Accounting for COVID-19 Funding for Post-Acute Organizations
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Accounting for COVID-19 Funding for Post-Acute Organizations
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Accounting for COVID-19 Funding for Post-Acute Organizations
- 1. ACCOUNTING FOR COVID-19 FUNDING FOR POST-ACUTE ORGANIZATIONS C I T R I N C O O P E R M A N evolutionJune 2, 2020 actioninto
- 2. AGENDA Moderator | Michael Criscione Health Care Funding| Pamela Sawin Managing Provider Relief Funds| Kieran Higgins Tax Provisions | Gerald Iadeluca Summary and Q&A | Michael Criscione evolution actioninto
- 3. Health Care Funding • You have obtained / received funding • Congratulations! • Now what? 3
- 4. Health Care Funding • Breathe for 10 seconds, then…. • Mobilize to take immediate action to help optimize each funding channel • Goals • Optimize the funding you can keep • Avoid compliance pitfalls • Avoid potential aggravation 4
- 5. Health Care Funding Key focus areas • Monitor • Comply • Track and report 5
- 6. Provider Relief Fund • Deadlines and due dates • Accept terms and conditions – deadline recently extended to 90 days after receipt • Provide 2018 revenue data – 30 days after receipt • Provide 6/30/20 quarter end reporting - by 7/10 • Best practices • Routinely check https://www.hhs.gov/provider-relief/index.html 6
- 7. Medicare Accelerated Payments • Term: the duration of the public health emergency • Repayment • To begin 120 days after the issuance of the payment • Via automatic recoupment against current claims submitted • Routinely check hhs.gov/providerrelief for updates 7
- 8. Workforce Stabilization Fund • Term: 5/4 – 6/1/2020 • Payroll reports will be one of the required documents; others to be specified • Routinely check workforce_stabilization_loan@ohhs.ri.gov for updates 8
- 9. Workforce Stabilization Fund • Cautions • Should be variable based on hours worked each pay period • Must be paid each pay period; not in one lump sum • Pension plan participants – If this is compensation as defined in the plan, it is subject to plan provisions • Don’t call it a bonus; CARES Act prohibits spending for a bonus • Those working remotely are not eligible 9
- 10. Managing Provider Relief Fund Distributions Carefully track receipt of funds Understand eligibility and appropriate uses & establish policies Assess crossover or conflict with other funding sources Implement detailed accounting methodology for costs and foregone revenue 10 Ensuring your organization is prepared for the Provider Relief Fund reporting requirements—set to begin July 2020—as well as any potential OIG or HHS audits is critical. With the fluidity of the COVID-19 Public Health Emergency, organizations need to be prepared to not only respond to regulatory responsibilities,but also to ensure that they are set up to maximize receipt of current and future distributions.
- 11. 11 In approaching its cost accounting methodology, organizations need to consider the impacts of COVID-19 across their enterprise. While not all expenses or losses may be reimbursable under the Provider Relief Fund today, careful tracking of all impacts will ensure providers can take full advantage of any future funding opportunities. Post Acute/Nursing Home Home Health Other Categories Prepare Respond Prevent Other Prepare Respond Prevent Other Prepare Respond Prevent Other Tangible Direct & Indirect Costs Staff Supplies Equipment Purchased Services Rent/Leases/Leasehold Improvement Wasted Resources Overhead Intangible Costs Employee Morale Quality Scores Bond Ratings/Covenants Foregone Revenues Volumes Charity Care Bad Debt Other Income Cost Accounting Methodology
- 12. Cost Accounting Methodology In approaching its cost accounting methodology, organizations need to consider the impacts of COVID-19 across their enterprise. While HHS has provided minimal guidance on allowable expenses, careful tracking of all impacts will ensure providers can take full advantage of current and future funding opportunities as guidance evolves. Categories Tangible Direct & Indirect Costs Examples Staff Additional staff, agency labor, overtime, turnover costs, increase workman’s comp, increase in benefit plan fees, etc. Supplies Additional supplies (uniforms, gas, cleaning supplies, protective equipment etc.) Equipment Non-recurring equipment (tents, tele health, ventilators, work from home IT costs, etc.) Purchased Services Consulting, legal fees, tax, ambulance service, management fees, etc. Rent/Leases/Leasehold Improvement Leasing space for staff, leasing equipment, conversions/additions for COVID units, etc. Wasted Resources Drugs, blood, blood derivatives, food, etc. Overhead Additional support center costs, administrative/management staff and support Intangible Costs Employee Morale Turnover and recruitment costs Quality Scores Lower quality scores, potential impact to reimbursement, third party scores Bond Ratings/Covenants Balance sheet deterioration covenant ratios, ability to obtain future financing Foregone Revenues Volumes Lost census days, lost volumes in general, loss of higher acuity mix Charity Care Increased unemployment potential increase in charity care Bad Debt Increased self-pay Other Income Lost professional fee income, parking income, lost gift shop/concession income 12
- 13. Cost Accounting Methodology In approaching its cost accounting methodology, organizations need to consider the impacts of COVID-19 across their enterprise. While not all expenses or losses may be reimbursable under the Provider Relief Fund today, careful tracking of all impacts will ensure providers can take full advantage of any future funding opportunities. Volume Related: Lost Reimbursement less Incremental Costs equals Lost Profits Census Days Acuity Mix Other Revenue Lost Foregone Revenues PrepareRespond Prevent Costs incurred that are mutually exclusive of caring for COVID-19 patients (these costs are captured under Additional Losses) Tangible Direct and Indirect Costs PrepareRespond Prevent COVID-19 Reimbursement less Activity-based Cost equals Resources used to care for COVID-19 patients Additional Patient Losses* PrepareRespond Prevent Uses Sources *At this point, it is unclear whetherAdditionalPatientLossesare coveredby the ProviderRelief Fund 13
- 14. Paycheck Protection Loan Program • Section 1106(i) of the CARES Act provides that amounts forgiven on a PPP Loan “shall be excluded from gross income” • Tax impact of forgiveness of debt • Classified as tax-exempt income • Expenses associated with tax-exempt income are not deductible • Other considerations • Classification of tax-exempt income for Form 990 • Effect on distributions 14
- 15. Economic Injury Disaster Grant • Advance grant up to $10,000 from the SBA • Separate & distinct from EIDL • All private nonprofit organizations are eligible for grant • Other considerations • No requirement for repayment • Interaction with the PPP Loan • Grants are taxable income 15
- 16. • Loans will be forgiven in full if spent on qualifying expenses • Tax impact of forgiveness of debt • Classified as tax-exempt income • Expenses associated with tax-exempt income are not deductible • Other Considerations • Classification of tax-exempt income for Form 990 • Effect on distributions RI Workforce Stabilization Loan Program 16
- 17. • A series of payments to qualifying Medicare providers and facilities • Available to nonprofit and for profit entities • No repayment required if all terms and conditions are met • Submission of 2018 tax returns, including Form 990, required for application • Special rules apply for entities acquired and sold with short year tax returns • Other Considerations: • Treated as grant income Provider Relief Fund 17
- 18. Refundable Tax Credits – Paid Sick and Family Leave • Applicable to Employers with less than 500 employees • What about related companies • Employers with less than 50 employees may opt out • Other considerations • Qualified sick and family leave wages are not subject to Employer FICA taxes • Employers must retain records and documentation supporting each employee’s claim 18
- 19. • Not available if PPP loan received • Test #1: operations were fully or partially suspended, due to a COVID-19-related shut-down order • Test #2: gross receipts declined by more than 50% when compared to the same quarter in the prior year • Sick pay and Family Leave wages are excluded • Only the Employer portion of FICA tax is eligible for the credit Employee Retention Credit 19
- 20. • Available to all Employers, except those who received a PPP loan and subsequent forgiveness • Deferral of Employer share of FICA taxes • Payment is deferred interest free – 50 percent due December 31, 2021 and 2022 • Other Considerations • Timing of tax deductions for deferral of taxes Employer Payroll Tax Deferral 20
- 21. Summary of COVID-19 Employer Tax Incentives 21 Paid Sick Leave Credit Paid Family Leave Credit Employee Retention Credit Employer Payroll tax Deferral Employee headcount cap and Applicable source 500 FLSA & FMLA 500 FLSA & FMLA < 100, > 100 A.C.A & IRC sec. 414 None Eligible Employers includes 501 ( C ) entities includes 501 ( C ) entities includes 501 ( C ) entities includes 501 ( C ) entities COVID-19 EFFECT Employee out of work for COVID-19 reasons Employee out of work to care for child during Pandemic Business suspended by gov't order or 50% reduction on Gross Receipts None Qualified Wages Only sick leave wages required to be paid under FFCRA Only Family leave wages required to be paid under FFCRA All of < 100, only those out of > 100 All wages subject to FICA $137,700 limit Credit amount up to $511 per day, total of $5110 plus pro rata Health premiums and 'ER medicare tax up to $200 per day, total of $10,000 plus pro rata Health premiums and 'ER 50% up to $10,000 of qualifed wages plus pro rate Health premiums per Employee 6.2% of all wages subject to FICA , maximum = $8,537, NO health premiums Credit Procedure Retain Form 941 taxes & Withholdings, File Form 7200 for Excess Credits Retain Form 941 taxes & Withholdings, File Form 7200 for Excess Credits Retain Form 941 taxes & Withholdings, File Form 7200 for Excess Credits Retain Employer FICA taxes up to limit Effective dates 4/1/20 - 12/31/20 4/1/20 -12/31/20 3/13/20 -12/31/20 3/27/20 -12/31/20 Effect of PPP loan None None Not available with PPP loan not available if PPP loan forgiven 21
- 22. Sec. 139 Payments – Federal Declared Disaster Areas • Employer payments to employees - both deductible to employer and tax free to employee • Not intended as a replacement of lost income • Must be a reimbursement or payment for reasonable and necessary personal, family, living or funeral expenses not covered by insurance • Examples of reimbursable costs: • Associated with enabling an employee to work from home during the pandemic • Over the counter medications and hand sanitizer • Medical expenses not covered by insurance • Cost of an employee’s child care or tutoring costs due to closing of schools 22
- 23. 2020 Tax Planning Considerations • Additional taxable income from Covid-19 Legislation • Accrual to cash method of accounting • Net operating losses • Estate & gift planning • Estimated tax payments • Qualified contributions to public charities – no AGI limitation 23
- 24. evolution COVID -19 TRANSITION TRANSITION SERVICES actioninto CRU SERVICES CASH FLOW, FORECASTING, AND MODELING SYLVIE GADANT • 13-Week Cash Flow Forecasting • 6-12 Month Cash Forecasting • Scenario Planning and Modeling • Modeling Capital Requirements • Maximizing Tax Efficiencies CRISIS MANAGEMENT KEN KIRKLAND • Bank Negotiations and Restructures • Operational and Financial Change Management • Cash Forecasting • Bankruptcy Navigation • Business Interruption Insurance Strategy • Strategic External Resource Identification COVID-19 ENDURANCE ASSESSMENT STEVE RONAN • Assessment of Your Business’ Priorities Right Now • Action-Oriented Insight into Handling the Next 6-12 Months • Data-Driven Insight into Economy-Wide Issues and Reactions SBA AND FINANCING MARK FAGAN / WILL FERNANDEZ SHAWN HOWARD / MITZI HOLLENBECK • Program Navigation and Guidance • PaycheckProtection Program (PPP) CARES Act Loan • Economic Injury Disaster Loan (EIDL) • Impact of PPP and EIDL on Other CARES Act Credits and Benefits • Traditional Financing Alternatives • Cash Flow Projections • Loan and Loan Forgiveness Calculations • Strategic External Resource Identification TAX SERVICES COMMERCIAL TAX SERVICES JOE BUBLE • Federal Tax Policy • M&A Tax • Tax Research and Planning STATEAND LOCAL TAX SERVICES DAVE SEIDEN TRUST & ESTATE SERVICES HOWARD KLEIN • Estate Planning • Gift Tax Planning • Business Succession Planning ADVISORY SERVICES BUSINESS CONSULTING STEVE RONAN • Business Process Outsourcing • Strategy and Business Transformation FORENSIC AND LITIGATION SERVICES KEN YORMARK • Internal Controls Health Check ADVISORY SERVICES CONT… TECHNOLOGY, RISK ADVISORY, & CYBERSECURITY (TRAC) DAVID ROATH / MIKE CAMACHO • Cybersecurity • IT Business Advisory Services • Outsourced IT and Managed Services • Risk Advisory TRANSACTION ADVISORY SERVICES SYLVIEGADANT • Quality of Earnings Reports (inc. Impact of COVID-19 on reported earnings (EBITDA-C Analysis)) • Normalized Working Capital Analysis • Debt and Debt-like Analysis (inc. Impact of PPP and FICA deferralon purchase price) • M&A Tax Structuring • Financial Modeling and Cash Flow Forecasts VALUATIONADVISORY SERVICES MANDEEP TRIVEDI • Gift and Estate Valuations • Intangible Asset, Goodwilland Business Impairment Testing • Portfolio Valuation Considerations • Shareholder Dispute and Buyout Considerations • Purchase Price Dispute Valuation WEALTH MANAGEMENT & INVESTMENT ADVISORY SERVICES ROB BROWN 24
- 25. CONTACT THE SPEAKERS 25 PamelaSawin, CPA Director psawin@citrincooperman.com GeraldIadeluca,CPA Director giadeluca@citrincooperman.com KieranHiggins Manager khiggins@citrincooperman.com MODERATOR: Michael Criscione,CPA Partner mcriscione@citrincooeprman.com
- 26. COVID -19 UPDATE Q & Aevolution actioninto