We never talk about the future
We never talk about the past anymore
We never ask ourselves the questions to the
answers that nobody even wants to know
I guess the honeymoon is over
So Much for the AfterglowMusic by Everclear, lyrics by Art Alexakis.
In August of 2005, and for months afterwards, the attention of the country was sympathetically focused on the devastation caused by Hurricane Katrina. Though slow to respond, once the great machinery of government was awakened Federal agencies began to pump billions of dollars into every conceivable recovery program available. Congress passed at least 10 appropriations bills to address the widespread destruction caused by Hurricane Katrina, dispersing over $110 billion in aid. But it did not take long for a different narrative to develop. Less than a year after the storm’s landfall the Government Accountability Office estimated that $600 million to $1.4 billion in improper and potentially fraudulent payments had been made directly to individuals. As the examples of fraud and abuse began to mount the afterglow from the unprecedented effort, like the failed relationship the alternative rock band Everclear sang about in the ‘90s, began to fade.
The U.S. government’s response to the COVID-19 pandemic, coming in at over $6 trillion to-date, dwarfs the Katrina total. Improper government payments, however, is not the part of the Katrina experience that should most concern hospitals, physicians and other providers who have legitimately received billions in funds distributed pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act. Rather, it is the fact that in 2020, now almost 15 years after the storm, government inspectors continue to audit recipients of Katrina disaster-related grants for compliance with a wide range of Federal spending laws, recommending the recoupment of billions in grant funds.
One-hundred billion dollars in the CARES Act (of the more than $2 trillion authorized in the bill) is set aside for “health care related expenses or lost revenues that are attributable” to the COVID-19 pandemic. An additional $75 billion was appropriated through the Paycheck Protection Program and Health Care Enhancement Act less than a month later. These funds are being made available through the U.S. Department of Health and Human Services (HHS) Public Health and Social Services Emergency Fund for provider relief (the “Relief Fund”).
At a Coronavirus Task Force press briefing held at the White House on April 7, 2020, the Administrator for the Centers for Medicare & Medicaid Services (CMS), Seema Verma, announced that the agency would soon begin distributing the first $30 billion “tranche” of the grant funds directly to provider bank accounts. And then in a remark that begged for a mic drop, she added:
There are no strings attached. So, the health care providers that are receiving these dollars can essentially spend that in any way that they see fit. 
But in what has to be one of the shortest regulatory honeymoons in government history, when the 11-page CARES Act Relief Fund Terms and Conditions document (“Terms and Conditions”) was posted to the HHS website a few days later it became obvious that there were, in fact, strings … lots of them. 
This is not to question the Administrator’s intentions. True to her word, the first $30 billion was distributed directly to bank accounts in record time for a government program. Since then, $20 billion more in General Distribution funds has been made available to providers willing to apply for them. But the conditions providers accept when they keep these funds (which, in turn, reference other conditions under Federal law) are the kinds of “strings” that, as Hurricane Katrina proved, can keep auditors busy for, literally, years.
By the time this article is published most providers who qualify for Relief Fund payments will have either accepted or returned the funds by the 90-day deadline, as required by the Terms and Conditions. Contrary to the lyrics of the song, it is time to talk about the future, especially as it pertains to the following grant conditions.
Talking about the future and the past
Among the most confusing parts of the CARES Act is a key provision that states that Relief Funds are intended
to prevent, prepare for, and respond to coronavirus . . . for necessary expenses to reimburse, through grants or other mechanisms, eligible healthcare providers for health care related expenses or lost revenues that are attributable to coronavirus.
This phrase is repeated in the Terms and Conditions, meaning that a provider who signs the attestation form is both promising that the funds will only be used in the future “to prevent, prepare for, and respond to coronavirus,” while also promising that the funds are reimbursing the provider for“health care related expenses or lost revenues that are attributable to coronavirus.”
It is important to note that unlike other CARES Act programs that do not allow funds to be used to replace lost revenue caused by the pandemic (e.g., the $150 billion Coronavirus Relief Fund administered by Treasury), Congress specifically stated in this provision that Federal funds are intended to replace “lost revenue attributable to coronavirus.”  In a recent update to its Frequently Asked Questions (FAQ) document posted online, HHS explained that Relief Fund money is intended to fill gaps in revenue caused by things like “fewer outpatient visits, canceled elective procedures or services, or increased uncompensated care.” Alternately, the money can be used to reimburse providers for pandemic-related expenses like supplies and equipment used to test patients for COVID-19, workforce training, emergency operations, temporary structures and a wide variety of resources that were used to “expand or preserve care delivery.” While FAQs issued by Federal agencies are not considered rules, per se, they are important because they “advise the public of the agency’s construction of the statutes and rules which it administers.” 
So, what can providers use Relief Funds for going forward? To answer this question, it may be helpful for providers to think about this issue in the context of the two categories referenced in the Act: “lost revenues” and “health care related expenses.”
A June 2, 2020, update to the FAQ posting (modified June 19) gives a number of examples of health care related expenses that can be reimbursed with Relief Funds:
- supplies used to provide healthcare services for possible or actual COVID-19 patients;
- equipment used to provide healthcare services for possible or actual COVID-19 patients;
- workforce training;
- developing and staffing emergency operation centers;
- reporting COVID-19 test results to federal, state, or local governments;
- building or constructing temporary structures to expand capacity for COVID-19 patient care or to provide healthcare services to non-COVID-19 patients in a separate area from where COVID-19 patients are being treated; and
- acquiring additional resources, including facilities, equipment, supplies, healthcare practices, staffing, and technology to expand or preserve care delivery.
HHS acknowledges in this guidance that “health care related expenses attributable to coronavirus is a broad term;” therefore, this list is clearly not intended to be exhaustive. These expenses can be incurred on “any date, so long as those expenses were attributable to coronavirus and were used to prevent, prepare for, and respond to coronavirus.”
As for lost revenues, the FAQ document states that Relief Funds can be used “to cover any cost that the lost revenue otherwise would have covered…”, which seems straightforward enough. However, the agency also “encourages” providers to use funds to maintain “delivery capacity,” by using the money for such things as:
- Employee or contractor payroll;
- Employee health insurance;
- Rent or mortgage payments;
- Equipment lease payments; and
- Electronic health record licensing fees.
At the end of the day it is difficult to see how HHS could restrict a provider’s use of Relief Funds for any legitimate health care related purpose, so long as the provider can show at audit time that it incurred the expense to “prevent,” “prepare for” or “respond” to the pandemic, as required by the CARES Act. Another FAQ response seems to confirm this broad interpretation with the agency’s statement that it “does not intend to recoup funds as long as a provider’s lost revenue and increased expenses exceed the amount of Provider Relief funding a provider has received.”
The questions to the answers that nobody even wants to know
The HHS Terms and Conditions contain only the briefest of references to a number of other important conditions, including these, that providers should be aware of:
- Don’t duplicate benefits.  A prohibition that Relief Funds cannot be used “to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse….” is found in both the CARES Act and the Terms and Conditions. Sources that are “obligated to reimburse” is an apparent reference to insurance, possibly business interruption coverage, that could potentially cover a provider’s loss. In addition, the FAQ was updated on May 29, 2020, to include a question pertaining to a provider’s receipt of funds from the Paycheck Protection Program (“PPP”) and the Relief Fund.  HHS makes it clear in this guidance that while it is not improper for a provider to receive both PPP and Relief Fund payments, a signature on the Terms and Conditions is a certification that the provider “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.” This admonition is consistent with other HHS regulations that provide that in order for costs to be allowable they must be “allocable” to the particular award source and “adequately documented.” 
- Be careful about salaries paid with grant funds. The Terms and Conditions limits salaries payable with Relief Funds to Executive Level II, a reference to the Federal government’s rates of basic pay for executive salaries. Level II is currently set at $197,300 per annum. This prohibition, found in the standard HHS provisions at the end of the Terms and Conditions, is a reference to section 202 of the Further Consolidated Appropriations Act of 2020. A FAQ question confirms that this limitation “only applies to the rate of pay charged to Provider Relief Fund payments and other HHS awards.”  The part of a salary above this amount can be paid with “non-federal funds.”
- Reports could be key. Quarterly reports are required for providers who receive more than $150,000 in total funds under the CARES Act, including Relief Funds. At the time this article went to press HHS had announced that Relief Fund recipients that received one or more payments exceeding $10,000 in the aggregate would also be required to file reports. Detailed reporting instructions were forthcoming at that time, but early plans provided for the reporting system to be open by Oct. 1, 2020, with the deadline to file initial reports set at 45 days after the end of the 2020 calendar year. Providers should be aware that HHS and the HHS Office of Inspector General are likely to use these reports, among other tools available to their inspectors, to conduct “significant anti-fraud monitoring of the funds distributed….” Time spent making sure that reports are accurate and well-documented will be time well-spent.
- Keep good records – for years. Appropriate records and cost documentation requirements are not explained in the Terms and Conditions but are referenced only by the applicable HHS regulations. A closer look at these rules reveals a number of additional requirements, including a requirement that financial records pertaining to the receipt and use of grant funds “must be retained for a minimum of three years from the date of submission of the final expenditure report….” If there is an audit, this period is extended until the audit is resolved and final action taken. Financial management systems must be “sufficient to permit the preparation of reports … and the tracing of funds to a level of expenditure adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.” Federal funds must be clearly identified in the provider’s accounts by certain identifying information.
The honeymoon is over
The speed and size of the Federal government’s fiscal response to the COVID-19 pandemic has been nothing short of breathtaking. But healthcare providers should not mistake the relative ease by which Federal money almost magically appeared in their bank accounts for a lack of resolve on the part of the government to ensure that grant funds are not misspent. The HHS Office of Inspector General recently published a strategic plan to govern the agency’s oversight of COIVID-19 funds. In it, the Federal agency made clear that it places a high priority on monitoring the use of Relief Funds and plans to use, among other things, “modern tools and technologies, including artificial intelligence,” and cooperation with other Federal and state entities to “ensure adequate oversight, avoid duplication, and share insights.”
Federal guidance pertaining to the use of CARES Act funds is updated almost weekly; therefore, healthcare providers would do well to monitor the HHS CARES Act Provider Relief Fund website (https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/index.html ) for future developments with regard to these and other conditions. Government auditors are waiting in the wings to ensure that grant funds are handled properly by recipients. The short honeymoon of good intentions is over, likely to be followed by years of Katrina-like scrutiny. So much for the afterglow.
 Bruce Lindsay, Jared Nagel, Cong. Research Serv., R43139, Federal Disaster Assistance After Hurricanes Katrina, Rita, Wilma, Gustav, and Ike (Rev. 2019).
 Terry Dinan, Cong. Budget Off., 51518, Potential Increases in Hurricane Damage in the United States, at Table 3 (2016).
 U.S. Gov’t. Accountability Office, GAO-06-844T, Hurricanes Katrina and Rita, Unprecedented Challenges Exposed the Individuals and Households Program to Fraud and Abuse; Actions Needed to Reduce Such Problems in Future (2006).
 Andrew Van Dam, The U.S. Has Thrown More Than $6 Trillion at the Coronavirus Crisis. That Number Could Grow, Washington Post, April 15, 2020.
 Coronavirus Aid, Relief, and Economic Security Act, Pub. L. No. 116-136 (2020). As of June 23, 2020, the Statutes at Large citation was not available for this act.
 Recent examples of OIG audit findings include a 2017 report claiming that the city of New Orleans should repay 2.04 billion (FEMA Should Disallow $2.04 Billion Approved for New Orleans Infrastructure Repairs, OIG-17-97-D (2017)), that the City of Gulfport, Mississippi should repay $4.2million (FEMA Should Recover $4.2 Million of $142.1 Million in Grant Funds Awarded to the City of Gulfport, Mississippi, for Hurricane Katrina Damages, OIG-15-148-D (2015)) and $5.3 million should be repaid by the Bay St. Louis-Waveland School District (FEMA Should Recover $5.3 Million of the $52.1 Million of Public Assistance Grant Funds Awarded to the Bay St. Louis Waveland School District in Mississippi – Hurricane Katrina, OIG-14-44-D (2014)). DHS OIG audit reports can be accessed on the Office of Inspector General website, under the tab Audits, Inspections, and Evaluations, https://www.oig.dhs.gov/reports/audits-inspections-and-evaluations.
 CARES Act, Pub. L. No. 116-136, Division B, Title VIII.
 Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 620 (2020).
 CARES Act, Pub. L. No. 116-136, Div. B, Title VIII; Paycheck Protection Program and Health Care Enhancement Act, Pub. L. No. 116-139, 134 Stat. 622.
 Remarks by President Trump, Vice President Pence, and Members of the Coronavirus Task Force in Press Briefing (April 7, 2020, 5:43 P.M. EDT), https://www.whitehouse.gov/briefings-statements/remarks-president-trump-vice-president-pence-members-coronavirus-task-force-press-briefing-april-7-2020/.
 Id. at remarks by Seema Verma.
 CARES Act Provider Relief Fund Terms and Conditions, U. S. Dept. of Health and Human Services, https://www.hhs.gov/sites/default/files/terms-and-conditions-provider-relief-30-b.pdf.
 Many of the FEMA regulations that have triggered Katrina repayment demands, like ineligible work, unsupported costs, and improper grant administration, have direct corollaries to concepts referenced in the fine print of the Terms and Conditions. See, e.g., Summary of Key Findings of Fiscal Year 2017 FEMA Disaster Grant and Program Audits, Office of Homeland Security Office of Inspector General, OIG-18-75 (2018).
 “If you receive a payment from funds appropriated … and retain that payment for at least 90 days without contacting HHS regarding remittance of those funds, you are deemed to have accepted the following Terms and Conditions.” Terms and Conditions at 1.
 CARES Act, Pub. L. No. 116-136 at Div. B, Title VIII.
 Id. at Div. A, § 5001.
 Id. at Div. B, 753 (emphasis added).
 CARES Act Provider Relief Fund Frequently Asked Questions at 8 (U.S. Dep’t of Health & Human Services), https://www.hhs.gov/sites/default/files/provider-relief-fund-general-distribution-faqs.pdf (last viewed August 18, 2020).
 Id. at 7-8 (as modified, June 19, 2020).
 Perez v. Mortg. Bankers Ass’n, — U.S. –, 135 S. Ct. 1199, 1204 (2015).
 CARES Act at Div. B, Title VIII, 753.
 CARES Act FAQ at 7-8.
 Id. at 7.
 Id at 8 (emphasis added). HHS cautions in the FAQ document, however, that it would be “highly unusual” for these expenses to have been incurred prior to January 1, 2020. Id.
 Id. (emphasis added).
 Id. (emphasis added).
 Id. at 6-7.
 “Duplication of benefits” is a term for this concept used in the Stafford Act § 312, 42 U.S.C. § 5155 ( prohibits the use of grant funds to reimburse a grantee for expenses that have already been reimbursed from a different source).
 CARES Act at Div. B, Title VIII, 753.
 Id. at Div. A, §§ 1102-1114 (Paycheck Protection Program).
 CARES Act FAQ at 10.
 See 45 C.F.R. § 75.403(a) and (g).
 External Grants Policy Bulletin 2020 Salary Cap Limitation, No. 2020-03E, (Health Resources & Service Administration February 7, 2020), https://www.hrsa.gov/sites/default/files/hrsa/grants/manage/grants-policy-bulletin-2020-03E.pdf.
 This prohibition incorporates Section 202 of the Further Consolidated Appropriations Act, Pub. L. No. 116-94, § 202, 133 Stat. 2577 (2020).
 CARES Act FAQ at 7.
 CARES Act, Div. B, § 15011 at 698-701.
 U.S. Department of Health and Human Services, General and Targeted Distribution Post-Payment Notice of Reporting Requirements (August 14, 2020).
 CARES Act FAQ at 6.
 Relief Fund Payment from $30 Billion General Distribution, Terms and Conditions at 2 (citing 45 C.F.R. §§ 75.302 and 75.361 – 75.365).
 45 C.F.R. § 75.361.
 Id. at § 75.361(a); see also Arizona Health Care Cost Containment System v. Centers for Medicare and Medicaid Services, Slip Copy, 2020 WL 805235 at *8.
 45 C.F.R. § 75.302(a).
 45 C.F.R. § 75.302(b)(1).
 OIG Strategic Plan: Oversight of COVI-19 Response and Recovery May 2020.
 Id. at 2.