HHS on Thursday announced it is reversing course on requirements on healthcare providers receiving COVID-19 relief grants that prohibited them from using grant funds to become more profitable than they were pre-pandemic.
The new changes mean that providers will be able to keep grant funds up to the amount of their year-over-year revenue difference from 2019 to 2020. The policy shift came after pressure from hospitals and members of Congress, as healthcare providers felt the detailed requirements announced in September diverged substantially from an outline in June.
"From our initial reading, this change appears to address many of our concerns. We appreciate HHS' consideration of the issue and look forward to reviewing the document in more detail," American Hospital Association Executive Vice President Tom Nickels said.
In June, HHS said that hospitals could use Provider Relief Fund grants for coronavirus-related expenses or lost revenue, which could be calculated by comparing actual or budgeted revenue for 2019 and 2020. HHS in September said providers had to compare net operating income instead, and that they could not use the funds to become more profitable in 2020 than the year before. Congress set aside $175 billion for the fund.
HHS created the profit limitation because the department concluded it would be unfair for some providers to make more profit in a pandemic using taxpayer funds while others struggled to stay open. But the agency said it had heard feedback from stakeholders and members of Congress that the profit limitation should be removed.
"In consideration of this feedback, HHS has amended its reporting instructions to provide for the full applicability [Provider Relief Fund] distributions to lost revenues," HHS said in a policy memo.
Now providers can compare actual year-over-year revenue to determine how much grant funding they might be eligible to keep, but not budgeted revenue.
"Providers had managed their businesses on the premise that was issued in June. That changed in September, and it changed their entire scenario planning. This guidance reverts to much closer what they were working from before," said RSM US Partner Rick Kes.
Kes said the guidance helps clear up some stakeholder concerns but leaves unanswered other questions about what expenses would be eligible for reimbursement. It also does not take into account whether a hospital opened a new location or offered new services, which could account for a difference in revenue that would not be reflected in the HHS formula.