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HHS FAQs Released with Reporting Guidance Clarity

Mueller Prost CPA Firm Technology
Tiffany Karlin

November 03, 2020

Additional guidance was recently posted by the HHS regarding mandatory reporting requirements.  This guidance provides some additional clarifications on reporting guidelines issued but is definitely still not complete. We reported these details in our recent client alert.

 

Below are the FAQs as taken from the HHS website that will offer a more clear picture of what the HHS believes can qualify for G&A expenses and lost revenue.  It is clear that the HHS states that they are the “payer of last resort”. It is stated that HHS money can be used on “COVID related costs” only after all other resources, including that of standard revenue incurred, are exhausted.

Lost revenue however still remains the biggest challenge to define as even with the FAQ’s below, there is contradictory guidance being issued.

 

The HHS has not yet posted a template for providers to use as a guideline for reporting.  Mueller Prost has continual communication with our resources at several leading national healthcare associations which are meeting with the HHS and the CMS regularly. Our resources are also awaiting further definitive reporting requirements before issuing any further guidance. 

 

Mueller Prost is here to help perform and/or review any calculations for forgiveness. We will keep you informed and provide any necessary education and/or training, as more details are released.

 

We have thoroughly read and vetted the updated FAQ’s. We are sharing the most crucial FAQs and highlighting key take-aways. We would still highly encourage you to review all FAQs posted, if you have not done so already.

 

If a provider returns a Provider Relief Fund payment to HHS, must it also return any accrued interest on the payment? 

Yes, for Provider Relief Fund payments that were held in an interest-bearing account, the provider must return the accrued interest associated with the amount being returned to HHS. However, if the funds were not held in an interest-bearing account, there is no obligation for the provider to return any additional amount other than the Provider Relief fund payment being returned to HHS. HHS reserves the right to audit Provider Relief Fund recipients in the future to ensure that payments that were held in an interest-bearing account were subsequently returned with accrued interest.

Is interest earned on Provider Relief Fund funds considered a reportable revenue source to HHS? 

Yes, if funds were held in an interest-bearing account. Interest earned would then be reported in “Other Assistance.” If interest is earned on Provider Relief Fund disbursements that the Reporting Entity expended in full, the interest amounts may be retained and applied toward a reportable use of funds.

If interest is earned on funds that are only partially expended, the interest on remaining unused funds must be calculated, reported, and returned if not applied to permissible use of funds.

 

What is included in use of funds for salaries and employee compensation?

Direct employees (full and part-time), contract labor, and temporary worker expenses are eligible expenses provided they are not reimbursed from other sources, or only the incremental unreimbursed amounts are claimed.

The Terms and Conditions associated with each Provider Relief Fund payment do not permit recipients to use Provider Relief Fund money to pay salaries at a rate in excess of Executive Level II which is currently set at $197,300. For the purposes of the salary limitation, the direct salary is exclusive of fringe benefits and indirect costs. The limitation only applies to the rate of payments charged to Provider Relief Fund payments and other HHS awards. An organization receiving Provider Relief Fund payments may pay an individual’s salary amount in excess of the salary cap with non-federal funds.

An example of how this Executive Level II Salary cap is applied to aggregated personnel expenses is shown below. Reimbursement from other sources is applied in Step Two. Providers should apply reasonable assumptions when estimating the portion of personnel costs that are reimbursed from other sources.

At the bottom of page 1 of the reporting requirements announcement in PDF, Step 2 states “PRF payment amounts not fully expended on healthcare-related expenses attributable to coronavirus are then applied to patient care lost revenues, net of the healthcare-related expenses attributable to coronavirus calculated under step 1.” Is the underlined language still applicable under the reporting requirements notice that HHS posted on October 22, 2020?

No, healthcare-related expenses are no longer netted against the patient care lost revenue amount in Step 2. A revised notice will be posted to remove this language.

When reporting my organization’s healthcare expenses attributable to coronavirus, how do I calculate the “expenses attributable to coronavirus not reimbursed by other sources?” 

Healthcare-related expenses attributable to coronavirus may include items such as supplies, equipment, information technology, facilities, employees, and other healthcare-related costs/expenses for the calendar year. The classification of items into categories should align with how Provider Relief Fund recipients maintain their records. Providers can identify their healthcare-related expenses, and then apply any amounts received through other sources. Examples include direct patient billing, commercial insurance, Medicare/Medicaid/Children’s Health Insurance Program (CHIP), or other funds received from the Federal Emergency Management Agency (FEMA), the Provider Relief Fund COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured, and the Small Business Administration (SBA) and Department of Treasury’s Paycheck Protection Program (PPP) that offset the healthcare-related expenses. Provider Relief Fund payments may be applied to the remaining expenses or cost, after netting the other funds received or anticipated to offset those expenses. Provider Relief Fund payments may be applied to the remaining expenses or cost, after netting the other funds received or anticipated to offset those expenses. The Provider Relief Fund permits reimbursement of marginally increased expenses related to coronavirus. For example, assume the following:

A $5 increase in expense or cost to provide an office visit is calculated by pre-pandemic cost vs. post-pandemic cost, regardless of reimbursement source:

  • Pre-pandemic average expense or cost to provide an office visit = $80
  • Post-pandemic average expense or cost to provide an office visit = $85

Examples of reimbursed amounts may include, but not be limited to:

Example 1 Medicaid reimbursement: $70 (Report $85-$80 = $5 as expense attributable to coronavirus but unreimbursed by other sources)
Example 2Medicare reimbursement: $80 (Report $85-$80 = $5 an expense attributable to coronavirus but unreimbursed by other sources)
Example 3Commercial Insurance reimbursement: $85 (Report $5, the commercial insurer did not reimburse for $5 increased cost of a post-pandemic office visit)
Example 4Commercial Insurance reimbursement: $85 + $5 insurer supplemental coronavirus-related reimbursement (Report zero since insurer reimbursed for $5 increased cost of post-pandemic office visit)
Example 5COVID-19 Claims Reimbursement to Health Care Providers and Facilities for Testing, Treatment, and Vaccine Administration for the Uninsured: $80 (Report $5 as expense attributable to coronavirus but unreimbursed by other sources)

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”? 

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. Providers 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?

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.

Note: Reported patient care revenue is net of uncollectible patient service revenue recognized as bad debts.

Recipients that reported increased revenue from patient care in 2020 as compared to 2019, are eligible to use Provider Relief Fund payments toward expenses attributable to coronavirus not reimbursed by other sources, however, they would not be considered to have lost revenues attributable to coronavirus for the initial reporting period.

What are the documentation retention requirements for the Provider Relief Fund? 

Providers need to retain original documentation for three years after the date of submission of the final expenditure report, in accordance with 2 CFR 200.333.

If an entity incurred enough lost revenue in April and May 2020 to justify its use of the Provider Relief Fund payments received, can it only report those two months? 

No. The Reporting Entity must report revenue and expense for the full calendar years 2019 and 2020. If funds were not expended in full by December 31, 2020, then a second and final report will be required on the use of funds for the period January 1, 2021 – June 30, 2021, which is due no later than July 31, 2021.

Should entrance fee amortization be excluded from patient care?

If the provider includes entrance fee amortization as operating revenue on its financial statements, it should be considered as revenue associated with patient services. Entrance fee amortization must be handled in a consistent manner in both 2019 and 2020.

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