For-profit healthcare entities and the Provider Relief Fund

Your organization may have been fortunate enough to have received an influx of funding from several federal stimulus sources in response to the coronavirus pandemic. These sources may have included the U.S. Department of Health & Human Services (HHS) Provider Relief Funds and COVID-19 Uninsured Program Portal funding. While this additional support can help your organization maintain capacity through future coronavirus-related business concerns, it comes with terms, conditions, and regulatory guidance that must be followed. Keep these considerations in mind as you navigate the use of these additional funding sources.

1. Is your organization clear on the spending timelines and reporting requirements for the usage of funds?

The Provider Relief Fund (PRF) Reporting Portal recently opened for Reporting Period 2 (Period 2) on Jan. 1, 2022, and will remain open through Mar. 31, 2022, which is when the Period 2 submission is due. All entities that have received $10,001 or more in the aggregate (General and/or Targeted PRF payments) from Jul. 1, 2020, through Dec. 31, 2020, must report on their use of funds (COVID related expenses/Lost Revenue due to COVID-19) in the PRF Reporting Portal for Period 2. The deadline to use funds for payments received in Period 2 was Dec. 31, 2021. HHS has listed some Reporting Portal updates (What's New PRF Reporting 2 Fact Sheet) for returning reporting entities as well as updates for the returning reporting entities who are electing the Lost Revenue option (i.e. changing the methodology for calculating lost revenues, changes to previously reported patient care revenue, etc.). There are also other PRF review resources posted on the Health Resources & Services Administration’s (HRSA) website that can be helpful tools in assisting recipients prepare the PRF reporting submission for Period 2 (Review Resources - PRF Reporting Period 2).

2. Have you considered Uniform Guidance Single Audit implications?

Provider Relief Fund General and Targeted Distribution payments (Assistance Listing Number 93.498) and COVID-19 Testing for the Uninsured reimbursement payments (Assistance Listing Number 93.461) are also federal awards and subject to Single Audit. Commercial organizations that expend $750,000 or more in annual federal awards are subject to the HHS for-profit audit requirements and have two options:

a. A financial audit conducted in accordance with Generally Accepted Government Auditing Standards (45 CFR 75.216)

b. A Single or Program-Specific Audit in accordance with the requirements under 45 CFR 75 Subpart F

If you’re unsure as to which of these options best fits your organization, reach out to your trusted advisor. There are a series of key attributes to take into account in each situation.

3. Have you implemented sufficient procedures for tracking the use of funds?

The use of all funding streams will need to be diligently documented so that when reporting on use of funds for Period 2, you will be able to clearly show that multiple funding streams were not being used for the same expenses – that you didn’t engage in any “double-dipping.” This will also facilitate the reporting that will ultimately have to be done for all funding streams to confirm that you have used funding aligned with the terms and conditions on usage. Expenses charged to each funding source should be clearly documented in the accounting records to stand up to audit. Providers should also be cognizant of the fact that the Period of Availability for Period 2 payments has some overlap with PRF Reporting Period 1 (Period 1). Providers will need to demonstrate that expenses and/or lost revenues utilized for Period 2 did not “double-dip” and become duplicative of the same expenses and/or lost revenues recognized in Period 1.

4. Have you considered the tax impact of the Provider Relief Funds?

The federal income tax rules are complicated. No doubt, the IRS applies a broad definition of “income,” especially when a company receives cash. Even though the government intended to provide a benefit with the Provider Relief Fund, the receipt of the funding could come at a (tax) cost to the company. When your company pays tax –and how much tax it pays in connection with the receipt of Provider Relief Funds –is a function of when cash is received and spent (e.g., you could have a potential addition to taxable income in 2021 and then a corresponding expense in 2022). Tax treatments may differ based on whether the company uses the accrual method or cash method of accounting.

If you have received HHS Provider Relief Funds, talk to a CohnReznick tax professional to learn more about the potential tax ramifications arising from the receipt of these funds and whether you can take steps to mitigate or defer any taxes that you would otherwise owe.