The new HHS Provider Relief Funds (PRF) FAQ covers capital purchases and changes in net patient service revenue that were due to third-party payor settlements. Here’s what you need to know.
What does this mean for your healthcare organization?
In previous FAQs, HHS indicated that healthcare providers could claim only the relevant depreciation amount for capital equipment purchased during the pandemic. Due to this not being a popular position, many healthcare providers submitted questions to HHS related to fully expensing capital purchases. In response, HHS has expanded the FAQ guidance on capital equipment and inventory and capital facility projects. The new guidance states that expenditures for capital equipment and inventory and facilities directly related to preventing, preparing, and responding to coronavirus may be fully expensed.
With the FAQ document, HHS provided the following examples of the types of expenditures that could be fully expensed:
- Ventilators, computerized tomography scanners, and other intensive care unit, related equipment put into immediate use or held in inventory
- General personal protective equipment
- Upgrading a heating, ventilation, and air conditioning system to support negative pressure units
- Retrofitting a COVID-19 unit
- Enhancing or reconfiguring ICU capabilities
- Leasing or purchasing temporary structure to screen and/or treat patients
- Leasing a permanent facility to increase hospital or nursing home capacity
The previous guidance also had healthcare providers questioning how to account for third-party payor settlements within net patient service revenue when calculating the difference between their 2019 and 2020 actual patient care revenue. Within the new guidance, HHS clarified that healthcare providers, when comparing lost revenue year-to-year, shall exclude from reporting of net patient revenue payments received or payments made to third parties relating to care not provided in 2019 or 2020.
What action should you take?
- Read the HHS FAQ document for additional guidance issued to assist your organization’s application of the Nov. 2, 2020 guidance.
- Reevaluate your calculations of capital expenditures and lost revenue to determine whether changes are needed to earlier estimates. If so, reassess the effects on your financial statements or other reporting requirements.
- Watch for future guidance issued by HHS as the Feb. 15, 2021 reporting deadline approaches.
As you navigate the complexities of PRF funding, we’re here to help. Don’t hesitate to reach out.