HHS Issues Provider Relief Fund Reporting Requirements

On September 19, 2020, the Department of Health and Human Services (HHS) issued the long awaited reporting requirements for the Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Funds (PRF).  These guidelines were originally due to be published by August 17, 2020, but, on August 14, they were paused by HHS.  The appropriated funds were designed to reimburse eligible healthcare providers for healthcare related expenses or lost revenues attributable to the coronavirus.  These funds were distributed by the Health Resources and Services Administration (HRSA).

Reporting Guidance on Use of Funds

The original terms and conditions were designed to reimburse healthcare providers for coronavirus related expenses or lost revenues.  The definitions were very broadly defined, especially the lost revenue calculation.  The newly released guidelines provide much more specific requirements.  The following are requirements that recipients will use to report their use of the PRF payments.

1. Healthcare related expenses attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse, which may include General and Administrative (G&A) or healthcare related operating expenses.  
2. PRF payment amounts not fully expended on healthcare related expenses attributable to coronavirus are then applied to lost revenues, represented as a negative change in year-over-year net patient care operating income (i.e., patient care revenue less patient care related expenses for the Reporting Entity, defined below, that received funding), net of the healthcare related expenses attributable to coronavirus calculated under step 1. Recipients may apply PRF payments toward lost revenue, up to the amount of their 2019 net gain from healthcare related sources. Recipients that reported negative net operating income from patient care in 2019 may apply PRF amounts to lost revenues up to a net zero gain/loss in 2020.

If recipients do not expend PRF funds in full by the end of calendar year 2020, they will have an additional six months in which to use remaining amounts toward expenses attributable to coronavirus but not reimbursed by other sources, or to apply toward lost revenues in an amount not to exceed the 2019 net gain.

Expenses will need to be recorded in two aggregated categories:  General and Administrative expenses and Healthcare Related Expenses If recipients do not expend PRF funds in full by the end of calendar year 2020, they will have an additional six months in which to use remaining amounts toward expenses attributable to coronavirus but not reimbursed by other sources, or to apply toward lost revenues in an amount not to exceed the 2019 net gain and other healthcare related expenses. 

General and Administrative Expenses

These are the actual expenses incurred over and above what has been reimbursed by other sources.

1. Mortgage / Rent – Monthly payments related to mortgage or rent for a facility
2. Insurance – Premiums paid for property, malpractice, business insurance, or other insurance relevant to operations.
3. Personnel – Workforce-related actual expenses paid to prevent, prepare for, or respond to the coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor payroll, overhead employees, or security personnel
4. Fringe Benefits – Extra benefits supplementing an employee’s salary, which may include hazard pay, travel reimbursement, employee health insurance, etc.
5. Lease Payments – new equipment or software lease
6. Utilities / Operations – Lighting, cooling/ventilation, cleaning, or additional third party vendor services not included in “Personnel”
7. Other General and Administrative expenses – costs not captured above that are generally considered part of overhead structure

Healthcare Related Expenses

These are the actual expenses incurred over and above what has been reimbursed by other sources.

1. Supplies – Expenses paid for purchase of supplies used to prevent, prepare for, or respond to the coronavirus during the reporting period. Such items could include: personal protective equipment (PPE), hand sanitizer, or supplies for patient screening
2. Equipment – Expenses paid for purchase of equipment used to prevent, prepare for, or respond to the coronavirus during the reporting period, such as ventilators, updates to HVAC systems, etc.
3. Information Technology (IT) – Expenses paid for IT or interoperability systems to expand or preserve care delivery during the reporting period, such as electronic health record licensing fees, telehealth infrastructure, increased bandwidth, and teleworking to support remote workforce.
4. Facilities – Expenses paid for facility-related costs used to prevent, prepare for, or respond to the coronavirus during the reporting period, such as lease or purchase of permanent or temporary structures, or to modify facilities to accommodate patient treatment practices revised due to coronavirus.
5. Other Healthcare related expenses – Any other actual expenses, not previously captured above, that were paid to prevent, prepare for, or respond to the coronavirus.

Lost Revenue Attributable to Coronavirus

This category is a significant area of emphasis.  The initial guidelines that HHS published on how to calculate “lost revenue” were vague.  HHS stated that providers could use any reasonable method.  They suggested comparison of actual revenue from current year to prior year OR comparison of current year actual revenue to budget revenue.  However, this guidance provides a more stringent methodology.  This information will need to be reported on a quarterly basis.         

In this section Reporting Entities will need to provide information used to calculate lost revenues attributable to coronavirus, represented as a negative change in year-over-year net operating income from patient care related sources. Once revenue information is provided, cost/expense impacts will be calculated based upon a calendar year comparison of 2019 to 2020 healthcare expenses to determine net operating income. Revenues and expenses in this section include all lost patient care revenues and patient care cost/expense impacts.

While information will be reported quarterly, it would appear that HHS will be making this determination on the full calendar year.  Thus, reductions in revenue during a portion of the year may be offset by upswings later in calendar year 2020.  In addition, the lost revenue is not based on reductions in revenues but “net operating income”.  Net operating income is operating revenue less operating expenses.  This is a significant difference from what the healthcare industry was lead to believe in the beginning.  

Note: Reporting Entities with unused funds after December 31, 2020, must submit a second and final report no later than July 31, 2021, that includes patient care related revenue amounts earned January 1–June 30, 2021.

Revenues also need to be reported by patient care payer mix.  The report will need to capture revenue in the following categories:

1. Medicare Part A + B
2. Medicare Part C
3. Medicaid
4. Commercial Insurance
5. Self-Pay (No Insurance)
6. Other

Other Assistance Received (2020)

This category includes the reporting of non Provider Relief Funds revenues.

1. Treasury, Small Business Administration (SBA) and the CARES Act / Paycheck Protection Program (PPP)
2. FEMA CARES Act
3. CARES Act Testing
4. Local, State, and Tribal Government Assistance
5. Business Insurance
6. Other Assistance

Additional Data

HHS is also requesting additional non-financial data on a quarterly basis.  This includes facility, staffing and patient care data.

1. Personnel Metrics – Total personnel by labor category (full-time, part-time, contract, other: recipient must define), total re-hires, total new hires, total personnel separations by labor category
2. Patient Metrics – Total number of patient visits (in-person or telehealth), total number of patients admitted, total number of resident patients
3. Facility Metrics – Total available staffed beds for medical/surgical, critical care, and other beds

Single Audit Status

Reporting Entities that expended $750,000 or more in aggregated federal financial assistance in 2020 (including PRF payments and other federal financial assistance) are subject to Single Audit requirements, as set forth in the regulations at 45 CFR 75.501.

Summary

The actual reporting form has not yet been published.  The first report will be for the calendar year end December 31, 2020, and is due by February 15, 2021.  The data HHS is requesting is much more detailed than originally anticipated.  The lost revenue calculation will be significantly different.  If a provider experienced a decrease in revenue but was able to reduce expenses, they may not be able to demonstrate “lost revenue” for purposes of this report. 

All providers should make sure that you are properly tracking all of the required data.  Do it now.  Don’t wait.  It is not specifically stated in the reporting requirements, but it would be reasonable to believe that the lost revenue calculation should be on the accrual basis and not cash basis of accounting. 

You can review the HHS guidance via the following links.

Provider Relief Funds Reporting Requirements and Auditing Release

Final Reporting Data Elements

VonLehman will be providing assistance to providers in this reporting.  

For any questions related to the CARES Act Provider Relief Fund, or healthcare reimbursement in general, contact Dave Macke, VonLehman’s reimbursement specialist, at dmacke@vlcpa.com or 800.887.0437.