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Law360 (May 4, 2020, 5:27 PM EDT) --
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| Matthew Hogan |
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| Scott McBride |
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| Howard Young |
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| Gregory Etzel |
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| Lily Becker |
The so-called Phase 3.5 coronavirus stimulus bill, signed into law on April 24, includes an additional $75 billion for the CARES Act relief fund for, among other things, increased COVID-19 testing, and contains the same appropriation language as the initial CARES Act.
The relief fund payments, on top of the CARES Act Payment Protection Program, or PPP, forgivable loans and the Medicare Accelerated and Advance Payment Program, or AAPP, offer welcome financial relief at a time when most health care providers are under enormous strain from increased expenses and lost revenues due to COVID-19.
However, accepting these funds, and all of the associated terms and conditions regarding current and ongoing compliance requirements, will invite substantial government scrutiny and inadequate controls may pose a risk for potential civil and criminal liability in the future.
General Distribution
HHS stated that $50 billion was allocated for general distribution to Medicare facilities and providers to be based on providers' net patient revenue. However, to ensure that relief funds would be made available quickly, HHS started to disburse an initial $30 billion based on a formula tied to a provider's 2019 Medicare fee-for-service payments.
HHS then began to distribute another $20 billion to providers, allocated proportionally to the provider's share of 2018 net patient revenue, and based on revenue data that a provider submitted in Medicare cost reports. Providers that do not have adequate cost-report data on file will be required to submit their revenue information through an online HHS portal[1] to be eligible.
Even if a provider received the second wave of funds by direct deposit with no corresponding application, it will need to submit revenue information that HHS will verify. HHS has stated that providers are required to submit (1) gross receipts or sales, or program service revenue as submitted on a federal tax return; (2) estimated revenue losses in March and April due to COVID-19; (3) a copy of their most recently filed tax return; and (4) a listing of the tax identification numbers of any of their subsidiary organizations that received relief funds but that do not file tax returns.
HHS has not signaled an intent to use this information to make any adjustments to the initial $30 billion that was distributed based on fee-for-service payments, but that outcome is not yet clear. Also, although HHS may accept this information for current relief fund disbursement purposes, later questions regarding the accuracy of this information could lead to False Claims Act exposure, or even criminal exposure, for submitting false information.
Targeted Allocations
HHS also announced that $10 billion of the relief funds will be allocated to hospitals in hard-hit areas such as New York and Detroit. This distribution also will take into consideration the challenges faced by facilities serving a disproportionate number of low-income patients, as reflected by their Medicare Disproportionate Share Hospital Adjustment.
Hospitals were required to apply for these funds by April 25, providing (1) a tax identification number; (2) a national provider identifier; (3) the total number of intensive care unit beds as of April 10; and (4) the total number of admissions with a positive diagnosis for COVID-19 from Jan. 1 to April 10.
An additional $10 billion of the relief funds will be allocated to rural health clinics and hospitals starting as early as the week of April 27 on the basis of operating expenses, using a methodology that distributes payments proportionately to each facility.
The relief fund allocated $400 million for Indian Health Service facilities starting as early as the week of April 27 on the basis of facilities' operating expenses. HHS also announced further, separate funding would be available for providers, including skilled nursing facilities, dentists and providers that solely take Medicaid. No additional details regarding these separate funds has been made available.
Finally, HHS announced that approximately $1 billion of the relief funds will be used to reimburse providers, at Medicare rates, for the coronavirus-related treatment of the uninsured. Providers that provided treatment to uninsured coronavirus patients on or after February 4 were permitted to begin registering for the program[2] on April 27. On demand training started April 29 and providers may begin submitting claims to HHS' Health Resources and Services Administration (through its contractor UnitedHealth Group) on May 6.
Once enrolled, a provider will need to certify that it has confirmed that a patient is uninsured and that no other entity will reimburse for COVID-19 testing or care for that patient, that it will accept program reimbursement as payment in full, that no balance billing of the patient will be sought, and that the provider agrees to all program terms and conditions and may be subject to post-reimbursement audit review. Enrolled providers will then receive payments via direct deposit in mid-May.
Acceptance of Relief Funds
Providers are required to sign an attestation confirming receipt of the funds and agreeing to the corresponding relief funds payment terms and conditions,[3] which set forth requirements for acceptance of any funds, use of the funds and documentation and reporting. The attestation further requires compliance with "any other relevant statutes and regulations."
In an apparent direct reference to the FCA, the attestation states that a provider's "commitment to full compliance with all Terms and Conditions is material to the [Health and Human Services] Secretary's decision to disburse these funds to you."
HHS also added a certification paragraph to all of its relief funds' terms and conditions (not originally included in the initial iteration of the terms and conditions linked to the first $30 billion payment prior to April 22), requiring all recipients to ensure the accuracy and completeness of any submissions to HHS associated with the relief funds, stating that falsification in any request or future report could give rise to criminal, civil and administrative penalties.
Provider recipients will have 30 days from receipt to decide whether to accept the relief funds and agree to the terms and conditions. If a health care provider does not wish to accept the funds, it must reject them via the same online portal,[4] and follow the portal's instructions to remit the funds within 30 days of receipt of payment.
Failure to complete the attestation while not returning the payment within 30 days of receipt will be viewed as acceptance of the terms and conditions, audits, and any future documentation requirements.
Terms and Conditions on Use of Funds
Eligibility
To qualify for a General Distribution Relief Fund payment, a health care provider must certify (1) that it billed Medicare in 2019 and provided testing or care after Jan. 31, for individuals with possible or actual cases of COVID-19; and (2) that it is not currently excluded from participation in federal health care programs and does not currently have Medicare billing privileges revoked.
Use of the Funds
Relief fund payments may only be used to prevent, prepare for, and respond to COVID-19, and to reimburse health care-related expenses or lost revenues attributable to coronavirus incurred on or after Jan. 31.
While health care providers need not pay back relief funds when used for permissible purposes, the government will audit at least some providers' use of these funds, and the HHS Office of Inspector General was allotted specific funding in the CARES Act to conduct audits. Improper use of funds by recipients, inadequate documentation, or a determination that the provider received funds to which it was not entitled, could lead to government recovery of funds and expose recipients to substantial risks.
Relief funds cannot be used to reimburse expenses or losses that have already been reimbursed from other sources, or that other sources are obligated to reimburse.
While health care providers are not precluded from obtaining relief from both the relief fund and other sources (such as the AAPP and PPP), they should carefully document the expenses and reimbursements for which the funds are used to ensure that the funds were allocated for an appropriate COVID-19-related use and that relief funds are not used to reimburse expenses covered by another funding source, including liability insurance (e.g., business disruption) coverage.
Reporting Requirements
Providers that accept relief funds are required to maintain documentation of their compliance and shall submit future reports "as directed by HHS." No details have yet been released about the form or content of such reports.
Further, providers that receive more than $150,000 in total funds under the CARES Act, or any other act primarily making appropriations for the COVID-19 response, are required to submit a quarterly report to HHS and the Pandemic Response Accountability Committee.
This report must contain, among other things:
- The total amount of funds received from HHS;
- The amount of funds received that were expended or obligated for each project or activity; and
- A detailed list of all projects or activities for which funds were expended or obligated, including the name and description of the project or activity and the estimated number of jobs created or retained by the project or activity.
No Balance Billing
The terms and conditions include a requirement that any provider accepting relief fund payments certify that, for possible or actual cases of COVID-19, the provider will not seek to bill the patient for out-of-pocket expenses (e.g., co-payments) 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 provider.
Diligence Now Is Key to Avoiding Future Liability
As health care providers accept relief funds, it will be critically important to monitor and document compliance with the terms and conditions. As with all payments from the federal government, wrongful acceptance, misuse or retention of the relief funds could lead to allegations of fraud, criminal charges and liability under the FCA, which carries with it treble damages and significant fines.
HHS has cautioned that it will conduct significant anti-fraud and auditing work, underscored by the allocation of $6 million to the HHS Office of Inspector General for Relief Fund oversight activities.
For providers that receive the relief funds, but neither use those funds for permissible coronavirus related purposes, nor remit the money to HHS, relators might allege there is reverse FCA liability for knowingly retaining those amounts. Providers' employees who suspect fraud or abuse may be incentivized by the prospect of receiving a portion of any government recovery to report suspected fraud, waste or abuse to the government.
Whistleblower attorneys are also motivated by the FCA provision granting the right to recover attorneys' fees and expenses. Indeed, whistleblower lawyers are already planning for relief funds-related litigation. The U.S. Department of Justice also will not hesitate to initiate criminal proceedings if it believes that a provider has intentionally misallocated funds, provided false information to the government or concealed how funds were used.
Providers should be vigilant in ensuring that relief funds are used only for COVID-19 care and prevention, and related losses. Providers should consistently track expenses and payments tied to any relief funds, ensuring the funds are not used for expenses already reimbursed from another source, including other COVID-19-related government programs. Such documentation should include a clear and detailed description of health care expenses or losses that are attributable to COVID-19.
Some providers are creating a separate bank account to assist with the tracking and administration of these relief funds. Comingling of relief funds with other recipient funds could complicate effective tracking.
The terms and conditions include many of the terms and conditions typically used in connection with federal grants. For providers that regularly receive government grants, this monitoring will be familiar and maintaining their compliance procedures, with particular attention to internal concerns raised by employees, will continue to be critical. For providers unfamiliar with federal grant compliance, this may be a new area requiring diligent attention through compliance programs, procedures and documentation.
As with any government grant funding, if the funds are used inappropriately or a provider lacks supporting documentation, the government can pursue a refund and/or a FCA case. Accepting funds for which a provider is not eligible could also lead to liability.
Indeed, HHS is already facing pressure to account for the disbursement and use of the relief funds, with the chairman of the House Ways and Means Committee, Richard Neal, D-Mass., commenting in an April 22 press release:
Providers should expect scrutiny in the months and years ahead and initiate their relief fund control activities now.
The [s]ecretary has indicated that HHS will improve the transparency around the Provider Relief Fund. The agency must do better on this front. Accountability is crucial as the government implements the new COVID-19 response laws and distributes these huge sums of money."[5]
Matthew J.D. Hogan, B. Scott McBride, Howard J. Young, and Gregory N. Etzel are partners, and Lily G. Becker is an associate, at Morgan Lewis & Bockius LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] https://covid19.linkhealth.com/docusign/#/step/1.
[2] https://www.hrsa.gov/coviduninsuredclaim.
[3] https://www.hhs.gov/sites/default/files/relief-fund-payment-terms-and-conditions.pdf.
[4] https://covid19.linkhealth.com/#/step/1.
[5] https://waysandmeans.house.gov/media-center/press-releases/chairman-neal-comments-additional-allocations-100-billion-covid-19-fund.
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