Feds expected to scrutinize Covid-era payments to providers

Feds expected to scrutinize Covid-era payments to providers

If your hospital, nursing home or doctor’s office received financial relief from the government during the pandemic, be prepared for some scrutiny that might be headed your way.

Tens of billions of dollars were showered on healthcare providers under the so-called Provider Relief Fund. PRF filled in for lost revenue and higher costs during the pandemic. But now the Health Resources and Services Administration, which oversees the relief fund, has begun determining whether providers used the money as intended. If not, providers will likely be asked to return what they were given.

Providers need to ensure they are ready in case government auditors come knocking, said Christopher Frisina and Brian Lee, attorneys for Atlanta-based law firm Alston & Bird. As of February, HRSA had clawed back about $23 million in overpayments said Lee, who is based in Washington, D.C.

“The exposure and the risk is very very real, and the last thing you want is to get caught flat-footed,” said Lee, a partner in the policy group inside the law firm’s healthcare practice.

Like other government grant programs during the pandemic, the PRF came together quickly. Its goal was to help hospitals, health systems, doctors’ offices, nursing homes and other frontline providers remain afloat at a time of deep financial strain.

However, officials prioritized rapid distribution over controls to ensure payments were proper, according to a September 2022 report by the Office of Inspector General for the U.S. Department of Health and Human Services. The report suggested continuing scrutiny of payments.

In a phone interview, Lee and Frisina, who is also based in Washington, cited several factors that might prompt a government review.

In some cases, auditors will flag technical errors in the reports that providers have been required to file roughly every six months for the duration of the public health emergency. A provider, for example, may have failed to include its taxpayer information number on a report.

“That is an automatic trigger,” Lee said.

Another likely trigger is grant size. Larger awards are in store for greater scrutiny, Lee said. Of the roughly 422,000 aid recipients, 130 accepted PRF awards of more than $100 million.

Health systems that have been involved in mergers and acquisitions could face reviews, as could systems that transferred PRF money internally, say from a health system parent to an acquired entity with more exposure to Covid costs. Transfers were allowed, Lee said. Nonetheless, he added, “That activity is going to increase audit likelihood.”

Other factors are more complex, such as the process for calculating Covid-related revenue losses. Most providers saw revenue slide as people put off or canceled elective procedures during the pandemic.

Providers were able to choose one of three methods to determine the losses, Lee and Frisina said. Two were relatively straightforward. One called for comparing actual results from 2019 and 2020, which would likely show a decline. Another allowed providers to take their 2019 budgets and compare them to their board-approved budgets for 2020 and several years following.

The third option, the one that may lead to audits, allowed providers to use their own methods for calculating lost revenue, provided it was “reasonable,” Lee said. A provider may have felt its methodology was reasonable at the time. But HRSA may disagree and require a provider to recalculate using one of the other two methods.

Providers also may have to defend how they attributed salaries to Covid work, such as a nurse who normally worked on elective surgeries but was transferred to virus testing, said Frisina, a senior associate in the regulatory investigations group for Alston & Bird’s health care practice.

To prepare for scrutiny, providers should consider bringing in outside counsel to look at what they already submitted to HRSA and comb the reports for potential errors, Frisina and Lee said. Providers also should anticipate areas of potential disagreement with auditors and develop defenses, ideally backed up by documentation and other evidence.

“You want to be able to push back in a way that is meaningful right away,” Frisina said.

In addition, providers can look for additional Covid-related costs that were not covered by the PRF or other aid programs, such as state-level grants, Lee said. Those costs could be claimed if auditors ultimately disallow previously reported costs.

If the public health emergency ends May 11 as planned, providers will file their final reports for PRF next summer, Lee and Frisina said. However, the risk of audits could linger for several years after that, as officials pore over the reports. Providers are only now receiving letters seeking repayments based on reports filed in late 2021, they added.

“This isn’t just going to go away with the public health emergency,” Frisina said.

Photo: illustration, Getty Images

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