OIG to Audit $50B in Coronavirus Relief Funds Given to Providers

The Office of the Inspector General (OIG) at HHS recently announced that it will audit the distribution of $50 billion in coronavirus relief funds to hospitals and other eligible healthcare providers.

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In the announcement released at the end of May, the OIG said the audit will determine the effectiveness of HHS controls over the awarding and disbursement of the coronavirus relief funds given to healthcare providers through the Provider Relief Fund.

The audit will also, among other things, decide whether HHS controls over the funds ensured that the payments were correctly calculated and disbursed to eligible providers.

The federal watchdog will collect data and interview program officials to complete the audit, which is expected to conclude in 2020.

Congress has allocated approximately $175 billion to hospitals and other healthcare providers to offset the financial losses stemming from the outbreak of the novel coronavirus. The funds were authorized by the Coronavirus Aid, Relief and Economic Security (CARES) Act and later, the Paycheck Protection Program and Health Care Enhancement Act.

About $50 billion of the coronavirus relief funds were put into the Provider Relief Fund, while other monies were earmarked for providers in COVID-19 hotspots, rural areas, and those experiencing an uptick in uninsured COVID-19 patients.

Providers first received some of the $50 billion from the Provider Relief Fund in early April when HHS distributed $30 billion based on a provider’s share of Medicare fee-for-service reimbursements in 2019. The department then disbursed the remaining $20 billion in late April based on CMS cost reports of incurred financial losses from the pandemic.

However, some providers have criticized HHS’ method for distributing payments from the Provider Relief Fund, arguing that the plan disadvantages hospitals in the greatest need.

“An allocation methodology that consists only of Medicare fee-for-service revenue could tilt the playing field against some essential hospitals, which care for disproportionate numbers of uninsured and Medicaid patients. It is especially concerning because their narrow margins and front-line role mean these hospitals are among those in greatest need of funding support during this public health emergency,” said Bruce Siegel, MD, MPH, president and CEO of America’s Essential Hospitals.

Healthcare leaders have been uncertain about the impact of coronavirus relief funds on their organizations.

According to a recent Xtelligent Healthcare Media survey, about a quarter (24 percent) of industry leaders from hospitals, health systems, and other healthcare organizations were unsure if the funds would help their organization overcome the financial challenges stemming from the pandemic. At the time, respondents were more focused on how their organizations were overcoming some of the pandemic’s most pressing challenges, including shortages of personal protective equipment (PPE) and increased patient volumes.

But the providers may have cause for concern. A recent analysis by Kaiser Family Foundation found that the formula used by HHS to disburse coronavirus relief funds to healthcare providers favored hospitals with the highest share of private payer revenue and those with larger operating margins.

Statutory language in the CARES Act called for HHS to review applications before distributing the funds to hospitals. However, top health officials largely disbursed relief to providers without requiring a formal application or review, lawyers at McGuire Woods LLP explained.

Top health officials have previously stated that the reason for HHS’ formula was to get coronavirus relief funds to providers impacted by the pandemic as quickly as possible.

In addition to the OIG audit, the watchdog also recently announced its Strategic Plan for COVID-19 Oversight, which, among other things, will aim to protect coronavirus relief funds from fraud, waste, and abuse.