Overview of Phase 3 of the Provider Relief Fund for Healthcare Providers

As part of the CARES Act, the Department of Health and Human Services (HHS) has been distributing Provider Relief Fund (PRF) payments in phases, using both general and target distributions.  The PRF was initially allocated $175 billion under the CARES Act through Phase 1-2 to reimburse eligible healthcare providers for healthcare-related expenses and lost revenues attributable to COVID-19.

On October 5, 2020, Phase 3 of the Provider Relief Fund opened for applications with an additional $20 billion in new funding for providers on the front lines of the pandemic, including those who were previously ineligible for funding. The deadline to apply is November 6, 2020.

HHS has already issued over $100 billion in relief funding to providers through prior distributions. Still, HHS recognizes that many providers continue to struggle financially from COVID-19’s impact. For eligible providers, the new Phase 3 General Distribution is designed to balance an equitable payment of 2 percent of annual revenue from patient care for all applicants plus an add-on payment to account for revenue losses and expenses attributable to COVID-19.

Here is a recap of Phase 1-2 of Provider Relief Funding:

Phase 1 Funding

To have been eligible for a Phase 1 – General Distribution payment, providers must have billed Medicare fee-for-service (Parts A or B) in Calendar Year 2019. Additionally, under the Terms and Conditions associated with payment, these providers were eligible only if they provided after January 31, 2020, diagnoses, testing, or care for individuals with possible or actual cases of COVID-19. HHS broadly views every patient as a possible case of COVID-19.

These funds were distributed as automatic deposits into the healthcare providers’ accounts, and they did not need to apply for it.

Phase 2 Funding

On July 31, 2020, the HHS granted another opportunity for healthcare providers to apply for the PRF under Phase 2, aimed at reimbursing eligible healthcare-related expenses and lost revenues attributable to COVID-19.

Healthcare providers who had already received a payment under Phase 1 of the PRF were still eligible to apply for additional funds under Phase 2, as long as they had not yet received a payment that is approximately 2% of annual revenue from patient care.

Eligible providers had until August 28, 2020 to apply for Phase 2 funding.

Here is an overview of Phase 3 of the PRF (Now open for applications until November 6, 2020):

Phase 3 Funding

Under this Phase 3 General Distribution, providers that have already received PRF payments may still apply for additional funding that considers financial losses and changes in operating expenses caused by COVID-19. In addition, previously ineligible providers may now apply, including those providers who began practicing in 2020 as well as an expanded group of behavioral health providers, including addiction counseling centers, mental health counselors, and psychiatrists.

The application window is open from Monday, October 5 until November 6, 2020, and providers can apply on the Provider Relief Fund Application and Attestation Portal.

The following documentation is required to be submitted with the application:

  • Most recent federal income tax return for 2017, 2018, or 2019, unless exempt;
  • Revenue worksheet; and
  • Operating revenues and expenses from patient care.

Eligibility for Phase 3

  • All submissions for a Phase 3 payment will be reviewed to determine whether the applying provider has already received a PRF payment equal to approximately 2% of patient care revenue from prior PRF general distributions.
  • Provider must have filed a federal income tax return for fiscal years 2017, 2018, and 2019 if in operation before January 1, 2020, or was exempt from filing a return; and
  • Provided patient care after January 31, 2020 (Note: patient care includes healthcare services and support as provided in a medical setting, at home, or in the community); and
  • Did not permanently cease providing patient care directly or indirectly; and
  • For individuals providing care before January 1, 2020, had gross receipts or sales from patient care reported on Form 1040 (or other tax form).
  • The applicant must meet at least one of the following:
    • Billed Medicaid/CHIP programs or Medicaid managed care plans for health-related services between January 1, 2018 and March 31, 2020; or
    • Billed a health insurance company for oral healthcare-related services as a dental service provider as of March 31, 2020; or
    • Was a licensed dental service provider as of March 31, 2020, who does not accept insurance and has billed patients for oral healthcare-related services; or
    • Billed Medicare fee-for-service between January 1, 2019 and March 31, 2020; or
    • Was a Medicare Part A provider that experienced a CMS-approved change in ownership prior to August 10, 2020; or
    • Was a state-licensed/certified assisted living facility as of March 31, 2020; or
    • Was a behavioral health provider as of March 31, 2020 who has billed a health insurance company or who does not accept insurance and has billed patients for healthcare-related services as of March 31, 2020.

There is no direct ban under the CARES Act on accepting a payment from the Provider Relief Fund and other sources such as the SBA Paycheck Protection Program.  By attesting to the terms and conditions, the recipient certifies that it will not use the payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.  Keep in mind that the payment from the Provider Relief Fund is includible in gross income.

For more information or assistance complying with the financial reporting requirements of the Provider Relief Fund, we welcome you to reach out to Sax’s Healthcare Practice.  Please also stay tuned for our next article that will do a deep dive on the financial reporting requirements of the Provider Relief Fund.

About the Author:

Deborah Nappi, CPA, MST is a Director at Sax and a vital member of the firm’s Healthcare Practice.  Debbie focuses her attention on the rapidly changing healthcare landscape.  In this role, she leads the firm’s healthcare clients through all aspects of the CARES Act, including PPP and PRF compliance.   In addition to specializing in revenue cycle management and productivity analysis, she also serves as interim CFO during M&A transactions, mitigating risk and ensuring a smooth and successful process.  Debbie can be reached at [email protected].

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