Pursuant to the CARES Act passed in March 2020 and augmented by the Health Care Enhancement Act, the department of Health and Human Services (HHS) made certain relief funding available to healthcare providers to assist in response to the COVID-19 Pandemic and the to provide additional support to providers serving Medicaid and Medicare populations. The purpose of these funds was to help subsidize healthcare providers (including early intervention providers) for COVID-19 related expenses or losses incurred as a direct result of the coronavirus pandemic. When the funds were distributed, recipients agreed to certain terms and conditions, which included compliance with certain reporting requirements that were not yet developed.
On September 19, 2020, some of this additional compliance guidance was released outlining the reporting & compliance requirements for providers receiving funds in excess of $10,000 (referred to within the notice as PRF (Provider Relief Fund) funding) from this program.
Per the new regulations, recipients must document their use of the HHS Stimulus funds by submitting the following information for use of funds in 1 of 2 categories:
1. Healthcare related expenses attributable to Coronavirus that another source has not reimbursed
2. Lost revenues as a result Coronavirus
Healthcare Related Expenses
The first category of allowable use of PRF funds are for healthcare related expenses attributable to coronavirus that have not been reimbursed by another source, or another source is not obligated to reimburse. For purposes of this provision, expenses attributable to coronavirus may be incurred in treatment of confirmed or suspected cases, preparing for possible or actual coronavirus cases, maintaining healthcare delivery capacity, etc. Prior HHS guidance had been very broad, indicating that any provider that has treated a patient after January 31, 2020 is considered to have treated a suspected or confirmed case of Coronavirus. EI providers meet this criteria through the maintenance of healthcare delivery capacity as EI is considered a healthcare related service.
The new regulations require providers receiving aggregate HHS funding between $10,000 and $499,999 to report healthcare related expenses attributable to coronavirus, net of other reimbursed sources (including insurance or amounts received from federal, state or local governments) in two aggregated categories:
a) G&A Expenses
b) Other healthcare related expenses
These are the actual expenses incurred in excess of those amounts reimbursed by other sources (including any expenses covered by PPP forgiveness). From the guidance it appears it will require only these 2 high-level categories of reporting. Providers should look to the guidance below regarding detailed reporting for providers who received more than $500,000 in grants to determine which expenses may qualify and the proper categorization.
For providers that receive $500,000 or more in HHS funding are required to provide more detailed reporting within the two categories outlined above to include the following information:
Providers should report the actual G&A expenses incurred in excess of amounts reimbursed by other sources. G&A should be presented in the following categories:
a) Mortgage/Rent – Monthly payments related to the mortgage or rent of facilities
b) Insurance – Premiums paid for property, malpractice, business insurance, etc.
c) Personnel Costs – Workforce-related actual expenses paid to prevent, prepare for, or respond to the coronavirus pandemic during the reporting period, such as workforce training, staffing, temporary staffing, overhead employees, or security personnel. This includes staff and contracted personnel. Please note HHS funds cannot be used to pay an individual staff member’s salary in excess of $197,300.
d) Fringe Benefits – Extra benefits supplementing an employee’s salary, such as hazard pay, travel reimbursement, employee health insurance, etc.
e) Lease Payments – new equipment or software leases
f) Utilities/Operations – Lighting, cooling/ventilation, cleaning, etc.
g) Other G&A expenses – Costs not captured above that are generally considered part of the provider’s overhead structure
For any providers that run multiple programs, some that are healthcare related and some that are not, the G&A should be properly allocated to only reflect those costs attributable to healthcare related activities.
Other healthcare related expenses attributable to Coronavirus
The actual healthcare related expenses not funded by other sources. This includes the following expenses:
a) Supplies – Expenses paid for purchase of supplies used to prevent, prepare for, or respond to the pandemic during the reporting period. Such items could include PPE, hand sanitizer, patient screening, etc.
b) Equipment – Expenses paid for the purchase of equipment used to prevent, prepare for, or respond to the pandemic during the reporting period including such items as ventilators, updates to HVAC systems, etc.
c) Information Technology – Expenses spent on technology to expand or preserve care delivery during the reporting period, such as telehealth infrastructure, increased bandwidth, teleworking to support a remote workforce, etc.
d) Facilities – Expenses paid for facility-related costs used to prevent, prepare for, or respond to the pandemic during the reporting period, such as additional space to accommodate services or social distancing, modifications of facilities to accommodate revised patient treatment practices, etc.
e) Other healthcare related expenses – Any other actual expenses not captured in one of the above categories incurred to prevent, prepare for, or respond to the pandemic during the reporting period.
The guidance does not provide any detail as to what type of underlying records may be required, so providers should continue with their best practices to document and retain source documentation and records.
Lost Revenues Attributable to Coronavirus
For any HHS funding not fully expended on healthcare related expenses attributable to the pandemic as outlined in Healthcare Related Expenses above, are then applied to “lost revenues” incurred by the provider. Lost revenues are defined as a negative change in year-over-year net patient care operating income (patient care revenue less patient care related expenses), net of the healthcare related expenses outlined above. Providers can only apply HHS payments towards lost revenues and cannot utilize the funds to cover losses that would normally incurred in running such programs. For example, if a program generated a $500,000 loss in 2019 and a $1,000,000 loss in 2020 as a result of the pandemic, the HHS funds can only cover $500,000 of the loss (the delta between the 2 years). Revenue and expense information is required to be presented on a quarterly basis, based upon natural calendar quarters (January through March, April through June, July through September, and October through December).
The reporting will require providers to provide the following information on Payor mix
a. Medicare Part A&B
b. Medicare Part C
c. Medicaid (including CHIP)
d. Commercial Insurance
The revenue reporting also will request information on Other Assistance Received, which includes
a. PPP Loans
b. EIDL and EIDL Grants
c. CARES Act Testing
d. Any State or Local assistance
e. Business Insurance
f. Other assistance
Like the revenue reporting, the expense reporting for G&A will be reported on a quarterly basis.
One key item to note for providers is that for any funds not utilized by December 31, 2020, this guidance provides an additional 6 months (through June 30, 2021) to apply to these categories.
Reporting: For those programs that have fully expended their funds prior to December 31, 2020, the original July 2020 guidance said providers may submit a single final report at any time during the window that begins October 1, 2020 but no later than February 15, 2021. The updated September 19, 2020 guidance indicates that this deadline has been moved to allow for comments, and as noted the HHS FAQ stated the system will not be available until early 2021. The guidance states that the HRSA has “subsequently revised this date” but does not provide any details into deadlines. As such, providers are facing a moving target and need to continue to monitor for when reporting will be due. Recipients with funds unexpended as of December 31, 2020, must submit a second, and final report, no later than July 31, 2021 per the previous guidance; no update has been provided on this due date.
In addition to the financial data that must be reported, providers will need to provide certain non-financial data including:
a) Personnel metrics: Total personnel by labor category (full-time, part-time, contract, etc.), total re-hires, new hires, total separations by labor category.
b) Patient Metrics: Total number of patient visits (in-person or telehealth), total number of patients admitted, total number of resident patients.
c) Facility Metrics: Total available staffed beds for medical/surgical, critical care, and other beds.
Uniform Guidance: These funds are federally originated and need to be considered in determining if your agency has crossed the $750,000 threshold that would require a single audit.
Auditing: Please keep in mind that when you accepted the HHS funding, it was accepted subject to right of audit. We are not sure when, if, and how these audits will be performed, however we encourage all providers to generate detailed records to substantiate the information they are submitting with their claims to be able to substantiate the forgiveness they are seeking pursuant to their HHS filings.
The original guidance in July 2020 indicated that the reporting system would be available by October 1, 2020; however, the most recent update on the HHS FAQ now indicates that the reporting system may not be available until early 2021. Having not seen the exact format and nature of the reporting function and also seeing the level of changes that have occurred since inception, providers are somewhat aiming at a moving target. There is a lot of information being requested, so providers should begin the process of assembling the required information so that they can determine what level of allowable cost that they can claim against the HHS funds received.
Adam Brigandi, CPA, MBA
Adam is a staff auditor who works with both nonprofit and special education clients. His auditing experience allows him to assist in vital audit functions such as systems testing and analysis.