The Provider Relief Fund: Reporting Unreimbursed Expenses and Lost Revenue

By Lynn M. Barrett and Stephen Shaver

Lynn M. Barrett (lbarrett@wachler.com) is a Partner and Stephen Shaver (sshaver@wachler.com) is an Associate Attorney at Wachler & Associates PC in Royal Oak, Michigan and Weston, Florida.

The reporting deadlines for healthcare providers who received payments under the Provider Relief Fund (PRF) to report on their use of the payments have begun. Perhaps the largest compliance challenge for providers in PRF reporting is demonstrating that the provider used the payment in accordance with the terms and conditions of the PRF, as well as the numerous items of guidance released by the Department of Health & Human Services (HHS) in connection therewith. Specifically, providers who received PRF funds must demonstrate that they applied the PRF payment toward eligible expenses that were not reimbursed by other sources or toward lost revenue.

The PRF consists of $175 billion in funds set aside by Congress at the beginning of the COVID-19 pandemic. At the time, in March and April 2020, hospitals and other healthcare providers saw revenue-generating procedures cancelled en masse and other services dry up in the face of social-distancing requirements and fear of the coronavirus. These circumstances left many healthcare providers struggling to operate or in danger of shutting down—and at a time when they were needed the most. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020, and the Paycheck Protection Program and Health Care Enhancement Act on April 24, 2020, which created the PRF and together set aside $175 billion to provide financial relief to hospitals and healthcare providers by distributing funds directly to the providers. The PRF is administered by the HHS through the Health Resources and Services Administration.

The HHS has divided the PRF into a series of general and targeted distributions. The bulk of the funds were allotted to general distributions, which have been divided into four phases. Phase 1 involved nearly $50 billion deposited directly into providers’ accounts in April 2020. Providers did not need to apply for or request these funds but were deemed to have accepted the payment and all associated terms and conditions if they did not return the funds or affirmatively accept the terms and conditions within a certain time frame. To make payments quickly, the HHS used Medicare payment information and costs reports already on file. Consequently, Phase 1 payments only went to providers who had billed Medicare in 2019. Phase 2 of the general distributions involved nearly $6 billion in payments to providers who received smaller or no payments in Phase 1 due to Phase 1’s reliance on 2019 Medicare data. Providers were required to apply for Phase 2 payments and accept the associated terms and conditions. Combined, payments under Phases 1 and 2 were intended to represent approximately 2% of a provider’s annual patient care revenue.

For Phase 3, in October 2020, the HHS invited providers who had previously received PRF payments and some providers who had not previously been eligible for PRF payments to apply for an additional $24.5 billion in payments. Phase 3 was intended to take into account providers’ “financial losses and changes in operating expenses caused by the coronavirus.” In September 2021, the HHS invited providers to apply for an additional $17 billion in Phase 4 payments. Phase 4 payments were based on providers’ changes in operating revenues and expenses from July 1, 2020, to March 31, 2021; reimbursed smaller providers for changes in operating revenues and expenses at a higher rate compared to larger providers; and included bonus payments based on the amount of services providers furnish to Medicaid/Children’s Health Insurance Program and Medicare beneficiaries.

Payments under the PRF may have provided a level of relief to healthcare providers; however, these payments came with many strings attached. Each provider who received funds was required to accept (or was deemed to have accepted, in the case of some automatic Phase 1 payments) the terms and conditions of the payment, including agreeing to report to the HHS on the provider’s use of the payment. The deadlines for reporting are based on when a recipient received a PRF payment, and a provider who received multiple payments may be required to report multiple times. The first reports were due September 30, 2021, with subsequent reporting deadlines on March 31, 2022; September 30, 2022; and March 31, 2023.

Providers are required to report on their use of the PRF payment in compliance with the terms and conditions of the payment. Specifically, providers must demonstrate that they appropriately applied the PRF payment that they received either to healthcare-related expenses not reimbursed by another source or to lost revenue. To do so, providers are required to report (1) their expenses that are eligible for reimbursement by the PRF, (2) how the provider applied their PRF payment to those eligible expenses, and (3) the provider’s lost revenue attributable to the coronavirus. Depending on how the provider applies funds to eligible expenses or the amount of the payments it received, the provider may be required to furnish significant additional detail. The complexity of these requirements and calculations creates one of the largest compliance challenges associated with the PRF.

First, the provider must report the net unreimbursed expenses attributable to the coronavirus that have not been reimbursed by other sources and that are not obligated to be reimbursed by other sources. These expenses represent the expenses to which the provider may apply the PRF payment. To calculate these expenses, the HHS has directed providers to identify all expenses attributable to the coronavirus, and then offset any amounts received through other sources, including direct patient billing, commercial insurance, Medicare, Medicaid, Children’s Health Insurance Program, as well as any funds received from the PRF Uninsured Program, the Small Business Administration, the Federal Emergency Management Agency, and the Paycheck Protection Program. PRF payments may be applied to the remaining expenses or costs, after netting the other funds received or obligated to be received that offset those expenses.

Next, the provider must report on how they applied the PRF payment to these eligible expenses. Providers are required to report the application of the PRF payment to two categories of expenses: (1) “General and Administrative Expenses,” including mortgage or rent payments, insurance, personnel costs and benefits, equipment lease payments, and utilities or operations expenses, and (2) “Health Care-Related Expenses,” including supplies, equipment, information technology, and facilities expenses. Because a provider must report both their application of the PRF payment as well as their eligible expenses to which they could have applied the payment, depending on a provider’s expenses, the provider should consider reporting all eligible expenses to which it could have applied the PRF payment. This strategy may create a “buffer” of eligible payments in the event that the HHS audits the provider and disagrees with the expenses to which the provider applied the PRF payment.

After expenses, the provider is required to report their lost revenue attributable to the coronavirus. Any funds that the provider did not apply to eligible expenses may be applied to lost revenue. The HHS has articulated three ways in which a provider may calculate their lost revenue for reporting purposes. First, the provider may compare actual patient care revenues from 2019 with actual patient care revenues for the year being reported. Second, the provider may compare budgeted revenue with actual revenue. To use this methodology, the provider must submit a copy of their budget that was approved prior to March 27, 2020. Third, a provider may propose an alternate methodology to calculate lost revenue. A provider who proposes an alternate methodology must submit a detailed explanation of why the alternate methodology is reasonable and a description of how they implemented the methodology. The HHS may accept the alternate methodology or may reject it and require the provider to choose between the two approved methodologies. In any event, the HHS has indicated that it is more likely to audit providers who propose an alternative methodology.

The HHS has promised significant auditing of PRF payments and enforcement of the terms and conditions. Other agencies, including the Department of Justice and the Special Inspector General for Pandemic Recovery, are also involved in enforcement relating to the various pandemic relief programs, including the PRF. The information that providers report will likely be a target for these audit and enforcement activities. Providers should remember that, when the funds were initially released, according to the terms and conditions of each payment type, the HHS indicated that compliance with the terms and conditions, which include the reporting requirements, was “material” to their distribution of the payments. Making compliance material to the government’s payment of the funds tees up liability under the False Claims Act. Therefore, the criminal and civil penalties of the False Claims Act may be used as enforcement tools for alleged violations relating to PRF reporting, along with the government’s other potential enforcement tools, such as recoupment.

The potential liability, as well as the complexity of the reporting requirements, makes them one of the largest compliance challenges of the PRF. Although the PRF was initially intended as a relief program during a pandemic that devastated the nation’s healthcare providers, the plethora of terms and conditions attached to the fund has created a potential compliance minefield for the very providers the PRF was intended to help. A thorough understanding of the reporting requirements is key to accurate reporting and compliance with the terms and conditions of the PRF.

• Provider Relief Fund (PRF) recipients must comply with specific reporting requirements.
• Compliance with the reporting requirements is material to the receipt of the funds.
• PRF recipients must report both their eligible expenses and the expenses to which they applied the funds.
• PRF recipients must also report their lost revenue attributable to the coronavirus.
• Accurate reporting is key to PRF compliance.

1. Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136, 134 Stat. 281 (2020).

2. Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).

3. “Past General Distributions,” Health Resources & Services Administration, last reviewed September 2021,.

4. “Reporting and Auditing Questions,” Health Resources & Services Administration, accessed November 17, 2021,.

5. “Past General Distributions,” Health Resources & Services Administration.

6. U.S. Department of Health & Human Services, “HHS Announces the Availability of $25.5 Billion in COVID-19 Provider Funding,” news release, September 10, 2021,.

7. “Future Payments,” Health Resources & Services Administration, last reviewed November 2021,.

8. Health Resources & Services Administration, “Provider Relief Fund General and Targeted Distribution Post-Payment Notice of Reporting Requirements,” June 11, 2021,.

9. “Reporting and Auditing Questions,” Health Resources & Services Administration.

10. Health Resources & Services Administration, “Provider Relief Fund General and Targeted Distribution Post-Payment Notice of Reporting Requirements.”

11. U.S. Department of Health & Human Services, “HHS Announces Additional Allocations of CARES Act Provider Relief Fund,” news release, April 22, 2020..

12. “Relief Fund Payment from Initial $30 Billion General Distribution Terms and Conditions,” Health Resources & Services Administration; “Relief Fund Payment from $20 Billion General Distribution Terms and Conditions,” Health Resources & Services Administration; “Phase 2 General Distribution Relief Fund Payment Terms and Conditions,” Health Resources & Services Administration; “Phase 3 Relief Fund Payment Terms and Conditions,” Health Resources & Services Administration; “Phase 4 Provider Relief Fund Payment Terms and Conditions,” Health Resources & Services Administration.

13. 31 U.S.C. §§ 3729–3733.