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.
The Consolidated Appropriations Act, which was signed into law on December 27, 2020, contained many updates related to the HHS Provider Relief Fund. Although previous versions of the bill had included an additional $35 billion, the final bill only appropriated $3 billion in supplementary funds. Although this development was disappointing to healthcare providers still dealing with the ongoing global pandemic, the bill offers more flexibility and promises additional distributions. Significant uncertainty remains in some areas so providers should continue to monitor the HHS website for additional guidance.
The bill reverts the ever-changing lost revenue definition back to the June 2020 guidance. This allows providers to elect to use any reasonable method of calculating lost revenue, including budget to actual, provided the budget was established and approved prior to March 27, 2020. This is especially advantageous for providers whose 2019 revenue was not reflective of their anticipated 2020 revenue. For example, providers that added or discontinued a service line or had significant changes to a rate that was unrelated to the coronavirus will be able to use more discretion in selecting a methodology that fits their individual circumstances and normalizes year over year revenue.
More flexibility is also provided to systems and groups. Previously, only General Distributions could be allocated between subsidiaries at the parent’s discretion. The consolidated appropriations act permits Targeted Distributions to be shared as well. Reporting will be the responsibility of the entity that originally received the funds.
85% of the remaining Provider Relief Funds (approximately $35-40 billion) and the newly appropriated $3 billion will be distributed in a “Phase 4” distribution which has yet to be formally announced. An application, similar to the Phase 3 application, will be used to determine the financial losses incurred during the second half of 2020 and the first quarter of 2021 as compared to the same period in 2019. The remaining 15% is not earmarked for a specific distribution and presumably can be allocated at the Secretary’s discretion, potentially in the form of further Targeted Distributions.
Although the bill provided some clarity on lost revenue, significant uncertainty remains in several key areas. Previous versions of the bill would have allowed providers to calculate lost revenue monthly, quarterly, or annually. The final bill made no mention of the time frame for calculation. There are continued questions about the allowable General and Administrative expenses as some guidance seems to favor a broad interpretation while more recent language appears to restrict them to incremental expenses.
There are also indications that the opening of the reporting portal, originally scheduled for 1/15/2021, and potentially the reporting timeline may be delayed. The FAQ and Reporting Requirements have not yet been updated to reflect the recent legislative changes and providers will need some time to incorporate these changes into their documentation. HRSA has not yet held the webinars explaining the reporting process that was promised. It is also unclear how future distributions based on 2020 losses will be reported on.
If you have questions or need additional assistance, please feel free to reach out to us.
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.