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Home > Provider Relief Fund > Future Payments > Phase 4 General Distribution and
ARP Rural Payments Application Instructions > Payment Methodology


PAYMENT METHODOLOGY


PROVIDER RELIEF FUND PHASE 4 PAYMENT OVERVIEW

In the interest of transparency, HRSA is publishing the methodology that will be
used to determine the payment amounts for Provider Relief Fund (PRF) Phase 4.
Exact figures are not provided in some steps as they will depend on analysis of
the applications received. After applications have been received and analyzed,
HRSA will publish the final figures used to calculate payments.

PRF Phase 4 consists of two components:

 1. Base Payments: Approximately 75% of the funding will be allocated to
    providers based on their reported changes in revenues and expenses for the
    period from July 1, 2020 to March 31, 2021. Smaller and medium-sized
    providers (based on annual net patient care revenues) will receive
    relatively higher percentages of their changes in revenues and expenses from
    this period.
 2. Bonus Payments: Approximately 25% of the funding will be used to make bonus
    payments to providers based on the provider’s level of participation in
    Medicaid, the Children’s Health Insurance Program (CHIP), and Medicare.

Section 1: Application Review Process


STEP 1: TIN VALIDATION

IRS Validation: Once a provider applies for a Phase 4/ARP Rural payment, the
provider's Tax Identification Numbers (TINs) are validated against Internal
Revenue Service (IRS) data in order to ensure that the TIN submitted is a valid,
registered TIN and is associated with the correct name on the provider's tax
return. The most common reason that providers fail IRS validation is that their
application does not list their tax name exactly as it appears on their W-9.
Entities that do not pass the IRS validation are ineligible for a Phase 4
payment.

TIN Validation: Once a provider passes IRS validation, HRSA will also verify
that the entity is a known provider as a program oversight safeguard. HRSA has
compiled a list of 1.4 million TINs associated with valid Medicare, Medicaid,
Children’s Health Insurance Program (CHIP), dental, behavioral health, and other
eligible providers (i.e., the "curated list of providers"). If a provider is not
on the list, HRSA sends the provider's filing TIN and subsidiary/billing TINs to
state/territorial Medicaid/CHIP agencies, the Substance Abuse and Mental Health
Services Administration, or other relevant entities, in order to validate the
provider. If the provider is validated, their TIN is added to the curated list.
Entities that are not on the curated list of providers or those that are
determined to be not valid by HRSA are ineligible for a Phase 4 payment.


STEP 2: CALCULATION OF INITIAL LOSS RATIO AND PROVIDER-TYPE LOSS RATIOS

Once the application cycle closes, HRSA will begin pre-payment risk mitigation
and cost containment activities.

Initial Loss Ratio: HRSA will calculate an initial loss ratio in the following
manner:

 1. Quarterly Losses = Sum of Operating Revenues from Patient Care (see
    Applicant Instructions Fields 13.1-13.6) MINUS Sum of Operating Expenses
    from Patient Care (see Applicant Instructions Fields 14.1-14.6)
 2. Loss Ratio = Quarterly Losses DIVIDED BY Annual Net Patient Care Revenues
    (see Applicant Instructions Field 12)

Provider-Type Loss Ratio: The Phase 4 application includes a field for
self-selected provider type. For each provider type, HRSA will calculate the
loss ratio mean, median, and standard deviation from applicants in that provider
type.


STEP 3: IDENTIFYING FLAGS

HRSA will employ several pre-payment risk mitigation and cost containment
safeguards to ensure that information is accurate and legitimate and that HRSA
is making payments equitably. HRSA will employ the following flags to identify
providers for different treatment or additional review:

 A. New providers in 2019 or 2020 that began delivering patient care between
    January 1, 2019 and December 31, 2020.
 B. Pharmacies and Durable Medical Equipment (DME) suppliers.
 C. Anomalous financial information
    * Single quarter of revenues or expenses greater than X% of the applicant's
      total annual revenues*
    * Loss ratio greater than Nth percentile for their provider type**
    * High potential payment
    
    *Percentage will be determined after analysis of applicants received during
    the application period.
    **Percentile will be determined after analysis of applicants received during
    the application period.

 D. Duplicate or Related Applications.

Note: HRSA does not conduct in-depth reviews of applications flagged as "New
Providers in 2019 and 2020" or "Pharmacy and DME supplier" unless the
application is flagged for another reason. (See Section 2, Step 1 for treatment
of new providers and pharmacy and DME providers.)


STEP 4: IN-DEPTH REVIEW

If C. or D. of the Step 3 flags is raised, HRSA will conduct an in-depth review
of the application and supporting documentation:

 * Anomalous Financial Information—Applications with this flag will be reviewed
   for documentation that reasonably supports the reported figures.
 * Duplicate or Related Applications—HRSA will review the applications to
   determine if they are duplicate or related applications.


STEP 5: PAYMENT ADJUSTMENT DETERMINATIONS

At this step of the payment process, HRSA will make payment adjustment
determinations (see Section 2) based on the provider applications that have been
received and associated flags.

Section 2: Payment Adjustments, Caps, And No Payment


STEP 1: AUTOMATIC PAYMENT ADJUSTMENTS

For New Providers and pharmacy/DME flags that do not undergo a manual review,
HRSA will make the following adjustments to the applications' reported financial
figures:

Flag Adjustments to
Annual NET Patient Care REVENUES Adjustments to
Quarterly Losses New provider in 2019 or 2020 Sum of Operating Revenues from
Patient Care (see Application Instruction Fields 13.1-13.6) Median Provider-Type
Loss Ratio MULTIPLIED BY  Annual Net Patient Care Revenues (see Application
Instructions Field 12) Pharmacies and DME suppliers Capped at 10% of Total
Annual Revenues (see Application Instruction Field 10) Capped by the same ratio
by which Annual Net Patient Care Revenues was adjusted


STEP 2: PAYMENT ADJUSTMENTS BASED ON MANUAL REVIEW

HRSA will make the following adjustments to an applicant’s reported financial
figures based on the in-depth manual review:

Anomalous Financial information Resolved
(documentation fully supports reported figures) Not Resolved - Reasonable
(some inaccuracies in supporting documentation) Not Resolved - Insufficient
(missing or inaccurate information) Loss ratio greater than Nth for their
provider type Paid based on
submitted figures Adjusts Quarterly Losses to Nth percentile based on provider
type No Payment Single quarter revenues or expenses greater than X% of the
applicant's total annual revenues Paid based on
submitted figures Caps Quarterly Losses at mean Provider-Type Loss Ratio No
Payment High potential payment Paid based on
submitted figures Caps Quarterly Losses at mean Provider-Type Loss Ratio No
Payment

Section 3: Calculation of Payments

Of the $17 billion Phase 4 allocation, approximately 75% will be used for Base
Payments, and 25% will be used to make Bonus Payments. 


STEP 1: CALCULATING BASE PAYMENT

After the payment adjustments are calculated, HRSA will calculate the Base
Payment, which is a percentage of a provider's change in quarterly operating
revenues and expenses.  Provider size categories (Small, Medium, and Large) will
be based on annual net patient care revenues, and will be established after the
close of the Phase 4 application and any payment adjustments are made.

Large providers will receive a Base Payment amount that is X%* of the change in
their operating revenues and expenses summed across all three quarters (after
payment adjustments have been considered). For example, in Phase 3, that amount
was 88 percent. Base Payments for medium and small providers will include X% of
the change in their quarterly operating revenues and expenses (after payment
adjustments have been considered) plus a supplement payment equivalent to an
additional percentage (to be determined) of the sum of their change in revenues
and expenses for the three quarters, with small providers receiving the greatest
amount. No provider will receive a Base Payment that exceeds 100% of their
change in quarterly operating revenues and expenses.

* Percentage will be determined after analysis of applicants received during the
application period.

Base Payment for New Applicants: New applicants are defined as having no TINs,
including at the subsidiary level, that have received a General Distribution
payment in any of the previous three phases or a Targeted Distribution payment. 
New applicants will receive a payment that is the greater of:

 * 2% of Annual Net Patient Care Revenues, or
 * Their calculated Base Payment. 


STEP 2: DEDUCTIONS OF PRIOR PRF PAYMENTS FROM BASE PAYMENTS

HRSA will deduct prior Provider Relief Fund payments that were not previously
deducted in Phase 3.  This will allow providers that have never benefitted from
the Provider Relief Fund to receive greater financial support.


STEP 3: CALCULATING BONUS PAYMENTS

Approximately 25% of the Phase 4 funding will be used to make Bonus Payments to
providers based on Medicare, Medicaid, and CHIP administrative claims data from
January 1, 2019 through September 30, 2020. To reduce administrative burden and
streamline application processing, providers will not provide claims data in the
application. HRSA will use data to which it already has access.

 1. HRSA will price Medicaid and CHIP claims data at Medicare rates, in order to
    promote equity between Medicare and Medicaid/CHIP reimbursement rates. 
    There will be some limited exceptions for certain services provided
    predominantly in Medicaid and CHIP, when those services are not typically
    provided (and therefore not priced) by Medicare.
 2. HRSA will calculate the number and type of Medicare, Medicaid, and CHIP
    claims per billing TIN, and multiply them by the relevant prices from Step
    1.
 3. HRSA will adjust the Bonus Payments to the portion of funding set aside for
    bonus payments.
 4. HRSA will then aggregate billing TINs' payments to the filing TIN (i.e., the
    applicant).


AMERICAN RESCUE PLAN (ARP) RURAL PAYMENT OVERVIEW

In the interest of transparency, HRSA is publishing the methodology that will be
used to determine the payment amounts for American Rescue Plan (ARP) Rural
payments. Exact figures are not provided in some steps as they will depend on
analysis of the applications received. After applications have been received and
analyzed, HRSA will publish the final figures used to calculate payments.

The $8.5 billion in ARP Rural payments will be made to providers based on the
amount and type of services they provide to Medicare, Medicaid, and Children’s
Health Insurance Program (CHIP) patients who live in rural areas, as defined by
the Federal Office of Rural Health Policy. In other words, eligible providers
who may not live in an area classified as rural, but who serve rural patients,
may receive ARP Rural payments.

Section 1: Application Review Process


STEP 1: TIN VALIDATION

IRS Validation: Once a provider applies for a Phase 4/ARP Rural Distribution
payment, the provider's Tax Identification Numbers (TINs) are validated against
the Internal Revenue Service (IRS) data in order to ensure that the TIN
submitted is a valid, registered TIN and is associated with the correct name on
the provider's tax return. The most common reason that providers fail IRS
validation is that their application does not list their tax name exactly as it
appears on their W-9. Entities that do not pass the IRS validation are deemed
ineligible for an ARP Rural payment.

TIN Validation: Once a provider passes IRS validation, HRSA will verify that the
entity is a known provider as a part of program oversight. HRSA has compiled a
list of 1.4 million TINs associated with valid Medicare, Medicaid, Children’s
Health Insurance Program (CHIP), dental, behavioral health, and other eligible
providers (i.e., curated list of providers). If a Medicare, Medicaid, or CHIP
provider is on the curated list, the applicant is eligible to apply via the PRF
application portal for ARP Rural payments.


STEP 2: FLAGS AND PAYMENT ADJUSTMENTS

HRSA will conduct an analysis to flag applications to ensure information is
accurate.  HRSA will flag applicants that appear to be duplicate or related. 
HRSA will conduct an in-depth review of the applications and supporting
documentation to determine if they are duplicate or related applications.

 * If an applicant's TIN is duplicate, then HRSA will only pay the last
   application submitted.
 * If an applicant's TIN is unique, but the billing TIN (i.e., TIN that
   submitted the claim for healthcare services) is determined to be a duplicate,
   then HRSA will remove the billing TIN from payment calculation and the
   billing TIN will be classified as "No Pay."

Section 2: Calculation of Payments

Payments will be based on Medicare, Medicaid, and CHIP administrative claims
data from January 1, 2019 through September 30, 2020. To reduce administrative
burden and streamline application processing, providers will not provide claims
data in the application. HRSA will use data to which it already has access.

Step 1. HRSA will price Medicaid and CHIP claims data at national Medicare
rates, to eliminate any impact from the disparities between Medicare and
Medicaid/CHIP reimbursement rates. There will be some limited exceptions for
certain services provided predominantly in Medicaid and CHIP, when these
services are not typically provided (and therefore not priced) by Medicare.

Step 2. HRSA will calculate the number and type of Medicare, Medicaid, and CHIP
claims per billing/subsidiary TIN from January 1, 2019 through September 30,
2020, and multiply them by the relevant prices from Step 1.

Step 3. HRSA will adjust the claims-based payments to the amount of funding
available for ARP Rural (approximately $8.5 billion), while also ensuring that
providers who are eligible for the distribution receive a minimum payment of
$500 per subsidiary billing TIN.

Step 4. HRSA will then aggregate billing TINs' payments to the filing TIN (i.e.,
applicant).

Date Last Reviewed:  November 2021





PHASE 4 GENERAL DISTRIBUTION AND ARP RURAL PAYMENTS APPLICATION INSTRUCTIONS

Overview

Application Instructions

Application Review Process

Payment Methodology

Definitions


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