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HHS Changes Guidance On Provider Profitability And Lost Revenues For Provider Relief Fund Recipients

The Coronavirus Aid, Relief, and Economic Security (CARES) Act states that providers can use the HHS Provider Relief Fund (PRF) dollars to cover "health care related expenses or lost revenues that are attributable to coronavirus." For June through August, HHS guidance stated that lost revenue could be measured one of two ways:

1) calculating the difference between budgeted and actual revenue for March and or

2) comparing revenues from last year to this year for that same period. Providers were making decisions for their respective businesses based on that guidance.

Then in September, HHS changed their definition of lost revenue, saying that it now needed to be “a negative change in year-over-year net patient care operating income.” Revenue is not the same as operating income, so that new definition was highly criticized. It was taken to mean that providers couldn’t be more profitable in 2020 than they were in 2019 and still be eligible for PRF payments.

Based on the feedback they have received regarding this change, HHS has issued additional guidance, and is now stating that providers who received PRF payments can indeed end up more profitable than they were last year. In part, the new guidance reads, “On September 19, 2020, HHS issued instructions for reporting on the use of PRF distributions. These instructions, reflecting the Department’s balancing of dual objectives, limited the applicability of funds to an amount that would allow most providers to be no more profitable in 2020 than in 2019. At the time, HHS concluded that it would be inequitable to allow some providers to be more profitable in 2020 than 2019, while so many other providers struggled to remain viable. The September 19, 2020 reporting instructions placed a limitation on the permissible use of PRF money that HHS had not previously articulated, although previous guidance did not preclude the establishment of such a limitation in the future. HHS established an exception for providers that were unprofitable in 2019. These providers could deploy PRF funds toward lost revenue in an amount that would allow the provider to break even in 2020. This decision to prohibit most providers from using PRF payments to become more profitable than they were pre-pandemic, in order to conserve resources to allocate to providers who were less profitable, has generated significant attention and opposition from many stakeholders and Members of Congress. There is consensus among stakeholders and Members of Congress who have reached out to HHS that the PRF should allow a provider to apply PRF payments against all lost revenues without limitation. In consideration of this feedback, HHS has amended its reporting instructions to provide for the full applicability PRF distributions to lost revenues.”

The full release from HHS and their additional guidance on this topic can be found here:  https://www.hhs.gov/sites/default/files/reporting-requirements-policy-update.pdf.

VGM will continue to monitor this program for any additional guidance. Please contact Craig Douglas or Mark Higley if you have any questions.