Providers have unanswered questions ahead of COVID-19 grant reporting deadline

Providers have unanswered questions ahead of COVID-19 grant reporting deadline


For some healthcare providers, meeting next week’s deadline for reporting on their federal COVID-19 grant spending is shaping up to be a mad scramble.

Accountants helping providers get ready for the Sept. 30 deadline to report on the first tranche of Provider Relief Fund spending say even those who’ve been prepared for weeks have legitimate questions about how to move forward. Congress approved $178 billion to help providers weather the unprecedented crisis, but many in the healthcare industry say the Health and Human Services Department’s guidance on how to account for that money has been confusing and unclear.

For the most part, those that are “entirely unprepared” tend to be smaller and don’t view themselves as big enough to have to report to the government, said Anna Stevens, partner-in-charge for healthcare at the accounting firm Weaver. Providers that spent more than $10,000 in grant money must report that to HHS, and those that spent more than $750,000 will be subject to audits.

“I literally get emails daily that say: ‘What are we supposed to do? What reporting module? What are you talking about?'” Stevens said.

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The Sept. 30 deadline, the first for reporting Provider Relief Fund grants, covers payments received between April 10, 2020, and June 30, 2020. The deadline to spend that money was June 30, 2021.

The American Hospital Association continues to seek more time for its members to use their grants.

In a letter sent to acting Health Resources and Services Administration Administrator Diana Espinosa Friday, the trade group requested the agency extend the June 30, 2021, deadline to spend money received between April 10, 2020 through June 30, 2020. Well over half of the grant money went out before June 30, 2020, much of it to hospitals in high-impact areas serving vulnerable populations, AHA Executive Vice President Stacey Hughes wrote.

HHS tacked on a 60-day grace period to the Sept. 30 reporting deadline, but many providers have indicated they don’t plan to use that, hoping instead to get it done and out of mind.

The Medical Center Health System in Odessa, Texas, is among those that don’t plan to take advantage of the grace period, said Grant Trollope, the company’s assistant chief financial officer. The Medical Center Health System comprises a 402-bed hospital and physician practices.

“We do just want to get it behind us and move on to the next chapter,” Trollope said.

A potential problem tax experts have identified with using the grace period is it technically does not comply with the Office of Management and Budget’s compliance instructions for auditing the funds. That’s confusing because auditors look to the OMB compliance instructions that require them to perform audits, Stevens said. However, the agencies are likely to align their standards, she said.

Perhaps an even bigger area of confusion is HHS’ recent announcement of a fourth distribution phase for Provider Relief Fund grants. That final pool includes $25.5 billion, and is meant to cover lost revenue and higher spending between July 1, 2020, and March 31, 2021.

That time window includes the period during which providers were also spending money they’ll report in the first phase of distributions, which had to be used by June 30, 2021. The question many providers are asking is whether they should save some of those expenses and lost revenues for their fourth-phase applications, instead of reporting them for their first-phase grants by Sept. 30, said Rick Kes, the accounting company RSM’s senior analyst for healthcare.

The phase-one reporting portal requires providers to list COVID-19 expenses that their relief grants did not cover. Another question is whether providers who don’t want to put in the effort to identify those expenses will be stuck once phase four comes around, Kes said.

“That’s the confusing part,” Kes said. “There are pieces here that relate to each other but we’re not sure how dependent they are on each other.”

The phase-four applications are likely to come out just days before the Sept. 30 deadline to report phase one, so providers won’t have much time to decide how to proceed, Kes said.

“Most clients that I talk to have all their data in the portal,” Kes said. “They’re just kind of waiting to hit submit and trying to figure out: Should I do that, or should I wait and figure out more about the phase-four application?”

Providers also are uncertain about what they can and cannot count as incremental expenses related to COVID-19 for the purpose of accepting the grant money.

That’s particularly true when it comes to payroll. For example, an employee at the front of a hospital screening people’s temperatures would clearly count because that person would not have been there before the pandemic, Stevens said. What’s less clear would be a cardiologist who stopped treating her regular patients and instead exclusively saw COVID-19 patients. Hospitals have commonly redeployed medical specialists to care for COVID-19 patients throughout the crisis.

The main differentiator is whether that provider would have been there regardless of the presence of COVID-19 patients. If the answer is yes, it’s not an incremental cost. However, if the hospital paid them overtime or bonus pay to treat COVID-19 patients, those expenses are included, Stevens said.

Another murky area is telehealth. One of Stevens’ clients wanted to use grants on legal expenses related to telehealth. But the provider had used telehealth before the pandemic, making it was unclear whether the costs were related to COVID-19, she said. Ultimately, that provider was able to show that those outlays were connected to bringing on physicians who only conducted COVID-19 telehealth visits, she said.

HHS amended its guidance a few times on how providers should calculate lost revenue for the purpose of demonstrating how the relief funds were spent.

The final guidance ended up being favorable to providers. That’s because quarters where they saw financial gains were not netted against the quarters where they lost money, said Aparna Venkateswaran, a senior manager with Moss Adams For example, if, over a six-quarter period, a provider experienced three quarters with $1 million of gains each and three quarters with $1 million in losses each, that provider would get to report $3 million in lost revenue, regardless of the gains, she said.

That’s welcome news for healthcare entities that were concerned about being able to continue using their grant money even as their finances improve. Returning patients and continued government support pushed some health systems’ operating margins past 10% in the second quarter of 2021.

But there’s still a lot that’s unclear about how a strong 2021 financial performance will affect a providers’ ability to report expenses and lost revenue for PRF grants, Venkateswaran said. “It is certainly a wild card on how that’s going to look,” she said.


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