Many Recent Provider Relief Fund Changes: Pulling It All Together

• November 22, 2020
• Jennifer Boese

Over the past two months the Department of Health & Human Services (HHS) released its long-awaited Provider Relief Fund (PRF) reporting guidance, modified that guidance twice and released 60+ new or modified FAQs. In today’s blog, we help pull it all together.

Though the original September 19 Post-Payment Notice of Reporting Guidance has been altered, it largely remains intact and serves as the foundation for PRF reporting. Read our September 23 blog and October 27 blog for more details. Today’s blog will provide a high level overview of changes made to the September 19 guidance and subsequently released FAQs as outlined above.

Lost Revenues Attributable to COVID

Under the September 19 guidance, HHS created four main reporting data elements plus subcategories within:

• Demographics – reporting entity, TIN and related information

• COVID expenses – general and administrative; healthcare related

• Lost Revenues – patient care revenues, other assistance received, general and administrative expenses and healthcare expenses

• Other Non-Financial Information – facility, staffing, patient metrics, and changes of ownership

These four categories and reporting requirements remain. However, after significant concerns were raised about the September 19 lost revenues calculation (based on a net patient care operating margin), on October 22 HHS released a modified calculation. The new calculation is based on actual patient care revenues for 2019 compared to 2020. Holdover language from the original lost revenues calculation was removed on November 2 and confirms that COVID expenses do not need to be netted out in the lost revenues calculation.

In sum, the current reporting guidance from HHS on lost revenues is as follows:

“PRF payment amounts not fully expended on healthcare related expenses attributable to coronavirus are then applied to patient care lost revenues. Recipients may apply PRF payments toward lost revenue, up to the amount of the difference between their 2019 and 2020 actual patient care revenue… represented as a negative change in year-over-year actual revenue from patient care related sources.” – Excerpts from PRF November 2 reporting guidance.

While the lost revenues calculation would appear to no longer include general operating expenses/costs (which were previously needed to determine a net patient care operating margin), those data elements still remain in the guidance as it stands currently; therefore, must still be reported.

With respect to the lost revenues calculation, additional FAQs released on October 28 and November 18 elaborate further to explain that:

• PRF is applied to COVID expenses first then lost revenues

• Lost revenue is based on a calendar year comparison of 2019 to 2020

• Recipients may not use a budget-to-actual calculation or use April/May lost revenues to justify PRF

• Recipients with higher 2020 patient care revenues compared to 2019 will have zero lost revenues, but may still use PRF to cover COVID expenses

• Other assistance (FEMA, PPP etc) received is to be considered “operating revenues” and factored into the lost revenues calculation

• Patient revenue payments or settlements received or made to third parties relating to care that is not provided in 2019 or 2020 are excluded from net patient revenue payments

• Entrance fee amortization that is considered operating revenue in financial statements should also be considered as revenue associated with patient services

Expenses Attributable to COVID

For COVID expenses, the reporting guidance and two categories originally released are unaltered. HHS did release a series of FAQs on October 28 and November 18 elaborating on those expenses. A few highlights:

• Allowable expenses are incremental

• To the extent other assistance (ex: PPP or FEMA) reimburses COVID expenses, those are netted out before applying PRF

• Capital equipment and inventory may be fully expensed in cases where the purchase was directly related to preventing, preparing for and responding to COVID. HHS provides several examples of acceptable expenses (ventilators, computerized tomography scanners, and other intensive care unit- (ICU) related equipment put into immediate use or held in inventory; masks, face shields, gloves, gowns; biohazard suits; general personal protective equipment; disinfectant supplies)

• Capital facilities may be fully expensed only in cases where the purchase was directly related to preventing, preparing for and responding to the coronavirus. HHS provides several examples (upgrading a heating, ventilation, and air conditioning (HVAC) system to support negative pressure units; retrofitting a COVID-19 unit; enhancing or reconfiguring ICU capabilities; leasing or purchasing a temporary structure to screen and/or treat patients; leasing a permanent facility to increase hospital or nursing home capacity)

• HHS provides several examples of how to consider and calculate COVID expenses related to PPE, personnel costs etc

• Cost-based reimbursed providers may have no eligible expense to report if the full cost was reimbursed under this methodology. If a ceiling is applied to cost reimbursement and the reimbursed amount does not fully cover the actual COVID expense, then the incremental cost may be eligible

• Providers with cost allocation methodologies in place may allocate normal and reasonable overhead costs to their subsidiaries which may be eligible expenses

Reporting Entity Flexibility

HHS modified its original reporting guidance on October 22 related to the definition of “Reporting Entity.” It now reads:

“Reporting Entity: Entity (at the Tax Identification Number (TIN) level) that received one or more PRF payments, or an entity that meets the following three criteria: 1) is the parent of one or more subsidiary billing TINs that received General Distribution payments, 2) has providers associated with it that were providing diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 on or after January 31, 2020, and 3) is an entity that can otherwise attest to the Terms and Conditions. If the entity has subsidiary TINs that received General Distribution payments, regardless of whether the subsidiary or Reporting Entity formally attested to accepting the payment within the provider portal, the Reporting Entity may report on and direct the use of General Distribution payments. However, if a subsidiary TIN received a Targeted Distribution payment, the subsidiary TIN must report use of funds for that payment, and the parent organization that reports on a subsidiary’s General Distribution payment cannot also report on (or transfer) the subsidiary’s Targeted Distribution payment.” – HHS Reporting Guidance

A subsequent FAQ confirmed that irrespective of which entity (parent or subsidiary) attested to a General PRF Distribution, the Reporting Entity may use and report on those distributions. However, Targeted Distributions are treated differently and the subsidiary is responsible for those.

Your Next Steps

• Review all the new FAQs and reporting guidance.

• Reconsider your organizational structure and PRF distributions in light of the Reporting Entity flexibility. It will be useful for PRF recipients to strategically analyze these changes to determine how or if you may benefit from this flexibility.

• Re-evaluate your capital expenses – equipment and facilities – relative to the new HHS FAQs. Keep in mind PRF will be used first to offset your COVID expenses.

• Recalibrate your lost revenues models under the new methodology. Consider projecting those models out through the end of 2020. This will help you understand how much PRF you may use to offset lost revenues.

• Remember, your first reporting deadline is February 15, 2021 and will be for your use of PRF in calendar year 2020. You have through June 30, 2021 to use your remaining PRF with the final PRF report due July 31, 2021.

How We Can Help

Whether you are a senior living provider, a large health care system or Critical Access Hospital, a physician practice, federally qualified health center, a dentist or other health care provider, CLA is actively working with all of these provider types on Provider Relief Funds and beyond. We are here to know you and help you.

As COVID continues rising, please be safe. With gratitude for health care organizations and health care professionals on the frontlines every day.

Happy Thanksgiving.

, COVID-19 financial management and disaster relief, COVID-19 operational support, COVID-19 regulatory and tax updates, Health Care General, Health Care Policy, Regulations, Uncategorized | Comments Off on Many Recent Provider Relief Fund Changes: Pulling It All Together