It’s Time for the CARES Act Round 2 Stimulus Payments—Could You Be Left Out?

The portal is open for healthcare providers to apply for additional CARES Act funding, available from a pot of $20 billion in Round 2. The question is, how much will you get? The answer may surprise you.

In determining Round 1 stimulus payments, HHS took your 2019 Medicare fee-for-service (not including Medicare Advantage) payment, divided it by $484 billion, then multiplied that ratio by $30 billion—or, to put it more simply, 6.198% of your 2019 Medicare revenue. Of course, this method weighted payments in favor of providers who do a higher volume of Medicare patient business. Round 2 shifts this weight.

To calculate amounts due under Round 2, HHS is taking a completely different approach. To get the amount you’re due, you must first determine your “individual revenue.” In submitting information to the portal, you are specifically asked to include “gross receipts” from box 1 of your IRS 1040 form (for those filing as individuals or single member LLCs); “program service revenue” from line 9 of your IRS 990 form (for tax-exempt entities); or gross sales from box 1a of your 1120 form (for corporations). If you are a municipal entity that doesn’t file tax forms at all, you should calculate your actual patient revenue based on your most recently audited financial statement. For a complete list of acceptable forms or alternatives, see the HHS FAQs at www.hhs.govhttps://s3.amazonaws.com/HMP/hmp_ln/imported/20200425-general-distribution-portal-faqs.pdf.

For the Round 2 formula, HHS takes this revenue from your latest tax filing, divides by $2.5 trillion, then multiplies by $50 billion. Put simply, this becomes 2% of the revenue reported on your latest tax filing or audited financials (yes, they really could have made it that easy!). The resulting amount is your expected combined general distribution. Note the word combined: This means when the Round 2 amount is calculated, you must subtract the amount you received in Round 1. If the remaining balance is still positive, that amount will be due to you in Round 2. If the Round 2 calculated amount is less than what you received in Round 1, you would not be eligible for additional funds.

To demonstrate these possibilities, let’s look at two examples:

If in 2019 you received $1 million from Medicare and had $4 million in total gross receipts (i.e., Medicare is 25% of your total revenue), then your Round 1 payment would have been $61,980 ($1M x 6.198%), and your Round 2 estimated payment would be $80,000 ($4M x 2%). Subtracting the $61,980 you already received from Round 1 results in a Round 2 payment of $18,020 you’d be due.

However, if in 2019 you received the same $1 million from Medicare but only $2 million in total gross receipts (i.e., Medicare is 50% of your total revenue), then your Round 1 payment would have still been $61,980 ($1M x 6.198%), but your Round 2 estimated payment would be $40,000 ($2M x 2%). If you subtract the amount you received in Round 1, the Round 2 amount becomes negative. The bad news is, since you were paid more in Round 1 than what you are due under Round 2 calculations, you would not be eligible for any additional funds. The good news is that we do not think you would have to refund any “overage” you received in Round 1.

While this may seem unfair at first glance, it really is a balancing of the scale. As we said in the beginning, the initial payments favored those who do mainly Medicare patient business and paid little to nothing to those who provide care primarily to Medicaid or commercially insured patients. Round 2 now allows for those providers with a higher payer mix of commercial insurance and Medicaid to get more. For many EMS providers, Medicare patients make up a large percentage of their paid transports. If that sounds like your organization, then you may be left out when it comes to Round 2. (We say may because things seem to change by the hour, so it can't hurt to still apply even if you think you may not get additional funds.)

But if that is the case, don’t feel like you were cheated—it just means you got proportionately more money in Round 1, and you got it earlier, without having to do anything!

Christopher Kelly and Dan Pedersen are lawyers with Page, Wolfberg & Wirth LLC, a law firm that focuses on healthcare law as it relates to the EMS and ambulance industry. This article is not intended as legal advice. For more information or assistance, reach them at 717-691-0100 or info@pwwemslaw.com.