With the COVID-19 pandemic, there continues to be rapid change at the federal and state government levels related to funding sources available for healthcare providers that are on the front lines of the pandemic. This includes the recent passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes $100 billion of funding to ensure healthcare providers continue to receive the support they need for COVID-19 related expenses or lost revenue.
Eligible healthcare providers, as contemplated in the CARES Act, are public entities, Medicare or Medicaid enrolled suppliers and providers, and such for-profit entities and not-for-profit entities that provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.
While certain of the processes to access federal and state funds related to COVID-19 are to be determined, it is critical that healthcare providers begin tracking and documenting COVID-19 related labor, medical supplies, contracted services, medical equipment and other expenditures immediately. We generally recommend that organizations track these expenditures in separate general ledger accounts. Further, healthcare providers should begin to think about the methodology they will use to calculate lost revenue if they plan to pursue funding for lost revenue.
Segregating COVID-19 specific expenses, and estimating lost revenue as a result of external or internal COVID-19 mandates, will also help to facilitate the analysis of a provider’s year over year operating results. Further, if a provider has debt covenant compliance issues attributed to COVID-19, segregating COVID-19 specific expenses, and estimating the lost revenue, will help a provider “tell their story” to the appropriate stakeholders when necessary.
All expenditures reimbursed with federal and state funding are required to be accounted for in accordance with the respective federal and state agency requirements, even in these uncertain times, including the maintenance of appropriate internal controls. It’s also important to understand the compliance requirements as a recipient of federal and state funds, even in crisis situations such as this.
Due to the unprecedented nature of the impact of COVID-19, the specific terms and conditions of each award that healthcare providers may receive are still evolving, but it can be presumed that detailed documentation, calculations, etc. will be necessary in order to qualify for assistance.
From a compliance standpoint, it should be noted that federal funding cumulatively in excess of $750,000 per recipient entity is subject to the federal single audit requirements under Uniform Guidance. Additionally, several states also impose single audit requirements on funding provided at the state level.
See our COVID-19 Impact Tracking Checklist – Note that this checklist is not meant to be all-inclusive, but rather a guide for organizations as they establish processes to begin tracking and calculating COVID-19 related expenditures and lost revenue.