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CARES Act Provider Relief Fund: what healthcare providers need to know now

Authored by Alicia Caldwell

The Department of Health and Human Services (HHS) has distributed approximately $77.4 billion of the $175 billion allocated to healthcare providers in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Health Care Enhancement Act. This funding to hospitals and other healthcare entities supports healthcare-related expenses or lost revenue attributable to COVID-19 and ensures uninsured Americans can get testing and treatment for COVID-19. The largest share of the $77.4 billion is the $50 billion General Distribution that HHS allocated to providers who participate in Medicare based on their total net patient revenue from all sources. Other allocations include $12 billion for hospitals in COVID-19 high-impact areas, $10 billion for rural providers, $500 million for tribal healthcare providers and $4.9 billion for skilled nursing facilities. Some providers may receive further, separate funding, including dentists and providers that solely accepts Medicaid. A portion of the Provider Relief Fund is being used to reimburse healthcare providers, generally at Medicare rates, for COVID-related treatment of the uninsured.

On May 22, 2020, HHS announced a 45-day deadline extension for providers who received payments from the Provider Relief Fund to accept the terms and conditions for Provider Relief Fund payments. This announcement means providers have now been granted 90 days from the date they received a payment to accept HHS Terms and Conditions or return the funds. The terms and conditions include measures to help prevent fraud and misuse of the funds. All recipients will be required to submit documents sufficient to ensure that these funds were used for healthcare-related expenses or lost revenue attributable to coronavirus. There will be significant anti-fraud and auditing work done by HHS, including the work of the Office of the Inspector General. The recipient certifies that it will not use the payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.

Recipients who accept the terms of conditions of the funds received will be required to submit a report to the Secretary and the Pandemic Response Accountability Committee, no later than 10 days after the end of each calendar quarter, if they received more than $150,000 in total funds under the CARES Act (which includes funds received from the Paycheck Protection Program), the Families First Coronavirus Response Act) and any future legislation providing funding relief related to COVID-19. The terms and conditions state that the report should contain:

  • the total amount of funds received from HHS under one of the foregoing enumerated Acts;
  • the amount of funds received that were expended or obligated for reach project or activity;
  • a detailed list of all projects or activities for which large covered funds were expended or obligated, including:
    – the name and description of the project or activity; and
    – detailed information on subcontracts or subgrants awarded.

The mandatory reporting begins with the calendar quarter ending June 30, 2020 and HHS has stated that the secretary may request additional reports prior to that date. HHS will provide guidance in the future about the type of documentation that recipients will be expected to submit to its Provider Relief Fund page.

Below is a list of the most commonly asked questions that has been received from provider organizations. Expand the section(s) below to view the answers.

Providers need to submit revenue information to be considered for an additional general allocation payment by June 3, 2020. All providers who automatically received a general distribution payment prior to 5 p.m. on Friday, April 24, 2020 must provide HHS with an accounting of their annual revenues by submitting tax forms or financial statements. The submission of tax forms or financial statements to the portal will also serve as an application for additional funding for those providers that have not already received an additional general distribution payment. If these providers do not submit their revenue information by June 3, 2020, they will no longer be eligible to receive potential additional funding from the $50 billion general distribution. Providers can upload financial information to the General Distribution Portal. Payments will go out weekly, on a rolling basis, as information is validated by HHS. The General Distribution Fund payment portal collects four pieces of information to allocate remaining general distribution funds:

  1. Provider’s “Gross Receipts of Sales” or “Program Service Revenue” as submitted on its federal income tax return;
  2. Provider’s estimated revenue losses in March 2020 and April 2020 due to COVID-19;
  3. Copy of provider’s most recently filed federal income tax return, or audited financial statements if the entity does not file a tax return; and
  4. Listing of TINs for any of the provider’s subsidiary organizations that received relief funds but do not file separate tax returns

This information may also be used to allocate other Provider Relief Fund distributions

In the HHS FAQ, HHS says that generally HHS does not intend to recoup funds as long as a provider’s lost revenue and increased expenses exceed the amount of Provider Relief Funding a provider has received. HHS reserves the right to audit recipients in the future to ensure this requirement is met, and collect and amounts that were made in error or exceed lost revenue or increased expenses due to COVID-19. Financial records, supporting documents, statistical records, and all other recipient records pertinent to a federal award must be retained for a period of three years from the date of submission of the final report to HHS.

This has not been clarified by HHS so as of now; there is no time period eligible for incurring lost revenue or increased expenses.

HHS does not clearly define lost revenue or prescribe an exact method for the provider to calculate its lost revenue. In the Provider Relief Fund General Information FAQ document, HHS lost revenue can be estimated by comparing year-over-year-revenue or by comparing budgeted revenue to actual revenue. It could also be acceptable to look at a historical trend before the COVID-19 business disruption and compare that to the period after. We recommend a trend be at least six months. Due to there being no exact method prescribed by HHS, we recommend the provider document its chosen methodology and rationale, and be consistent with its calculation each reporting period.

All nonreimbursable expenses attributable to COVID-19 qualify for funding. Examples include building or retrofitting new ICUs, increased staffing or training, personal protective equipment, the building of temporary structures. It is important to note that this fund can only be used for nonreimbursable expenses. Any expenses reimbursed or obligated to be reimbursed by insurance or other mechanisms are not eligible. There will be a reconciliation process under which payments will have to be returned to the fund if other sources provide reimbursement for expenses. We anticipate further guidance to come from HHS regarding the qualification of expenses. We encourage providers to carefully track and document all expenses related to COVID-19.

We recommend providers do the following:

  • Create general ledger accounts, by department, to accurately track COVID-19 related funding and expenditures
  • Set up project/activity codes to document payroll costs that are COVID-19 related
  • Establish logs or other system to track supplies/equipment usage/purchases that are COVID-19 related
  • Maintain all invoices related to COVID-19 expenses and document on invoice methodology for allocating expense to COVID-19 departments
  • Establish and document methodology to track and estimate lost revenue due to COVID-19 disruptions in operations
  • Remember a provider cannot submit the same costs to be compensated from one program to be compensated from another program (no double dipping). One person in the organization should be looking at all the stimulus packages broadly

The Provider Relief Fund was increased from $100 billion to $175 billion when the Paycheck Protection Program and Health Care Enhancement Act was signed into law on April 24, 2020. Approximately $77.4 billion has already been distributed to providers but it has yet to be determined how the remaining funds will be allocated.

For more information on this topic, or to learn how Baker Tilly’s Value Architects™ can help, contact our team.

Contact our COVID-19 support team

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