The question of whether CARES Act funds, specifically Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural payments, need to be repaid is a critical one for recipients. These funds were designed to support healthcare providers during the COVID-19 pandemic, but understanding the terms and conditions associated with them is essential. This article clarifies the repayment obligations related to these crucial financial aids.
Understanding the Nature of CARES Act Funds: Grant vs. Loan
It’s important to establish upfront that, generally, PRF and ARP Rural payments are not loans and do not have to be repaid, provided they are used in accordance with the stipulated guidelines. These funds were distributed as grants to help healthcare providers combat the financial strain and operational challenges brought on by the pandemic. The key to avoiding repayment obligations lies in adhering to the terms and conditions set forth by the Department of Health and Human Services (HHS).
Eligible Use of PRF and ARP Rural Funds
Recipients of PRF and ARP Rural funds are mandated to utilize these payments for specific eligible expenses. These encompass:
- Eligible Expenses: This includes a broad range of costs incurred in preventing, preparing for, and responding to the coronavirus. Crucially, these expenses must be for services rendered within a defined “Period of Availability”.
- Lost Revenues Attributable to COVID-19: Funds can also be applied to cover lost revenues directly linked to the COVID-19 pandemic. However, this application is subject to specific timeframes, with the opportunity to use funds for lost revenue generally available up to June 30, 2023.
The period of availability for both eligible expenses and lost revenues is determined by when the payment was received. Let’s break down these periods for clarity.
Period of Availability: Key Timelines for Fund Usage
To ensure compliance and avoid any potential issues, recipients must be acutely aware of the “Period of Availability.” This period dictates the timeframe within which expenses must be incurred or lost revenues must have occurred to be eligible for coverage by PRF and ARP Rural payments.
The following table outlines the Period of Availability based on when the payment was received:
| Period | Payment Received Period | Period of Availability for Eligible Expenses | Period of Availability for Lost Revenues |
|---|---|---|---|
| 1 | April 10, 2020 to June 30, 2020 | January 1, 2020 to June 30, 2021 | January 1, 2020 to June 30, 2021 |
| 2 | July 1, 2020 to December 31, 2020 | January 1, 2020 to December 31, 2021 | January 1, 2020 to December 31, 2021 |
| 3 | January 1, 2021 to June 30, 2021 | January 1, 2020 to June 30, 2022 | January 1, 2020 to June 30, 2022 |
| 4 | July 1, 2021 to December 31, 2021 | January 1, 2020 to December 31, 2022 | January 1, 2020 to December 31, 2022 |
| 5 | January 1, 2022 to June 30, 2022 | January 1, 2020 to June 30, 2023 | January 1, 2020 to June 30, 2023 |
| 6 | July 1, 2022 to December 31, 2022 | January 1, 2020 to December 31, 2023 | January 1, 2020 to June 30, 2023 |
| 7 | January 1, 2023 to June 30, 2023 | January 1, 2020 to June 30, 2024 | January 1, 2020 to June 30, 2023 |
Note: For lost revenues, the period of availability generally extends until June 30, 2023, regardless of the payment received period, coinciding with the end of the quarter in which the COVID-19 Public Health Emergency concluded, except for Period 7.
What Constitutes “Incurred” Expenses?
Understanding when an expense is considered “incurred” is crucial for accurate fund allocation. HHS guidelines clarify this based on the recipient’s accounting method (cash, accrual, or modified accrual). Examples of costs incurred during the Period of Availability include:
- Services that have been received.
- Renovation or construction projects that have been completed.
- Tangible property that has been ordered, even if not yet delivered. For instance, if Personal Protective Equipment (PPE) or an ambulance was ordered within the Period of Availability, the expense is eligible even if delivery occurred later.
However, for larger projects that bundle services and tangible items (like capital or construction projects), reimbursement is contingent on the project’s full completion within the Period of Availability associated with the Payment Received Period.
Pre-Award Costs and the COVID-19 Emergency
Recipients could utilize funds for eligible expenses or lost revenues incurred before receiving the payments (pre-award costs), as long as these were directly related to preventing, preparing for, and responding to the coronavirus. While theoretically possible, HHS notes that incurring eligible expenses or lost revenues before January 1, 2020, would be “highly unusual.”
Potential for Audits and Fund Recovery
While PRF and ARP Rural payments are not typical loans requiring repayment, HHS retains the right to audit recipients both presently and in the future. Fund recovery, essentially requiring repayment, may occur if:
- Payments are not supported by adequate documentation.
- Funds are not used in a manner consistent with program requirements or applicable law.
All recipients attested to Terms and Conditions, which necessitate maintaining documentation to substantiate that funds were used for healthcare-related expenses or to cover lost revenues attributable to coronavirus. It is imperative for recipients to meticulously maintain all relevant documentation and be prepared to submit it if requested by HHS.
Conclusion: Utilizing Funds Compliantly to Avoid Repayment
In summary, CARES Act funds distributed through the Provider Relief Fund and ARP Rural programs are grants, not loans. Therefore, they do not have to be repaid if utilized correctly. “Correct utilization” means adhering to the guidelines regarding eligible expenses, lost revenues, and, critically, the Period of Availability. Maintaining thorough documentation and ensuring funds are used for their intended purpose is paramount to avoid audits and potential recovery actions by HHS, which would effectively necessitate repayment. By understanding and following these guidelines, recipients can leverage these funds effectively to support their healthcare operations without the concern of mandatory repayment.
