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4 ways for providers to survive the CARES Act

Providers can extend a lifeline with careful decisions and action

RFP
Hispanic doctor reading medical chart in office 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
If we’ve learned anything from past aid packages, it’s that audits will happen. To avoid surprises, providers that have received Phase 3 funding and are within the 90-day window to accept the funds should understand limitations and reporting requirements.

  • 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
For providers that plan to accept Phase 3 funds or have accepted past funding, attestation requires adherence to Department of Health and Human Services (HHS) terms and conditions. They vary by funding source, but the general tenets among the three funding phases are similar. Recipients are required to provide — if not already provided after Jan. 31, 2020 — diagnoses, testing or care for individuals with possible or actual cases of COVID-19. Additionally, the terms state that CARES Act funds can be used only for healthcare-related expenses or lost revenue due to COVID-19.

“Healthcare-related expenses” and “lost revenue” are broadly defined by HHS and include costs and services that might not occur to providers. Expenses likely include costs related to additional training, COVID-19 reporting, building temporary structures for COVID-19 care or testing, and additional janitorial staffing. In lost revenue, less obvious examples include losses due to fewer outpatient visits, cancelled elective procedures and increased uncompensated care.

3. With audits, the best defense is a good offense
Providers face significant regulatory repercussions and False Claims Act liability if they improperly use the funds or fail to meet reporting requirements. In accepting and allocating funds, and planning for additional regulatory oversight and audits, proactively follow these best practices:

  • 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.

Contacts:

Erik ShannonErik Shannon
Partner, Strategy and Transactions
T +1 832 487 1440


Tami RadinskyTami Radinsky
Partner, Audit Services
T +1 646 825 8431


Brian BonaviriBrian Bonaviri
Managing Director, Strategy and Transactions
T +1 617 290 2449