Finding 1176872 (2024-002)

Criteria In accordance with the Federal Emergency Management Agency (FEMA) Public Assistance Program and Policy Guide, Version 2.1, Chapter 2, costs are not eligible for reimbursement if the applicant received funding from another source (e.g., patient revenue or insurance) for the same work funded by FEMA. FEMA refers to this as a duplication of benefits. On February 15, 2023, FEMA issued a memorandum titled Hypothetical Reasonable Applicant Methods, which outlines the basic elements for estimating duplication of benefits within net patient service revenue. The Department of Homeland Security (DHS) also engaged the RAND Corporation’s Homeland Security Research Division, through the Homeland Security Operational Analysis Center (HSOAC), to assist with the administration of disaster grants to health care providers related to COVID 19. In December 2024, HSOAC published Methods of Assessing Duplication of Benefits with Patient Care Revenue, as applied by FEMA to Health Care Provider’s Public Assistance Claims During the COVID 19 Emergency. This publication describes FEMA’s Standard Method for estimating duplication of benefits, as well as alternative methodologies, and states that applicants using an alternative methodology are expected to document the methodology and calculations used. Condition and Context FEMA obligated various Public Assistance Projects (projects) during the fiscal year ended September 30, 2024 for a total of $28.8 million. The claimed costs included $12.8 million temporary agency nurse labor projects and the remaining projects substantially related to labor force account overtime incurred during portions of 2021, 2022, and 2023. Prior to filing FEMA Public Assistance claims, Brown Health performed a detailed analysis to determine eligible project costs. To determine eligible project costs, Brown Health utilized an alternative methodology to estimate potential duplication of benefits with patient care revenue, relying on guidance from HSOAC, other FEMA guidance, and coordination with FEMA and the Rhode Island Emergency Management Agency (RIEMA). Consistent with HSOAC guidance, Brown Health documented the alternative methodology and related calculations in memoranda submitted with each large project application. The alternative methodology documentation for Brown Health’s FEMA projects was reviewed by Brown Health’s VP of Finance. In October 2024, HSOAC issued an Applicant Review Memo to Bradley Hospital indicating they had evaluated the claimed costs for potential duplication of benefits by applying FEMA’s Standard Method and recommended a total reduction of approximately $819,000 for Project #701099. The Standard Method uses an applicant’s base year revenue and expense data to establish a cost ceiling that is compared to claimed project costs to prevent duplication of benefits. In July 2025, FEMA issued its own Applicant Review Memo, which also identified potential duplication of benefits by applying the Standard Method to reassess previously obligated costs. However, FEMA identified Project #701099 as having a high likelihood of duplication of benefits and recommended reduction of approximately $746,000, which is contrary to the amount recommended by HSOAC. Additionally, FEMA identified Project #737681 as having a high likelihood of duplication of benefits and recommended an approximately $30,000 reduction of previously obligated costs. In addition, in February 2025, HSOAC issued an Applicant Review Memo to Newport Hospital indicating that they had evaluated the claimed costs for potential duplication of benefits by applying FEMA’s Standard Method and recommended reductions of approximately $615,000 for Project #701104 and reductions of approximately $9,000 for Project #737631 by using the Standard Method. In September 2025, FEMA then issued an Applicant Review Memo, which also identified potential duplication of benefits by applying the Standard Method to reassess previously obligated costs. However, FEMA found no duplication of benefits for Project #737631, contrary to HSOAC’s Applicant Review Memo. Additionally, FEMA incrementally identified Project #701104 as having a high likelihood of duplication of benefits and recommended a reduction of approximately $384,000, which differs from the amount recommended by HSOAC. The aforementioned projects were closed prior to the HSOAC and FEMA Applicant Review Memo, except project #701099, which entered into pending close status in May 2025, prior the Applicant Review Memo. Brown Health asserts that it properly applied an allowable alternative methodology consistent with FEMA guidance. Management also stated its methodology and supporting calculations were reviewed by RIEMA and FEMA personnel periodically from approximately July 2022 through the projects’ obligation dates. On February 12, 2026, Brown Health appealed of FEMA’s recommended $764,000 reduction for Project #701099 and $67,000 reduction for Project #737681 for Bradley Hospital. On March 3, 2026, Brown Health appealed FEMA’s recommended $384,000 reduction for Project #701104 for Newport Hospital. As of the date of this report, the appeals remain unresolved; therefore, the amount of questioned costs cannot be determined. Questioned costs Cannot be determined. Statistical Sample Not applicable Repeat Finding A similar finding was not reported in the prior year audit. Recommendation We recommend Brown Health continue to work with FEMA through the designated appeal process. View of Responsible Officials Brown Health management agrees with the facts as summarized above. Brown Health filed appeals for Bradley Hospital on February 12, 2026 and for Newport Hospital on March 3, 2026 and as of the date of this report, the appeals remains outstanding. We applied a reasonable and allowable methodology to estimate and avoid duplication of benefits for all claims submitted, consistent with FEMA guidance, including the Public Assistance Program and Policy Guide, FEMA issued memoranda and webinars, and methodologies described HSOAC, including those reviewed by HSOAC and FEMA. Our methodology and supporting calculations were reviewed by RIEMA and FEMA personnel prior to submission, and the project was subsequently approved, obligated, funded, and closed out prior to the FEMA review.