SOUTHCOAST HOSPITALS GROUP, INC.

2023-001 Congressional Directives Principal Investigator Cluster: Not applicable Grantor: U.S. Department of Health and Human Services Award Names: Congressional Directives Award Year: August 1, 2022 – July 31, 2025 Award Number: 1 CE1HS46621‐01‐00 Assistance Listing Number: 93.493 Pass-through entity: Not applicable Criteria The recipient is required to notify the Grants Management Officer (GMO) in writing if the Principal Investigator (PI)/Program or Project Director (PD) or key personnel specifically named in the Notice of Award (NoA) will withdraw from the project entirely, be absent from the project during any continuous period of 3 months or more, or reduce time devoted to the project by 25 percent or more from the level that was approved at the time of award (for example, a proposed change from 40 percent effort to 30 percent or less effort). The HHS Operating Divisions (OPDIV) must approve any alternate arrangement proposed by the recipient, including any replacement of the PI/PD or key personnel named in the NoA. Condition We noted the PI specifically named in the NoA resigned from the System in February 2023. Management identified a replacement of the PI to oversee the grant; however, management did not notify the GMO in writing that the PI would withdraw from the project and did not obtain approval from the OPDIV regarding the replacement. Cause Management did not have a control in place to notify the GMO and request approval from OPDIV upon the PI withdrawal from the grant. Effect The System was not in compliance with the requirement to notify the GMO and OPDIV of the change in the PI role. Questioned Costs None identified. Recommendation We recommend that management communicate with their GMO and OPDIV, as applicable, regarding this matter and implement a control that monitors the PIs assigned to each grant to ensure that they are notifying the GMO of any changes in status and obtaining approval from the OPDIV in a timely manner. Management’s View and Corrective Action Plan Management’s Views and Corrective Action Plan are included at the end of this report after the summary schedule of prior audit findings and status.

2022-001 Provider Relief Fund Lost Revenue Payor Classification Cluster: Not applicable Grantor: Health Resources and Services Administration Award Names: COVID-19 Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution Award Year: PRF Period 2 Period of Availability from January 1, 2020 to December 31, 2021 Award Number: Not applicable Assistance Listing Numbers: 93.498 Criteria Reporting entities were required to submit revenues/net charges from patient care (prior to netting with expenses) incurred within the period of availability, by payer mix (including out of pocket charges), and by quarter for each quarter during the period of availability up to June 30, 2023, the end of the quarter in which the Public Health Emergency ends. Condition As we were performing our lost revenue tie out procedures, we noted the Net Charges from Patient Care by Payer (?Net Charges?) were inaccurately reported in the PRF Period 2 Reporting Portal Submission. More specifically, the System transposed the referenced Net Charges in the `Total Revenue/Net Charges from Patient Care (2021 Actuals)? table by the following: ? For Q2 (2021), the System understated the Medicaid/Children?s Health Insurance Program (CHIP) payer and overstated the Commercial Insurance payer Net Charges by $2,222,668. ? For Q3 (2021), the System understated Medicaid/Children?s Health Insurance Program (CHIP) by $973,100, understated Commercial Insurance by $289,399, and overstated Self-Pay (No Insurance) by $1,262,499. ? For Q4 (2021), the System understated Medicaid/Children?s Health Insurance Program (CHIP) by $411,383, understated Commercial Insurance by $99,064, and overstated Self-Pay (No Insurance) by $510,447. As Net Charges were transposed between payers, there was no impact to the total revenue and lost revenue calculation reported in the PRF Period 2 Reporting Portal Submission. Cause Management did not have a control in place to perform a second level of review to check the accuracy of the reporting at the time of completing the PRF Period 2 Reporting Portal submission. Effect Net Charges from Patient Care by Payer for were inaccurately reported in the PRF Period 2 Reporting Portal Submission. Questioned Costs None identified. Recommendation We recommend that management implement a second level of review over the PRF Reporting Portal submissions. Management?s Views and Corrective Action Plan Management?s Views and Corrective Action Plan are included at the end of this report after the summary schedule of prior audit findings and status.

2022-002 ? Insurance payments not fully deducted from FEMA funding Cluster: Not applicable Grantor: U.S. Department of Homeland Security Award Names: COVID-19 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Award Year: January 20, 2020 ? July 1, 2022 Award Number: 4496DR-MA Assistance Listing Numbers: 97.036 Pass-through entity: Massachusetts Emergency Management Agency (?MEMA?) Criteria FEMA guidance indicates that costs incurred as a result of an incident must be reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155 and 2 CFR section 200.406) Condition Through our testing of 60 direct costs associated with the System?s FEMA projects that were obligated in fiscal year 2022, 6 transactions totaling $1.4M were tested related to COVID-19 PCR tests that were purchased by the System from 2 vendors. These tests were administered to patients and System personnel and to the extent eligible, they were billed to the patients? or employees? third-party insurance company. As such, when compiling information for their FEMA application, the System completed an analysis showing total PCR tests purchased and the associated cost and deducted third-party insurance payments received associated with these PCR tests. The System calculated the third-party insurance deduction by developing an average third-party insurance payment rate per test. When performing our review of the average third-party insurance payment calculation, we noted management inappropriately included employee PCR tests not subject to reimbursement in the calculation of the average rate per test. As a result, management used an estimated average rate per test of $79 to calculate the third-party insurance deduction instead of an estimated average rate per test of $84. The impact of the change in average rate per test results in the System understating the third-party insurance payments by approximately $218,000. Cause Management?s review of the calculation did not identify the formula error in the calculation of the average payment rate per reimbursed PCR test. Effect The System?s FEMA application was overstated, resulting in an overpayment by FEMA related to the System?s PCR tests. Questioned Costs $218,000 Recommendation We recommend that management enhance their controls over the review of their third-party insurance payment calculation to ensure the accuracy of the information provided to FEMA. Additionally, we understand management continues to have conversations with MEMA over different aspects of the third-party insurance payment calculation and we recommend through those discussions the System, along with MEMA and FEMA, as applicable, determine whether there are any amounts that should be reimbursed to FEMA. Management?s Views and Corrective Action Plan Management?s Views and Corrective Action Plan are included at the end of this report after the summary schedule of prior audit findings and status.