CLA: For Provider Relief Fund Compliance, the ‘List of Questions Continues to Grow’

The Department of Health and Human Services (HHS) last month released its reporting rules for health care providers who received payments from various COVID-19 relief funds.

And according to the professional services firm CliftonLarsonAllen (CLA), there were some curveballs in those rules, which were released September 19 and covered distributions from the CARES Act and the Paycheck Protection Program (PPP).

Specifically, there appear to be several changes from previous guidance on Provider Relief Fund (PRF) reporting, CLA director of health care policy and innovation Jennifer Boese said on a webinar recorded on October 8. Those areas include:

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  • Changes in how “expense” is defined under the reporting guidance
  • Changes to the calculation of lost revenue
  • Changes in how PRF funds are to be used: first for COVID-19 expenses and then for lost revenue

The timeline for the opening of the reporting portal from HHS also changed. It was originally projected to open October 1, but is now set for January 15, 2021. From that point, providers will have a month to complete the first calendar year report for PRF use. The second and final report is due July 31, 2021.

The reporting requirements apply to all general distributions from the PRF and to targeted distributions, including those for skilled nursing facilities, according to CLA’s presentation. But of note for SNFs, the Nursing Home Infection Control Distribution is exempt from the requirements, though HHS has indicated other reporting mandates could apply, the presentation noted.

In terms of expenses, the guidance includes two general areas: general & administrative (G&A) and health care-related expenses, Boese noted. Health care-related expenses could include such costs as supplies, personal protective equipment (PPE) and information technology for remote work.

The G&A section, however, is new to HHS. In the guidance, HHS for the first time details some of the terms related to this type of pandemic expenses, Boese said. It includes items such as mortgage or rent, lease payments or insurance.

“I would actually like HHS to provide more clarity on what they mean by expenses,” she said on the webinar. “Because they kind of mix different terms. I think the general perspective right now in the industry is that expenses are more narrow, and it’s limited to those things that can be directly tied back to COVID.”

The reporting requirements make use of the phrase “maintaining health care delivery capacity,” but that phrase was only used once before by HHS, Boese pointed out, in an FAQ that covers allowable uses of PRF funds. But the phrase is used in the “lost revenue” section of that document in a much broader context indicating providers could use it to cover lost revenue to sustain this capacity.

The point for CLA is that HHS’ definition of “expense” might be a bit broader than what providers previously understood, but at the moment, it’s not entirely clear if that’s the case.

“The safest way at this point is probably to model out what [expenses] would look like based on a narrower interpretation,” Boese said. “But maybe keep the broader definition in your back pocket.”

She also noted that there’s a lack of detail when it comes to “reimbursements received” that should be taken out of COVID-19 costs, which providers should keep in mind.

‘Areas Needing Clarity’

In addition, the guidance includes significant changes to the calculation of lost revenue, Josh Wilks, health care principal at CLA, said on the webinar.

“The reality is this is not a calculation of year-over-year in comparison to the previous year or the previous quarter,” he said. “It’s really a comparison of patient-care margin, operating margin on a quarterly and year-over-year basis.”

That creates questions about the accounting treatment of the funds, especially given the language, Wilks said, and that HHS does not appear to be focused on the financial reporting and the accounting treatment of PRF funds.

CLA also noted several questions related to ‘Areas Needing Clarity’ on the requirements. These include questions over just how broadly G&A expenses will be defined, whether depreciation expense is allowable and the handling of changes of ownership in 2019 and 2020.

And those opaque areas could expand over time.

“Our list of questions continues to grow,” Boese said.

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