The U.S. Department of Health and Human Services (DHHS), the entity charged with overseeing the Provider Relief Fund (PRF), requires recipients of program funds to comply with a specific post-payment reporting process. This process has undergone changes since the program was established in March 2020, but the most recent requirements were outlined in a notice, in form of a FAQ, published on January 15, 2021 and are applicable to all reports filed in 2021. The purpose of this reporting process is to ensure PRF payments were used in accordance with the Terms and Conditions of the PRF program.
The calculation of provider support – and the reporting requirements for receiving that support – were different under each distribution phase.
Phase 1 Distributions
In the first round of Phase 1 funding, the DHHS allocated $30 billion to individual healthcare providers in proportion to their share of the total Medicare fee-for-service payments in 2019 (a total of $453 billion).
Provider Support = (2019 Medicare Fee-For-Service Payments / $453 Billion) x $30 Billion
No application was needed to receive the funds, but entities were required to attest within 90 days of receipt that they were eligible providers and that the amount received was correctly calculated with the above formula.
The second round of Phase 1 funding, which was $20 billion, was allocated to these same providers to ensure all providers received Phase 1 funding of at least 2% of annual gross receipts for patient care.
Provider Support = (Most Recent Tax Year Annual Gross Receipts x 2%) – Phase 1 Distribution Payment Already Received
Phase 2 Distributions
The distribution calculations under Phase 2 closely resembled the calculations under the second round of Phase 1, with one major difference: providers had to apply for support to receive a Phase 2 distribution. The $18 billion distribution was allocated to eligible applicants at 2% of gross patient care revenues. Providers eligible for funding under Phase 2 included:
- Medicaid providers
- CHIP providers
- Assisted living facilities
- Dentists
- Private pay assisted living facilities and nursing homes
- Medicare Part A providers who experienced a change in ownership
- Providers eligible for Phase 1 funding who did not receive full support
Phase 3 Distributions
Providers eligible for funding under Phase 3 included all providers from the first two phases plus behavioral health professionals and providers who began operating in the first quarter of 2020. But Phase 3 payments were allocated differently. They were made available to providers from Phase 1 or 2 who had not received their full 2% of patient care revenues, but they were also made available to providers who experienced a change in revenues or net expenses attributable to COVID-19.
Providers who received at least $10,000 in PRF support are required to report to the DHHS how they used those funds by following the DHHS’s post-payment reporting process. As part of this process, Phase 3 recipients must be able to prove that their expenses and/or revenues were affected by the pandemic.
Step 1: Calculate Additional Expenses
The DHHS asks businesses to first calculate their healthcare related expenses directly attributable to coronavirus that had not (and will not be) reimbursed from some other source (such as FEMA, insurance, or local governments). This includes:
- Supplies and equipment to provide healthcare services to actual (or possible) COVID-19 patients
Examples: personal protective equipment, cleaning agents, ventilators, upgraded HVAC systems, and lab equipment.
- Supplies and equipment to provide healthcare services to actual (or possible) COVID-19 patients
- Workforce costs
Examples: payroll for employees and contractors, training costs, health insurance, overtime pay, hiring bonuses, childcare services, and temporary housing.
- Workforce costs
- Developing and staffing emergency operation centers
Examples: leases of additional equipment, rental costs, excess personnel costs, and recruitment fees.
- Developing and staffing emergency operation centers
- Acquiring additional resources to expand or preserve level of care
Examples: equipment and facility leases, supplies, telehealth software, and improved internet services.
- Acquiring additional resources to expand or preserve level of care
- Other general and administrative expenses
Examples: mortgage for medical office, malpractice insurance, software leases, food service, and payroll for office staff.
- Other general and administrative expenses
The covered expenses are intended to be broad and could include other costs not listed. As a practical matter, providers who had received COVID expense reimbursements from other sources should subtract the reimbursement from the direct COVID expense and only report the net unreimbursed COVID expense.
If the support a provider received exceeds the amount calculated under Step 1, they can apply excess PRF payments to lost revenues as calculated under Step 2.
Step 2: Estimate Lost Revenues Attributable to Coronavirus
When PRF support exceeds additional expenses, providers may apply that excess to lost patient care revenues attributable to coronavirus. There are different allowable methodologies to estimate lost revenue, and each option requires one of the following supporting documentation:
1. Calculate the difference between 2019 and 2020 actual patient care revenue.
The DHHS requires 2019 and 2020 revenue numbers and the patient care payer mix that bifurcates revenue into the following categories:
- Medicare Part A or B
- Medicare Part C
- Medicaid/CHIP
- Commercial Insurance
- Self-Pay
- Other
2. Calculate the difference between 2020 budgeted and 2020 actual patient care revenue.
The DHHS will require budgeted and actual amounts and payer mix. The provider must include an attestation from the CEO, CFO, or other officer that the budget used in the calculation was established prior to March 27, 2020.
3. Calculate the lost revenue using some other reasonable method.
This calculation is the most complex, and t this method is expected to be most likely to be audited. If providers use this method, they must submit the following documentation:
- a description of their methodology,
- a rationalization for why this chosen method is reasonable, and
- an explanation of why the lost revenues were attributable to coronavirus rather than some other factor.
The difference calculated using one of the methodologies is the lost revenue, which may be applied to any remaining PRF that was not consumed in Step 1 of the calculation. Any amounts in excess of lost revenues will be deferred at year end and may be used for eligible expenses prior to June 30, 2021. There are no substantive updates for PRF as of March 24, 2021.
Deadlines
The reporting portal opened on January 15, 2020. While the reporting function of the portal has not been functioning yet, PRF recipients are encouraged to enroll now. The DHHS has not yet announced a reporting deadline. For now, December 31, 2020, fiscal year-end and later single audits including PRF and for-profit audits of PRF funding continue to be on hold.
The DHHS guidelines are updated continually, so if you’re unsure what you’re required to do, please contact us. Our LaPorte advisors can walk you through the PRF reporting requirements and can help you document your use of funds to ensure you’ve complied with the program’s terms and conditions.