The Federal Government Is Taking Action Against COVID-19 Fraud—Here’s How Nursing Facilities Can Prepare

By Colin McCulloch

Congress distributed a lot of “free” money to help nursing facilities respond to the COVID-19 pandemic, appropriating a total of $9.44 billion specifically for skilled nursing facilities. The government distributed money under a number of different programs, each with its own rules for accounting for the money. For instance, nursing facilities could use lost revenues to account for general distributions from the Provider Relief Fund (PRF), but Nursing Home Infection Control targeted distributions and Quality Incentive Program payments under the PRF program were required to be accounted for by the hiring of staff to address infection control or other financial expenditures to safeguard the resident population during the pandemic. The Paycheck Protection Program, the Economic Injury Disaster Loan Program, and FEMA’s Public Assistance Program all had their own rules for applying and using funds. 

The rules were often evolving and unspecific because Congress’s goal was to get the relief funds in the hands of providers as quickly as possible. Now the government is catching up, and enforcement is a headline event. In May 2021, U.S. Attorney General Merrick Garland established a COVID-19 Fraud Enforcement Task Force, which has already charged over 1,000 criminal cases and opened over 200 civil investigations. President Biden has moved to reinforce this Task Force and recently announced the appointment of a Task Force Chief Prosecutor, who will focus on criminal cases against perpetrators of COVID-19-related fraud. Furthermore, according to remarks made by Garland at the American Bar Association’s annual white-collar crime conference, Biden’s 2022 budget request seeks $36.5 million to hire an additional 120 attorneys nationwide to handle COVID-19-related fraud cases.

Given the government’s strong stance against COVID-19-related fraud, nursing facilities should understand their reporting and audit requirements to minimize the risk of an enforcement action. Facilities that received PRF payments totaling over $10,000 during a payment received period are required to file reports, regardless of whether funds were received from general distributions, Nursing Home Infection Control distributions, or Quality Incentive Program payments. For facilities that received greater than $750,000 in a fiscal year, they will also have to submit a compliance report on the use of the funds prepared by an outside independent certified public accountant by the end of this calendar year.   

The Health Resources & Services Administration (HRSA) requires nursing facilities that received Nursing Home Infection Control funds and Quality Incentive Program payments, in particular, to support the use of those funds by reporting costs associated with reducing the COVID-19 threat to residents. This is distinct from the general distributions of the PRF that could be supported by lost revenue. 

It is important to note just how broad these reporting requirements are. For example, “hiring staff” may include asking and paying current staff to provide additional patient care and administrative support over existing levels. Similarly, “incurring expenses to improve infection control” includes not only personal protective equipment and laboratory expenses but also the costs of extra training for staff on infection control measures or the cost of hiring an infection control nurse. 

The deadline for reporting on the use of funds received from July 1, 2020, to December 31, 2020, was March 31, 2022. If your nursing facility had unused funds during the reporting period or failed to report on your use of funds, then you are required to repay HRSA by April 30, 2022. HRSA, the Department of Health and Human Services (HHS), the HHS Office of Inspector General, and the Department of Justice all reserve the right to audit your use of the funds. Given the amount of money distributed under these programs and the increases in agency budgets for enforcement personnel, it is likely that we will see more government audits or the government engage outside contractors to audit providers that received larger distributions.

It is unknown how many providers will be audited or how the providers will be selected for audit, but it is easier to prepare for the contingency while the facts are fresh. It is imperative to keep detailed records and document your rationale for each expense category. Consider gathering the following information:

  • The procedures and policies in place before and after the start of the pandemic to address COVID-19 at your facility
  • The cost of labor devoted to reporting COVID-19 test results to local, state, or federal governments
  • The cost of preparing reporting requirements and/or providing a compliance audit
  • A comparison of the cost of labor per resident day in 2019, 2020, and 2021
  • A comparison of the cost of personal protective equipment and other infection control equipment in 2019, 2020, and 2021
  • A comparison of the rates of infection at your facility for COVID-19 and other infections (e.g., urinary tract infections, pneumonia, or soft-tissue infections)

These are just a few of the many things you should do to prepare for a potential audit. For additional information and assistance, please contact one of the authors of this article.

Colin McCulloch is a healthcare attorney at Epstein Becker Green.