Qui Tam Quarterly - Uncertain Relief: Navigating Cares Act Provider Relief Fund Guidance and False Claims Act Risks

Qui Tam Quarterly | Novembver 2020 | Uncertain Relief: Navigating CARES Act Provider Relief Fund Guidance and False Claims Act Risks1The speed with which the government has made PPP and PRF payments during the pandemic has raised the specter that certain recipients inside and outside of the health care industry will face substantial civil and criminal enforce-ment risks. In fact, almost immediately after the govern-ment began distributing PPP loans—which were intended to help small businesses continue operating during the pandemic crisis—the U.S. Department of Justice (DOJ) engaged in aggressive criminal enforcement actions across the country against PPP loan recipients for allegedly falsely certifying compliance with PPP loan requirements. Defendants charged to date with PPP-related fraud have allegedly engaged in largely egregious conduct, from inten-tionally misrepresenting the existence of the business that applied for PPP funds to inflating the number of the busi-ness’s employees in order to increase the size of stimulus aid received. Indeed, the DOJ’s enforcement efforts to date surrounding PPP funds have been characterized largely by a focus on “the low-hanging fruit” or those whose alleged conduct makes potential prosecution clear. Continued criminal enforcement against certain PPP recipients and a related wave of significant civil enforcement, primarily through the federal False Claims Act (FCA), is expected throughout the remainder of 2020 and into subsequent years.In contrast to the payment of PPP funds, the PRF likely presents a more nuanced enforcement scenario, particu-larly from a civil and FCA perspective.2 The PRF is aimed at supporting health care-related expenses or lost revenue attributable to the pandemic and assuring that uninsured Americans are able to receive testing and treatment for COVID-19. The government distributed this funding to providers through multiple rounds of general and targeted allocations and reimbursement, amounting to over US$100 billion distributed to health care providers and suppliers to date. To receive PRF funds, providers were required to sign attestations confirming receipt of the funds and certifying compliance with certain terms and conditions (Terms and Conditions). The government also issued PRF Frequently Asked Questions (FAQs) to supplement the Terms and Conditions. Critically, while they are the primary source of provider guidance for use of PRF funds, the FAQs have The COVID-19 pandemic created unprecedented strain on the nation’s health care system and the economy. To combat the economic side of the pandemic’s pervasive impacts, on 27 March 2020, the U.S. Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act,1 which President Donald J. Trump signed into law on the same day. The CARES Act is one of a series of government stimulus packages aimed at buoying the nation’s economy during the pandemic. In particular, the CARES Act includes an extensive US$2 trillion federal aid package, which is composed of a combination of funding for public health programs, tax benefits for businesses and individuals, appropriations for government programs supporting pandemic relief efforts, and other items to help stabilize the economy. As has been well-documented since its inception, the CARES Act has resulted in hundreds of billions of dollars in federal stimulus money being paid to recipients with almost unprecedented speed, largely as a result of the Paycheck Protection Program (PPP) and the Provider Relief Fund (PRF).UNCERTAIN RELIEF: NAVIGATING CARES ACT PROVIDER RELIEF FUND GUIDANCE AND FALSE CLAIMS ACT RISKSBy: John H. Lawrence, Michael D. McKay, Leah D’Aurora Richardson, John C. RothermichQUI TAM QUARTERLYQui Tam Quarterly | Novembver 2020 | Uncertain Relief: Navigating CARES Act Provider Relief Fund Guidance and False Claims Act Risks2often proven unclear, complicated, and shifting since their issuance. The complexities inherent in the Terms and Conditions and the FAQs—coupled with the attestation and certification requirements—create potentially fertile grounds for significant FCA-related enforcement efforts by the government and relators against recipients of PRF funds for years to come.This edition of the Qui Tam Quarterly focuses on the potential FCA risk areas faced by recipients of PRF funds in the health care industry, as well as the potential defenses to FCA actions based on some of the nuances of accepting PRF funds under the Terms and Conditions and related FAQs. It begins by reviewing the key Department of Health and Human Services (HHS) guidance around the PRF to determine which guidance is more likely to result in enforcement activity. It then considers potential defenses to such activity under the FCA, including the extent to which (1) ambiguous or changing guidance and/or regula-tions may create enforcement problems where recipients interpreted the regulations in good faith, (2) the material-ity element may not be satisfied where HHS knows about provider non-compliance with certain guidance require-ments but declines to request reimbursement or initiate an investigation, and (3) the government and relators will be able to establish falsity through relying on the informal and frequently updated FAQ guidance documents. It also considers whether the government may more aggressively move to dismiss qui tam actions brought by relators in marginal cases where a provider appears to have acted in good faith pursuant to the guidelines in the so-called “Granston Memo.”CARES Act Provider Relief Under the CARES Act, the PPP and Health Care Enhance-ment Act,3 and the Families First Coronavirus Response Act,4 the federal government allocated over US$175 billion in payments to be distributed through the PRF to hospi-tals and other health care providers and suppliers on the front lines of the pandemic response. The PRF is aimed at supporting health care-related expenses or lost revenue attributable to the pandemic and assuring that uninsured Americans are able to receive testing and treatment for COVID-19.5 HHS has distributed this funding to providers through multiple rounds of general and targeted allocations and reimbursement to health care providers, including US$50 billion in “General Distribution” funding and over US$52 billion in “Targeted Distribution” funding directed to specific types of providers, including skilled nursing facilities; rural health care providers; Medicaid and CHIP providers; safety net hospitals; tribal hospitals, clinics, and urban health centers; dental providers; and hospitals located in COVID-19 “high-impact” areas. Health care providers receiving distributions and reim-bursement under the PRF must sign attestations confirm-ing receipt of the funds and certifying compliance with certain Terms and Conditions, which vary depending on which distribution is received and retained. HHS also issued FAQs to supplement the Terms and Conditions. The FAQs are particularly important, as they are one of the few guidance documents HHS has issued on the receipt and use of PRF funds. Key compliance obligations under the Terms and Conditions include, among others, the following:• Use of Funds. Recipients must attest that the PRF funds will be used only to prevent, prepare for, and respond to COVID-19, and to reimburse the recipient only for health care-related expenses or lost revenues attributed to COVID-19.• Prohibition on Double-Dipping. Recipients are not permitted to utilize PRF funds to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse. Accordingly, recipients also participating in other federal response programs (e.g., PPP, FEMA emergency response funds) must carefully track that expenses or losses are not claimed twice.• Reporting Requirements. Recipients receiving more than US$150,000 must submit quarterly reports detail-ing certain information on use of the funds. In addition, recipients are required to maintain appropriate records and cost documentation as required by certain regula-tions under 45 C.F.R. Part 75 (Uniform Administrative Requirements, Cost Principles, and Audit Requirement for HHS Awards).• Prohibition on Balance Billing. Recipients are prohib-ited from seeking more than in-network cost-sharing amounts from out-of-network COVID-19 patients for all care for possible or actual cases of COVID-19. This requirement is significant given that out-of-network pro-viders are generally not aware of in-network cost-sharing requirements under insurance plans. • Audit Requirements. Certain nonprofit recipients of PRF funds are subject to single audit requirements under 45 C.F.R. Part 75 (i.e., if it reported annual total federal fund expenditures (including PRF funds) equal to or above US$750,000). Similarly, commercial organiza-tions that receive US$750,000 or more in annual awards must either obtain a financial audit conducted in accordance with generally accepted government audit-ing standards or a single audit under 45 C.F.R. Part 75, Subpart F. Note that this requirement was introduced several months after the first General Distribution alloca-tion and is not included in the Terms and Conditions. Qui Tam Quarterly | Novembver 2020 | Uncertain Relief: Navigating CARES Act Provider Relief Fund Guidance and False Claims Act Risks3• Reporting Requirements. Recipients that receive PRF payments exceeding US$10,000 in aggregate are required to report their use of funds in accordance with guidance issued by HHS in September 2020. • Most notably, the Terms and Conditions state that the listed provisions are not exhaustive and recipients must also comply “with any other relevant applicable statutes and regulations.”It is notable, then, that HHS has not promulgated regula-tions related to the receipt and use of the PRF funds. Moreover, HHS revised the General Distribution Terms and Conditions on multiple occasions as the distributions were being...