On December 28, 2020, President Trump signed the Consolidated Appropriations Act, 2021, into law. The legislation includes roughly $900 billion in COVID-19 relief, including several provisions beneficial to health care providers, and $1.4 trillion in spending to fund the federal government for the fiscal year 2021.
The Act appropriates an additional $3 billion to the Provider Relief Fund and makes significant revisions to the existing Department of Health and Human Services (HHS) Provider Relief Fund Guidance.
The Act provides greater flexibility for calculating "lost revenue" for purposes of reporting and retaining Provider Relief Fund payments. The change overrides current HHS guidance that requires recipients to compare 2019 actual patient care revenue to 2020 actual patient care revenue when calculating lost revenue. The Act will also allow recipients to allocate Targeted Distribution payments to related entities under common control, the flexibility that was previously limited to General Distribution payments only.
These two changes will help providers keep millions in Provider Relief Fund payments and help them continue to serve their patients and communities during the ongoing public health crisis. Below is additional information about the Provider Relief Fund revisions included in the Act and the impact on recipients.
• Lost Revenue: The most significant change to the Provider Relief Fund is clarifying how recipients calculate COVID-19 related "lost revenue." It allows recipients to calculate lost revenues consistent with HHS guidance issued last June. Recipients are no longer restricted to calculating lost revenue based on a year-to-year actual patient care revenue comparison.
• System Allocation of Targeted Funds: The Act allows parent organizations to allocate Targeted Distributions to subsidiaries, the flexibility that was previously limited to General Distribution payments.
• Additional Funding: The Act appropriates an additional $3 billion to the Relief Fund. This is a substantially lower number than was included in an earlier version of the bill. Still, it does include billions in additional funding related to vaccine distribution and administration.
• No Reporting Delay: The Act does not include any delay in the reporting requirements scheduled to begin January 15, with first reports due by February 15. Though it is possible HHS could delay the reporting requirements in response to the changes included in the Act or the change in administration.
• Diligently Prepare for Reporting Period: Providers should continue diligently preparing to report on the use of Provider Relief Fund payments considering the revisions included. In preparation for the upcoming reporting, providers should immediately begin working with their financial, accounting, and legal advisors to determine how to best calculate their lost revenue consistent with the new legal standard included in the Act. There are only a few weeks left before the first report is due on February 15.
The flexibility previously afforded only to General Distributions is now available for Targeted Distributions, as well. Like the fixes to calculating lost revenue, this change could have an enormous beneficial financial impact on multi-corporate health systems.
Current HHS guidance allowed parent organizations to allocate General Distribution Provider Relief Fund payments among separate legal entities but required Targeted Distribution payments to remain with the legal entity that received the applicable payments. This lack of flexibility adversely impacted numerous health systems, particularly systems with various provider operations housed within separate legal entities. In these multi-corporate structures, it has been standard for Targeted Distributions (rural, safety net, high impact, etc.) to be "stuck" in an overfunded legal entity, with no system flexibility to reallocate the funding among affiliates, even though those other legal entities may be underfunded.
The revision allowing parent organizations to allocate General Distribution and Targeted Distribution payments to subsidiary organizations better accounts for the different corporate structures used by health systems and will again enable systems to retain millions in Provider Relief Fund payments. However, it is essential to note that reporting obligations for reallocated funds will remain with the original recipient. Affected systems will, therefore, need to establish tracking and reporting guidelines for these intra-system reallocations.
The Act provides that at least 85 percent of the unobligated Provider Relief Fund balance and any future funds recovered from providers must be used for additional distributions that consider financial losses in the third and fourth quarters of 2020 and the first quarter of 2021.
No Delay in Reporting
The HHS Provider Relief Fund reporting system is scheduled to open on January 15, with the first report due February 15, 2021. A final report is due for most recipients on July 31, 2021. The Act does not include any delay or modification to this reporting schedule.
Other Benefits
• Rental Aid: The Act includes $25 billion for rental assistance, but it will take time for that money to be distributed. The bill extends an eviction moratorium only through the end of January, although President-elect Joe Biden is likely to extend it.
• Paycheck Provider Program (PPP) Loans: The Act allocates $284 billion to businesses that were not approved for the first iteration. It also allows businesses that have exhausted previous PPP money and have been significantly impacted by the pandemic to apply for a second draw. It also makes forgiveness easier for businesses that used most of the money for payroll, and makes the loans tax-free. This time, loans are capped at $2 million instead of $10 million previously, but businesses with up to 500 employees are still eligible. Further guidance will be released from the U.S. Small Business Administration. While there is no clear timeline for when applications for the second round will open, experts recommend that small businesses start preparing their paperwork now if they plan to apply.
• Mental Health: The package designates roughly $4.25 billion for mental health and substance use disorders. The funding — just a portion of what was sought by experts — is the largest amount behavioral health has received in a single spending bill in recent history. It represents a growing awareness of the mental toll the pandemic is taking on the country.
The Act does not provide broad COVID-19 liability shields for businesses, nor funding for state and local governments. While lawmakers debated including such provisions in the Act, they ultimately were omitted. There will be several more updates to the provisions as the new administration gets settled in.