Locke Lord QuickStudy: CARES Act Provider Relief Fund Releases $30 Billion in Payments: What’s the Catch?

Locke Lord LLP
April 16, 2020

On April 9, 2020, the Centers for Medicare and Medicaid Services (CMS) began the distribution of $30 billion appropriated by the bipartisan CARES Act to Medicare and Medicaid providers and suppliers – with most payments arriving via direct deposit.  CMS Administrator Seema Verma made it clear that these are payments, not loans, to healthcare providers and suppliers and will not need to be repaid.

The $30 billion allocation is part of the $100 billion appropriated under the CARES Act to the Public Health and Social Services ‎Emergency Fund to be provided to hospitals, physicians, and other healthcare providers and suppliers on the front ‎lines of the coronavirus response.  Congress intended that the Emergency Fund be used, among other ‎purposes, to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ‎ensure uninsured Americans can get testing and treatment for COVID-19.‎

The Money

All providers and suppliers that received Medicare fee-for-service reimbursements in 2019 are eligible for this initial rapid distribution.  Payments to practices that are part of larger medical groups will be sent to the group's central billing office.  All relief payments are made to the billing organization according to its Taxpayer Identification Number (TIN).

The emergency funds are being distributed in proportion to each recipient’s share of total Medicare fee- for-service reimbursements in 2019.  Medicare Advantage payments will not be taken into account.

Providers or suppliers can estimate their payment by multiplying their 2019 Medicare fee-for-service payments (not including Medicare Advantage) by .06198 (that is, by 6.198%).  Providers and suppliers can obtain their 2019 Medicare fee-for-service billings from their organization's revenue management system.

The Department of Health and Human Services engaged UnitedHealth Group to provide rapid payment to providers eligible for the distribution of the initial $30 billion in funds.  United has paid providers and suppliers using via Automated Clearing House account information already on file with United or CMS, except that providers and suppliers who normally receive a paper check for reimbursement from CMS will receive a paper check in the mail for this payment as well.

The Attestation
Within 30 days of receiving the payment, providers and suppliers must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment. The portal for signing the attestation is now open,

HHS has stated that payment of this initial tranche of funds is conditioned on the recipient’s acceptance of the Terms and Conditions – PDF, acceptance of which must occur within 30 days of receipt of payment.  The Terms and Conditions (the “Terms”) fall into two categories:  (1) Terms related to the CARES Act and (2) Terms unrelated to the CARES Act.

If a provider or supplier receives payment and does not wish to comply with these Terms and Conditions, they must contact HHS within 30 days of receipt of payment and then remit the full payment to HHS as instructed.  HHS has stated that it will provide appropriate contact information soon.

Category 1:  Terms Related to the CARES Act

The first seven Terms are clearly related to the purposes of the CARES Act or are related to the administration of the Fund by HHS:

  • The Recipient certifies that it billed Medicare in 2019; provides or provided after January 31, 2020 diagnoses, testing, or care for individuals with possible or actual cases of COVID-19; is not currently terminated from participation in Medicare; is not currently excluded from participation in Medicare, Medicaid, and other Federal health care programs; and does not currently have Medicare billing privileges revoked.

  • The Recipient certifies that the Payment will only be used to prevent, prepare for, and respond to coronavirus, and shall reimburse the Recipient only for health care related expenses or lost revenues that are attributable to coronavirus.

  • The Recipient certifies that it will not use the Payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.

  • The Recipient shall submit reports as the Secretary determines are needed to ensure compliance with conditions that are imposed on this Payment, and such reports shall be in such form, with such content, as specified by the Secretary in future program instructions directed to all Recipients.

  • Not later than 10 days after the end of each calendar quarter, any Recipient that is an entity receiving more than $150,000 total in funds under the Coronavirus Aid, Relief, and Economics Security Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act, the Families First Coronavirus Response Act, or any other Act primarily making appropriations for the coronavirus response and related activities, shall submit to the Secretary and the Pandemic Response Accountability Committee a report. This report shall contain: the total amount of funds received from HHS under one of the foregoing enumerated Acts; the amount of funds received that were expended or obligated for reach 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 sub-contracts or subgrants awarded by the covered recipient or its subcontractors or subgrantees.

  • The Recipient shall maintain appropriate records and cost documentation to substantiate the reimbursement of costs under this award. The Recipient shall promptly submit copies of such records and cost documentation upon the request of the Secretary, and Recipient agrees to fully cooperate in all audits the Secretary, Inspector General, or Pandemic Response Accountability Committee conducts to ensure compliance with these Terms and Conditions.

  • For all care for a possible or actual case of COVID-19, 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 have otherwise been required to pay if the care had been provided by an in-network Recipient.  How this applies to uninsured recipients is unclear.

While some of these conditions impose burdens on the recipients of funds, each of them either reflects language in the CARES Act, or bears an ascertainable relationship to its purpose. 

Category 2:  Terms Unrelated to the Cares Act

The second category of Terms are not in the CARES Act, but are drawn from the Fiscal Year 2020 Consolidated Appropriations Act.  These Terms, drawn from the 2020 appropriations act, are not contained in the CARES Act and bear no relationship to its purposes.  These additional Terms purport to bear on the permitted uses of the funds received by providers and suppliers.   For example, the additional Terms would appear to bar the use of any funds to pay salaries above $219,200 annually, bar the use of funds in contravention of the Privacy Act (a law that applies only to government agencies) or for the procurement of wild chimpanzees.  A full list of the Terms drawn from the 2020 Appropriations Act can be found here.

Notably, the Terms drawn from the 2020 Consolidated Appropriations Act were not incorporated ‎into the CARES Act, which is itself an appropriations bill.  This calls into question whether these additional Terms are even applicable.  Further, appropriations bills are used by Congress to authorize spending and to direct the executive branch on specific conditions on spending.  The U.S. Supreme Court has ruled that an appropriations bill should not be read as impliedly changing existing substantive law unless Congress clearly says so.  Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978).  The enforceability of these additional Terms is far from clear.

We will continue to monitor HHS for further guidance on the Terms that apply to recipients of these funds.

Best Practices

Providers and suppliers should account for the uses of the funds (including reimbursement of prior losses and expenses relating to COVID-19) in accordance with the Terms.  Reports should be filed on a timely basis and records should be retained.  Patients who have, or might have, COVID-19 should not be balance-billed for COVID-19 related services even if they are out of network.  Further guidance can be expected for reimbursement for uninsured patients by the federal or state governments. 

Reverse False Claims

While the payments did not arise from filing claims with the federal government, reverse false claims liability could apply to the improper retention of funds received under the CARES Act or the filing of false reports.  Further, the sixty day overpayment rule under the Affordable Care Act might well apply to overpayments.  If a recipient of funds cannot document COVID-19 related expenses or losses, it should consult with counsel to determine next steps.

Your Locke Lord contacts and the authors of this article would be happy to help you navigate the CARES Act and its implications for the health care industry

Visit our COVID-19 Resource Center often for up-to-date information to help you stay informed of the legal issues related to COVID-19.