Protecting Your Institution from False Claims Act Allegations After Receipt of CARES Act Funding

This article was originally published by the American Health Law Association, and is republished here with permission.

In April 2020, the Department of Health and Human Services (HHS) revealed a plan to disperse $175 billion in funding for health care providers allocated by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent federal relief bills. HHS titled the $175 billion the “Provider Relief Fund” (or PRF), and almost immediately after the CARES Act was signed into law, providers’ relief about potential economic stimulus was curbed by their confusion over how the Provider Relief Fund would be administered.

In particular, providers have questioned how to calculate the numbers necessary for their application to receive funds, how to apply if they have undergone a change in ownership and, importantly, what steps to take if a provider receives a potential overpayment.

These concerns are especially important given the potential for False Claims Act (FCA) liability resulting from misuse of federal funds. However, whether the PRF will lead to FCA enforcement is unclear. The federal government invested in banks and the auto industry following the 2008 recession and created antifraud institutions like the Consumer Financial Protection Bureau to police use of the government funds. However, while the government has not instituted antifraud measures to the same degree now, providers should be vigilant in their handling of federal funds, as the government could take measures to combat potential fraud if more information comes to light about misuse.

HHS has not promulgated regulations governing distribution of the PRF and has instead issued sub-regulatory guidance in the form of frequently asked questions (FAQs) and statements on its website. This fact has serious implications regarding whether the government will bring FCA claims against providers related to CARES Act funds. In 2018, then Associate Attorney General Rachel Brand issued a memorandum (Brand Memo) directing Department of Justice (DOJ) attorneys against basing FCA enforcement on violations of sub-regulatory guidance.[1] Although the reach and scope of the Brand Memo are still not fully understood, its existence may serve as a defense in the event that a qui tam or government action is threatened.

Of greater concern is the fact that providers that accept money via the PRF must attest to the accuracy of their application and their use of funds:

The Recipient certifies that all information it provides as part of its application for the Payment, as well as all information and reports relating to the Payment that it provides in the future at the request of the Secretary or Inspector General, are true, accurate and complete, to the best of its knowledge . . . The Recipient certifies that the Payment will only be used to prevent, prepare for, and respond to coronavirus, and that the Payment shall reimburse the Recipient only for health care related expenses or lost revenues that are attributable to coronavirus.[2]

This attestation could provide the government with a clearer avenue for FCA enforcement. Additionally, HHS could seek to offset or otherwise recover funds for incorrect payments outside of the FCA.

The HHS Office of Inspector General (OIG) Work Plan includes numerous items related to the Provider Relief Fund, the CARES Act, and COVID-19 related activities.[3] In August 2020, OIG announced several new Work Plan items including an audit of Provider Relief Funds under the general and targeted distributions to hospitals (described below). Importantly, OIG provides the following objective regarding the Provider Relief Fund audit, which illustrates the Department’s interest in accurate use of government funds: “[o]ur objective is to determine whether providers that received PRF payments complied with certain Federal requirements, and the terms and conditions for reporting and expending PRF funds.”

While the future is unclear, providers are well advised to take protective steps against potential future FCA allegations. The following overview of the PRF, FCA exposure, and disclosure opportunities is a road map for institutions interested in minimizing FCA risk under the PRF program.

The Provider Relief Fund—Background

HHS allocated the PRF into multiple distributions.[4] The “General Distribution” includes $50 billion for providers based on share of 2018 net patient revenue and was distributed in two separate tranches. Approximately $52.5 billion comprises the “Targeted Distribution,” which HHS has directed to different types of providers, including skilled nursing facilities; tribal hospitals, clinics, and urban health centers; rural providers; Medicaid, and Children’s Health Insurance Program (CHIP) providers; safety net hospitals; and hospitals in areas especially affected by the COVID-19 public health emergency (PHE). HHS calls this last distribution the “High Impact Area Fund.”

HHS has issued sub-regulatory guidance primarily in the form of an ever-growing FAQ document.[5] While this document is invaluable because it is one of the few pieces of guidance on this complicated program, it has caused confusion for many providers.

For instance, HHS periodically updates the FAQ document and indicates the date that a question was added or modified in parentheticals. However, if HHS modifies an answer, there is no record of the prior guidance on the website unless a provider saves the previous version of the FAQ document locally. Consequently, providers may be relying on guidance one day and learn the next that the guidance has changed—with no ready way to document the prior guidance upon which they relied. In some cases, guidance has come out after key deadlines have passed.

Providers have also been faced with questions about the calculation of the payments they receive, with few options for raising these concerns. In some cases, providers receive funds directly based on reports submitted previously, and in others they are required to submit additional reports to receive funds. In both cases, providers have reported uncertainty about the amount of funds they received, including concerns that the data relied on were incomplete or that providers did not receive funds for which they were eligible. HHS has stated that there is no appeals or dispute process for Provider Relief Funds.

Another cause of concern is that some of HHS’ guidance pertains to only one of the distributions. For instance, some guidance is specific to funds distributed under the “General Distribution” and other questions address the specific pools of funding in the “Targeted Distribution.” This has left many providers wondering, for example, whether they can rely on guidance about the “General Distribution” when applying similar reasoning to the High Impact Area Fund. Additionally, HHS contracts with UnitedHealth Group to administer the PRF and directs providers to contact UnitedHealth with all questions. However, providers may receive different, and at times even contradictory, guidance from different UnitedHealth representatives, causing further headaches and uncertainty.

Implications of Disclosure

Providers across the country are anxious to take advantage of money received via the PRF, but many are cautious due to the lack of clear guidance. Moreover, providers are facing unique challenges during the COVID-19 PHE and their issues may differ based on whether a provider receives funds via the “General Distribution” or one of the “Targeted Distribution” allocations. Namely, the terms and conditions to which providers must attest differ based on the distribution, and providers must submit different data for the “Targeted Distribution” allocations and “General Distribution” funds.

Some providers who received money via the High Impact Area Fund applied for and received funds based on the limited guidance that existed at the time of application. Some weeks later, after HHS released updated guidance that appeared to contradict or substantially alter the applicable rules, the providers became concerned that they may have miscalculated some of the numbers required for their application. Because of this, providers should maintain detailed and careful records of their reasoning and the facts available to them at the time of their application, and even to notify the government of their actions to demonstrate transparency and forestall FCA allegations. This includes any calls with agencies or their representatives contemporaneously saved and dated with complete names of who at the agency provided guidance.

While other components within HHS and other agencies have clear processes for disclosing potential overpayments relating to specific funding sources or violations, this is not the case with HHS’ Provider Relief Fund, likely because of the urgency with which the agency acted in responding to the economic crisis caused by the COVID-19 PHE.

Despite the wealth of guidance relating to other disclosure protocols, providers have been left in a no man’s land when navigating the PRF and the implications of a self-identified overpayment. Importantly, the decision regarding disclosure is critical because of potential FCA liability. Consequently, providers should think seriously about the potential implications of disclosure when assessing their concerns related to the PRF.

Should Your Institution Disclose a Potential PRF Overpayment?

Given the lack of a clear repayment protocol, providers are left with important choices related to if and how they want to disclose a potential overpayment. This decision is complicated by the fact that HHS’ changing guidance makes it unclear what constitutes an overpayment.

Providers may choose to address an overpayment by simply repaying the money. However, this option may be unattractive because, while HHS has issued guidance stating that providers may keep a suspected overpayment if their total losses related to COVID-19 will exceed the PRF payment, providers must reject all funds if the PRF payment is less than total COVID-19 losses. The agency had reprocessed such full refunds in cases with which we are familiar, but some providers are, understandably, worried that these reprocessed payments might not be made. Needless to say, since it is not at all clear when a provider would receive a “corrected” payment in the future—and providers frequently need these funds desperately to cover the costs of the pandemic—returning the entire payment is not a very attractive or viable option. Some providers have repaid only the “overpayment” portion of the funds notwithstanding HHS guidance, including clear documentation of the calculation.

Alternatively, providers may choose to disclose potential overpayments or questions about calculations via notice to the government seeking confirmation of the provider’s interpretation of the rules. This route may appeal to providers for a few reasons. Disclosure could preserve a government knowledge defense to an FCA allegation, allowing the provider subsequently to argue that the overpayment was not material because the government was on notice but failed to seek an overpayment recovery. Additionally, depending on how a provider goes about disclosing, notice may protect against a qui tam action due to the public disclosure bar, which prohibits a relator from bringing an FCA action based on information that has already been disclosed to the public.

However, what should be disclosed to the government, to whom disclosure should be made, and what means of disclosure should be employed are outstanding questions and each provider’s decision will differ based on their circumstances. Despite the confusion—or perhaps because of it—providers should document all decision-making and supporting materials, including the HHS guidance the provider relied on when applying for and subsequently using CARES Act funds.

Importantly, on September 19, 2020, HHS released guidance establishing the reporting requirements for recipients of PRF funds.[6] Entities that received more than $10,000 in the aggregate through the PRF (except the Nursing Home Infection Control and Rural Health Clinic Testing distributions, and the Health Resources and Services Administration Uninsured Program) must report certain information to HHS including, but not limited to:

1. Health care related expenses attributable to the coronavirus that are not reimbursed by other sources;
2. PRF payment amounts not fully expended on health care related expenses;
3. Lost revenue attributable to coronavirus; and
4. Non-financial data including facility, staffing and patient care metrics, and information on any change of ownership.

In this guidance, HHS significantly modified how providers may calculate “lost revenues.” HHS now defines lost revenues as a year-over-year change in net patient care operating income, which is equal to patient care revenue for the year minus patient care related expenses for the same year. In contrast, HHS previously defined lost revenues as any revenue that a health care provider loses due to coronavirus, but did not incorporate expenses.[7] U.S. senators and hospitals are critical of these reporting requirements, claiming that the revised definitions of lost revenue and expenses could require PRF recipient hospitals to return millions of dollars in funding. Senators and hospitals urged HHS to reverse the change made to the definitions of lost revenues and expenses.[8] In response, HHS revised the September 19, 2020 reporting guidance on October 22, 2020.[9] In this revised guidance, HHS reversed course and provided for the “full applicability [of] PRF distributions to lost revenues.”

Additionally, HHS will be auditing entities that expended more than $750,000 in aggregated federal funds (including PRF funds and other federal financial assistance). HHS indicated that it will release additional guidance related to reporting via question and answer sessions, and answers to frequently asked questions.

We will not know until sometime in the future how enforcement will work where guidance has shifted or conflicted over time as HHS has adapted to the pandemic and responded to scenarios it had not previously considered. The PRF is a complex program and this article only begins to describe the factors that providers should consider when applying for funds, using funds, or reporting a potential error. Because of this, providers should consult with counsel when appropriate.

[1] Memorandum from Rachel Brand, Associate Attorney General, Dep’t of Justice, to the Heads of Civil Litigating Components, U.S. Attorneys, Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases (Jan. 25, 2018), https://www.justice.gov/opa/pr/associate-attorney-general-brand-announces-end-use-civil-enforcement-authority-enforce-agency.

[2] See https://www.hhs.gov/sites/default/files/terms-and-conditions-provider-relief-30-b.pdf.

[3] OIG, Active Work Plan Items, https://oig.hhs.gov/reports-and-publications/workplan/active-item-table.asp.

[4] See https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/index.html.

[5] HHS, CARES Act Provider Relief Funds: FAQs, https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/faqs/index.html.

[6] HHS, General and Targeted Distribution Post-Payment Notice of Reporting Requirements, Sept. 19, 2020, https://www.hhs.gov/sites/default/files/post-payment-notice-of-reporting-requirements.pdf.

[7] See https://www.hhs.gov/sites/default/files/provider-relief-fund-general-distribution-faqs.pdf.

[8] See Tony Pugh, Hospitals at Risk of Lost Pandemic Money Need Help, Senators Say, Bloomberg Law, Oct. 9, 2020, https://news.bloomberglaw.com/health-law-and-business/hospitals-at-risk-of-lost-pandemic-money-need-help-senators-say (subscription required).

[9] HHS, HHS Expands Relief Fund Eligibility and Updates Reporting Requirements, Oct. 22, 2020, https://www.hhs.gov/about/news/2020/10/22/hhs-expands-relief-fund-eligibility-and-updates-reporting-requirements.html.