On September 19th HHS released updated reporting guidelines for CARES act funding from General and Targeted distributions. Included in this announcement is a shift in the definition and calculation of “Lost Revenues”.

Previous announcements and attestations indicated Provider Relief Funds (PRF) could report their use by either lost revenues or costs incurred to treat, prepare, or prevent against actual or possible cases of COVID-19. Going forward PRF recipients will report the use of their payments by first submitting “healthcare-related expenses attributable to coronavirus” then applying any remaining funds against “negative change in year-over-year net income from patient care.”

Effectively, lost revenues are now defined as an entity’s change in net operating income, a significant departure from previously communicated examples of lost revenue by HHS. Reporting will still be required at the Tax Identification Number level.

Other updates include:

• Entities that received between $10,000 and $499,999 in aggregated PRF payments require reporting at an aggregated level for healthcare-related expenses.
• Entities that received $500,000 or more in PRF payments will require detailed reporting on healthcare expenses related to coronavirus.
• Definitions & examples of General & Administrative expenses and Healthcare related expense attributable to coronavirus that can be claimed against any PRF payments.
• Lost revenue/operating income calculations will be reported quarterly, but impacts for use of PRF payments will be calculated upon a “calendar year comparison of 2019 to 2020.”
• Providers with unused funds on December 31, 2020, will submit a second and final report no later than July 31, 2021, that includes coronavirus expenses and lost revenues for the period January 1- June 30, 2021.
• Assistance from PPP, FEMA, business insurance, or other local & State assistance will be reported to reduce allowable expenses related to coronavirus.
• Non-financial data will be collected for each quarter of 2020 including various personnel, patient, and facility metrics.

Significant questions still remain over the announcement and much like the Payroll Protection Program (PPP) we expect multiple rounds of FAQs and changes to the final reporting. In fact, HHS has committed to offering a Q&A session via webinar in advance of the reporting deadline for providers.

Find more information from HHS as they release it at their reporting requirements and auditing webpage here.

Practical takeaways from this announcement:

• Accumulate your organization’s COVID expenses used to “prevent, prepare for, or respond to” COVID-19 and assess their value compared to any PRF payments already received.
• Revisit your financial accounting treatment of PRF payments received this spring and summer and update any reserves or assumptions made based on this new announcement.
• Review the revised definition for lost revenues (net operating income) on your organization’s 2019 and 2020 operations to determine what, if any amounts can be used to offset funds received.
• Gather human resources and senior leadership to begin accumulating non-financial metrics by quarter for items such as staffed beds, patient visits in-person or telehealth, total employee separations, or re-hires.

Read the full notice HERE.

If you would like additional information or further discussion on how this impacts your organization, please contact your local Blue & Co. advisor.