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As of October 15, 2020, there have been over 8 million COVID-19 cases nationwide. To help address the economic impact of the pandemic, the federal government passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March. The CARES Act made billions of dollars available to aid healthcare providers battling the devastating impact of COVID-19.
Below we discuss the most significant programs under the CARES Act that are available to assist healthcare providers, as well as the related COVID-19 accounting impacts for healthcare entities:
Under the CARES Act, the Department of Health and Human Services (HHS) has allocated Provider Relief Fund (PRF) funds to make general and targeted distributions to pay providers for:
Within the last few weeks, HHS has provided further guidance regarding the use of the PRF funds and the lost revenue calculations. This guidance can be found at the end of this article.
Noncompliance with any terms or conditions may allow HHS to recoup all or a portion of the payments. Additionally, if there are excess funds that the provider does not use for COVID-19 or are not needed to cover the related lost revenue, such funds may need to be returned.
Under the CARES Act, the Centers for Medicare and Medicaid Services (CMS) expanded the Medicare Accelerated Advance Payment Program by providing $100 billion in cash advances to many healthcare providers during this time of uncertainty. These funds represent advances on payments for future services provided to Medicare patients.
FEMA granted funding to healthcare entities as part of its recovery efforts declared on March 13, 2020. Only governmental entities and not-for-profit hospitals are eligible to receive these funds — for-profit hospitals are not eligible.
The accounting treatment for any funds received from FEMA would be similar to reporting for PRF. Accordingly, the funds are generally recognized in the statement of operations as the qualifying expenditures are incurred, given that the funds are non-exchange in nature.
On top of the typical day-to-day reporting, healthcare providers should establish methods to calculate lost revenues from changes in patient care and changes in patient care payor mix due to the COVID-19 pandemic, as well as track general and administrative expenses attributable to addressing coronavirus and healthcare-related expenses.
The level of tracking varies by the aggregate funding received in PRF payments. If a recipient received more than $500,000 in PRF funds, they will need to provide a breakdown between the following expense groupings:
In September 2020, HHS released information on reporting deadlines. All recipients of PRF payments of $10,000 or more are required to comply with post-payment reporting processes. The new HHS reporting system opens for providers on January 15, 2021. Nursing homes, rural health clinics, and health resources and services administration reimbursement/distribution recipients are exempt from the reporting requirements. All other recipients have to report by February 15, 2021, on the use of funds, with July 31, 2021, as the final deadline for those who did not fully expend PRF funds before December 31, 2020.
In the future, there may be more governmental programs providing opportunities for funding during this period of uncertainty.
Healthcare entities should evaluate the stipulations of the funds and whether they represent a contract with a customer. If so, such entities should consider the application of Topic 606. If amounts are expected to be repaid, they should be represented on the balance sheet as a liability.
The most unclear topic of discussion relates to the PRF program. What qualifies as lost revenues? And when will the end of the pandemic be considered to have occurred? According to the most recent guidance from HHS, “…lost revenues (are) represented as a negative change in year-over-year net patient operating income … Recipients may apply PRF payments toward lost revenue, up to the amount of their 2019 net gain from healthcare related sources." This may include operations that were cancelled as a result of the pandemic or other revenue lost that can be directly attributed to COVID-19. Obviously, as of the date of this article, we do not know the date of the conclusion of the pandemic given the everchanging situation surrounding COVID-19.
Each of these COVID-19 accounting impacts for healthcare entities was addressed in detail at AICPA webinars and in various other formats over the past few months. We have accumulated some of the most common resources, literature, and guidance into one location below for your convenience:
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