FLAGLER HOSPITAL, INC. AND SUBSIDIARIES

Assistance Listing Number, Federal Agency, and Program Name – 93.498, U.S. Department of Health and Human Services, Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (PRF) Federal Award Identification Number and Year – N/A, 2023 Pass-through Entity – N/A – Direct funded Finding Type – Material weakness and material noncompliance with laws and regulations Repeat Finding – Yes; 2022-001 and 2021-001 Criteria – per the Provider Relief Fund General and Targeted Distributions Post-Payment Notice of Reporting Requirements dated June 11, 2021, recipients may choose to apply PRF payments toward lost revenue using one of three options, up to the amount: Option i: of the difference between actual patient care revenue; Option ii: of the difference between budgeted (prior to March 27, 2020) and actual patient care revenue; or Option iii: calculated by any reasonable method of estimating revenue Condition – The guidelines relating to the reporting of lost revenue for the Provider Relief Fund were not followed. Questioned Costs – None Identification of How Questioned Costs Were Computed – N/A – Refer to context below for additional information. Context – The Period 4 reporting submission for lost revenue did not follow the acceptable options provided by the Department of Health and Human Services. Recipients may choose to apply Provider Relief Fund payments toward lost revenue using one of three options: (i) up to the amount of the difference between actual patient care revenue, (ii) up to the amount of the difference between budgeted (if approved prior to March 27, 2020) and actual patient care revenue, or (iii) up to the amount calculated by any reasonable method of estimating revenue. The System used option ii to calculate lost revenue but the budgeted amounts used in the submission for several periods were not approved by March 27, 2020; therefore, option ii was not allowable. The System should have used option iii to report lost revenue. Additionally, it was identified that the revenue information included in the lost revenue calculation for calendar year 2022 utilized the incorrect months and revenue other than revenue that was patient-related. Cause and Effect – Appropriate review of the reporting submission was not completed to ensure the report followed the required guidelines. As a result, the report submitted was inaccurate and the amount of lost revenue included in the portal submission was understated. Recommendation - We recommend the System implement controls, including levels of review, to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Views of Responsible Officials and Planned Corrective Actions – The System will review and enhance its PRF reporting process by implementing controls to ensure reports are completed and submitted in accordance with the guidelines established by HHS.

Finding Number: 2023-002 Condition: The guidelines relating to the reporting of lost revenue for the Provider Relief Fund were not followed. Planned Corrective Action: The System will review and enhance its PRF reporting process by implementing controls to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Contact person responsible for corrective action: Deb Costabile Anticipated Completion Date: 6/30/24

2022-001

Assistance Listing Number, Federal Agency, and Program Name ? 93.498, U.S. Department of Health and Human Services, Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (PRF) Federal Award Identification Number and Year ? N/A, 2022 Pass-through Entity ? N/A ? Direct funded Finding Type ? Material weakness and material noncompliance with laws and regulations Repeat Finding ? Yes; 2021-001 Criteria ? per the Provider Relief Fund General and Targeted Distributions Post-Payment Notice of Reporting Requirements dated June 11, 2021, recipients may choose to apply PRF payments toward lost revenue using one of three options, up to the amount: Option i: of the difference between actual patient care revenue; Option ii: of the difference between budgeted (prior to March 27, 2020) and actual patient care revenue; or Option iii: calculated by any reasonable method of estimating revenue The same Post-Payment Notice of Reporting Requirements included specific submission deadlines for PRF portal submissions. Period 2 submissions were due by March 31, 2022 and Period 3 submissions were due by September 30, 2022. Condition ? The System?s controls in place for reporting submissions did not identify that guidelines were not followed related to the lost revenue calculations or the required submission timeline. Questioned Costs ? None Identification of How Questioned Costs Were Computed ? N/A ? Refer to context below for additional information. Context ? The Period 2 reporting submission for lost revenue did not follow the acceptable options provided by the Department of Health and Human Services. Recipients may choose to apply Provider Relief Fund payments toward lost revenue using one of three options: (i) up to the amount of the difference between actual patient care revenue, (ii) up to the amount of the difference between budgeted (if approved prior to March 27, 2020) and actual patient care revenue, or (iii) up to the amount calculated by any reasonable method of estimating revenue. The System used option ii to calculate lost revenue but the budgeted amounts used in the submission for several periods were not approved by March 27, 2020; therefore, option ii was not allowable. The System should have used option iii to report lost revenue. Additionally, the Period 2 submission was submitted late; it was due by March 31, 2022 but was not submitted until June 14, 2022. Cause and Effect ? Appropriate review of the reporting submission was not completed to ensure the report followed the required guidelines. As a result, the report submitted was inaccurate and late. Recommendation - We recommend the System implement controls, including levels of review, to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Views of Responsible Officials and Planned Corrective Actions ? The System will review and enhance its PRF reporting process by implementing controls to ensure reports are completed and submitted in accordance with the guidelines established by HHS.

Condition: The System?s controls in place for reporting submissions did not identify that guidelines were not followed related to the lost revenue calculations or the required submission timeline. Planned Corrective Action: The System will review and enhance its PRF reporting process by implementing controls to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Contact person responsible for corrective action: Tom Bailey Anticipated Completion Date: 6/30/24

2021-001

Assistance Listing Number, Federal Agency, and Program Name - 93.498, U.S. Department of Health and Human Services, Provider Relief Fund Federal Award Identification Number and Year - N/A, 2020 Pass-through Entity - N/A - direct funded Finding Type - Material weakness and material noncompliance with laws and regulationsRepeat Finding - No Criteria - Per the Provider Relief Fund General and Targeted Distribution Post-Payment Notice of Reporting Requirements dated June 11, 2021, recipients may choose to apply PRF payments toward lost revenue using one of three options, up to the amount: Option i: of the difference between actual patient care revenues; Option ii: of the difference between budgeted (prior to March 27, 2020) and actual patient care revenues; or Option iii: calculated by any reasonable method of estimating revenues. Condition - The System?s controls in place for reporting submissions did not identify that guidelines were not followed related to the lost revenue calculations. Questioned Costs - None Identification of How Questioned Costs Were Computed - N/A - refer to context below for additional information. Context - The reporting submission for lost revenue did not follow the acceptable options provided by the Department of Health and Human Services. Recipients may choose to apply Provider Relief Fund payments toward lost revenue using one of three options: (i) up to the amount of the difference between actual patient care revenue, (ii) up to the amount of the difference between budgeted (if approved prior to March 27, 2020) and actual patient care revenue, or (iii) up to the amount calculated by any reasonable method of estimating revenue. The System used option ii to calculate lost revenue but reported an incorrect total of budgeted revenue in one of the quarters included in the submission. If the System had reported the actual budgeted revenue amount, it still would have qualified to recognize all PRF payments received in period 1. Additionally, the budgeted amounts used in the submission for the fourth quarter of 2020 and the first and second quarter of 2021 were not approved by March 27, 2020, therefore, option ii was not allowable. The System should have used option iii to report lost revenue. Cause and Effect - Appropriate review of the reporting submission was not completed to ensure the report followed the required guidelines. As a result, the report submitted was inaccurate.Recommendation - We recommend the System implement controls, including levels of review, to ensure reports are completed and submitted in accordance with the guidelines established by HHS. Views of Responsible Officials and Corrective Action Plan - The System will review its process surrounding the reporting of lost revenue and will implement additional levels of review to prevent this issue from recurring.

Finding Number: 2021-001 Condition: The System?s controls in place for reporting submissions did not identify that guidelines were not followed related to the lost revenue calculations. Planned Corrective Action: The System will review its process surrounding the reporting of lost revenue and will implement additional levels of review to prevent this issue from recurring. Contact person responsible for corrective action: Tom Bailey, Administrator of Finance/Controller Anticipated Completion Date: 6/30/22