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Provider Relief Fund Reporting Guidelines Change Approach for “Lost Revenue” Calculation

on Wednesday, 7 October 2020 in Health Law Alert: Erin E. Busch, Editor

In its guidance for recipients of payments from the Provider Relief Fund published on September 19, 2020, the U.S. Department of Health and Human Services (“HHS”) provided more detail on recipients’ obligations for reporting on health care related expenses and lost revenues attributable to COVID-19. The most significant change in the updated guidance is that HHS has changed course from information in the Provider Relief Fund FAQs on how recipients can use payments to make up for “lost revenue.”

The document published on September 19, 2020, titled the “General and Targeted Distribution Post-Payment Notice of Reporting Requirements” (hereafter referred to as the “Reporting Guidance”) lists those data elements that recipients of Provider Relief Funds must report to HHS. If a recipient uses all of its Provider Relief Funds in CY 2020, its report to HHS will be due by February 15, 2021; if a recipient has payments remaining after December 31, 2020, it has until June 30, 2021 to use those funds consistent with the statutory language under the Coronavirus Aid, Relief, and Economic Security Act or the “CARES Act” (Pub. L. 116-136), the Paycheck Protection Program and Health Care Enhancement Act (Pub. L. 116-139) (hereafter collectively referred to as the “Acts”) and the applicable Terms & Conditions. If a recipient uses any Provider Relief Funds after December 31, 2020, a second report will be due to HHS by July 31, 2021.

The Reporting Guidance breaks down the “data elements” that must be reported into four (4) categories: (1) Expenses Attributable to Coronavirus Not Reimbursed by Other Sources; (2) Lost Revenues Attributable to Coronavirus; (3) Demographic Information; and (4) Additional Non-Financial Data. Each of these categories will be briefly discussed below.

Health Related Expenses

Recipients will be required to report on “[e]xpenses attributable to coronavirus” which “may be incurred both in treating confirmed or suspected cases of coronavirus, preparing for possible or actual coronavirus cases, maintaining healthcare delivery capacity, etc.” The level of detail that recipients must report will depend on the amount of the Provider Relief Fund payments that they received. For those that received between $10,000 and $499,999, they will be required to report healthcare related expenses attributable to coronavirus in two aggregated categories: (1) G&A expenses and (2) other healthcare related expenses. The Reporting Guidance goes on to state that “[t]hese are the actual expenses incurred over and above what has been reimbursed by other sources.” This limitation is based on language in the Acts appropriating the funds, which states that the payments cannot be used “to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse,” (e.g., expenses reimbursed by a loan under the Paycheck Protection Program).

Recipients that received $500,000 or more in Provider Relief Fund payments are subject to more detailed reporting requirements. They must report healthcare related expenses in the same two broad categories but must also provide detail on the following sub-categories within each:

  • G&A: Mortgage/Rent, Insurance, Personnel, Fringe Benefits, Lease Payments, Utilities/Operations, Other General and Administrative Expenses
  • Other Healthcare Related Expenses: Supplies, Equipment, Information Technology (IT), Facilities, and Other Healthcare Related Expenses

Recipients will first report those healthcare related expenses attributable to coronavirus and any Provider Relief Fund payments that remain may be recognized as “lost revenue” as discussed below. 

Lost Revenue 

The most significant change in HHS’s position is how it wants recipients to report lost revenue. The statutory language appropriating the funds states that the Provider Relief Fund payments are available “to prevent, prepare for, and respond to coronavirus, domestically or internationally, for […] lost revenues that are attributable to coronavirus.” The Terms & Conditions also have similarly broad language stating that the Provider Relief Funds “shall reimburse the Recipient only for health care related expenses or lost revenues that are attributable to coronavirus.” This same broad interpretation was carried through to the Provider Relief Fund FAQs.

The Reporting Guidance requires recipients to provide “information to calculate lost revenues attributable to coronavirus” in two steps. First, recipients must provide the total revenue/net charges from patient care (prior to netting with expenses) for the calendar years 2019 and 2020 broken down by quarter. The total revenue/net charges will be reported for Medicare Part A+B, Medicare Part C, Medicaid, Commercial Insurance, Self-Pay (No Insurance), and Other.

Recipients will also need to report “Other Assistance Received” in 2020, including funds from the Small Business Administration’s Paycheck Protection Program; FEMA CARES Act funding; CARES Act Testing; Local, State, and Tribal Government Assistance; Business Insurance; and Other Insurance. 

After reporting the above information, recipients will need to report total calendar year expenses for 2019 and 2020. These expenses will be broken down into two categories: G&A expenses and healthcare related expenses.

After providing the information for total revenue/net charges and total expenses for calendar years 2019 and 2020, HHS will use these figures to calculate recipients’ “lost revenues” that may be reimbursed by payments from the Provider Relief Fund. The Reporting Guidance states that the “lost revenues” will be “represented as a negative change in year-over-year net operating income from patient care related sources.” The document also states that “[r]ecipients may apply [Provider Relief Fund] payments toward lost revenue, up to the amount of their 2019 net gain from healthcare related sources,” (emphasis added), which would effectively create a total cap on the amount of payments recipients can recognize as lost revenue.

HHS’s change in direction from the language in the Provider Relief Fund FAQs in how recipients could recognize “lost revenue” to the reporting requirements in the Reporting Guidance creates uncertainty for recipients who were operating under the assumption that they could use “any reasonable method of estimating the revenue during March and April 2020 compared to the same period had COVID-19 not appeared” as stated in HHS’s FAQs. The new methodology also penalizes those healthcare providers and suppliers that took steps to cut expenses during the early days of the spread of SARS-CoV-2 in March–May 2020.

In addition to the information reported on expenses and lost revenues attributable to coronavirus, recipients will also be required to report the following general information:

Demographic Information  

Recipients of Provider Relief Fund payments must submit the following demographic information:

  • Reporting entity name
  • TIN
  • NPI
  • Fiscal year-end date
  • Federal Tax Classification

Additional Non-Financial Data 

  • 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.”)
  • Patient metrics (“Total number of patient visits (in-person or telehealth), total number of patients admitted, total number of resident patients.”)
  • Facility metrics (“Total available staffed beds for medical/surgical, critical care, and other beds.”)

Single Audit Requirements

The Reporting Guidance also states that recipients “that expended $750,000 or more in aggregated federal financial assistance in 2020 (including [Provider Relief Fund] payments and other financial assistance) are subject to Single Audit requirements, as set forth in the regulations at 45 CFR 75.501.”

The Reporting Guidance states that the recipient will need to indicate if they are subject to these Single Audit requirements and whether the recipient selected the Provider Relief Fund payments to be included within the scope of the Single Audit. The Reporting Guidance does not provide any additional information on the requirements for Single Audits so expect further explanation in HRSA’s Q&A webinars, or the FAQs on HHS’s Provider Relief Fund website, including how the $750,000 audit threshold interacts with loans received under the SBA’s Paycheck Protection Program.  

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