CARES Act Relief Fund Payments to Health Care Providers: Key Requirements and Compliance Risks

On April 10, 2020, the federal government began distributing $30 billion of the $100 billion in funds that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) makes available to health care providers through the Public Health and Social Services Emergency Fund (the Fund). The Fund is designed to reimburse eligible providers for health care-related expenses or lost revenues that are attributable to COVID-19 (see our previous alert). These are not loans; instead, they are payments to health care providers that do not need to be repaid. The Relief Fund Payment Terms and Conditions (Relief Fund Terms) that are applicable to payments from the Fund include certification and reporting requirements that providers need to be aware of and follow. Accepting funds without meeting the required Relief Fund Terms could result in recoupment of some or all of the payments from the Department of Health and Human Services (HHS) and give rise to potential future liability under the False Claims Act (FCA).

Payments to providers in this first round of payments are based on their share of the $484 billion of Medicare fee-for-service payments made to all providers in 2019. Each provider will be paid an amount equal to approximately 6.2% of the Medicare fee-for-service reimbursement it received in 2019. Health care providers should already have received a payment via direct deposit on behalf of the government with “HHSPAYMENT” in the payment description.

Attestation and Agreement to Relief Fund Terms

Providers who receive a payment from the initial $30 billion general distribution must sign an attestation confirming receipt of funds and agree to the Relief Fund Terms within 30 days after receiving the funds. HHS has stated that it will view the failure to return the payment within 30 days after receipt of funds without contacting HHS regarding remittance of the funds as acceptance of the terms and conditions. HHS has set up an attestation portal for providers to use to accept or reject the funds.

Certifications

Recipients of a payment from the Fund (Payment) must certify the following:

• The Payment will only be used to prevent, prepare for and respond to coronavirus, and shall reimburse the recipient only for health care-related expenses or lost revenues that are attributable to coronavirus.
• The recipient will not use the Payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.
• The recipient billed Medicare in 2019; provides or provided diagnosis, testing or care for individuals with possible or actual cases of COVID-19 after January 31, 2020; is not currently terminated from participation in Medicare; and is not currently excluded from participation in Medicare, Medicaid and other federal health care programs.

In addition, the recipient must certify that it will not seek to collect out-of-pocket expenses from a patient with a presumptive or actual case of COVID-19 in an amount greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network health care provider.

Reporting and Record Keeping

Recipients of a Payment will be required to submit reports as HHS determines are needed to ensure compliance with the Relief Fund Terms. The HHS Secretary will provide program instructions about the form and content of the reports to all recipients in the future.

A special reporting requirement applies on a quarterly basis to any recipient who receives more than $150,000 total in funds under the CARES Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act or any other Act primarily making appropriations for the coronavirus and related activities. More specifically, no later than 10 days after the end of each calendar quarter these recipients must provide a report to the Secretary and the Pandemic Response Accountability Committee that includes the following:

• The total amount of funds the recipient received from HHS under those Acts
• The amount of funds received that were expended or obligated for each project or activity
• A detailed list of all projects or activities for which large covered funds were expended or obligated, including:
  • The name and description of the project or activity
  • The estimated number of jobs created or retained by the project or activity (where applicable)
  • Detailed information on any level of subcontracts or subgrants awarded by the covered recipient or its subcontractors or subgrantees

Recipients also must maintain appropriate records and cost documentation as required by 45 CFR § 75.302 (Financial Management) and 45 CFR § 75.361 through 75.365 (Record Retention and Access) and other information required by future program instructions to substantiate the reimbursement of costs. Recipients must be prepared to promptly submit copies of such records and cost documentation upon the request of the Secretary. Recipients are expected to fully cooperate in all audits the Secretary, Inspector General or Pandemic Response Accountability Committee conducts to ensure compliance with the Relief Fund Terms.

Restrictions on Use of Funds

The Relief Fund Terms state that various statutory provisions from the General Provisions in FY2020 Consolidated Appropriation also apply to the use of Payments from the Fund. These include, but are not limited to, restrictions on the use of funds for salary of an individual in excess of Executive Level II (currently $197,300 per year), for gun control advocacy, lobbying, embryo research and abortion.

What’s Next

As noted above, the initial tranche of payments from the Fund was allocated based on a provider’s share of total Medicare fee-for-service reimbursement in 2019 compared to total fee-for-service payments in 2019. This allocation methodology resulted in heavily hit states like New York and New Jersey receiving an average of $802 and $898, respectively, per person diagnosed with the virus compared to Alaska which received an average of $111,380 per case, according to an article published in Bloomberg Law.¹

The Trump administration is working to determine how to best utilize the remaining $70 billion earmarked for providers. HHS has stated that the next round of distributions will help providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans.

Mitigating False Claims Act and Regulatory Compliance Risks

Providers should: (i) carefully consider whether they can meet the Relief Fund Terms before deciding to keep grant funds and (ii) establish procedures to ensure that they are able to properly monitor and document their compliance with the Relief Fund Terms if they elect to keep the funding. To the extent that their decision requires interpretation of ambiguous Relief Fund Terms, providers should memorialize in writing their legal interpretation and rationale as to why they concluded that they were eligible to participate in the Fund and how the provider’s use of funds complies with the certifications required under the Relief Fund Terms

A health care provider that is not careful about its acceptance of money from the Fund could face liability under the FCA, which imposes treble damages and additional penalties for violations. A provider that makes a false attestation in reckless disregard as to whether it will satisfy the Relief Fund Terms could face FCA liability. In addition, a provider that signs the attestation in good faith, but that ultimately fails to comply with the Terms and Conditions, could also be liable under the FCA’s reverse false claims provision which imposes liability on knowingly retaining overpayments from the government.

It is predictable that once the pandemic passes and memories begin to fade, individuals will file suit under the qui tam provisions of the FCA accusing health care providers of failing to abide by the Relief Fund Terms. The qui tam provisions incentivize whistleblowers to file suit by awarding them bounties of 15 to 30% of any amounts recovered. Furthermore, past experience with stimulus, disaster relief and urgent wartime procurement programs suggest that the government may ultimately scrutinize COVID-19-related program spending with 20/20 hindsight. Anticipating such future scrutiny, providers would be well served to ensure that they comply with the Relief Fund Terms, manage the use of funds so that they are expended only for permissible purposes and memorialize any interpretations of ambiguous Relief Fund Terms relied upon in making their attestation. 

As the number of cases around the world grows, Faegre Drinker’s Coronavirus Resource Center is available to help you understand and assess the legal, regulatory and commercial implications of COVID-19.