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Jul 2020
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July 22, 2020

Provider Relief Act and False Claims Liability – Who Knew There Were So Many Strings Attached?

In response to the COVID‑19 pandemic, Congress has allocated $100 billion to the Coronavirus Aid, Relief and Economic Security Act (CARES Act), and another $75 billion through the Paycheck Protection Program and Health Care Enhancement Act. Both allocations direct funding to the health care industry in order to combat the pandemic. The goal is simple: help the health care industry “prevent, prepare, and respond to [COVID‑19.]” 

The U.S. Department of Health and Human Services (HHS) is responsible for distributing the funds through what’s known as the Provider Relief Fund (the “Fund”). Fund payments were separated into “General” distributions and “Targeted” allocations. Importantly, most Fund payments were automatic; providers likely received a check in the mail or a direct deposit into their bank accounts. While this facilitated a quicker distribution of funds, it placed the burden on providers who did not wish to retain the funds to formally reject the payment within 90 days. 

The Fund has provided much needed economic relief to those hit hardest by the pandemic. According to data available on the Center for Disease Control and Prevention’s website, 8,519 Michigan providers had received Fund payments as of July 15, 2020. The payments are grants, not loans or advancements, and do not have to be repaid if terms and conditions are met. When the Fund was unveiled, the White House announced that there were “no strings attached” and that providers may spend the money in “any way that they see fit.” 

In reality, there are strings attached. Specifically, health care providers who retain Fund money must sign an attestation. Not only does the attestation require providers to certify that they received the money, but significantly, it requires providers to agree to HHS’s terms and conditions, which include requirements on how funds are used, documentation and reporting obligations. For instance, the terms and conditions applicable to the general disbursement of funds include the following requirements, among others: 
 
  • Recipients must certify that the payment will only be used to “prevent, prepare for, and respond to the coronavirus.”
  • Recipients must also certify that the payment “shall reimburse the Recipient only for health care related expenses or lost revenues that are attributable to the coronavirus.”
  • Recipients must maintain appropriate records and cost documents as described in the terms and conditions to substantiate the reimbursement of allowable costs.
  • Recipients must agree to “fully cooperate” in audits.
  • Within 10 days after the end of each calendar quarter, entities that received more than $150,000 total in funds must submit a report to the HHS Secretary, as detailed by HHS.
  • Recipients must certify 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.”

Retention of funds for at least 90 days, without contacting HHS concerning remittance, will be deemed acceptance of HHS’s terms and conditions. 

If the requisite attestation does not cause one to pause, it should. Falsely certifying to HHS’s terms and conditions, or failing to document how the funds are being used, may require repayment or trigger a fraud investigation, potentially resulting in legal action under the federal False Claims Act (FCA). In general, the FCA prohibits parties from knowingly submitting or causing the submission of a false claim to the government. The FCA also prohibits what’s known as “reverse” false claims, i.e., failing to timely return an overpayment to the government. FCA violators may be subject to both criminal prosecution and civil claims. Civil fines are steep, ranging from $11,463 to $23,331 per claim. Persons who violate the FCA are also liable for three times the damages incurred by the government. In the FCA context, whistleblowers, known as relators, who initiate FCA actions on the government’s behalf are entitled to share in a portion of the recovery, plus attorneys’ fees, and are, therefore, incentivized to expose suspected fraud. Relators can come from anywhere, but most often, they are insiders with intimate knowledge about a facility or provider (e.g., employees and even executives in some instances). Finally, several states, including Michigan, have enacted their own version of a false claims statute. 

The Fund’s terms and conditions set the stage for future FCA actions. They warn that “any deliberate omission, misrepresentation, or falsification of any information contained in [the] Payment application or future reports may be punishable by criminal, civil, or administrative penalties, including but not limited to revocation of Medicare billing privileges, exclusion from federal health care programs, and/or imposition of fines, civil damages, and/or imprisonment.” HHS states in no uncertain terms that there “will be significant anti-fraud and auditing work done by HHS, including the work of the Office of the Inspector General.” Nevertheless, health care providers feeling the pressure may have accepted the Fund money in haste without fully understanding the potential implications. 

So what should Fund recipients do to avoid criminal, civil and administrative penalties? Here are a few things to consider: 
 
  • Confirm your eligibility. As noted above, Provider Relief Fund payments are disbursed through both “General” and “Targeted” distributions. Fund recipients should exercise caution and ensure they qualify for the distribution. Eligibility will vary depending on the distribution type and the applicable terms and conditions stated by the qualification requirements. HHS’s FAQs provide additional guidance on eligibility. In making a determination that you are eligible, you should document your rationale and support for the decision. It may be months or years before questions are asked, and having documentation may prove vital in combating any future doubt. If you received money but do not know if you qualify, you should promptly seek guidance. Failure to return the payment within 90 days of receipt is deemed acceptance of HHS’s terms and conditions. 
  • Don’t just read the applicable terms and conditions, understand them. There are nearly a dozen different sets of terms and conditions depending on the distribution type. The time it takes to read and, most importantly, understand the terms and conditions is time well spent. Failing to comply with the terms and conditions or making false certifications may result in administrative, civil and/or criminal penalties, and risks disenrollment in federal health care programs. If you do not understand any terms or need clarification, seek guidance promptly. 
  • Use Fund money only for qualifying expenses. As noted above, the terms and conditions require the recipient to certify that the payment will only be used to “prevent, prepare for, and respond to coronavirus” and also state that the payment “shall reimburse the Recipient only for health care related expenses or lost revenue that are attributable to coronavirus.” To ensure compliance, recipients should expect to be audited and should be prepared to “submit documents sufficient to ensure that these funds were used for health care related expenses or lost revenue attributable to the coronavirus.” Facilities and providers should implement controls to ensure the funds are spent appropriately and consider creating a ledger or system to separately track Provider Relief Fund payments and the expenses and reimbursements for which the funds are used. If you are unsure of your reporting obligations or document retention obligations, seek guidance. 
  • Exercise caution when relying on HHS’s FAQ page. HHS publishes an ever-growing list of FAQs on its website concerning the Fund. These FAQs provide useful guidance on many subjects. However, some guidance is murky. Also, FAQs are subject to change at any given moment, and when guidance is updated, HHS neither states what has been specifically changed nor provides older versions of the page. As a result, providers who relied on a previous version of the FAQs may later discover that guidance has changed. Accordingly, providers should exercise caution when relying on FAQs and should regularly monitor the FAQs for updates and changes. 

The key to avoiding pitfalls that may result in fraud allegations is exercising due diligence and seeking guidance when needed. Providers must monitor new developments and understand and comply with the applicable terms and conditions. Audits are inevitable; providers should prepare accordingly by maintaining proper documentation and satisfying all reporting obligations. 

Warner Norcross + Judd’s health care team understands your ever-changing industry, and we are ready to help you navigate health care fraud and abuse laws and regulations that apply in implementing your business goals. Additionally, our health care litigation team will guide you through the entire litigation process, from pre‑dispute strategy planning to resolution. If you would like to discuss the Fund or any other health care related issues, please contact Katherine Pullen, Alan Rogalski, Jeff Segal or any other member of our Health Law or Health Care Litigation Practice Groups. 

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