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Relief Fund Payments to Healthcare Providers Under the CARES Act
April 23, 2020


All information in this COVID-19 Response Resource issue is effective as of April 23, 2020.

On March 27, 2020, comprehensive legislation known as the Coronavirus Aid Relief and Economic Securities Act (CARES) was signed into law to broadly address the economic impacts of the COVID-19 pandemic. That legislation included several provisions to support small businesses, including healthcare providers. The primary provisions are: $349 billion in Paycheck Protection Program (PPP) loans, various employment tax deferral provisions and advance Medicare payments. 

In addition, the CARES Act appropriated $100 billion to the Public Health and Social Services Emergency Fund (an existing program). The Department of Health and Human Services (HHS) administers this fund and has determined that $30 billion of the appropriation should be distributed directly to Medicare fee-for-service providers as a function of each provider’s share of 2019 Medicare payments (Relief Fund). The Relief Fund payments are the focus of this article. 

Only certain providers are eligible for the Relief Fund monies, so HHS is requiring each provider to evaluate their eligibility and then return the funds if they are not eligible. HHS has retained UnitedHealth Group to manage this distribution, and providers should expect to receive an email from UnitedHealth Group providing information about the program.  

Healthcare providers recently started to see these Relief Fund payments deposited directly into their accounts. Providers that billed Medicare in 2019 are receiving payments equal to approximately 6.20 percent of the provider’s 2019 Medicare billings. These Relief Funds come with significant reporting obligations and can only be used to offset expenses or losses that have not been reimbursed by other sources related to the COVID-19 pandemic. While the funds can be broadly used—including to replace lost revenue—some providers will not qualify for the funds if they secured other federal relief monies. In other words, these are “last resort” funds, so if a provider has or plans to receive other financial assistance under the CARES Act, such as through a PPP loan, they will not be eligible to receive the Relief Funds. However, since the Relief Funds are being deposited directly into providers’ accounts without forewarning, the burden is on providers to determine their eligibility for the funds. A provider has 30 days from the date of deposit to reject the Relief Funds and can accept or reject the funds through a payment portal. 

This memorandum provides an overview of the Relief Fund and the criteria to determine eligibility to receive and use the funds. It also makes qualified recommendations to providers as to whether a provider may be eligible and what to do with the Relief Funds based upon the law and facts known to the authors as of the date of this memorandum. 

Importantly, as of April 21, 2020, HHS has not issued any guidance regarding the Relief Funds, and the provisions in the CARES Act addressing the Relief Fund are sparse and leave interpretation of the Act largely up to HHS. Without guidance from the HHS, providers and others attempting to understand these CARES Act provisions are required to interpret the CARES Act Relief Fund sections without clear direction, and HHS guidelines could considerably change providers’ abilities to accept Relief Funds. As such, this memorandum attempts to provide guidance to providers receiving Relief Funds, but the recommendations made herein could change upon issuance of HHS guidance. 

II. ANALYSIS OF THE CARES ACT RELIEF FUND

A. The Relief Fund Payment Process 

The process of receiving Relief Fund payments will occur as follows: 

  • Each provider will receive a payment—by ACH deposit—to the Medicare routing number on file with HHS. The payment will process via Optum Bank with “HHSPAYMENT” in the re: line.
  • A provider’s payment will be approximately 6.20 percent of 2019 Medicare fee-for-services billings. 
  • Providers will have thirty (30) days to accept or reject the Relief Fund payments. If a provider takes no action, they will be deemed to have accepted the Relief Funds. 

B. Relief Fund Eligibility Criteria:

To be eligible for Relief Fund payments, providers must meet the following criteria: 

  1. The provider must have billed Medicare in 2019.
  2. The provider is not currently terminated from participation in Medicare.
  3. The provider is not currently excluded from participation in Medicare, Medicaid or other Federal health care program.
  4. The provider does not currently have any of its Medicare billing privileges revoked.
  5. The provider provided health care services after January 21, 2020.
  6. The provider may not have any unpaid federal tax liability.
  7. The provider, “after January 31, 2020, [performs] diagnosis, testing or care for individuals with possible or actual cases of COVID-19.” The underscored language is very broad, and HHS has confirmed that this is intentional: “HHS broadly views every patient as a possible case of COVID-19.”
  8. Providers may not “balance bill” any patient for COVID-related treatment.

HHS has not issued guidance on the application of the above requirements with each member of a group practice. As such, groups’ practices which have practice members that fail to meet any of the above criteria related to Medicare billing eligibility should wait to accept the funds until additional guidance is issued. 

C. Use of Relief Funds

Important restrictions are imposed by the statutory language as to how Relief Fund payments may be used by providers: 

  1. Relief Fund payments will “only be used to prevent, prepare for, and respond to coronavirus, and shall reimburse the [provider] only for health care related expenses or lost revenues that are attributable to coronavirus.” The clause following “or” will permit most providers’ use of Relief Fund monies.
  2. Relief Fund payments will “only be used to prevent, prepare for, and respond to coronavirus, and shall reimburse the [provider] only for health care related expenses or lost revenues that are attributable to coronavirus.” The clause following “or” will permit most providers’ uses of Relief Fund monies.
  3. The provider will not use Relief Fund payments to “reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.” This is perhaps the most concerning prohibition for healthcare providers regarding the use of Relief Funds.  By its express terms, the CARES Act restricts “double-dipping” in the receipt and use of federal relief monies.
  4. No Relief Fund payments may be used to pay the salary of any individual at a rate in excess of Executive Level II, which is currently set at $197,300.00.
  5. The Relief Fund payments may not be used if the healthcare provider requires its employees or contractors to sign confidentiality agreements or nondisclosure agreements that would restrict the employees/contractors from reporting fraud, abuse, or waste.

HHS has not issued any guidance explaining any of the above criteria and how, in particular, these criteria interact with other funding mechanisms under the CARES Act, such as the PPP loan program. Providers that decide to accept the Relief Funds should clearly document how the use of the funds will meet the above criteria. This documentation should include financial analysis in a written work product outlining the application of funds in the context of the provider’s larger financial need responding to the pandemic and the application of other funding sources.

D. Reporting Requirements

In addition to the eligibility and use criteria set forth above, a provider that accepts the Relief Fund payments is also required to comply with reporting requirements. Once again, regulations implementing those requirements have not been released by HHS. Providers that receive more than $150,000 from any federal program addressing the pandemic (not just from the Relief Fund) must also file a quarterly report with both HHS and the Pandemic Response Accountability Committee, detailing the quantity of funds received and a detailed list of projects on which the funds were spent.

E. Additional Observations 

Because HHS has not issued any guidance, there is some risk in providers accepting Relief Fund payments at this point. In particular, providers who have already received, applied for or expect to receive a PPP loan, should probably reject Relief Fund monies. In other words, until HHS issues further guidance, a provider should not plan to accept both a PPP loan and Relief Fund payments. Because of the rapidity in which the Relief Funds were disbursed, HHS has effectively placed the burden directly on providers to determine if they are eligible for Relief Fund payments. HHS is not independently determining upfront whether a provider meets the technical criteria listed above or whether a provider has accepted other CARES Act funds that would make it ineligible for Relief Fund payments. The CARES Act simply lacks specificity as to eligibility and the interplay of Relief Funds and other CARES Act provisions, and providers will be dependent on future HHS guidance to determine eligibility. Because of this, and to avoid future liability, providers who have received other CARES Act assistance should wait to accept the Relief Fund payments deposited in their accounts until HHS issues further guidance. 

III. CONCLUSION 

In summary, we recommend the following: 

  1. Providers should carefully evaluate their eligibility for Relief Fund monies per the above criteria.
  2. Providers who accept Relief Fund payments should carefully track the use of such funds and maintain scrupulous records of such usage.
  3. Providers who have received other CARES Act funding should refrain from accepting Relief Funds payments until HHS issues further guidance on the interplay of the various CARES Act funding mechanisms.
  4. Providers should watch for further guidance from HHS as to use of funds and reporting.

For more about this or other related matters, contact Kevin West by calling (208) 562-4908 or send an email to kwest@parsonsbehle.com, Ross Keogh at (406) 206-9710 or send an email to rkeogh@parsonsbehle.com or Christina Hardesty at (208) 562-4878 or send an email to chardesty@parsonsbehle.com.