Consolidated Appropriations Act of 2021: COVID-19 Relief

This blog is written by CLA’s Rob Schile, CPA, and focuses on the key Provider Relief Fund changes included in this new law.

In late December the U.S. House and U.S. Senate overwhelming passed a federal funding and COVID-19 relief package to bring much needed assistance to individuals and businesses in the form of stimulus payments, extended unemployment benefits and various tax benefits. The President, ultimately, signed the bill into law on December 27, 2020.

Among the over 5,500 pages in the bill are multiple provisions that will impact various elements of the health care industry. CLA is currently unpacking the new law and will continue to provide relevant updates. In the interim, we wanted to highlight the key updates impacting the Provider Relief Fund (PRF) to help you plan and prepare for the first reporting deadline still scheduled for February 15, 2021.

• Additional PRF Dollars. The new law adds an additional $3 billion to the PRF. There are no significant changes in how funds can be spent. However, Congress directs the Department of Health & Human Services (HHS) to distribute at least 85% of the new and any remaining PRF dollars for “any successor to the Phase 3 General Distribution allocation to make payments to eligible health care providers based on applications that consider financial losses and changes in operating expenses occurring in the third or fourth quarter of calendar year 2020, or the first quarter of calendar year 2021, that are attributable to coronavirus….”

• Lost Revenue Calculation. Continuing with the roller coaster of how providers should report lost revenue, the law restores earlier guidance issued by HHS in June of 2020. Specifically, the law states that providers “may calculate such lost revenues using the Frequently Asked Questions guidance released by the Department of Health and Human Services in June 2020, including the difference between such provider’s budgeted and actual revenue budget if such budget had been established and approved prior to March 27, 2020.” The law does not restate which June FAQ(s) it is referring to, but the assumption is that the reference would be back to the June FAQ outlining allowable uses and lost revenues. See excerpted text below.

“…The term “lost revenues that are attributable to coronavirus” means any revenue that you as a health care provider lost due to coronavirus. This may include revenues losses associated with fewer outpatient visits, canceled elective procedures or services or increased uncompensated care. Providers can use Provider Relief Fund payments to cover any costs that the lost revenue otherwise would have covered, so long as that cost prevents, prepares for or responds to coronavirus. Thus, these costs do not need to be specific to providing care for possible or actual coronavirus patients, but the lost revenues that the Provider Relief Fund payment covers must have been lost due to coronavirus. HHS encourages the use of funds to cover lost revenue so that providers can respond to the coronavirus public health emergency by maintaining health care delivery capacity, such as using Provider Relief Fund payments to cover:

• Employee or contractor payroll
• Employee health insurance
• Rent or mortgage payments
• Equipment lease payments
• Electronic health record licensing fees

You may use any reasonable method of estimating the revenue during March and April 2020 compared to the same period had COVID-19 not appeared. For example, if you have a budget prepared without taking into account the impact of COVID-19, the estimated lost revenue could be the difference between your budgeted revenue and your actual revenue. it would also be reasonable to compare the revenues to the same period last year….”

Excerpt from Modified June 19, 2020 PRF FAQ

The lost revenue change is a significant reversal from how HHS had directed providers to calculate PRF. The assumption is that providers would still be using a calendar year look at lost revenue. HHS will need to clarify various issues around the new lost revenues language. Regardless, the change warrants review and reconsideration now.

• Transferring PRF Distributions. The new law also allows more flexibility for a parent entity to transfer and/or use the PRF distributions of its eligible subsidiaries, including Targeted Distributions. Previously, only General Distributions were afforded this flexibility. It is important to note that the law still requires the responsibility for reporting for the reallocated reimbursement to remain with the original recipient.

Next Steps

1. Reconsider your lost revenue calculations in light of the new statutory change.
2. Reconsider your parent and subsidiary relationships in light of the new Targeted Distribution flexibility.
3. Prepare for the first reporting deadline, still scheduled for February 15, 2021.

Have Questions? CLA can help. Please reach out today. In the interim, CLA will continue to review the remaining pieces of law that impact health care and will be watching for additional PRF guidance from HHS on the reporting requirements and reporting portal. We will keep you updated!

Welcome to 2021!