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Should I Apply for Phase 3 Funds? Important Considerations Every Provider Should Know

Client Alert

On October 1, 2020, the Department of Health and Human Services (“HHS”) announced an additional $20 billion in new funding for providers through a Phase 3 distribution. Importantly, providers that previously received HHS Provider Relief Funds or already received payments of approximately 2% of annual revenue from patient care are eligible to apply. Eligible providers have until November 6, 2020 to apply for these Phase 3 Funds. However, the question from providers continues to be: Should I Apply for Phase 3 Funds

The Provider Relief Funds have been fraught with uncertainty and frustration. Initially touted as a “no strings attached” relief payment, HHS quickly distributed the Phase 1 $20 billion in Provider Relief Funds (seemingly overnight) to providers that billed Medicare in 2019 without any initial application, proof of eligibility, or demonstration of need. While the funds came as an immediate relief to many providers, HHS required these providers to attest to receipt of the funds as well as a 10-page Terms and Conditions with multiple requirements. Notably, HHS required recipients to comply with certain HRSA grant requirements related to accounting of funds and record-keeping requirements. 

Following the initial $20 billion distribution, HHS then made available an additional $30 billion in funds, but only for those providers that received an initial distribution. This was an application-based distribution and providers that received an initial distribution were essentially capped at a maximum of 2% of gross receipts from 2019. Providers were also required to provide information on lost revenues in March and April 2020 to justify eligibility.  

HHS distributed additional funds through a Phase 2 general distribution to: those providers that were ineligible for Phase 1 distributions (e.g. Medicaid, CHIP, and dental providers); providers that did not receive funds equaling 2% of 2019 gross receipts; or providers that returned Phase 1 funds, but changed their mind and would like to receive Provider Relief Funds. Again, providers were required to submit an application for Phase 2 funds. Additionally, HHS capped Phase 2 distributions at 2% of 2019 total patient care revenues and required providers to attest to Terms and Conditions.

Now HHS has announced its Phase 3 general distribution, with an application deadline of November 6, 2020. HHS continually delayed the quarterly reporting requirements set forth in the original Terms and Conditions. However, HHS has continued to issue guidance notifying providers that they must be prepared to demonstrate (1) lost revenues, and (2) increased expenses attributable to COVID-19 in order to justify the receipt and use of these funds. On the heels of the Phase 3 general distribution, HHS recently issued clarifications on the Provider Relief Fund Reporting Requirements, which will begin on January 15, 2021. 

Providers with more than $10,000 in Provider Relief Fund payments must report on the use of the funds through December 31, 2020. The reporting window will begin on January 15, 2021 and providers must complete reporting obligations for FY 2020 by February 15, 2021 through a portal designed by HHS. However, providers that have unexpended funds as of December 31, 2020, will have an additional 6 months to use the remaining funds through June 30, 2021. These providers must submit a second and final report no later than July 31, 2021.

With the deadline for Phase 3 looming and the recent reporting clarifications, here are some important considerations for providers that are determining whether to apply for Phase 3 funds:

  • Per the IRS, providers must include all Provider Relief Funds in gross income. As such, providers must calculate increased tax liability due to the receipt of the Provider Relief Funds. Additionally, if the provider received a PPP loan, the provider may also have increased tax liability due to the use of the PPP funds and the nondeducibility of certain expenses paid for with PPP monies.
  • The new reporting obligations will no longer focus on just April and May 2020. HHS now requires the provider to review year-over-year data comparing 2019 to 2020 in order to calculate changes in increased expenses and lost revenue attributable to COVID-19.
  • When calculating increased expenses and determining lost revenues, providers must calculate and report other income and grants received such as PPP funds, EIDL, FEMA monies, grants from state and local governments, etc. Additionally, a provider’s lost revenue calculation will look at operating revenues from patient care services; the calculation cannot include shareholder or partnership payments.
  • The Provider Relief Funds cannot be used to repay Medicare Accelerated/Advance Payments.
  • HHS has made clear that providers that do not have or do not anticipate that they will have eligible expenses or lost revenue in excess of the Provider Relief Funds must return the funds. Providers must carefully calculate increased expenses attributable to COVID-19 and lost revenue due to COVID-19 in accordance with the new guidance issued by HHS. 
    • HHS has the right to audit providers’ use of the funds and calculation of increased expenses and lost revenue through a 3-year statutory lookback period.
  • If the Provider Relief Funds were held in an interest-bearing account, the interest must be reported as “Other Assistance” and used towards a reportable use of funds. If the provider does not use the funds towards a reportable use, HHS requires the provider to return the unexpended earned interest.  
    • If the provider must return any unused portion of the Provider Relief Funds, the provider must also return any earned interest on the funds.

For more information on the HHS Provider Relief Fund Reporting Requirements, please visit our website at www.bmdllc.com. For more information on the HHS Provider Relief Funds, please contact Amanda Waesch at alwaesch@bmdllc.com or 330-253-9185.

 


Valley National Bank/Trulieve Loan: A Big Step Out of the Shadows

In a late December press release, Trulieve announced that it had secured a $71.5 million commercial bank loan. In addition to the amount of the loan, which may be the largest commercial bank loan to date to a cannabis company, the release prominently identified Valley Bank and featured both a quote from Valley’s Senior Vice President, John Myers, and a description of the Bank’s service platform and commitment to the cannabis industry.

The End of Non-Competes? The Impact It Will Have on the Healthcare Industry

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year. The Rule would also require employers to rescind non-competes that they had already entered into with their workers. For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”

2022 Healthcare Recap and 2023 Healthcare Check-Up

As the country begins to return to a new “normal” following the COVID-19 pandemic, there are many healthcare rules changing on both the federal and state levels as a result. Thus, it is important for healthcare providers and their employers to be aware of these changing rules, and any implications they may have on their practice. Look back on healthcare in 2022 and find a checklist for 2023.

Direct Support Professional Retention Payments

On December 15, the Ohio Senate and House passed House Bill 45, which authorizes the Department of Developmental Disabilities (DODD), in conjunction with the county boards of developmental disabilities, to launch their initiative to issue retention payments to Direct Support Professionals (DSPs). These retention payments will be distributed quarterly to participating home and community-based waiver providers to address the workforce crisis in the direct provider sector. Governor DeWine needs to sign the Bill to begin the payments, but he is expected to do so by the end of 2022.

Real Estate Investors Position for 2023 Opportunities

Real estate investors weathered another year in a post-pandemic world, with the year closing with yet another interest rate increase coupled with both uncertainty and heightened interest carrying into 2023. Just last Wednesday, the Federal Reserve raised its benchmark interest rate 0.50 percentage points, shifting the target range to 4.25% to 4.50%. The new level is the highest the fed funds rate has been since December 2007 and marks the seventh rate hike this year. So what does this mean to investors, brokers, lenders, and others in the real estate world? Read a few perspectives below from stakeholders familiar with our BMD clients and the markets in which they do business.