by the Trump administration.


Accelerated and Advanced Payment

As part of the CARES Act, CMS announced the expansion of its accelerated and advance payment program to all Medicare providers and suppliers throughout the U.S. Accelerated and advanced payment essentially is a short-term loan. In cases where Medicare providers/suppliers experience claims submission and/or processing disruptions as a result of a natural disaster or national emergency, accelerated and advanced payments are intended as emergency funding for cash flow issues.

Payments are based on historical payments made to the provider/supplier and are offset by future claims. Specifically, CMS will identify amounts for the previous three months of payments and will pay the provider/supplier in an accelerated way without that provider/supplier having to first submit their claims. The concept is that, when the COVID-19 crisis eventually subsides, CMS will begin to take those monies back under the normal claims submission process. No interest on these payments will be levied; but the monies will be taken back, so before jumping on board, your LTPAC should ensure that this arrangement won’t adversely impact your future cash flow.


Sequestration Suspension

Since 2013, sequestration has been used as a 2% reduction of skilled nursing and Medicare Part B payments. It was put into place with the Balanced Budget Act because skilled nursing had to pay for physicians to get paid more. Under the CARES Act, and beginning on May 1, sequestration reductions are being suspended through December 31, 2020. Therefore, any Medicare payment post-acute care providers or skilled nursing homes for Part A or Part B will not have the 2% reduction automatically applied. Additionally, the CARES Act also extends sequestration through 2031. Previously, it was extended through 2030 under the Balanced Budget Act.

For many facilities, this suspension could increase monthly Medicare revenue by around $3,000.


MDS Submission Extension

Typically, LTPACs face a tight timeline in which to submit a minimum data set (MDS) assessment for payment. Under the CARES Act, that timeline is extended—although at this point, the specific timeline is a bit open-ended. While this could cause claims delays, your LTPAC could utilize the accelerated and advanced payment provision to offset that.


Lack of Clear Guidance in Some Areas Compels Careful Evaluation and Thorough Documentation

LTPAC organizations face a double-edged sword when it comes to leveraging CARES Act opportunities. On the one hand, the provisions above offer great potential benefits, and timeliness will be key to secure dollars. Moreover, LTPACs must still meet significant requirements around the Family First Act (e.g., two weeks sick time as a benefit, the four-month Family Medical Leave Act requirement), so CARES Act relief could help your facility offset those burdens. Yet, a lack of clear current guidance from CMS, the Department of Health and Human Services, the Small Business Administration and other agencies presents a formidable challenge. Therefore, your facility should strongly consider these two recommendations:

  1. Evaluate these CARES Act relief measures in the context of your entire operation to determine the range of potential impacts, good and bad. Accelerated and advanced payment, for example, offers short-term benefits; but it could impact long-term cash flow. If you don’t have an immediate or imminent need for extra cash, it may not be the right move for your LTPAC.
  2. Document everything. Make sure that when this crisis is over and CMS begins to audit your admissions, your documentation is rock-solid. If it is not, auditors very well could take the money back. You must ensure that you’re admitting properly and documenting everything correctly so that you protect your payments moving forward.

For more information about COVID-19, Richter has developed a dedicated COVID-19 Resource Center for skilled nursing facilities which will be regularly updated with the latest information.


Contact Richter’s Healthcare Financial Consulting Professionals

Do you have questions about the CARES Act and its impact on your long-term post-acute care organization, or other financial management challenges? Call Richter’s healthcare financial consulting professionals at 866-806-0799 to schedule a free consultation.


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