Accounting and Financial Reporting

Updated reporting requirements for the CARES Act Provider Relief Fund: What providers need to know

October 23, 2020 4:19 pm

Matthew R. Hutt

Note: This article has been updated to reflect new guidance that was issued Oct. 22.

  • HHS guidance issued Sept. 19 relating to reporting obligations could prove troublesome for providers that receive CARES Act Provider Relief Fund (PRF) payments.
  • Key issues involve the definition of lost revenue and the change to a calendar-year reporting basis.
  • Providers should apply PRF payments toward expenses before doing so for lost revenue.
  • On Oct. 22, HHS issued a revision to the lost revenue definition that should be more favorable to providers and more consistent with prior guidance.

On Sept. 19, the U.S. Department of Health and Human Services (HHS) issued updated guidance relating to general and targeted distributions made under the Provider Relief Fund (PRF). There were some significant changes as a result, including to the information that must be reported and how lost revenue should be calculated.

The changes generated significant attention and opposition from many healthcare stakeholders and members of Congress. Among those who reached out to HHS, the consensus was that providers should be allowed to apply PRF payments against all lost revenues without limitation. 

In consideration of this feedback, HHS issued newly updated guidance on Oct. 22 and amended its reporting instructions to provide for the full applicability of PRF distributions to lost revenues.  

Changes to key definitions in PRF reporting

The Coronavirus Aid, Relief, and Economic Security (CARES) Act appropriated funds to reimburse eligible providers for healthcare-related expenses or lost revenues attributable to COVID-19.  These funds were distributed by the Health Resources and Services Administration through the CARES Act PRF program.

The guidance issued Sept. 19 centered on the categories of data elements that recipients must submit for CY19 and CY20 as part of the reporting process. The report for CY20 needs to be submitted on or before Feb. 15, 2021.

Most importantly, the guidance changed the definition of lost revenue. The original definition, outlined in a June 19 HHS FAQ, was any revenue that a provider lost due to COVID-19. Providers could use any reasonable method of estimating lost revenue during March and April 2020 compared with the same time period for the prior year or compared with budget. 

Under the Sept. 19 guidance, lost revenue was represented as a negative change in year-over-year net patient care operating income. After factoring in the cost of COVID-19-related expenses, providers would generally be able to apply PRF payments only toward lost revenue up to the amount of their CY19 net patient operating income (or to a net zero gain/loss if 2019 had negative net operating income). 

That guidance also states that recipients should apply PRF payments toward healthcare-related expenses before lost revenue. These expenses are defined as costs attributable to COVID-19 that another source has not reimbursed and is not obligated to reimburse, which may include general and administrative expenses or healthcare-related operating expenses.   

Based on the guidance issued Oct. 22, PRF payment amounts not fully expended on healthcare-related expenses attributable to COVID-19 are to be applied to patient care lost revenue, net of the attributable expenses.  Recipients may apply PRF payments toward lost revenue up to the amount of the difference between their CY19 and CY20 actual patient care revenue.  

Changes to the reporting time frame

Another challenge stemming from the new guidance is calculating and reporting lost revenue on a calendar-year basis. The burden could be significant for providers that use fiscal-year calendars, as they will need to consider how they can best accumulate the calendar-year information for both 2020 and 2019. In addition, the change could alter the timing of revenue recognition of PRF payments.

For example, a June 30, 2020, fiscal-year-end provider may have calculated lost revenue and determined what it could recognize as revenue based on that fiscal year. That provider will now need to consider the new definition of lost revenue and calculate for the end of the calendar year. That amount may not be determinable and thus may lead to a delay in the recognition of PRF revenue until Dec. 31, potentially preventing the provider from meeting debt covenants. Such a development could have a significant impact on the provider’s ability to carry out its operations.

How providers should respond to the changes

To maximize utilization of PRF payments, providers should apply their payments towards healthcare expenses before doing so for lost revenue. Since the funds can be applied to the period spanning Jan. 31, 2020, to June 30, 2021, a plan needs to be developed as to how to best use these funds. Generally, PRF payments can be utilized only after first applying other sources, such as proceeds from the Paycheck Protection Program or CARES Act-appropriated FEMA funding.

Recipients of PRF payments also need to consider Single Audit requirements. Reporting entities that expended $750,000 or more in aggregated federal financial assistance (including PRF payments) in 2020 are subject to those requirements.


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