Updated Reporting Requirements for Provider Relief Funds; Revised Definition of Lost Revenue

AAFCPAs would like to make clients aware, on October 22, 2020, the U.S. Department of Health and Human Services (HHS) issued an updated 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 calculation of lost revenue.

On September 19, 2020 HHS issued instructions for reporting on the use of PRF distributions. These instructions limited the applicability of funds to an amount that would allow most providers to be no more profitable in calendar year 2020 than calendar year 2019.  HHS at that time determined that it would be inequitable to allow some providers to be more profitable in 2020 than 2019 while so many other providers struggled to remain viable.

The September 19, 2020 reporting instructions placed a limitation on the permissible use of the PRFs that changed the definition of lost revenue to be represented as a negative change in year-over-year net patient care operating income. This was a significant change to the initial definition of lost revenues as outlined in the June 19, 2020 HHS’ PRF frequently asked questions.  This change generated significant attention and opposition from many stakeholders and members of Congress.  There was a consensus among stakeholders and members of Congress who reached out to HHS that the PRF should allow a provider to apply PRF payments against all lost revenues without limitation.  In consideration of this feedback, HHS has amended its reporting instructions in the Notice to provide for the full applicability PRF distributions to lost revenues.

Updated Guidance on Use of Funds

Providers are allowed under the Notice to utilize PRFs for the following purposes:

  1. 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.
  2. PRF payment amounts not fully expended on healthcare related expenses attributable to the Coronavirus are then applied to patient care lost revenues, net of the healthcare related expenses attributable to the Coronavirus calculated under step 1. Recipients may apply PRF payments toward lost revenue, up to the amount of the difference between their calendar year 2019 and 2020 actual patient care revenue.

Patient care is defined as healthcare, services and supports, as provided in a medical setting, at home, or in the community.  Patient care revenue should include gross revenue net of contractual allowances, bad debts, and charity care.

The following is an example of the lost revenue calculation:

Calendar year 2019 Patient Care Revenue           $15,000,000

Calendar year 2020 Patient Care Revenue          $14,000,000

Reduction in patient revenue                       $(1,000,000)

Any PRFs not utilized for healthcare related expenses attributable to the Coronavirus could be applied up to $1,000,000 of the reduction in patient revenue for calendar year 2020.

If providers do not expend PRF funds in full by the end of calendar year 2020, they will have an additional six months in which to use remaining amounts towards expenses attributable to the Coronavirus but not reimbursed by other sources, or to apply toward lost revenues in an amount not to exceed the difference between 2019 and 2021 actual revenue.  For example, the reporting period January – June 2021 will be compared to the same period in 2019, or January – March 2021 will be compared to the same quarter in 2019.

AAFCPAs continues to monitor updates from HHS very closely and will provide additional updates and guidance as new information becomes available.

If you have any questions please contact: Matt Hutt, CPA, CGMA at 774.512.4043, mhutt@nullaafcpa.com; or your AAFCPAs Partner.

About the Author

Matthew Hutt CPA
Matt leads AAFCPAs’ Healthcare Division, providing assurance, tax and advisory solutions for Federally Qualified Health Centers (FQHCs), behavioral health providers, home care agencies and hospices, nursing homes, and senior care living centers. Matt advises healthcare providers on consolidation and coordination of care, including the integration of behavioral health into the primary care delivery system. He also provides consulting solutions for providers transitioning to new value-based reimbursement models, and data driven patient care, including: developing business process and controls for collecting and advantaging data to provide analysis on: provider activity, delivery of care, and analysis of efficiency & cost effectiveness. Matt is also highly-sought after for his knowledge on issues related to affordable housing developers with requirements related to the US Department of Housing and Urban Development, MassHousing, Low Income Housing Tax Credits, Historical Tax Credits and New Markets Tax Credits.