The Provider Relief Fund (“PRF”) was created to support healthcare providers during the COVID-19 pandemic. Through the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, the Department of Health and Human Services (“HHS”) distributed funds to qualified providers for healthcare related expenses and lost revenues due to COVID-19 and to reimburse for testing and treating uninsured individuals with COVID-19.

With the PRF payments came certain stipulations and guidelines on how the funds could be used as well as extensive reporting requirements.  The guidelines and related reporting requirements have changed since the initial funds were distributed and keeping up with the changes has proven difficult.

Five questions that private equity groups should ask portfolio companies that received PRF payments.

1. Is the company prepared to meet the reporting requirements described in the PRF terms and conditions and has the company designated an individual or team with responsibility for this reporting?

PRF recipients who received one or more payments exceeding, in the aggregate, $10,000 during a Payment Received Period (as defined in the Notice of Reporting Requirements – see link below) are required to report as part of the post-payment reporting process. The PRF Reporting Portal opened for reporting on July 1, 2021, however, the portal is currently only accepting reporting for payments received during the period from April 10, 2020 to June 30, 2020. Payments received outside of this timeframe will be reported in a separate reporting window. The reporting requirements include information on the following data elements: interest earned on PRF payments, other assistance received, use of SNF and nursing home infection control distribution payments (as applicable), use of general and other targeted distribution payments and lost revenues reimbursement. Links have been included below with additional reporting requirement information. Data entry worksheets have been provided by HHS on the Reporting and Auditing site linked below to help providers prepare for reporting.

2. Has the company properly tracked the use of PRF payments and maintained supporting documentation for any expenses paid for with payments through the general and targeted distribution payments?

Providers can use PRF payments to reimburse expenses incurred to prevent, prepare for, and respond to COVID-19. For all eligible expenses, providers are required to maintain documents to substantiate that these funds were used for health care-related expenses attributable to COVID-19, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them. The burden of proof is on the provider to ensure that documentation is maintained to show that expenses are to prevent, prepare for, and respond to coronavirus. Documentation should be maintained for a period of 3 years from the date of submission of the final report.

Management of companies should ensure policies and procedures for internal controls are in place over federal funds received and gain an understanding of applicable compliance requirements. Links have been included below with additional information on eligible expenses and the related reporting requirements for those expenses.

3. What calculation method has the company used for lost revenues reimbursement and does the chosen method substantiate that lost revenues were due to COVID-19?

PRF payments not fully expended on health care-related expenses can be applied to patient care lost revenues. Providers may choose to apply PRF payments toward lost revenues using one of three methods, up to the amount of:

  1. Difference between 2019 and 2020 actual patient care revenues;
  2. Difference between 2020 budgeted (with an approved budget prior to March 27, 2020) and 2020 actual patient care revenues;
  3. Any reasonable method as determined by the provider. Providers electing to use this method will be required to submit a description of the methodology, an explanation as to why it is reasonable and support for why the revenue was lost due to the COVID-19 pandemic versus other possible reasons. Providers electing to use this method will also be subject to an increased likelihood of an audit by the Health Resources and Services Administration (“HRSA”). Per the HHS Frequently Asked Questions (“FAQ”) site, should HRSA determine the method of lost revenues calculation to be not reasonable, including if it does not demonstrate with a reasonable certainty that claimed lost revenues were caused by COVID-19, HRSA will notify the provider. If HRSA determines that a provider’s proposed alternate methodology is not reasonable, the entity will be asked to resubmit its report within 30 days of notification using one of the other two options described above to calculate lost revenues attributable to coronavirus.

4. Has the company received stimulus funding in addition to PRF?

In the PRF reporting portal, a reporting entity will be required to report on other assistance received, by quarter, during calendar years 2020 and 2021 (including Treasury, Small Business Administration (SBA), Paycheck Protection Program (PPP), FEMA, CARES Act Testing, local, state and tribal government assistance, etc.).

Per the June 11, 2021 Post-Payment Notice of Reporting Requirements, expenses that are paid for with General and Targeted PRF payments (excluding SNF and Nursing Home Infection Control Distribution payments) must be those that are unreimbursed by other sources and that other sources are not obligated to reimburse. If an organization received other assistance, they should have policies in place to prevent “double dipping” of funds used for expense reimbursement to ensure compliance with terms and conditions.

Understanding other assistance received during 2020 and 2021 will help ensure compliance with the PRF terms and conditions and appropriate use of funds. Further, there may be additional reporting obligations and compliance requirements associated with other stimulus funding that a Reporting Entity will need to be aware of.

5. Have the company closed an acquisition during the year that received PRF payments? If so, the company should evaluate the acquiree’s compliance with the terms and conditions of receiving the funds.

HHS provided specific guidance on asset vs. stock or membership interest deal, noting under an asset purchase, the original recipient must use the funds prior to the transaction and then return any remaining funds to HHS.  If the purchase is a stock or membership interest transaction, the PRF recipient may continue to use the funds, regardless of the new owner.  Guidance was also provided on purchasing a TIN and HHS stated that the new TIN owner cannot accept the payment from another entity or attest to the terms and conditions on behalf of the previous owner.  HHS has provided several FAQ’s related to changes in ownership.  Companies should review this information to ensure they understand who is responsible for reporting and maintaining appropriate documentation.

Per the HRSA webinar on July 8, 2021, after the initial review of the reporting submission, they will not be notifying PRF recipients whether the agency is in agreement with the information submitted and use of the funds.

Purchase agreements should speak to the treatment of these funds and include representations and warranties regarding the pre-closing compliance with the terms and conditions of receiving the funding and that information can be gathered for the required reporting.

Additional Resources

Below are links to HHS guidance referenced above or that will be helpful in addressing the items noted above.  Asking the 5 questions above will help ensure portfolio companies comply with the requirements, as specified by HHS, and prevent potential paybacks of funds that were not used in accordance with the PRF terms and conditions.

HHS Reporting and Auditing site – https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/reporting-auditing/index.html

June 11, 2021 Post-Payment Notice of Reporting Requirements – https://www.hhs.gov/sites/default/files/provider-post-payment-notice-of-reporting-requirements-june-2021.pdf

HHS FAQ site – https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/faqs/provider-relief-fund-general-info/index.html

If you have questions about your portfolio or would like additional information, please contact us.