On September 19, 2020, the U.S. Department of Health and Human Services (HHS) issued a Post-Payment Notice of Reporting Requirements (the Notice) relating to General and Targeted Distributions made under the Provider Relief Fund (PRF). This notice updates the initial notice issued on July 20, 2020.
There are some significant changes as a result of this guidance. This includes the information that will be included in the report as well as how lost revenue should be calculated.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act appropriated funds to reimburse eligible Healthcare providers for healthcare related expenses or lost revenues attributable to the Coronavirus. These funds were distributed by the Health Resources and Services Administration (HRSA) through the CARES Act PRF program.
This HHS notice informs recipients of the categories of data elements that recipients must submit for calendar years 2019 and 2020 as part of the reporting process. The report for calendar year 2020 needs to be submitted on or before February 15, 2021.
Reporting Guidance on Use of Funds
Healthcare providers will be required to report their use of PRF payments by submitting the following information:
- Healthcare related expenses attributable to the Coronavirus that another source has not reimbursed and is not obligated to reimburse, which may include General and Administrative (G&A) or healthcare related operating expenses. Expenses may include treating both confirmed or suspected cases of the Coronavirus, preparing for possible or actual Coronavirus cases, and maintaining healthcare delivery capacity which includes operating and maintenance of facilities.
- PRF payment amounts not fully expended on healthcare related expenses attributable to Coronavirus are then applied to lost revenues, represented as a negative change in year-over-year net patient care operating income (i.e. patient care revenue less patient care related expenses for the entity) net of the healthcare related expenses attributable to Coronavirus included in #1, above.
The entity may apply PRF payments toward lost revenue, up to the amount of their 2019 net gain from healthcare related sources. Recipients that reported negative net operating income from patient care in 2019 may apply PRF amounts to lost revenues up to a net zero gain/loss in 2020.
If a recipient does not expend PRF funds in full by December 31, 2020, they will have an additional six months in which to use remaining amounts. The allowable uses will be the same as above, however if applying to lost revenue the amount cannot exceed the 2019 gain (i.e. the reporting period January – June 2021 compared to January – June 2019). The final report for this period is due on or before July 31, 2021.
Data Elements to be Reported
The following data elements are included in the PRF Reporting System to allow HRSA and HHS to assess whether recipients properly used PRF payments, consistent with the Terms & Conditions associated with the payment.
- Demographic Information
- Reporting Entity – entity that received one or more PRF payments. The reporting entity may report on behalf of subsidiary entities for general distributions but may not report for targeted distributions.
- Tax Identification Number (TIN) of reporting entity
- National Provider Identifier (NPI) is optional
- Fiscal Year-End Date
- Federal Tax Classification
- Recipients that received between $10,000 and $499,999 in aggregated PRF payments are required to report healthcare related expenses attributable to Coronavirus, net of other reimbursed sources, in two aggregated categories: (1) General and Administrative (G&A) expenses, and (2) other healthcare related expenses. These are the actual expenses incurred over and above what has been reimbursed by other sources.
- Recipients who received $500,000 or more in PRF payments are required to report more detailed information within the two aggregated categories of G&A expenses and other healthcare related expenses as follows:
- G&A Expenses:
- Fringe Benefits
- Lease Payments
- Other G&A Expenses (costs not included above that are generally considered overhead
- Other Healthcare Related Expenses:
- Supplies (i.e. PPE, hand sanitizer, supplies for patient screening)
- Equipment (i.e. ventilators, updates to HVAC, etc.)
- Information Technology (IT) (i.e. telehealth infrastructure, increased bandwidth, teleworking to support remote workforce)
- Facilities (i.e. lease or purchase of permanent or temporary structures, modifications to facilities, etc.)
- Other Healthcare Related Expenses (other expenses that were paid to prevent, prepare for, or respond to the Coronavirus)
- Lost Revenues
- Lost revenue is represented as a negative change in year-over-year net operating income from patient care related sources. Once revenue information is provided, cost/expense impacts will be calculated based upon a calendar year comparison of 2019 to 2020 healthcare expenses to determine net operating income. Revenues will be entered by quarter for both years (i.e. Jan – March 2019, Jan – March 2020, etc.)
- Patient care is defined as healthcare, services, and supports, as provided in a medical setting, at home, or in the community. It should not include: 1) insurance, retail, or real estate values (except for skilled nursing facilities, where that is allowable as a patient care cost), or 2) grants or tuition.
- Revenue from Patient Care Payer Mix (2019 and 2020)
- Medicare Part A and B
- Medicare Part C
- Medicaid and CHIP
- Commercial Insurance
- Self-Pay (No insurance)
- Other Assistance
- Other Assistance Received (2020)
- Treasury, Small Business Association, and the Paycheck Protection Program (PPP): Total amount received as of reporting period end date.
- FEMA CARES Act: Total amount received from FEMA by the Reporting Entity as of the reporting period end date.
- CARES Act Testing
- Local, State, and Tribal Government Assistance
- Business Insurance: Paid claims against insurance policies intended to cover losses related to healthcare business interruption as of the reporting period end date.
- Other Assistance
- Total Calendar Year Expenses for 2019 and 2020, in the following categories, with quarterly break down for both years:
- G&A Expenses: Include items such as monthly mortgage/rent payments for facility where Reporting Entity provides patient care services, other monthly finance charges for real property and/or property taxes, insurance premiums for property, employee health insurance, or malpractice insurance, overhead salaries, healthcare and contractor salaries, fringe benefits, lease payments, lighting, cooling/ventilation, cleaning, vendor services purchased from third party vendors, consulting support, legal fees, audit and accounting services, food preparation and supplies, logistics and transport or other costs not captured above, such as debt financing, for the relevant calendar year.
- Healthcare Related Expenses: Include items such as supplies, equipment, IT, facilities, employees, and other healthcare related costs/expenses for relevant calendar year.
- Additional non-financial data (per quarter):
- Facility, Staffing, and Patient Care
- Personnel Metrics: Total personnel by labor category (full-time, part-time, contract, other), total re-hires, total new hires, total personnel separations by labor category.
- Patient Metrics: Total number of patient visits (in-person or telehealth), total number of patients admitted, total number of resident patients.
- Facility Metrics: Total available staffed beds for medical/surgical, critical care, and other beds.
- Change in Ownership – If the reporting entity underwent a change in ownership, the following needs to be provided:
- Date of acquisition/divestiture
- TIN(s) included in the acquisition/divestiture
- Percent of ownership for acquisition/divestiture
- Did/do you hold a controlling interest in this entity? (Y/N)
- Single Audit Status: Reporting entities that expended $750,000 or more in aggregated federal financial assistance in 2020 (including PRF payments and other federal financial assistance) are subject to Single Audit requirements. Recipients must indicate if they are subject to Single Audit requirements in 2020, and if yes, whether the auditors selected PRF payments to be within the scope of the Single Audit (if it is known at the time the report is submitted).
Financial Reporting Considerations
PRFs are considered nonexchange transactions and accounted for as government grants under FASB Accounting Standards Codification (ASC) 958, Not-for-Profit Entities. Because there are conditions attached to the funding and the funds are subject to return if the terms and conditions are not complied with, general distributions would be considered conditional grants. AAFCPAs advises client recipients to evaluate their individual facts and circumstances. Under ASC 958, revenue is recognized as the conditions are substantially met which can be met in stages. ASC 958 typically pertains to not-for-profit entities; however, business entities may follow this guidance as well by analogy. Business entities could also follow the guidance in International Accounting Standards (IAS 20) Accounting for Government Grants and Disclosure of Government Assistance in certain cases.
The requirements stated in the application process and the previously issued FAQs was that lost revenue would be applied to PRFs based upon the month over month reduction in patient revenue compared to the same period for the prior year or compared to budget. This new guidance could change significantly the timing of the recognition of revenue for PRFs. AAFCPAs advises clients to reassess your revenue recognition plans given the revised guidance.
AAFCPAs advise the following approach to revenue recognition:
- Apply to PRFs to allowable healthcare expenses attributable to Coronavirus. The key consideration here is that another source did not reimburse the entity for these costs or was not obligated to reimburse. If the entity has determined that there are allowable expenses, then the revenue should be recognized as these costs are incurred.
- Keep in mind that it is expected that reimbursements from the PPP and FEMA should be utilized prior to PRFs.
- Any remaining amounts may be applied towards lost revenue. The patient care operating results will need to be calculated for calendar years 2020 and 2019. Consideration needs to be given as to what should be included and excluded from the calculation of patient care revenues and expenses. The revenue recognized cannot result in a larger operating result for 2020 than 2019 or greater than break even if 2019 was a deficit.
Single Audit Considerations
Recipients of PRFs need to consider the Single Audit requirements. If you currently receive more than $750,000 in federal financial assistance, the PRFs could increase the scope of the Single Audit. It could also require you to have a Single Audit if you are currently under the $750,000 threshold. Another consideration is for for-profit entities (business entities). Business entities that receive more than $750,000 in PRFs will need to have a program specific Single Audit conducted on these funds.
AAFCPAs has significant expertise in conducting Single Audits and is available to help you determine your audit requirements.
HRSA plans to offer Question & Answer Sessions in advance of the reporting deadline, and as needed, HRSA will also issue Frequently Asked Questions to aid in the reporting process. AAFCPAs will continue to monitor this situation very closely and provide additional updates as new information becomes available.
If you have any questions please contact: Matt Hutt, CPA, CGMA at 774.512.4043, email@example.com; or your AAFCPAs Partner.