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August 10, 2020

Best Practices to Navigate CARES Act Provider Relief Funding and Minimize False Claims Act Exposure

By John Libby, Esq. and Kathleen Wise, Esq., Manatt, Phelps & Phillips LLP, Los Angeles, CA, Allison Orris, Esq., Manatt, Phelps & Phillips, LLP, Washington, DC

Please note that this article contains guidance from the U.S. Department of Health and Human Services (HHS) that is current as of July 31, 2020, but as the HHS guidance is continually shifting, providers should check the HHS website for the latest information.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, Public Law 116-136, signed into law on March 27, 2020 established a “Provider Relief Fund” as part of a larger Public Health and Social Services Emergency Fund, to be distributed by grants or other payment mechanisms to eligible healthcare providers in order to reimburse providers for healthcare related expenses or lost revenues that are attributable to COVID-19.1 Additional legislation passed in late April supplemented the Provider Relief Fund, bringing the total available to $175 billion.2 The legislation delegated discretion as to how to distribute and administer the funds to the U.S. Department of Health and Human Services (HHS).3

In recognition of the imperative to quickly deliver funding to providers and the competing demands for the funding, HHS elected to release funds in “tranches” or waves, beginning on April 10. Over time, HHS has distinguished these funding tranches as being either under the umbrella of “General Distribution” funds, meant to provide a base payment of at least two percent of revenues to most providers, and additional “Targeted Distributions” designed to deliver additional funding to subsets of providers that meet certain criteria.4 In some cases HHS delivered funding directly to providers’ bank accounts, and in other cases HHS established procedures by which specified providers must seek funding. The efforts by the government to speed these funds into the healthcare system have been essential to deliver relief to providers, but also are likely to result in audits, investigations, and possibly qui tam litigation. Providers should take several steps now to minimize exposure in the event of such scrutiny.5

Key Issues

Provider Relief Fund payments may be used for healthcare related expenses or lost revenues that are attributable to COVID-19. All healthcare providers retaining payments from the Provider Relief Fund must certify that the funds will be used for only these purposes and must attest to the terms and conditions (Terms and Conditions) associated with the payments and “any other relevant statutes and regulations, as applicable.”6 The Terms and Conditions also obligate providers who accept Provider Relief Funds to consent to reporting requirements about uses of the funds as well as public disclosure of their receipt of such funds.7

In handling the funds and submitting reports to HHS,8 recipients of Provider Relief Funds must comply with federal financial management, cost documentation, and record retention requirements, including certifying that all information provided in the application and reports is true, accurate, and complete to the best of the recipient’s knowledge and acknowledging that any deliberate omission, misrepresentation, or falsification in the application or future reports may be punishable by criminal, civil, or administrative penalties.9  

HHS’s Office of Inspector General (OIG), which works to protect the integrity of HHS programs as well as the health and welfare of beneficiaries served by those programs, has already issued a strategic plan to address the “unprecedented challenges” stemming from COVID-19.10 The OIG states it will “identify, monitor, and target potential fraud, waste, and abuse affecting HHS programs and beneficiaries,” including auditing “fund recipients to assess whether they met use, reporting, and other requirements, and where appropriate, recommend recovery of misspent funds.”11

Providers should begin planning now to ensure that their use of funds, related attestations, and reporting are accurate. Such planning not only will help providers respond to oversight requests by the OIG and/or congressional committees, but is essential to avoid or minimize liability under the False Claims Act (FCA). The FCA prohibits the submission of false claims to the federal government or to a private party, such as a Medicare Advantage plan, administering federal funds, or false statements or records in support of such claims.12 FCA liability attaches where a recipient “knowingly” makes a false claim for, or false statement in support of a claim for, government funds. No specific intent to defraud is required, but “knowingly” encompasses actual knowledge, deliberate ignorance, and reckless disregard.13 Reverse false claim liability can also occur should the false claim or statement be designed to allow the recipient to keep funds where there is an obligation to return them.14 The FCA provides for significant penalties, including substantial fines, treble damages, and attorneys’ fees, and it may be enforced by both the government and whistleblowers (known as relators) in qui tam actions, who are entitled to a share of any proceeds recovered.15

As recipients of the Provider Relief Fund are required to submit attestations and reports to HHS, the FCA is in play for all recipients, and it is prudent to be prepared for possible audits16 and investigations in the future.

Best Practices for Providers

In order to minimize FCA exposure and prepare for potential future audits, investigations, and litigation, the following are best practices for providers based on select provisions in the Terms and Conditions and HHS’s informal guidance in the form of Frequently Asked Questions (FAQS),17 which continue to be updated on a rolling basis. It is important to note that HHS guidance is continually shifting, and providers should check the HHS website for the latest guidance.

Accounting for Lost Revenue and Use of Funds

Perhaps the most critical area for providers accepting and using Provider Relief Fund payments lies in making sure the funds are accepted and used in conformance with the criteria established by the CARES Act and set forth in the Terms and Conditions issued by HHS to which providers must attest; namely, providers must establish that they are using Provider Relief Funds for “health care related expenses or lost revenues that are attributable to coronavirus.”18  Providers accepting the funds must acknowledge that they anticipate having lost revenue or expenses sufficient to cover the funds received, and document that they used the funds appropriately. In addition, to access one tranche of the Provider Relief Fund, certain providers had to estimate their lost revenues in March and April 2020 so that HHS could allocate funds accordingly.19

HHS defines “lost revenues that are attributable to coronavirus” to mean any revenue the provider lost due to coronavirus, including “revenue losses associated with few outpatient visits, canceled elective procedures or services, or increased uncompensated care.”20 HHS’ FAQs specifically encourage providers to use the Provider Relief Fund to cover lost revenue so that providers can respond to the public health emergency by maintaining healthcare delivery capacity, including by using funds to pay for employee or contractor payroll, employee health insurance, rent or mortgage payments, equipment lease payments, and electronic health record licensing fees.21 The FAQs define healthcare expenses as a range of items and services that providers purchase to prevent, prepare for, and respond to coronavirus, including supplies, equipment, workforce training, and building facilities to increase capacity.22

When providers estimate lost revenues, HHS suggests that such losses can be established by comparing actual revenue in prior years in those months, or by comparing actual revenue to a budget prepared prior to the COVID-19 crisis.23 HHS’ FAQs state that if a provider does not have or anticipate having COVID-related lost revenues or increased expenses equal to or in excess of the relief payments received, the provider should return the funds.24 That “anticipate having” language here is key. If a provider anticipates further lost revenues or coronavirus-related expenses, then such funds can be retained to make up such shortfalls.25 But it is critical that the projected lost revenues and anticipated expenses be based on reasonable assumptions, and providers should be prepared for a reconciliation process at some point in the future as any leftover Provider Relief Funds that providers cannot expend on permissible expenses or losses must be returned.   

Providers are not required to prove at the time they accept payment that prior and/or future lost revenues and increased expenses attributable to COVID-19 meet or exceed their Provider Relief Fund payment.26 Instead, HHS “expects that providers will only use the Provider Relief Fund payments for permissible purposes and if, at the conclusion of the pandemic, providers have leftover Provider Relief Fund money that they cannot expend on permissible expenses or losses, then they will return this money to HHS.”27 It is critical then that providers carefully account for their use of the funds so that they can demonstrate that the payment was used for lost revenue and increased expenses attributable to COVID-19, and accurately identify whether an overpayment occurred, requiring funds to be returned.28 It is important to note too that recipients are not allowed to use the Provider Relief Fund payment to reimburse expenses or losses that have been reimbursed from other sources or that other sources are obligated to reimburse, such as other government funds, insurance proceeds or other disaster relief funds, and that the payment is not to be used for certain purposes that are prohibited by HHS appropriations law, including executive compensation, lobbying, abortions, or unpaid federal tax liabilities.29

While it is unlikely that a provider would “knowingly” seek or use the payment improperly, poor accounting and documentation procedures can lead to FCA liability under the “reckless disregard” or “deliberate ignorance” knowledge standards.30 Best practices to minimize the risk of this outcome when estimating lost revenue and documenting that the funds were used for lost revenue and eligible healthcare expenses include:

·         Track lost revenue from closed services and document patient volumes for all sites and services, including hospital inpatient/outpatient services, physician practices, and ambulatory centers;

·         To the extent the budget for the relevant period was prepared without taking into account the impact of COVID-19, estimate the lost revenue by looking at the difference between the budgeted revenue and actual revenue;

·         Compare revenue this year to the same period last year and document the differences;

·         Ensure accurate cost reports or accurate estimates in lieu of cost reports when tracking eligible healthcare expenses;

·         Document each expenditure with a specific and supported finding that the expenditure qualifies as reimbursement for lost revenue or eligible healthcare expense;

·         Segregate the Provider Relief Funds from other accounts to track use of the funds; consider limiting access to the Provider Relief Fund account and instituting a two-signature requirement; and

·         Return funds if an overpayment may have occurred based on actual or anticipated lost revenue and expenses.

Billing Practices

Recipients of Provider Relief Funds must also certify that they will not issue “surprise bills” for out-of-network care to “presumptive or actual” COVID-19 patients. HHS includes this provision in the Terms and Conditions governing each distribution, reflecting its concern that established health plan networks could become overwhelmed, forcing patients out-of-network.31 The FAQs define a “presumptive patient” as a case where a patient’s medical record documentation supports a diagnosis of COVID-19, even if the patient does not have a positive in vitro diagnostic test result in his or her medical record.32 Best practices to ensure out-of-network patients are not charged beyond what the patient would have paid in-network include:

·         Ensure that out-of-network patients are not charged for deductibles, copayments or balance billing in amounts greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network recipient;33

·         Use reasonable judgment in arriving at the proper rate, such as attempting to bill the patient’s insurer or at least seeking information about the patient’s in-network rate, deductible, and copayment first, and if neither approach works, then document the methodology used to set the proper rate for out-of-network patients; and

·         Document billing codes, medical records, and reports of COVID-related testing.

Determining and Documenting Who Is a “Possible” COVID-19 Patient

The CARES Act describes eligible providers as those “that provide diagnoses, testing, or care for individuals with possible or actual cases of COVID– 19,” a phrase that generated questions about whether certain providers could accept Provider Relief Funds. For example, providers that saw patients in January and February but closed their offices in March – as COVID-19 surged – may not have treated any confirmed COVID-19 patients and may be concerned about attesting to having done so in the Terms and Conditions. Recognizing the long incubation period, the potential for carriers to remain asymptomatic, and the unique circumstances of controlling the spread of a pandemic, HHS has taken a broad view of eligibility in an apparent effort to ensure that the maximum number of providers have access to these funds. Although the Terms and Conditions to which providers attest do not elaborate on the statutory definition of an eligible provider, the HHS FAQs state that “under the Terms and Conditions associated with payment, providers are eligible only if they provide or provided after January 31, 2020, diagnoses, testing or care for individuals with possible or actual cases of COVID-19. HHS broadly views every patient as a possible case of COVID-19.”34

This informal guidance from HHS is likely to provide a defense to FCA liability where a provider either shut down due to the COVID-19 pandemic or cannot otherwise establish that the provider treated actual or possible COVID-19 patients. Courts have held that the government’s “knowledge of the facts” underlying an alleged false claim can provide a defense to liability under the FCA.35 While there are slight variations, this aptly named “government knowledge inference defense” generally may be applied where two requirements are met: (1) the government agency knew about the alleged false statement(s) and (2) the provider knew the government knew.36 Under this framework, parties are not liable under the FCA for following the government’s explicit instructions, even if such instructions might contradict statutory language and thus arguably cause the submission of a false claim.37 This is especially true where contractors and other recipients of government funds have been up front and explicit with the government, informing the government of their intentions.

Here, HHS has advised providers on its website and in FAQs that they may receive and retain funds under the CARES Act, so long as they have cared for at least one patient after January 31, 2020. HHS appears to be telling recipients of the Provider Relief Fund – up front – how and when they may retain the funds in question. This overt instruction may provide a basis for the application of the “government knowledge inference defense” to avoid potential liability under the FCA for certifications that allegedly violate the plain language of the CARES Act, which is reflected in the associated Terms and Conditions of the payment.

For those providers who kept their offices open when COVID-19 surged and did see patients, best practices to minimize FCA exposure include:

·         Review billing codes to identify those reflecting one or more of the Centers for Disease Control and Prevention (CDC) recognized symptoms of COVID-19;38

·         Ensure that COVID-related claims are appropriately documented with COVID-specific billing codes and modifiers;39

·         Provide guidance to frontline staff and payors on billing to ensure appropriate reimbursement for services and tracking of COVID-specific expenses; and

·         Maintain internal documentation regarding the treatment of confirmed COVID-19 patients and “presumptive” COVID-19 patients who have one or more of the CDC recognized symptoms of COVID-19.

For those providers who closed their offices when COVID-19 surged and are concerned that they did not see actual or presumptive COVID-19 patients, best practices to minimize FCA exposure include:

·         Internally document reliance on HHS’s informal statement that every patient is a possible COVID-19 patient; and

·         Retain screenshots of relevant HHS website pronouncements, as they are constantly shifting.

Conclusion and Key Takeaways

HHS’ efforts to quickly distribute Provider Relief Fund payments to providers responding to the COVID-19 pandemic place new responsibilities on providers to carefully document the conditions of their receipt of the funding and to track how they use the funds. Providers can institute practices now to manage potential FCA exposure. In addition to following the recommended best practices set forth above, providers should carefully review HHS’s website, FAQs, and the Terms and Conditions for each allocation of the Provider Relief Fund to determine how best to apply for, retain, and use these funds. When reviewing and analyzing the Terms and Conditions, providers should evaluate the eligibility requirements of each portion of the Provider Relief Fund to ensure that they satisfy the criteria to retain the funds, evaluate the restrictions on use of the funds to ensure that their use will comply with statutory requirements as well as administrative guidelines from HHS, and ensure that the Provider Relief Funds are not used to cover expenses reimbursable by other available funding sources. Providers should also monitor HHS and other relevant government websites on a regular basis to track updates on reporting requirements, and cross reference the Terms and Conditions for each program with subsequent HHS guidance for consistency. By reviewing the rules and creating a thorough and accurate paper trail, providers will be better prepared to confront any future audits, investigations, or litigation.

  1. [1] CARES Act, Pub. L. No. 116-136, 134 Stat. 281, 116th Cong. (2020).
  2. [1] The CARES Act originally allocated $100 billion. Id. An additional $75 billion was added to the Provider Relief Fund by the Paycheck Protection Program and Health Care Enhancement Act (PPPHCEA), signed into law on April 24, 2020. The PPHCEA Provider Relief Fund provision mirrors the CARES Act provision, and hereinafter this article refers to the CARES Act Provider Relief Fund to encompass the entire $175 billion fund. PPHCEA, Pub. L. No. 116-139, 134 Stat. 620, 116th Cong. (2020).
  3. [1] The legislation refers to provider “applications” for the funds and also says that HHS must distribute the funding “in consideration of the most efficient payment systems practicable to provide emergency payment,” leaving to HHS the mechanics of application for and disbursement of funds. CARES Act, 134 Stat. 281.
  4. [1] The revenue-based payments include the $50 billion General Distribution for Medicare providers, $15 billion for Medicaid providers that did not receive a General Distribution payment, and an unknown allocation for dentists eligible for neither of the prior payments. For a breakdown of the Provider Relief Fund distributions to date, see CARES Act Provider Relief Fund: General Information, HHS, available at
  5. [1] This analysis focuses on the approximately $102.4 billion allocated to date through the General Distribution and several Targeted Distributions announced by HHS; the considerations and best practices described below apply to all of these funds. This article does not specifically address the COVID-19 Testing and Treatment of the Uninsured Program, which is a claims-based reimbursement program that raises related, but not identical, considerations.
  6. [1] See CARES Act Provider Relief Fund: For Providers, HHS, available at, which provides the Terms and Conditions for the various distributions.
  7. [1] Id.
  8. [1] HHS has stated that it will release detailed reporting instructions by August 17, 2020. See General and Targeted Distribution Post-Payment Notice of Reporting Requirements, HHS, available at
  9. [1] See, e.g., Terms and Conditions for Initial $30 Billion General Distribution, HHS, available at HHS has also stated it will provide more detailed reporting requirements in the future, which will be available at
  10. [1] OIG Strategic Plan: Oversight of COVID-19 Response and Recovery, available at (May 2020).
  11. [1] Id.
  12. [1] See 31 U.S.C. §§ 3729(a)(1)(A)-(a)(1)(B).
  13. [1] See 31 U.S.C. §§ 3729(b)(1)(A)-(b)(1)(B).
  14. [1] See 31 U.S.C. § 3729(a)(1)(G).
  15. [1] 31 U.S.C. §§ 3729(a)(1)(G), 3729(a)(3); 31 U.S.C. § 3730.
  16. [1] HHS states it “will have significant anti-fraud monitoring of the funds distributed, and the Office of Inspector General will provide oversight as required in the CARES Act to ensure that Federal dollars are used appropriately. HHS will notify recipients of applicable audit requirements in the coming weeks.” CARES Act Provider Relief Fund: FAQs, available at
  17. [1] CARES Act Provider Relief Fund: FAQs, available at
  18. [1] See e.g., Terms and Conditions for Initial $30 Billion General Distribution, HHS, available at
  19. [1] This requirement applies to the 2nd tranche of the $50 billion General Distribution, some of which was distributed to providers automatically, and some of which required providers to provided estimated lost revenues. See CARES Act Provider Relief Fund: FAQs, available at
  20. [1] See id.
  21. [1] See id.
  22. [1] See id.
  23. [1] See id.
  24. [1] See id.
  25. [1] Providers can use the funds to make up shortfalls until July 31, 2021, which is the deadline for submitting reports on the use of Provider Relief Fund money. Id. (“[R]eports on the use of Provider Relief Fund money must be submitted no later than July 31, 2021, and accordingly HHS expects that providers will fully expend their payments by that date.”
  26. [1] See id.
  27. [1] Id.; see also supra note 23.
  28. [1] See id. HHS FAQs note that “HHS will provide directions in the future about how to return unused funds. HHS reserves the right to audit Provider Relief Fund recipients in the future and collect any Relief Fund amounts that were used inappropriately.”
  29. [1] CARES Act, 134 Stat. 281.
  30. [1] While innocent mistakes and negligence do not lead to FCA liability, “[d]eliberate indifference and reckless disregard can be means of inferring actual knowledge in the absence of direct evidence.” Siebert v. Gene Sec. Network, Inc., 75 F. Supp. 3d 1108, 1116 (N.D. Cal. 2014). Deliberate ignorance requires a higher level of scienter when compared to reckless disregard though, as reckless disregard is the minimum requirement for scienter under the FCA. See Urquilla-Diaz v. Kaplan Univ., 780 F.3d 1039, 1058 n. 15 (11th Cir. 2015) (noting that the deliberate ignorance scienter requirement “plainly demands even more culpability than that needed to constitute reckless disregard”).
  31. [1] See e.g., Terms and Conditions for Initial $30 Billion General Distribution, HHS, available at
  32. [1] See CARES Act Provider Relief Fund: FAQs, available at
  33. [1] See Terms and Conditions for Initial $30 Billion General Distribution, HHS, available at
  34. [1] See CARES Act Provider Relief Fund: FAQs, available at (emphasis added).
  35. [1] See, e.g., United States ex rel. Spay v. CVS Caremark Corp., 875 F.3d 746, 756 (3d Cir. 2017).
  36. [1] See, e.g., id.; United States ex rel. Becker v. Westinghouse Savannah River Co., 305 F.3d 284, 289 (4th Cir. 2002); United States ex rel. Durcholz v. FKW, Inc., 189 F.3d 542, 545 (7th Cir. 1999).
  37. [1] See, e.g., id.; United States ex rel. Burlbaw v. Orenduff, 548 F.3d 931, 953-54 (10th Cir. 2008).
  38. [1] The CDC’s website sets forth recognized symptoms of COVID-19, and it is available at
  39. [1] Providers should rely on Centers for Medicare & Medicaid Services (CMS), CDC, and professional association updates for the latest coronavirus coding information, such as guidance available here:

About the Authors

John Libby is a partner at Manatt, Phelps & Phillips, LLP and the leader of the firm’s investigations and white collar defense practice. He represents businesses, officers, and directors during criminal investigations, prosecutions, and in complex civil litigation. Formerly an Assistant U.S. Attorney, he guides clients through the phases of complex disputes with both the government and with private parties for clients in the healthcare and financial services industries, among others. His practice also involves conducting internal corporate investigations in response to government inquiries or internal allegations of misconduct, and advising on compliance programs and leading compliance trainings. Mr. Libby has been recognized by The Best Lawyers in America since 2013 and as a Southern California Super Lawyer since 2004. He may be reached at (310) 312-4342 or [email protected].

Allison Orris
is counsel at Manatt, Phelps & Phillips, LLP in the firm’s healthcare practice. A former healthcare policy advisor for the executive branch of the federal government, she has deep experience in Medicaid, the Children’s Health Insurance Program (CHIP) and the Patient Protection and Affordable Care Act. She regularly advises hospitals, states and national association clients on the impact of emerging Medicaid legislation, regulations and subregulatory guidance, bringing her health policy expertise and familiarity with administrative and legislative processes to bear in helping clients respond to the changing federal healthcare landscape. She also counsels hospital systems about Medicaid reimbursement and supports state clients in the development and negotiation of Medicaid 1115 demonstrations with the Centers for Medicare & Medicaid Services (CMS). Ms. Orris may be reached at (202) 585-6561 or [email protected].

Kathleen Wise
is an associate at Manatt, Phelps & Phillips, LLP, concentrating in white collar investigations and financial services litigation. Her white collar defense practice includes assisting companies and individuals at all phases of government investigations, including responding to subpoenas and civil investigative demands; negotiating pleas; and conducting internal investigations in response to allegations of misconduct or to government inquiries. Ms. Wise previously served as a law clerk to the Honorable Robert S. Ballou, magistrate judge of the U.S. District Court for the Western District of Virginia, and held a legal internship with the Department of Justice's U.S. Attorney’s Office in the District of Maryland. She may be reached at (310) 312-4100 or [email protected].