Audit and Internal Controls

Money received through the Provider Relief Fund could be at risk as audits ramp up

Payments made through the COVID-19 Uninsured Program also are coming under close inspection.

September 1, 2023 11:27 am

Recipients of Provider Relief Fund (PRF) distributions and COVID-19 Uninsured Program payments should be girding themselves for audits, legal experts say.

The programs represent “a two-front audit fight that providers are facing and will face in the coming years,” Brian Lee, partner with Alston & Bird, said during an Aug. 24 webinar hosted by the firm.

CJ Frisina, senior associate, noted that more than 130 recipients received at least $100 million from the PRF. If they haven’t been already, those entities are virtually certain to be audited by the Health Resources and Services Administration (HRSA) or the Office of Inspector General (OIG) at the U.S. Department of Health and Human Services (HHS).

Other high-risk areas include funds that were part of the PRF’s targeted tranches and subsequently were transferred by a hospital to its parent health system, and funds that went to providers involved in a merger or acquisition.

“We certainly heard the concerns about whether the resources from the Provider Relief Fund were driving mergers and acquisitions,” Carole Johnson, HRSA administrator, said during an April congressional hearing. “We added some additional requirements in Phase 4, when we initiated a new program so that we’d be able to identify people who have done mergers and acquisitions, so that that could be part of our risk assessment criteria when it comes to accountability in the program.”

Providers that used more than $750,000 of PRF funding in a given fiscal year also must account for that spending as part of federal Single Audit requirements, as described in 2021 and 2022 guidance from the U.S. Government Accountability Office, Frisina said.

PRF questions mount

The PRF has sent out $135 billion to 422,000 providers since its launch in March 2020 as part of the CARES Act. Audits are in process for the first three PRF reporting periods, Frisina said, with HRSA sending letters to high-dollar recipients asking about how they calculated lost revenue and developed their internal auditing plans.

“HRSA has hired several accounting firms to do this work,” he said. “That indicates to us that they’re really going to go after this aggressively because they’re bringing outside people in, which is not typically how HRSA does their audits.”

OIG also is expected to get in on provider auditing, Frisina said, although to date it has been more focused on examining HRSA’s internal processes.

The first five reporting periods are likely to be the subject of the most scrutiny, since that’s when the bulk of the funds went out. Those periods cover payments received through the first half of 2022, with the fifth reporting period set to close at the end of this month.

Providers’ tracking and calculation of COVID-19-related expenses also will be examined.

“What was included? Did you make sure not to double-count with FEMA or state assistance or other grants? There’s a lot of activity still to come, even though there’s a lot underway,” Frisina said.

Scrutinizing uninsured payments

The Uninsured Program (UIP), which funded COVID-19 testing, treatments and vaccine administration for those without insurance, represents another audit risk. As of December, $24 billion in payments had gone out, although claims needed to be filed by April 5, 2022.

UIP provider participants had to agree to conditions such as not balance-billing patients and not seeking additional payment beyond the UIP amount. Lee said the balance-billing issue already was audited by OIG, with few issues found.

“The greatest weakness in all of this is the verification that an individual was eligible to receive care under this program,” he said.

Although providers were supposed to request some type of documentation to confirm the patient was uninsured, the patient was not obligated to give that information because policymakers did not want to discourage anybody from seeking care.

OIG conducted an audit of HRSA’s contractor and reported that out of a sample of 300 patients who were seen in May-December 2020, UIP claims were generated for 38 patients who actually had health insurance. Twenty-five of the 38 had Medicare or Medicaid coverage, but that had not been verifiable because they did not provide a Social Security number.

Extrapolating from that sample, OIG determined that out of $4.2 billion in UIP payments made during the time frame, $784 million was paid improperly and should be recouped. Expanding that estimate to the program’s entire history, almost $4.7 billion would be subject to recoupment, Lee noted.

“They will almost certainly go after the bigger scope beyond that December 2020 date,” he said.

In April, HHS announced that HRSA would transfer $1.1 billion from the Provider Relief Fund to support a “bridge program” that will provide free COVID-19 vaccines and treatments for uninsured adults through 2024.

Studying PRF payments

Throughout the pandemic, healthcare policy analysts have examined the efficacy of PRF distributions.

In July, researchers with the RAND Corporation published a study in JAMA Health Forum in which they reported that “the size of COVID-19 relief funds may have been larger than was necessary for many hospitals.”

Among the nearly 54% of hospitals that did not experience “new financial distress” during the public health emergency even when excluding the impact of the relief funding, more than three-quarters still received such funds, “raising questions about the appropriateness of relief funding for these hospitals and how relief funding may be better targeted in the event of a future pandemic.”

In an August study published in Health Affairs, however, researchers with Loyola University Chicago and the Urban Institute concluded that PRF funding was deployed sensibly.

“Our findings indicate that PRF distributions to hospitals were appropriately targeted and did not make some hospitals significantly more profitable than others; rather, PRF payments helped offset financial losses associated with the pandemic,” they wrote. “The effects of PRF support intensity were concentrated among hospitals that were financially vulnerable before the pandemic and thus in need of support to remain financially viable during the crisis.”


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