By Anna Stevens, CPA, CHFP
Earlier this year, hospitals and other providers received and accepted millions of dollars in federal Provider Relief Funds (PRFs) without clear direction on reporting and auditing requirements. On Sep. 19, 2020, Health and Human Services (HHS) released these requirements for payments exceeding $10,000.
The following is a summary of some of the key elements of current PRF reporting requirements. It does not apply to the Nursing Home Infection Control and Rural Health Clinic Testing or the HRSA Uninsured Program funding streams.
Recipients will report the use of their funds in two categories. The first allows the recipient to report any healthcare related expenses due to COVID-19 that were not reimbursed from another source. The second is for any PRFs received in excess of the healthcare related COVID-19 expenses. The entity may be allowed to attribute funds in the second category to lost revenue.
Health care related expenses
HHS has divided PRF recipients into two groups for the part of the reporting section entitled “Expenses Attributable to Coronavirus Not Reimbursed by Other Sources.” Those receiving between $10,000 and $499,999 will take a broader approach and report expenses in two categories: 1) general and administrative (G&A) expenses and 2) other healthcare related expenses. Recipients of $500,000 or more will be required to provide detailed information about their expenditures by subgroups. Subgroups for G&A include rent, insurance, personnel, fringe benefits, lease payments, utilities, and other G&A. Subgroups for other healthcare related expenditures include supplies, equipment, information technology, facilities, and other healthcare related expenses.
For PRFs in excess of qualifying expenditures, recipients should determine whether any of the PRF payments could offset lost revenues. Previous HHS FAQ’s indicated that this would be a very broad calculation, either through a budgetary or year over year revenue comparison. Under the updated reporting requirements, however, the new calculation is an operating income comparison. Recipients are allowed to use lost revenues from healthcare related sources up to their 2019 net gain, from healthcare related sources, or up to a net zero gain in 2020 if they had a loss in 2019.
These new stipulations may limit the recipient’s lost revenue. In addition to revenue, the new calculation looks at expenses from 2019 to 2020, which may not have been comparable. Recipients that had nonrecurring expenses in 2019 or made an effort to cut costs in 2020, may find themselves penalized regarding the amount of lost revenue they can calculate. Based on prior FAQ’s, recipients were not likely to have been looking at expense fluctuations year over year when determining whether to return potential excess funds.
In the section of the reporting module “Lost Revenues Attributable to Coronavirus,” recipients provide the total patient revenue, by quarter, for both 2019 and 2020. The entity also must disclose other funding received from the following sources: SBA and CARES Act/PPP; 2) FEMA CARES Act; 3) CARES Act testing; 4) local, state, and tribal government assistance; 4) business insurance; and 5) other assistance. Lastly, the recipient will summarize the calendar year expenses for 2019 and 2020 by quarter, segregated by G&A and healthcare related expenses. Once all information is submitted, the system will automatically calculate any lost revenue that PRFs can be used to offset.
The HHS reporting system also will require certain non-financial data. Demographic information will include the reporting entity, the tax identification number, the national provider identifier, the fiscal year end date, and the federal tax classification. Recipients will need to provide, by quarter, personnel metrics, patient metrics, and facility metrics. The personnel metrics may include labor by category, hires and rehires, and terminations. Patient metrics will require information such as number of patient visits, patients admitted, and resident patients.
If there was a change in ownership for the reporting entity, certain details around the acquisition or divestiture must be disclosed. Finally, the entity should disclose whether it is subject to a Single Audit and whether the auditors have selected PRF to be within the scope of the Single Audit.
The reporting system will become available to recipients in early 2021. Recipients that have expended all funds prior to Dec. 31, 2020 may submit one report. If a recipient has expenditures subsequent to Dec. 31, 2020, a second and final report will be required.
HHS will continue to provide information and updates in webinars and FAQ guidance leading up to the reporting deadlines.
Anna Stevens, CPA, CHFP is the Partner-in-Charge of Health Care Services at Weaver, a national CPA and advisory firm. For nearly 10 years, Anna has provided accounting services to health care organizations. She has served clients in a variety of health care entities, including physician practices, ambulatory clinics, acute care hospitals, post-acute care facilities, as well as biotech companies. Anna worked as the corporate controller for an $80 million post-acute health care system, where she managed the operating budget, prepared financial statements, and helped department leaders manage their individual operating budgets. While working as a public accountant, Anna has managed audits for organizations with up to $100 million in net patient service revenues.
A Texas-licensed CPA, Anna has been a national speaker for and is an active member of the Health Care Financial Management Association (HFMA). As a member of the TXCPA, she serves on its Advanced Health Care Committee. She is also an active member of the AICPA. She earned both Master of Science and Bachelor of Science degrees in accounting from Sam Houston State University.