Chambliss, Bahner & Stophel, P.C.

The Department of Health & Human Services (HHS) is scheduled to open its Provider Relief Fund (PRF) reporting system tomorrow (January 15, 2021). 

Recipients of over $10,000 in PRF aid will report on their use of funding through December 31, 2020, to address increases in health care-related expenses, general and administrative (G&A) expenses, and lost revenue due to the coronavirus, using their normal method of accounting (cash or accrual basis). Recipients who received $500,000 or more will be required to submit more detailed reports. HHS has previously indicated that PRF recipients will be required to submit these reports to HHS no later than February 15, 2021.

The recent passage of the Consolidated Appropriations Act, 2021 (the Act), signed into law by President Trump on December 27, 2020, has introduced material changes with respect to how lost revenues will be reported. Although HHS has provided several new frequently asked questions (FAQs) since that time, PRF recipients cannot ignore the fact that the prior pace and level of detail of the guidance from HHS has slowed significantly in recent weeks.

As we await tomorrow’s scheduled opening of the reporting system, there are still significant unknowns, but the following is a high-level overview of what we understand HHS will likely require in terms of reporting on the use of PRF funding:

Step One:

A PRF recipient will be required to total its 2020 expenses attributable to COVID-19 that another source of funding has not reimbursed and is not obligated to reimburse. These expenses include G&A and health care-related operating expenses attributable to COVID-19. A recipient should apply its PRF funds to these 2020 expenses first.

Step Two:

If a recipient’s PRF funds are not fully expended pursuant to step one, then it should apply the remaining PRF funds to 2020 lost revenue. We have walked a long and winding road of guidance from HHS regarding what constitutes lost revenue. The definition of this term has changed significantly several times since the first FAQ on this concept was provided by HHS on June 2, 2020. Most recently, the Act shifted the definition of this term yet again, reverting back to HHS’ original June 2, 2020, guidance and essentially overruling HHS’ current position, which had required that providers calculate lost revenue by comparing 2019 actual patient care revenue against 2020 actual patient care revenue.

Instead, the Act now instructs that providers may calculate lost revenue “using the [FAQ] guidance released by [HHS] in June 2020, including the difference between [a] provider’s budgeted and actual revenue budget if such budget had been established and approved prior to March 27, 2020.” The Act does not specify which June 2020 FAQs it is referring to, but we believe the intent may be to reference this June 2, 2020, FAQ, which described the expenses or lost revenues that are eligible for reimbursement with PRF funds. This FAQ was subsequently modified on June 19, 2020, and again on October 28, 2020. 

In short, lost revenue is broadly defined as “any revenue that you as a health care provider lost due to coronavirus.” On June 2, 2020, HHS instructed providers to use PRF payments to cover “any cost that the lost revenue otherwise would have covered, so long as that cost prevents, prepares for, or responds to coronavirus.” HHS further instructed that these costs “do not need to be specific to providing care for possible or actual coronavirus patients, but the lost revenue that the [PRF] payment covers must have been lost due to coronavirus.”

The June 19, 2020, modifications to this FAQ also included the key statement that PRF recipients could “use any reasonable method” for estimating COVID-19 related lost revenue. HHS gave an example of this sort of reasonable method, commenting that if a PRF recipient had a budget prepared without taking into account the impact of COVID-19, the estimated lost revenue could be the difference between the recipient’s budgeted revenue and its actual revenue. 

Step Three: 

If a recipient did not expend all of its PRF funds in full by the end of calendar year 2020, it will have an additional six months—between January 1, 2021, and June 30, 2021—to use its remaining amounts toward expenses attributable to COVID-19 or to offset 2021 lost revenue. The most recent guidance from HHS instructs that providers who expend PRF funds during the first six months of 2021 will have a second and final reporting deadline of July 31, 2021.

Again, the reporting system opens tomorrow, January 15, 2021, and the deadline for completing and submitting your PRF report to HHS will be February 15, 2021

As we have already seen, guidance from HHS regarding PRF funding—particularly with respect to calculating lost revenue—is constantly evolving. Our Chambliss team will continue to analyze the new legislation and developing guidance on these topics.