Mitigating Compliance Issues in the COVID-19 Environment

TASA ID: 15395

In the healthcare arena, compliance issues are raised, especially when a crisis comes along.   COVID-19 is such a crisis which has been enhanced from a compliance perspective by the Coronavirus Aid, Relief and Economic Security (CARES) Act which has released over $2.2 Billion into the economy to various businesses, healthcare facilities, providers’ offices, and more.              

The providers of healthcare are receiving the bulk of those funds to offset the financial impact of COVID-19 and assist in treating those for testing and those who have contracted the virus.   Supersized health systems to small hospitals to even small physician practices have received the fund.  

What we learned from Hurricane Katrina, after massive federal funds were channeled into the economy towards multiple recipients is that the federal government is immediately attracted to fraud schemes and scams which include those who have petitioned for funds without foundation.  The government officials are particularly drawn to the False Claims Act wherein the damages can be trebled, fines can be assessed, and even criminal charges brought.   Many of these fraud schemes can be uncovered by relators, better known as “whistleblowers.”  

The False Claims Act comes into play in times of emergency spending, especially at the levels being discussed and distributed during the pandemic we are now experiencing.   This Act is the federal government’s greatest tool when investigating fraud within the spending of federal monies.   The risks are significant in that it:

1) gives the government a strong and feared resolution leading to treble damages and civil penalties against any individual or company which commits and perpetuates fraud (e.g. the submission of false claims for remuneration to the federal government either knowingly or those who act with ignorance of the law/reckless disregard for the false claims filed) and

2) allows for the use of whistleblowers (those who come to the government with evidence or suspicion of false claims being submitted).   Whistleblowers can file Qui Tam suits (meaning on  behalf of the King or, in these cases, on behalf of the federal government).  

COVID-19 has led to significant government funds being released due to the damages caused to businesses, hospitals, health care companies, physician practices, and others.  The CARES act has allotted over $175 Billion in emergency funds to be distributed by the HHS via emergency funding mechanisms.   The method by which the monies are distributed to the healthcare businesses is based on their prior year amounts billed to Medicare.    As a part of this, the Department of Justice is urging those who know of fraud schemes and fraudulent claims to report those actions immediately to stem the tide of false claims being submitted.   Whistleblowers are coming forward at rapid rates and the federal officials are investigating at enhanced levels. 

The question then becomes what can healthcare companies do to mitigate the risk of non-compliance?  Compliance is a critical part of receiving government funds in this pandemic and in other disasters occurring in the United States.   Without compliance, the False Claims Act can easily come into play and be more damaging, financially and criminally, than most can imagine. 

One key to begin with towards mitigating compliance matters is to ensure that claims are made correctly, and the rules adopted by the program distributing monies have been followed diligently through understanding and action.  The funds must be used for their intended purposes and detailed records must be kept demonstrating compliance.  The overall compliance plan embraced by each entity must incorporate the rules related to the distribution of funds, communicating those rules and requirements, commit the rules to writing and keep a record of any government changes insofar as rules or requirements are issued and make sure the records separate any COVID-19 funds from ordinary revenues (from receipt through spend).  Those who prepare and submit the required government forms accounting for the funds must ensure that the forms are correct, reviewed and signed by the appropriate officer(s).  

Set in place the best practices in compliance, involve the compliance officers, the C-Suite executives and the Board of Directors.  Make everyone aware of the risks, the steps being taken to ensure compliance and keep everyone informed as to progress.  Keep separate records related to the pandemic funds so there can be no intermingling, despite how easy one might believe it to be.  Separate records require no explanation.  

Lastly, any business relationships, partnerships or alliances must be scrutinized so that all entities are compliant to the letter of the law and make sure they comply before entering into any deal with other entities.                 

The risks are real, tangible and costly.  The damages, once determined, will be tripled under the False Claims Act, the penalties range from $11,665 to $23,331 PER VIOLATION and criminal charges may be brought.  Do not think that the government will not look, do not unbundle charges, expect a review of monies received and spent and accept no kickbacks, often offered through labs and testing companies.  The risks are too great, and the payoff is de minimis when considered with the FCA penalties.   

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This article discusses issues of general interest and does not give any specific legal or business advice pertaining to any specific circumstances.  Before acting upon any of its information, you should obtain appropriate advice from a lawyer or other qualified professional.

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