How To Calculate Lost Revenue
If your agency received funds through one of the many HHS Provider Relief Fund (PRF) distributions, you are likely thinking about the reporting compliance that comes with those funds. There were two prescribed methods to properly justify spending those funds – additional COVID-19 related expenses or reimbursement for “lost revenue(s)”. The first of these is fairly straight-forward and easy to account for, but what about the second? How do you go about calculating what your “lost revenues” are due to the COVID-19 Pandemic? And if you’ve followed this topic all along, you know the rules and guidance have changed many times, so where are with now with it?
According to HHS, providers are required to first allocate their PRF to additional COVID-19 related expenses. These are expenses related to providing healthcare services that you would not have experienced if the COVID-19 Pandemic had not be involved. Secondly, providers can then allocate PRF funds to reimburse themselves for “lost revenues”. How do you even quantify this? Let’s discuss that!
Providers are now allowed to use a variety of methods to calculate their revenues lost due to the pandemic – thanks to many trade associations for fighting for this broader interpretation of the law. This list may not cover every option available but rather those most commonly being utilized:
1. Revenue 2020 VS Revenue 2019
If your agency experienced less revenue for a month in 2020 vs that same month in 2019, this is lost revenue.
a. It is recommended that this be calculated on a monthly basis. Calculating monthly will allow you to include the loss for one month and not offset it by a gain in another month.
b. You can also look at in year vs year if you had substantial losses, maybe the total loss from 2020 vs 2019 covers your full PRF distribution – this is enough detail to justify using the money for this purpose.
2. Budget vs Actual
If your agency/facility had a formal budget in place as of 3.27.2020 they can use their budgeted numbers as the basis for this calculation. Simply compare your budgeted revenue vs actual revenue. If actual revenue is less than budgeted, that is your lost revenue.
3. Missed Visits/Days of Care
Did you experience patients that did not want you in their home as a home care provider? Or patients that withdrew from services entirely due to the pandemic?
Document these situations, possibly in your EMR (Electronic Medical Records system). Note which patients declined services and the reason why, be as detailed as possible. Then assign a value to each situation. Maybe that value is the daily reimbursement rate, or a full episodic payment or per visit rate. How ever you are reimbursed or paid for that patient, those services, how much revenue did you miss out on by the patient declining services?
4. Lost Referrals
Did you experience a distinct drop in referrals from certain referral sources? Maybe your agency works closely with an orthopedic surgery center and group of doctors. Your agency is their “go to” for post-surgical home care and rehab. As we know, most elective surgeries were shut down for a period of time and those referrals stopped abruptly. This again is where you will want to thoroughly document this drop in referrals.
a. Compare the normal refer count pre-pandemic to the actual referrals experience (per referral source) during the pandemic.
b. Again, look at this on a weekly or monthly basis.
c. Assign a value to each referral. Likely this value will be an average of what you would have normally had in revenue for the average patient referred by that source. If those patients vary greatly, simply apply your average reimbursement rate per day, per hour or per episode.
These methods are not the be-all end-all ways to calculate your lost revenue for PRF purposes, however they are the most common and easily documented methods. With regards to documentation, make it as thorough and detailed as possible. Include some sort of patient identifier where possible (Missed Visits/Days of Care) and the same for your referral sources when calculating lost referrals.
Methods 3 & 4 can be combined. However, methods 1 or 2 would stand on their own and could not be combined with any other method as that would result in duplicating the impact of missed visits or lost referrals as those declines would also be shown in the reduced amount of revenue shown on the financial statements.
As of the writing of this article, HHS’s reporting portal is open only for registration and not for actual reporting purposes. Reporting has been delayed indefinitely. Stay engaged with Knight Home Care Financial and we’ll keep you informed on any changes regarding these reporting requirements and due dates.
About Knight Home Care Financial
Knight Home Care Financial is a Texas-based accounting firm that provides innovative accounting solutions for providers in assisted living, home health, hospice care, and nursing facilities. By focusing solely on post-acute and long-term health providers, the firm is able to offer tailored services that meet and simplify the business and regulatory demands of the industry. For more information, visit www.knighthcfinancial.com.
