On October 22, the U.S. Department of Health and Human Services clarified guidance on how hospitals may use federal CARES Act Provider Relief Fund (PRF) dollars.
The clarification comes in the wake of WHA and others raising concerns over a notice that was issued on September 19 that seemed to change the meaning of “lost revenue.” Prior to the September 19 notice, HHS had issued FAQs on June 19 that suggested hospitals could use PRF dollars very broadly, stating in their FAQs that:
“You may use any reasonable method of estimating the revenue during March and April 2020 compared to the same period had COVID-19 not appeared. For example, if you have a budget prepared without taking into account the impact of COVID-19, the estimated lost revenue could be the difference between your budgeted revenue and actual revenue. It would also be reasonable to compare the revenues to the same period last year.”
Unfortunately, HHS’ September 19 notice changed the definition of “lost revenue” to mean “a negative change in year-over-year net patient care operating income,” which was akin to a change in a hospital’s operating margin. WHA and others raised concerns that this was not in line with the statute and prior guidance which clearly intended these dollars to be used for lost revenue. Changing the definition to a difference in margin could have penalized hospitals that cut expenses to deal with losses in revenue experienced during COVID. It also may have penalized states like Wisconsin that had a high number of rural hospitals with low COVID-related expenses.
With the new October 22 notice, HHS has reverted back to directing hospitals to use these PRF dollars for actual lost revenue. However, the new guidance requires hospitals apply the dollars to COVID-related expenses or the difference in the entire calendar year 2019 patient care revenues compared to calendar year 2020 revenues, rather than being able to compare certain months from each year. Hospitals may also incur additional expenses or lost revenues through June 2021 that they can compare to the same months of 2019 when allocating PRF dollars.
Lastly, the notice further clarified how systems may be able to allocate general distribution payments to other entities within their system. Specifically, it expands the definition of “reporting entity” to include, for example, “the parent of one or more subsidiary billing TINs that received General Distribution payments,” among other criteria. This applies even if a subsidiary hospital originally attested to the receipts of the funds.
For questions, please contact WHA’s VP of Federal and State Relations, Jon Hoelter.