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HHS' Distribution of Provider Relief Funding to Skilled Nursing Facilities Along with New Terms and Conditions Raises Compliance Considerations for Providers

May.29.2020

The Department Health and Human Services (HHS) announced last Friday that it is distributing approximately $4.9 billion in COVID-19 provider relief funds directly to skilled nursing facilities (SNFs). The funds are accompanied by a host of terms and conditions, compliance with which is “material” to HHS’ decision to disburse payments to SNFs. This materiality language raises considerations for providers, particularly with regard to potential liability under the civil False Claims Act (FCA).

The SNF distribution is the most recently announced targeted allocation from the Provider Relief Fund, which has been created by the CARES Act and subsequent stimulus legislation and consists of $175 billion earmarked to support, at present, Medicare and Medicaid enrolled providers and suppliers with health care-related expenses or lost revenue attributable to the pandemic. This is the first specific tranche of relief money for the SNF industry.

Each certified SNF will receive or has already received a fixed distribution of $50,000, plus an additional $2,500 per bed. The money is available to all facilities with six or more certified beds. HHS provided a state-by-state breakdown of where the distribution would be allocated. In announcing the distribution, HHS observed that SNFs have experienced up to a 6% decline in census along with an associated loss of revenue as current and potential residents choose other care settings, or as current residents pass away.  These additional funds should help nursing homes offset those losses as well as address and pay for critical needs such as higher labor costs, resident and staff testing, and acquiring PPE, among other expenses directly linked to the pandemic.

Previously, HHS distributed $30 billion to providers based on Medicare fee-for-service revenue, and then allocated an additional $20 billion for a $50 billion total general allocation that is being disbursed based on providers’ 2018 Medicare revenue. HHS also announced targeted distributions of $12 billion for high impact areas, $10 billion for rural health centers and clinics, and $400 million for the Indian Health Service. The current distribution is not limited to Medicare providers but will also benefit those facilities that treat a primarily Medicaid-eligible only population. 

Terms and Conditions

As with previous distributions from the Provider Relief Fund, providers must agree to certain terms and conditions in order to accept the funding. The terms and conditions for the SNF funding largely mirror the terms and conditions associated with the prior provider-relief distributions. The SNF funding terms require the recipient facility to certify that:

  • It provides or provided after January 31, 2020 diagnoses, testing, or care for individuals with actual or possible COVID-19 cases, and is eligible to participate in any Federal health care programs;
  • The proceeds of the payment will only be used to prevent, prepare for, and respond to coronavirus, and that the distribution shall only reimburse the recipient for health care related expenses or lost revenues that are attributable to coronavirus;
  • It will not use the distribution to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse; and
  • The recipient will not seek out-of-pocket expenses from patients, regardless of coverage, in an amount greater than in-network rates for care for presumptive or actual cases of COVID-19.

Moreover, per the terms and conditions, distributions are subject to public disclosure, and the funds are subject to specific record-keeping requirements as well as to audits by the HHS Office of Inspector General (OIG). Additionally, recipients are required to provide HHS with a quarterly accounting of how they spend their relief money if they receive over $150,000 in total from any number of funds established in coronavirus-targeted legislation. This $150,000 threshold is met if, for example, the recipient received in the aggregate over $150,000 from the Paycheck Protection Program (PPP), the General Allocation from the Provider Relief Fund, and the SNF Targeted Allocation from the Provider Relief Fund.

The terms and conditions are to be accepted via HHS’ online portal within 45 days of distribution. If a SNF receives a payment from the Provider Relief Fund and retains that payment for at least 45 days without contacting HHS in order to remit those funds, the SNF is deemed to have accepted the terms and conditions.

Provider Considerations

We wrote previously about some risks and considerations associated with acceptance of the funds here. We also discussed risks under the civil FCA and best practices for recipients of Provider Relief Funds in a recent webinar.

Because the funds come with recordkeeping requirements and submission to OIG audits, providers should confirm that they have the ability and the controls in place to ensure compliant use and tracking of funds before they accept the distribution. The HHS has previously stated that the terms of conditions of receiving provider relief distributions include measures to help prevent fraud and misuse of the funds and that “[t]here will be significant anti-fraud and auditing work done by HHS,” including OIG. 

Additionally, the terms and conditions specify that full compliance with all terms and conditions “is material to the Secretary’s decision to disburse funds” to each SNF. The terms also require that the recipient certify that all information it provides is “true, accurate and complete, to the best of its knowledge” – including information submitted as part of any application for the funds, as well as all information submitted in future reports to HHS. The recipient must acknowledge that any misrepresentation or falsehood submitted in the application or future reports related to the distribution is punishable by civil and criminal means. Such language counsels providers to be wary of the risk of non-compliance and the potential for future liability under the FCA, which can result in treble damages for false certifications associated with submissions for payment from the Federal government. 

SNFs with questions or concerns about the risks associated with accepting Provider Relief Funds should consult counsel before accepting this distribution—that is, retaining it 45 days after receipt.

For more information, please contact the professional(s) listed below, or your regular Crowell & Moring contact.

Jacinta Alves
Partner – Washington, D.C.
Phone: +1 202.624.2573
Email: jalves@crowell.com
John T. Brennan Jr.
Partner – Washington, D.C.
Phone: +1 202.624.2760
Email: jbrennan@crowell.com
Mana Elihu Lombardo
Partner – Los Angeles
Phone: +1 213.443.5563
Email: melombardo@crowell.com
Brian McGovern
Partner – New York
Phone: +1 212.895.4306
Email: bmcgovern@crowell.com
Brian Tully McLaughlin
Partner – Washington, D.C.
Phone: +1 202.624.2628
Email: bmclaughlin@crowell.com
David W. O'Brien
Partner – Washington, D.C.
Phone: +1 202.624.2850
Email: dobrien@crowell.com
Matthew Vicinanzo
Associate – Washington, D.C.
Phone: +1 202.508.8721
Email: mvicinanzo@crowell.com