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Insight Center: Publications

FAQs - CARES Act Provider Relief Fund for Health Care Providers

Updated May 26, 2020

Authors: Henry C. Fader, Kimberly Hughes Gillespie, Jan P. Levine, Callan G. Stein and Erin S. Whaley

5/04/2020
FAQs - CARES Act Provider Relief Fund for Health Care Providers

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, allocated $100 billion to the Provider Relief Fund (Relief Fund) designated for hospitals and other health care providers on the front lines of the coronavirus response. The CARES Act allocated $50 billion for general distribution to Medicare facilities and providers impacted by COVID-19. Ten billion dollars was provided to rural acute care general hospitals and Critical Access Hospitals (CAHs), Rural Health Clinics (RHCs), and Community Health Centers located in rural areas, and another $10 billion was given to High Impact Areas. To be eligible for a High Impact payment, hospitals and health systems had to provide inpatient care for at least 100 COVID-19 patients by April 10, 2020.

Providers across the country received the first round of Relief Fund payments on April 10, including all facilities and providers that received Medicare fee-for-service (FFS) reimbursements in 2019. Facilities and providers received the second round of Relief Fund payments on April 24 based on their 2018 cost report data. Additional distributions from the Relief Fund will be allocated to hospitals in areas that were particularly impacted by the COVID-19 outbreak, rural health clinics and hospitals, and Indian Health Service facilities. An unspecified amount will also be made available to reimburse skilled nursing facilities, dentists, and providers that serve only Medicaid patients and those that serve uninsured individuals.

Although these payments are very much welcomed by health care facilities and providers, due to the rapid rollout of the CARES Act and the even more rapid disbursement of the Relief Fund payments, many recipients received the funds in their accounts before fully understanding the scope of the program and, more importantly, the requirements that come along with keeping money from the Relief Fund. Below we offer some general guidance in response to questions regarding the CARES Act Relief Fund payments, but we want to caution providers that in many instances you will want to seek legal and accounting advice specific to your facts and circumstances.

We will continuously update this information as new guidance is provided.

Overview of the CARES Act and Relief Fund Payments

Eligibility for Payments from the Relief Fund

What requirements must a provider or facility satisfy in order to be eligible to receive funds under the Relief Fund?

The CARES Act defines an “eligible health care provider” to include “public entities, Medicare or Medicaid enrolled suppliers and providers, and such for-profit entities and not-for-profit entities not otherwise described in this proviso as the Secretary may specify, within the US (including territories), that provide diagnoses, testing or care for individuals with possible or actual cases of COVID-19.” In addition to falling within this definition, to receive payments from the Relief Fund, a health care facility or provider must (1) sign an HHS attestation, (2) satisfy all of the outlined terms and conditions, and (3) submit all required financial documentation. These requirements are discussed in more detail below.

Does a recipient have to repay amounts it receives from the Relief Fund in either the first or second round of disbursements?

No. HHS has said that the Relief Fund payments are intended to reimburse health care providers that have been economically disadvantaged by incurring expenses as a result of caring for patients with COVID-19 and the stoppage of elective procedures due to the pandemic. If providers satisfy all of the terms and conditions of the attestations, they will not have to repay the funds. However, HHS has indicated its clear intent to vigorously monitor the use of these funds, including by conducting audits. Providers should strictly adhere to all reporting, recordkeeping and other requirements to ensure they are prepared to satisfy the audit requirements and avoid having to repay the funds (and other penalties).

Is a recipient permitted to receive and use Relief Funds if it also received financial assistance under another CARES Act program (e.g., the Paycheck Protection Program or an Economic Injury Disaster Loan)?

Yes. The receipt of a Paycheck Protection Program loan (or other Small Business Administration loan) does not prohibit a health care facility or provider from validly receiving Relief Funds. However, a facility or provider may not use Relief Funds “to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.” Therefore, because a recipient of Relief Funds may only count expenses once across the various COVID-19 relief fund programs, it cannot use Relief Funds to pay, for example, “payroll costs” accounted for by another loan. The Provider Relief Fund is also the “payer of last resort.” When considering these issues, you will want to seek advice from your legal and accounting advisers.

Attestation to the Terms and Conditions

Is a recipient required to certify its compliance with the terms and conditions? What if the recipient does not intend to keep the money? (Updated May 26, 2020)

Yes. All facilities and providers that receive Relief Funds must complete the attestation online and agree to the terms and conditions of the program (https://covid19.linkhealth.com/#/step/1). The timeframes for responding have changed several times, but, at this time, providers must respond by July 9, 2020 if they received a payment on April 10, 2020 and by July 23, 2020 if they received a payment on April 24, 2020. For payments made to skilled nursing facilities on May 22, 2020, the facilities must complete the attestation by August 20, 2020. For providers that wish to receive additional payments from the Relief Fund, they must accept the terms and conditions and submit revenue information in support of their request by June 3, 2020. Because there have been so many changes in regard to these deadlines, we strongly recommend that providers monitor the HHS website for future updates.

If a recipient believes it received a payment in error, or will not have COVID-19 related lost revenues or increased expenses equal to or in excess of the amount of the relief payment, it should reject the entire amount and submit revenue documentation through the General Distribution portal to initiate a correct payment amount.

If multiple offices/entities that are within the same system or otherwise affiliated receive Relief Funds, must each file its own separate attestation to the terms and conditions?

Yes. Every health care facility and provider that receives Relief Funds must separately complete the attestation and certify compliance with the terms and conditions. This is also true if a facility or provider receives Relief Funds in both the first and second rounds of disbursements, as the terms and conditions are slightly different.

What happens if a recipient falsely certifies its compliance with the terms and conditions, or after so certifying, uses the Relief Funds in a noncompliant manner?

Falsely certifying or attesting compliance with the terms and conditions can result in serious civil and even criminal penalties. HHS has not yet announced any specific processes for investigating or auditing a recipient’s compliance, but there is no doubt that HHS and the Department of Justice will pay close attention to ensure the Relief Funds are used for proper purposes and only by those eligible to receive them. The penalties for violators may include any one or combination of the following:

  • requiring the facility/provider to pay back all or a portion of the Relief Funds

  • imposing civil monetary penalties

  • excluding the facility/provider from participation in Medicare, Medicaid and other government health care programs

  • civil and criminal prosecutions for fraud under the federal False Claims Act.

Permitted Uses of Relief Funds

What costs may a recipient pay using Relief Funds? (Updated May 12, 2020)

A recipient may only use Relief Funds “to prevent, prepare for, and respond to coronavirus,” and the Relief Funds may “reimburse the Recipient only for health care related expenses or lost revenues that are attributable to coronavirus.” In its “General Distribution Portal FAQs,” HHS clarified how lost revenues could be estimated, but the agency has not yet commented on what expenses will count. Providers may calculate their lost revenue by comparing their actual March and April revenue to a reasonable estimate of what it would have been had COVID-19 not appeared. Regardless of how providers estimate their lost revenue, it is imperative that they carefully track and document all expenses and lost revenue related to COVID-19. When considering these issues, you will want to seek advice from your legal and accounting advisers.

HHS plans to implement strong antifraud monitoring and will exercise its audit right to ensure payments are used in accordance with the terms and conditions outlined in the attestations and that those expenses/losses were not reimbursed from another source (e.g., a PPP loan) or obligated to be reimbursed by another source (e.g., insurance). Amounts received in error or in excess may be subject to recoupment. Recoupment might be made without notice to the recipient.

How does a recipient identify and document the funds that it used to “prevent, prepare for, and respond to coronavirus” and that it reimburses itself for “health care related expenses or lost revenues that are attributable to coronavirus”?

HHS has not provided direction related to these questions, so the specifics remain unknown. However, in its “General Distribution Portal FAQs,” HHS indicates that it will “broadly view every patient as a possible case of COVID-19.”

The terms and conditions of the attestation also require recipients to submit general revenue data for calendar year 2018 when applying for a payment or within 30 days of receiving a payment. Recipients must also submit quarterly reports to HHS and the Pandemic Response Accountability Committee if they receive more than $150,000 across all the Acts making appropriations for the coronavirus response and related activities. These reports are due within 10 days of the end of a calendar quarter and must include the following information:

  • the total amount of funds received from HHS under one of the Acts

  • the amount of funds received that were expended or obligated for a project or activity

  • a detailed list of all projects or activities for which large covered funds were expended or obligated, including: the name and description of the project or activity, and the estimated number of jobs created or retained by the project or activity, where applicable; and detailed information on any level of subcontracts or subgrants awarded by the covered recipient or its subcontractors or subgrantees, to include the data elements required to comply with the Federal Funding Accountability and Transparency Act of 2006 allowing aggregate reporting on awards below $50,000 or to individuals, as prescribed by the Director of the Office of Management and Budget.

What documentation must a recipient maintain related to its use of the Relief Funds?

Recipients are required to maintain “appropriate records and cost documentation.” This includes, as applicable, documentation described in 45 C.F.R. § 75.302 (Financial Management and Standards for Financial Management Systems) and 45 C.F.R. §§ 75.361-365 (Record Retention and Access). A recipient should be extremely inclusive in what documentation it maintains, as future program instructions may include additional requirements for what is needed to substantiate reimbursement costs. When considering these issues, you will want to seek advice from your legal and accounting advisers.

Forbidden Uses of Relief Funds

Are there any specific exemptions for which Relief Funds may not be used?

Yes. The terms and conditions contain a list of specific items that may not be paid with Relief Funds. This list includes, but is not limited to, prohibiting the use of Relief Funds to pay for:

  • individual salaries in excess of $197,300 (Executive Level II)

  • most lobbying activities

  • except in limited circumstances, abortions or health benefits that include coverage for abortions

  • creating human embryos for research or research in which human embryos or destroyed

  • activities that promote the legalization of Schedule I controlled substances

  • contracts, grants or cooperative agreements with any entities that seek to prohibit or restrict employees from reporting waste, fraud and abuse

  • contracts, memoranda of understanding, cooperative agreements, grants, loans or loan guarantees to a corporation that has unpaid federal tax liability.

If an entity or provider within a recipient organization provided abortions in the past and expects to continue doing so in the future, does that prevent the recipient from attesting to the terms and conditions?

Not necessarily. The terms and conditions explicitly prohibit the use of Relief Funds and any other funds in any trust fund to which Relief Funds are appropriated to be expended on abortions, subject to two specific exceptions: (1) where the pregnancy is the result of an act of rape or incest or (2) in the case where a woman suffers from a physical disorder, physical injury or physical illness that places her life in danger unless an abortion if performed. However, this does not prohibit the use of state, local or private funds to perform abortions or provide health benefits coverage that includes abortions.

Do the limitations on the uses of Relief Funds exclude specialty practices that, for example, primarily perform elective procedures and have been closed for part of the pandemic from receiving and/or retaining Relief Funds? (Updated May 25, 2020)

HHS has issued clarification that providers that ceased operations as a result of COVID-19 are still eligible for Relief Funds as long as the provider “provides or provided after January 31, 2020, diagnosis, testing, or care for individuals with possible or actual cases of COVID-19” and the use of the funds is to “prevent, prepare for, and respond to coronavirus” and reimburse it for “lost revenues that are attributable to coronavirus.” HHS has indicated that it will “broadly view every patient as a possible case of COVID-19.” Like all recipients of Relief Funds, the provider will need to fully satisfy all of the other requirements in the terms and conditions and ensure it has documentation and appropriate records to support the claim.

Reporting Obligations and Publication

What are a recipient’s reporting obligations to HHS concerning the disposition of Relief Funds? (Updated May 12, 2020)

Recipients that receive more than $150,000 in total funds under the CARES Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, or any other coronavirus act are required to make quarterly reports to HHS and the Pandemic Response Accountability Committee. These reports must be submitted within 10 days of the end of each quarter, and must include the following:

  • total amount of funds received from HHS

  • amounts expended or obligated to each project or activity

  • detailed list of all projects or activities for which Relief Funds were used

  • detailed information on subcontracts or subgrants awarded.

All recipients will be required to comply with the reporting requirements described in the terms and conditions as well as any future directions issued by the HHS Secretary. Recipients that received $150,000 or more must begin reporting for the calendar quarter ending June 30. HHS has said it will issue future guidance on the type of documentation recipients are expected to provide.

Will a recipient’s financial information that it includes in a report to HHS become public? Can a recipient access its competitor’s information (and vice versa)?

The attestation required for the second distribution of Relief Funds requires a recipient to consent to HHS publicly disclosing its payment information. This “may allow some third parties to estimate the Recipient’s gross receipts or sales, program service revenue, or other equivalent information.” This information may also be subject to FOIA or other public records laws, though it is not clear at this time whether HHS would assert an exemption to prevent disclosure of the information.

In addition, once a provider attests to receiving Provider Relief funds and agrees to the terms and conditions, HHS will post its name and corresponding payment amount. Those that keep the funds, but do not attest to receipt and accept or reject the terms and conditions within 45 days, are deemed to have agreed and will be included. The list will be updated biweekly.

Will the tax returns of a provider that submitted its tax identification number and last filed tax return as part of the attestation process for Targeted or General Distributions be made available to the public or our competitors?

It is not clear at this time why HHS required the filing of tax returns in connection with the attestation and acceptance process. However, that HHS required the submission of that information should not necessarily be read as an endorsement of releasing it publicly, as there are other, more innocuous reasons for HHS to require this information. One such reason was very likely to verify the level of revenues received by the taxpayer identification number used to receive a Provider Relief Fund payment. In addition, HHS might also find it useful to have the information in the event of any audit of the use of the payments that might be conducted for any Provider Relief Funds received by that particular provider.

Balance Billing

When attesting to compliance with the terms and conditions for the Provider Relief Fund payments, are providers prohibited from billing patients for out-of-network charges for any diagnoses during the national emergency?

The terms and conditions impose a limitation on balance billing that applies only to those patients who have presumptive or actual cases of COVID-19. It is not necessary to have an in vitro diagnostic test result in the medical record to back up the determination of a presumptive or actual case of COVID-19. The prohibition on balance billing does not apply to other treatments or diagnoses for a patient’s other medical conditions.

What portion of the patient’s bill are providers prohibited from sending to the patient to be paid by the patient?

If the patient had a presumptive or actual case of COVID-19, the provider that received the Provider Relief Fund payments may not bill for out-of-pocket expenses in excess of the charges typically billed by an in-network provider for the treatment and care given. The exclusion applies to deductibles, co-payments or balance billing generally. To the extent the patient has multiple diagnoses, those charges related to the non-COVID-19 services would not be subject to this limitation.

How does a provider determine the appropriate in-network rate to properly charge the patient?

Most health insurers, including Medicare, have announced that in-network rates will apply to all patients with presumptive or actual cases of COVID-19. If a health insurer refuses to pay for a patient given treatment by a provider receiving Provider Relief Payments that provided care to a presumptive or actual COVID-19 patient, the provider may only bill the patient at the known in-network rate for that carrier. Calculating the appropriate in-network rate may, however, be challenging if there is no contractual relationship with that particular carrier.

Additional Relief Fund General Distribution

How does a provider receive additional payments from the Provider Relief Fund $50 billion General Distribution?

All providers that automatically received an additional General Distribution payment prior to April 24, 2020 have until June 3, 2020 to provide HHS with documentation to support an additional payment. If the provider’s initial automatic payment was less than 2 percent of the provider’s net patient revenue for 2018 (or the most recent complete tax year) or the sum of the provider’s incurred losses for March and April 2020, then the provider may receive additional General Distribution payments. To apply for this additional payment, the provider must submit its “Gross Receipts or Sales” or “Program Service Revenue” from its federal income tax return; estimated losses in March 2020 and April 2020 due to COVID-19; a copy of the provider’s most recently filed federal income tax return; and a listing of any tax identification numbers for any of the provider’s subsidiaries that received relief funds but do not file separate tax returns.

Can a provider include losses from May to June 2020 that reflect decreased volumes in March to April 2020?

The application for additional payments requires the provider to estimate its losses in March and April 2020. For many providers, the loss of volume in March and April 2020 will not be reflected in decreased revenue until May or June 2020 because of the nature of the revenue cycle. At this point, HHS has not provided guidance on how to account for this revenue cycle timing issue in the calculation of losses. Providers should consult their financial and legal advisers to discuss reasonable mechanisms for estimating this loss.

Does each of a provider’s subsidiaries have to apply for an additional payment from the Provider Relief Fund?

If the subsidiary received an automatic distribution from the Provider Relief Fund and filed its own federal income tax return for 2017, 2018 or 2019, the subsidiary does have to submit its own application for an additional distribution. If the subsidiary did not file its own tax return, then its revenue and loss information can be incorporated into the parent provider’s application for additional relief funds. Regardless, HHS also clarified that a parent organization is permitted to accept and allocate its own distribution from the Provider Relief Fund to its subsidiaries, subject to the restrictions on how the funds may be used (set forth in the terms and conditions) and substantiation requirements.

How does a change in ownership impact a provider’s ability to receive additional payments from the Provider Relief Fund?

On May 20 and 21, HHS published eight new FAQs that address various change of ownership scenarios. These FAQs demonstrate that this is a particularly complicated and fact-dependent area. If you are a provider that was involved in a merger, sale or acquisition in 2019 or 2020, consult your legal and financial advisers on your specific situation and ability to retain payments or seek additional payments in connection with the practice involved in the transaction.

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.

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