The U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) recently conducted two audits of HHS management of healthcare provider loan and funding programs during the COVID-19 pandemic. Two reports were produced based on these audits, providing insight into the effectiveness of HHS program management and internal controls. The first report found that broadening provider access to the Accelerated and Advance Payments Programs (the "AAP Programs," and such payments provided thereunder, the "AA Payments") was effectively managed by HHS.1 In the second report, the OIG identified flaws in HHS implementation and oversight of the Provider Relief Fund Program (the "PRF Program," and such payments provided thereunder, "PRF Payments").2
Accelerated and Advance Payments Programs Generally in Compliance with Federal Law
Beginning in August 2020, the OIG conducted an audit of AA Payments issued during the COVID-19 pandemic.3 This audit reviewed whether AA Payments made during the pandemic were issued in accordance with federal regulations.4 Upon conclusion of the audit, the OIG determined that the Centers for Medicare & Medicaid Services (CMS) predominantly made AA Payments to qualified providers.5 Because of the lack of systemic problems with these AA Payments, the OIG did not provide recommendations to improve the program's accuracy or efficiency.6
Under the AAP Programs, healthcare providers facing cash-flow problems can receive temporary up-front payments, essentially as advances on future claims.7 AAP Program eligibility requires, among other things, that providers not be bankrupt.8 In the wake of COVID-19, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and other legislation allowed CMS to greatly expanded access to the AAP Program for providers financially impacted by the pandemic.9 The expanded program, known as the COVID-19 Accelerated and Advance
Payments Program (the "CAAP Program," and such payments provided thereunder, "CAA Payments"), increased the AAP Program's payment limits and extended the period by which providers must pay back AA Payments. 10 After a provider is deemed eligible, they receive a CAA Payment within seven days of their initial loan request.11
Despite initial concerns that the short turnaround for provider eligibility verification and payment disbursement would increase the chance of improper CAA Payments, the OIG audit found that CAA Payments were generally made in compliance with the CARES Act and other federal regulations.12 Out of a sample of 109 providers who requested CAA Payments, the OIG determined that 100 payments were appropriately made and six appropriately denied.13 Three CAA Payments were inappropriately made to bankrupt providers.14 Of the three inappropriate payments, the OIG found that the contractors tasked with establishing provider eligibility and issuing payments did not correctly identify the providers as being bankrupt.15 Because the vast majority of CAA Payments were properly made, the OIG did not issue further guidance related to CAAP Program control improvement.16
To access the full report, click here.
Provider Relief Fund Program Controls Can Be Improved
The OIG launched an audit in October 2020 assessing HHS-established internal controls governing the PRF Program.17 While the audit concluded that these internal controls predominantly resulted in accurate and efficient payments, the OIG noted that improvement in control and oversight is possible.18
In March 2020, the federal government funded the PRF Program in response to the COVID-19 pandemic, with the purpose of providing providers with emergency funding for pandemic-related expenses.19 While HHS is responsible for the PRF Program's general oversight, the Health Resources and Services Administration (HRSA) is tasked with its daily management.20 HHS established the criteria for both PRF Program eligibility and the internal controls verifying eligibility, as well as the calculation methods determining the size of provider payments.21 Payment calculations varied, depending on the round of funding in question. Non-automatic payments, those that providers directly applied for, were calculated based on the lesser of (1) 2% of the provider's 2018, or most recent tax year's, gross receipts; or (2) the sum of estimated revenue losses in March and April 2020.22
The OIG audit tested the program's controls by randomly sampling 45 providers who were issued PRF Payments between April and December 2020.23 While the OIG generally approved of the program's management, the audit concludes that the controls, as implemented, were likely not enough to ensure all providers received accurately calculated PRF Payments.24 The OIG identified three missing controls that were likely causing errors.25 These missing controls included the following:
- HRSA failed to require that providers submit supporting documentation for non-automatic payments in order to verify provider revenue loss in March and April of 2020;
- Payments made to provider subsidiary organizations using PRF Program funds were not subtracted from provider PRF Payments to prevent overpayment; and
- No clear deadline existed for providers to return rejected automatic payments.
The OIG also found weaknesses in existing controls.26 These identified weaknesses included the following:
- The criteria triggering manual review of a provider's PRF Program application were set so high that HRSA manually reviewed only 2% of provider applications. Triggering criteria for manual review was any provider eligible for PRF Payments of more than $2 million; and
- A transcription error in extracting subsidiary organization taxpayer identification numbers from PRF Program applications resulted in inaccurate calculations of PRF Payments.
As a result of weak or nonexistent controls, the OIG found it probable that some providers received improper PRF Payments. The OIG conceded, however, that some of the identified issues could not feasibly have been implemented at the outset of the pandemic, especially with the goal of rapidly disbursing payments.27 Despite this, the OIG suggests that as the COVID-19 public health emergency moves forward, or in preparing for future public health emergencies, HHS and HRSA should refine or create new processes that take the OIG's findings into account.28
Notable OIG recommendations included suggesting that HHS and HRSA continue to perform post-payment quality control reviews of non-automatic payments made based on estimated revenue losses in March and April of 2020, as well as ensuring collection of overpayments or rejected payments not yet returned.29 The OIG also suggested that HRSA revisit funding disbursements of subsidiary payments that were not subtracted and determine the impact of these overpayments on PRF Program funding as a whole.30 Last, the OIG notes that HRSA should determine which providers were impacted by the errors in extracting taxpayer identification numbers and should push for repayment if erroneous payments resulted.31
While it is uncertain how quickly HHS or HRSA can implement the OIG's recommendations, it is clear that the OIG believes steps should be taken to identify and recoup some PRF Payments. Therefore, providers who received non-automatic PRF Payments based on revenue loss estimates from March and April of 2020 should ensure their PRF Payment was properly calculated. Furthermore, this audit represents the first of several audits relating to the PRF Program.32 Thus, providers should remain cognizant of future OIG recommendations that propose changes to PRF Program internal controls or that may trigger future recoupment of PRF Payments.33
To access the full report, click here.
If you have further questions about the Advanced or Accelerated Payment Programs, or the Provider Relief Fund, or need assistance interpreting HHS or state regulations, please feel free to contact the authors of this alert or your Venable relationship attorney.
* The authors would like to thank Patrick Dunbar, a Law Clerk in Venable's New York office, for his assistance in drafting this article.
Footnotes
[1] Off. of Inspector Gen., Dep’t. Health & Hum. Services, A-05-20-00053, Payments Made to Providers Under the COVID-19 Accelerated and Advance Payments Program Were Generally in Compliance with the CARES Act and Other Federal Requirements, at 4 (Oct. 2022) (hereinafter Advance Payments).
[2] Off. of Inspector Gen., Dep’t. Health & Hum. Services, A-09-21-06001, HHS’s and HRSA’s Controls Related to Selected Provider Relief Fund Requirements Could Be Improved, at 16 (Sept. 2022) (hereinafter PRF).
[3] Advance Payments, supra, note 1, at 7.
[4] Id. at 1.
[5] Id. at 4.
[6] Id. at 6.
[7] Id. at 1.
[8] Advance Payments, supra, note 1, at 2-3.
[9] Id. at 2.
[10] Id. at 1.
[11] Id. at 3.
[12] Id. at 1, 4.
[13] Advance Payments, supra, note 1, at 1, 4.
[14] Id. at 4-5.
[15] Id. at 9-10.
[16] Id. at 6.
[17] PRF, supra, note 2, at 34.
[18] Id. at 16-17.
[19] Id. at 3.
[20] Id. at 1-2.
[21] Id. at 8-10.
[22] PRF, supra, note 2, 8-10
[23] Id. at 15-16.
[24] Id. at 16-17.
[25] Id. at 18-24.
[26] Id. at 24-27.
[27] PRF, supra, note 2, at 28-29.
[28] Id. at 29.
[29] Id.
[30] Id.
[31] Id. 29-30.
[32] PRF, supra note 2, at 2.
[33] Id.