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HHS Provider Relief Funds: Avoiding the Double Dip – Cost Reporting Edition

This blog was written and produced by Janine Mangione, Partner, CPA, and Margaret Lally, Healthcare Consulting Manager at The Bonadio Group. Looking to get in touch with Janine or Margaret? Reach out today: Janine Mangione jmangione@bonadio.com, Margaret Lally mlally@bonadio.com.

The abundant funding distributed during the pandemic has been a welcome relief to many providers, but it has also produced an alphabet soup of programs with changing rules to keep track of, onerous reporting requirements, and deadlines to monitor. Most providers have been warned of the infamous “double-dip” risk as funds from one source cannot be used on the same expenses that were used to offset another funding stream. One area that is especially murky is the impact, cost-based reimbursement has on the use of the HHS Provider Relief Funds. As cost reporting season commences, it is an opportune time to review the areas of reimbursement that could pose a risk of duplication of funding.

Provider Relief Funds may be used on expenses attributable to COVID-19 that are not reimbursed by another source or obligated to be reimbursed by another source. The most straightforward example of how cost-based reimbursement interacts with Provider Relief Funds is a Critical Access Hospital. Medicare reimburses Critical Access Hospitals for 101% of their costs based on the cost report. As such, any costs related to Medicare patients are considered to be reimbursed in full and no HHS Provider Relief Funds can be used on these costs, even if they are attributable to COVID-19. Providers should carve out the Medicare portion of their cost when determining allowable expenses for Provider Relief Fund.

One beneficial rule change in the Provider Relief Fund frequently asked questions (FAQ) was to allow the funds to offset the full purchase price of capital equipment instead of just the annual depreciation expense. The capital purchases are required to be attributable to COVID-19 and include items such as ventilators, CT scanners, ICU equipment inventory stockpiles, HVAC upgrades, infrastructure to support telehealth and remote working, and projects or equipment investments to allow for social distancing. This allowed providers to make purchases that were necessary to prevent, prepare for and respond to COVID-19, but also investments that would be a benefit to the organization in the future.

One area providers may not have considered is the cost-based reimbursement of capital rates. Medicaid in New York State reimburses Skilled Nursing Facilities, Article 28 clinics, and Licensed Home Care Services Agencies and other provider types for the Medicaid portion of capital improvements. Capital assets reported on the various provider cost reports are used in determining the capital rates in subsequent years. Even though this reimbursement may not come for several years, these capital items are still obligated to be reimbursed by another source. It is therefore important to exclude the Medicaid portion of capital items when reporting expenses on the HHS portal and the schedule of Federal expenditures if the funds are subject to single audit requirements.

Providers should also review cost reporting instructions for changes that may impact HHS reporting. For example, COVID-19 vaccines and vaccine administration costs are reimbursable for Federally Qualified Health Centers and Rural Health Clinic Centers through the cost report in the same way that influenza and pneumococcal vaccines are. Monoclonal antibody treatments are also reimbursable for Medicare beneficiaries. Make sure the expenses associated with newly reimbursable services are not used to offset Provider Relief Funds.

Since HHS considers the Provider Relief Fund the payer of last resort, providers should file cost reports normally and exclude any cost-reimbursed amounts from the HHS reporting.

If you have questions about the HHS Provider Relief Fund, cost reimbursement, or cost reporting, feel free to reach out to us for further consultation or an analysis of your cost report.

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.