By Jennifer Boese Director CLA Madison Email T. 608.662.7635
Over the weekend, the Department of Health & Human Services (HHS) released the long-awaited reporting guidance for Provider Relief Fund (PRF) recipients. Everyone was looking for this guidance to provide more clarity, but in key ways, the release raises a whole new set of questions. HHS threw a few curveballs, so you’ll want to review our summary below, read the relatively short guidance itself, and consider the implications.
Four Reporting Data Elements
HHS will require PRF recipients to report data in four areas:
- Demographics of entity (TIN etc)
- Health care expenses attributable to COVID.
- Lost revenues from patient care attributable to COVID
- Additional, non-financial information (facility, staffing, CHOWs…)
We take a look at two areas under which HHS departs substantially from its guidance to date.
Health Care Expenses
Under the new guidance, HHS allows two categories of expenses attributable to COVID: General & Administrative (G&A) and Health Care Expenses. This is a change, as operational expenses found under G&A were previously only referenced as an option under lost revenues.
Once those two buckets are determined and added together, a provider would then need to subtract any payments received from insurance and/or patients, and amounts received from federal, state or local governments. This calculation leads to the net allowable COVID expenses for PRF to offset. Further, in another departure from past guidance, PRF would need to be applied to these health care expenses first before providers would look to using PRF to offset lost revenues.
One note, for entities receiving $10,000 – $499,999, they will need to report on these expense buckets in aggregate but not in detail. For those receiving $500,000 and up, they will need to provide additional details under each category.
Another material departure from how HHS has previously discussed it relates to the lost revenues calculations. Up until this weekend, HHS had only discussed the lost revenues calculation as a budgeted to actual, projected to actual or any other reasonable method. Under the new guidance, HHS is looking for lost revenues to be net patient care operating revenue based on a 2019 to 2020 quarterly comparison of patient care revenues and costs.
HHS defines patient care as “health care, services and supports, as provided in a medical setting, at home, or in the community. It should not include: 1) insurance, retail, or real estate values (except for SNFs, where that is allowable as a patient care cost), or 2) grants or tuition.” Providers will need to report information on total and net patient care revenues for both 2019 and 2020 by quarter. HHS will compare the revenues on a quarterly basis after which they will bring in the expense side. HHS will look at total expenses in G&A and health care expense categories for 2019 and 2020 broken out by quarter. Providers would also need to list out any other COVID funding or assistance received, including from FEMA, Paycheck Protection Program and business insurance among others.
Ultimately, HHS will only allow PRF dollars to offset losses capped at 2019 baseline quarterly operating margin, or zero if baseline operating margin was a loss. The take-away here: HHS wants to make providers whole with PRF, but nothing beyond that.
HHS appears to also have changed several dates related to the reporting portal and use of PRF itself.
First, HHS indicates that, “Reporting Entities with unused funds after December 31, 2020, must submit a second and final report no later than July 31, 2021 that includes patient care related revenue amounts earned January 1–June 30, 2021.” While not explicitly stated, this appears to establish a deadline of June 30 for PRF dollars while still keeping the reporting deadline of July 31, 2021.
Second, in an infographic posted on September 23, HHS indicates January 15, 2021 as the date the reporting portal will open up to providers. It had previously said the portal would open up on October 1, 2020.
Your Key Take-Aways
New guidance appears to materially change several items from previous guidance/FAQs:
- Changes what is now considered an allowable “expense” attributable to COVID
- Changes how “lost revenue” is to be calculated
- Changes how PRF dollars are to be staged for use
- Appears to change several deadlines: that PRF funds may need to be used by June 30, 2021 (final report deadline is still the same at July 31, 2021), the reporting portal will not open to providers until January 15, 2021
While we all await further clarification, consider these next steps in the interim:
- Review the guidance in full.
- Review your health care expenses, particularly getting your arms around what could be included in G&A and fully capturing all COVID-related costs.
- Begin determining 2019 patient revenues and costs and compare to 2020 by quarter in order to assess what this new lost revenues calculation means to your practice or organization.