HRSA Initiates Audits and Requires Return of Provider Relief Funds

By Rob Wanerman, Colin McCulloch, and Eleanor Chung

Throughout the course of the pandemic, the US Department of Health and Human Services (HHS) distributed $178 billion in Provider Relief Funds (PRF) to hospitals and health care providers.  The Public Health Emergency has ended, and now HHS is now turning an eye to how the money was spent, and whether it was spent properly.  

PRF funds were distributed with nearly no-strings-attached; hospitals and providers had to simply agree to a few terms and conditions.  Yet a number of facilities and providers have received one of two types of letters from HHS: (1) a letter stating the money must be returned—a Final Repayment Notice—or (2) a letter stating that HHS will be conducting an audit.  What do these letters really mean?  What should you do?  

Provider Relief Funds: What to Expect 

Providers who received a total of more than $10,000 in PRF funds were required to report on the use of funds during one of nine reporting periods, depending on when the funds were received.  For those who failed to report during the reporting periods, the Health Resources and Services Administration (HRSA) issued several reminders, deadline extensions, and finally began issuing requests for repayment.  After all of these notices, HRSA has started to issue Final Repayment Notices.

Is a final notice really final?

A Final Repayment Notice will say something to the effect of “Debt is owed to HRSA as a result of failure to comply with the Terms and Conditions of funding received through the Provider Relief Fund,” and will enumerate the total amount due.  

A provider who has received a Final Repayment Notice has 60 days to either return PRF payments to HRSA, arrange for a payment plan, or submit a request for a Decision Review.  The outcome of the Decision Review is considered by HRSA to be final and is not appealable.  HRSA’s position is that the scope of a Decision Review is limited to contesting repayment only, and that the period for contesting the calculation or amount of repayment has closed.   However, to date, HRSA has not published binding regulations on point. We have observed that the Decision Review process is relatively quick, taking on average two to three weeks—because the decision is usually “no” with an instruction to return the funds.   After an adverse and final answer to the provider’s Decision Review, the only option left if the amount in controversy is financially significant is to seek judicial review in federal court.

Epstein Becker Green attorneys can help you to negotiate payment terms with HRSA and to evaluate possible options in the event of a final adverse decision.  The facts and circumstances of an individual case may vary, but it is important to understand your rights and options as early as possible. 

Audit of Provider Relief Funds 

Providers who expended (not received) $750,000 or more in government grants (which includes but is not limited to: PRF distributions, Federal Emergency Management Agency (FEMA) awards, and uninsured and underinsured COVID testing and treatment) are required to complete single audits or OMB Circular A-133 audits (the “Single Audit”) for the applicable fiscal year.  These Single Audits are submitted by CPAs through federal or commercial audit portals and are colloquially called “yellow book audits” because they used to feature yellow covers.  All recipients of PRF audits are required to retain records in accordance with federal law, and to promptly submit such records upon HRSA’s request.  

Additionally, HRSA may decide to audit a provider regardless of whether a Single Audit was submitted.  There are three reasons why HRSA may have decided to audit you: 1) luck of the draw. 2)  Your PRF reports may have claimed that you used the money to replace lost revenue on a method other than the 2019 actuals or a budget approved prior to March of 2020.  HRSA allowed providers to account for lost revenue by a method other than by the aforementioned options but stated that if you selected an alternative method that you would be at increased odds of being selected for an audit. 3) There is something in your PRF reports that raised a flag.  Perhaps your reports are unusual or inconsistent with the reports of like providers.  Perhaps you complied with most of the requirements of the terms and conditions, but you neglected to cross your Ts and dot your Is. 

What do you do now?  

First, let your accounting firm know that you were selected for an audit.  HRSA does not have the internal resources to conduct audits and is thus using outside accounting firms.  Most big accounting firms also did Single Audit compliance audits for providers and may be conflicted out of working for HRSA.  

Second, engage an attorney who can engage your accountant under privilege.  That way, your accountant’s findings will be protected by attorney-client privilege.  Once engaged, your accountant should ready PRF reports and supporting documentation, and kick the tires on your reports.  

Based on your accountant’s findings, you may need to amend your PRF reports.  You will have to communicate to HRSA that you completed your initial reports in good faith and based on the knowledge that you had at the time of submitting the report.  However, upon review (maybe years later), you have identified additional information.  As soon as you find the additional information, you will need to correct it promptly.    

HRSA may also review audits and reports filed for the coordination of funds with other federal programs, such as those administered by FEMA and the Small Business Administration’s Paycheck Protection Program.  It may shine a spotlight on general and targeted distributions, and uninsured and underinsured COVID testing and treatment.  For these more nuanced issues, an attorney’s counsel is highly recommended.  

Robert E. Wanerman is a partner in the Washington, DC office of Epstein Becker Green.  He advises health care manufacturers, service providers, and investors in health-care organizations on regulatory compliance and reimbursement issues. 

Colin G. McCulloch is a partner in the Washington, DC office of Epstein Becker Green. He advises clients on matters ranging from corporate and regulatory advice for hospital systems, post-acute providers and physicians. He has advised clients across the country on Provider Relief Fund application and reporting issues and assisted clients with related government inquiries.

Eleanor T. Chung is an associate in the Washington, DC office of Epstein Becker Green. She assists a wide variety of health care clients with government investigations and litigation.