HHS starts distribution of $24 billion more in COVID grants but rejects one-third of applicants

• HHS has begun disbursement of $24.5 billion in pandemic-related grants to providers.
• Congress is considering adding $35 billion to the $175 billion Provider Relief Fund.
• A healthcare attorney warns that DOJ and OIG could be aggressive in enforcing the rules relating to those funds.   

HHS increased its planned $20 billion distribution of Phase 3 CARES Act provider assistance this week by $4.5 billion to meet the financial demands of qualifying applicants. However, nearly only one-third of applicants were rejected.

The Health Resources and Services Administration’s release of Phase 3 Provider Relief Fund (PRF) grants followed its processing of applications, which were requested in October. The planned distribution of $24.5 billion to more than 70,000 qualifying providers will run through January.

“With the Provider Relief Fund, we’ve been able to support providers hardest hit by COVID-19, including safety net hospitals, rural providers, and nursing homes, helping ensure they can continue serving their communities during and beyond the pandemic,” HHS Secretary Alex Azar said in a release.

However, more than 35,000 applications were rejected because those applicants “experienced no change in revenues or net expenses attributable to COVID-19, or because they have already received funds that equal or exceed reimbursement of 88% of reported losses,” according to the release.

The applications were open to providers that had not already received a baseline payment of 2% of their annual revenue from patient care. The Phase 3 distribution considered COVID-19-attributable revenue losses and expenses that providers experienced in the first half of 2020. It was open to previously eligible PRF applicants seeking to garner additional funding.

The distribution included:

• $1 billion for nursing homes
• $1.48 billion for ambulance or transportation-service providers

California had the largest concentration of provider recipients in the distribution, with more than 8,400 approved to receive $2.1 billion, according to an HHS state breakdown. 

Payments will continue as applications are reviewed and recipients take the required steps to receive payment.

Will more money soon be approved?

The latest PRF distribution came as a bipartisan group of senators and representatives released legislative text for the Emergency Coronavirus Relief Act of 2020, a $748 billion COVID-19 relief package that includes funding for healthcare providers. The bill would allocate $35 billion in additional PRF money and would change PRF reporting guidelines.

Reporting changes in the bill include the requirement that HHS revert back to an approach established in June that allowed providers to use any reasonable method to calculate lost revenue. A September change — since partially reversed — defined lost revenue as a negative change in year-over-year net patient-care operating income, net of the healthcare-related expenses attributable to the novel coronavirus.

The bill also would allow health systems to move targeted PRF payments within their system.

The bipartisan group of legislators is pushing for the bill to be part of an end-of-the-year federal funding agreement.

PRF enforcement coming

Robert Anello, JD, a partner at Morvillo Abramowitz Grand Iason & Anello, said providers should prepare for aggressive enforcement actions by the Department of Justice and HHS Office of the Inspector General related to attestation for PRF money.

“I do anticipate a lot of enforcement actions,” Anello said in an interview. “DOJ has made clear that it is something they intend to do, and there is no reason to doubt their sincerity when they say they are going to bring these actions.”

Additionally, the DOJ’s focus on PRF fraud also could attract private fraud claims through qui tam action, Anello said.

The most likely issue with the required attestation is misrepresentation — intentional or inadvertent — of providers’ finances or the pandemic’s financial effect on their organization.

“There’s such a myriad of ways people can run afoul of this,” Anello said.

HHS has required providers receiving PRF grants to sign attestations confirming receipt of the funds and certifying compliance with certain terms and conditions. HHS has issued a series of FAQs to clarify the terms and conditions, but providers and industry advisers have complained that in many instances the clarifications are unclear or complicated, or that they shift after issuance.

The complexities, coupled with the attestation and certification requirements, create fertile grounds for significant False Claims Act enforcement by the federal government over a span of years.

The incoming Biden administration could have significant interest in such enforcement, Anello said. For instance, the nominee for secretary of HHS, Xavier Becerra, is the attorney general of California. He gained fame in recent years for anti-merger lawsuits against hospitals in the state.

The Biden administration “is going to be undoubtedly more active in the regulatory and white-collar [law enforcement] world,” Anello said.