CARES Act funding ‘terms and conditions’ raise concerns among hospital advocates

• Hospitals need to obtain their own legal analysis of the terms and conditions tied to CARES Act funding.
• The terms are vague, contradictory and complex, advisers say.
• Hospitals can take prudent steps to minimize their risk of noncompliance.

The clock is ticking for hospitals to decide whether to accept the legally binding “terms and conditions” placed on billions of dollars in provider assistance that the federal government is offering. But some provisions are raising red flags among legal and policy experts.

The U.S. Department of Health and Human Services (HHS) has started to disburse the first $30 billion of the $100 billion in provider assistance included in the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act. However, healthcare providers that take the funding must accept the terms and conditions within 30 days of receipt of payment. The acceptance process recently was made available.

Not returning the payment within 30 days of receipt will be viewed as acceptance of the terms and conditions, according to an HHS provider page. Providers that review and reject the terms must return the full payment to HHS within 30 days of receipt — even as they scramble to address an ongoing pandemic.

“It’s not ‘no strings attached,’” Pamela Pelizzari, a principal at Milliman, said about the CARES funding.

The central compliance challenge

The key issue with the terms is that they are “very broad” and lifted straight from the CARES Act without interpretation, clarification or guidance from HHS, said Barbara Eyman, a principal at Eyman Associates.

“I was awaiting clarification from the agency on some of that statutory language, and they didn’t provide it,” Eyman said.

That is why all hospitals and health systems should obtain a careful review of the language from their attorneys to serve as a reasonable interpretation of the broad language, legal experts said.

The terms and conditions are so different from common HHS payment rules for hospitals likely because they originated as requirements for grant funding, said Chip Kahn, president and CEO of the Federation of American Hospitals.

“There’s ambiguity in it that really doesn’t fit with the usual preciseness with which rules are set for hospitals and that hospitals know how to comply with,” Kahn said in an interview.

His group plans to seek clarification from HHS, although the tight time frame may complicate that attempt.

Contradictions in the terms identified

A leading concern for Eyman is the apparent contradiction between statutory language allowing hospitals to use the CARES Act funding to replace lost revenue and the terms limiting the use of the funds to “prevent, prepare for and respond to Coronavirus.”

“They just don’t provide any clarity on whether the lost revenues can be claimed on top of coronavirus expenses,” Eyman said.

The statute and HHS guidance also provide no direction on how to calculate lost revenues. Kahn noted that almost every hospital he has heard from has had “significant” revenue losses and increased expenses stemming from the coronavirus response, even if they’ve had no patients.

Another area of ambiguity is the prohibition on using CARES Act funding to cover expenses traditionally paid for by other sources. It remains unclear whether that prohibition includes programs like the Medicaid Disproportionate Share Hospital payment program for uncompensated care provided by hospitals, Eyman said.

Given that coronavirus assistance also is being provided by commercial health plans, the Federal Emergency Management Agency and states, the funding source challenge could be complicated by the inability of some hospitals to clearly account for which activities are funded by the separate streams, Pelizzari said.

HHS did clarify recently that all patients are considered potential COVID-19 cases. The funds are limited to expenses for possible or actual COVID-19 cases.

Prudent steps for hospitals

Given the many unanswered questions surrounding the requirements of the terms and conditions, hospital advisers highlighted some prudent steps organizations can take to reduce their risk of violations.

For instance, Pelizzari urged hospitals to ensure their accounting systems include “as many delineations as possible regarding these COVID-19 activities.” That may include tracking line items and profit centers that are not typically accounted for as part of an emergency response but are involved in the COVID-19 response.

“It’s not necessarily that these funding lines are flowing through to a clearly delineated emergency response line item but rather that all sorts of departments are being affected by this in different ways,” Pelizzari said.