On April 10, 2020, the Department of Health and Human Services (HHS) began delivering the initial $30 billion tranche from the $100 billion provider relief fund (the Relief Fund) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The following provides our impressions of key issues and questions providers are already encountering when attempting to analyze their eligibility to retain Relief Fund payments and the limitations placed on the use of such payments, particularly in light of the HHS terms and conditions (Terms and Conditions) a provider must attest to within 30 days of receipt of payment.

Frankly, we anticipate that HHS will soon offer additional clarification regarding the implications of accepting and using Relief Fund payments. This has been the approach taken by similar government agencies in response to hastily crafted funding efforts. This is especially true as many of the Terms and Conditions are ambiguous, open-ended, and generally unclear. 

We will continue to monitor activity surrounding the Relief Fund and update the below information as and when appropriate.

Does a provider have to be engaged in treating actual cases of COVID-19 to retain Relief Fund payments?

HHS stated that the quick dispersal of funds is intended to provide relief to both providers in areas heavily impacted by the COVID-19 pandemic and those providers who are struggling to keep their doors open due to healthy patients delaying care and canceled elective services. Yet the Terms and Conditions require a provider to certify that the provider provides, or provided after January 31, 2020, diagnosis, testing, or care for individuals with possible or actual cases of COVID-19. In some ways, the language of the Terms and Conditions appears to be more restrictive than HHS’ public remarks about delivering the Relief Funds to support medical providers who are struggling to stay afloat during the current pandemic. 

Likely in response to the confusion caused by this seeming inconsistency, on April 16, 2020, HHS updated its initial guidance issued in conjunction with the April 10 press release, clarifying that care does not need to be specific to treating COVID-19 in order for a provider to retain Relief Fund payments, given the fact that HHS is “broadly viewing every patient as a possible COVID-19 case.”

Therefore, barring subsequent guidance from HHS to the contrary, it seems fairly clear at this point that a provider may retain his or her portion of Relief Fund payments without having to be engaged in the known treatment of patients diagnosed with COVID-19. 

What qualifies as preventing, preparing for, and responding to COVID-19?

The Terms and Conditions require a provider to certify that Relief Fund payments will only be used to prevent, prepare for, and respond to COVID-19 and will reimburse a provider only for health care related expenses or lost revenues that are attributable to COVID-19.

As with so many of the other Terms and Conditions, additional guidance is needed from HHS to determine what qualifies as preventing, preparing for, and responding to COVID-19, as essentially all providers would seem to be able to make an argument for proper application of funding to satisfy this certification. After all, seemingly all providers are making financial decisions in an effort to prevent, prepare for, or respond to COVID-19. Similarly, it is difficult to imagine a provider who has not experienced lost revenue due to the virus. 

Without more definitive criteria for evaluating a provider’s compliance with this certification, analyzing how broadly or narrowly HHS will interpret its own requirements is challenging. However, our expectation is that HHS will lean toward an inclusive rather than exclusive reading of this particular certification—one that will permit most providers to qualify as those preventing, preparing for, or responding to COVID-19. Yesterday, HHS linked the portal through its website where providers may execute the required attestations to retain Relief Fund payments. We had hoped that in doing so, HHS might clarify what qualifies as preventing, preparing for, and responding to COVID-19. Unfortunately, additional information regarding this certification was not offered, but we will continue to scout for more guidance.

Regardless, it is imperative that providers follow HHS’ instruction to maintain appropriate records and cost documentation in order to substantiate the reimbursement of costs from Relief Fund aid, given that a provider may be required to submit copies of such records and costs documentation upon request from HHS and to fully cooperate in any audit conducted by HHS, the Inspector General, or the Pandemic Response Accountability Committee (PRAC) to ensure compliance with the Terms and Conditions of the Relief Fund.

What reports will providers be required to submit to HHS?

If you receive less than $150,000:

For providers receiving less than $150,000 total in funding under the CARES Act, the Coronavirus Preparedness and Response Supplemental Appropriations Act (the Supplemental Appropriations Act), the Families First Coronavirus Response Act (the Families First Act), or any other law relating primarily to appropriations made for coronavirus response – the Terms and Conditions instruct that such providers should be aware that they may be required to submit reports to HHS as specified by HHS future guidance. However, there is no specific reporting requirement at this time for providers receiving this level of aid. 

If you receive more than $150,000:

For entity providers that receive more than $150,000 total from the laws specified above, the Terms and Conditions impose quarterly reporting requirements to HHS and the PRAC, which reports must include the following information:

• Total funds received from HHS under the CARES Act, the Supplemental Appropriations Act, the Families First Act or any other law relating primarily to appropriations made for coronavirus response
• Amount of funds received that were expended or obligated for each project or activity
• Detailed list of all projects or activities for which large covered funds were expended or obligated (including the name and description of the project or activity and the estimated number of jobs created or retained by the project or activity)
• Detailed information on any level of subcontracts or subgrants awarded by the covered recipient or its subcontractors or subgrantees (including data elements required to comply with the Federal Funding Accountability and Transparency Act of 2006 allowing aggregate reporting on awards below $50,000 or to individuals, as prescribed by the Director of the Office of Management and Budget)

Regardless of the level of aid received from the laws specified above and the associated reporting requirements to HHS and the PRAC, again, it is imperative that all providers maintain detailed records and cost documentation, given that all providers may be required to submit copies of such records and cost documentation upon request in relation to audits conducted to ensure compliance with the Terms and Conditions.

Is receipt and retention of Relief Fund payments taxable?

At this time, HHS has not definitively stated how the IRS might tax a provider’s receipt of Relief Fund payments. However, neither the CARES Act nor implementing guidance have affirmatively stated that the Relief Funds will not be taxable. We are hopeful that the IRS may view Relief Fund payments to be nontaxable—similar to qualified disaster relief offered previously to victims of natural disasters—but at the moment, this is an open issue. Until HHS and/or the IRS definitively state otherwise, providers must be aware that there is a potential for Relief Fund payments to be treated as income.

How does a provider’s receipt of Relief Fund payments impact receipt of funding from other relief programs?

The Terms and Conditions require a recipient to certify that the recipient 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. However, HHS also made clear that Relief Fund payments are distinct from the Centers for Medicare and Medicaid Services’ Accelerated and Advanced Payment Program. 

We also know certain “double-dipping” restrictions are in place to prevent providers from receiving duplicative support under certain COVID-19 relief programs for the same expenses and in the same amounts—for example, relief through PPP loans and Economic Injury Disaster loans available from the Small Business Administration (SBA). 

It should, therefore, be readily apparent that providers may not use Relief Fund payments received from HHS to reimburse any expenses for which they are reimbursed through other relief funding. Again, careful tracking of spending from Relief Fund payments as well as other relief programs will be critical.

Can Relief Fund payments be used to pay physicians?

The Terms and Conditions specify that the general provisions of the FY 2020 Consolidated Appropriation Appropriations Act apply to Relief Fund payments, which means that Relief Fund payments cannot be used to pay the salary of an individual at a rate in excess of Executive Level II—$197,300. 

In the absence of a statement to the contrary by HHS, it is not recommended that providers use Relief Fund payments to compensate or pay any portion of a salary to a provider whose annual pay rate exceeds $197,300.

This recommendation may seem to stand in contrast to the interpretation of financial thresholds under other CARES Act appropriations—such as the exclusion of payroll costs in PPP loan applications for those portions of cash compensation paid to employees in excess of $100,000—but until further guidance is provided by HHS, we are uncomfortable with providers using Relief Fund payments to pay any portion of a provider’s salary if that provider’s annual salary exceeds $197,300.  

What are examples of appropriate uses of relief fund payments?

If a provider is eligible to retain Relief Fund payments, the following are examples of what we believe can be considered appropriate uses of those payments:

• Payroll costs that fall outside of the eight-week period covered by the PPP
• Refund of Medicare overpayments
• Rent and occupancy expenses that are not otherwise covered by the PPP
• Malpractice premium payments
• Billing invoices
• Professional fees

What is next for provider relief?

We are navigating unprecedented circumstances under which large sums of money are being doled out by the federal government with little forewarning, and which are accompanied by nebulous indications as to provider eligibility to retain such sums as well as sparse information on how such sums are to be used by the provider. 

Indeed, beyond providing basic information as to why providers began receiving payments from Optum Bank marked, “HSSPAYMENT,” guidance from HHS seems to be raising as many issues as the quick burst of cash into providers’ hands was intended to alleviate.  Providers are rightly concerned about the exact implications of signing the required attestation, but until HHS releases additional guidance, these and other concerns, such as how providers will access portions of the remaining $70 billion in Relief Fund payments, are unclear.

Based on current guidance (or the lack thereof) as to how HHS might interpret any given Term and Condition, the best practical advice at the moment for any provider intending to use Relief Fund payments, or any other relief program mechanism, is to document in detail how COVID-19-related expenses are being reimbursed, document prior and ongoing drops in patient volume, and exercise commonsense judgment in determining whether a provider’s use of funds is appropriate. Because providers have 30 days after the receipt of funds to return the money, it is recommended to hold the Relief Funds (if possible) and not provide any certifications until further guidance is issued from HHS.