This article was written and produced by Robert Nasso, Partner, and Margaret Lally, Healthcare Consulting Manager. Looking to get in touch with Robert or Margaret? Reach out today: rnasso@Bonadio.com, mlally@bonadio.com.
HHS began distributing performance-based payments to eligible skilled nursing providers in early November. On or around November 2, the payment for the September performance period was remitted. In order to be eligible, facilities must have a rate of COVID-19 infections that is less than the county in which they are located and have a mortality rate lower than the national threshold. The infection rate is calculated using NHSN data and does not include COVID-19 admissions, only infections that occurred within the facility. The rate is then scaled up by patient volume to arrive at a performance score. The mortality rate of a facility is compared to a statistical model of expected deaths which takes the health and demographic information of the facility’s residents into account. 80% of bonus payments will be based on the infection measure and 20% on the mortality measure. A significantly high mortality rate may render a provider ineligible for any payment. There will be five potential payments based on performance periods of September, October, November, December, and a cumulative September through December performance period.
The first reporting deadline for the HHS Provider Relief Fund is quickly approaching, so providers should begin to prepare the data and documentation that will be necessary to comply. The reporting portal for 2020 is scheduled to open on January 15, 2021, and will close on February 15, 2021. Providers who do not expend all Provider Relief Funds in 2020 will have until June 30, 2021, to fully utilize the money and will have a final report due on July 31, 2021.
Reporting requirements vary depending on the amount of funds received. For providers receiving less than $10,000 in total Provider Relief Funds, no reporting is required. Simplified aggregate reporting is requisite for providers who received between $10,000 and $500,000, and detailed reporting will be compulsory for providers who accepted over $500,000. Additionally, providers who expended over $750,000 in government funds may be subject to a single audit.
HHS Provider Relief Funds can be applied to healthcare related expenses attributable to coronavirus that are not reimbursed by another source. After expenses are exhausted, lost revenues can be used to cover any remaining funds. Healthcare expenses fall into two main categories: General & Administrative Expenses and Healthcare Related Expenses. Simplified reporting for providers receiving between $10,000 and $500,000 entails stating total amounts for each of the two expense categories and lost revenue. Providers receiving more than $500,000 will need to further detail the expense categories. General & Administrative expense is broken down into mortgage/rent, insurance, personnel, fringe benefits, lease payments, utilities and operations, and other overhead. Healthcare related expenses must be itemized as supplies, equipment, information technology, facilities, and others. Recently, HHS updated guidance to allow the full purchase price of equipment purchased directly because of coronavirus (new air filtration equipment, for example) instead of just the annual depreciation.
Lost revenue is defined as the change in revenue from patient care sources from 2019 to 2020. Revenue must be net of bad debt, charity care, and other allowances and should only include revenue related to the year being reported, so prior period adjustments or settlements related to another year should be excluded. In a change from prior guidance, lost revenue is no longer capped at the change in year-over-year net income. This may allow some providers to be more profitable in 2020 than they were in 2019 once provider relief funds are included.
Providers will need to report quarterly amounts for both expenses and revenue. Revenues will need to be broken out by payer and other assistance received such as PPP loans, FEMA grants, business insurance, and other grants will also need to be reported. Providers should also ensure that expenses and lost revenues applied to the HHS funding are not also used to offset other funding streams as double-dipping is prohibited. HHS will also collect data on personnel (total personnel by labor category, hires, re-hires, and separations), patients (visits, admissions, residents), and facilities (staffed beds). Entities that experienced a change in ownership may also have to provide additional information about the acquisition or divestiture. Currently, no outside documentation, such as invoices and contracts, will be required in the portal submission and a worksheet will be supplied to assist providers who are subject to detailed reporting guidelines. Providers are required to maintain documentation supporting reported amounts for three years after the final expenditure report is submitted.
These reporting requirements do not apply to the Nursing Home Infection Control distribution that was deposited in late August or to the Performance-based payments that are currently being awarded. Separate reporting requirements for these funds may be announced in the future.
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The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.