American Rescue Plan’s $8.5 billion rural fund isn’t just for rural providers

American Rescue Plan’s $8.5 billion rural fund isn’t just for rural providers


Rural healthcare providers cheered the Health and Human Services Department’s announcement earlier this month that it was sending $8.5 billion in COVID-19 stimulus funding their way.

But large health systems with more than 100 hospitals and billions of dollars in revenue are also eligible for the money as standalone, rural hospitals, and they intend to get their share.

The grants are part of the American Rescue Plan, a sweeping, $1.9 trillion pandemic relief package Congress approved earlier this year. HHS combined its September 10 news about the rural ARP grants with its decision to release another $17 billion in highly anticipated Provider Relief Fund grants, the fourth distribution under that package.

Eligibility for ARP’s rural fund is based on whether the patients are rural, not the providers. Providers must either be located in or serve patients who live in rural areas and have billed Medicare, Medicaid or the Children’s Health Insurance Program between January 1, 2019 and September 30, 2020. Rural health clinics, critical access hospitals and in-home health, hospice or long-term service providers are also eligible.

The distinction between “providers who serve rural patients” and “rural providers” is important because it opens eligibility to large, urban providers that also treat rural patients, said Brock Slabach, chief operations officer for the National Rural Health Association, a trade group for rural providers.

The NRHA would have preferred the money be reserved specifically for rural providers, not rural patients, although it’s better than nothing, Slabach said.

“It’s not that we are against urban hospitals having access to these funds, but it just changes the dynamic in where that $8.5 billion may end up,” he said.

CommonSpirit Health, a 140-hospital system that brought in north of $33 billion in revenue in the year ended June 30, is among the large systems that plans to apply for the ARP’s rural fund. Dan Morissette, CommonSpirit’s chief financial officer, said on an investor call last week that the Chicago-based system plans to apply for a portion of the ARP rural distribution “as soon as possible.” CommonSpirit will also apply for the fourth phase of PRF grants.

Morissette said CommonSpirit typically receives about 1% of total distributions. The not-for-profit system also received more than $110 million from the PRF distribution targeted specifically for rural hospitals, a small portion of the total $1.5 billion in total PRF grants it has recognized under the program.

CommonSpirit on Thursday said they have 45 rural hospitals.

“Being a big system doesn’t make you ineligible for this rural distribution,” said Nathan Baugh, director of government affairs for the National Association of Rural Health Clinics. “It’s not reserved for small systems that are solely based in rural areas. I’m sure those systems would prefer this funding was just for them and not everyone who serves rural patients.”

HHS has said the amounts providers get from the ARP will be based on the amount of Medicaid, CHIP and/or Medicare services they provided to patients who live in rural areas. The ARP rural payments will generally be based on Medicare reimbursement rates.

“The funding will be distributed with an eye towards equity, to ensure providers who serve our most vulnerable communities will receive the support they need,” HHS Secretary Xavier Becerra said in a statement when the ARP rural fund was announced.

Rural Americans are dying of COVID-19 at more than twice the rate of their urban counterparts, new data from the Rural Policy Research Institute show. Rural areas were largely spared from the pandemic’s initial surge, but that’s changed in recent months with the delta variant.

Applying for the ARP rural fund means simply checking ‘yes’ in a box on the application for PRF’s fourth phase, Baugh said. Since it’s such a low barrier to entry, Baugh said he thinks almost every provider will opt in.

“I suspect a lot of the big systems, because they’re applying for phase four, will go ahead and check ‘yes’ and let the government figure out if they have enough patients to let the government pay them some of the funding from that rural bucket,” he said.

The text of the ARP includes a provision that defines a rural provider as being located in a metropolitan statistical area with fewer than 500,000 residents, but the Health Resources and Services Administration has taken a different approach to implementing the law, focusing the rural designation on the patient, not the provider.

It’s not surprising that large, multi-hospital systems would apply for the rural relief funds, said Gregory Etzel, a partner in the law firm Morgan Lewis’ healthcare practice group.

“Congress appears to have sought to make the reach of those funds broad enough to encompass the rural communities served by such hospitals whether or not the hospital itself is situated in a rural area,” he said.


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