4 ways for providers to survive the CARES Act

Providers can extend a lifeline with careful decisions and action

Healthcare organizations impacted by the COVID-19 pandemic got a lifeline in the CARES Act early in the crisis. This relief package and others have been critical for providers. Yet of the CARES Act’s 900 pages, just three outline how relief funding should be distributed. For providers, this has meant months of monitoring regulatory changes and requirements.

It’s safe to expect more adjustments and increased public scrutiny. Four key points can support decision-making and action.

1. Expect to be audited

• Providers that got more than $150,000 in funding initially should file detailed quarterly reports no later than 10 days after the end of each calendar year.
• Those that received more than $750,000 will be automatically audited in the fiscal or calendar year the funds are spent.
• Additionally, reporting details may trigger increased regulatory scrutiny.

2. Terms and conditions are broad but critical

3. With audits, the best defense is a good offense

• Enhance compliance programs to account for COVID-19 considerations.
• Maintain clear, organized and accessible books and records.
• Create an oversight committee to ensure you meet all compliance obligations to file quarterly reports and prepare for audits.
• Implement funding utilization measures such as segregated bank accounts and general ledger accounts for CARES Act funds.
• Follow Title VI civil rights considerations.
• Recognize that external audit implications vary depending on factors such as nonprofit or for-profit status.

4. Consider the broader business implications of CARES Act funding

In addition to reporting and compliance minutiae that come with accepting economic stimulus money, consider the broader business implications. Focus on areas such as the operational and financial impact that the funds will have on the bottom line; depending on the type and amount received, short-term liquidity is likely impacted and future cash flows will be affected. Funding could also impact debt covenants, creating uncertainty with lender/borrower agreements and calculations.

Other business areas to consider are valuation, balance sheet strength and strategic alignment. In addition, watch for M&A activity to rebound.

Finally, consider the public perception and branding impact of receiving funds. The media and the general public may think differently about some providers that choose to accept funds — or return them.

For healthcare providers, these considerations can be the keys to success in managing CARES Act funding and compliance.

Grant Thornton professionals discussed these points in a webcast with law firm Buchanan Ingersoll & Rooney.

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