The Devil is in the Details: Terms and Conditions of CARES Act Provider Payments

Think before providing false or fraudulent documentation. The costs could be great.

COVID-19 has up-ended every facet of the healthcare industry. From the mass triage of patients in multiple locations, to resource allocation, to remaining financially viable during a time when elective procedures, treatments and in-patient visits were halted for many. 

In searching for solutions to sustaining healthcare operations, many providers turned to the options available through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, including the Paycheck Protection Program (“PPP”) loans, which may be forgiven if two conditions are met, and the Provider Relief Fund (“PRF”). And, as the title of this article suggests, “the devil is in the details”, which has been interpreted to mean “a catch hidden in the details.”

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Indeed, there are “catches” in both the PPP loans and the PRF monies. First, let’s address the PPP loans. Here are some key items, which can be “catches” and land persons in hot water:

• The loan amounts will be forgiven, as long as, (1) the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8-week period after the loan is made; and (2) employee and compensation levels are maintained. If the loan is not forgiven, then the fixed interest rate is 1.00% and the loan is due in 2 years with no prepayment penalties or fees.

• Loan payments will be deferred for 6 months.

• Payroll documents will need to be provided to the lender. (NOTE: beware if the underlying payments are based on fraudulent amounts or commissions are based on ill-gotten gains).

• 75% of the loan must be used for payroll costs, while the other 25% may be used for interest on mortgage obligations, rent and utilities if they incurred before February 15, 2020.

Now, assuming a provider, say a multi-specialty practice, applied for and received a PPP loan, provided truthful information, used it as required and documented how the funds were utilized to substantiate the allocation of the funds in the event of an audit. How do the PPP loan proceeds coincide with the funds received from the PRF? 

• Don’t “double dip the chip.” Meaning, don’t use the money from the PRF for the same purpose designated for by the PPP. 

• The Terms and Conditions expressly, “[t]he Recipient certifies that all information it provides as part of its application for the Payment, as well as all information and reports relating to the Payment that it provides in the future at the request of the Secretary or Inspector General, are true, accurate and complete, to the best of its knowledge. The Recipient acknowledges that any deliberate omission, misrepresentation, or falsification of any information contained in this Payment application or future reports may be punishable by criminal, civil, or administrative penalties, including but not limited to revocation of Medicare billing privileges, exclusion from federal health care programs, and/or the imposition of fines, civil damages, and/or imprisonment.”

• If more than $150,000 were received under any Act primarily making appropriations for the coronavirus response and related activities, a report is required to be submitted to the HHS Secretary and the Pandemic Response Accountability Committee. 

• There are certain exclusions and prohibitions on the utilization of the funds.

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The items listed here are just some of the “catches” that providers accepting funds need to be aware of. It is imperative to seek appropriate counsel and advice to understand all of the legal and financial nuances. The consequences for falsifying the documentation or the attestation can include criminal and civil liability. Just ask the two men from Rhode Island who were charged in the District of Rhode Island with allegedly filing false and fraudulent applications for PPP loans. (hyperlink this - https://www.justice.gov/opa/pr/two-charged-rhode-island-stimulus-fraud)  

Rachel V. Rose, JD, MBA, advises clients on compliance and transactions in healthcare, cybersecurity, corporate and securities law, while representing plaintiffs in False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.