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By Anna Stevens, Partner-In-Charge, Health Care Services, and Yoram Kappel, CA, Manager of Risk Advisory Services
Health care providers who received Provider Relief Funds (PRF) during the pandemic should be looking closely at their systems and processes to make sure they are prepared to conform to revised reporting requirements issued by Health and Human Services (HHS) in a notice released on June 11, 2021. In addition to providing information about when the reporting module is set to open, the announcement included a revised period of availability for the use of funds and more flexible due dates for the submission of required reports.
These revised reporting requirements apply only to the General and Targeted Distributions of this program – which includes the Skilled Nursing Facility (SNF) and Nursing Home Infection Control Distributions (including Quality Incentive Program payments).
What is New?
Under the old guidance, the maximum period of availability for the use of funds was through June 30, 2021. However, under the revised guidance the deadline is based on the date the funds were received. The new deadlines for the period of availability are as follows:
Table 1: Deadlines for Use of Funds
|Payment Received||Funds Must be Used By|
|Period 1||April 10, 2020 – June 30, 2020||June 30, 2021|
|Period 2||July 1, 2020 – December 31, 2020||December 31, 2021|
|Period 3||January 1, 2021 – June 30, 2021||June 30, 2022|
|Period 4||July 1, 2021 – December 31, 2021||December 31, 2022|
Source: Health and Human Services
To align with the periods of payments received and use of funds, the reporting time periods have also changed. The requirements apply to recipients who received payments exceeding $10,000 in aggregate during any Payment Received Period. The new reporting time periods are as follows:
Table 2: Reporting Time Periods
|Payment Received||Reporting Time Period|
|Period 1||April 10, 2020 – June 30, 2020||July 1, 2021 – September 30, 2021|
|Period 2||July 1, 2020 – December 31, 2020||January 1, 2022 – March 31, 2022|
|Period 3||January 1, 2021 – June 30, 2021||July 1, 2022 – September 30, 2022|
|Period 4||July 1, 2021 – December 31, 2021||January 1, 2023 – March 31, 2023|
Source: Health and Human Services
Recipients of greater than $10,000 in aggregate that do not report their use of funds in the reporting periods listed above will be considered out of compliance with the payment Terms and Conditions.
What has Not Changed?
The Coronavirus Response and Relief Supplemental Appropriations Act required the recipient of Targeted Distributions to be the entity that would report the use of funds, regardless of whether they were transferred to another entity. In reporting these funds, the entity that received the funds discloses whether the funds were transferred to a subsidiary or stayed with the recipient.
Entities will report the use of their funds on healthcare-related expenses to the extent they were paid for with PRF distributions. Subsequently, they will report any lost revenues using either a comparison of year-over-year actual patient revenues, comparison of budgeted patient revenues to actual patient revenues, or another reasonable method for determining lost revenues.
The audit requirements for recipients are largely the same, with non-federal entities being subject to Single Audit requirements if they expend more than $750,000 in federal funds during their fiscal year. Commercial organizations that expend more than $750,000 of federal funding can choose between two options: a financial related audit conducted in accordance with Generally Accepted Government Auditing Standards, or a Single Audit.
What Should Recipients Do Now?
If your organization received a PRF distribution, taking these three key steps now can help you make the most of your PRF funds while preparing for a potential audit.
Make sure your tracking distribution systems collect the right information. Distributions should be recorded separately to:
- Identify the value of receipts within given receiving periods
- Determine the applicable use of fund deadlines, as distribution thresholds may apply
- Determine the applicable reporting period, and
- Calculate interest earned, if applicable, over the distributions.
Review and update your organization’s internal policies to ensure that all valid PRF allowances are specifically identified and classified. Valid uses of PRF include personnel and benefits, rental costs and lease payments, equipment, facilities and many other expenses your organization may have paid to prevent, prepare for and/or respond to the coronavirus. To encourage their appropriate use, make sure these PRF-related expenditures are specifically authorized in your organization’s internal policies and communicated.
Keep offsetting amounts and limitations in mind for expense categories such as direct patient billing, commercial insurance, Medicare/Medicaid, FEMA funding and salary limitations (including capped compensation allowances).
Create an effective expenditure tracking process that maps expenses to the appropriate cost centers. Since all distributions may be subject to an audit by HHS, it is important to have a strong tracking process in place as early as possible before funds are used. Your organization’s expenditure tracking process should include:
- Establishing separate cost center(s) to record expenditures attributable to the Coronavirus. Separate cost center recording will also support accurate and appropriate movements of PRF between the balance sheet and income statement (classification consideration).
- Implementing regular audit practices (or consulting a third party) to maintain the integrity of transactions recorded under these cost centers and ensure costs are compliant and appropriately supported.
Regardless of whether your organization is subject to an audit, the HHS reporting requirements may be particularly challenging. But with these systems in place, reporting on the use of PRF dollars can be far less painful and better prepare you for a potential audit while maximizing lost revenue claims. For more details about the PRF and its audit requirements, download a copy of Peeling Back the Layers of the Provider Relief Fund.
Anna E. Stevens, CPA, is a partner at Weaver, a Texas-based national accounting firm. She has served clients in a variety of health care entities, including physician practices, ambulatory clinics, acute care hospitals and post-acute care facilities. Her practice is currently focused on providing services to support recipients of federal CARES Act funding.
Yoram Kappel, CA, is a Manager of Risk Advisory Services at Weaver where he is focused on internal audit, large-scale risk management efforts, financial and regulatory assessments and compliance with federal regulatory guidelines. He works with a team of Weaver’s health care professionals to provide services to Provider Relief Fund recipients.