Authors’ Note: In what may be emblematic of the legal landscape in the time of coronavirus (COVID-19), after we finalized the blog post below for publication regarding the US Department of Health and Human Services updates to the HHS FAQs relating to the CARES Act Relief Fund payments made by HHS on May 19, the agency later added or updated its FAQ on the night of May 20, with some notable changes. These updates have been included (and emphasized in italics) in this republication.
With just days left until provider attestations are due related to acceptance of CARES Act Provider Relief Funds, the US Department of Health and Human Services (HHS) has recently been updating its FAQs, providing some additional clarity, and potentially confusion, surrounding the acceptance of Relief Funds from its initial tranche $30 billion of General Distribution payments. Attestations for the first tranche of payments on April 10 are due May 25, and HHS continues to furnish guidance regarding the details of the General Distribution Relief Fund.
As a reminder, the General Distribution Relief fund totals $50 billion in payments and was distributed to providers in two separate tranches calculated with two different calculation methodologies. The initial $30 billion tranche was automatically and immediately distributed based on a provider’s share of Medicare fee-for-service billings for FY2019. The remaining $20 billion tranche was designed “to augment [providers’] allocation so that the whole $50 billion general distribution is allocated proportional to providers' share of net patient revenue.” Providers with cost reporting data on file with CMS began receiving relief payments on or after April 24, 2020, for this second tranche, while those without such data were permitted to submit revenue data through an attestation portal.
On May 14, HHS provided clarification that the ultimate goal of the General Distribution was to furnish providers with relief payments that represent “the lesser of 2% of a provider’s 2018 (or most recent complete tax year) net patient revenue or the sum of incurred losses for March and April [of 2020].” HHS indicated that, if the first tranche payment was determined to be at least 2% of the provider’s annual patient revenue, the provider would not receive additional General Distribution payments (i.e., payments from the second tranche). On May 19, HHS furnished additional FAQ guidance, indicating that:
If a provider believes it was overpaid or may have received a payment in error, it should reject the entire General Distribution payment and submit the appropriate revenue documents through the General Distribution portal to facilitate HHS determining their correct payment. If a provider believes they are underpaid, they should accept the payment and submit their revenues in the provider portal to determine their correct payment.
Although unlikely, it remains unclear whether HHS considers it an error or overpayment if an initial relief payment accurately reflects the first tranche calculation methodology (based on FFS payments from 2019), but that may be higher than the 2% of 2018 net patient revenue or March and April incurred losses amount. HHS did not clarify whether a provider is required to reject the initial payment and reapply under such circumstances. It also provided no guidance regarding what rules would apply to the approximately 179,000 providers that have already accepted their initial relief payment amounts, prior to this FAQ clarification on day 40 of the 45-day attestation window.
However, HHS most recently informed recipients that it wants each of the providers to assess whether it has received a larger amount of Relief Funds than the provider believes will be needed in connection with COVID-related care. Specifically, in its update in the early evening of May 20, HHS stated that, if a provider believes that its COVID-related lost revenues or increased expenses will be materially less than the value of the Provider Relief Fund payment, the provider should reject the entire distribution and submit revenue information for HHS to determine the correct amount of Relief Fund payments. This appears to be at odds with the recent executive order from President Donald Trump in which he has instructed agencies to consider efforts that may inhibit economic recovery and to recognize “the efforts of businesses to comply with often-complex regulation in complicated and swiftly changing circumstances.” With such uncertainty, providers are left to determine whether they should accept the funds or reject them and ask HHS to reconsider its allocation in the face of uncertain economic realities and in the face of a potential resurgence of COVID-19 cases as states consider efforts to reopen businesses.
The potential for returning Relief Funds and the difficulty of how to assess the appropriate payment amounts is also highlighted elsewhere in the FAQs. HHS clearly recognizes that the reconciliation process for determining 2% of net patient revenue may be complicated, suggesting in the FAQ that, “[p]roviders should work with a tax professional for accurate submission.” Obviously, any amounts later identified to be in excess of General Distribution payment caps would be subject to refund (as would any amounts not meeting the terms and conditions). It would thus seem unreasonable to interpret this guidance regarding the overall calculation as applicable to the April 10 initial payment, but the May 19 FAQ may have injected some late confusion in the provider attestation process.
In addition, HHS’s May 19 FAQ update attempts to clarify certain issues for providers that have been part of a change of ownership between the reference period and the General Distribution Relief Fund payments, though some of these clarifications could also create confusion based on general understandings of provider transactions. For example, providers acquiring a TIN from another provider in 2019 may have expected that the General Distribution Relief Fund revenues would “follow the acquisition of the provider number” in a manner similar to an acquired accounts receivable. HHS clarifies that this is not the case.
In the FAQ, HHS provided as follows:
Can an organization that sold its only practice or facility under a change in ownership in 2019 and is no longer providing services, accept payment and transfer it to the new owner? (Added 5/19/2020)
No. A provider that sold its only practice or facility must reject the Provider Relief Fund payment because it cannot attest that it was providing diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 on or after January 31, 2020, as required by the Terms and Conditions. Seller organizations should not transfer a payment received from HHS to another entity. If the current TIN owner has not yet received any payment from the Provider Relief Fund, it may still receive funds in other distributions.
While technically, the provider number that was acquired by the new owner could attest that the provider was furnishing services on or after January 31, 2020, albeit under a new owner, HHS appears to be strictly applying the General Distribution Relief Funds conditions to the TIN itself. In this respect, recently acquired providers appear to be “blocked” from the General Distribution and must await the “other distributions” referenced by HHS. When revising the FAQs on May 20, HHS added clarifications with respect to entities that have merged between January 1, 2018, through January 31, 2020, resulting in the creation of a new entity with a new billing TIN. If the non-surviving entity (billing TIN) received a general distribution, but was not providing diagnoses, testing or care for individuals with possible or actual cases of COVID-19 after January 31, 2020, the provider must reject the General Distribution payment. HHS also clarified that a provider that sold part of its practice in 2019 or January 2020 may not return a portion of a Provider Relief Fund payment.
HHS also clarified in its recent FAQ updates that it will be publishing data for providers receiving Relief Fund payments on a biweekly basis. Providers receiving funds from the CARES Act Provider Relief program have had their data relating to receipt of the funds published on the CDC website. In the update to the FAQs on May 20, HHS made clear that, to ensure transparency, a provider cannot choose to have its payment data omitted from the CDC website. Whether due to the potential pitfalls of compliance with the Terms & Conditions and likely subsequent audits, the publication of the data, other complexities arising from the Provider Relief Fund process or conditions, the potential for negative public perception related to acceptance of government funding, the potential tax implications relating to the funds, or some combination of these factors, some large chain providers have decided to return monies received from the HHS Provider Relief Fund.
Recent updates to the HHS FAQs highlight the complexities surrounding the General Distribution CARES Act Relief Funds and the still unfolding guidance around receiving and retaining the funds. Once comfortable with the appropriateness of the amount of Relief Funds, providers must still carefully consider and comply with the terms and conditions for using the funds. Those terms and conditions require certain reporting obligations, beginning June 30, and HHS has indicated in its FAQ updates that additional guidance for these quarterly reports will be forthcoming. It is hoped that such guidance will provide greater clarity into the manner of documenting and reporting COVID-19-related expenses and lost revenue. In the meantime, providers will have to focus on available, and constantly evolving, HHS guidance and the attention of their compliance and legal departments to ensure appropriate receipt and use of the Relief Funds and documentation to ensure that recipients are able to satisfy future government audits.