Co-authored by Kimberly Hughes Gillespie and Erin S. Whaley at Troutman Sanders

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.

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?

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). This must be done within 30 days of receiving the funds, regardless of whether or not the recipient intends to keep the funds. This means that providers that received the first round of funding on April 10, 2020 have until May 10, 2020 to complete the attestation. Eligible providers that do not intend to keep the funds should indicate as much when completing the attestation. Instructions on how a provider repays funds are still pending.

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?

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.

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.

Reporting Obligations

What are a recipient's reporting obligations to HHS concerning the disposition of Relief Funds?

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.

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.

Originally published 5/04/2020

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.