Home Health & Hospice Week

‘We know it’s not free money,’ CEO says.

If you’re wondering whether you should pocket the Provider Relief Funds the feds automat­ically deposited in your account or return them, you’re in good company.

In discussing their 2020 Quarter 1 earnings, many heads of publicly traded companies said they are mulling over the same question — and coming to varying conclusions.

Encompass Health Corp. is the first home health and hospice company to make a definitive call. On April 10, Encompass “began to receive the CARES Act relief fund payments, for which it did not apply, from the … Department of Health and Human Services,” the Birmingham, Alabama-based chain says in a May 7 Securities and Exchange Commission 8-K filing. “To date, the Company’s inpatient rehabilitation hospitals and home health and hospice agencies have received in aggregate approximately $237 million. On May 7, 2020, the Company informed HHS it would not accept any of the CARES Act relief funds. The Company is currently seeking direction on how to process the repayment of those funds,” Encompass says in the form.

In its April 29 Quarter 1 earnings conference call, the company indicated it was deliberating on the topic. The funds “are subject to terms and conditions, including restrictions on permitted use,” CEO Mark Tarr said in the call. “Without further clarification from HHS, we cannot reasonably estimate what portion, if any, of these funds we will be able to keep and use. We are holding these funds itemized in special accounts and are not spending or dispersing these funds while we assess the terms, conditions and permitted use associated with them.”

More specifically: “There’s not a lot of information relative to the definition of lost revenues or language around appropriate ways to use this for expenses,” Tarr responded to an analyst’s question. “So … we’re taking a very cautious stance on it. We know it’s not free money and we’re being very diligent in our review of the circumstances and language around these funds.”

Encompass CFO Doug Coltharp added more detail. “The current form of the attestation is open ended, and it seems clear that additional terms and conditions can and will be added after the fact; and, we don’t know what those might be or how onerous those might be,” Coltharp explains. Plus “the funds will require extensive reporting and auditing, and those requirements are likely to increase with time. Those requirements could also prove to be somewhat onerous and, as an example, we received funds at 209 separate legal entities and it remains unclear at this point as to whether or not we’ll be able to aggregate those funds for utilization or reporting purposes.”

While Encompass leaders didn’t reference it, the public perception that large for-profit companies shouldn’t take advantage of Provider Relief Fund payments meant to keep struggling health care providers afloat may also have played into the decision.

Other leaders of publicly traded companies expressed hesitation over the funds in their earnings calls, but haven’t yet renounced them. The Pennant Group Inc. received about “$9.9 million in CARES Act Provider Relief Funds for which we did not apply,” Pennant CFO Jennifer Freeman said in the company’s May 14 earnings call. “We have not made a decision to accept or return the funds as we are evaluating their terms and conditions. In the meantime, we are holding these funds in a segregated account and carefully tracking lost revenues and expenses related to COVID-19.”

On April 10th LHC Group Inc. “without application received $87.5 million from the CARES Act” Provider Relief Fund, LHC CFO Josh Proffitt said in the company’s May 8 earnings call. “The ability of LHC Group to retain and utilize the full $87.5 million from this provider relief fund will depend on the magnitude, timing and nature of the economic impact of COVID-19 within LHC Group as well as the guidelines and rules of the federal relief program itself,” Proffitt said.

In contrast, VITAS Corp. parent Chemed Corp. hinted it is planning to take at least part of the funds. Almost word-for-word, CEO Kevin McNamara said the same thing as LHC about its $80.2 million Provider Relief Fund payment received April 10. But later in the April 29 call, CFO David P. Williams said it was “expected that the CARES Act funds received by VITAS will be sufficient to substantially offset anticipated costs and lost revenue related to the COVID-19 pandemic.”

Finally, Amedisys Inc. appears all systems go on keeping its $100 million in Provider Relief Funds. “Consistent with the terms and conditions for the receipt of the payment from HHS, we will utilize the funds to replace lost revenue and healthcare costs related to COVID-19,” Amedisys CEO Paul Kusserow said in the company’s May 8 earnings call.

“And we will properly and fully document the use of these funds in required quarterly reports to HHS.”

Still needed: HHS must issue written guidance with more details on compliant costs and losses for documentation, Kusserow noted.

Note: A list of businesses that have received Provider Relief Funds, including payment amounts, is at https://data.cdc.gov/Administrative/HHS-Provider-Relief-Fund/kh8y-3es6/data. At press time, the list was updated through May 13 with more than 179,300 recipients.