On September 19, 2020, the U.S. Department of Health and Human Services (HHS) released a notice related to post-payment reporting requirements for Provider Relief Fund (PRF) recipients who received payments of $10,000 or more in the aggregate. This notice is in support of the July 20, 2020, Post-Payment Notice of Reporting Requirements and provides the data elements that are required for the post-payment reporting process. This reporting requirement applies to all organizations receiving $10,000 or more of PRFs.
The updated reporting requirements will likely necessitate a new approach for calculations of PRF reimbursement and result in changes to revenue recognition. The reporting requirements now include the required application of a lost revenue calculation that in essence limits the allowable use of PRFs to the difference between the negative change in year-over-year (calendar years 2019 and 2020) net patient care operating income, net of the healthcare-related expenses attributed to the coronavirus and not already reimbursed from PRF or other sources. This could have an unexpectedly disproportionate impact on organizations that have aggressively controlled patient care-related expenses (including general and administrative) and negative impacts from reduced patient care revenues. Recipients reporting negative net operating income from patient care in 2019 may apply PRF amounts to lost revenues up to a net zero gain/loss in 2020.
Those recipients not expending PRFs in full by December 31, 2020 will have an additional six months to use remaining amounts toward expenses attributable to coronavirus but not reimbursed by other sources. If a subsidiary TIN (Tax ID Number) received a Targeted Distribution payment, the subsidiary TIN must report use of funds for that payment, and the parent organization cannot also report on (or transfer) the subsidiary’s Targeted Distribution payment.
Below are some recommended activities for assessing the Post-Payment Reporting Requirements and preparing to complete required reports:
- Perform a quick impact assessment on financial statement reporting specific to recognized and deferred revenues. If the organization has unissued financial audits, it will need to consider if a late period adjustment or a subsequent event footnote may be warranted.
- Consider the need to update spreadsheets or financial models used to compute PRF earned and deferred revenues. This includes reviewing methodology, entity-specific limitations, key assumptions, and the ability to support quarterly breakouts required for December 31, 2020, and potentially June 30, 2021, reports.
- If the entity’s fiscal year end is not prior to December 31, consider strategies to support 2019 and 2020 calendar year reporting and any implications large year-end 2019 adjustments may have on January 2021 through June 2021 PRF lost revenue reporting.
- PRF entities that are part of a consolidated reporting group and do not have audited financial statements should assess strategies available if a Single Audit is required (received $750,000 or more in PRFs) or if significant corporate expenses are allocated only to certain entities for tax reporting.
- Assess resources available to support the identification and assembly of data and records necessary to prepare the required PRF reports and to support Single Audit requirements. This includes preventing duplicate funding claims, removal of disallowed costs (including executive compensation limitations above $197,300 using PRF money, and lost revenues), and documentation related to activities supporting claimed healthcare expenses attributed to the coronavirus.
- Plan on working closely with the external auditor for modeling implications on recognized and deferred revenues.
- Monitor HHS sites for new updates on HRSA (Health Resources and Services Administration), FAQs on PRF recipient reporting and future webinars.