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COVID-19 Relief Programs: Mitigating and Responding To Enforcement Risk

Since the early days of the pandemic, Mintz’s COVID-19 Compliance & Enforcement Defense Task Force has closely monitored and advised clients on the evolving COVID-19 relief programs, including those created by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The CARES Act provided for over $2 trillion in relief funds, which is the largest emergency assistance package in American history. The numerous CARES Act programs have continued to develop through, among other things, the passage of the Paycheck Protection Program and Health Care Enhancement Act, the Paycheck Protection Program Flexibility Act of 2020, and rapidly changing regulatory guidance and FAQs. As one example, the government recently wrestled with whether to make public the list of about 4.6 million entities that received more than $500 billion from the Paycheck Protection Program (PPP) under the CARES Act. After initially refusing to disclose PPP loan recipients, the Small Business Administration and Treasury Department decided to make public the names of entities that received loans larger than $150,000, as well as the dollar range of each loan.

In addition to monitoring the fast-paced evolution of these COVID-19 relief programs, we are continually assessing the criminal and civil enforcement actions that recipients of COVID-19 relief funds may face, including substantial risk under the False Claims Act (FCA) and various criminal laws.  The federal government has already announced a number of fraud cases and will undoubtedly continue to pursue COVID-19 grant and loan fraud. 

This post is the first in a series that will discuss the compliance risks related to acceptance of COVID-19 relief funds, examine strategies for mitigating risks, report on criminal and civil enforcement developments, and forecast how future enforcement actions may arise in this rapidly evolving landscape. This series will culminate with a webinar on Wednesday, July 15th.

Overview of COVID-19 Relief Programs

As mentioned above, the CARES Act authorized over $2 trillion in economic relief for individuals and businesses, including health care providers, to address the public health crisis and adverse economic impact resulting from COVID-19. The law created several programs with differing eligibility requirements, varying terms and conditions and certifications of eligibility, and a number of ongoing compliance obligations. The risks associated with each program may differ based on which government agency administers the program, how the program is structured, who is eligible, the certifications made to obtain funds, and the agency charged with overseeing and enforcing each program. In addition, the rapidly evolving agency guidance for the COVID-19 relief programs presents substantial compliance challenges as the guidance is sometimes unclear, is internally inconsistent, or conflicts with past statements made by the agency.

Below we have provided a high-level overview of select programs established or expanded under the CARES Act, each of which poses compliance and enforcement risks.

Program and Administering Agency

Program Summary

Eligibility

Maximum Loan Amount

Name: CARES Act Provider Relief Fund

 

Administering Agency: Department of Health and Human Services (HHS)

 

HHS is distributing $175 billion in relief funds to health care providers, and eligibility varies for each allocation of funds. The relief fund consists of both general distributions and targeted allocations, which are being distributed on a timeline (April-June):

  1. General Distribution: $50 billion allocated in proportion to a provider’s share of 2018 net patient revenues.  Payments are determined based on the lesser of 2% of a provider’s 2018 (or most recent complete tax year) net patient revenue or the sum of incurred losses for March and April 2020.
  2. Targeted Allocations: Varied amounts distributed to providers in areas hard-hit by the COVID-19 pandemic, and rural providers, among others. A list of the targeted distribution type, amount, and eligible recipients is available on HHS’s website.

 

HHS has also issued guidance in the form of frequently asked questions.

 

To be eligible for the General Distribution, providers must have billed Medicare fee-for-service in 2019 and provided care to individuals with suspected or confirmed cases of COVID-19 on or after January 31, 2020.

 

HHS set eligibility requirements for general and targeted distributions, as well as formulas to determine allocation of funds.  HHS summarized the CARES Act Provider Relief Fund distribution here.

Formula-based

Name: Paycheck Protection Program (PPP)

 

Administering Agency: Small Business Administration (SBA)

$660 billion in funds available to be distributed to businesses to incentivize these businesses to retain employees on their payroll. Recipients may use PPP loan funding for payroll, rent, mortgage interest, or utilities. Loans will be forgiven where recipients meet certain conditions. If not forgiven, loan repayments will be deferred for six months. The loan has a maturity of 2 years and an interest rate of 1%.

 

Mintz has discussed the PPP in prior posts here, here, and here.

Small businesses, as defined by the SBA, may apply.

 

The SBA issued numerous interim final rules detailing additional eligibility requirements. The U.S. Department of Treasury has aggregated evolving guidance here.

Formula-based up to a total of $10 million.

 

See Treasury’s guidance for more information on calculating maximum loan amounts per business type.

Name: COVID-19 Telehealth Program

 

Administering Agency: Federal Communications Commission (FCC)

 

$200 million in funding disbursed by the FCC in response to the COVID-19 pandemic “to help health care providers provide connected care services to patients at their homes or mobile locations in response to the COVID-19 pandemic.” 

 

Mintz has discussed the program here, here, here, and here.

Only nonprofit and public health care providers who meet FCC’s criteria may receive funding.

FCC did not set a cap on reimbursement, but does not anticipate awarding more than $1 million to any single applicant.

 

Name: Main Street Lending Program

 

Administering Agency: Federal Reserve

Different credit facilities are designed to help small and medium-sized businesses that were in sound financial condition prior to the COVID-19 pandemic.

 

The program is still unfolding, as Mintz has discussed in prior blog posts here, here, and here.

Eligibility for the various credit facilities are discussed here, here, and here.

Anywhere from $35 million to $300 million, depending on the type of loan.

 

Oversight and Enforcement Agencies

In conjunction with these COVID-19 relief programs, the CARES Act also created several oversight and enforcement mechanisms intended to facilitate transparency, monitor the implementation of the CARES Act, and oversee the distribution and use of funds.

As funds have been and will continue to be disbursed through the various COVID-19 relief programs, investigating fraud among fund recipients has become a top enforcement priority for new oversight agencies as well as existing enforcement authorities, including the Department of Justice (DOJ).  In a March 16, 2020 Memorandum regarding DOJ’s COVID-19 priorities, Attorney General William Barr directed every U.S. Attorney’s Office to “prioritize the detection, investigation, and prosecution of all criminal conduct related to the current pandemic.” For example, DOJ’s Criminal Division has already filed several cases against individuals accused of fraud in connection with the PPP program in Illinois, Washington, California, Texas and Rhode Island.

Below is a listing of a few of the many enforcement agencies tasked with overseeing disbursements under the CARES Act:  

  • Office of the Special Inspector General for Pandemic Recovery (SIGPR): Section 4018 of the CARES Act established the SIGPR, which is intended to lead a new inspector general’s office within the Department of the Treasury.  It is directed to “conduct, supervise, and coordinate audits and investigations” of the COVID-19 relief programs for businesses included in the CARES Act and any other Treasury programs established under the CARES Act. The SIGPR received $25 million under the CARES Act.
  • The Pandemic Recovery Oversight Committee (PRAC): Section 15010(b) of the CARES Act establishes the PRAC within the Council of Inspector General on Integrity and Efficiency (CIGIE). The PRAC is tasked with coordinating and monitoring the federal government’s COVID-19 response, conducting oversight, and maintaining a public website. Among its oversight responsibilities, the PRAC supports efforts to “prevent and detect fraud, waste, abuse, and mismanagement [and] mitigate major risks that cut across program and agency boundaries.” In particular, the PRAC holds broad authority to conduct its own investigations and to collaborate with any other inspector generals, and it is authorized to issue subpoenas for documents, records, and testimony from private individuals. The PRAC receives $80 million under the CARES Act.
  • Congressional Oversight Commission: Section 4020 of the CARES Act establishes the Congressional Oversight Commission, which is charged with overseeing the implementation of the CARES Act by the Department of the Treasury and the Board of Governors of the Federal Reserve System, and with submitting related reports to Congress.
  • Inspectors General: Existing Inspectors General at various federal agencies including HHS, SBA, and the Department of the Treasury are conducting anti-fraud and auditing work related to funds dispersed under the CARES Act.  For example, in May 2020, the HHS OIG announced that it would audit the distribution of $50 billion in Provider Relief Fund payments to hospitals and other providers. Additionally, in its Paycheck Protect Program Loans FAQ, SBA advised that “all PPP loans in excess of $2 million, and other PPP loans as appropriate, will be subject to review by SBA for compliance with program requirements[.]”

In addition, we expect that whistleblowers will actively seek to enforce the FCA in this context and that investigative reporters will undoubtedly play a role as well in driving CARES Act enforcement activity and FCA investigations and lawsuits.

In the next installment of our blog series, we will discuss civil enforcement, including lessons learned from the Troubled Asset Relief Program implemented in 2008 during the last financial crisis.

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Authors

Brian P. Dunphy is a member of the Health Care Enforcement & Investigations Group at Mintz. He defends clients facing government investigations and whistleblower complaints regarding alleged violations of the federal False Claims Act. Brian also handles commercial health care litigation.
Jane T. Haviland is a Mintz attorney who handles litigation matters, including complex civil and business litigation and product liability law. She has contributed to litigation victories including multijurisdictional product liability disputes involving pharmaceutical drugs.

Nicole E. Henry

Associate

Nicole represents clients in complex litigation matters across a variety of areas including health care enforcement defense, white collar defense, construction law, and general commercial litigation in state and federal court. Her practice focuses on defending companies against government investigations of alleged violations of the False Claims Act (FCA) and the Anti-Kickback Statute (AKS), conducting internal investigations, and litigating qui tam FCA cases.

Karen S. Lovitch

Member / Chair, Health Law Practice

Karen S. Lovitch is a Mintz attorney who represents health care companies in regulatory, transactional, and operational matters. She advises them on health care regulations such as the Stark Law and the Clinical Laboratory Improvement Amendments of 1988.