- The U.S. Department of Health & Human Services added and updated answers to some of the CARES Act Provider Relief Fund FAQs last week.
- Payments to providers under the CARES Act Provider Relief Fund are taxable, according to HHS.
- Details of how to report revenue using financial statements was provided by HHS.
The U.S. Department of Health & Human Services added and updated answers to some of the CARES Act Provider Relief Fund FAQs last week (ending July 16). Below is a summary of key clarifications included in the update.
1. Are provider relief funds (PRF) taxable? Yes. “The payments to providers do not qualify as qualified disaster relief payments under section 139. The payment from the Provider Relief Fund is includible in gross income under section 61 of the Code. For more information, visit the Internal Revenue Service’s website.
Not-for-profit providers (501c) are typically exempt from federal income tax. However, the FAQ states that, “a payment received by a tax-exempt health care provider from the Provider Relief Fund may be subject to tax under section 511 if the payment reimburses the provider for expenses or lost revenue attributable to an unrelated trade or business as defined in section 513. For more information, visit the Internal Revenue Service’s website.
Maybe it’s me, but taking 21% of for-profit providers PRF funding (and that’s just the Feds) seems counterproductive, counterintuitive and counter to Congress’s intention. In particular, this adds to the already considerable financial pressures independent physician practices are facing. It also may increase the numbers of practices that close or look to be acquired. We could end up with increased concentration or shortages of physicians in markets across the country for healthcare services after this.
2. Reporting revenue using financial statements. If you’re completing the application based on financial statements using the “Enhanced Provider Relief Fund Payment Portal” (Medicaid/CHIP and Dental Distributions), according to a FAQ posted on July 10: “The amount reported in Field 10 should be net patient revenue plus other operating income. Net patient revenue is gross patient revenue less contractual adjustments, charity care/financial assistance, and bad debt expense. Other revenues, such as rental income, grants and contributions, joint venture income, and investment income, should be excluded from the amount reported in Field 10.”
HHS needs to make sure that this definition of revenue is consistent regardless of the source documents used to report revenue so as not to advantage or disadvantage one provider over another based on their source of truth for the application.
Finally, HHS provides more detail on why it expanded the criteria for the second round of funding for Safety Net Hospitals (sounds like they got heat from Congress). The new criteria was expanded to include, “certain acute care hospitals that have (1) a profit margin threshold of less than or equal to 3% averaged consecutively over two or more of the last five cost reporting periods and (2) an annualized uncompensated care cost (UCC) of at least $25,000 per bed in the most recent cost report. The other criterion (Medicare Disproportionate Patient Percentage (DPP) of 20.2% or higher) for acute care hospitals remains the same.”