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Evolving Rules for HHS Provider Relief Fund Reporting and Usage

By Aaron Cohen, Kate Broderick .

As seen in Crain's New York Business

In response to the unprecedented strain placed on healthcare provider organizations (“providers”) by the COVID-19 pandemic, the federal government created, through multiple pieces of legislation, the Provider Relief Fund (“PRF”) to provide much-needed financial assistance. Providers can use distributions received from the PRF to reimburse expenses and lost revenues attributable to coronavirus. Congress has appropriated $178 billion to this fund to date, which is administered by the Department of Health and Human Services (“HHS”), nearly $140 billion has been obligated or disbursed to providers through several distributions.

While this money has provided sorely needed liquidity, the constantly evolving, ambiguous guidance surrounding the many terms and conditions for the use and reporting of funds has created a complex web of concerns for recipients. These concerns are particularly pressing as the PRF distributions will be subject to significant governmental oversight and scrutiny. As providers contemplate how to deploy these funds, they must consider how to reduce risk while maximizing benefit, while at the same time maintaining appropriate controls and documentation to meet reporting and audit requirements.

New Legislation and Important Change in Methodology

In December 2020, Congress passed an additional coronavirus relief bill. In the new legislation, Congress revised the methodology for determining eligible use of the PRF distributions. In particular, providers will now be permitted to calculate lost revenue attributable to coronavirus by comparing actual 2020 revenue with budgeted revenue, so long as the applicable budget was “established and approved” by the provider by March 27, 2020.

On January 15, 2021, HHS issued additional guidance regarding the new budgetary comparison for determining lost revenue. HHS will now allow for three possible methodologies for determining lost revenue: (i) a comparison of 2020 actual patient care revenue to 2019 actual; (ii) a comparison of 2020 actual patient care revenue to 2020 budget; or (iii) “any reasonable method of estimating lost revenue.” HHS notes that providers who pursue the second option must also complete an attestation confirming that their budget was “established and approved” prior to March 27, 2020. For providers that pursue the third option, they must submit an explanation of their methodology with their reporting. HHS indicated that providers who choose the third option will face a higher risk of audit by HHS.

PRF Distributions – Reporting and Use

In addition to issuing updated guidance on calculating lost revenue, on January 15, 2021, HHS also issued new guidance on reporting. While the first reporting deadline for PRF payments was initially set for February 15, 2021, it now appears to be delayed. HHS did not indicate a new deadline, but rather asked providers to register for reporting through a new portal ( and stated that “in the near future,” they would be releasing an updated window for reporting on providers’ 2020 use of PRF payments. This new guidance does not appear to amend HHS’ position that providers may continue to deploy PRF payments until June 30, 2021 and that they must report on the 2021 use of funds by July 31, 2021.

Despite this delay, as providers close out 2020, they must finalize how they are going to allocate the funds they received. In the fall of 2020, HHS clarified that PRF reporting will require a two-step process for allocating PRF payments. Providers must first allocate funds to healthcare-related expenses attributable to coronavirus. Any funds that remain after covering such healthcare-related expenses may be claimed as lost revenue.

For reporting purposes, providers should identify and quantify incremental healthcare-related expenses attributable to coronavirus. The categories of eligible expenses appear broad, including expenses such as supplies, equipment, workforce trainings, and additional staffing expenses. It is critical to bear in mind when considering these expenses, however, that it must be defensible as “preventing, preparing for, or responding to coronavirus.”

Importantly, HHS clarified that two critical expense categories can generally be covered with PRF payments: capital expenses attributable to coronavirus and taxes imposed on PRF payments. Capital expenses attributable to coronavirus, such as ICU-related equipment, retrofitting COVID-19 units, or leasing temporary structures to screen/treat patients, are eligible, in full, for PRF payment use, so long as they are directly related to preventing, preparing for, or responding to coronavirus. Likewise, HHS “considers taxes imposed on Provider Relief Fund payments to be ‘healthcare-related expenses attributable to coronavirus’,” with the noted exception of PRF payments made as part of the Nursing Home Infection Control Distribution.

While allocating funds to cover healthcare-related expenses attributable to coronavirus may be helpful, many providers may not have sufficient, eligible expenses to utilize all of their PRF payments. As a result, providers will often lean on the “lost revenue” category to validate the use of PRF payments.

For reporting lost revenue attributable to coronavirus, providers must first determine revenue losses attributable to coronavirus. The definition of “revenue” for purposes of the computation appears to include amounts received under the Paycheck Protection Program (“PPP”), as well as any interest earned on PRF payments. Factoring PPP funding into the definition of revenue could significantly reduce available revenue losses for some providers, making it more difficult to claim PRF payments.

Providers who are able to claim funds under lost revenue may, per HHS guidance, use their PRF distributions to “cover any cost that the lost revenue otherwise would have covered, so long as that cost prevents, prepares for, or responds to coronavirus.” and, critically, providers may consider “maintaining healthcare delivery capacity” as a means of responding to coronavirus. HHS has provided examples of eligible costs, including rent, employee payroll, and equipment leases. Given that claiming funds under lost revenue allows providers to cover normal operating expenses, this pathway seems to offer a lower risk and more flexible route to taking advantage of PRF payments than attributing the PRF payments to healthcare-related expenses.

Preparing Documentation for Reporting and Oversight – Internal Controls

Providers must simultaneously stand up appropriate internal controls and documentation to prepare for future HHS reporting and audit requirements. First, providers should document and implement effective internal controls to demonstrate responsible stewardship and transparency in the management of their distributions. Additionally, providers should maintain careful documentation of their eligibility for the funds they received, including bank statements identifying PRF funds received, tax returns, and proof of patient care on or after January 31, 2020.

It is critical that providers undertake detailed documentation of PRF payment uses. While HHS has provided guidance on the type of information it will look to gather, it has not identified the specific documentation that will be required of providers. We would suggest being prepared to provide information such as internal financial statements, individual receipts, and line-item budgets.

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