Watch out for compliance obligations when accepting supplier reduction funds, legal professional says – Information

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The federal government answered the call for relief earlier this month when it deemed that assisted living providers now are eligible for provider relief funds. But that relief comes with some pretty significant strings attached, according to one legal expert.

Sept. 1, the Department of Health and Human Services announced that private-pay assisted living communities could apply for the phase 2 general distribution allocation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act Provider Relief Fund.

Although industry representatives welcomed the news, Chris DeMeo, a partner with Chicago-based Seyfarth Shaw LLP, writes that assisted living communities unaccustomed to receiving federal funding “will have to come up to speed quickly with the compliance obligations triggered by such funding.”

Terms and conditions

Provider relief funds, DeMeo stated, are subject to terms and conditions of the False Claims Act liability. An operator can be liable under the FCA for “knowingly” applying for or keeping more funds than it knows it should receive, or for using funds for an unapproved purpose. The “knowingly” standard, he said, includes “deliberate ignorance or reckless disregard for the truth and does not require an intent to defraud.”

“It is also important to note that while the corporate form may provide protection for acts done on behalf of the organization, individuals, including directors and officers, can be personally liable for their own conduct in ‘causing’ a false claim to be submitted,” DeMeo wrote.

FCA cases, he added, often are brought by “whistleblowers,” who are entitled to a share of funds recovered by the government. That recovery could be up to three times the amount of the actual damages and include some or all of the relief funding, penalties of $11,665 to $23,331 for each false claim, plus attorney’s fees for the whistleblower.

DeMeo cautioned against relying on HHS guidance, noting that it has been “almost exclusively through FAQs,” does not have the force and effect of law and is subject to change. 

Assisted living operators considering applying for relief funds, he said, “must pay careful attention to evolving guidance with an understanding of the underlying purposes of the funding legislation and their organizations’ role in responding to the pandemic. The two fundamental concepts under the terms and conditions, he added, relate to how much money a community can receive and how a community uses that money.

The terms and conditions state that provider relief funds are supposed to reimburse an operator’s “demonstrable economic loss because of the coronavirus” but can only be used to pay for measures to “prevent, prepare for or respond” the virus. HHS recommends that funds be used to maintain healthcare delivery capacity, such as employee salaries and insurance, and to pay costs associated with compliance with Centers for Disease Control and Prevention guidelines. 

Funding limits

Allocation of phase 2 general distribution funding is based on 2% of an operator’s annual revenue from “patient care.” This methodology, DeMeo said, was prepared with Medicare and Medicaid providers in mind, so assisted living facilities will have to consider carefully what annual revenue can be attributed to “patient care.” 

HHS defines patient care revenue for assisted living communities as revenue that supports resident “nutrition, housing, activities of daily living and medical needs, including purchased services.” Resident fees for accommodations, and revenue from independent living units that are part of larger assisted living or skilled nursing facilities, qualify as patient care, according to the federal agency.

“While this guidance is helpful, an ALF with monthly fees that cover multiple services should take care to isolate those elements of the monthly fee that it feels are clearly within the current guidance, knowing that deliberate ignorance can be a basis for FCA liability,” DeMeo said.

In bringing assisted living communities under the “eligible provider” umbrella to receive funding, DeMeo said, HHS recognized the important role such providers play on the front lines in protecting older adults.

“Money from the Provider Relief Fund can help mitigate the effects of the pandemic and should be considered as part of a facility’s overall response strategy,” he wrote. “To prevent the relief from being worse than the problem, ALFs should have a clear understanding of their legal obligations in applying for and accepting the relief funds and proceed accordingly.”

Assisted living operators and other providers applying for the phase 2 general distribution funding have until Sept. 13 to begin their application by entering a tax identification number for validation.

Read DeMeo’s complete article here.