Phase 3 PRF & PPP Key Takeaways To Consider Now
Providers who have previously received or are expecting to receive HHS Provider Relief Funds (PRF) should read this before submitting their Phase 3 applications, as well as providers who are preparing to submit Paycheck Protection Program (PPP) loan forgiveness applications. Applying different funding sources to cover the same cost is prohibited.
For providers who prefer to get a head-start on the PRF reporting process, the below key takeaways are important to consider to avoid any unnecessary surprises. HHS will have significant anti-fraud monitoring of the PRF distributed. Recipients of PRF payments may be subject to auditing to ensure the accuracy of the data submitted to HHS for payment.
Here are some key points that providers should pay attention to:
PRF Funds Can Be Used For
- Expenses attributable to coronavirus that are not reimbursed or not obligated to be reimbursed from other sources, which may include G&A or healthcare-related operating expenses. Providers need to make sure expenses are not double-counted (for example, if some payroll expenses are reimbursed and forgiven under Paycheck Protection Program, they cannot be covered by PRF funds). For more information on PRF reporting requirements, click here.
- Lost revenues attributable to coronavirus, as represented by a negative change in year-over-year net patient care operating income (patient care revenue less patient care related expenses). Please note that this has significantly been modified from the previous FAQ issued by HHS, which defined “lost revenues” as any revenues lost due to coronavirus but did not incorporate expenses. Any providers that relied on the previous guidance will need to carefully re-evaluate the impact of the new guidelines on their use of PRF funds. This might result in some providers being required to return potentially significant amounts of PRF funding.
Additional PRF Considerations
- Under the new instructions, PRF payments will first be applied to offset expenses attributable to coronavirus. If there are remaining payments, they can then be allocated to lost revenues.
- Providers cannot use PRF funds to repay loans received under the CMS Accelerated and Advance Payment (AAP) program.
- None of the funds shall be used to pay the salary of an individual at a rate in excess of Executive Level II, which is $197,300 effective 01/05/2020 (direct salary is exclusive of fringe benefits and indirect costs).
- Providers will be required to submit revenue information broken down by payer category, as well as information on financial assistance from other sources such as PPP loans, FEMA funds, local, state, and tribal government assistance, etc. We recommend that providers catalog all sources and amounts of coronavirus-related funding from other sources.
- Providers need to maintain appropriate records and cost documentation that specifically identifies coronavirus expenses. Too much documentation is better than not enough documentation! We recommend that providers use separate general ledger accounts and classes in accounting software (for example, maintain a separate department with all coronavirus related costs or establish unique expense accounts with all appropriate departments to records the costs).
- Reporting requirements will apply to PRF recipients that received one or more payments exceeding $10,000 in the aggregate. There are more detailed reporting requirements for those that received $500,000 or more in payments.
- Reporting is by TIN (tax ID number) numbers and relief payments cannot be transferred between TINs.
- Do not miss the reporting deadline! The reporting system will be available on 01/15/2021, with the initial reporting due by 02/15/2021.
- Recipients that do not spend the full amount of PRF funds by the end of calendar year 2020 will have an additional 6 months to use any remaining amounts. Such providers will have until 07/31/2021 to submit a final report.
- Providers that expended $750,000 or more in aggregated federal financial assistance in 2020 (including PRF payments and other federal financial assistance) are subject to Single Audit requirements. Single Audit is an organization-wide financial statement and federal awards’ audit of a non-federal entity.
- Any recipients of PRF identified as having provided inaccurate information to HHS will be subject to payment recoupment and other legal action.
Please contact us if you have any questions about the PRF reporting process or need assistance with these reporting requirements.
For more information on Phase 3 PRF, click here to read our recent blog post.
About Traci Getz
Partner & CPA
Traci is a partner with Ryan & Wetmore, PC and is based in our Frederick, MD office. The Frederick office is home to the firm’s small business services department. Traci currently works with clients on individual, corporate, and tax compliance issues along with a variety of accounting and consulting services for small and medium-sized business owners.
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About Pete Ryan
Co-Founder & Partner
Peter T. Ryan co-founded Ryan & Wetmore in 1988 with business partner Michael J. Wetmore. Peter provides clients with the best strategies for success. His expertise extends across various industries, including healthcare. Peter obtained a Master of Business Administration in Finance from the University of Baltimore and a Bachelor of Arts in Accounting from the Catholic University of America.
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About Tu Nguyen
Senior Finance Consultant
Tu Nguyen holds the position of Senior Finance Consultant at Ryan & Wetmore, P.C., where she primarily works with clients on business consulting, financial planning & analysis, mergers & acquisitions, and various healthcare projects. Tu earned her M.A. degree in Economics from Johns Hopkins University and a B.A. in Economics and Mathematics from Lake Forest College in Illinois.