In May of 2021, the United States Department of Health and Human Services (“HHS”) announced a sweeping audit of certain health care providers who received general distribution payments from the Provider Relief Fund. As a result, 2021 may see an increase in the number of enforcement actions against providers who violate applicable Provider Relief Fund rules.

Congress established the Provider Relief Fund pursuant to the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act to support health care providers in the course of rendering care in response to the coronavirus pandemic. HHS made payments from the Provider Relief Fund in multiple phases, including three phases of general distribution payments (known as the “General Distribution” and “Phases 1, 2, and 3”) as well as targeted distributions to providers serving vulnerable and high-need populations, such as rural-area providers, nursing homes, safety net hospitals, tribal hospitals, and children’s hospitals.

Generally speaking, providers eligible for Provider Relief Fund payments under General Distribution Phases 1, 2, and 3 included the following providers who rendered care after January 31, 2020:

Phase 1

• Facilities and providers that received Medicare fee-for-service reimbursements in 2019 and who provided care after January 31, 2020.

Phase 2

• State-licensed/certified assisted-living facilities;
• Dentists who directly billed health insurance for oral health care-related services or otherwise directly billed patients for oral health care-related services;
• Providers who directly billed their state Medicaid/CHIP program or Medicaid managed care plans for health care-related services in 2018 or 2019; and
• Medicare Part A providers who experienced a change in ownership and billed Medicare fee-for-service in 2019 and 2020, who were not otherwise eligible under Phase 1.

Phase 3

• Behavioral health providers who do not accept insurance and, as of March 31, 2020, have directly billed patients for health care-related services; and
• Providers who received payments under Phase 1 or Phase 2 who received a disbursement equal to 2% or less of annual revenue from patient care.

HHS distributed a total of $46.02 billion to over 320,000 providers under Phase 1, $5.98 billion to 60,832 providers under Phase 2, and $24.5 billion to 97,433 providers under Phase 3. For some, funds were received before they provided supplemental documentation to HHS confirming the need for funding.

When applying for payments from the Provider Relief Fund, providers were required to execute an attestation through HHS’s online portal, and to submit certain financial information to HHS following execution of the attestation. The attestation included confirmation that any provider in receipt of funds would comply with the HHS Terms and Conditions for Provider Relief Fund payments. The Terms and Conditions make clear that providers must:

1. only use Provider Relief Fund payments to prevent, prepare for, and respond to coronavirus;
2. only use Provider Relief Fund payments to reimburse the recipient of funds for health care-related expenses or lost revenues attributable to the coronavirus, and
3. not use any payments from the Provider Relief Fund to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse.

HHS regulations also required all providers, in receipt of Provider Relief Fund payments in excess of $10,000, to submit documentation confirming that funds were used to prevent, prepare for, and/or respond to coronavirus, with providers in receipt of more than $500,000 in payments from the Provider Relief Fund, being subject to additional reporting requirements.

While HHS enforcement actions are still in the nascent stages, recent activity suggests that the HHS audit will closely examine financial information submitted by providers in connection with Provider Relief Fund payment attestations and applications, to ensure that funds were not misappropriated or used in contravention of the Terms and Conditions and applicable HHS regulations. Examples include:

• In December of 2020, the HHS Office of Inspector General reached a settlement with a California endoscopy center that knowingly and falsely attested that it treated patients after January 31, 2020.
• In February 2021 the United States Department of Justice indicted a Michigan home health provider who misappropriated Provider Relief Fund payments for personal use due to the fact that the provider received over $37,000, despite having never operated the home health care agency during the coronavirus pandemic.
• On May 26, 2021, the Department of Justice announced criminal charges of theft of government property and wire fraud against a California home health care provider for misuse of $229,454 of Provider Relief Fund payments received by the provider. These enforcement actions demonstrate the severity of penalties – both fines and possible criminal liability – as a result of violating HHS regulations regarding Provider Relief Fund eligibility and use of funds.

As these penalties may have long-lasting consequences for any provider subject to HHS audits, providers should consult with Hinckley Allen’s Health Care group if they receive requests for additional information from HHS in connection with any such audit.

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