95: HHS Payments Q&A with Host Ken Kaufman and Guest Preston Marchant, Director of Revenue Cycle Tax & Audit

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You have this natural talent, this unique ability. Hello, everyone, and welcome to another episode of DSO Secrets. I am Ken Kaufman, your host for today. We're also live in Facebook, the DSO Secrets group for those who want to participate in today's recording. And our focus today is on HHS payments. And I am thrilled that we've got Preston Marchant with us today. He is the Director of Revenue Cycle Tax and Audit at Community Dental Partners, also a cpa, and has become our resident expert on all government funding programs that have been made available to dental practices, to dental support organizations. And so, Preston, thanks so much for being with us today.

Thanks for having me, Ken.

Great. Well, we've been talking about doing this now for a little bit. We've been getting quite a few questions from the folks that are on the DSS Secrets Facebook group. And we finally decided there's just enough material here for us to try to put it all in one comprehensive place rather than chats all over in the Facebook group and everything else. So, Preston, why don't, if you don't mind, could you just start off by giving us that high level overview of what is the HHS payments program, what is its purpose, and who does it apply to?

Yeah, I'd be happy to do that. So this HHS distribution stems from the CARES act. And HHS is providing funds to basically providers in a lot of different healthcare sectors, but also for dentistry, for those that are basically, basically providing service to patients that maybe may have COVID 19 or, you know, it's a very broad view of patient care for anybody that could be affected by COVID 19. So I just, and the way that it's developed, it's, it's kind of developed over a couple of months in different phases. And it just looks, from what I've read on it and can tell, it looks like it's open to just about all providers who are providing patient care in 2020. And that's a little bit new recently. There's a new phase that opened on October 5th. And even entities that opened in 2020 are providing care can now apply for this. And even practices and providers that don't necessarily bill for Medicaid or ppo, even if they just do cash pay, they're also eligible now in most cases. And it would be good to also we'll put some links in the description on this webcast, but just to kind of review the eligibility. But it's very, very broad.

That's outstanding. So phase one is the one that came out.

What was that?

The time period. And then remind us where phase two is. And now phase three is the part that's open for those who participated or have participated but may qualify for additional funds. Can you walk us through that timing through the summer here?

Yeah, I can't remember the exact dates, but it seems like it was about four months ago roughly for phase one when that started and then maybe a month or two after that phase two opened. And then. And then phase three opened on October 5th, so just about two weeks ago. And that one closes on November 6th. And if you received funds in phase one or two, you are still eligible to apply for additional funds in Phase three. And that's based on if you have significant losses when you're comparing 2019 to 2020. So you may not get additional funds in phase three if you haven't had significant losses, but you may want to look into it and see if you already have received funds in the phase one or Phase two distribution.

Okay, so we're kicking the door open. There's some interesting things you just said there. I want to unpack. But before we get to that, I want to go through a couple of questions we got from some of the listeners and the participants over in the Facebook group for DSO Secrets. There are questions about what do the funds have to be used for? Is it just for extra PPE costs, or can all PPE be included? Does it have to cover just things that are otherwise Covid related, for example, loss of revenue or if employees are sick and they have to be out on leave. Can you maybe walk us through this? And I realize it might be somewhat of a broad list, so maybe if we could hit some different categories and then break it down a little if we need to?

Yeah, that's a great question. And there was some guidance that came out September 19th where they gave a lot of detail on this. And basically there's three categories. And PPE can be reimbursed, but there's a lot more that can be reimbursed as well. And one thing to note as well is ppe. If you receive reimbursements like say, from your insurance company or other government funds, you need to account for those reimbursements. You cannot be reimbursed by HHS if those funds are being reimbursed somewhere else. But if they're not being reimbursed somewhere else, these are sort of the three, the kind of the categories that they've broken it down into general and administrative expenses attributed to coronavirus and I think I mentioned earlier, they view like coronavirus and patients that possibly have coronavirus, they may not have it. They view this very broadly. So if you are providing patient care in this environment, these, these expenses would qualify to be reimbursed by, through the HHS funds. And they give a list of some of them like mortgage and rent payments, insurance premiums related to, you know, property malpractice, business insurance. It's a lot of the fixed costs of your practice, which sounds a lot

like the fixed costs that are also identified in the PPP program. Does that sound about right?

Yeah, there's probably a lot that crosses over. Yeah. So because I know mortgage and rent was one of ppp. Yep.

And to be clear, there wouldn't be double dipping if you're saying, hey, I'm spending these PPP funds for the mortgage payment in this month, you wouldn't be able to claim that the HHS payment was used for that too.

Exactly. Yes, exactly. So you've got to, if you have PPP funds, you need to be sure that you are kind of applying certain expenses to those, but not bring those over to use for your HHS funds.

So I want to go through these three, but I want to stop really quickly just because I think it's important to make clear for the listeners that the bookkeeping of how these funds are being spent and utilized is super critical when it comes to reporting as well as should any arm or branch of the government come and want to audit in the future to see if you use these funds in the appropriate way and that you were compliant with what the rules were. It seems like bookkeeping takes a higher level of importance here to make sure that we're using them properly. But then also we're prepared to show and demonstrate in an audit environment that we followed the rules. So can you comment on that really quickly?

Yeah, definitely can. I think that's really important to keep good records. And just so everyone's aware here, this guidance that came out on September 19th about the reporting, there's a six page document and we can put a link to that in this webinar in the description. But basically, basically if you receive $10,000 or less for an entity, you're not going to have to report, you're not going to have to do that part of the process of reporting on these funds. If you receive 10,000 to 500,000, you will need to report audit and there is the possibility of an audit, but it's not as high as if you received 750,000. I think it's a, you have to have an audit done but the reporting is not that terrible. It's basically report two categories of the expenses that you have and the six page document really outlines it nice nicely. But yes, you want to keep records so that in case you ever do get audited, you have a good record of what where you spent these funds. And it's also those records are going to basically be summarized in the reporting that you end up submitting. Now there, if you do receive more than 500,000, then there's a little bit more detailed reporting and that's outlined in the six page document as well that came out on September 19th. But yes, you'll want to keep track of these expenses and any other, like I said, reimbursements that you might have received. Whether it's reimbursements in the PPP program that you're not going to apply to the expenses that you're keeping track of or if it's, if you've paid, let's say you've paid $15,000 for PPE but you've been reimbursed $5,000 from insurance companies for PPE then you'd want to keep a record of that. So you could use 10,000 of that to apply to your HHS funds. And it doesn't have to be really complicated tracking, but you should be able to have a spreadsheet of some kind that shows these expenses and probably be able to trace those back to your bank account. And that's typically what you'll see in an audit, that they'll take these expenses and trace them back and to see that the cash went out. So yeah, it's important to have that all lined out.

This is great, Preston.

I want to come back to the

reporting concept, but I did take us

down a little bit of a rabbit hole. I want to go back because you

talked about the three categories that you could spend the HHS funds on and talked about number one, which was GNA admin, general administrative costs related to the impact of coronavirus on practice, fixed costs like mortgage, rent, insurance, things like that. Can you make sure we've got that compartment full and then if we could go to 2 and 3, it would be awesome because this is going to be really helpful for the listeners.

Yeah, definitely. So there's also, in that first category of general administrative expenses attributable to coronavirus, there's also personnel and it says, it defines it as workforce related. Actual expenses paid to prevent, prepare for and respond to the coronavirus during the reporting period, such as workforce training, staffing, temporary employee or contractor, payroll, overhead employees or security personnel. So there's a lot in there that you could use, expenses that you're using to pay for staff and things like that, Especially if you can connect it to COVID 19. And like I said, they're looking at COVID 19 is very broad. Like any patient that comes in during this time period, they're considering potentially having COVID 19.

If I'm a practice owner and during, I should say shortly after COVID 19 came out and perhaps I was closed for a little while. But when I reopened, if I had an employee that I assigned instead of being an assistant, I assigned them to my lobby. And full time they were cleaning and sanitizing everything in the lobby, as well as engaging with patients, you know, checking temperatures, having them sign release forms, all of those sorts of things. Would that sound like something to you that would qualify under the personnel category?

I think so. I think probably any employees that are working in the practice, I mean, a lot of this ties back to patient care and the practice. And so I think that definitely anybody that's working in the practice would be considered, you know, responding to coronavirus.

Outstanding. So I went really narrow. But there's possibly much broader interpretation of what that means.

Yeah, yeah, I think so. And all these definitions are in this document that we'll put the link so you can go back and refer to them and kind of see your interpretation of them. But that's. Yeah, it does seem to be somewhat broad here. And then under that same category of general and administrative expenses, there's also fringe benefits. So sometimes there's. You're paying employees a little bit more. You know, you've seen grocery stores do this and I don't know if dental companies have, but you might pay them a little bit more because they may be putting themselves at risk or, you know, whatever those could be qualified expenses, Lease payments for new equipment and software is in that definition, utilities. And then it says costs not captured above that are generally considered part of the overhead structure which we mentioned, a lot of fixed costs, you know, I think they're trying to target those fixed costs. So. And then the second category is healthcare related expenses attributable to coronavirus. And this goes into, you know, buying your PPE and supplies that you're buying now that you would not have bought before. But because coronavirus is out there, you know, we're buying a lot more different items to protect ourselves. We might be buying equipment to, you know, maybe keep things cleaner, more supplies to keep the office clean. Information technology, People may be investing in information technology to help through this. It says, let's see, Preserve care delivery during the reporting period, such as electronic health record, licensing fees, telehealth infrastructure, increased bandwidth and teleworking to support remote workforce. So you know, people may be doing more of this remote type of activity and some of that could apply here. Facilities expenses paid for facility related costs to prevent, prepare for or respond to the coronavirus, such as a lease purchase of a permanent or temporary structure. I'm not sure if dental offices are doing that much, but you know, if you're leasing new locations to help with this or whatever, those could apply. And then it says any other actual expenses not previously captured above that were paid to prevent, prepare for or respond to the coronavirus. So they kind of leave it open ended. There may be expenses that dental practices, they might not fall in any of these specific categories, but you spent some money to respond to this, those could potentially be used as well. And so those are kind of the first two categories, the GNA and then health care related expenses to respond to the coronavirus. And then I think a lot of practices are going to have their HHS funds reimbursed just by hitting those expenses. But then there's this other section that if you had losses related to the coronavirus in 2020 compared to 2019, you could use those to be reimbursed for those HHS funds. And one thing to note about that is they've originally mentioned that it was lost revenues that they were looking at, but they've redefined this to be net operating income related to patient care. So on the application they're asking you to figure out what your 2019 operating income was for the first two quarters and then what your 2019 operating income related to patient care was in 2020. And if there's a loss that could also be used to reimbursed funds on top of these other expense categories that we just went through.

Interesting. And it's interesting that they picked Q1 and Q2, because for some, some saw a big decline end of March and April and then May came back and June was really strong. I think probably everybody still had, you know, a loss net. Net against that, you know, compared, compared to prior year. But it's interesting, I would imagine that for many, just that one bucket alone would cover the entire amount of the HHS payment they received. Does that sound about accurate?

I'm sorry, can you repeat what you just said? Yeah, sure.

So the thought process I had here

was

if we're taking 2019 profitability and comparing that to 2020 profitability for the first half of the year, Q1 and Q2, that many just with the variance or in essence the lower profit or maybe losses that they incurred in that comparison, that could very well justify the entire amount of the HHS payment.

It could. The way I'm reading this reporting though, it's sort of like the third item to look at. They're basically saying, and you don't have to necessarily justify losses even to get these HHS funds. You just, you kind of, if you have these fixed cost expenses, you use those first. And then if you have some of these health care expenses, you can use those to apply for the HHS funds and then you can look at your losses and you may be able to get some additional funds. But yeah, those, those losses probably could in some cases justify everything for some of these practices since things shut down like real significantly in April. But yeah, the way that this reporting is flowing, they're actually kind of saying, look at your expenses first. And then if that covers all your HHS reimbursement, you know, you may not even have to, you know, look at your losses, but if you do want additional funds, you can look at those losses and apply in phase three to get some additional funds.

It's great feedback. You know, one of the questions we got was about is, can the HHS funds be used to level up lost revenue from April or, you know, the time period that they were closed, and it sounds like it is, that's possible. But to the degree you have ppe, you know, these general administrative costs, the workforce costs, you know, all of these different things, those go in front on the reporting and then the losses will probably be able to fill up any gaps in terms of your use. The question that I have is, if for some reason the amount of HHS payment that dental practice receives ends up being greater than what they can justify, you know, going through the, all these items that you talked about, what happens then? Do they have to return the funds or process.

Yeah. My understanding, from what I've read, is that if you can't justify all of them, then some of those funds would be, would need to be returned. But as I'm looking through it, I think in most cases, most practices, because this is 2% of revenue and there's so many expenses. Like if you just look at rent, for example, if we look at rent in our business, most of these HHS funds are going to be covered by just rent alone over, you know, and some of them are covered in a couple months. Some of them might be eight months or whatever to cover that HHS funding that we received. But I think in a lot of cases, unless we're getting a lot of government funds from different sources and we have to subtract those government funds out, I think most everybody's going to be able to get to forgiveness. There's enough expenses that they've said that you can use to apply to these funds.

So I know that there are some that have been coming up with strategies around how to sort of organize the way they think about these funds and how to report on them. And it seems like a very popular one that I've been hearing more and more is go ahead and because of the extension on the PPP loans to five and a half months from the original two and a half months, the thought process is go ahead and just all your payroll costs, go ahead and devote those to getting forgiveness for, for your PPP loans because again, the government funded two to two and a half months of payroll and gave you five and a half months to spend. So if you spent it all there, go ahead and let payroll be what you apply to and use your PPP funds for. And then you can draw a line. And then if you jump over to the fixed cost element, like you said, the mortgage or rent and utilities and some of those fixed costs, in most practices, that ends up being 5, 7, 8, 10% of their overall revenue. And where you're saying, you know, is 2%, they're very easily probably could be justified with saying PPP covers all my payroll and then HHS covers rent. And then if there's any gaps in those, then you've got some other places you can go with ppe, other G and A expenses and loss in net income. So, yeah, that sound about right.

That sounds like a great strategy. I know for us that's a great strategy. I don't know if everybody's expenses, you know, fit that perfectly. But in general, I think that's a really Good direction to go.

Great. Another question that we got asked, and we've answered this to some degree, but I think we want to drive this point home, is, are the HHS payments free money? And they put free money in quotes, which is helpful. I think we categorically would say no. But maybe you could just make sure we hit on why it's not free money. What strings are attached to this?

Yeah. So I guess what I could do here is a lot of times with these government funds, they're either funds that can be forgiven or they could be loans. These HHS funds can be forgiven. If we've gone through a lot of the expenses that we need to, you know, have to be able to justify keeping those funds. In that sense, it could be considered free money. But if we, if you can't justify all those expenses, there may be some that would need to be paid back. The other thing is there's a reporting requirement if you receive more than $10,000. And this, this document from September 19th outlines the reporting requirements. And that portal is going to be open, from what I understand, in January of 2021 to do the reporting. And so, in a sense, you know, we have an obligation to make sure that we are eligible. We're expending these funds the way that the HHS program has outlined it, and then we'll have to report in January of 2021, actually, and it can be extended to. They're giving another six months of January through June of 2021. If you don't have enough expenses to get your full reimbursement, they're allowing you to use expenses from January to June of 2021. And then you would report, you know, towards the middle or end of 2021, if you're in that bucket. So, anyway, so this is outstanding, Preston.

So what's the earliest that I could, you know, complete my reporting and submit it?

So if you have enough expenses to cover the funds that you receive by the end of this year, you could report in January of 2021. The portal is supposed to be open at that point in time, and HHS will be sending out an email. And so you could potentially be done reporting at that point in time if you already used all the funds and had enough expenses to cover for the reimbursement.

Okay, great. And another follow on question to this reporting element, because there's a lot of questions. Can you give us an overview of exactly what are we being asked to report? And I know you've gone through the forms and looked at the format. I Think it'd be helpful for our listeners if we could give them an overview of what are all the questions being asked on there. And we know there's going to be the general questions of, you know, practice name and ein number and some of those things or TPI number. Can you give us an overview of what am I going to be asked so I can start thinking about how I can prepare myself to fill all of that out?

Yeah. So they've listed a few things on this document from September 19th. A lot of it might be some of the same information from the application. So it might be like entity information. It says demographic information, but it doesn't give a lot of detail. But I don't know if that might mean, you know, what's your payer mix, you know, MCOs, PPOs, is it patient pay? It just says demographic information. So I don't know what that specifically means yet. You may need to report on your, the type of tax, the way your entity is taxed and that's part of the application process. So if you've applied, you should already have that information your fiscal year end. So just some of that general information. And then if you are between, if you receive between 10,000 and $500,000 for total funding for your entity, then they basically say that you're required to report healthcare related expenses attributable to coronavirus Net of other reimbursed sources. It says payments received from insurance or patients and amounts received from federal, state or local government. So you'll have to report all those funds and reimbursements that you received in two aggregated categories. Basically they're kind of narrowing it down to these two categories and it's G and A expenses and other healthcare related expenses, which are the ones we talked about. You don't have to detail out if it's a mortgage or whatever. You should have those records that you keep, you know, in case you get audited. But you just put it in those two buckets and you have your supporting documentation that you keep. But it doesn't seem too terrible for if you have between, if you receive between $10,000 and $500,000 for each entity and they call it a reporting entity, I'm assuming that's for whatever entity you applied with.

So under $10,000, no reporting required. Now let's say that I'm a dental support organization and I'm providing non clinical support services, including accounting and help for some of these dental practices that I support or that are affiliated with my organization. With all of this because of that would, let's say that, you know, received $5,000 for five different practices. Does that put the organization over $25,000 because I'm a dental support organization, or is it done by, you know, the owner of the dental practices? How would we think about what. What if we're under 10, if we're 10 to 500,000 or over 500,000?

That's. That's a really good question. I'm not sure I know 100%, but my, the way I'm interpreting it is a lot of these applications are done by a tin and it's received by that specific entity and with a provider connected to it that's providing care. And I kind of look at, I haven't seen them define reporting entity, but I'm kind of looking at it as the entity that's reporting on that application those specific funds. That might be a question to. There's a phone number and I can give it to you guys now. But that might be a question to ask UnitedHealthcare who is managing this process. And that's one that maybe I could call on as well. But I'm kind of. The way that I've read it, it hasn't really been clearly defined, but I'm kind of looking at it as by entity, TIN, as the reporting entity, unless I know that some companies might be applying under one TIN and rolling up other tins or entities, and maybe in that case that might be the reporting entity and maybe there are multiple that are combined into one. So I'm not 100% clear on that. But this is the number that you can call UnitedHealthcare to ask some of these questions. And I called them this morning on a few and they were helpful.

So.

But the number is 866-569-3522. So any questions you have about application and the process after you've applied and received funds or reporting, you can call them and they should be able to either answer it or maybe get an answer later.

Yeah, this is great. And Preston, as you mentioned, when we're finished recording this and everything's up in the Facebook group. Yeah. If you don't mind going there and putting the document, you know, the link to the document that's got a lot of great information and the phone number. And then certainly Preston and I will be there to facilitate answer any questions or at least try to point you to the best and right resources. All right, Preston, anything else stick out to you or you know, that you think is critical for our listeners to be considering as they're maneuvering through this process.

Yeah, I think there's a few things as you're reading the application that I think you can get hung up on. And one that I got hung up on is entities that opened in 2020, this new phase three. It says that they can apply for funds. And then when I went to read it, it said basically you need to have a tax return to apply. And some, some people may file quarterly tax returns. Some instances, I know for us, ours are annual and we won't have a tax return for another year or so for these 2020 entities. And so that's one of the things I called them about today to ask, so if we don't have a tax return or a quarterly tax return for these entities that opened in 2020, are we not able to apply? And they said, no, you can, you can apply. Just do a write up to explain your situation and provide some supporting documents. So it may be like your income statement, you know, and would quarterly payroll

tax reports just to show, hey, I'm in business and I have employees. Maybe something like that would give some good documentation.

That's a possibility. I didn't think about that. But that might help just to show something more official because I know that that's one thing they are trying to have validated by someone other than the entity that is applying so that they can reduce fraud.

Absolutely. And it's sad to say, but there are some who will try to defraud the system and work their way around. So I respect the fact that they ask for the documentation and want it because they're trying to be good stewards with the funds. And unfortunately there are those who want to lurk around the corner in the dark corners and see if they can't try to defraud the system. We would certainly never condone that and just want to be completely on board with how we approach all of this.

Yeah. And the other thing I would say is this phase three is closing on November 6th, which is about three weeks away. So we'll put a link to, you know, resources that you can use to figure out how to go through the application process if you haven't applied. But that's coming up. So if you are interested in applying, you should probably start thinking about it now and starting to dig into this to see what you need. I would say if I, if I was applying for one or two practices, I think it might take me, depending on how easily I can access financial information and entity information, it might take two to three hours to gather that for practice, if you're doing it for multiple practices, you start to get some efficiencies. But it's still, it might take you, you know, if you're doing it for 10 practices or 15 practices, you might spend two days, three days gathering everything. So I would just kind of gauge your time if you want to apply for this and just figure out how to fit that in. And like I said earlier, this is they've really tried to make this available to just about any provider that's providing patient care to patients that may have coronavirus. They don't, you know, they don't even have to have it. So it's available to just about everybody that's providing patient care.

Outstanding, Preston.

Well, thank you so much for joining today.

We appreciate the time and effort you've put in to become a quasi expert, if you will, on this program. It seems like even the people running it aren't necessarily don't know everything about it. So I say quasi expert just because

you've taken the deep dive in to

get to know at least as much as we know today about it. And so we appreciate all your time and in researching and getting to this point and then obviously your time and sharing a lot of this wisdom.

Again, I invite you, as we're wrapping

this up here, make sure to come on over to the DSO Secrets Facebook group we will have.

And if you're not a member there

yet, well, you need to be a member. That's basically what it is. There's a lot of great content. There's a lot of great information there. But Preston and I are both on that page. You can engage with us. And there was Preston is going to follow up here with some great resources and materials for you and anyone who's supporting you in going through this process. Preston, any final parting words to our listeners?

Just good luck with everything. And if you do have any questions, feel free to post on the DSO Secrets page and we can respond.

All right, well, this is a wrap

for HHS Payments Q and A.

Happy day Foreign.

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