AMARILLO, TX – Throughout the past year, the Provider Relief Fund (“PRF”), established by the CARES Act, has allowed many health care providers to continue to operate and provide necessary services. As the PRF program matured, the Department of Health and Human Services (“DHHS”) encouraged providers to apply for PRF funding if they had lost revenue and/or experienced increased expenses attributable to COVID-19.
If the provider was deemed eligible, funds were provided in the amount of 2% of revenue. These revenue numbers were furnished by providers at a time when information regarding the calculations of revenue to be submitted was sparse. The effect of this is that some providers may have received PRF monies that DHHS later indicated they were not entitled to.
Reporting Use of PRF Funds
As a condition of receiving PRF funds, each recipient is required to report on the use of such funds and should aim to exhaust all PRF funds no later than June 30, 2021 (which may change prior to the publication date of this article). However, there has been a delay in a comprehensive PRF reporting program. Currently, the reporting portal remains open only for registration purposes. There is no indication about when providers will be required to begin reporting data.
Overpayments and Refunds
Similar to the lack of guidance on reporting, there is currently no mechanism for providers to return a portion of PRF funds received. As such, it is difficult to determine the proper course of action for providers that plan to exhaust all PRF funds by June 30, 2021, but which funds may include some monies that the provider later learned it was not entitled to.
DHHS has not offered any guidance that would help a provider determine how to report the partial overpayment of PRF funds, or how to return such funds that the provider was not entitled to receive. The closest guidance pertaining to a partial return of funds comes from the following DHHS FAQ:
An organization that sold part of a practice in 2019 or January 2020 received a payment under the General Distribution that reflected the 2019 Medicare fee-for-service billing of the part of the practice that was sold. Can the parent entity return a portion of the payment for the part of the practice it no longer owns? (Modified 3/31/2021)
DHHS responded with the following answer:
No. A provider may not return a portion of a Provider Relief Fund payment. If a provider that sold a practice that was included in its most recent tax return gross receipts or sales (or program services revenue) figure can attest to meeting the Terms and Conditions, it may accept the funds. The Terms and Conditions place restrictions on how the funds can be used. In particular, all recipients will be required to substantiate that these funds were used for health care-related expenses or lost revenue attributable to coronavirus, and that those expenses or losses were not reimbursed from other sources and other sources were not obligated to reimburse them.
While this FAQ does not directly address the question at hand, it seems to suggest that a provider may keep funds it believed it was entitled to at the date of the application if it continues to meet the terms and conditions regarding use of the funds. However, because there is no clear guidance on this specific issue, and there is a risk associated with retaining the funds, below are some options for providers to consider:
- A provider could return the entirety of funds received. This would be the most conservative approach.
- A provider could escrow or isolate the funds and wait for DHHS to seek repayment. However, because DHHS has set time frames for use of the funds, a provider could later be forced to return funds it could have used due to not timely using the money for permitted purposes.
- A provider could use the funds based on the interpretation above, strictly complying with the terms and conditions of the PRF program, while being prepared for the possibility of DHHS requiring repayment in the future.
- A provider could take a hybrid approach. The provider could create an accounting method that would account for the appropriate use of the money received, but physically keep the funds isolated in case DHHS seeks repayment.
Given the lack of clarity on the matter, the risk of adverse action being taken is relatively low, but it cannot be guaranteed that some action will not be taken in the future to collect the overpayment of funds provided. Providers should determine the portion of funds received that the provider was entitled to and compare that to the total amount of funds the provider actually received. A conservative approach would be for the provider to isolate the excess funds or keep detailed records of how the excess funds were spent. In that regard, when it comes time to report the use of PRF funds, any excess funds can be clearly accounted for. With little guidance available on this matter, the best option would be to remain diligent in tracking the use of the funds and monitoring new guidance that could provide insight into these issues.
AAHOMECARE’S EDUCATIONAL WEBINAR
Collaborative Arrangements with Hospitals, Pharmacies, Home Health Agencies, and Other Referral Sources
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato & Kelly T. Custer, Esq., Brown & Fortunato
Tuesday, June 1, 2021
1:30-2:30 p.m. CENTRAL TIME
The lifeblood of the successful DME supplier is to develop relationships with physicians, hospitals, long term care facilities, home health agencies, pharmacies, and other providers to ensure a steady stream of referrals. There are innovative arrangements that, if structured properly, are legally acceptable. Examples include a Medical Director Agreement with a physician, loan closet with a hospital, preferred provider agreement with a long-term care facility and/or a hospital, joint venture with a hospital, and sponsoring a physician to present education programs. In structuring such an arrangement, DME suppliers need to be careful to avoid the federal anti-kickback statute, the federal physician self-referral statute (“Stark”), and other federal and state anti-fraud laws. This webinar will (i) discuss the applicable legal guidance, (ii) give examples of legally acceptable arrangements with referral sources, and (iii) give examples of arrangements that need to be avoided.
Register for Collaborative Arrangements with Hospitals, Pharmacies, Home Health Agencies and Other Referral Sources on Tuesday, June 1, 2021, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. and Kelly T. Custer, Esq. of Brown & Fortunato.
Hosted by AAHomecare, Brown & Fortunato, and McKesson
(Speak with your McKesson Rep for a Discount Code)
Perils of the “Gray Market”: Reselling to Providers and Second Tier Wholesalers
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato
Tuesday, June 15, 2021
1:30-2:30 p.m. CENTRAL TIME
The standard distribution channel is for the DME supplier to purchase products from the manufacturer or the wholesaler…and then resell the products to consumers. In purchasing from the manufacturer/wholesaler, the supplier will normally agree to sell the products only to the end user (i.e., the consumer). In return for this commitment, the manufacturer/wholesaler will offer special pricing to the supplier.
Unfortunately, it is not uncommon for suppliers to sell these restricted products on the “gray market” – that is – suppliers will resell the products to medical clinics, home health agencies, long term care facilities that, in turn, provide the products to their patients. Alternatively, the DME supplier will resell the restricted products to second tier wholesalers that operate in the gray market.
By diverting products from the normal distribution channel into the gray market, DME suppliers are opening themselves up to liability from different sources. The manufacturer/wholesaler can (i) terminate its relationship with the supplier and/or (ii) sue the supplier for breach of contract and possibly under a tort theory such as fraud in the inducement. In addition, there have been a number of federal criminal cases brought against DME suppliers and pharmacies that have diverted products into the gray market.
This program will discuss the restrictions that DME suppliers normally agree to when they purchase products from manufacturers and wholesalers. The program will then describe the gray market and the legal risks to suppliers that operate in the gray market. Lastly, the program will discuss the compliance steps that DME suppliers can take to steer clear of the legal pitfalls associated with the gray market.
Jeffrey S. Baird, JD, is Chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers, and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or email@example.com.
Kelly T. Custer, JD, is an attorney with the Health Care Group at Brown & Fortunato, PC, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies and other health care providers throughout the United States. Mr. Custer can be reached at (806) 345-6343 or firstname.lastname@example.org.