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CARES Act provides hospitals with emergency funding and policy wins

03.31.20

CARES Act update:

As anticipated, the House of Representatives approved the CARES Act on March 27, 2020, and the President has signed the measure. The provisions highlighted in our prior summary remain intact in the final measure. 

So…how are the emergency relief funds in the legislation accessed by healthcare providers?

  • Public Health & Social Services Emergency Fund (PHSSEF): The guidance on how hospitals will access the $100 billion in PHSSEF funds to offset “COVID-19 related expenses and lost revenue” is expected to be released shortly. Keep an eye on this space for further updates as information becomes available.
  • Medicare Advanced Lump Sum or Periodic Interim Payments: Application is made through the Fiscal Intermediary (FI). It should be noted that healthcare organizations do not qualify if they are in bankruptcy, under active medical review or program integrity investigation, or have outstanding, delinquent Medicare overpayments.
  • SBA Paycheck Protection Program (PPP): This application process begins with your local lender. Do not hesitate—contact your lender immediately as it is anticipated that application volume will be tremendous. For more specifics on this program compiled by BerryDunn experts, visit our blog.

We will continue to provide updates as more information becomes available. In the meantime, please feel free to contact the hospital consulting team. Despite the current circumstances we remain available to support your needs. 


On March 25, 2020 the US Senate unanimously approved the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act (The “Act”). The White House has signaled that it will sign the measure as approved by the Senate. 

Major provisions of the proposed legislation include:

  • $100 billion for hospital “COVID-19 related expenses and lost revenue”
  • $275 million for rural hospitals, telehealth, poison control centers, and HIV/AIDS programs
  • $250 million for hospital capacity expansion and response
  • $150 million for modifications of existing hospital, nursing home, and “domiciliary facilities” undertaken as part of COVID-19 response

The CARES Act also includes the following targeted relief and payment modifications under the Medicare and Medicaid programs:

  • The Medicare 2% sequester will be suspended from May 1, 2020 through December 31, 2020. 
  • “Through the duration of the COVID-19 emergency period”, the Act will increase by 20% hospital payments for the treatment of patients admitted with COVID-19. The add-on applies to hospitals paid through the Inpatient Prospective Payment System.
  • $4 billion in scheduled cuts to Medicaid Disproportionate Share Hospital payments will be further delayed from May 22, 2020 to November 30, 2020.
  • Certain hospitals, including those designated as rural or frontier, have the option to request up to a six month advanced lump sum or periodic interim payments from Medicare. The payments will:
    1. Be based upon net payments represented by unbilled discharges or unpaid bills,
    2. Equal up to 100% of prior period payments, 125% for Critical Access Hospitals
    3. In terms of paying down the “no interest loans”, hospitals will be given a four month grace period to begin making payments and at least 12 months to fully liquidate the obligation.

Non-financing provisions contained in the Act that will impact hospital operations include:

  • Providing acute care hospitals the option to transfer patients out of their facilities and into alternative care settings to "prioritize resources needed to treat COVID-19 cases." That flexibility will come through the waiver of the Inpatient Rehabilitation Facility (IRF) three-hour rule, which requires patients to need at least three hours of intensive rehabilitation at least five days per week to be admitted to an IRF.
  • Allowing Long-Term Care Hospitals (LTCH) to maintain their designation even if more than 50% of their cases are less intensive and would temporarily pause LTCH site-neutral payments.
  • Suspending scheduled Medicare payment cuts for durable medical equipment during the length of the COVID-19 emergency period, to help patients transition from hospital to home.
  • Disallow Medicare beneficiary cost-sharing payments for any COVID-19 vaccine.
  • Ensuring that uninsured individuals could receive free COVID-19 tests "and related service" through any state Medicaid program that elects to enroll them.

Other emergency-period provisions that directly affect other entities but have implications for hospitals:

  • Affording $150 billion to states, territories, and tribal governments to cover their costs for responding to the coronavirus public health emergency.
  • Physician assistants, nurse practitioners, and other professionals will be allowed to order home health services for Medicare beneficiaries, to increase "beneficiary access to care in the safety of their home."
  • Requiring HHS to clarify guidance encouraging the use of telecommunications systems, including remote patient monitoring, for home health services.
  • Allowing qualified providers to use telehealth technologies to fulfill the hospice face-to-face recertification requirement.
  • Eliminating the requirement that a nephrologist conduct some of the required periodic evaluations of a home-dialysis patient face-to-face.
  • Allowing federally qualified health centers and rural health clinics to serve as a distant site for telehealth consultations.
  • Eliminating the telehealth requirement that physicians or other professionals have treated a patient in the past three years.
  • Allowing high-deductible health plans with a health savings account (HSA) to cover telehealth services before a patient reaches the deductible.
  • Allowing patients to use HSA and flexible spending accounts to buy over-the-counter medical products without a prescription.

For more information
If you have questions or need more information about your specific situation, please contact the hospital consulting team. We’re here to help. 
 

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Read this if you are at a rural health clinic or are considering developing one.

Section 130 of H.R. 133, the Consolidated Appropriations Act of 2021 (Covid Relief Package) has become law. The law includes the most comprehensive reforms of the Medicare RHC payment methodology since the mid-1990s. Aimed at providing a payment increase to capped RHCs (freestanding and provider-based RHCs attached to hospitals greater than 50 beds), the provisions will simultaneously narrow the payment gap between capped and non-capped RHCs.

This will not obtain full “site neutrality” in payment, a goal of CMS and the Trump administration, but the new provisions will help maintain budget neutrality with savings derived from previously uncapped RHCs funding the increase to capped providers and other Medicare payment mechanisms.

Highlights of the Section 130 provision:

  • The limit paid to freestanding RHCs and those attached to hospitals greater than 50 beds will increase to $100 beginning April 1, 2021 and escalate to $190 by 2028.
  • Any RHC, both freestanding and provider-based, will be deemed “new” if certified after 12/31/19 and subject to the new per-visit cap.
  • Grandfathering would be in place for uncapped provider-based RHCs in existence as of 12/31/19. These providers would receive their current All-Inclusive Rate (AIR) adjusted annually for MEI (Medicare Economic Index) or their actual costs for the year.

If you have any questions about your specific situation, please contact us. We’re here to help.

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Section 130 Rural Health Clinic (RHC) modernization: Highlights

Read this if you are an employer with basic knowledge of benefit plans and want to learn more. 

This article is the third in a series to help employee benefit plan fiduciaries better understand their responsibilities and manage the risks of non-compliance with Employee Retirement Income Security Act (ERISA) requirements. Our first article covers the background of ERISA, while our second article covers the definitions and rules of parties-in-interest and prohibited transactions.

Form 5500 is an informational return filed annually with the US Department of Labor (DOL). The purpose of Form 5500 is to report information concerning the operation, funding, assets, and investments of pension and other employee benefit plans to the Internal Revenue Service (IRS) and DOL. All pension benefit plans covered by the Employee Retirement Income Security Act (ERISA), and, generally, health and welfare plans covering 100 or more participants are subject to filing Form 5500. Any retirement plan covering less than 100 participants at the beginning of the plan year may be able to file Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. Read on for important filing requirements, as noncompliance can result in substantial penalties assessed by both the DOL and IRS. 

Who has to file, and which Form 5500 is required?

Pension plans

The most common types of pension benefit plan filers include:

  • Retirement plans qualified under Internal Revenue Code (IRC) § 401(a)
  • Tax sheltered annuity plans under IRC § 403(b)(1) and 403(b)(7)
  • SIMPLE 401(k) Plan under IRC § 401(k)(11)
  • Direct Filing Entity (DFE)

Which Form 5500 you should file depends on the type of plan. Small plans covering less than 100 participants as of the beginning of the plan year will normally file a Form 5500-SF. Conversely, large plans, mainly those plans covering 100 or more participants as of the beginning of the plan year, will file Form 5500 as a general rule. 

Participants include all current employees eligible for the plan, former employees still covered, and deceased employees who have one or more beneficiaries eligible for or receiving benefits under the plan.

Welfare plans

Generally, all welfare benefit plans covered by ERISA are required to file a Form 5500. Common types of welfare benefit plans include but are not limited to medical, dental, life insurance, severance pay, disability, and scholarship funds.

Similar to pension plans, the required Form 5500 to be filed typically depends on whether the plan is a small plan with less than 100 participants at the beginning of the year, or a large plan with 100 or more participants at the beginning of the plan year. However, certain welfare benefit plans are not required to file an annual Form 5500, including, but not limited to:

  • Plans with fewer than 100 participants at the beginning of the plan year and that are unfunded, fully insured, or a combination of the two
  • Governmental plans 
  • Employee benefit plans maintained only to comply with workers’ compensation, unemployment compensation, or disability insurance laws

Participants for welfare benefit plans include current employees covered by the plan, former employees still covered, and deceased employees who have one or more beneficiaries receiving or entitled to receive benefits under the plan (e.g., COBRA). 

Required financial schedules for Form 5500

Small plans that do not file Form 5500-SF require the following schedules to be filed along with the Form 5500:

  • Schedule A—Insurance information
  • Schedule D—DFE/Participating plan information
  • Schedule I—Financial information for a small plan

Large plans require the following schedules in addition to small plan schedules:

  • Plan Audit (Accountant’s Opinion)
  • Schedule C—Service provider information
  • Schedule G—Financial transaction schedules
  • Schedule H—Financial information (instead of Schedule I)

Welfare plans with 100 or more participants that are unfunded, fully insured or a combination of the two are not required to attach Schedule H or an Accountant’s Opinion. Also, pension plans will attach Schedule SB or MB reporting actuarial information, if required, along with Schedule R reporting retirement plan information.

When to File

Form 5500 must be filed electronically by the last day of the seventh calendar month after the end of the plan year. However, a two and one-half months’ extension of time to file can be requested. Penalties may be assessed by both the IRS and the DOL for failure to file an annual Form 5500-series return. For 2020, the IRS penalty for late filing is $250 per day, up to a maximum of $150,000 (applies only to retirement plans), and the DOL penalty can run up to $2,233 per day, with no maximum. Therefore, it is very important to track participant counts and ensure compliance with filing deadlines.

If you have questions about your specific situation, please contact our employee benefit consulting team. We’re here to help.

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Form 5500: An overview

Read this if you are an employer looking for more information on the Employee Retention Credit (ERC).

As we previously wrote, the Consolidated Appropriations Act, 2021 expanded, retroactively to March 12th, 2020, the Employee Retention Credit (ERC) to include those otherwise eligible employers who also received Paycheck Protection Program (PPP) loans. For those employers, wages qualifying for the ERC include wages that were not paid for with proceeds from a forgiven PPP loan. 

IRS guidance released

Recently, the Internal Revenue Service (IRS) released guidance under Notice 2021-20 (the Notice) clarifying how eligible employers who also received a PPP loan during 2020 can retroactively claim the ERC. The Notice also formalizes and expands on prior IRS responses to FAQs and addresses changes made since the enactment of the Act; it contains 71 FAQs. The IRS has stated it will address calendar quarters in 2021 in later guidance.

Under the 2020 ERC rules, an eligible employer may receive a refundable credit equal to 50% of qualified wages and healthcare expenses (up to $10,000 of wages/health care expenses per employee in 2020) paid by a business or not-for-profit organization that experienced a full or partial suspension of their operations or a significant decline in gross receipts. For employers that received a PPP loan, Q&A 49 of the Notice outlines the IRS’ position on the interaction with the ERC for 2020. 

An eligible employer can elect which wages are used to calculate the ERC and which wages are used for PPP loan forgiveness. The Notice provides for a deemed election for any qualified wages  included in the amount reported as payroll costs on the PPP Loan Forgiveness Application, unless the included payroll costs exceed the amount needed for full forgiveness when considering only the entries on the application. The text of Q&A 49 appears to treat the minimum amount of payroll costs required for PPP loan forgiveness (i.e., 60%) as being the deemed election as long as there are other eligible non-payroll expenses reported on the application to account for the other 40% of loan forgiveness expenses.

Payroll costs reported on the PPP Loan Forgiveness Application: Examples

The examples make it clear the payroll costs reported on the PPP Loan Forgiveness Application and needed for loan forgiveness are generally excluded from the ERC calculations. The qualified wages included on the PPP Loan Forgiveness Application that may be included in the ERC calculations are partially impacted by the documented non-payroll expenses included in the PPP Loan Forgiveness Application. Following are a few examples from the Notice. Each example outlines the interaction between payroll costs reported on the PPP Loan Forgiveness Application and the qualified wages for the ERC.

Example #1: An employer received a PPP loan of $100,000 and has both payroll and non-payroll costs that far exceed the borrowed amount. The employer only reports payroll costs of $100,000 on the PPP Loan Forgiveness application to simplify the forgiveness process. The employer cannot use any of the $100,000 of payroll costs to claim the ERC. This is notwithstanding the fact that 100% forgiveness may have been achieved by reporting only $60,000 of payroll costs and the remaining $40,000 from non-payroll costs.   

Example #2: An employer received a PPP loan of $200,000. The employer submitted a PPP Loan Forgiveness Application and reported $250,000 of qualified wages as payroll costs in support of forgiveness of the entire PPP loan. The employer is deemed to have made an election not to take into account $200,000 of the qualified wages for purposes of the ERC, which was the amount of qualified wages included in the payroll costs reported on the PPP Loan Forgiveness Application up to (but not exceeding) the minimum amount of payroll costs. The employer is not treated as making a deemed election with respect to $50,000 of the qualified wages ($250,000 reported on the PPP Loan Forgiveness Application, minus the $200,000 PPP loan amount forgiven), and it may treat that amount as qualified wages for purposes of the ERC.

Example #3: An employer received a PPP loan of $200,000. The employer is an eligible employer and paid $200,000 of qualified wages that would qualify for the employee retention credit during the second and third quarters of 2020. The employer also paid other eligible expenses of $70,000. The employer submitted a PPP Loan Forgiveness Application and reported the $200,000 of qualified wages as payroll costs, as well as the $70,000 of other eligible expenses, in support of forgiveness of the entire PPP loan. In this case, the employer is deemed to have made an election not to take into account $130,000 of qualified wages for purposes of the ERC, which was the amount of qualified wages included in the payroll costs reported on the PPP Loan Forgiveness Application up to (but not exceeding) the minimum amount of payroll costs, together with the $70,000 of other eligible expenses reported on the PPP Loan Forgiveness Application, sufficient to support the amount of the PPP loan that was forgiven. As a result, $70,000 of the qualified wages reported as payroll costs may be treated as qualified wages for purposes of the ERC.

Key takeaway:

For purposes of PPP loan forgiveness, an employer must generally submit payroll expenses equal to at least 60% of the loan amount to maximize loan forgiveness and to maximize the available wages for the ERC. If an employer does not report non-payroll costs (or limits the amount it reports) on the PPP Loan Forgiveness Application then doing so will have a direct impact on the wages available for the ERC. 

An employer must also consider the payroll costs reported on the PPP Loan Forgiveness Application and the payroll costs necessary to maximize the ERC. For example, if an employer does not qualify for the ERC until the third quarter of 2020, it should consider limiting the amount of wages reported on the PPP Loan Forgiveness Application that are attributable to the third quarter in order to maximize the wages available for the ERC.

How to claim the Employee Retention Credit

An eligible employer that received a PPP loan and did not claim the ERC may file a Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return for the relevant calendar quarters in which the employer paid qualified wages, but only for qualified wages for which no deemed election was made. 

Form 941-X may also be used by eligible employers who did not receive a PPP loan for 2020, but subsequently decide to claim any ERC to which they are entitled for 2020. 

The deadline for filing Form 941-X is generally within three years of the date Form 941 was filed or two years from the date you paid the tax reported on Form 941, whichever is later.

For more information

If you have more questions, or have a specific question about your situation, please call us. We’re here to help.

Article
IRS guidance: Retroactively claiming the 2020 ERC

Read this if your organization has to comply with HIPAA.

We have been monitoring HHS Office for Civil Rights (OCR) settlements as part of the HIPAA Right of Access Initiative (16 settlements and counting) and want to dispel some myths about HIPAA enforcement. Myths can be scary. It would be pretty frightening to run into Bigfoot while taking a stroll through the woods, but sometimes myths have the opposite effect, and we become complacent, thinking Bigfoot will never sneak up behind us. He’s just a myth, right?

As we offer our top five HIPAA myths, we invite you to decide whether to address gaps in compliance now, or wait until you are in the middle of the woods, facing Bigfoot, and wondering what to do next.

Myth #1: OCR doesn’t target organizations like mine.

The prevailing wisdom has been that the Office for Civil Rights only pursues settlements with large organizations. As we review the types of organizations that have been targeted in the recent past, we find that they include social services/behavioral health organizations, more than one primary care practice, a psychiatric medical group practice, and a few hospital/health systems. With settlements ranging from $10,000 to $200,000 plus up to two years of monitoring by the OCR, can you really afford to take a chance?

Myth #2: I have privacy policies, procedures, and training protocols documented, so I’m all set if OCR comes calling.

Are you really all set? When did you last review your policies and procedures? Are you sure what your staff actually does is HIPAA compliant? If you don’t regularly review your policies and procedures and train your staff, can you really say you’re all set?

Myth #3: HIPAA gives me 30 days to respond to a patient request, so it’s ok to wait to respond.

Did you try to ship a package during the 2020 holiday season? If so, do you remember checking your tracking number daily to see if your gift was any closer to its destination? Now imagine it was your health records you were waiting for. Frustration builds, goodwill wanes, and you start looking for a higher authority to get involved. 

And beware: if proposed Privacy Rule changes to HIPAA are finalized, the period of time covered entities will have to fulfill patient requests will be reduced from 30 to 15 days.

Myth #4: If I ignore the problem, it will go away.

Right of Access settlement #10 dispels this myth: A medical group was approached by OCR to resolve a complaint in March 2019. Then again in April 2019. This issue was not resolved until October 2020. Now, in addition to a monetary settlement, the group’s Corrective Action Plan (CAP) will be monitored by the OCR for two years. That’s a lot of time, energy, and money that could have been better spent if they worked to resolve the complaint quickly.

Myth #5: OCR will give me a “get out of jail free” card during the pandemic.

As one of our co-workers said, “Just because they are looking aside does not mean they are looking away.” The most recent settlement we have seen to OCR’s Right of Access Initiative was announced February 10, 2021, showing that the initiative is still a priority despite the pandemic.

Are you ready to assess or improve your compliance with HIPAA Right of Access rules now? Contact me and I will help you keep OCR settlements at bay. 

Article
Debunking the myths of HIPAA: Five steps to better compliance

Read this if your organization has received assistance from the Provider Relief Fund.

On January 15, 2021 the US Department of Health & Human Services released updated guidance on the Provider Relief Fund (PRF) reporting requirements. Below, we outline what has changed and supersedes their last communication on November 2, 2020.

This amended guidance is in response to the Coronavirus Response and Relief Supplemental Appropriations Act (Act). The act was passed in December 2020 and added an additional $3 billion to the PRF along with new language regarding reporting requirements. 

Highlights

Please note this is a summary of information and additional detail and guidance that can be found on the Reporting Requirements and Auditing page at HHS.gov. See our helpful infographic for a summary of key deadlines and reporting requirements. 

  • On January 15, 2021 The Department of Health and Human Services (HHS) announced a delay in reporting of the PRF. Further details on the deadline for this reporting have not yet been communicated by HHS. Recipients of PRF payments greater than $10,000 may register to report on use of funds as of December 31, 2020 starting January 15, 2021. Providers should go into the portal and register and establish an account now so when the portal is open for reporting they are prepared to fulfil their reporting requirements.
  • Recipients who have not used all of the funds after December 31, 2020, have six more months from January 1 – June 30, 2021 to use remaining funds. Provider organizations will have to submit a second report before July 31, 2021 on how funds were utilized for that six-month period. 
  • The new guidelines further define the reporting entity and how to report if there is a parent company with subsidiaries for both general and targeted distributions:
     
    • Parent organizations with multiple TINs that either received general distributions or received them from parent organizations can report the usage of these funds even if the parent was not the entity that completed the attestation.
    • While a targeted distribution may now be transferred from the receiving subsidiary to another subsidiary by the parent organization, the original subsidiary must report any of the targeted distribution it received that was transferred.
       
  • The calculation of lost revenue has been modified by HHS through this new guidance. Lost revenue is calculated for the full year and can be calculated as follows:
     
    1. Difference between 2019 and 2020 actual client/resident/patient care revenue. The revenue must be submitted by client/resident/patient care mix and by quarter for the 2019 year.
    2. Difference between 2020 budgeted and 2020 actual. The budget must have been established and approved prior to March 27, 2020 and this budget, as well as an attestation from the CEO or CFO that this budget was submitted and approved prior to March 27, 2020, will have to be submitted.
    3. Reasonable method of estimating revenue. An explanation of the methodology, why it is reasonable and how the lost revenue was caused by coronavirus and not another source will need to be submitted. This method will likely fall under increased scrutiny through an audit by the Health Resources & Services Administration.
       
  • Recipients with unexpended PRF funds in full after the end of calendar year 2020, have an additional six months to utilize remaining funds for expenses or lost revenue attributable to coronavirus in an amount not to exceed the difference between:
     
    • 2019 Quarter 1 to Quarter 2 and 2021 Quarter 1 to Quarter 2 actual revenue,
    • 2020 Quarter 1 to Quarter 2 budgeted revenue and 2021 Quarter 1 to Quarter 2 actual revenue.

Next steps

In the wake of this new guidance, providers should undertake the following steps:

  • Register in the HHS portal and establish an account as soon as possible.
  • Revisit lost revenue calculations to determine if current methodology is appropriate or if an updated methodology would be more appropriate under the new guidance.
  • Understand the ability to transfer general and targeted distributions and the impact on reporting of these funds.
  • Develop reporting procedures for lost revenue and increased expense for reporting in the HHS portal.

If you have questions about accounting for, or reporting on, funds that you have received as a result of the COVID-19 pandemic, please contact a member of our team. We’re here to help.

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Coronavirus Response and Relief Act impacts on the HHS Provider Relief Fund