Fairfield Memorial Hospital Association

2021-004 Finding: Allowable Costs/Cost Principles and Reporting U.S. Department of Health and Human Services Direct Program: COVID-19 Provider Relief Fund and the American Rescue Plan (ARP) Rural Distribution - 93.498 Criteria or Specific Requirement – Reporting (45 CFR 75.342) and Activities Allowed/Unallowed and Cost Principles (Pub L. No. 116-136, 134 Stat. 563 and Pub L. No. 116-139, 134 Stat. 622 and 623). The Provider Relief Fund (PRF) was established in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) to reimburse, through grants or other mechanisms, eligible health care providers for increased expenses or lost revenue attributable to Coronavirus Disease (COVID-19). Entities that received more than $10,000 (either one time or in the aggregate) are required to report the uses of their funds, including the lost revenue reimbursement and documentation of how the lost revenue was calculated. In addition, management is responsible for establishing and maintaining effective internal controls over costs directly and indirectly charged to federal awards. Condition – The Hospital is required to prepare and submit period one PRF reporting to the U.S. Department of Health and Human Services. This report is to be prepared using accurate financial information; however, the Hospital incorrectly reported lost revenue for Period 1. Questioned Costs – Unknown Context – We tested the Period 1 PRF report submitted by the Hospital and total lost revenue calculation. The Hospital elected to use lost revenue calculation Option II, Budget to Actual. Option II requires that an approved budget prior to March 27, 2020, which covers the entire period of availability, be utilized to calculate lost revenues. While the budget period relating to calendar year 2020 was approved prior to March 27, 2020, the budget period relating to calendar year 2021 was approved subsequent to March 27, 2020. Thus, the budget approved prior to March 27, 2020 did not cover the entire period of availability and the budget relating to calendar year 2021 was not approved within required time parameters. Effect – The Hospital claimed and reported lost revenues under the PRF program that are not within the framework prescribed with selecting Option II - Budget to Actual. Cause – The Hospital selected Option II - Budget to Actual and should have selected Option III - Alternative Reasonable Method of estimating revenues because the budget period related to calendar year 2021 was not approved by March 27, 2020. Internal controls were not in place to ensure the Hospital correctly applied the guidance. Identification as a Repeat Finding – Not applicable. Recommendation – The Hospital should continue to improve understanding of the guidance related to this type of reporting and implement additional controls over future reporting periods to help ensure guidance is followed. View of Responsible Official and Planned Corrective Actions – The Hospital agrees with this finding. See separate auditee document for planned corrective action.

The Hospital elected to use lost revenues calculation Option II, Budget to Actual. Option II requires that an approved budget prior to March 27, 2020, which covers the entire period of availability, be utilized to calculate lost revenues. While the budget period relating to calendar year 2020 was approved prior to March 27, 2020, the budget period relating to calendar year 2021 was approved subsequent to March 27, 2020. Thus, the budget approved prior to March 27, 2020 did not cover the entire period of availability and the budget relating to calendar year 2021 was not approved within required time parameters. Additionally, there were certain errors discovered within the calculation due to the inclusion of nonpatient revenues and the exclusion of bad debts. Corrective Action Plan: The finding identified is a result of confusion over information required to be input into the portal. It was the Hospital’s intention to rely entirely upon those lost revenues related to calendar year 2020. Calendar year 2020 lost revenues calculated using a budget approved prior to March 27, 2020, result in total lost revenues of $5,115,335. Lost revenues alone more than substantiate the $4,503,732 of Provider Relief Funds recognized by the Hospital. Going forward, the Hospital will continue to improve its understanding of the guidance related to lost revenue reporting and work with their external advisors to ensure future portal submissions, if any, are compliant with said guidance. While the Hospital will ensure compliance with submission requirement in any future required submissions, if any, the Hospital considers the lost revenues and COVID-19 related expenses incurred by the Hospital sufficient in substantiating those Provider Relief Funds received and reported on within the period in question. Personnel Responsible for Corrective Action: Kathleen Bunting, Chief Executive Officer; kjbrnmsn@hotmail.com; 618-842-2611. Anticipated Completion Date: Change is in process and full adoption is anticipated at time of next portal submission, if any.

Finding: Allowable Costs/Cost Principles and Reporting U.S. Department of Health and Human Services Direct Program: COVID-19 Provider Relief Fund and the American Rescue Plan (ARP) Rural Distribution - 93.498 Criteria or Specific Requirement – Activities Allowed/Unallowed and Cost Principles (Pub L. No. 116-136, 134 Stat. 563 and Pub L. No. 116-139, 134 Stat. 622 and 623). The Provider Relief Fund (PRF) was established in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) to reimburse, through grants or other mechanisms, eligible health care providers for increased expenses or lost revenue attributable to Coronavirus Disease (COVID-19). Entities that received more than $10,000 (either one time or in the aggregate) are required to report the uses of their funds, including the lost revenue reimbursement and documentation of how the lost revenue was calculated. In addition, management is responsible for establishing and maintaining effective internal controls over costs directly and indirectly charged to federal awards. Condition – The Hospital claimed and reported COVID-19-related supply expenses within the HHS PRF portal that were eligible to be reimbursed via other sources. Questioned Costs – $147,682 of expenses were charged and reported which were available to be reimbursed by other sources. This was calculated by taking the supply expenses and multiplying this amount multiplied by the Hospital's internally calculated Medicare reimbursement rate. Context – Upon testing the compliance requirements of this program, it was determined certain expenditure items were being claimed and reported incorrectly as they were not "Medicare-affected" to reduce the portion of expense to be reimbursed by another source. Effect – The Hospital submitted and reported expenses which did not adhere to the terms and conditions of the award. Cause – The guidance provided by HHS to providers across the country as to how to report their COVID-19-related expenses and lost revenues is, at times, difficult to comprehend and apply. The Hospital incorrectly applied guidance. Identification as a Repeat Finding – Not applicable. Recommendation – The Hospital should continue to improve understanding of the nuances within the guidance as it relates to charging and reporting direct expenses. Additionally, the Hospital should implement additional controls over future reporting periods to help ensure guidance is followed. View of Responsible Official and Planned Corrective Actions – The Hospital agrees with this finding. See separate auditee document for planned corrective action.

The Hospital claimed and reported COVID-19-related supply expenses within the HHS Provider Relief Fund portal that were eligible to be reimbursed via other sources due to not reducing the amount of COVID-19 supply related expenses by the internally calculated Medicare reimbursement rate. Corrective Action Plan: While errors were identified within the COVID-19 expenses reported by the Organization, calendar year 2020 lost revenues, calculated using a budget approved prior to March 27, 2020, result in total lost revenues of $5,115,335. 2020 lost revenues alone more than substantiate the $4,503,732 of Provider Relief Funds recognized by the Hospital, regardless of any errors identified in COVID-19 expenses. Going forward, the Hospital will work to improve controls surrounding the tracking of COVID-19 related expenses and will ensure an individual, independent from the tracking of COVID-19 expenses, is reviewing reported expenses for accuracy and reasonableness. Personnel Responsible for Corrective Action: Kathleen Bunting, Chief Executive Officer; kjbrnmsn@hotmail.com; 618-842-2611. Anticipated Completion Date: Change is in process and full adoption is anticipated at time of next portal submission, if any.