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Provider Relief Fund Reporting: Small Changes to “Lost Revenue” Calculation & New FAQs

on Friday, 6 November 2020 in Health Law Advisory: Zachary J. Buxton, Editor

A little over a month after the U.S. Department of Health and Human Services (“HHS”) published its initial guidance on the reporting obligations for recipients of Provider Relief Fund (“PRF”) payments, HHS released updated guidance on October 22, 2020 (the “October Reporting Guidance”). In the updated guidance, HHS softened its position on the calculation of “lost revenues” but it is not likely that the change will have a significant impact on a recipient’s ability to recognize more PRF payments as “lost revenue.”

On September 19, 2020 (the “September Reporting Guidance”), HHS originally proposed calculating “lost revenue” as:

“[A] negative change in year-over-year net patient care operating income (i.e., patient care revenue less patient care related expenses for the Reporting Entity, defined below, that received funding), net of the healthcare related expenses attributable to coronavirus calculated under step 1,” (Note that “step 1” is the provider’s calculation of healthcare related expenses for purposes of reporting).

The original guidance also permitted recipients to apply such amounts “up to the amount of their 2019 net gain from health care related sources.”

The October Reporting Guidance no longer define the calculation for “lost revenue” as the negative change in year-over-year net operating income but now defines it as “[a] negative change in year-over-year actual revenue from patient care related sources.”
The updated guidelines also permit recipients to apply such PRF payments “up to the amount of the difference between their 2019 and 2020 actual patient care revenue.”

In a policy memo titled “Reporting Requirements Policy Update” published on the same day as the October Reporting Guidance, HHS recognized the “significant attention” and “opposition” from “many stakeholders and Members of Congress” to its original proposal to cap use of the PRF payments for lost revenues up to a health care provider’s 2019 revenue. In the memo, HHS stated that it felt it was “inequitable” to allow some providers to be more profitable in 2020 than 2019 by virtue of recognizing those Provider Relief Fund payments as “lost revenues” attributable to the coronavirus. The updated guidance and softening of the interpretation for “lost revenues” was HHS’s response to these complaints.

Both the old September Reporting Guidance and the new October Reporting Guidance cap how much health care providers can recognize as “lost revenue” but the latter has a slightly higher cap. Although HHS touted such change as responding to comments from industry stakeholders, in practice it will not likely amount to a significant difference in what providers can recognize as lost revenues.

HHS made a handful of other changes in the October Reporting Guidance but a number of the original concepts carried over. For example, recipients must make an initial report to HHS by February 15, 2021 of PRF payments used in calendar year 2020. If any PRF payments remain after December 31, 2020, recipients have until June 30, 2021 to use the remaining PRF payments for eligible healthcare related expenses or lost revenues; a second report is due to HHS by July 31, 2021 for these funds. A more in depth summary of these requirements is available here.

After publishing the October Reporting Guidance, days later HHS published an updated Provider Relief Fund FAQs. Most importantly, the updated FAQs provide additional information for recipients of PRF payments that are instructive on appropriate use of the funds and reporting obligations. The additional FAQs added on October 28, 2020 include the following:

  • What is included in use of funds for salaries and employee compensation?
  • When reporting my organization’s healthcare expenses attributable to coronavirus, how do I calculate the “expenses attributable to coronavirus not reimbursed by other sources”?
  • When reporting my organization’s G&A expenses attributable to coronavirus, how do I calculate the “expense attributable to coronavirus not reimbursed by other sources”?
  • Do providers report total purchase price of capital equipment or only the depreciated value?
  • Can providers allocate parent overhead costs to the entities that received CARES Act Provider Relief Funds?
  • When reporting use of funds, how will my organization’s “lost revenues attributable to coronavirus” be calculated?
  • What is the maximum allotment of my organization’s Provider Relief Fund amount that can be allocated to lost revenue in 2020?
  • Is interest earned on Provider Relief Fund funds considered a reportable revenue source to HHS?
  • Can I use 2020 budgeted revenues as a basis for reporting lost revenues?
  • How does cost reimbursement relate to my Provider Relief Fund payment?

As recipients prepare for the reporting deadlines of February 15, 2021 and July 31, 2021, they should begin to take these steps to help prepare for the reporting obligations:

  • Monitor frequent changes to guidance. Monitor current guidance released by HHS on the organization’s reporting obligations for the PRF payments and any new updates released between now and February 15, 2021.
  • Appoint a lead for your organization. Appoint a single individual or a committee within the organization to lead efforts to gather the necessary information to meet the organization’s reporting obligations. This individual or committee will likely work closely with external advisors (i.e., accounting, legal, and consulting firms) to prepare any submissions to HHS.
  • Be prepared to return at least some of the PRF payments. As patient volumes normalized and state-based restrictions on elective procedures were lifted, providers have seen revenues bounce back from the drops in March–May 2020. This has coincided with increasingly strict interpretations from HHS on appropriate use of the PRF payments for lost revenues. Given the normalization in revenues and HHS’s increasingly strict interpretations on use of the funds, recipients of PRF payments should be prepared to return PRF funds that cannot be supported by specific health care expenses related to COVID.

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