Yesterday, the HHS Office of Inspector General (HHS OIG) released the report “HRSA Made Some Potential Overpayments to Providers Under the Phase 2 General Distribution of the Provider Relief Fund Program.” The title to the report speaks volumes about its contents as the OIG asserts in its summary that roughly 3.3% of the Phase 2 payments were not correctly calculated. When extrapolated to the entire Phase 2 distribution, the HHS OIG speculates that HRSA made over $159 million in overpayments.

This is one of many reports the HHS OIG has underway on the distribution and use of the funds distributed to the health care provider community during the pandemic from the Provider Relief Fund (PRF). No doubt many more will follow. The magnitude of the PRF (approximately $178 billion in general and targeted distributions) makes years of audits all but a certainty. Moreover, frequently changing guidance on the use of funds and the reporting portal merry-go-round (when would it be open? how does it work? how to get your account reopened if you needed to amend your report or failed to report timely? and on and on) are all but guaranteed to result in numerous audit findings.

In the case of the current audit, total Phase 2 funding was limited to 2% of a provider organization’s patient care revenue for one of three fiscal years selected by the provider, less any Phase 1 payments. The provider organization would submit an application for Phase 2 funding containing “(1) its revenue, (2) the fiscal year for that revenue, and (3) the percentage of revenue from patient care.” While HRSA could double-check tax records for total revenue, the percentage of revenue from patient care was completely self-reported and HRSA did not attempt to confirm that percentage. Thus, provider organizations are at risk if they submitted a patient care revenue percentage that cannot now be supported by appropriate and auditable documentation.

As far as recommendations, the HHS OIG suggested that HRSA seek recoupment from the 17 providers in the sample size and that HRSA should focus additional reviews of Phase 2 funding on provider organizations with subsidiaries to ensure that there were not overlapping, and therefore excessive, payments to parent and subsidiaries. Given past actions by the HRSA Provider Relief Bureau with, for example, the Uninsured or UIP fund, we would expect that HRSA’s program integrity office within the Bureau will soon be identifying organizations at risk for an overpayment and reaching out for further support for the amount requested. Accordingly, we recommend reviewing the application your organization submitted for Phase 2 funds, see if you have documents in your records now that support your Phase 2 application and, if not, consider appropriate action after conferring with counsel.

If you or your organization have questions around your receipt of Provider Relief Funds or other government funding, please contact Ted Waters, Managing Partner, Feldesman Leifer LLP at ewaters@feldesman.com.