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CARES Act Grants Need Not Be Repaid, But Must Be Earned

Categories: Healthcare, Article

Beginning April 10, 2020, thousands of health care providers across the country began receiving funds from the US Government in the form of grants made under the federal CARES Act, signed into law by President Trump on March 27, 2020. The purpose of the CARES Act is to get money into the hands of the “front line” providers of healthcare to actual or potential COVID-19 sufferers.

To this end, the federal government has paid and is paying up to $30 billion to certain healthcare providers without receiving applications or representations of any kind from the recipients. Funds are being paid based on the value of healthcare provided by the recipient to Medicare beneficiaries on a fee-for-service service basis during the federal Fiscal Year 2019 (the twelve months ending October 31, 2019). Recipients are receiving funds through the Automated Clearing House system that processes Medicare payments, and the payments are marked “HHSPAYMENT.”

Here’s the rub: Although the recipient has done nothing to cause this payment to be issued, in order to have a legal right to keep the money, the recipient must accept and agree to perform the “Terms and Conditions” of this grant. A PDF of these terms and conditions is available here. Among other requirements, the recipient must certify—which constitutes an enforceable promise—that the funds will be used only to prevent, prepare for, and respond to coronavirus, and shall reimburse the recipient only for health care related expenses or lost revenues that are attributable to coronavirus.

The recipient will be deemed by law to have accepted these Terms and Conditions, and be contractually bound to perform them all (not just the one condition I have quoted above), if the recipient does not return the funds within thirty days of receipt.

I have been shocked to hear from my clients and other health law attorneys the argument that since any patient their the recipient practice treats might have COVID-19 coronavirus, whether symptomatic or not, expenses for patient care of any kind provided to any patient will meet the requirement that the expenditures being reimbursed by the grant are “attributable to coronavirus.” I have even heard that physicians in a specialty practice that never treats respiratory illnesses are keeping the grant money on the theory that the patients they do treat might have the coronavirus, notwithstanding that they have no symptoms and are not tested by the practice for coronavirus. I have been told, apparently in all seriousness, that “HHS is taking a very expansive view of what constitutes treatment attributable to coronavirus,” so these flimsy arguments will be accepted. I don’t believe that.

While it is true that our government is throwing money at us, apparently in the belief (which I do not discount) that even dropping cash from an airplane will help keep our economy alive, it is still terribly imprudent to think that there will never be an accounting for the $30 billion being distributed under this program. Maybe not right now, but if you keep this money, someone sometime may well ask how you spent it. If you did not comply with the program, they will want it back. If you lie about how you spent it, you will have committed a felony. Nothing an HHS representative says or prints now will be sufficient to defend a recipient if he or she kept money without complying with program requirements, because HHS does not have the authority to bind future administrative decisions interpreting statutory requirements, even if the recipient reasonably relied on current interpretations.

Moreover, the flimsy arguments I have heard for keeping this grant money without treating actual coronavirus patients do not pass the smell test. You cannot sleep well expecting a future federal investigator to be persuaded.

Even when it is raining money, it is not safe to just grab a bucket and expect everything will be fine. That’s exactly like spending money accidentally credited to your bank account; if you don’t have a right to the money, it is a civil wrong, and possibly even a crime, to spend it.

If you have any question about whether your practice can keep money received under the CARES program, contact a qualified health care regulatory attorney and get a competent answer before you decide to spend your windfall or let expire the thirty days allowed to return the money.


About the Author: Douglas O. Guffey is a healthcare law attorney and partner at the Phoenix law firm of Jaburg Wilk. Doug has been representing medical professionals in matters of regulatory compliance (including Medicare “incident to” billing, Stark, Anti-Kickback, and HIPAA), licensure, professional employment, group organization and management, and strategic alignment with hospital systems, health maintenance organizations, and accountable care organizations.