Health Law Advisor

On April 8, 2021, the U.S. Department of Justice (“DOJ”) announced the first charges brought in connection with alleged fraud on the Accelerated and Advance Payment Program, administered by the Centers for Medicare & Medicaid Services (“CMS”).[1]  According to the indictment, Francis Joseph, M.D., a Colorado physician, has been charged with misappropriating nearly $300,000 from three different COVID-19 relief programs: the Accelerated and Advance Payment Program, the Provider Relief Fund, and the Paycheck Protection Program.[2]

Accelerated and Advance Payment Program

The Accelerated and Advance Payment Program is intended to provide emergency funds by way of expedited payments to health care providers and suppliers when there is a disruption in claims submission or claims processing.  While CMS has historically utilized this program to provide targeted relief in response to national emergencies or natural disasters affecting certain portions of the country, the program was expanded in March 2020 to apply to a broader group of Medicare Part A providers and Part B suppliers nationwide due to the financial impact of COVID-19.[3]

According to the indictment, Dr. Joseph allegedly submitted an Advance Payment Request Form for a medical practice of which he had relinquished control, and then transferred approximately $92,000 from the medical practice’s operating account to a personal bank account (approximately $87,000 of that amount was paid by the Medicare Administrative Contractor as an advance payment the previous day).

Provider Relief Fund

The Provider Relief Fund is a $178 billion measure appropriated under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act that offers aid to providers who were financially impacted by COVID-19 and treatment and other assistance to individuals suffering from COVID-19.

The indictment marks the second time that DOJ has brought charges related to misuse of Provider Relief Fund distributions (DOJ announced the first charges in February 2021 against a home health provider).  According to the indictment, Dr. Joseph’s former medical practice met the criteria for a Provider Relief Fund distribution of $31,782, but Dr. Joseph allegedly transferred those funds from the medical practice’s operating account to a personal bank account.

On March 26, 2021, the U.S. Department of Justice (“DOJ”) reported on the agency’s heightened criminal and civil enforcement activities in connection with COVID-19-related fraud.[1]  As of that date, DOJ had publicly charged 474 defendants with criminal offenses in connection with COVID-19-related schemes across 56 federal districts to recover more than $569 million in U.S. government funds.

The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a federal law, enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic.  The CARES Act provides relief through a number of different programs, including the Paycheck Protection Program (“PPP”), Economic Injury Disaster Loans (“EIDL”), the Provider Relief Fund, and Unemployment Insurance (“UI”).[2]  With the promulgation of these programs, DOJ has ramped up efforts in identifying and investigating fraud to protect the integrity of the $2.2 trillion in taxpayer funds appropriated under the CARES Act.

Criminal Enforcement Activities

The majority of fraud cases brought by DOJ have originated in the Criminal Division’s Fraud Section, accounting for at least 120 defendants charged with PPP fraud.[3]  The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent.  PPP loan proceeds must be used by businesses for payroll costs, interest on mortgages, rent, and utilities.  Most of these defendants are facing charges for allegedly misappropriating loan payments for prohibited purposes, such as luxury purchases, while another significant portion are charged in connection with allegedly inflating payroll expenses in order to obtain larger PPP loans.[4]

DOJ also announced that it has seized over $580 million in fraudulent application proceeds in connection with the EIDL program, which is designed to provide loans to small businesses and agricultural and nonprofit entities.  DOJ’s primary concerns with respect to this program have related to fraudulent applications for EIDL advances and loans on behalf of shell or nonexistent businesses.

In response to a rise in UI fraud schemes, DOJ has established the National Unemployment Insurance Fraud Task Force to investigate domestic and international organized crime groups targeting unemployment funds through the use of identity theft.  Since the start of the pandemic, over 140 defendants have been publicly charged with federal offenses related to UI fraud.[5]