HHS Releases Another Round of FAQs

HHS Releases Another Round of FAQs

11/2/2020 Tags: Announcements, In the News, COVID-19, CARES Act

The following was initially prepared before the HHS provided a correction to one of its FAQs. We've updated it on Nov. 3, 2020, to reflect the new guidance. Any subsequently issued guidance or further corrections may not be reflected. Please check with yo

The U.S. Department of Health and Human Services released another round of FAQs about the CARES Act and Provider Relief Funds.

Although the FAQs do address previous issues, some confusion remains. Also, some of the answers could be problematic for healthcare and nursing home facilities.

We’re working to provide additional clarity about the new FAQs. In the meantime, we wanted to touch on a few highlights.

One of the more concerning answers is related to capital equipment and depreciation. From the HHS FAQs:

“Do providers report total purchase price of capital equipment or only the depreciated value? (Added 10/28/2020) Providers who use accrual or cash basis accounting may report the relevant depreciation amount based on the equipment useful life, purchase price and depreciation methodology otherwise applied.

“Providers may report an expense for items purchased with a useful life of 12 months or less if in accordance with their existing accounting policies.”

As it stands, if healthcare facilities had to invest in capital, HHS will only pay for the part of deprecation that happened during the current health crisis. This could change or be challenged. But right now, it’s not ideal news for organizations that heavily invested in capital items.

Other highlights include:

  • Cost reimbursed to providers: Provider Relief Funds only cover coronavirus eligible expenses that are incremental costs not reimbursed by full-cost reimbursement methodologies. So, let’s say Medicare reimburses a critical access hospital 100 percent of its costs. That facility wouldn’t have any coronavirus expenses to report for Medicare patients.
  • Lost revenues definition and calculation: HHS calculates lost revenue as the change between calendar-year 2020 and 2019 patient service revenue. The maximum amount of lost revenue eligible for reimbursement through Provider Relief Funds is the total change in patient service revenue from 2019 to 2020. It’s still not clear if HHS will allow the normalization of operating activities.
  • Example calculations of expenses other sources didn’t reimburse: There’s now guidance about how HHS defines direct and general and administrative expenses. There are also example calculations so you can estimate expenses that other sources didn’t reimburse. These include other grants, third-party payors, and patient payments, among others.
  • Timeline for spending: Facilities have to spend Provider Relief Funds by June 30, 2021, and final reporting is due July 31, 2021. It’s expected that future HHS guidance will outline how facilities return to HHS any ineligible funds or funds they didn’t spend. If it’s appliable, facilities have to include any accrued interest on funds they didn’t spend in the amount they return to HHS.

We’ll provide another update about the new FAQs as soon as we have a better understanding of their impact. In the meantime, if you have questions, please reach out to us.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.

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