CMS Clarifies that Provider Relief Funds & Paycheck Protection Program Loans will NOT Offset Expenses on Medicare Cost Report

Nathan Baugh, Director of Government Affairs


CMS clarified in guidance that providers who received provider relief funds (PRF) and/or paycheck protection program (PPP) loans would not need to offset expenses on their Medicare cost report by the amount received through those programs.

This is a huge victory for providers reimbursed through cost-based systems such as rural health clinics and critical access hospitals who faced the prospect of having their Medicare reimbursement reduced because they received COVID-19 funds. If this had gone the other way, providers would have had to pay Medicare back (in the form of lower Medicare reimbursement) a significant percentage of the money received through the provider relief fund and/or paycheck protection program. For example, if half of the RHC’s patients were on Medicare, then roughly half of the money received through the PRF or PPP would have been recouped by Medicare during the cost settlement.

However, with this guidance now released, we can confidently pronounce that rural health clinics will be able to keep and use their provider relief funds and/or paycheck protection program loans without the fear that using those funds would lower their Medicare payments.

This guidance comes after pressure from the rural health community made it very clear to CMS that this was a major concern for RHCs and CAHs. NARHC had direct communications with CMS Deputy Administrator Demetrios Kouzoukas and other CMS staff where we made our preference on this issue understood. NRHA and others also worked diligently on elevating this issue.

Senator Jeanne Shaheen (NH), Senator Marco Rubio (FL), and Senator Susan Collins (ME) wrote CMS Administrator Verma on this issue in late July and Senator John Kennedy (LA) was getting ready to introduce a statutory fix for critical access hospitals and rural health clinics.

Thankfully, CMS listened to the rural health community and Members of Congress when they issued this guidance.

Here is the key section: 

Question: Should PRF payments offset expenses on the Medicare cost report? 

Answer: No, providers should not adjust the expenses on the Medicare cost report based on PRF payments received. However, providers must adhere to HRSA’s guidance regarding appropriate uses of PRF payments, in order to ensure that the money is used for permissible purposes (namely, to prevent, prepare for, or respond to coronavirus, and for health care related expenses or lost revenues that are attributable to coronavirus) and that the uses of the PRF payments do not violate the prohibition on using PRF money to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse. 

Recipients may find additional information on the terms and conditions of the PRF at 

Questions regarding use of the funds, pursuant to the Fund Terms and Conditions and any questions about overpayments should be directed to HRSA. 

Question: Should SBA loan forgiveness [PPP] amounts offset expenses on the Medicare cost report?

Answer: No. Do not offset SBA Loan Forgiveness amounts against expenses unless those amounts are attributable to specific claims such as payments for the uninsured. The Paycheck Protection Program loan administered by the SBA is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The terms and conditions of the SBA loan forgiveness, overseen by the SBA, include employee retention criteria, and the funds must be used for eligible expenses.

Recipients may find additional information at and

We will note that question two in the cost reporting section of this guidance identifies exactly where PRF payments should be reported on the Medicare Cost Report for various facility types but the answer does not explicitly mention rural health clinics. We inquired about this with CMS and we were told that because independent/freestanding RHCs do not have to report income, there is no requirement to report these PRF or PPP funds on the RHC’s cost report.

RHCs that are a part of a hospital or SNF would report any funds that the RHC received in Worksheet G-3 on the hospital/SNF cost report.