Reconciling cash transactions is a constant, daily pain point for healthcare providers. It is also a risk area that requires significant time and attention from general accounting and revenue cycle staff members. Effective cash reconciliation is critical for today’s healthcare providers to optimize cash management and prevent unwanted write-offs.
The March 2020 passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) has put even more of a spotlight on proper cash management. Improper identification, reconciliation, and accounting of CARES Act receipts can result in future returns to the federal government or underpayments for services rendered, putting organizations at financial risk during an already challenging economic time.
Here are several leading practices for reconciling unapplied cash, including recording and managing receipts related to the CARES Act.
Accounting considerations for CARES Act receipts
Due to the COVID-19 pandemic, hospitals throughout the United States have suffered drastic reductions in inpatient and outpatient revenue. The CARES Act has added $100 billion to the public health and social services emergency fund to reimburse providers for expenses and revenue losses related to the pandemic. To maintain best practices for cash reconciliation, providers should pay particular attention to treatment of receipts related to the following provisions in the CARES Act:
Expansion of the Accelerated and Advance Payment Programs to a broader group of Medicare Part A providers and Part B suppliers (CARES Act, H.R. 748, Section 3719). The purpose of the Centers for Medicare & Medicaid Services (CMS) Accelerated and Advance Payment Programs is to provide funds when claims submissions or claims processing is disrupted. Inpatient hospitals can now request from the CMS an advance payment of up to 100% of the Medicare payment amount for a six-month period. Payments that providers receive represent working capital financing. This financing is provided by a customer (Medicare) and subject to repayment at a future date.
To properly account for these payments, organizations should record them as a liability in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) 606, “Revenue From Contracts With Customers.” Repayment of the liability begins 120 days after receipt. At that time, every provider claim processed and approved for payment is applied against the cash advance until the balance is reduced to zero. Providers must take great care to reconcile these transactions to help make sure the government does not recoup too much, resulting in underpayment to the provider.
Hospital stimulus funds (CARES Act, H.R. 748, Division B). On April 10, the U.S. Department of Health and Human Services (HHS) began releasing $30 billion in emergency funds to healthcare providers. Recipients eligible for the first wave of funds included all facilities and providers that received Medicare fee-for-service reimbursements in 2019 and physician practices that are part of a larger medical group. During the month of May, additional funding was released to rural hospitals and high-volume COVID-19 health systems.1
Stimulus payments are not subject to repayment if providers 1) agree not to charge any patient for the difference between the cost of COVID-19-related treatment and the amount paid by Medicare or other insurers and 2) agree to limit collection of out-of-pocket payments from COVID-19 patients to what would be collected from patients who receive in-network care from the provider. If a provider does not wish to meet these conditions, that provider will need to notify HHS within 30 days of receiving the funds and return them to HHS.
Providers should take care to account for COVID-19-related expenses and be prepared to show documentation in the event of a future HHS audit. Documentation should include information related to why the funds were needed and how they were used for COVID-19-related care (for example, lost revenue, cost of treatment and testing, purchase of equipment, or expansion of facilities).
