Medical provider groups are pressuring the Biden administration to ease the rules for a $178 billion COVID-19 relief fund as the first deadline nears for doctors to report on how they spent the money.

Hospital and physician groups are lobbying the administration to release the $24 billion remaining in the fund and extend deadlines for spending and reporting the money, in addition to a series of wonky requests with implications for hundreds of millions of taxpayer dollars.

Medical providers are scheduled to report by Sept. 30 on how they spent the first wave of funds, kicking off the first of many expected administrative audits that could heighten tensions between the industry and the administration.

Hospitals and other providers face staggered deadlines for spending the money based on when they received it. The first round was supposed to have been spent by June 30, and the next batch must be spent by Dec. 31, but hospital groups are lobbying for a broad delay until next June.

The administration’s rules for the money have changed several times in the wake of the emergency distributions, leaving providers such as doctors scrambling to keep up.

“Dollars went out the door and then rules were established after dollars went out,” said Mark Polston, a King & Spalding partner who advises health care clients on regulatory compliance.

Scrutiny of the money has increased since the early days of the COVID-19 emergency. Patient volumes have rebounded since fears of the virus and restrictions on nonemergency procedures tanked profits in spring 2020. Wealthy hospital chains reported increased profits, while safety net hospitals struggled.

The Trump administration’s initial scramble to rush money out the door ended as vaccines became available and doctors and hospitals resumed broader services.

Still, the delta variant’s surge is starting to feel like déjà vu, with cases averaging more than 150,000 per day. Hospitalization rates have reached levels not seen since January, and hospital capacity is overwhelmed in states like Texas and Florida.

The industry’s focus has shifted from Congress to the administration in recent weeks as lawmakers turn their attention to broader policy goals. A Democratic push to pass a $3.5 trillion jobs and infrastructure package is an unlikely target for groups seeking to boost the fund’s coffers again because of restrictions on what can be in bills passed with a simple majority in the Senate under the planned reconciliation process.

Fight over funding

The Health Resources and Services Administration, which administers the Provider Relief Fund under the Department of Health and Human Services, has an estimated $24 billion left to distribute but hasn’t spelled out the timeline, according to an HRSA spokesperson. The fund also includes a separate $8.5 billion set-aside for rural providers.

“HHS is working on approaches to distribute these funds to providers as quickly and equitably as possible while maintaining strong safeguards for taxpayer dollars. We will provide further updates as soon as they are available,” HRSA spokesman Scott Kodish said in a statement.

In June, HHS delayed the initial June 30 deadline for all but the first wave of funding recipients to either spend or forfeit the money. Lobby groups are pushing for an extension on the first wave as well, noting that the majority of COVID-19 cases occurred after the first recipients received the funds.

“It does not make sense to us in a policy manner and in an administrative and a logistical manner to be recouping funds from those hospitals only to perhaps pass them back out again or simply to retain them for use in a different manner,” said Joanna Hiatt Kim, vice president of payment policy with the American Hospital Association.

But HRSA noted that providers have had a full year to spend the money, and the agency currently does not plan to release any further guidance.

“The updated requirements reflect our focus on giving providers equitable amounts of time for use of these funds, maintaining effective safeguards for taxpayer dollars, and incorporating feedback from providers requesting more flexibility and clarity about [Provider Relief Fund] reporting,” Kodish said.

HRSA and Congress have already made a number of concessions to hospital groups, including expanding allowances for sharing funds among sister facilities and rolling back tighter calculations around lost revenue due to the pandemic. The impact of those changes alone could stretch into the hundreds of millions of dollars for a single health system, according to AHA.

One lingering request from the hospital industry is to let facilities choose which year’s budget to use as a reference point for calculating lost revenues. Current rules limit the use of budgets to those approved before March 27, 2020, and differences in budget cycles among hospitals could mean some facilities miss out on funds for part of the year, according to America’s Essential Hospitals policy analyst Shahid Zaman.

“That doesn’t really mesh with the reality of hospitals’ fiscal calendars,” he said.

Lawmakers have already delivered on many of the industry’s requests. In addition to replenishing the fund several times, Congress stepped in to loosen restrictions on HRSA’s definition of lost revenue in the 2021 spending law in December.

Hospitals on the front lines of the resurgent crisis are backed by influential partners in Congress. Last month, a brief debate over whether to use the remaining provider funds as an offset for a bipartisan infrastructure bill was scuttled by powerful congressional allies that included Senate Finance Chair Ron Wyden, D-Ore.

The delta variant’s spread is also likely boosting the industry’s arguments for more flexibility. Sen. Michael Bennet, D-Colo., recently introduced a bill to extend the initial spending deadline to either the end of the year or the end of the public health emergency.

Senators want money released

Meanwhile, Sens. Susan Collins, R-Maine, and Jeanne Shaheen, D-N.H., led nearly half of the Senate on Sept. 2 in a letter urging HRSA to release the rest of the money. The letter follows a series of similar requests from other lawmakers.

Top Senate Republicans, including Minority Leader Mitch McConnell, also wrote to HHS Secretary Xavier Becerra on Sept. 2 questioning why HRSA has not released the remaining money.

“It is baffling to us that the Department has failed to even promulgate a plan to distribute those funds to hospitals and providers disproportionately impacted by the current wave of COVID-19 cases,” they wrote.