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COVID-19: Provider Relief Funds, Attestation, and the False Claims Act

This Briefing is brought to you by AHLA’s Enterprise Risk Management Task Force.
  • October 30, 2020
  • William B. Eck , Seyfarth Shaw LLP

The Coronavirus Aid, Relief and Economic Security Act[1] (CARES Act), as supplemented by the Paycheck Protection Program and Health Care Enhancement Act[2] (Enhancement Act), appropriated $175 billion to the Provider Relief Fund to reimburse eligible providers for health care-related expenses and lost revenues attributable to COVID-19. Eligible providers are, in general, Medicare Part A and Part B providers, Medicaid/Children’s Health Insurance Program or Medicaid managed care plan providers, and dental providers.

However, these Provider Relief Funds (PRF) have strings attached. PRF acceptance is subject to provider attestation to compliance with the terms and conditions established by the Department of Health and Human Services (HHS). False or inaccurate attestations can give rise to enforcement action and liability under the False Claims Act (FCA).[3]

In Phase 1, HHS disbursed an initial $30 billion to nearly 320,000 providers, and subsequently distributed an additional $20 billion to nearly 15,000 providers.[4] In Phase 2, HHS disbursed or will disburse an additional $15 billion to Medicaid providers, dental providers, and certain Medicare providers.[5] Targeted distribution funding was allocated for providers in areas particularly impacted by the COVID-19 outbreak. Similarly, funding was allocated to hospitals that had a high number of confirmed COVID-19 positive inpatient admissions.

HHS also allocated $11 billion to rural hospitals and $4.9 billion to skilled nursing facilities. Allocations are also provided for tribal hospitals, clinics, urban health centers, safety net hospitals, providers who treat uninsured COVID-19 patients, and certain children’s hospitals.[6]

This briefing reviews the general and more detailed HHS terms and conditions associated with PRF monies as organizations prepare for attestation and assess their individual organizational enforcement risk.

Summary of Terms and Conditions Associated with PRF Monies

Providers who accepted COVID-19 Provider Relief Funds agreed to an array of terms and conditions. Broadly, these terms and conditions were intended to assure that the funds were used for the purposes ascribed by Congress and to protect against fraud and misuse.

In general, these terms and conditions required providers (1) to use the funds only to reimburse for health care-related costs or expenses, or lost revenues, that were attributable to COVID-19; (2) submit required reports regarding the use of the funds; and (3) not charge patients more than the patients would have been required to pay for care provided by an in-network provider.

However, nuances exist. For example, there are terms and conditions for the general distributions, and there are different terms and conditions for the rural, uninsured, high impact, and other distributions. There is also the possibility that once agreed to by the provider, the terms and conditions could be changed, but it appears unlikely that they could be changed with retroactive effect as to funds already expended or legally committed. Differences in terms and conditions by category of PRF distribution include:

General Distributions

The terms and conditions of the general grant (both the initial $30 billion and the subsequent $20 billion) require the provider-recipient to certify that it billed Medicare in 2019; that it provided diagnosis, testing, or care for individuals with possible or actual cases of COVID-19; and, that it is not currently terminated, excluded, or revoked from participation in Medicare, Medicare Advantage, Part D, Medicaid, or other federal health care programs.

The recipient must certify that the PRF payment was only used to prevent, prepare for, and respond to COVID-19, and reimburse expenses or lost revenues attributable to COVID-19. The recipient must further certify that these COVID-19 associated expenses or losses were not reimbursed or obligated to be reimbursed from other sources.

Significantly, the recipient must certify that it will not seek to collect from the patient out-of-pocket expenses in an amount greater than what the patient would otherwise have been required to pay if the care had been provided by an in-network recipient. There are also other statutory provisions that relate to such topics as the use of funds for lobbying, limitations on use of funds for abortions, and embryonic research.

The recipient also agrees to submit specified reports to HHS, which must be certified. Included among these are quarterly reports required of recipients receiving more than $150,000 in total funds, which must be made to HHS and the Pandemic Response Accountability Committee established by the CARES Act. Recipients are expected to maintain appropriate records and cost documentation to substantiate the reimbursement of costs, and to cooperate with record requests and audits.

Finally, the recipient of general PRF distributions consents to the public disclosure of those payments received.

Distributions for Uninsured Care

The terms and conditions of PRF grants for the care or treatment of COVID-19 uninsured patients contain in general the same provisions as the general grant terms and conditions discussed above. The recipient must additionally certify that the grant funds were applied to provide care and treatment related to positive diagnoses of COVID-19 to individuals who do not have any health care coverage at the time the services were provided. Recipients may not include costs for which grant payment was received in cost reports or otherwise seek uncompensated care reimbursement through federal or state programs for items or services for which grant payment was received.

Rural Provider Distributions

The terms and conditions of the rural PRF grant for the diagnosis, testing, or care for individuals with possible or actual cases of COVID-19 are substantially the same as those of the general grant discussed above. Importantly, included in the terms and conditions is the requirement that for all care for a presumptive or actual case of COVID-19, the recipient certifies that it will not seek to collect from the patient out-of-pocket expenses in an amount greater than what the patient would otherwise have been required to pay if the care had been provided by an in-network recipient.

Families First Coronavirus Response Act (FFCRA) Distributions

The terms and conditions applicable to the FFCRA distributions to fund testing and testing-related items and services to FFCRA Uninsured Individuals (in general, individuals who are not enrolled in a federal health care program or private health plan), are also substantially similar to those of the general grant discussed above.

Similar to the other PRF payments or grants, the recipient must certify that it will not engage in “balance billing” or charge any type of cost sharing for COVID-19 testing and/or testing-related items and services provided to FFCRA Uninsured Individuals for whom the recipient submits claims to the FFCRA Relief Fund. The recipient shall consider the PRF payment to be payment in full for such care or treatment. In general, the payment rate of the FFCRA Relief Fund is 100% of the Medicare rate (including any amounts that would have been due to the provider as patient cost sharing).

Other Distributions

The CARES Act and Enhancement Act provide for other distributions to skilled nursing facilities, Indian Health Services, and safety net hospitals. The terms and conditions associated with these distributions are largely the same as those discussed above.

The Attestation and FCA Concerns

The attestation requires providers to confirm the receipt of funds and the amount received. It also requires providers to agree to the terms and conditions associated with the funds.[7] In general, the attestation must be made by the provider, if an individual, or if an organization, the provider’s chief financial officer or other corporate financial official.[8] HHS provides a mechanism to return funds for use by those who receive the funds but cannot or are unwilling to make the attestation.

The attestation subjects the provider’s receipt and application of PRF monies to FCA scrutiny.[9] The per claim penalty under the FCA currently is $23,331. While it is not clear how the Department of Justice (DOJ), the Office of Inspector General (OIG), and the Centers for Medicare & Medicaid Services (CMS) will collaborate on or prioritize recoupment efforts, organizations certainly must critically assess their documentation supporting appropriate use of PRF monies relative to the various terms and conditions requirements that apply to the funds—both for the potential per claim penalty risk, and, of likely greater significance, treble damages exposure.

This risk is real. The OIG has incorporated into its workplan evaluation of CMS enforcement of PRF terms and conditions.[10] CMS has also made clear that the attestations will be a basis to enforce the terms and conditions.[11] Breach of the terms and conditions will be a basis for recoupment of the funds and could in certain circumstances give rise to a claim of false certification. As discussed above, the provider is making the attestation and thus could have exposure under the FCA. In addition, for organizational providers, the chief financial officer or other official executing the attestation could face individual exposure under the FCA.

The FCA may be enforced by the Department of Justice. Whistleblowers could also file an action on behalf of the government.[12] Probably the most common qui tam plaintiffs are employees and former employees. Thus, there is a potential risk that an FCA claim, with significant exposure, could result if the provider does not comply with the terms and conditions of a PRF grant.

Sales and Mergers; Return of Funds

HHS made PRF available based on the latest available data for a tax identification number. This is 2019 data. In asset sales, previous owners may not transfer PRF to new owners.[13] At this time, HHS will not reissue funds to subsequent owners, but subsequent owners are eligible to apply for future allocations. If the previous owner continues to provide services after January 31, 2020, then the previous owner may continue to use the PRF for its own COVID-19-related purposes within the terms and conditions.[14] However, if it does not, the previous owner must return the PRF. Similarly, in asset purchases, no pre-closing PRF may be included.

However, in stock sales, if the underlying provider continues to provide services after January 31, 2020, then the PRF need not be returned, assuming the PRF are used for proper purposes within the terms and conditions. In organizations with a parent and subsidiaries, if a subsidiary received PRF then the PRF must stay with the subsidiary that received it.[15] However, if the parent received PRF, it may transfer the PRF to the subsidiaries for proper purposes as it sees fit.[16]

If a recipient of PRF must or chooses to return the PRF, it must provide notice of rejection of the PRF within 90 days of receipt. It must then return the PRF within 15 days of providing the notice of rejection.[17] Here, a nuance arises if a recipient of PRF does not become aware of the need to return the PRF within 90 days of receipt (for example, an asset sale more than 90 days after receipt where there are unexpended PRF. The best answer is to promptly return the PRF required to be returned.

Enterprise Risk Analysis Relative to PRF Monies

As noted, compliance with the terms and conditions of PRF grants will be an enforcement priority of CMS and OIG, as well as a qui tam and direct enforcement risk area for DOJ under the FCA. As noted, the attestation confirms receipt of the payment and the specific amount received, and agreement to the terms and conditions. Therefore, although an error in the attestation would be consequential, the attestation, by itself generally does not give rise to material fraud and abuse risk.

Second, the terms and conditions establish specifications as to the use of the Provider Relief Funds. Except in specific cases, such as the FFCRA testing Relief Funds, the funds are to be applied to prevent, prepare for, and respond to COVID-19, and for health care-related expenses or lost revenues attributable to COVID-19. Also, the funds may not be used to reimburse expenses or losses reimbursed from other sources or that other sources are obligated to reimburse.

CMS has interpreted the purpose for which the funds may be applied broadly. The permitted uses include the following items and services:

  • supplies used to provide services for possible or actual COVID-19 patients;
  • equipment used to provide services for possible or actual COVID-19 patients;
  • workforce training;
  • developing and staffing emergency operations centers;
  • reporting COVID-19 test results to federal, state, or local governments;
  • building or constructing temporary shelters to expand capacity for COVID-19 patient care or to provide health care services to non-COVID-19 patients in a separate area from where COVID-19 patients are being treated; and
  • acquiring additional resources, including facilities, equipment, supplies, health care practices, staffing, and technology to expand or preserve health delivery.[18]

Although broad, these categories are not all-encompassing. The terms and conditions require a reasonable relationship to COVID-19. In the absence of such a relationship, the use of PRF monies may violate the FCA.

Similarly, care should be taken that CARES Act and related Provider Relief Fund dollars do not simply reimburse expenses or losses for which reimbursement is available from other sources, such as bond funds or Medicare. This, too, could give rise to FCA issues.

From the compliance and internal audit perspective, it is advisable to track the application of PRF to assure that they are applied only to uses approved by CMS, and to assure that they are not simply displacing the application of funds from other sources.

This suggests that providers consider segregating PRF monies, so that their application can be readily documented. In this manner, the documentation of fund use for permitted purposes can be demonstrated.

Lastly, the terms and conditions prohibit billing the patient more than an in-network patient responsibility amount, or “balance-billing” the patient in presumptive or actual cases of COVID-19. Here, it is of critical importance that CMS defines a “presumptive” case of COVID-19 as “where the patient’s medical record documentation supports a diagnosis of COVID-19, even if the patient does not have a positive in vitro diagnostic test result in his or her medical record.”[19] Presumptive or actual cases of COVID-19 may not be balance-billed, and doing so has potentially significant implications under the FCA.

Coding and billing staff should be trained in and understand these principles. It is also advisable that, particularly where the care is paid for with PRF, billing of and payment for presumptive and actual cases of COVID-19 be included in the provider’s audit plan.

Recipients of Provider Relief Funds should also consider reviewing their directors and officer’s liability insurance to ascertain coverage of liability and defense costs in the event of a claim of misapplication of the funds or of a violation of the FCA. Such coverage can mitigate the risk associated with the use of PRF.

Recipients of PRF monies should also consider the reputational risks associated with claims related to misapplication of funds, and even with receipt of unneeded funds during the pandemic (analogous to the fallout experienced by certain recipients of Payroll Protection Program Loans). Certainly, even the publication of the total monies received by an organization, relative to other public data such as executive compensation, could elicit negative public perception.

Conclusion

PRF monies provided by Congress are a significant relief to the financial stresses upon providers caused by COVID-19. However, there are risks associated with this relief, especially under the FCA. These risks can be identified and managed by appropriate application of the funds and billing, and by active risk management engagement across affected departments (clinical, supply, pharmacy, cost accounting, patient financial services, finance), inclusive of executive leadership, to proactively identify areas of risk and approaches to mitigate them, including compliance engagement to assist with self-auditing in advance of governmental audits.

Bill Eck is a partner in Seyfarth Shaw’s Washington, DC office serving as a member of the firm’s national Health Care, Life Sciences & Pharmaceuticals industry group. Bill’s representation experience in the health care industry includes mergers and acquisitions, sales, strategic affiliations, and public hospital conversion from private to non-profit status. He has also assisted hospital/health system clients with provider-sponsored network formation. Bill volunteered through AHLA’s Leadership Development Program, despite his tenure professionally and at AHLA. He is a welcome addition to the Enterprise Risk Management Task Force. Bill can be reached at (202) 772-9721 or cell (786) 218-8768, or by email at [email protected].

 

[1] Pub. L. No. 116-136.

[2] Pub. L. No. 116-139.

[3] 31 U.S.C. §§ 3729-3733.

[4] HHS, CARES Act Provider Relief Fund: General Information, https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/index.html.

[5] Id.

[6] Id.

[7] HHS, Provider Relief Fund General Information (FAQs), https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/faqs/index.html.

[9] Pursuant to 31 U.S.C. § 3729, the FCA provides, in relevant part, that any person who: (A) knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval; (B) knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim; [or] (C) conspires to commit a violation of subparagraph (A) [or] (B) . . . is liable to the United States Government for a civil penalty of not less than $5,000 and not more than $10,000, as adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 (28 U.S.C. 2641 note, P.L. No. 104-410), plus 3 times the amount of damages which the Government sustains because of the act of that person.

[12] The government may intervene and litigate the case against the defendant. If the government does not, the qui tam plaintiff may pursue the action on the plaintiff’s own. Qui tam plaintiffs are incentivized because they are entitled to 15% to 25% of the proceeds recovered by the government if the government intervenes, and 25% to 30% if the government does not intervene. 31 U.S.C. §§ 3730(b), 3730(d)(1), (2).

[13] HHS, Provider Relief Fund General Information (FAQs), https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/faqs/index.html (Aug. 28, 2020).

[14] HHS, Provider Relief Fund General Information (FAQs), https://www.hhs.gov/sites/default/files/provider-relief-fund-general-distribution-faqs.pdf (Aug. 28, 2020).

[15] Id.

[16] Id.

[18] HHS, Provider Relief Fund General Information (FAQs), https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/faqs/index.html (Aug. 28, 2020).

[19] Id.