April 27, 2020

The Coronavirus Aid, Relief, and Economic Security Act (CARES) that was signed into law on March 27, 2020 allocated $100 billion in financial relief targeted to hospitals and other healthcare providers.

On Friday, April 14, 2020, the Department of Health and Human Services (HHS) initiated a portion of this $100 billion through its distribution of $30 billion as part of the $50 billion general allocation fund that was established through CARES. Additional information on this first round of funding can be found here.

On Friday, April 24, 2020 HHS began its second round of funding that will spend the remaining $20 billion of the general allocation fund. This funding is intended to support healthcare-related expenses or lost revenues attributable to COVID-19 and to ensure availability of testing and treatment for COVID-19 related illnesses.

This new round of $20 billion in funding comes with certain restrictions that are similar the initial $30 billion relief. Some, but not all, of the restrictions include:

  1. The healthcare business must be able to certify that it is in good standing with Medicare.
  2. The healthcare business must be able to certify that payments will only be used to prevent, prepare for, and respond to the coronavirus AND that the payment shall reimburse for only health care related expenses or lost revenues that are attributable to coronavirus.
  3. The funds will not be used for expenses or losses that have already been reimbursed from other sources (PPP Loan, EIDL Grants, EIDL Loans).
  4. If the healthcare business receives more than $150,000 in total funds in relief from the multiple sources provided under the CARES Act, the Families First Coronavirus Response Act, and the Coronavirus Preparedness and Response Supplemental Appropriations Act, then the business will be required to report no later than 10 days after the end of each quarter detailed financial and employment information.
  5. None of the funds can be used to pay the salary of an individual whose pay is in excess of Executive Level II, which for 2020 is defined by the Office of Personnel Management as $197,300.
  6. The healthcare business will charge patients in-network charges even if their health plan is out of network.

However, there are also new restrictions added to this round of funding. Some, but not all, of the new restrictions include:

  1. The requirement to submit revenue data for calendar year 2018.
  2. The requirement to agree to this information being publicly disclosed.
  3. Submission of the most recently filed tax return; dates specified are 2017, 2018, or 2019.
  4. Submission of the provider’s estimated loss of revenue for March and April 2020 due to COVID-19. This can be in the form of a budget to actual statement or a prior year comparative financial statement.
  5. A listing of Tax Identification Numbers (TINs) with very specific instructions on the appropriateness of listing multiple TINs.

If the paperwork becomes too burdensome and the healthcare business cannot comply or prove that it is complying, the funds will be required to be repaid. It is unclear whether interest will be charged.

It appears that there will be audits. Writing collection policies and financial policies as well as keeping good accounting records will be imperative. Billing and collections will have an added layer of necessary consideration regarding patient billing. The accounting department will be required to keep additional paperwork and provide additional reporting to HHS.

KHA recommends that, similar to the PPP Loan program, the healthcare business should open a separate bank account for these funds and move the exact amount of funds into the new bank account. Additionally, set up separate chart of account items and/or classes in the accounting software to keep track of the expenses that are being supported by this program. Finally, identify expenses that are appropriate to be used for these funds and transfer that exact amount out of the bank account and maintain detailed documentation supporting such transfers.

What remains unclear is how much will be provided in relief to any individual business.  Unlike the initial round that was based on relative proportion of 2019 Medicare Fee-For-Service (FFS) payments, the second round is expected to be distributed proportionate to the providers share of 2018 net patient revenue. For those providers who have a small Medicare practice, the second round of payments could be more beneficial. Of course, it depends on the total revenue of submitted requests to determine how much of the remaining funds will be allocated to any individual practice.

It’s possible that the amount of relief will be insufficient to support the level of paperwork and new policies and procedures that will be required to be implemented. Consideration should be given to repaying these funds within 30 days of payment if the healthcare business doesn’t anticipate that it will be able to comply.

For more information on this relief, here are some useful links:

CARES Act Provider Relief Fund

Information on the Terms and Conditions

This nine-page FAQ is very helpful as well.

For the remaining $50 billion in funding not currently allocated, plans are in progress. We anticipate that this funding will provide more targeted support, specific to healthcare entities that provide treatment to the uninsured, high impacted areas, rural providers, Indian Health Service, skilled nursing facilities, dentists, and providers that solely take Medicaid.

Visit the HHS website at https://www.hhs.gov/ to learn more about future relief efforts.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. Consult your legal and business advisors prior to making financial decisions. This is intended for illustrative and discussion purposes only.