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Validate Your CARES Act Funding

This blog was written and produced by Jonathan Miller, CPA, Partner, Aimee Jozic, Partner, and Margaret Lally, Healthcare Consulting Manager at The Bonadio Group. Looking to get in touch with Jonathan, Amiee, or Margaret? Reach out today: jmiller@bonadio.com, ajozic@bonadio.com, mlally@bonadio.com.

Since the onset of the pandemic, health care providers have been the recipients of funding through a variety of sources, including the CARES Act Provider Relief Fund (PRF), Payroll Protection Program, as well as local and private funding, provided to stabilize the health care sector.

The U.S. Department of Health & Human Services (HHS) has been successful in providing funding to providers in an expedited manner. However, an unintended consequence of the expediency has left many providers in the dark due to limited guidance. Providers are becoming anxious, unsure whether they have interpreted the rules and regulations correctly for when the Office of the Inspector General or another government regulator comes for audit.

As discussed in this blog post and the CARES Act Provider Relief Fund Frequently Asked Questions (FAQ), health care providers that received PFR funds and choose to retain the funds, must attest that they met the terms and conditions of the funding, via the CARES Act Provider Relief Fund Payment Attestation Portal. The terms and conditions prescribed in the attestation require the health care providers to certify they will use the monies to “prevent, prepare for, or respond to coronavirus and can be used to cover expenses and lost revenues related to the pandemic. Providers must also ensure that the losses and expenses reimbursed through the Provider Relief Fund have not been paid from other sources or are obligated to be paid from another source.” In addition, health care providers must adhere to quarterly reporting requirements and must agree to cooperate with any future audits.

HHS has stated they reserve the right to audit PFR funds in the future to ensure the requirements are met. Rightfully so, many providers have concerns attesting they will meet terms and conditions that will be set in the future. Of the limited guidance available, as cited in this May 6th article in HFMA, an HHS spokesperson stated “generally, HHS does not intend to recoup funds as long as a provider’s lost revenue and increased expenses exceed the amount of PFR the provider has received.”

The key to managing this process will be record-keeping and documentation. Healthcare providers will have to develop two methods to track compliance; a method to track and report lost revenue and a method to track and report increased expenses related to COVID-19.

Revenue Loss

In its FAQ, HHS states that lost revenue can be estimated by any reasonable method. Two possibilities are comparing year-over-year revenue or by comparing budgeted revenue to actual. This can be accomplished by the use of monthly financial metrics most health care providers currently utilize, including monthly reports of actual revenue earned, compared to prior year and budget.

Expenses

For health care providers that have received PFR and other relief aid in excess of lost revenue, the next step would be to review expenses. Begin to segregate all expenses between ‘typical’ and “COVID-related” now the information will be available in the future for audit and cost reporting. Remember that expenses cannot be duplicated under differing funding streams. CARES Act funds will only cover expenses NOT reimbursed through other programs including PPP.

Our top 10 list of expenses to document and segregate include:

  1. PPE – Clinical PPE including additional supplies for increased volumes, as well as increased prices due to shortages and time spent searching for PPE. Also include the additional costs associated with isolating patients, increased documentation, additional clinical equipment and supplies, time spent on telehealth issues, and CMS/CDC infection control procedure changes.
  2. Testing Costs – COVID-19 personnel testing costs associated with Executive Order 202.30 mandating twice-weekly testing for all nursing home personnel. Include test kits, supplies, lab work, time spent scheduling, reviewing and managing the testing process, and incentives paid to employees to encourage testing and compliance.
  3. Personnel Costs – This includes additional hours for screening, coverage (including contracted personnel) of absent employees, development of additional policies, increased scheduling, employee perks such as gift cards and meals, additional education, moving of staff where needed.
  4. Administration Costs – Such as those associated with updating policies, managing an anxious workforce, communication to both staff and families, time spent hiring and managing an absent workforce, management of COVID-19 exposure in your facility and phone time working through new rules and problem resolution as a result; compliance, consulting fees for COVID-19 response assistance, maintaining records of daily events, and/or public relations.
  5. IT and Equipment – This includes additional equipment, software, and internet upgrades, to accommodate remote work, video conferencing, and virtual family visitation.
  6. Finance – Time spent applying for grants/loans, reporting compliance, development of new policies and procedures, consulting fees for COVID-19 response assistance, billing time and issues with lab tests, and 1135 waivers.
  7. Equipment – Security and plant, operating, and maintenance equipment to test temperatures of all personnel, vendors, etc. who enter the building, as well as the staff who manage people in the building. Consider also the additional cost of waste services due to enhanced infection control and increased PPE.
  8. Patient Food Service – Meals in isolation, meals in rooms, the additional cost of staff to assist with meals, and/or additional equipment due to meals served in a social distancing environment.
  9. Additional Staff Hours – This includes housekeeping and the need for more intense cleaning and sanitizing, additional activities due to more individualized activities, as well as additional time for admin, nursing, finance staff who spent time spent handling additional duties and virus issues, as well as communicating with families who cannot visit their loved ones and need help to talk to them through phone calls or window visits.
  10. Workforce Training – Health care providers will need to train their providers, nurses, and staff to protect themselves, patients, and community form exposure to, and infection with COVID-19.

As previously mentioned, CARES act funding will not cover expenses reimbursed through other programs. In addition to segregating CARES act expenditures, you should segregate out expenses that are being reimbursed through the Payroll Protection Program (PPP), FEMA, or other sources of relief aid.

Reporting

At this time, HHS has not yet released specific reporting requirements. Quarterly reporting is referenced in the terms and conditions, but HHS has announced that it will develop a report that will contain the necessary information for providers to comply with this provision. HHS has indicated it will notify recipients of PRF money of the content and due dates of reports in the coming weeks. Based on the quarterly requirement, this could be due as soon as July 10. Providers who have received any PRF money should also note that attestation to the terms and conditions must be completed within 90 days of receipt.

DOCUMENT, DOCUMENT, DOCUMENT

In these uncertain times, documentation is more important than ever. With all the CARES Act programs, there is new information about the regulations being disseminated daily. It is important to document the decisions made to ensure compliance and maximize the benefit of these programs.

As your trusted business advisors, we are in a position to assist you in the tracking and aggregation of revenue and expenses as mentioned above. 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.