Practice Management Alert

If you received Provider Relief Funds, make sure you know these updates.

The Department of Health and Human Services (HHS) released guidance for various coronavirus relief funds — and the specificity of certain aspects may come as a surprise.

Make sure you know the ins and outs of current guidance so you’re not caught unaware by any newly disclosed responsibilities.

Know the Definition of ‘Lost Revenues’

HHS has released a specific definition for lost revenues, and it may not mean what you thought it meant.

Old guidance: CARES Act PRF funds are supposed to help providers replace revenue lost due to COVID-19. In a PRF Frequently Asked Question (FAQ) issued June 18, HHS said “the term ‘lost revenues that are attributable to coronavirus’ means any revenue that you as a health care provider lost due to coronavirus.” The FAQ continues, “providers can use Provider Relief Fund payments to cover any cost that the lost revenue otherwise would have covered, so long as that cost prevents, prepares for, or responds to coronavirus.” And “HHS encourages the use of funds to cover lost revenue so that providers can respond to the coronavirus public health emergency by maintaining health care delivery capacity, such as using Provider Relief Fund payments to cover,” the FAQ says.

New guidance: Now, in its long-awaited new six-page guidance document on PRF reporting, HHS explains that it considers “lost revenues” a “negative change in year-over-year net patient care operating income.” And what is “patient care operating income,” you may ask? HHS defines it as “patient care revenue less patient care related expenses … net of the healthcare related expenses attributable to coronavirus.” After covering COVID-19-related expenses, “recipients may apply PRF payments toward lost revenue, up to the amount of their 2019 net gain from healthcare related sources” (emphasis added).

In other words, providers can only use PRF funds for their “lost revenue” if their loss exceeds their figures from the previous year, says the guidance issued Sept. 19.

What if you didn’t have a gain in the previous year, but a loss? “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,” the new guidance instructs. In other words, PRF funds can only cover up to the amount you lost last year as “lost revenues.”

For example: “If a program generated a $500,000 loss in 2019 and a $1,000,000 loss in 2020 as a result of the pandemic, the HHS [PRF] funds can only cover $500,000 of the loss (the delta between the 2 years),” explains accountant Adam Brigandi with accounting firm Cerini & Associates in Long Island, New York, in online analysis.

HHS’ “position that providers must use a year-over-year net operating income (not revenue) comparison is a significant departure from HHS’ guidance over the past several months that providers can use any reasonable methodology to calculate lost revenues,” highlight attorneys Joe Geraci, Eric Weatherford, Jameson Sauseda, and Andrew Brenton with law firm Husch Blackwell in online legal analysis.

“HHS has significantly modified the calculation of ‘lost revenues’ attributable to the COVID-19 emergency,” agree attorneys Alexis Finkelberg Bortniker, Monica Chmielewski, Thuong Nguyen, and Anil Shankar with law firm Foley. “This is in stark contrast with a previous FAQ issued by HHS,” the attorneys underscore in online legal analysis. “PRF recipients who relied on this prior guidance will need to review and evaluate the effect of the modified definition of lost revenues on their use of PRF payments,” they warn.

“This will be a surprise for some,” warns finance expert Dave Macke with VonLehman & Co. in Fort Wright, Kentucky — and most likely not a pleasant one. “This is not what providers were hoping for.”

The cap on the net loss based on last year’s loss is “also a new change that springs from the HHS imposition of a ‘net operating income’ standard, instead of a true lost revenues calculation,” the Husch attorneys add. “It does, however, allow providers that lost money in 2019 to break even in 2020” at least, they acknowledge.

Mind Reporting Deadlines

In addition to the new definition of lost revenues, the guidance also contains this new information:

• Dates. The reporting system for providers is scheduled to open Jan. 15, 2021, with the first reporting deadline staying at its Feb. 15 date. The second reporting deadline, for those that use funds in 2021, will remain July 31. Providers have until June 30 to spend their PRF funds.
• Providers with a year-end fiscal year can’t report their data until after the year closes on Dec. 31, 2020, anyway, thanks to the new year-over-year comparison requirement for losses, Macke points out.
• Thresholds. Providers that received between $10,000 and $499,999 in PRF funds will use a streamlined reporting method, while those with $500,000 or more must submit more detailed reporting. Providers with less than $10,000 appear to be off the hook for reporting.
• Intervals. Revenues and expenses “will be entered by quarter (e.g., January–March 2019, April–June 2019, etc.),” the guidance says.
• Other assistance. HHS directs providers to include funds from “other assistance received in 2020,” including payments from the Paycheck Protection Program, other CARES Act sources, local/state/tribal governments, business insurance, and “other.” This indicates HHS will be looking to head off “double dipping,” particularly with the PPP payments, Macke expects. And if you had business insurance that covered your COVID-19-related losses, that basically goes back to the government under this program, Macke observes.
• Audits. “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,” HHS says in the new guidance. Upon HHS’ request, “the recipient shall promptly submit copies of such records and cost documentation and the recipient must fully cooperate in all audits the Secretary, Inspector General, or Pandemic Response Accountability Committee conducts,” HHS says on its PRF webpage. “Deliberate omission, misrepresen­tation, or falsification of any information contained in payment applications or future reports may be punishable by criminal, civil, or administrative penalties, including but not limited to revocation of Medicare billing privileges, exclusion from federal health care programs, and/or the imposition of fines, civil damages, and/or imprisonment.”

For more information on how to prepare, see Reader Question “Take These Steps Now for PRF Fund Reporting” on page 6.

Note: The six-page guidance document is at www.hhs.gov/sites/default/files/post-payment-notice-of-reporting-requirements.pdf.