Physician practice consolidation causes CARES Act grant headaches

HHS sent out $50 billion in general provider grants based on 2018 and 2019 data, and the grants were attached to Tax Identification Numbers instead of the providers themselves. That left sticky situations for hospitals, private equity funds and physicians when money was sent starting in April. In some cases thousands of dollars were on the line. HHS clarified its guidance on May 19 and 20, but didn’t notify providers of the change ahead of a June 3 deadline to submit financial information.

Providers are affected differently based on the distinct fact patterns of their acquisitions.

Hospitals could lose out if they acquired a practice between partway through 2019 and January 2020. If the grants went to the practice’s inactive TIN, the provider has to send back the funds. 

A hospital or provider group can only apply for more grant funds for the practice they purchased if the acquisition changed the gross receipts in its most recent tax return by at least 20%. If not, they can’t recover the funds.

“Hospitals will have purchased practices as they moved to create more integrated health systems, which is a wrinkle in this,” Washington Council Ernst & Young principal Heather Meade said.

The 20% cutoff appears to be an arbitrary threshold, though observers pointed out that HHS likely had to choose a cutoff for practicality’s sake.

“There’s a bright line they had to draw, and I’m not being critical,” King & Spalding partner Mark Polston said. “They had to do it, but that bright line creates problems.”

Other issues arise when a practice left a larger group. A gastroenterology practice in Washington sued to recover provider relief grant funds after it exited a larger group at the end of 2019. The practice, Gastroenterology Associates Clinical Practice, estimated in its complaint that the larger group held onto between $350,000 and $400,000 in provider grants based on services the practice provided in 2019.

According to HHS’ new guidance, larger groups don’t have to return or transfer the funds a previously owned practices provided so long as the group can attest they will use the grants to offset coronavirus-related expenses or lost revenue.

Attorneys representing Gastroenterology Associates did not return an inquiry about how the new HHS guidance affects the dispute. The lawsuit was listed in a COVID-19 complaint tracker maintained by the law firm Hunton Andrews Kurth.

Private equity firms that acquired practices would likely be somewhat insulated from the issue, said Faegre Drinker Biddle & Reath partner Isaac Willett. Private equity firms often indirectly acquire non-clinical assets from a practice, but the practice maintains its existing billing TIN and payer contracts.

However, McDermott Will & Emery partner Joshua Spielman said some private equity acquisitions of multiple practices in a geographic area result in consolidations of TINs, which means providers could have to return some of the grant money.

“It seems that there are dollars Congress intended for the healthcare system, for care they provided to patients in the world, and that money is being lost as a result of the rules,” Spielman said.

As there was more than a month between when payments started to be distributed and when HHS issued guidance on the issue, some practices reached out to a provider hotline run by UnitedHealthcare in the meantime. 

But providers have said the hotline assistance has been inconsistent. Mara McDermott, vice president at McDermott+Consulting, said she was given instruction through the hotline that conflicted with the guidance HHS ultimately issued. She said there’s a chance that other providers may have gotten similar guidance and started spending money they should have sent back. 

“There is value in having certainty, but I think the process would be better if there were some sort of timeline where it’s not the day before you attest that you find out what the rules are,” McDermott said.

A HHS spokesperson said in a statement that the department has been responsive to questions and concerns from providers, particularly those related to accepting the funds given conditions and other potentially time-constrained issues.UnitedHealthcare said it has fielded nearly 100,000 calls from providers and sent over 1 million emails about the funds, with a provider satisfaction rate of 91%.

“We continue to work with HHS to address unique provider needs as they arise,” UnitedHealthcare said in a statement.While consultants, trade associations and lawyers who advise providers said they generally appreciate HHS updating its guidance to address specific circumstances, they said the delay poses potentially thorny compliance issues. 

Mollie Gelburd, associate director at the Medical Group Management Association, said she advises members to download a version of the terms and conditions and guidance from HHS when they attest to the conditions to insulate themselves from issues later.

“With the guidance constantly changing, it’s hard to gauge the risks of accepting funds,” Gelburd said.

HHS doesn’t proactively notify providers of changes to its guidance. Advisers to providers said they have to download PDFs of the guidance daily to compare with previous versions to find out about changes. Some changes are marked with the date they were released, while some changes aren’t dated.For example, HHS on Friday changed guidance on group practices that sold or terminated a provider. HHS removed language recommending that such groups return payments if they anticipate their lost revenue and coronavirus-related costs will be “materially less” than the grant amount without labeling the change, according to a version comparison document. A HHS spokesperson said the guidance is continually updated to address providers’ questions that were not explicitly addressed in the terms and conditions for the grants. The department has also extended the initial 30-day attestation deadline to 90 days to give providers more time as HHS works through guidance on more nuanced issues, the spokesperson said.”Generally, if providers are uncomfortable, even if they have attested to the funds already they may contact HHS and proceed to return the funds,” the spokesperson said.Smaller practices may have issues keeping track of those changes, said George Hruza, a doctor who serves on the American Academy of Dermatology’s COVID-19 task force. Hruza said dermatology has seen consolidation in recent years and could be affected by the TIN guidance changes.

“Trying to make heads or tails of this not easy stuff. You need an accounting expert, and sometimes they don’t even agree on what it means,” Hruza said.

But Polston, who formerly served as a HHS deputy associate general counsel for CMS, said the evolving guidance is a result of how quickly HHS sent out the funds. He said the task of operationalizing such a large funding distribution usually would take at least a year.

“There is a lot of grumbling about the process, the interface and the new information coming out constantly, but I do think if you pause a bit and think about the task that the agency had to do, they have done a pretty good job,” Polston said.

On the provider side, Polston said practices and groups need to cautiously consider whether keeping the funds is worth a potential audit or public exposure, though it’s unclear what the full extent of consequences could be.