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CARES Act Healthcare Provider Relief Funds Update

05/15/2020 Dave Macke

In recent weeks, there has been much activity relative to all of the funding pools that are available to healthcare providers. The Small Business Administration (SBA) issued the popular Paycheck Protection Program (PPP) loans designed to assist businesses in meeting payroll, rent, and utilities expenses during an eight-week period during the immediate COVID-19 crisis. In addition, the U.S. Department of Health and Human Services (HHS) issued various pools of funding for healthcare providers through the CARES Act Provider Relief Fund. 

On April 10, the HHS issued $26 Billion of funds to healthcare providers based on their Medicare fee for service payments in 2019, excluding Medicare Advantage. This initial funding was 6.1983% of an individual provider’s Medicare payments in 2019. The remaining $4 Billion of this allocation was issued the following week. This is referred to by the HHS as Tranche 1.  Beginning on April 24, the HHS added an additional $20 Billion to the allocation, referred to as Tranche 2. Automatic payments to providers began on April 24 and continue to be distributed weekly. The HHS stated that the $20 Billion will be added to the initial $30 Billion “to augment their allocation so that the whole $50 Billion general distribution is allocated proportional to providers’ share of net patient revenue” in 2018. This formula amounts to 2% of 2018 net patient revenue from all payors. An individual providers’ amount will be calculated based on 2018 Medicare cost reports or 2018 tax returns if the provider does not file a cost report. One significant difference, is that cost reports are on the accrual basis while tax returns may be either cash basis or accrual basis, thus there will be differences in the revenue amounts for an individual provider. Providers without adequate cost report data on file will need to submit their revenue information to the General Distribution Portal for additional general distribution funds, via this link. Providers who receive their money automatically will still need to submit revenue information to the portal so that it can be verified. This information may also be used in allocating other Provider Relief Fund distributions. In addition to 2018 tax return information, providers will need to estimate revenue losses in March and April 2020. A detailed listing of information that you will need to have before starting the application process is in the HHS FAQs. All of these funding amounts are based on Tax Identification Number (TIN) and not Medicare PTAN number.

Of great concern to providers is whether or not if the funding amount in Tranche 2 is less then Tranche 1 and, if so, will the provider have to pay back the excess to HHS immediately. In the HHS FAQs published by the HHS, it is stated that the HHS does not intend to recoup the excess but that the total funding that a provider receives will be subject to the Terms and Conditions. For example, if a provider received $1,000,000 in Tranche 1 and the Tranche 2 amount is $900,000, the excess of $100,000 will not need to be repaid. However, providers will still have to demonstrate that lost revenues and increased expenses attributable to COVID-19 exceed the amount of the Provider Relief Funding a provider has received. In this example, the provider must demonstrate lost revenues and COVID-19 expenses of at least $1,000,000. It is also important to remember that these amounts cannot be used if reimbursed from other sources or that other sources are obligated to reimburse, such as PPP.

Subsequent to this initial $50 Billion funding allocation, the HHS issued another $12 Billion on May 6, 2020. Of this amount, $10 Billion is allocated to rural acute general hospitals and Critical Access Hospitals, Rural Health Clinics, and Community Health Centers located in rural areas. Rural hospitals will receive a base payment of $3,000,000 with an add-on if operating expenses exceed $10,000,000. Independent Rural Health Clinics will receive a minimum of $100,000 per clinic site, and Community Health Centers will receive a flat amount of $100,000 per rural clinic site.

Each funding amount has a separate Terms and Conditions document, and each payment must be attested to separately. The attestation form, found here, is acknowledgement that the provider has received the funding and agrees to the terms and conditions.  Currently, there are six different Terms and Conditions documents. You should read the applicable documents carefully before attesting to the acceptance.

The deadline to attest was originally 30 days from receipt of the individual funding amount but was recently extended to 45 days from the day of the receipt of the funds. If a provider does not file an attestation, the HHS will consider the provider as having agreed to the Terms and Conditions.

If a provider does not want to accept the funds, they may return their General Distribution payment by going into the Attestation Portal and indicating that they are rejecting the funds, here. This must be done within 45 days or it will be considered that the funds were accepted.  The funds should be returned via ACH with return code “R-23 – Credit Entry Refused by Receiver.” Paper checks are to be handled separately.

The HHS stated that these funding amounts are not loans and do not have to be repaid.  However, there are strings attached. If a provider receives more than $150,000 in total funds under CARES Act Provider Relief Fund, the provider must file quarterly reports no later than ten days after the end of each calendar quarter. Therefore, the first report will be for the quarter ended June 30, 2020, and is due no later than July 10, 2020. This report is to contain the provider’s lost revenues or COVID-19 related expenses. If at the end of the pandemic the provider’s documented lost revenues and expenses are less than the funding amount, the excess is subject to recoupment.

It is important to note that the total sum of all funding allocations is subject to the amount of lost revenues and COVID-19 expenses on an accumulative basis. As of the time of this writing, the HHS has not yet published the report form that providers will have to use on the report due July 10. The HHS reserves the right to audit Relief Fund recipients to ensure that all requirements are met. The HHS will have significant anti-fraud monitoring, and the Office of Inspector General will provide oversight.

Providers should immediately develop an accounting system to properly document lost revenues and COVID-19 related expenses. These expenses are not the base line operating expenses but those expenses above and beyond that are attributable to COVID-19, such as more PPE supplies, technology, etc. Providers should carefully consider what expenses would qualify. Revenue losses attributable to reduction of services rendered need to be carefully thought out as well.  We recommend separately accounting for these expenses in your financial statements for HHS reporting purposes as well as budgetary purposes.

Click here to view the HHS CARES Act Provider Relief Fund in its entirety. For any questions related to the CARES Relief Fund, or healthcare reimbursement in general, contact VonLehman’s reimbursement specialists today at dmacke@vlcpa.com or 800.887.0437.

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