On September 9, 2021, the Department of Health and Human Services (HHS) announced that it is releasing $25.5 billion in COVID-19 funding to health care providers – $8.5 billion from the American Rescue Plan for providers serving rural patients, and $17 billion from the Provider Relief Fund (PRF) “for a broad range of providers who can document revenue loss and expenses associated with the pandemic.” Consistent with the Coronavirus Response and Relief Supplemental Appropriation Act of 2020, the $17 billion PRF Phase 4 payments will be based on providers’ lost revenues and expenditures between July 1, 2020 and March 31, 2021.
HHS describes the Biden-Harris Administration’s commitment to equity and supporting providers in most need. Accordingly, HHS intends that PRF Phase 4 funding will go to smaller providers “at a higher rate compared to larger providers.” It also intends to “price these bonus payments at the generally higher Medicare rates to ensure equity for those serving low-income children, pregnant women, people with disabilities, and seniors.” HHS’s Press release explains, “To help ensure that these provider relief funds are used for patient care, PRF recipients will be required to notify the HHS Secretary of any merger with, or acquisition of, another health care provider during the period in which they can use the payments.” Detailed information explains the methodology for calculating PRF Phase 3 payments.
Acting Administrator Diana Espinosa of the Health Resources & Services Administration (HRSA), which administers the COVID funds, provided additional details at a September 15 briefing. The PRF Phase 4 distribution will be similar to the Phase 3 distribution. Administrator Espinosa said that 75% of the $17 billion will be distributed to providers to reflect lost revenues and expenses, with higher supplemental payments going to smaller providers, and that 25% of the $17 billion will be distributed to providers serving patients receiving Medicare, Medicaid, or Child Health Insurance Payments. She described a reconsideration process for providers.
The Center for Medicare Advocacy fully supports the Administration’s commitment to equity and supporting providers in need. However, we have questions and concerns about the distribution of the PRF for nursing facilities.
First, how will HRSA define small, medium, and large facilities? Will each facility be evaluated on its own, individually, or will HRSA consider corporate ownership of multiple facilities to determine facility size?
Second, how will HRSA’s methodology for identifying lost revenues ensure that calculations of PRF payments are based on accurate information? As The New York Times reported in January 2018, nearly three-quarters of all nursing facilities in the country buy goods and services, such as therapy services, management services, medications, and rent, often at inflated prices, from companies that they own and control and that as a result of these related party transactions, facilities are able to hide profits as the cost of doing business. Jordan Rau described two New York owners whose family trusts took $40 million of the $145 million that their facilities received as reimbursement over an eight-year period – a 28% profit margin. Rau reported Kaiser Health News’s analysis that facilities engaging in these practices have fewer nurses and aides to provide care to residents, “higher rates of patient injuries and unsafe practices,” and twice as many complaints as other facilities.
Several months later, The Naples Daily News similarly reported that Consulate Health Care, the largest nursing home operator in Florida and sixth largest operator in the country (then, with 210 facilities and 22,059 beds in 21 states), founded in 2006 and owned by the Atlanta-based private equity firm Formation Capital, designed its facilities “to appear cash-strapped.” The article described the chain’s individual facilities as “essentially empty shells, they pay rent, management and rehabilitation service fees to Consulate or Formation Capital-affiliated companies.” One Consulate facility paid $467,022 in management fees and $294,564 in rent to two companies owned by Consulate and Formation Capital.
While self-dealing contracts are not illegal under current law, HHS must take steps to ensure that losses identified by nursing facilities are real and not paper losses claimed by owners and corporations hiding their profit-taking.
Third, will facilities be ineligible for PRF if they have serious deficiencies related to infection control and prevention or other resident care areas? In September 2020, CMS announced that $2 billion of PRF would be distributed as “performance-based incentives” to nursing facilities meeting two criteria: (1) a COVID-19 infection rate below the rate of infections in the county in which the facility is located and (2) a COVID-19 death rate below a nationally-established performance threshold for mortality among nursing home residents infected with COVID-19. In some instances, these “performance-based” payments exceeded the civil money penalties that CMS had imposed against the same facilities for infection control deficiencies. The Colorado Sun reported that 132 Colorado nursing facilities were both fined for poor infection control practices and received performance-based incentive payments. One hundred seventeen of the 132 facilities, which also experienced a COVID outbreak, received more than $10.3 million more than they were fined in federal COVID-19 relief money.
There should be no question that federal funds should be directed to the care of residents, not to facility and corporate profits.
Providers may begin submitting applications for the funding on September 29, 2021.
September 23, 2021 – T. Edelman
 HHS, “HHS Announces the Availability of $25.5 Billion in COVID-19 Provider Funding” (Press Release, Sep. 10, 2021), https://www.hhs.gov/about/news/2021/09/10/hhs-announces-the-availability-of-25-point-5-billion-in-covid-19-provider-funding.html
 Provider Relief Fund Phase 3: Payment Calculation Methodology, https://www.hrsa.gov/sites/default/files/hrsa/provider-relief/phase-3-methodology-overview.pdf
 The Center expressed concern before with the distribution of “performance-based” Provider Relief Funds to facilities that were fined for infection control deficiencies. “Nursing Homes Fined for Infection Control Should Not Receive COVID-19 ‘Performance Based’ Relief Funds” (May 27, 2021), https://medicareadvocacy.org/no-extra-funds-for-poor-performers/
 Jordan Rau, “Care Suffers as More Nursing Homes Feed Money Into Corporate Webs,” The New York Times (Jan. 2, 2018), https://www.nytimes.com/2018/01/02/business/nursing-homes-care
 Ryan Mills and Melanie Payne, “Neglected: Florida’s largest nursing home owner represents trend toward corporate control,” Naples Daily News (May 31, 2018), https://www.naplesnews.com/story/news/special-reports/2018/05/31/floridas-largest-nursing-home-owner-part-growing-national-trend/581511002/
 California State Auditor, Skilled Nursing Facilities: Absent Effective Oversight, Substandard Quality of Care Has Continued, Report 2017-19 (May 2018), https://www.auditor.ca.gov/pdfs/reports/2017-109.pdf
 CMS, “Nursing Home Quality Incentive Program Methodology” (Dec. 7, 2020), https://www.hhs.gov/sites/default/files/nursing-home-qip-methodology.pdf
 Zack Newman and Kevin Vaughn, “117 Colorado nursing homes with COVID outbreaks received both fines and financial assistance from the federal government,” The Colorado Sun (May 9, 2021), https://coloradosun.com/2021/05/09/colorado-nursing-home-fines-coronavirus/ See “Nursing Homes Fined for Infection Control Should Not Receive COVID-19 ‘Performance Based’ Relief Funds” (CMA Alert, May 27, 2021), https://medicareadvocacy.org/no-extra-funds-for-poor-performers/