HRSA and OIG Begin Recovery and Audits of the COVID-19 Funding Programs

HRSA and OIG Audits of COVID-19 Relief Funding Programs

PRF recipients have continued to receive letters from HRSA instructing them to report noncompliance with the terms and conditions of the program and repayment notices seeking to recover past payments based on such noncompliance.

This year, HRSA began auditing select PRF recipients’ use of payments reported in reporting periods 1 and 2. Thus far, these audits focus on whether PRF recipients followed the terms and conditions of the program, including whether funds were used for permissible purposes. We expect these audits to continue and to expand to reporting periods 3 and 4.

OIG is auditing both individual PRF/UIP recipients and HRSA itself. In total, OIG has announced at least seven PRF and UIP audits as part of its workplan. The purposes of these audits range from evaluating HRSA’s controls over calculating and distributing payments, to provider eligibility, to provider compliance with the applicable terms and conditions (e.g., balance billing prohibitions, use of funds) and reporting requirements. PRF and UIP recipients may be the target of these audits or receive requests to provide documentation in connection with OIG audits of HRSA.

In recent audits, OIG requested recipients produce items such as:

• General ledger transactions for all expenses attributable to COVID-19 within specified date ranges
• Detailed lists of expenses that were reimbursed with COVID-19 funding payments during specified date ranges
• Lists of employees and contractors whose salaries were charged to the COVID-19 funding sources and corresponding payroll summaries
• General ledger transactions for patient care revenue from federal healthcare payors
• Bank statements for the receipt of assistance payments from other sources
• Board meeting minutes
• Policies and procedures related to procurement and PRF payments and expenditures
• Audited financial statements
• Supporting documentation for other relief funding and insurance sources

OIG’s first PRF audit report of HRSA reinforces that more oversight is expected. The first audit focused narrowly on certain HRSA controls over the calculation of correct Phase 1 payments and identified millions in improper PRF payments and weaknesses in HRSA’s collection and review of applicant documentation. OIG recommended that HRSA (1) ensure improper payments were properly reconciled in subsequent PRF distributions and recoup any remaining overpayments from providers, (2) review additional supporting documentation for certain providers and (3) ensure collection of more than $50 million in rejected Phase 1 payments.

Consistent with HRSA’s response to OIG’s audit, providers should expect HRSA to:

• Continue collecting outstanding rejected payments
• Request supporting revenue data for certain providers who received $2 million or more in payments based on March and April 2020 losses (providers who received Phase 1, Round 2 payments on this basis may receive additional documentation requests from HRSA)
• Increase improper payment recovery actions with the recent completion of Phase 4 disbursements [1]

We recommend that PRF and UIP recipients consult legal counsel in responding to audits, inquiries and repayment demand letters and that they work proactively with legal counsel to prepare for additional oversight activity.

Qui Tam Complaint for Violations of the False Claims Act: Singh v. Hudson Hospital OpCo

On June 12, 2023, a PRF-related qui tam lawsuit was unsealed. The qui tam suit was brought by Vijayant Singh, M.D., a former officer of the New Jersey-based defendant hospitals, against a group of New Jersey hospital entities, their management companies and the hospitals’ chief executive and financial officers.

Dr. Singh alleged that the defendant hospitals improperly obtained more than $50 million in CARES Act provider relief funds by submitting false claims for reimbursement for diagnosing and treating patients who had not tested positive for COVID-19; failed to return the funds; and improperly used the funds for purposes unrelated to diagnosing and treating COVID-19 patients.

According to Dr. Singh, the hospitals claimed, in high impact area distribution application materials, that they had treated and sought reimbursement for between 2,400 and 3,300 patients who had tested positive for COVID-19. Dr. Singh alleges that 1,214 of those patients had not tested positive for COVID-19 and otherwise failed to meet the US Department of Health and Human Services (HHS) inclusion criteria, thereby representing false claims for reimbursement. Dr. Singh also alleges that the improper retention of the PRF funds constitutes reverse false claims, by way of the government being “deprived of the use of these monies.”

Dr. Singh also alleges that two of the hospitals entered into a consulting services agreement under which it made consulting payments in exchange for patient referrals in violation of the Anti-Kickback Statute.

While the US Department of Justice (DOJ) declined to intervene, we expect to see an increase in relator actions based on application for, retention of and use of PRF funds.