Legal Alert

Compliance With CARES Act Provider Relief Fund Terms and Conditions Is Imperative

by White Collar Defense/Internal Investigations Group
April 27, 2020
Allocation of funds under the CARES Act Provider Relief Fund commenced on April 10, 2020, to address the economic impact of the pandemic on the U.S. healthcare system, including the heroic providers battling COVID-19.

$26 billion was distributed on April 10 proportionate to providers’ shares of Medicare fee-for-service reimbursements in 2019, and another $4 billion was distributed on April 17. HHS began additional distribution of $20 billion on April 24. You can read about what eligible providers should know in accepting these funds here, “CARES Act Health Care Provider Relief Fund–What Eligible Providers Should Know” and “Update: CARES Act Health Care Provider Relief Fund–What Eligible Providers Should Know.” Providers must use these funds for healthcare-related expenses or lost revenue attributable to the coronavirus or potentially face serious consequences.

As we previously reported, providers who receive funds must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment and confirming the CMS cost report. Notably, in its April 22 press release announcing additional allocations of CARES Act Provider Relief Funds, HHS cautions that the terms and conditions include measures to help prevent fraud and misuse of the funds. “All recipients will be required to submit documents sufficient to ensure that these funds were used for healthcare-related expenses or lost revenue attributable to coronavirus.” Moreover, HHS warns recipients that HHS, including the Office of Inspector General and Office of Audit Services, will conduct anti-fraud and auditing work to ferret out the illegal misuse of the funds.

Recipients of the funds should take heed of the anti-fraud warning. The risks attendant to misapplication of funds include investigation by the FBI and HHS OIG which could lead to civil or criminal charges. For instance, under the federal False Claims Act (FCA), a provider may be liable for making materially false claims or false statements in connection with the receipt of federal funds. If found liable, providers may be subject to treble damages, i.e., three times the amount of money improperly paid by the federal government, and other penalties. This is not an idle threat. The government has long focused its FCA enforcement efforts on the healthcare industry, as shown by the fact that FCA recoveries from the healthcare industry have exceeded $2 billion for each of the last ten years.

Potential criminal charges include federal program fraud, 18 U.S.C. § 666(a)(1)(A), which carries a statutory maximum penalty of 10 years’ imprisonment and a $250,000 fine. Other potential criminal charges include wire fraud and conspiracy to commit wire fraud, 18 U.S.C. §§ 1343, 1349, based upon electronic transmission of the attestation, and making false statements to the federal government, 18 U.S.C. § 1001(a). Wire fraud and conspiracy to commit wire fraud charges each carry a statutory maximum penalty of 20 years’ imprisonment and a $250,000 fine, and a false statement charge carries a 10 year statutory maximum prison sentence and a $250,000 fine.

With these potential consequences in mind, providers receiving government aid must be careful not to cut corners. Perhaps because, as here, it is when the government is providing funds on an expedited basis, a financial crisis is precisely when the government will scrutinize recipients of government funds most closely, even if not until years later. This was shown most recently by the fallout from the Troubled Asset Relief Program (“TARP”), which included 350 criminal convictions and civil recoveries of more than $10 billion to the federal government. Providers must take heed of these very real risks, be meticulous in applying for and using government aid, and immediately seek counsel if they have any questions or concerns about potential civil or criminal liability.

Attorneys in the Heath Care Group and White Collar Defense/Internal Investigations Group counsel healthcare system providers in complying with the law, including the CARES Act. Our preventive counseling guides clients to prevent situations that trigger government investigations and mitigate consequences if one occurs.

Copyright © 2020 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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