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June 15, 2020

Health Headlines – June 15, 2020


HHS Sending New Round of COVID-19 Funding to Safety Net Hospitals and Medicaid and Children's Health Insurance Program Providers – On June 9, 2020, HHS announced that it will distribute, through the Health Resources and Services Administration (HRSA), two new rounds of funding to healthcare providers treating low-income and uninsured patients during the COVID-19 pandemic.  HHS plans to distribute approximately $15 billion to eligible Medicaid and Children's Health Insurance Program (CHIP) providers, so long as those providers have not previously received federal aid through the Provider Relief Fund General Allocation during the pandemic.  Additionally, HHS will send $10 billion to certain hospitals primarily serving uninsured and lower-income areas – often known as “safety net” hospitals.  The distributions will come from the Provider Relief Fund and will occur as early as this week for safety net hospitals, HHS announced.  HHS’s full press release is available here.

Details of Medicaid/CHIP Provider Distribution

HHS will use updated provider data to determine its new $15 billion round of Provider Relief Fund payments, which will be at least 2% of reported gross revenue from patient care. Beginning June 10, 2020, an “enhanced” Provider Relief Fund Payment Portal is available for Medicaid and CHIP providers to report annual patient revenue.  To qualify for the new funds, the provider must participate in state Medicaid and CHIP programs and/or Medicaid and CHIP managed care organizations (MCOs), and the provider must not have received General Distribution funding.  The provider must also have directly billed the state program or managed care plan for services between January 1, 2018 and May 31, 2020.  HHS estimates that nearly one million providers will qualify for this round of funding.

Details of Safety Net Hospital Distribution

The new $10 billion distribution of Provider Relief Funds is intended to “recogniz[e] the incredibly thin margins these [safety net] hospitals operate on,” and hospitals should expect the funds to arrive via direct deposit within a week, HHS said.  To qualify, hospitals must have:

  • A Medicare disproportionate payment percentage (DPP) of 20.2% or more;
  • Average uncompensated care per bed of $25,000 or more; and
  • Profitability of 3% or less, as reported to CMS in the hospital’s most recent cost report.

If they qualify, the hospitals can expect to receive an amount within the range of $5 million to $50 million.

In its announcement, HHS also reiterated its call for all hospitals to update their COVID-19-positive inpatient admissions information for January 1, 2020 to June 10, 2020.  HHS will use the information to distribute additional funding rounds to hospitals “in COVID-19 hotspots.”  The deadline to submit updated information is June 15, 2020 at 9:00 P.M. E.T.

Additional Provider Relief Fund data is summarized by HHS here.

Reporter, Lee T. Nutini, Chicago, +1 312 764 6910, lnutini@kslaw.com.

CMS Issues Recommendations for Re-Opening Health Facilities for Non-Emergency, Non-COVID-19 Care – On June 9, 2020, CMS released recommendations for re-opening healthcare facilities to provide non-emergent, non-COVID-19 related health care.  The guide is intended for use by states or regions in Phase II of re-opening under the Trump Administration’s Opening Up America Again Guidelines.  Facilities are advised to check with state and local authorities to determine whether they are in Phase II before following the new CMS guidelines.

CMS recommends that healthcare systems and clinicians preserve capacity to handle potential surges of COVID-19 patients while simultaneously resuming non-emergent but clinically necessary care for non-COVID-19 patients.  In pursuit of that goal, facilities are advised to:

  • Evaluate the trend and incidence of COVID-19 in the area as well as health system capacity to ensure there is no evidence of a COVID-19 rebound;
  • Evaluate the necessity of care based on clinical needs and prioritize service that will result in harm if deferred and at-risk populations who need services most;
  • Establish non-COVID-19 care (NCC) zones where patients can be screened for COVID-19 symptoms, and continue routinely screening all staff;
  • Maintain sufficient resources across all phases of care, including sufficient personal protective equipment (PPE), healthcare workers, facilities, supplies, and screening and testing capacity without jeopardizing the facilities’ surge capacity; and
  • Participate in a data collection system, such as the National Healthcare Safety Network to help track patient outcomes, facility and system impacts, and resource allocation.

CMS advises facilities to continue to take steps to prevent the spread of COVID-19 to its in-person, non-emergent patients, including maintaining separate COVID-19 care zones in separate buildings, floors, or and/or rooms with minimal crossover of patients, staff, supplies, and personnel with non-COVID-19 patient areas.  CMS states that controls should be established to facilitate social distancing, such as minimizing time in waiting areas, spacing chairs, and maintaining low volumes, and the number of visitors should be minimized.

Where possible, CMS advises that hospitalized patients and those undergoing a procedure should receive COVID-19 testing 24 hours prior to the procedure or admission.  If testing is unavailable, patients should self-isolate for 14 days in advance of their procedure or hospitalization.  If a patient tests positive for COVID-19 and clinical staff decide to proceed with care, care should be provided in a COVID-19 care zone.  Clinical staff working in NCC zones should be screened daily upon arrival, and visitors showing symptoms or testing positive should be excluded from the NCC zones.  Staff who will be working in NCC zones should not rotate into COVID-19 zones unless absolutely necessary.  Staffing levels should remain adequate to cover a potential COVID-19 surge in the area.

CMS also recommends that healthcare providers and staff should wear surgical facemasks at all times unless an N95 respirator is required.  Procedures with a higher risk of aerosol transmission should be done with caution and staff should utilize appropriate respiratory protection in the context of a comprehensive respiratory protection program compliant with the Occupational Safety and Health Administration (OSHA) Respiratory Protection Standard (29 C.F.R. § 1910.134).  Patients and visitors should wear cloth face coverings, and facilities should be prepared to provide coverings or masks for patients and visitors who do not have one upon entry.  Facilities should make every effort to conserve PPE, including by following CDC recommendations for extended use and reuse when necessary.

Finally, CMS’s guidelines include recommended sanitation protocols.  Facilities are advised to establish a plan for thorough cleaning and disinfection prior to utilizing spaces for non-COVID-19 patients and to ensure that equipment used for COVID-19 positive patients are thoroughly decontaminated.  

For higher risk patients, CMS advises clinicians to take the following CDC-recommended precautions, including:

  • Developing a care plan with each patient and plan for how to receive urgent care should the need arise, including providing each patient with instructions for a 24/7 call-in line;
  • Providing care remotely to the extent possible;
  • Limiting major surgical procedures to the extent clinically possible; and
  • Screening and providing facemasks to family members or caregivers.

The CMS recommendations are available here.

Reporter, David Tassa, Los Angeles, +1 213 443 4335, dtassa@kslaw.com.

Senate Health, Education, Labor and Pensions Committee Chairman Alexander Solicits Input for Legislation to Fill Gaps, Respond to Next Pandemic – On June 9, Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) released a 40-page white paper, Preparing for the Next Pandemic.  Chairman Alexander is seeking stakeholder input to inform legislation that he hopes to see enacted by the end of this year.  In an effort to translate the lessons learned from the COVID-19 public health emergency into better preparedness for the next pandemic, Chairman Alexander is seeking responses to recommendations posed and questions raised in five key issue areas.

Questions from the five key issue areas include the following:

Tests, Treatments and Vaccines

  • What incentives can the federal government offer to the private sector to encourage development of more medical countermeasures with no commercial market? 
  • Should the federal government create government-owned-contractor-operated facilities to solve supply chain and manufacturing challenges?
  • How can the federal, state and private sector work together to more effectively distribute and administer treatments and vaccines? 
  • How can the United States build manufacturing systems that can rapidly respond to new threats?
  • What is the appropriate federal role in supporting the manufacturing of medical countermeasures, especially vaccines? 
  • How can Congress and HHS make sure CDC and FDA are working more closely with the private sector on diagnostic tests to detect emerging diseases? 
  • How can the United States better leverage public-private partnerships, industry and academic institutions?
  • Are additional or more predictable liability protections needed to incentivize manufacturers of medical products that are not approved or cleared by the FDA for use during a certain emergency to scale up manufacturing capacity?

Disease Surveillance

  • What appropriate role can innovative technologies play to improve public health surveillance? 
  • What privacy protections should accompany new technology? Would these technologies be utilized and maintained by HIPAA covered entities or others? 

Stockpiles, Distribution and Surges

  • How can the Strategic National Stockpile be better managed and how can Congress increase oversight and accountability? 
  • How can states and hospitals improve their ability to maintain a reserve of supplies in the future to ensure the Strategic National Stockpile is the backup and not the first source of supplies during emergencies? 
  • What steps should be taken to ensure that health care providers and first responders have the supplies they need, such as personal protective equipment? 
  • As states and hospitals establish or build their own stockpiles, how will they know what supplies to stockpile? What guidance should the federal government provide on what medical supplies are appropriate?
  • Could states and hospital systems establish their own vendor managed inventory programs with manufacturers and distributors? Should the federal government or states contribute to such hospital stockpiles? 

Public Health Capabilities

  • What specific changes to our public health infrastructure (hospitals, health departments, laboratories, etc.) are needed at the federal, state and local levels?
  • What changes can be made to Public Health Emergency Preparedness and Hospital Preparedness Program to help states prepare and respond more quickly?
  • How can the federal government ensure all states are adequately prepared without infringing on states’ rights and recognizing states have primary responsibility for response? 
  • How should the federal government ensure agencies like CDC maintain an appropriate mission focus on infectious diseases in the periods between emergencies to strengthen readiness to respond when a new threat arises?

Improve Coordination of Federal Agencies During a Public Health Emergency

  • Is the Assistant Secretary for Preparedness and Response the right position to coordinate a whole-of-government response to a pandemic? 
  • What is the appropriate role for HHS and how can the Federal Emergency Management Agency (FEMA) be better integrated into a nationwide pandemic response? 
  • Whose job is it to coordinate supply lines so that personal protective equipment, ancillary supplies and medicines are available and delivered to where they are needed when they are needed?
  • What is the right balance between specific and limited statutory authority and more flexibility for federal preparedness and response programs? 
  • Have well-intended requirements and directives created too much bureaucracy and slowed federal response? 
  • How can federal departments and agencies more effectively work together to respond to public health emergencies? 

On June 23, 2020, the Senate HELP Committee will hold a hearing entitled “COVID-19: Lessons Learned to Prepare for the Next Pandemic.” 

The white paper can be found here.  Comments are due by 5 PM ET on June 26, 2020 and should be submitted to PANDEMICPREPAREDNESS@HELP.SENATE.GOV. 

Reporter, Allison Kassir, Washington, D.C., +1 202 626 5600, akassir@kslaw.com.

Senate Finance Committee Leadership Makes Bipartisan Push to Increase HHS Transparency for COVID-19 Relief – In a letter dated June 11, 2020, Senate Finance Committee Chairman Charles Grassley (R-Iowa) and Ranking Member Ron Wyden (D-Ore.) urged HHS Secretary Alex Azar to take measures to increase transparency around funds distributed by HHS to healthcare providers in connection with the COVID-19 public health emergency under the Public Health and Social Services Emergency Fund (also known as the Provider Relief Fund) and the Medicare Accelerated and Advanced Payment Program. Between these two programs, HHS has allocated almost $210 billion to providers to date and has plans to distribute an additional $65 billion. The letter asks HHS to provide a more comprehensive public source of information regarding these distributions.

HHS has already released certain data concerning these distributions, including a list of providers who have submitted attestations for their distributions from the Provider Relief Fund and certain provider-level data concerning advanced payments. Senators Grassley and Wyden objected that the Provider Relief Fund dataset does not include a breakdown of how much each provider has received from each distribution and lacks unique identifiers such as National Provider Identifier (NPI) numbers. The Senators raised similar objections to the advanced payment data, noting that it does not distinguish between Part A and Part B funds and also lacks NPI numbers.

The letter calls for HHS to provide a “single, comprehensive public source that includes meaningful data,” in order to assess the provision of funds to date, understand the extent to which constituent providers have received funds, inform appropriate distribution of the remaining $65 billion, evaluate the pause of the Accelerated and Advanced Payment Program, and assess future needs. The letter also asks HHS to release details regarding the reports that providers receiving over $150,000 from the Provider Relief Fund will be required to submit to HHS.

Please click here for a copy of the letter. A press release from Senator Grassley’s office concerning the letter is available here.

Reporter, J. Gardner Armsby, Atlanta, +1 404 572 2760, garmsby@kslaw.com.

IRS Releases Proposed Rules on Excise Tax on Executive Compensation at Applicable Tax-Exempt Organizations, Including Tax-Exempt Hospitals – On June 12, 2020, the IRS released proposed regulations on the enforcement of Section 4960 of the 2017 Tax Cuts and Jobs Act.  Section 4960 imposes a 21% excise tax on “applicable tax-exempt organizations” (ATEOs), including certain tax-exempt hospitals, that pay executive employees more than $1 million a year or provide large “parachute” payments upon an employee’s separation from the company.  The proposed regulations define which tax-exempt executives qualify as a “covered employee” and provide other important clarifications and definitions that would guide IRS enforcement of this tax.  Comments are due by August 10, 2020.

The 21% excise tax applies to “covered employees” of ATEOs for tax years beginning after December 31, 2017.  A “covered employee” is defined in the Act as an employee who is one of the five highest-compensated employees of the ATEO in tax years beginning after December 31, 2016.  For purposes of identifying the covered employees of an ATEO, compensation includes not only the payments provided directly by the ATEO, but also payments to those employees by any “related organization,” such as a taxable parent company. 

After Section 4960 was passed, there was concern that this excise tax would extend to foundations and other exempt organizations established by larger, taxable corporations, where highly paid executives of the parent corporation might spend a portion of their time in the management of the ATEO and would therefore be subject to the 21% excise tax.  To address this concern, the regulations provide exclusions to the definition of covered employee under Section 4960.  Under the proposed rule, excluded executives would include those who are not compensated by the ATEO or related tax-exempt organizations and spend less than 100 hours a year performing services for the ATEO, as well as those who work primarily for the taxable parent company and whose compensation does not come directly or indirectly from the ATEO.

In addition to the exceptions to the definition of “covered employee,” the proposed regulations clarify that neither directors nor officers-in-name-only (i.e., an individual having the title of an officer, but who provides only minor services and does not receive and is not entitled to receive compensation for such services) are treated as employees of the ATEO. (Prop. Treas. Reg. §§53.4960-1(e)(2) and 53.4960-1(e)(1), respectively.)

The proposed rule also provides guidance on various other issues, including the definition of “related organizations” through the concept of board control tests, the definition of excess parachute payments, and IRS proposed treatment of split-dollar life insurance arrangements as compensation subject to the excise tax.  

The proposed rule comes over a year after the IRS issued Notice 2019-09 on December 31, 2018, which also provided guidance on these issues.  Until final regulations are issued, an organization may rely on Notice 2019-09, or on these proposed regulations, or the organization may adopt its own reasonable, good faith interpretation of the statutory rules.

The proposed regulations can be found here

Reporter, Ariana Fuller, Los Angeles, +1 213 443 4342, afuller@kslaw.com  

ALSO IN THE NEWS

OCR Publishes Guidance Regarding How HIPAA Permits Providers to Contact Recovered COVID-19 Patients About Blood and Plasmid Donation Opportunities  – On June 12, 2020, the Office for Civil Rights (OCR) with HHS, issued guidance detailing how a HIPAA covered health care provider may use protected health information (PHI) to identify, and contact patients who have recovered from COVID-19, in order to provide them with information about donating blood and plasma. OCR indicated that HIPAA permits covered entities to use or disclose PHI for purposes of health care operations without an individual’s authorization. Health care operations include population-based activities which relate to improving health but are not necessarily connected to a specific individual. Roger Severino, the OCR Director, emphasized that this guidance has been issued to make sure that misconceptions about HIPAA do not hinder a promising COVID-19 response. The guidance may be found here.

King & Spalding Webinar:  Healthcare M&A in a Post-Pandemic Environment  – On June 25, 2020, from 12:00 PM ET to 1:00 PM ET, please join King & Spalding for a webinar titled, “Healthcare M&A in a Post-Pandemic Environment.” Paul Ferninands, Tom Hawk, Torrey McClary, Craig Smith and Phillip Street from King & Spalding, together with Steven Shaefer from Tenet Health, will host a discussion regarding how the COVID-19 pandemic and government lockdown orders will impact mergers and acquisition activity and deal structure for healthcare providers and suppliers. Panelists will focus on:

  • How the pandemic has affected pending transactions;
  • New diligence areas driven by increased oversight by the OIG, CMS, and the SBA;
  • Increased FTC scrutiny of M&A activity in healthcare;
  • Distressed M&A;
  • How transaction documents will need to change to reflect pervasive uncertainty of this environment; and
  • Challenges in post-closing integration processes.

For more information and to register, please click here.

King & Spalding Business Recovery Task Force – Healthcare organizations now must navigate the challenge of both resuming and continuing work in the context of the ever-changing “new normal.”  To help our healthcare clients address this challenge, the King & Spalding Coronavirus Business Recovery Task Force has created a tool for healthcare organizations to assess and strengthen their recovery response.  Access the COVID-19 Recovery Response Assessment for Healthcare Organizations here.  Access the Coronavirus Business Recovery – Return to Work Hub here.