Posted by Mike Kelly, CPA
On April 10, 2020, the U.S. Department of Health and Human Services (HHS) automatically began distributing relief funds to “providers who billed Medicare-fee-for-service in 2019, be a known Medicaid and CHP or dental provider and provide after January 31, 2020 diagnoses, testing, or care for individuals with possible or actual cases of COVID-19, or prevented in the spread of COVID-19. HHS broadly views every patient as a possible case of COVID-19.”
Guidance, mostly in the form of Frequently Asked Questions (FAQ’s) and website posts, have gradually been released since these relief funds were first issued to providers in April. The available guidance, though sparse in the beginning, appeared to be very liberal in the allowable uses of the relief funds. As time has gone on, additional criteria has been released which has imposed tighter restrictions on the use of these funds. If the funds are not used for the eligible purposes by June 30, 2021 they need to be returned to HHS.
Highlights of recently released important items:
- Health Care Related Expenses Attributable to Coronavirus – Use of funds can first be used by a provider that has incurred additional “incremental costs” attributable to the coronavirus. These are listed below under administrative expenses and healthcare-related expenses.
- There are two qualifications when identifying expenses attributable to coronavirus. The first one is that the 2020 overall expense account must have increased when compared to 2019. The second qualification is the provider must be able to specifically identify the additional expenses that are related to the coronavirus. See the second FAQ below.
- Patient Care Lost Revenues – A second eligible way a provider could use the funds would be to replace lost revenue. Lost revenue is defined as the difference between 2020 and 2019 revenue. An important item to note is that Paycheck Protection Program (PPP) Funds received is treated as 2020 revenue. Therefore, if a provider received $1,000,000 of revenue from operations in 2019, $800,000 of revenue from operations in 2020, and a PPP loan in 2020 of $200,000 (assuming it would be fully forgiven), the provider could not rely on the “lost revenue” test to use the relief funds since there was not an overall decrease in revenue.
- When analyzing the eligible uses described above, providers will use their normal method of accounting (cash or accrual).
- Increased hazard pay is an eligible cost attributable to the coronavirus. However, a provider must be careful not to use the same expense for both the HHS funding and the Paycheck Protection Program.
Some of the issues described above came from the guidance which was issued on September 19, 2020 and superseded by additional guidance on October 22, 2020 and November 2, 2020.
The updated guidance includes some examples of the eligible health care expenses attributable to the coronavirus, assuming there is some sort of measurable “incremental cost” directly related to the coronavirus, which are listed below:
Administrative Expenses – Only marginal increased expenses due to coronavirus
- Fringe Benefits
- Lease payments on equipment
Health Care Related Expenses Attributable to Coronavirus – Only marginal increased expenses due to coronavirus
- Information Technology
- Other Health Care Expenses
Recent important FAQs that discuss the above topics:
- When reporting my organization’s G&A expenses attributable to coronavirus, how do I calculate the “expenses attributable to coronavirus not reimbursed by other sources”? (Added 10/28/2020)
- Providers should calculate incremental G&A expenses incurred that were attributable to coronavirus and then estimate the portion of those expenses that were not covered through operational revenues, other direct assistance, donations or others sources. Examples may include expenses such as: Hiring additional security personnel, increased hazard pay, increased cost of utilities to operate temporary facilities, or similar items attributable to the coronavirus that were not normally incurred.
- When reporting my organization’s other healthcare related expenses attributable to coronavirus, how do I calculate the “expenses attributable to coronavirus not reimbursed by other sources”? (Added 10/28/2020)
- Providers first calculate their expenses for supplies, equipment, IT, facilities, employees, and other healthcare related costs/expenses for calendar years 2019 and 2020, calculate the change in year over year expenses and identify the portion that is attributable to coronavirus. Provider will then apply reasonable assumptions to determine the amount of their “Total Revenue/Net Charges from Patient Care Related Sources” and “Other Assistance Received” that applies to each type of healthcare expense attributable to coronavirus. For example: PPE Supplies in 2019 = $1,000 PPE supplies in 2020 = $4,000, $4,000 – $1,000 = $3,000 in expenses over and above normal operations attributable to coronavirus. Of that $3,000, approximately $2,500 was attributable to coronavirus, and of that $2,500 approximately $1,000 was reimbursed, leaving a balance of $1,500 in unreimbursed healthcare related expenses attributable to coronavirus.
- When reporting use of funds, how will my organization’s “lost revenues attributable to coronavirus” be calculated? (Added 10/28/2020)
- Lost revenues attributable to coronavirus are calculated based upon a calendar year comparison of 2019 to 2020 actual revenue/net charges from patient care (prior to netting with expenses). The amount of lost revenues eligible for reimbursement through the Provider Relief Fund is capped at the change in 2019 to 2020 actual revenue from patient care related sources, less the Provider Relief Fund amount used to cover healthcare expenses attributable to coronavirus not reimbursed by other sources. Reporting Entities with unused funds after December 31, 2020, must submit a second and final report no later than July 31, 2021 that includes patient care related revenue and expenses for January 1–June 30, 2021.
The updated guidance defines revenue as:
- Medicare Part A+B
- Medicare Part C
- Commercial Insurance
- Self-Pay (No Insurance)
- Other assistance
It then goes on to define other assistance as follows:
- Treasury, Small Business Administration (SBA) and the CARES Act/Paycheck Protection Program (PPP): Total amount of coronavirus-related relief received from Treasury, SBA, and CARES Act/PPP by the Reporting Entity as of the reporting period end date.
- FEMA CARES Act: Total amount of coronavirus-related relief received from FEMA by the Reporting Entity as of the reporting period end date.
- CARES Act Testing: Total amount of relief received from HHS for coronavirus testing-related activities.
- Local, State, and Tribal Government Assistance: Total amount of coronavirus-related relief received from other Local, State, or Tribal government sources by the recipient and its included subsidiaries as of the reporting period end date.
- Business Insurance: Paid claims against insurance policies intended to cover losses related to various types of healthcare business interruption as of the reporting period end date.
- Other Assistance: Total amount of other federal and/or coronavirus-related assistance received by the recipient and the other TINs included in its report as of the reporting period end date.
BLS will continue to send important updates as information becomes available. Please be sure to visit our COVID-19 Resource Center for past guidance updates and additional details. Reach out to your BLS Team Member or email us at email@example.com with any questions.