Resources for senior living organizations affected by

COVID-

19

Today’s senior living providers must ensure that their mission and vision for the future are built on a healthy financial plan and structure. Here are some things you should know to build just that.

America’s senior living industry includes a diverse range of organizations — from skilled and long-term-care providers to assisted living organizations, retirement communities, community health organizations, and more — all operating in an unusually complex, fast-changing environment.

Yet one thing they have in common is the need to plan effectively for the future. Is your organization ready? Whatever your vision for the years ahead, the single most important question your organization needs to answer is “Do we have a realistic financial plan and structures in place to support the vision?”

Related: Download our e-book, Building a Sustainable Vision Through ‘Financial Fitness’ in Today’s Senior Living Industry.

Here are six tips on how you can prepare to step toward the future with confidence:

1. Analyze your balance sheet. Look for key indicators of strengths and weaknesses. What available assets do you have? How leveraged are you? Is there a liquidity problem? It’s important to resolve these issues right now.
2. Analyze your working capital needs. Most organizations find that their current and projected working capital needs are a mix of good and bad news. Understanding these needs now is crucial to your future success.
3. Know your long-term cash flow needs. Knowledge is power. The difference between your cash flow needs today and your cash flow needs tomorrow can be a showstopper.
4. Assess your capital capacity and needs. How much capital do you need today to run basic operations? How much do you need for the goals set forth in the vision — expansion, adding services, etc.? All these factors need to be managed to “help the present reach the future.”
5. Assess how you stack up. Next, benchmark your key current and projected financial results against data for similar senior living organizations. (At BerryDunn, we have access to industry data and use our own proprietary database for this purpose.) If your results don’t look realistic, don’t press the “Go” button just yet.
6. Put it all together — and implement. Integrate the factors discussed above, identify the gaps, and fill them.

After that, it’s full steam ahead! To learn more, download our free white paper on Building a Sustainable Vision Through ‘Financial Fitness’ in Today’s Senior Living Industry or reach out anytime to our seasoned senior living professionals.

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 long-overdue 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 as was 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.
• The above in effect eliminates uncapped cost-based reimbursement for provider-based RHCs certified subsequent to 12/31/19.
• 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.

Read this if your organization, business, or institution is receiving financial assistance as a direct result of the COVID-19 pandemic.

For companies and organizations that received federal funding to assist them during the COVID-19 pandemic, there have been some updates on Uniform Guidance. Here is a brief summary of those updates, audit threshold, federal funds subject to that threshold, and other pertinent information regarding the guidance.

Audit threshold

Non-federal entities that expend federal funds of $750,000 or more are required to have an audit in accordance with Subpart F of Title 2, U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Funds subject to threshold

• 93.498 Provider Relief Fund
• 21.019 Coronavirus Relief Fund
• 84.425 Higher Education Stabilization Fund
• 32.006 COVID-19 Telehealth Program
• 84.184C CARES Act Project SERV
• 93.461 COVID-19 Testing for the Uninsured
• 93.527 Grants for New and Expanded Services under Health Center Program
• 93.665 Emergency Grants to Address Mental and Substance Use Disorders During COVID-19
• 93.967 COVID-19 Testing for Rural Health Clinics

Funds exempt from threshold

• 59.073 (Small Business Administration) Payroll Protection Loan Program
• 59.072 Economic Injury Disaster Loan Emergency Advance

Audit options

• Single Audit in accordance with Uniform Guidance
• Program-specific audit (only applicable if the non-federal entity expends Federal awards under one single CFDA)

Reporting timetables

• Automatic three-month audit submission extension for Single Audits of 2020 year-ends through September 30, 2020 (only if recipient received some form of COVID-19 funding subject to Uniform Guidance)
  • Example, a June 30, 2020 year-end’s initial date is March 31, 2021, however this was extended to June 30, 2021

Compliance supplement addendum takeaways

• Released December 22, 2020
• Provides guidance on auditing above CFDAs
• For organizations with year-ends prior to December 31, 2020, above funding will be reported in the Schedule of Expenditures of Federal Awards (SEFA) for fiscal years ending in 2021

For-profit considerations

• Department of Health and Human Services (HHS) has determined for-profit commercial organizations (which envelopes hospitals, senior living facilities, and other health facilities) are required to includes PRF payments in determining the $750,000 threshold
• Currently, HHS guidance makes reference to organizations “receiving” not “expending” PRF, which is not in line with current Uniform Guidance definitions – AICPA has reached out for clarification
• There is a third option under HHS guidance for organizations to have a financial audit performed in accordance with U.S. generally accepted auditing standards and U.S. generally accepted governmental auditing standards. However, there is uncertainty as to the specifics of this option and if this option would receive reporting extensions discussed above – AICPA has reached out for clarification

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 Single Audit Team. We’re here to help.

The COVID-19 emergency has caused CMS (Centers for Medicare & Medicaid Services) to expand eligibility for expedited payments to Medicare providers and suppliers for the duration of the public health emergency.

Accelerated payments have been available to providers/suppliers in the past due to a disruption in claims submission or claims processing, mainly due to natural disasters. Because of the COVID-19 public health emergency, CMS has expanded the accelerated payment program to provide necessary funds to eligible providers/suppliers who submit a request to their Medicare Administrative Contractor (MAC) and meet the required qualifications.

Eligibility requirements―Providers/suppliers who:

1. Have billed Medicare for claims within 180 days immediately prior to the date of signature on the provider’s/supplier’s request form,
2. Are not in bankruptcy,
3. Are not under active medical review or program integrity investigation, and
4. Do not have any outstanding delinquent Medicare overpayments.

Amount of payment:
Eligible providers/suppliers will request a specific amount for an accelerated payment. Most providers can request up to 100% of the Medicare payment amount for a three-month period. Inpatient acute care hospitals and certain other hospitals can request up to 100% of the Medicare payment amount for a six-month period. Critical access hospitals (CAHs) can request up to 125% of the Medicare payment for a six-month period.

Processing time:
CMS has indicated that MACs will work to review and issue payment within seven calendar days of receiving the request.

Repayment, recoupment, and reconciliation:
The December 2020 Bipartisan-Bicameral Omnibus COVID Relief Deal revised the repayment, recoupment and reconciliation timeline on the Medicare Advanced and Accelerated Payment Program as identified below. 

Application:
The MAC for Jurisdiction 6 and Jurisdiction K is NGS (National Government Services). The NGS application for accelerated payment can be found here.

The NGS Hotline telephone number is 1.888.802.3898. Per NGSMedicare.com, representatives are available Monday through Friday during regular business hours.

The MAC will review the application to ensure the eligibility requirements are met. The provider/supplier will be notified of approval or denial by mail or email. If the request is approved, the MAC will issue the accelerated payment within seven calendar days from the request.

Tips for filing the Request for Accelerated/Advance Payment:
The key to determining whether a provider should apply under Part A or Part B is the Medicare Identification number. For hospitals, the majority of funding would originate under Part A based on the CMS Certification Number (CCN) also known as the Provider Transaction Access Number (PTAN). As an example, Maine hospitals have CCN / PTAN numbers that use the following numbering convention "20-XXXX". Part B requests would originate when the provider differs from this convention. In short, everything reported on a cost report or Provider Statistical and Reimbursement report  (PS&R) would fall under Part A for the purpose of this funding. 
 
When funding is approved, the requested amount is compared to a database with amounts calculated by Medicare and provides funding at the lessor of the two amounts. The current form allows the provider to request the maximum payment amount as calculated by CMS or a lesser specified amount.
 
A representative from National Government Services indicated the preference was to receive one request for Part A per hospital. The form provides for attachment of a listing of multiple PTAN and NPI numbers that fall under the organization.

Interest after recoupment period:
On Monday, April 6, 2020, the American Hospital Association (AHA) wrote a letter to the Department of Health and Human Services and CMS requesting the interest rate applied to the repayment of the accelerated/advanced payments be waived or substantially reduced. AHA received clarification from CMS that any remaining balance at the end of the recoupment period is subject to interest. Currently that interest rate is set at 10.25% or the “prevailing rate set by the Treasury Department”. Without relief from CMS, interest will accrue as of the 31st day after the hospital has received a demand letter for the repayment of the remaining balance. The hospital does have 30 days to pay the balance without incurring interest.  

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

Read this if you work at a renewable energy company, developer, or other related business. 

When entering into agreements involving tangible long-lived assets, an asset retirement obligation can arise in the form of a legal obligation to retire the asset(s) at a certain date. In the alternative/renewable energy industry, these frequently present themselves in leases for property on which equipment (i.e., solar panels) is placed. In the leases there may be a requirement, for example, that at the conclusion of the lease, the lessee remove the equipment and return to the property to its original condition.

When an asset retirement obligation is present in a contract, a company should record the liability when it has been incurred (usually in the same period the asset is installed or placed in service) and can be reasonably estimated. The fair value of the liability, typically calculated using a present value technique, is recorded along with a corresponding increase to the basis of the asset to be retired. Subsequent to the initial recognition, the liability is accreted annually up to its future value, and the asset, including the increase for the asset retirement obligation, is depreciated over its useful life.

As a company gets closer to the date the obligation is realized, the estimate of the obligation will most likely become more accurate. When revisions to the estimate are determined, the liability should be adjusted in that period.

It is important to note that this accounting does not have any income tax implications, including any potential increase to the investment tax credit (ITC).

These obligations are estimates and should be developed by your management through collaboration with companies or individuals that have performed similar projects and have insight as to the expected cost. While this is an estimate and not a perfect science, it is important information to share with investors and work into cash flow models for the project, as the cost of removing such equipment can be significant. 

Recording the liability on the balance sheet is a good reminder of the approximate cash outflow that will take place in the final year of the lease. If you have any questions or would like to discuss with us, contact a member of the renewable energy team. We’re here to help.

Read this if you are a business owner or interested in upcoming changes to current tax law.

As Joe Biden prepares to be inaugurated as the 46th President of the United States, and Congress is now controlled by Democrats, his tax policy takes center stage.

Although the Democrats hold the presidency and both houses of Congress for the next two years, any changes in tax law may still have to be passed through budget reconciliation, because 60 votes in the Senate generally are needed to avoid that process. Both in 2017 and 2001, passing tax legislation through reconciliation meant that most of the changes were not permanent; that is, they expired within the 10-year budget window. Here is a comparison of current tax law with Biden’s proposed tax plan.

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

Read this if your company is seeking guidance on PPP loans.

The Consolidated Appropriations Act, 2021 (H.R. 133) was signed into law on December 27, 2020. This bill contains guidance on the existing Paycheck Protection Program (PPP) and guidelines for the next round of PPP funding.

Updates on existing PPP loans

Income and expense treatment of PPP loans. Forgiven PPP loans will not be included in taxable income and eligible expenses paid with PPP funds will be tax-deductible. This tax treatment applies to both current and future PPP loans.

Tax attributes and basis adjustments. Tax attributes such as net operating losses and passive loss carryovers, and basis increases generated from the result of the PPP loans will not be reduced if the loans are forgiven.

Economic Injury Disaster Loans (EIDL). Any previous or future EIDL advance will not reduce PPP loan forgiveness. Any borrowers who already received forgiveness of their PPP loans and had their EIDL subtracted from the forgiveness amount will be able to file an amended forgiveness application to have their PPP forgiveness amount increased by the amount of the EIDL advance. The SBA has 15 days from the effective date of this bill to produce an amended forgiveness application. 

Simplified forgiveness application for loans under $150,000. Borrowers who received PPP loans for $150,000 or less will now be able to file a simplified one-page forgiveness application and will not be required to submit documentation with the application. The SBA has 24 days from the effective date of this bill to make this new forgiveness application available. 

Use of PPP funds. Congress expanded the types of expenses that may be paid with PPP funds. Prior eligible expenses were limited to payroll (including health benefits), rent, covered mortgage interest, and utilities. Additional expenses now include software and cloud computing services to support business operations, the purchase of essential goods from suppliers, and expenditures for complying with government guidance relating to COVID-19.

These additional expenses apply to both existing and new PPP loans, but they do not apply to existing loans if forgiveness has already been obtained.
 
In addition, the definition of "payroll costs" has been expanded to include costs for group life, disability, dental, and vision insurance. These additions also apply to both existing and new loans.

Information for new PPP loans

Application deadline. March 31, 2021 

Eligibility for first-time borrowers. A business that did not previously apply for or receive a PPP loan may apply for a new loan. The same requirements apply from the first round of loans. The business must employ fewer than 500 employees per physical location and the borrower must certify the loan is necessary due to economic uncertainty.

Eligibility for second-time borrowers. Businesses that received a prior PPP loan may apply for a second loan, however the eligibility requirements are a little more stringent. The business must have fewer than 300 employees per physical location (down from 500 previously) and it must have experienced a decline in gross revenue of at least 25% in any quarter in 2020 as compared to the same quarter in 2019. The business must have also expended (or will expend) their initial PPP loan proceeds. 

Maximum loan amount. Lesser of $2 million or 2.5x average monthly payroll for either calendar 2019 or the 12-month period prior to the date of the loan. Businesses operating in the accommodations and food service industry (NAICS code 72) can use a 3.5x average monthly payroll multiple. If the business previously received a loan less than the new amount allowed, or if it returned a portion or all of the previous loan, it can apply for additional funds up to the maximum loan amount. 

New types of businesses eligible for loans.

• Broadcast news stations, radio stations, and newspapers that will use the proceeds to support the production and distribution of local and emergency information 
• Certain 501(c)(6) organizations with fewer than 300 employees and that are not significantly involved in lobbying activities 
• Housing cooperatives with fewer than 300 employees 
• Companies in bankruptcy if the bankruptcy court approves

Ineligible businesses. A business that was ineligible to receive a PPP loan during the first round is still ineligible to receive a loan in the new round. The new legislation also prohibits the following businesses from receiving a loan in the second round:

• Publicly traded companies 
• Businesses owned 20% or more by a Chinese or Hong Kong entity or have a resident of China on its board 
• Businesses engaged primarily in political or lobbying activities
• Businesses required to register under the Foreign Agents Registration Act 
• Businesses not in operation on February 15, 2020 

Forgiveness qualifications. New PPP loans will be eligible for forgiveness if at least 60% of the proceeds are used on payroll costs. Partial forgiveness will still be available if less than 60% of the funds are used on payroll costs. 

Covered period. The borrower may choose a covered period (i.e., the amount of time in which the PPP funds must be spent) between 8 and 24 weeks from the date of the loan disbursement.

Employee Retention Tax Credit. The CARES Act prohibited a business from claiming the Employee Retention Tax Credit if they received a PPP loan. The new legislation retroactively repeals that prohibition, although it is unclear how an employer can claim retroactive relief. The new bill also expands the tax credit for 2021. 

Additional guidance is expected from the SBA in the coming weeks on many of these items and we will provide updates when the information is released.

We’re here to help.
If you have questions about PPP loans, contact a BerryDunn professional.