Finding 1182624 (2025-003)

Finding 2025-003 – Activities Allowed or Unallowed and Allowable Costs/Cost Principles, and Reporting Identification of the federal program: Federal Grantor: U.S. Department of Homeland Security – Federal Emergency Management Agency (FEMA) Assistance Listing Number: 97.036, COVID-19 Disaster Grants - Public Assistance (Presidentially Declared Disasters) Pass-Through Grantor: Michigan State Police Emergency Management & Homeland Security Division Ascension Entity: Ascension Providence Rochester Hospital (125-U0BDI-00) Pass-Through Award Number: DR4494 – PW811 Pass-Through Award Period: 07/01/2021 – 06/30/2022 Criteria or specific requirement (including statutory, regulatory, or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The recipient and subrecipient must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The internal controls should align with the guidance in ‘Standards for Internal Control in the Federal Government’ issued by the Comptroller General of the United States or the ‘Internal Control – Integrated Framework’ issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Section 200.403(g) of the Uniform Guidance requires that costs charged to Federal awards be adequately documented. In addition, Section 200.406 of the Uniform Guidance requires that costs charged to a Federal award be reduced by applicable credits, including any amounts that offset or reduce costs allocable to the Federal award. Condition: The System calculated a COVID-19 attribution percentage based on patient-level data extracted from the patient system that classified patients as COVID-19, suspected COVID-19, or non-COVID based on diagnosis codes. The COVID-19 percentage was then applied to the contractor costs to determine the allowable costs that could be charged to FEMA. During our testing, we noted 1 instance out of 25 patient files tested where the System could not support a COVID-19 diagnosis. Cause: The System relied on automated system logic and extracted a report that had patients’ classification as COVID-19, Suspected COVID-19 or non-COVID for purposes of the COVID-19 attribution calculation; however, controls were not sufficient to ensure that all patient accounts classified as COVID-19 were supported by sufficient underlying clinical documentation. Effect or potential effect: Costs may be charged to the federal award that do not comply with federal or pass-through grant requirements. Questioned costs: One of the 25 patient accounts tested did not retain consistent medical documentation supporting the COVID-19 classification. However, the amount of questioned costs cannot be calculated on a per-patient basis because the contractor’s costs charged are not directly attributable to individual patient accounts because of FEMA calculation methodology. Instead, the COVID-19 classification affects the overall percentage used to calculate the total allowable costs charged to FEMA. As a result, a specific overcharge attributable to the unsupported patient account could not be quantified. Context: During testing of 25 patient accounts selected to verify the accuracy of patient classification, one patient account at Ascension, Michigan, lacked documentation supporting a COVID-19 diagnosis, despite being classified as COVID-related in the patient system. Contract labor costs at Ascension Providence Rochester Hospital were $951,135. Total contract labor costs of $36,775,859 were calculated using COVID-19 attribution percentages. Total COVID FEMA federal expenditures for the year ended June 30, 2025, were $101,313,434. Identification as a repeat finding, if applicable: The finding is not a repeat finding from the prior year. Recommendation: Management should enhance its review controls to ensure that the patient classifications derived from the patient systems are supported by underlying clinical documentation. Views of responsible officials: Ascension acknowledges the inability to locate relevant documentation pertaining to the COVID classification for a specific patient with services during the COVID-19 public health emergency. Although the documentation was not located in this instance, patient care was appropriately provided. However, Ascension will sample patient-level encounter records at Ascension Providence Rochester Hospital prior to future revenue recognition to ensure appropriate documentation.