To address the COVID-19 public health emergency fiscal burdens, Congress authorized and appropriated the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act[1], Public Health and Social Services Emergency Fund (“Relief Fund”) for healthcare providers and facilities. The Department of Health and Human Services (“HHS”) has begun to distribute several tranches of the Relief Funds. All totaled, Congress provided $175 billion to the Public Health and Social Services Emergency Fund (“Relief Fund”) through the CARES Act and the Payroll Protection Program and Health Care Act.[2]

As of May 7, 2020, HHS identified $50 billion for general distribution to Medicare providers. HHS distributed to Medicare providers the Relief Fund’s initial $45 billion tranche in April 2020, and is distributing the Relief Fund’s second $20 billion tranche. Also, HHS allocated Relief Funds to: hospitals in COVID-19 high impact areas ($10 billion); rural providers ($10 billion); Indian Health Services ($400 million), and skilled nursing facilities, dentists, and providers that take solely Medicaid (unidentified amounts).[3]

Terms and Conditions: Appropriate Relief Fund Use

In order to retain the Relief Funds, HHS requires Recipients to acknowledge and agree to certain Terms and Conditions, including reporting and documentation on their use of the funds. Although the Terms and Conditions provide compliance standards for Recipients, they do not prescribe the types of expenses authorized for the Relief Funds.[4] The authorizing laws provide the only detail on the Relief Fund’s appropriate use. The Recipient may use Relief Funds only to “prevent, prepare for, and respond to coronavirus” and for “health care related expenses or lost revenues that are attributable to coronavirus” under the following categories:

  • building or construction of temporary structures
  • leasing of properties
  • medical supplies and equipment including personal protective equipment and testing supplies
  • increased workforce and trainings
  • emergency operation centers
  • retrofitting facilities, and
  • surge capacity.

The categories of appropriate use cannot be fully explored without also considering the Relief Fund’s limitations. For example, the authorizing legislation prohibits Relief Fund reimbursement of expenses or losses reimbursed from other sources or that other sources are obligated to reimburse. In addition, other statutory limitations on use of HHS appropriated funds[5] apply, including prohibitions on use of HHS funds for:

  • Salaries in excess of Executive Level II ($197,300)
  • Gun Control Advocacy
  • Lobbying
  • Abortions – with some limitations
  • Embryo Research, and
  • Promotion of Legalization of Controlled Substances.

CARES Act Authorizing Legislation and HHS Terms and Conditions: Contradictory and Unclear

The allowable uses for the Relief Funds in both the CARES Act authorizing legislation and in the HHS Terms and Conditions are less than clear and are arguably contradictory. Recipients must attest that they will only use the Relief Funds to “prevent, prepare for, and respond to coronavirus,” seeming to require that use of the funds must tie directly to prevention or treatment of the virus. However, the recipient must also attest that it will use the funds “only for health care related expenses or lost revenues that are attributable to coronavirus.” This latter language implies a broader category of acceptable uses for the funds, arguably including costs unrelated to the coronavirus, but which the Recipient would normally have funded with revenues lost due to the public health emergency.

Reports, Non-Compliance, Penalties, and Risk Mitigation

HHS requires Recipients to report the use of the Relief Funds and HHS reserves the right to audit Recipients for compliance with applicable standards. Non-compliance with any of the provisions of the Terms and Conditions may result in recoupment of some or all of the Relief Fund payments. More severe penalties may apply for deliberate omission, misrepresentation, or falsification within submitted reports, including criminal, civil, or administrative penalties. Documentation, therefore, will be critical to show that Recipients used Relief Funds appropriately. To best ensure and demonstrate compliance with the Relief Fund’s Terms and Conditions, Recipients should create a mechanism to track expenses for which the funds are used. Tracking should tie use of the funds to the billing entity that received the funds, identified by Tax Identification Number (“TIN”).

To strengthen risk mitigation, Recipients should first use the Relief Funds for those expenses that most clearly fall within the scope of appropriate uses as defined by the law and applicable Terms and Conditions. Next, the Recipient could weigh the risks of using the Relief Funds for needs that are less clearly within that scope or for any remaining expenses that have at least a principled basis to tie them to the applicable scope. We work with many clients to help identify those costs that fall at each risk level.

To Prevent, Prepare For and Respond to COVID-19

The expense group with the clearest supported use of the Relief Funds would be for costs to “prevent, prepare for and respond to” COVID-19, costs over and above a Recipient’s “normal” operating costs. For example, such expenses might include:

  • Purchase of medical supplies and equipment in excess of the normal level used by the provider due to needs from treating COVID-19 patients or to protect against potential COVID-19 transmission.
  • Employment (direct hire, temporary, or on a contract basis) of increased staff to manage needs related to COVID-19, such as a need for higher nurse-to-patient ratios, increased number of or overtime hours for cleaning staff, or for additional respiratory therapists.
  • Renovations within current buildings or construction of temporary structures to facilitate care of COVID-19 positive patients or to isolate non-COVID-19 positive patients to protect their health.[6]

Recipients’ finance team could establish “normal” costs, perhaps based on their current year’s budget or past year’s expenditures.

Salaries Limited to Executive Level II - $197,300

Use of the Relief Funds for salaries has raised particular questions for Recipients given the Executive Level II salary limitation. While HHS has not issued Relief Fund guidance on this salary limitation, HHS permits other HHS grant Recipients to pay individuals’ salaries in excess of the $197,300 limit with non-federal funds.[7] This parallels HHS regulations that limit use of federal contract funds for salary costs to the Executive Level II amount.[8]

Operational Costs – Lost Revenue

Next Recipients could target operational costs that the Recipient normally funded – at least in part – with what is arguably “lost revenue”. We define “lost revenue” as including lost reimbursements from government and private payers. Today, Recipients face decreased healthcare reimbursement from pre-COVID-19 “normal” levels due to the public health emergency. For example, a recipient that normally conducts one hundred elective procedures per week, now cancelled due to the public health emergency, could arguably use the Relief Funds to pay that portion of the rent, utilities, security, and other operational costs normally funded with the reimbursements now lost to cancellation. Reimbursement for these expenses enables the Recipient to “prevent, prepare for and respond to” COVID-19. As neither Congress nor HHS has spoken to clarify the intended meaning of “lost revenues attributable to the coronavirus”, use of the Relief Funds for such costs may pose a higher risk for the Recipient.

Other Fund Use

All other costs that fail “to prevent, prepare for, and respond to coronavirus”, but are funded normally with reimbursements from the now cancelled procedures (arguably this is “lost revenue”), would need to be individually reviewed to determine the level of risk associated with use of the funds. These could include payment of salaries of professionals who are not treating COVID-19 patients and who are partially or wholly unable to treat patients due to the temporary cessation of elective surgery or drop in non-COVID-related outpatient visits. One could argue that payment of salaries for such professionals is “in response to coronavirus,” at least indirectly, as the virus itself led to the hiatus in providing such services and the recipient must maintain its treatment team to address what will likely be the pent up demand which will be evident once the virus is better under control.

Other such costs could be for construction of a new physician office building or a new oncology wing; improvements to a hospital cafeteria; or advertising unrelated to the COVID-19 emergency. These may be more challenging to tie to coronavirus. The risk derives from acting on an interpretation of Congress’ and HHS’ contradictory language with the likelihood that HHS will eventually clarify what constitutes “lost revenue” and how funds can be used for such purposes.

Finally, Recipients should be cautious not to use Relief Funds to cover losses or costs attributable to treating uninsured COVID-19 patients to the extent that the Recipient submits claims for testing and treatment of these COVID patients to HHS through its designated portal.[9]


Ultimately, Recipients must identify and triage their specific funding needs and “lost revenues” to document the specific costs for which they use the Relief Funds. Each Recipient’s approach to complying with the Terms and Conditions[10] will likely differ depending on the Recipient’s operational structure and policies. Regardless, we strongly recommend that Recipients maintain their Relief Funds in one or more separate bank accounts to facilitate tracking and reporting. HHS continues to issue guidance on these and other issues related to the Relief Funds, including, at times, guidance that may apply retroactively.  Epstein Becker & Green monitors HHS’ actions for any changes that may affect our clients. In our next post, we will review the Terms and Conditions for the Uninsured Care Grants.

* * * * *

[1] Pub. L. No. 116-136.

[2] Pub. L. No. 116-139.

[3] CARES Act Provider Relief Fund, HHS Webpage (Accessed May 7, 2020).

[4] For additional discussion of the Terms and Conditions, see EBG Blog Post HHS Relief Fund’s Terms and Conditions – Reporting and Public Disclosure of Payments, May 7, 2020.

[5] Relief Fund Payment from Initial $30 Billion General Distribution Terms and Conditions, Relief Fund Payment from $20 Billion General Distribution Terms and Conditions.

[6] Other appropriations including the Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020, provided grant funds for non-federally owned facilities to improve preparedness and response capability at the state and local level. See EBG Blog Post Coronavirus Supplemental Appropriations Act – Construction Grants for Non-Federally Owned Facilities (March 9, 2020)

[7] See Health Resources & Services Administration (“HRSA”) External Grants Policy Bulletin 2020-03E, February 7, 2020.

[8] See 48 C.F.R. §§331.101-70 and 352.231-70.

[9]The HHS submission portal for claims related to COVID-19 testing and treatment of the uninsured is at

[10] The Terms and Conditions provide that Recipients “maintain appropriate records and cost documentation including as applicable documentation described in:

  • 45 CFR § 75.302 – Financial Management
  • 45 CFR § 75.361 through 75.365 – Record Retention and Access; and
  • Other documentation required by future program instructions to substantiate the reimbursement of costs under this award.
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