October 2020 has arrived, and with it not only are there signs of seasons changing, but also continued change in the pandemic funding landscape. It is certainly not time to go into hibernation, or you might miss some of the more recent funding opportunities or the latest guidance relating to required reporting.
On October 1st, the U.S. Department of Health and Human Services (HHS) announced $20 billion dollars in new Phase 3 Provider Relief Funding (PRF). Under this Phase 3 General Distribution allocation, providers that have already received PRF payments can apply for additional funding that considers financial losses and changes in operating expenses caused by the coronavirus. Previously ineligible providers, such as those who began practicing in 2020, are now eligible for funding, as are an expanded group of behavioral health providers confronting the emergence of increased mental health and substance use issues exacerbated by the pandemic.
All eligible providers will be considered for payment against two criteria. First, all provider submissions will be reviewed to confirm they have received a PRF payment equal to approximately 2 percent of patient revenue from prior distributions. Providers that have not received payments of 2 percent of patient revenue will receive a payment that, when combined with prior payments (if any), equals 2 percent of patient revenue. Second, the Health Resources and Services Administration (HRSA) will then calculate an equitable add-on payment that considers a provider’s change in operating revenue from patient care, a provider’s change in operating expenses from patient care, including expenses incurred related to coronavirus, and payments already received through prior PRF distributions.
Providers will have from October 5, 2020 through November 6, 2020 to apply for Phase 3 General Distribution funding.
On October 22nd, the HHS issued updated guidance on reporting requirements that redefines major calculations for healthcare organizations that have received Coronavirus Aid, Relief, and Economic Security Act (Cares Act) Provider Relief Fund distributions. This notice informs recipients of data elements that recipients must submit for calendar years 2019 and 2020 as part of the reporting process.
Recipients will report their use of PRF payments using their normal method of accounting (cash or accrual basis) by submitting the information in two categories. The first category is healthcare related expenses attributable to coronavirus that another source has not reimbursed and is not obligated to reimburse, which may include General and Administrative Expenses (G&A) or healthcare related operating expenses, as defined in the guidance. The second category consists of PRF payment amounts not fully expended on healthcare related expenses attributable to coronavirus. These amounts are applied to patient care lost revenues, net of healthcare related expenses attributable to coronavirus calculated under the first category. Recipients may apply PRF payments toward lost revenue, up to the amount of the difference between their 2019 and 2020 actual patient care revenue.
As an example, assume that Provider A and Provider B have $200,000 and $50,000 of healthcare related expenses attributable to coronavirus, respectively, and lost revenue of $100,000 each. Provider A is eligible for up to $200,000 of Phase 3 funding, i.e. $100,000 category 1+ $0 category 2 ($100,000-$200,000=negative amount, so zero category 2 funding limit), and Provider B is eligible for up to $100,000 of Phase 3 funding, i.e. $50,000 category 1+$50,000 category 2 ($100,000-$50,000).
If recipients have not expend PRF funds in full by December 31, 2020, they will have an additional six months in which to use the 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 difference between 2019 and 2021 actual revenue. For example, the reporting period January-June 2021 will be compared to the same period in 2019, or January-March 2021 will be compared to the same quarter in 2019.
Reporting of the aforementioned first category, unreimbursed G&A and other healthcare related expenses attributable to coronavirus, is required to be more detailed for recipients who received $500,000 or more in PRF payments to include specified sub-categories of expenses. The actual G&A expense sub-categories include mortgage/rent, insurance relevant to operations, work-force related expenses (including direct salary not to exceed $197,300), fringe benefits, lease payments for new equipment or software, utilities, and other costs generally considered part of overhead structure. Healthcare related expense sub-categories include supplies and equipment.
Expenses attributable to coronavirus may be incurred in both direct patient care and overhead activities related to treatment of confirmed or suspected cases of coronavirus, preparing for possible or actual coronavirus cases, maintaining healthcare delivery capacity which includes operating and maintaining facilities, etc.
Lost revenue data elements required to be reported by recipient entities should represent a negative change in year-over-year actual revenue from patient care related sources. Revenue from patient care mix will be required to be reported for 2019 and 2020. Reporting will also include information on assistance received in 2020 other than PRF payments. Total 2019 and 2020 calendar year expenses, with quarterly break down, will be required to be reported for G&A and healthcare related expenses.
Additional non-financial data will also be collected. This would include personnel metrics, patient metrics and facility metrics, as well as change in ownership.
Reporting entities that expended $750,000 or more in aggregated federal financial assistance in 2020 (including PRF payments and other financial assistance) are subject to Single Audit requirements, as set forth in the regulations at 45 CFR 75.501.
As you can see, October activities have resulted in quite a number of funding opportunities and new reporting requirements. While the focus this time of year is often on changes in the colors of the leaves, you might find that the rewards associated with these funding changes may be worthy of your attention. With regard to compliance and reporting, it has become apparent that coordinating the use of funds from various sources may require some analysis and expertise. Please contact our office if you have any questions.
This article contributed by Terri L. Marakos, CPA, CHBC.
