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HHS OFFERS DENTAL PRACTICES MORE CASH

HHS OFFERS DENTAL PRACTICES MORE CASH

October 26, 2020

On October 1, HHS announced that it plans to distribute an additional $20 billion to help health care providers finance the decrease in their profit and cash flow caused by Covid-19.  The deadline for applying is November 6, 2020.  This distribution is known as HHS’s Phase 3 General Distribution (“Phase 3”), as part of its Provider Relief Fund.  Here are the important highlights of the Phase 3 distribution:

  1. Dental practices can apply for additional cash under Phase 3 - even if your practice received cash from HHS previouslyHowever, if you received cash from HHS previously, you might not receive a significant amount of additional monies under Phase 3, as explained in 2. below.

  2. Our understanding is that HHS intends to distribute Phase 3 cash in the following order:
  1. HHS will first distribute Phase 3 cash to health care providers of up to 2% of their revenues from patient services shown on their most recent business income tax form, if they have not already received HHS proceeds using the 2% formula.  This means if your practice previously received cash from HHS using the 2% formula, you are not eligible to receive additional cash under Phase 3 yet. 
  1. More types of health care professionals are now eligible for Phase 3 distributions that were previously not eligible.  HHS will seek to distribute cash to those professionals, using the 2% of revenues formula.
  1. HHS clarified how health care providers who started in 2019 and reported losses can receive distributions under Phase 3.  Also, HHS clarified how health care providers who started in January through March 2020 can receive distributions under Phase 3.  This will increase the pool of applicants who will receive cash from HHS for the first time.
  1. After distributing cash to the applicants in A, B and C above, HHS will then determine how much cash it has available to distribute to dental practices (and other health care providers) who have already received cash from HHS (“HHS Cash”).  So, if your practice has already received HHS Cash, your practice will probably not receive additional cash from HHS for a while.  At this time, we know of no formulas available to predict how HHS will distribute the remaining Phase 3 monies. 

Key takeaways

  1. Before you apply for HHS Cash under Phase 3, you and your accounting team should know the two acceptable uses of HHS Cash.  They are:
  1. Your practice pays for expenses attributable to Covid-19 during 2020 for which it is not reimbursed by income from PPP forgiveness, the EIDL advance or other programs.  You must account for and report this information before you can utilize the second acceptable use of HHS cash.
  1. Your practice requests reimbursement of the decrease in 2020 collections of revenues from patient services (net of refunds) vs. the 2019 amount.  HHS refers to this reimbursement as “Lost Revenues Attributable to Coronavirus.”

If needed, you can extend your practice's use of HHS Cash for these two acceptable uses into 2021. See my article, HHS Issues Acceptable Uses of HHS Cash & the Related Reporting Requirements, items 4 - 6, for details about these two acceptable uses of HHS Cash.

  1. Before you apply for HHS Cash under Phase 3, you and your accounting team should know HHS’ recently issued reporting and documentation requirements.  Stress Alert!  The requirements are more demanding than originally expectedSee my article, HHS Issues Acceptable Uses of Cash & the Related Reporting Requirements dated October 27, for more details.  You will see that this program has turned into a “grant-like” program.  Your accounting team should confirm your practice's accounting system is capturing the data it needs to complete the application and to meet the reporting requirements by February 15, 2021.  Also, your team should confirm that your practice will store documents that support the data it reports to HHS.  If your practice cannot report that it used all the HHS Cash it received for one of the two acceptable uses, we believe your practice will need to return the excess cash. 
  1. If your practice’s cash flow is tight, you probably should apply.
  1. If your practice did not receive monies from HHS previously, you should probably apply -- but only if you think you have a reasonable chance to justify your practice’s use of HHS Cash, as described in Takeaway 1.

Takeaway for those who started in 2019 but lost revenues, and for those who started in 2020:  If your practice will pay during 2020 and the first 6 months of 2021 enough expenses attributable to Covid-19 for which it was not reimbursed by income from PPP forgiveness or other programs, your practice should probably apply -- if you if you have enough unreimbursed expenses attributable to Covid-19 to make it worth the cost of stress, staff time, and the loss of some of the HHS Cash when you pay income taxes on the HHS Cash you receive.

  1. If you received HHS Cash already, you can apply for more cash under Phase 3. Should you?  Like many issues, the answer is: It depends on your situation.

Takeaway:  If you previously decided it was not worth applying a second time to HHS, you may want to reconsider your decision.  HHS changed the definition of Lost Revenues, one of the acceptable uses of HHS Cash.  This change to measure loss to decreases in revenues collected (instead of net profit) should make it easier for you to assess whether you should apply.

  1. If you expect your practice’s 2020 collections of revenues from patient services will be significantly less than 2019’s amount, then it probably makes sense for you to apply.
  1. If you expect your practice’s 2020 collections of revenues from patient services will be close to or exceed 2019 amounts, it will only make sense to apply if your practice paid enough unreimbursed expenses attributable to Covid-19 to make it worth the cost of stress, staff time, and the loss of some of the HHS Cash when you pay income taxes on the HHS Cash you receive.
  1. Finally, consider:
  1. The distribution order HHS will use, as explained in item 2 earlier in this article. 
  1. As of October 26, the cash your practice receives from HHS is taxable.  This means the final amount of HHS Cash you keep will be net of income taxes.  For example, if you receive an additional $5,000 from HHS under Phase 3, and assuming your federal and NYS combined tax rate is 33%, the final amount of HHS money you keep after taxes will be $3,333.  Consider whether the net amount retained after paying the taxes on the additional Phase 3 HHS monies is worth the time and stress to gather the information to apply, and to satisfy the reporting requirements.

HHS is still developing the requirements of its Provider Relief Fund.  HHS continues to clarify and change the requirements often in response to comments from Congress and Stakeholders.  Therefore, you should not rely on the contents of this article until you confirm the contents are still valid.  Consider seeking the guidance of professional counsel to confirm the accuracy of this article.  Please call Jim Blowers at 518-344-6087, or email me at jimblowers@jebcpasolutions.com, if you have questions.