“Don’t worry about it. Take the money. We’ll deal with the details later,” said no one ever — especially not the federal government. But you took the money offered by the CARES Act, and in good faith agreed to the undisclosed terms and conditions.
You signed the attestation statement (or tacitly agreed to it if you kept the money for 90 days or longer) after giving it as much thought as you did the new terms and conditions of the recent iPhone update. To summarize, you took money, spent some or all of it, yet didn’t know whether there were strings attached.
It sounds almost Kafkaesque, but essentially that is what happened.
The Department of Health and Human Services needed to get money into your hands as quickly as possible so that you could continue to care for your residents, including those who were impacted by the coronavirus. Through the Provider Relief Funds (PRF), HHS has enabled you to keep playing a critical role in our nation’s response to COVID-19.
But now, let’s cue the orchestra so we can hear from the strings section. Yes, there are strings — there are always strings. In this case, there are more strings than a symphony’s performance of Vivaldi’s “The Four Seasons.”
HHS has stated that relief funds can be used in the following manner and order: 1) Expenses attributable to coronavirus that are not reimbursed or obligated to be reimbursed from other sources and 2) Lost revenues, as represented by a change in net patient care revenue operating income from 2019 to 2020 (revenue). Now HHS has specified when and what you must report concerning the use of these funds. Etch these key dates on your calendar:
- January 15, 2021: reporting portal opens for providers
- February 15, 2021: first reporting deadline for all providers on use of PRF funds
- July 31, 2021: final reporting deadline for providers who did not fully expend PRF funds prior to December 31, 2020
I had the privilege of facilitating a panel discussion for Bank Leumi’s nursing home clients that was focused on the proper use and accounting of PRF. Bank Leumi’s dedication to the senior care industry drove its request to get ahead of this most challenging topic.
To meet the emerging HHS requirements, and to respond to audits that may happen years from now, pristine documentation, retention and retrieval are required. Below are some highlights from this presentation, specific to the financial revenue and expense accounting and documentation of PRF, as shared by John Fazzio, director of financial services at Zimmet Healthcare Services Group. Critically, John noted that “Proper documentation does not commingle PRF with other revenues, nor does it pay COVID-related expenses from a general expense account.”
Therefore, here are seven deadly sins as related to PRF financial accounting:
- Don’t commingle different PRF together; keep them in separate accounts.
- Don’t include PRF in general funds.
- Don’t include PRF in debt revenue/EBITDA — all are separate and distinct.
- Don’t include PRF in operational revenue — if you do, future required reporting will be near impossible.
- Don’t assume expenses are “qualified” or “permissible.” Consider the “cause and effect” of expenses: “COVID-19 caused this, so I had to spend that.”
- Don’t defer proper accounting or documentation; do it as close to real-time as possible. If you are audited in two years, will you remember the necessary details?
- Don’t use PRF to pay back accelerated Medicare payments. HHS has made it clear that PRF cannot be applied in this manner.
And here are seven virtuous examples of good practice:
- Create separate accounts by fund/purpose: separate bank account, and a separate G/L account on your books.
- Create an expense account for each “qualified COVID expense” — segregated by department.
- Distinguish expenses as “over and above typical expenses” by invoice. (We always had PPE expenses; they must be separate from COVID-required PPE expenses.)
- Clearly define the source of PRF funds in the general ledger; be specific.
- Analyze every payroll period and reclassify qualified expenses into a separate G/L COVID payroll account, again by department. Note additional expenses as a result of COVID, such as special hires or “hero’s pay.” Segregate these expenses from “regular” payroll.
- Retain an audit trail of how you calculated the COVID payroll number, by pay period.
- Include PRF as revenue on your tax returns.
Audits will happen, so follow these guidelines to minimize your risk.
We are grateful to HHS for the PRF, but we must remember how these funds can be used and how they must be reported and consequently documented. Excess funds at the end of the pandemic reporting period must be returned. Again, there will be audits. This is not stated to instill fear, but to simply be factual, as there are several government entities tasked to conduct them.
In addition, the guidance from HHS continues to evolve. Since recent updates contradict previous guidance, it is essential to stay up to date to make informed decisions. Robust administrative systems are required to keep up with regulatory guidance and ensure usage of PRF funds remains above board and authorized.
Steven Littlehale is a gerontological clinical nurse specialist and chief innovation officer at Zimmet Healthcare Services Group.