This article originally appeared as Bloomberg Law Insight.
Health-care providers have seemingly benefited from financial aid offered under the CARES Act but must be aware of the numerous strings attached to these funds, say Butler Snow LLP attorneys. Here is a look at some of the funding terms and conditions that could lead to trouble for health-care providers down the road.
The CARES Act set aside $100 billion for “health care related expenses or lost revenues that are attributable” to the Covid-19 pandemic.
The consensus within the health-care community was (and is) that this appropriation, a significant amount under normal circumstances, will only begin to scratch the surface of the lost revenues and additional expenses tragically visited on hospitals, physicians and other providers by this pandemic.
As a result, within minutes of the bill’s release, health-care providers and their lawyers began frantically searching the Centers for Medicare & Medicaid Services and Department of Health and Human Services websites for the promised applications, in hopes that each could be among the lucky few to get a golden ticket.
That all changed with a Coronavirus Task Force press briefing held at the White House on April 7, in which the administrator for the CMS, Seema Verma, announced that the agency would soon begin distributing the first $30 billion “tranche” of the grant funds directly to provider bank accounts.
And then in a remark that begged for a mic drop, she added: “There are no strings attached so the health care providers that are receiving these dollars can essentially spend that in any way that they see fit.”
However, the Provider “Relief Fund Payment Terms and Conditions” soon posted to the HHS website would have made the Lilliputians who tied-down the giant Gulliver proud.
Multiple Pages of Grant Conditions
There can be no doubt that the administrator’s intentions were good. The first $30 billion was distributed directly to bank accounts in record time for a government program. Since then, $20 billion more has been made available. But the multiple pages of HHS grant conditions that apply to the respective allocations (which, in turn, reference other terms and conditions under federal law) certainly seem like, well, strings.
Those conditions that deserve special attention include the following promises, in which the “Recipient certifies that:”
- “it provides or provided after Jan. 31, 2020 diagnoses, testing, or care for individuals with possible or actual cases of COVID-19.” Likely in response to the collective outcry of a health-care community concerned that this language restricted distributions only to those directly testing for, or treating, Covid-19, the HHS recently issued this clarification: “If you ceased operation as a result of the COVID-19 pandemic, you are still eligible to receive funds so long as you provided diagnoses, testing, or care for individuals with possible or actual cases of COVID-19. Care does not have to be specific to treating COVID-19. HHS broadly views every patient as a possible case of COVID-19.”
- “the Payment will only be used to prevent, prepare for, and respond to COVID-19, and shall reimburse the recipient only for health care-related expenses or lost revenues attributable to COVID-19.” This appears to be two conditions in one (and injects additional ambiguity into the certification process): a promise that the funds will be (1) used to reimburse providers for expenses or lost revenues attributable to the pandemic or (2) spent “to prevent, prepare for, and respond to COVID-19 … .”
- “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.” This is an almost universal prohibition in the grant world. Making sure that governmental loans or grants are used for distinctly different purposes, which can be fully documented come audit time is easier said than done. Providers should segregate these grant funds in a separate account, if possible, and keep detailed records of expenses. Also referenced are federal record-keeping and retention requirements that providers must understand.
- “No funds received may be used to pay the salary of any individual, whether through a grant or other payment mechanism, at a rate in excess of Executive Level II [currently set at $197,300].” This is a reference to section 202 of the Further Consolidated Appropriations Act of 2020. According to various HHS grant policy guidelines, this condition should not be read as limiting, generally, the salaries of individuals within the recipient’s organization. It simply limits the amount that may be charged to HHS grant funds.
The speed and size of the federal government’s fiscal response to the Covid-19 pandemic has been laudable, and nothing short of breathtaking.
But our experience in dealing with other disasters over the years, including the aftermath of Hurricane Katrina, is that the good intentions of the moment soon fade. Health-care providers would be well advised to remember that there is a veritable army of government auditors, inspectors, and lawyers waiting in the wings to ensure that grant funds are handled properly by recipients.
As taxpayers, we expect nothing less. But those who receive Covid-19 funds would be wise to keep in mind the nine words that President Ronald Reagan once said were the most terrifying in the English language: “I’m from the government, and I’m here to help.”
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Mark W. Garriga, an attorney with Butler Snow LLP and former legislator, serves as the practice group leader for Butler Snow’s Health Law Group in Jackson, Miss., and focuses his practice on health law, administrative appeals and government litigation matters.
W. Scott Keaty, an attorney with Butler Snow LLP in Baton Rouge, La., is a board-certified health law specialist. He represents health care providers in federal and state health law matters.