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May 20, 2021

Preparing for Provider Relief Fund Reporting and Anti-Fraud Monitoring

This Briefing is brought to you by AHLA’s Fraud and Abuse Practice Group.
  • May 20, 2021
  • Breanne L. Hitchen , Jones Day

Provider Relief Fund (PRF) recipients that accepted PRF payments were quickly made aware of the strict Terms and Conditions associated with retention of the funds. Recipients were required to attest to the underlying Terms and Conditions associated with the funds, which included certification that the recipient would comply with a myriad of statutes and regulations, that future reports and documentation submitted to the Department of Health and Human Services (HHS) would be accurate and complete, and even that full compliance with the Terms and Conditions was material to HHS disbursing funds to the recipient.

With the Biden administration’s apparent focus on investigating and addressing pandemic-related fraud, recipients should take steps to prepare not only for the mandatory PRF reporting, but also for any government inquiries and auditing that may arise in connection with the PRF.

Background

In April 2020, HHS, through its Health Resources and Services Administration (HRSA), began distributing funds from the PRF to health care providers in the United States. The PRF initially consisted of $100 billion in funding allocated by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), but through funding from subsequent federal relief bills, it now consists of approximately $178 billion. Providers may use PRF funds for health care-related expenses or lost revenue due to COVID-19. Funds have been distributed in General Distributions, which are now referred to as Phase 1, Phase 2, and Phase 3, as well as Targeted Distributions, which include High Impact Distributions, Rural Distributions, Safety Net Hospital Distributions, a Children’s Hospitals Distribution, a Tribal Health Care Distribution, and three separate distributions for nursing homes including a Skilled Nursing Facility distribution, a distribution for infection control, and distributions under a quality incentive payment program.

When the first distribution began on April 10, 2020, funds appeared in providers’ bank accounts without any action on the part of the providers. At the time, the PRF website explicitly told providers: “These are payments, not loans, to healthcare providers, and will not need to be repaid.” However, providers were also told they had 30 days to decide whether they would retain the funds or return them to HHS. Recipients quickly learned that retention of the funds also meant attesting and agreeing to be bound by the Terms and Conditions of the applicable distribution. The Terms and Conditions apply to recipients, as well as subrecipients and contractors, unless an exception applies, and they lay out specific requirements and restrictions for retaining and spending the funds. To date, there are 14 active Terms and Conditions documents—11 for General and Targeted Distributions, two for the Uninsured Program, and one for a newly added Coverage Assistance Fund. HHS also issued Frequently Asked Questions (FAQs), which quickly became HHS’ main vehicle for providing PRF guidance to recipients.

Guidance Under Constant Revision

Within a matter of weeks, HHS began making revisions to the Terms and Conditions and the FAQs, as well as to the PRF website and other guidance documents posted on the website. Recipients began relying on the FAQs for guidance on everything PRF-related, including whether to retain or return the funds, how to register for the portals and attest to the Terms and Conditions, how to spend the funds, whether to apply for additional payments, and how to comply with potential auditing and reporting requirements. But because HHS was revising PRF guidance on an almost daily basis, it became difficult for recipients to keep up. If a recipient looked at the FAQs on Wednesday, and then HHS revised the FAQs on Thursday, the recipient may have been unknowingly acting in accordance with outdated information—potentially to its detriment.

Another issue that quickly became apparent after HHS began its almost daily updates was that prior versions of the guidance documents, particularly the FAQs, are no longer available online. HHS has made only the “Archived Reporting Requirements Notices” – but not the FAQs – available on the Reporting & Auditing page of the PRF website (see discussion below). That means recipients are unable to reference prior versions of the FAQ guidance, unless they saved prior versions before they were taken down or replaced.

Additionally, two key changes to the PRF came by way of the Consolidated Appropriations Act, 2021 in December 2020. First, this appropriation provides that a parent organization may allocate any or all of a PRF payment among its subsidiaries, including payments under any Targeted Distributions, although reporting responsibility for the reallocated reimbursement remains with the original recipient of the reimbursement. This was a complete change from past guidance, which largely provided the opposite—parent organizations were required to remit Targeted Distributions to the intended recipient subsidiary, and they were forbidden from transferring Targeted Distribution payments from the recipient subsidiary to a subsidiary that did not receive the payment. Second, this appropriation provides that recipients may calculate lost revenues consistently with guidance in the June 2020 FAQs, which allowed providers to include the difference between their budgeted and actual revenues, if such budget had been established and approved prior to March 27, 2020. HHS changed course in the reporting instructions released in September 2020, stating lost revenues would be “calculated based upon a calendar year comparison of 2019 to 2020 healthcare expenses to determine net operating income.” This change in course was not well-received by recipients, but through the Consolidated Appropriations Act, 2021, Congress responded to recipient concerns by mandating a pivot back to the June 2020 FAQ guidance on calculating lost revenues.

Reporting Requirements

Reporting to HHS is another PRF requirement for recipients retaining funds. Initial Terms and Conditions indicated that recipients would be required to “maintain appropriate records and cost documentation including, as applicable, documentation 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 under this award.” The Terms and Conditions also require recipients to submit such records and cost documentation to the Secretary of HHS, the Inspector General, or the Pandemic Response Accountability Committee, if requested.

In July 2020, HHS released the first Post-Payment Notice of Reporting Requirements, which previewed the forthcoming reporting instructions and portal. After the detailed reporting instructions were released in September 2020, HHS issued revised reporting instructions in October 2020 and November 2020. Prior to the Consolidated Appropriations Act, 2021, the first reporting deadline for recipients was set to be February 15, 2021, with a final reporting deadline of July 31, 2021 for providers who did not fully expend PRF funds prior to December 31, 2020.

However, HHS was required to revise the reporting instructions again in January 2021 after the Consolidated Appropriations Act, 2021 changed how recipients could calculate lost revenues. Concurrent with revising and re-issuing the reporting instructions on January 15, 2021, HHS opened the Reporting Portal for “registration only,” and posted two new guidance documents: (1) Reporting Portal FAQs; and (2) a Reporting Portal User Guide for Registration. At the same time, HHS also rescinded the February 15, 2021 deadline—indicating the agency was “currently reviewing this guidance and Provider Relief Fund reporting timelines[]” and would “post any updates on [the PRF] website as soon as they are available.”

As of the end of April 2021, HHS had not issued a revised reporting timeline or guidance. But recipients should not wait until revised reporting guidance is issued to prepare for reporting and potential auditing, particularly in light of the pandemic-related fraud enforcement activities planned for the Biden administration. Rather, recipients should carefully review the PRF guidance issued to date, register for the reporting portal, and best position themselves to report to HHS and/or respond to audit requests at a moment’s notice.

Pandemic-Related Fraud Enforcement

What exactly federal enforcement around the PRF funds will look like is the potentially multi-million dollar question. HHS was careful to note early on that it has broad enforcement and auditing powers over recipients that retained PRF monies. Approximately two weeks after the first distribution began, HHS revised the Terms and Conditions to include certification and acknowledgement that (1) “commitment to full compliance with all Terms and Conditions is material to the Secretary’s decision to disburse these funds to you. Non-compliance with any Term or Condition is grounds for the Secretary to recoup some or all of the payment made from the Relief Fund”; and (2) “any deliberate omission, misrepresentation, or falsification of any information contained in this Payment application or future reports may be punishable by criminal, civil, or administrative penalties.” This language has been incorporated into the Terms and Conditions for subsequent distributions as well.

Recent government action and high-level federal officials have suggested that pandemic-related fraud is, and will be, an anti-fraud enforcement priority for the Biden administration. For example, at the end of 2020, HHS announced its new False Claims Act Working Group partnership with the Department of Justice (DOJ) and the Office of Inspector General (OIG), which was formed to combat fraud and abuse by identifying and focusing resources on those seeking to defraud American taxpayers.[1] HHS’ announcement included affirmative confirmation that PRF payments to providers is an area of focus for HHS, particularly for the False Claims Act Working Group.

Additionally, both Brian Boynton, the Acting Assistant Attorney General (AAG) for the Civil Division of the DOJ, and Senator Chuck Grassley publicly commented about the Biden administration’s False Claims Act (FCA) enforcement, particularly arising from pandemic-related fraud. During the Federal Bar Association Qui Tam Conference in February 2021, AAG Boynton identified “pandemic-related fraud” as one of the key FCA enforcement priorities, and stressed that the FCA “will play a significant role in the coming years as the government grapples with the consequences of this pandemic.” [2] He specifically called out the PRF in this context, and indicated that while the vast majority of payments were distributed to eligible providers, some payments ended up with individuals and businesses that were not entitled to the funds they received. As such, “the inevitable fraud schemes” likely will resemble misconduct that the FCA has been used to address in the past, such as “false representations regarding eligibility[ and] misuse of program funds.”

Senator Grassley also emphasized the DOJ’s wide range of civil anti-fraud enforcement priorities arising from the CARES Act and the American Rescue Plan of 2021.[3] The Biden administration will likely “come down with a sledgehammer, not a toothpick[,]” when it comes to pandemic-related fraud. Pointing to a recent FCA settlement related to the Paycheck Protection Program (PPP), Senator Grassley indicated he hoped it was “a sign of things to come.”

Recent DOJ activity indicates Senator Grassley may have been right. In February 2021, less than a year after PRF distribution began, the DOJ announced the first charges related to the misappropriation of PRF payments.[4] Amina Abbas was criminally charged with embezzlement of government property for misappropriating approximately $37,656.95 in PRF monies. Abbas previously owned “1 on 1 Home Health,” a home health provider, which closed in early 2020, prior to the pandemic. Abbas received and retained PRF monies on behalf of 1 on 1 Home Health, despite the business never providing “diagnoses, testing, or care for individuals with possible or actual cases of COVID-19” after January 31, 2020, as required by all of the Terms and Conditions. Rather, Abbas allegedly gave the funds to her family members for personal use. The OIG and the Federal Bureau of Investigation (FBI) investigated the matter, and it is being prosecuted by the DOJ Criminal Division’s Fraud Section.

Shortly thereafter, in April 2021, the DOJ announced criminal charges against a Colorado physician who allegedly misappropriated thousands of dollars from three COVID relief funds—one of which was the PRF.[5] Francis F. Joseph was criminally charged for transferring approximately $118,000 in monies from the PRF and the Accelerated and Advance Payment Program from a medical clinic account into his personal bank account, which he then spent on travel and home improvements, among other things. Joseph has been charged with theft in connection with health care, theft of government property, wire fraud, and making a false statement in connection with a bankruptcy proceeding.

Best Practices for Recipients

Internal Auditing and Accounting

In advance of the reporting deadline, and using current reporting instructions and related worksheets from HHS, providers would be well-served to work with their finance department and accountants to ensure that they understand and are complying with all applicable reporting requirements. For each tranche of funding, providers may want to review closely the eligibility criteria and all applicable Terms and Conditions to confirm that they are prepared to attest to meeting them all. Providers should also take the time now to ensure that they have identified all other available funding (e.g., business interruption insurance, Federal Emergency Management Agency funding, or Federal Communications Commission telehealth funding) and have accurately allocated their expenses to those funding sources where applicable (and not also allocated them to the PRF). Careful auditing can prevent reporting pitfalls, prepare for any future government audits, and help bolster PRF-related record keeping.

Providers should also confirm that all the other Terms and Conditions of the PRF distributions have been met. For example, to the extent that the funds are being attributed to salary expenses, providers should confirm that PRF funds are not being allocated to more than the $197,300 cap referenced in the Terms and Conditions. Similarly, providers may want to conduct a review to confirm that they have not been balance-billing actual or presumptive patients in excess of what they would be billed in-network.

Document Retention and Detailed Record Keeping

Recipients should carefully maintain all internal documents (electronic and paper), notes, and records related to the PRF—even those not explicitly required by the PRF Terms and Conditions. Even though pandemic-related fraud is likely a priority in the near-term, PRF fraud allegations could arise years down the road. Between the passage of time, and how rapidly PRF guidance was changing throughout the first year, maintaining all relevant documents and notes can create a helpful audit trail and assist with defending against any fraud allegations. Moreover, in the event recipients identified a gray area in the guidance and, as a result, they acted in accordance with an interpretation of the guidance, all notes about such interpretation and how they arrived at it should be documented and maintained. Meticulously documenting interpretations now could prevent fuzzy memories from causing issues in the future. To that end, recipients should also review all documents and notes to ensure everything appears clear and complete, especially to a third-party.

HHS Guidance Document Retention

Recipients should carefully retain all HHS guidance documents relied upon since they received PRF monies, including the FAQs, Terms and Conditions, and website pages. To the extent not provided, noting the date of such guidance or preserving the document’s original metadata can help keep a clear timeline. In another effort to keep a clear record, recipients should ensure any internal documents and notes interpreting government guidance clearly correspond to, and are maintained with, the underlying guidance documents.

Establish and Implement Internal PRF Reporting and Compliance Procedures

Recipients—particularly larger systems where subsidiaries received funds or the parent entity received funds on behalf of subsidiaries— should establish and implement internal reporting and compliance procedures specific to the PRF. While the procedures should be similar in nature to current procedures for responding to government audits and other inquiries, having a specific plan for PRF reporting and compliance could ensure careful preparation, including with document retention and internal auditing, and could signal to the government that the recipient understood the seriousness of the PRF requirements.

Conclusion

Between the federal government’s pandemic-related enforcement activity and the PRF reporting and auditing obligations (and the unannounced reporting deadlines), PRF recipients should carefully review the foregoing Best Practices and prepare accordingly. Close attention to detail is, and will continue to be, key, particularly due to the need to closely monitor and adapt to the rapidly changing guidance that has existed since the PRF’s inception. Such preparation and close attention to detail could save precious time and money down the road and could ultimately help recipients avoid having to defend against fraud allegations.

 


[1] HHS Announces False Claims Act Working Group to Enhance Efforts to Combat Fraud and Focus Resources on Bad Actors, HHS.gov (Dec. 4, 2020), https://www.hhs.gov/about/news/2020/12/04/hhs-announces-false-claims-act-working-group-enhance-efforts-combat-fraud-and-focus-resources-bad-actors.html.

[2] Acting Assistant Attorney General Brian M. Boynton Delivers Remarks at the Federal Bar Association Qui Tam Conference, Dept. of Justice News (Feb. 17, 2021), https://www.justice.gov/opa/speech/acting-assistant-attorney-general-brian-m-boynton-delivers-remarks-federal-bar.

[3] "Come Down With A Sledgehammer": FCA Enforcement Priorities In The Biden Administration, https://www.mondaq.com/unitedstates/project-financeppp-pfi/1053434/come-down-with-a-sledgehammer-fca-enforcement-priorities-in-the-biden-administration; Grassley, Keynote Remarks at 2021 Federal Bar Association Qui Tam Conference, https://www.youtube.com/watch?v=ny0KU2jjEeM&t=10s.

[4] Woman First in the Nation Charged with Misappropriating Monies Designed for COVID Medical Provider Relief, Dept. of Justice News (Feb. 11, 2021), https://www.justice.gov/opa/pr/woman-first-nation-charged-misappropriating-monies-designed-covid-medical-provider-relief#:~:text=A%20Michigan%20woman%20was%20indicted,Assistant%20Attorney%20General%20Nicholas%20L.

[5] Colorado Physician Charged for Misappropriating Thousands from Three Different COVID Relief Programs, Dept. of Justice News (April 8, 2021), https://www.justice.gov/opa/pr/colorado-physician-charged-misappropriating-thousands-three-different-covid-relief-programs.