I get a lot of questions from providers asking what they can use their CARES Act Provider Relief Fund monies for. After all, it is not often (actually, never) that facilities get a relief payment from our federal government.
Recent Frequently Asked Questions from the Department of Health and Human Services, modified yet again on June 19, 2020, help to concisely explain the two categories of allowable uses of these relief funds: 1) healthcare-related expenses attributable to coronavirus and 2) lost revenues that are attributed to coronavirus. Providers should take heed of this important FAQ posted by HHS:
The Terms and Conditions state that Provider Relief Fund payments will only be used to prevent, prepare for, and respond to coronavirus and shall reimburse the Recipient only for healthcare-related expenses or lost revenues that are attributable to coronavirus. What expenses or lost revenues are considered eligible for reimbursement? (Modified 6/19/2020)
The term “healthcare related expenses attributable to coronavirus” is a broad term that may cover a range of items and services purchased to prevent, prepare for, and respond to coronavirus, including:
• supplies used to provide healthcare services for possible or actual COVID-19 patients;
• equipment used to provide healthcare services for possible or actual COVID-19 patients;
• workforce training;
• developing and staffing emergency operation centers;
• reporting COVID-19 test results to federal, state, or local governments;
• building or constructing temporary structures to expand capacity for COVID-19 patient care or to provide healthcare services to non-COVID-19 patients in a separate area from where COVID-19 patients are being treated; and
• acquiring additional resources, including facilities, equipment, supplies, healthcare practices, staffing, and technology to expand or preserve care delivery.
Providers may have incurred eligible healthcare-related expenses attributable to coronavirus prior to the date on which they received their payment. Providers can use their Provider Relief Fund payment for such expenses incurred on any date, so long as those expenses were attributable to coronavirus and were used to prevent, prepare for, and respond to coronavirus. HHS expects that it would be highly unusual for providers to have incurred eligible expenses prior to January 1, 2020.
The term “lost revenues that are attributable to coronavirus” means any revenue that you as a healthcare provider lost due to coronavirus. This may include revenue 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 cost 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 revenue 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 healthcare 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
How to Document A Facility’s Estimated Revenue Loss
As for that second category of allowable use for Provider Relief Funds under the CARES Act –for a facility’s lost revenues that are attributed to coronavirus — HHS says providers may use any reasonable method of estimating the revenue during March and April 2020 compared to the same period at that time had COVID-19 not appeared. For example, a budget previously prepared that does not take into account the impact of COVID-19 could show lost revenue as the difference between budgeted revenue and actual revenue. HHS also says it “would also be reasonable to compare the revenues to the same period last year.”
HHS points out that there will be future guidance on the type of documentation that HHS expects to show the use of Provider Relief Funds by providers. As such, it is important that providers document accurately, completely and robustly now to be able to show the government clearly the actual Provider Relief Fund expenditures made and why they relate to the COVID-19 pandemic under the criteria above.
Oversight and Enforcement
HHS expects that payments under the Provider Relief Fund will be used appropriately. As such, its anti-fraud efforts, while perhaps not overtly active right now, will be active in the future to make sure that providers are using the money for stated COVID-19 purposes, and not for ANY other purpose.
HHS expects that providers will only use Provider Relief Fund payments for permissible purposes and if, at the conclusion of the pandemic, providers have leftover Provider Relief Fund money that they cannot expend on permissible expenses or losses, then they will return this money to HHS. HHS will provide directions in the future about how to return unused funds. HHS reserves the right to audit Provider Relief Fund recipients in the future and collect any Relief Fund amounts that were used inappropriately.
HHS goes on to state that it will take compliance very seriously and will root out fraudulent or undocumented use. So providers need to beware:
HHS will have significant anti-fraud monitoring of the funds distributed, and the Office of Inspector General will provide oversight as required in the CARES Act to ensure that Federal dollars are used appropriately.
Finally, a lot of folks ask about the Paycheck Protection Program (“PPP”) and how it meshes with the Provider Relief Fund under the CARES Act. Providers that receive a PPP loan can also accept monies from the Provider Relief Fund. The two funding mechanisms are not mutually exclusive. However, the Terms and Conditions for the Provider Relief Fund states that the recipient cannot use the relief funds “to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.” More specifically, HHS says about the Provider Relief Fund that:
all recipients will be required to submit documents to substantiate that these funds were used for increased healthcare-related expenses or lost revenue attributable to coronavirus, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them.
Therefore, if a provider’s PPP loan did not cover all of a facility’s payroll costs for laid off employees or current employees to allow it to continue to provide care, it appears the Provider Relief Fund payments can be used for that purpose. Whatever the situation, providers who are relying on both PPP funds and Provider Relief funds should take extra precautions with their accountants and attorneys to make sure their documentation is clear and accurately maintained should the government question their usage in the future.
Neville M. Bilimoria is a partner in the Chicago office of the Health Law Practice Group at Duane Morris LLP; [email protected]