Payment Methodology

Step 1: TIN Validation

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

TIN Validation: After a provider passed IRS validation, HRSA also verified 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 was not on the list, HRSA sent the provider's filing TIN and subsidiary/billing TINs to state/territorial Medicaid/CHIP agencies, in order to validate the provider. In addition, HRSA checked the National Plan and Provider Enumeration System (NPPES) for entities that self-identified as assisted living facilities and dental service providers. If the provider was validated, their TIN was added to the curated list. Entities that were not on the curated list of providers or those that were determined to be not valid by HRSA were ineligible for a Phase 4/ARP Rural payment.

Step 2: Calculation of Initial Loss Ratio, Provider-Type Loss Ratios, and Provider Size

Once the application cycle closed, HRSA began pre-payment risk mitigation and cost containment activities.

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

1. Quarterly Losses (QL) = Change in Operating Revenues from Patient Care between Pre-Pandemic (2019) to COVID (2020 and 2021) (see Applicant Instructions Fields 13.1-13.6) MINUS Change in Operating Expenses from Patient Care between Pre-Pandemic (2019) and COVID (2020 and 2021) (see Applicant Instructions Fields 14.1-14.6)
2. Loss Ratio = QL 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 calculated the mean, median, and 99^th percentile loss ratio among all applicants, and median ratio of losses to quarterly patient care revenue (for new providers), for each provider type.

Applicant Type	Ratio of Losses to Annual Patient Care Revenues - Mean	Ratio of Losses to Annual Patient Care Revenues - Median	99th Percentile	Median Ratio of Losses to Quarterly Patient Care Revenue
Ancillary Services - Chiropractors	10.81%	6.71%	54.33%	9.11%
Ancillary Services - Dental Service Providers	7.02%	2.40%	46.86%	2.90%
Ancillary Services - Diagnostics	6.52%	2.27%	43.25%	3.16%
Ancillary Services - Eye and Vision Service Providers	6.17%	1.11%	44.66%	1.45%
Ancillary Services - Other Ancillary Service Providers	9.89%	5.42%	55.81%	7.47%
Ancillary Services - Pharmacy	4.64%	0.69%	39.90%	1.36%
Ancillary Services - Respiratory, Developmental, Rehabilitative and Restorative Service Providers	11.31%	7.21%	61.07%	9.70%
DME / Suppliers	8.57%	4.26%	51.83%	6.26%
Emergency Medical Service Providers	8.13%	4.14%	48.48%	6.75%
Facilities - Acute Care Hospital (includes Children's Hospital and Academic Medical Center)	4.02%	1.70%	29.72%	2.24%
Facilities - Assisted Living Facilities	7.85%	5.44%	40.16%	7.85%
Facilities - Hospice Providers	6.32%	1.14%	46.02%	1.51%
Facilities - Inpatient Behavioral Health Facilities	6.56%	2.29%	48.31%	3.38%
Facilities - Nursing Homes	7.62%	6.36%	30.27%	9.18%
Facilities - Other Inpatient Facilities	5.44%	1.73%	41.11%	2.37%
Facilities - Residential Treatment Facilities	7.05%	2.77%	47.27%	4.06%
Home and Community - Home and Community-based Support Providers	7.80%	1.98%	65.68%	2.83%
Home and Community - Home Health Agencies	6.94%	2.10%	50.04%	2.98%
Home and Community - Other Services	8.14%	2.49%	57.31%	3.77%
Other	7.80%	2.89%	53.81%	4.70%
Outpatient and Professional - Ambulatory Surgical Center	5.85%	2.30%	38.37%	3.02%
Outpatient and Professional - Behavioral Health Providers	8.38%	1.57%	60.24%	2.09%
Outpatient and Professional - Federally Qualified Health Center	7.38%	4.04%	43.06%	4.97%
Outpatient and Professional - Multi-specialty Practice	7.09%	3.65%	46.75%	5.03%
Outpatient and Professional - Other Outpatient Clinic	8.16%	3.82%	52.01%	5.11%
Outpatient and Professional - Other Single Specialty Practice	8.85%	5.01%	50.65%	6.63%
Outpatient and Professional - Pediatrics Practice	10.01%	8.13%	43.96%	11.04%
Outpatient and Professional - Podiatric Medicine and Surgery Practice	10.54%	6.73%	48.96%	9.61%
Outpatient and Professional - Primary Care Practice	8.99%	5.25%	52.82%	7.00%
Outpatient and Professional - Rural Health Clinic	11.04%	6.63%	71.69%	9.39%

Provider Size: HRSA calculated an applicant’s provider size based on the Annual Patient Care Revenues they reported in Field 12. For providers without a full year of Annual Patient Care Revenues based on the quarterly data, HRSA annualized the provider’s Quarterly Patient Care Revenue from 2020-2021 (see Applicant Instructions Fields 13.4-13.6).

Provider Size	Annual Patient Care Revenues
Small	Less than or equal to $10M
Medium	Between $10M and $100M
Large	Greater than or equal to $100M

Step 3: Identifying Flags

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

1. New providers in 2019 or 2020 that began delivering patient care between January 1, 2019 and December 31, 2020.
2. Pharmacies and Durable Medical Equipment (DME) suppliers
3. Anomalous financial information
   • One or more quarters of revenues or expenses greater than 75% of the applicant's annual patient care revenues
   • Loss ratio greater than 99^th percentile for their provider type
   • High potential payment
   • Other anomalous figures that reflect potential data entry errors
4. Duplicate/related or suspicious applications
5. New applicant with no TINs that had applied to PRF in previous portal applications
6. QL resulting in a $0 Base payment
7. Did not provide healthcare-related services between January 1, 2019 and December 31, 2020 (i.e., no Medicare, Medicaid, and CHIP administrative claims data from January 1, 2019 through September 30, 2020; annual patient care revenues = $0; and no reported quarterly operating revenues and expenses in Calendar Years 2019 and 2020)

Step 4: In-Depth Review

HRSA conducted an in-depth review of the application and supporting documentation in the following circumstances:

• Flagged for “Duplicate/Related or Suspicious Applications”
• Flagged for “Anomalous Financial Information” and not flagged for QL result in $0 Base Payment

HRSA manually reviewed the documentation that the applicant provided in their application to determine if it supported their reported annual patient care revenues, quarterly operating revenues, and quarterly operating expenses.

Annual Patient Care Revenues (APCR) were:

1. Fully supported when:
   • The provider’s reported APCR were within ±5% of the APCR in their documentation; and
   • The APCR in their documentation did not change their provider size classification.
2. Reasonably supported:

• The provider’s reported APCR were more than ±5% of the APCR in their documentation; or
• The APCR in their documentation changed their provider’s size classification.

Quarterly Losses (QL) were:

1. Fully supported when:
   • The provider’s reported QL were within ±5% of the QL in their documentation; and
   • The absolute difference was < $10,000.
2. Reasonably supported:

• The provider’s reported QL were more than ±5% of the QL in their documentation; or
• The absolute difference was ≥ $10,000.

Documentation of APCR and/or QL was deemed insufficient in the following scenarios:

• The provider failed to include documentation as required in the instructions,
• The name and/or TIN in the documentation did not match the applicant,
• The documentation was illegible or undecipherable,
• The applicant’s subsidiary TIN(s) appeared on more than one application and the applicant’s supporting documentation did not contain sufficient support of the ownership of the TIN(s), and/or
• The applicant did not provide healthcare-related services between January 1, 2019 and December 31, 2020.

Step 5: Payment Adjustment Determinations

At this step of the payment process, HRSA made payment adjustments and determinations based on the provider applications that had been received and associated flags.

Step 1: Automatic Payment Adjustments

Applications that were only flagged for pharmacy/DME and/or new 2019 or 2020 did not undergo manual review. HRSA made the following adjustments to the applications' reported financial figures in order to calculate payment amounts:

Flag	Adjustments to Annual Patient Care REVENUES	Adjustments to Quarterly Losses
New provider in 2019	None	Median Provider-Type Loss Ratio MULTIPLIED BY COVID Quarter Patient Care Revenues
New provider in 2020	Sum of Calendar Year (CY) 2020 Q3 and Q4 and CY 2021 Q1 Operating Revenues from Patient Care (see Application Instruction Fields 13.1-13.6)	Median Provider-Type Loss Ratio MULTIPLIED BY COVID Quarter Patient Care Revenues
Pharmacies and DME suppliers	Capped at 10% of Total Annual Revenues	Capped by the same ratio by which Annual Net Patient Care Revenues was adjusted

Step 2: Approach for Applicants Flagged for Quarterly Losses Resulting in $0 Base Payments

Providers flagged for reported quarterly operating revenues and expenses resulting in a $0 base payment did not undergo a manual review even if they were flagged for Anomalous Financial Information (in Step 3). HRSA adjudicated these applications in the following manner:

Flag	Base Payment	Bonus Payment
Quarterly operating revenues and expenses resulting in a $0 Base payment	No Payment	Paid based on administrative claims
Did not provide healthcare-related services between January 1, 2019 and December 31, 2020	No Payment	No Payment

Step 3: Manual Review Outcomes

• Applicants with fully supported or reasonable APCR and fully supported QL were paid based on their submitted QL.
• Applicants with fully supported or reasonable APCR and reasonable QL were paid the lesser of the payments calculated based on their submitted QL and the QL documented in manual review.
• Applicants with fully supported or reasonable APCR and insufficient QL were paid the lesser of the payments calculated based on their submitted QL and the QL calculated based on the mean loss ratio for the applicant’s self-selected provider type.
• Applicants with insufficient documentation of APCR failed to meet the eligibility requirements and did not receive a Phase 4 Base and Bonus payment.
• Applicants with insufficient documentation of the ownership of subsidiary TIN(s) that appear on more than one application resulted in the following:
  • Removal of the subsidiary TIN(s) from the application; and
  • Paying the lesser of the payments calculated based on their submitted QL and the QL calculated based on the mean loss ratio for the applicant’s self-selected provider type.

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

Step 1: Calculating Base Payment

After the adjustments were made, HRSA calculated the Base Payment, which was a percentage of the applicant’s QL (as entered or adjusted described in Step 5 Payment Adjustment Determinations above). This percentage was determined by provider size. Please note that, due to the risk mitigation and cost containment safeguards outlined in this methodology, a provider may have received less than the full percentage for their size (for example, if prior payments need to be deducted).

Size	Annual Net Patient Care Revenues	Percentage of Change in Revenues and Expenses to be Paid
Small	Less than or equal to $10M	45%
Medium	Between $10M and $100M	25%
Large	Greater than or equal to $100M	20%

Base Payment for New Applicants: New applicants were 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 received a payment that is the greater of:

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

Step 2: Deductions From Base Payments

HRSA deducted from the Phase 4 Base Payment any prior Provider Relief Fund payments, which were not previously deducted from the Phase 3 General Distribution payment. The Phase 4 deductions included any prior Provider Relief Fund payments that exceeded 2% of annual patient care revenue or 88% of changes in operating revenues and expenses for the first half of calendar year 2020.

For example, if a provider applied to Phase 3 after receiving $100,000 in prior Provider Relief Fund payments, and 88% of reported change in operating revenues and expenses in the first half of 2020 equaled $75,000, then the provider did not receive a Phase 3 payment. In Phase 4, the remaining $25,000 that was not yet deducted was taken into account when calculating the Phase 4 Base Payment amount.

Step 3: Calculating Bonus Payments

Approximately 25% of the Phase 4 funding was 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 did not provide claims data in the application. HRSA used data to which it already had access.

1. HRSA priced Medicaid and CHIP claims data at the average Medicare rates for all beneficiaries, in order to promote equity between Medicare and Medicaid/CHIP reimbursement rates. HRSA similarly priced Medicare Advantage and Medicaid managed care encounter data at the average national Medicare rates. There were some limited exceptions for certain services provided predominantly in Medicaid and CHIP, when those services were not typically provided (and therefore not priced) by Medicare. For services provided predominantly in Medicaid, Medicaid managed care encounter data was priced at average Medicaid/CHIP rates for all beneficiaries. Medicaid supplemental payments were not factored into bonus payment calculation.
2. HRSA calculated the number and type of Medicare, Medicaid, and CHIP claims per billing TIN, and multiplied them by the relevant prices from Step 1.
3. HRSA adjusted the Bonus Payments to the portion of funding set aside for bonus payments. Given that the aggregate value of adjusted Medicare, Medicaid, and CHIP claims for beneficiaries treated by applicants was significantly larger than the funding available for Phase 4 bonus payments, the adjusted value of these claims was scaled to approximately 0.3% of their original value in order to determine bonus payments.
4. HRSA then aggregated billing TINs' payments to the filing TIN (i.e., the applicant).

Step 1: TIN Validation

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

TIN Validation: After a provider passed IRS validation, HRSA verified that the entity was 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 was on the curated list, the applicant was eligible to apply via the PRF application portal for ARP Rural payments.

Step 2: Flags and Payment Adjustments

HRSA conducted an analysis to flag applications to ensure information was accurate. HRSA flagged applicants that appeared to be duplicate or related.  HRSA conducted an in-depth review of the applications and supporting documentation to determine if they were duplicate or related applications.

• If an applicant's filing TIN appears as a filing TIN on multiple applications and the applicant’s supporting document did not contain sufficient support of the ownership of the TIN, the applicant failed to meet the eligibility requirements and did not receive a payment..
• If a subsidiary TIN(s) on an application appears as TIN(s) on another application and the applicant’s supporting documentation did not contain sufficient support of the ownership of the TIN(s), the TIN(s) were removed from the application.

Payments were be based on Medicare, Medicaid, and CHIP administrative claims for rural beneficiaries from January 1, 2019 through September 30, 2020. To reduce administrative burden and streamline application processing, providers did not provide claims data in the application. HRSA used data to which it already had access.

Step 1. HRSA priced Medicaid and CHIP claims data at the average Medicare rates for beneficiaries residing in rural areas, to eliminate any impact from the disparities between Medicare and Medicaid/CHIP reimbursement rates. HRSA similarly priced Medicare Advantage and Medicaid managed care encounter data at the average rural Medicare rates. There were some limited exceptions for certain services provided predominantly in Medicaid and CHIP, when these services were not typically provided (and therefore not priced) by Medicare. For services provided predominantly in Medicaid, Medicaid managed care encounter data was priced at the average Medicaid/CHIP rates for beneficiaries residing in rural areas. Medicaid supplemental payments were not factored into ARP Rural payment calculation.

Step 2. HRSA calculated the number and type of Medicare, Medicaid, and CHIP claims for rural beneficiaries per billing/subsidiary TIN from January 1, 2019 through September 30, 2020, and multiplied them by the relevant prices from Step 1.

Step 3. HRSA adjusted the claims-based payments to the amount of funding available for ARP Rural (approximately $8.5 billion). All billing TINs that had at least one Medicare, Medicaid, or CHIP claim for a rural beneficiary received a minimum payment of $500. Given that the aggregate value of adjusted Medicare, Medicaid, and CHIP claims for rural beneficiaries treated by applicants was significantly larger than the funding available for ARP Rural payments, the adjusted value of these claims was scaled to approximately 3% of their original value in order to determine payments.

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