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Updated on: June 14, 2021

The Cares Act: Calling All Auditors

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Original story posted on: June 7, 2021
This program could be a windfall for accountants, but also a huge bottleneck.

The Provider Relief Fund (PRF) became law as part of the Coronavirus Aid, Recovery, and Economic Security (CARES) Act on March 27, 2020. The U.S. Department of Health and Human Services (HHS) distributed billions of dollars to hospitals and healthcare providers that were facing challenges posed by the COVID-19 pandemic. Qualified providers of healthcare services and support received PRF payments for healthcare-related expenses or lost revenue due to COVID-19. The funds were meant to be free from repayment obligations, assuming providers complied with defined terms and conditions.

Distributions were made in four phases:
  • Phase 1 – General Distribution (April 10, 2020);
  • Phase 2 – General Distribution (June 9, 2020);
  • Phase 3 – General Distribution (Oct. 1, 2020); and
  • Targeted Distributions
At the time the money was distributed, providers were largely unsure of how the distributions would be accounted for; yet in December 2020, HHS made available the “Summary of Reporting Requirements for Recipients of the PRF.” Key reporting dates are the following:
  • Jan. 15, 2021: Reporting portal opens for providers.
  • Feb. 15, 2021: First reporting deadline for all providers on use of PRF funds.
  • July 31, 2021: Final reporting deadline for providers who did not fully expend PRF funds prior to Dec. 31, 2020.
The guidelines required reporting of two specific areas: the incremental costs associated with treating COVID patients, and lost revenue due to patients not being able to come to the hospital for non-COVID-related treatment. This lost revenue was to be based on a difference in 2019 and 2020 revenues.

The data elements for required reporting are:
  • Revenue/net charges from patient care;
  • Revenue by patient care payor mix;
  • General and administrative (G&A) expenses; and
  • Healthcare-related expenses.
Here is the windfall for accountants, and a huge bottleneck. The reporting is to be covered under “Yellow Book” audit requirements applicable to federal grants to nonprofit entities. This would be true even if the provider was a for-profit provider. There simply are not enough licensed auditors in the United States to handle this flood of audit reporting. In addition, there are large questions regarding the computations of both lost revenue and expenses to qualify for forgiveness and prevent recoupment.

Programming Note:  Listen to Timothy Powell report this story live today during Talk Ten Tuesdays, 10 a.m. Eastern.
Timothy Powell, CPA

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of both the RACmonitor and ICD10monitor editorial boards and a national correspondent for both Monitor Mondays and Talk Ten Tuesdays.

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