CARES Act Relief: Conditions, Compliance, and Potential Whistleblower Complaints
Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act), the Coronavirus Preparedness and Response Supplemental Appropriations Act, and the Families First Coronavirus Response Act all provide funds to healthcare providers. In applying for funds under these Acts, the HHS has set up “Relief Fund Payment Terms and Conditions.” As with any government grant program, compliance with the terms and conditions form the basis of the government’s eventual evaluation of any complaint it may receive or any audit it may conduct regarding the healthcare provider’s use of the grant funds.
The Terms and Conditions
The terms and conditions for relief fund payment include both conditions specific to the emergency funds and those more general conditions generally associated with government grants. In a departure from the usual certification rules, the “terms and conditions” are deemed “accepted” if the healthcare provider retains the payment for 30 days without contacting HHS regarding remittance of the funds. This is a recognition that the healthcare provider may either anticipate losses that never occur (because the effect of the pandemic is not as great as anticipated) or “overshoot” the amount actually needed in its request for funds. The HHS gives such a provider a 30-day period that the amount it received is more than it needs for allowable reimbursable costs without being bound by the terms and conditions.
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The specific terms include the following:
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The healthcare provider must be a Medicare provider and not excluded from participation; it must have billed Medicare in 2019; and it must have provided “diagnoses, testing, or care” for individuals with possible or actual cases of COVID.
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The healthcare provider must use the funds only to “prevent, prepare for, and respond to coronavirus” and the funds shall be used only for health care related expenses or lost revenues that are attributable to coronavirus.
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The healthcare cannot use the funds to reimburse for expenses or losses that other sources are obligated to reimburse.
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For those who receive over $150,000 in funds, a quarterly report must be submitted to the Secretary of HHS and the Pandemic Response Accountability Committee within ten days of the ending of each quarter.
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The healthcare provider shall maintain sufficient records and documentation to substantiate the costs incurred.
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The healthcare provider cannot collect from a patient tested or treated for COVID-19 any out-of-pocket expenses greater than what the patient would have otherwise been required to pay if the care had been provided in-network.
The more general terms include many standard provisions that are likely not a concern of healthcare providers, but notable terms include:
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None of the funds can be used to pay salaries in a rate in excess of Executive Level II.
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None of the funds may be made to an entity that requires employees or contractors to sign confidentiality agreements that prohibit or restrict them from reporting fraud, waste, or abuse.
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The funds cannot be used to satisfy an unpaid federal tax liability.
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The funds cannot be given to any corporation convicted of criminal liability.
The HHS encourages the reporting of fraud, waste, and abuse in the relief money granted.
Grant money is often abused because the conditions are often broad, as they are here. This is even more true in emergency cases, as the government’s response is aimed at casting a wide net of relief. In such cases, the government relies heavily on whistleblowers to police the improper use of funds. Here is a bare bones, non-exclusive is of the sort of things we’ll likely see reported by whistleblowers:
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The low hanging fruit. These are the actual fraudulent claims—i.e., a healthcare provider who treats few or no COVID-19 patients who receives funds, or a provider who receives a lot more funds that it would ever need. These will go straight to criminal investigation. (This would also likely include a lot of grants at or below the $150,000 benchmark to scrutiny associated with the quarterly reporting.)
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The retention of funds. A provider unintentionally “overshoots” the mark on funds needed, but does not realize this until some time later. It is hard to give back free money, so the provider inflates losses and/or other documentation in its reports.
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Hidden salaries/profit. This is creative accounting at its best. While not “low hanging fruit” because of the complexity of the accounting involved, this could end up on the criminal side if the loss to the government is egregious enough, or the misrepresentation is knowing/intentional.
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Covering existing losses/debts. The funds can only be used to cover “losses attributable to coronavirus.” Any amount used to pay a past debt would likely be highly suspect. The more creative the accounting, the more suspect it will be.
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Stretching the definition of “attributable losses.” Granted, although the parameters are not well defined, the government will likely be satisfied with a plausible and well documented attribution of loss. The farther away from the pandemic, the less likely the loss will be attributable to coronavirus.
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Stretching the definition of “treatment of coronavirus.” This will also likely be given broad interpretation. But some may become creative. For example, merely mentioning “coronavirus preventative measures” where the encounter was not motivated by testing, diagnoses, or treatment is suspect, to say the least.
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Out-of-pocket limitation violation. Someone will do this and it will be reported.
Non-compliance Lasts Forever (or almost)
The improper retention of funds is a difficult issue, especially since it is difficult to predict the course of the pandemic. Also problematic is the fact that the HHS gives 30 days to return funds, but it will take providers more than 30 days to accurately assess their real losses. Because of this, it has the potential to haunt providers through a False Claims Act whistleblower suit up to 10 years after the date of the allegedly improper retention. Further, a false or fraudulent act may occur each time an improperly retained fund is used for a non-sanctioned purpose, which also could extend a provider’s potential exposure to suit for years and years to come.
Further, providers must be careful to not let compliance slip in general. Many of the claims that we will see will either be comprised exclusively of, or include, claims unrelated to relief funding, such as improper billing/upcoding, medical necessity, excluded personnel (especially difficult to monitor with the hiring of workers during the emergency), Stark law violations, Anti-Kickback violations, etc.
Finally, it is important to remember that many whistleblower complaints are ultimately dismissed, not because the whistleblower was lying, but because the whistleblower was mistaken or misinformed. Even with the unsupported claim, the provider will run up expenses in responding to audits, subpoenas, and the defense of a suit. The best defense is a well-documented, on-message system of compliance that is effectively communicated throughout the organization.
