Finding No: 2023 002 Federal Agency: U.S. Department of Homeland Security Federal Emergency Management Agency Assistance Listing Number: 97.036 Program: COVID 19 – Disaster Grants Public Assistance (Presidentially Declared Disasters) Award Year: July 1, 2022 to June 30, 2023 Compliance Requirements: Activities allowed or unallowed and Allowable costs/cost principles 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. Subsequent to FEMA both obligating and paying project worksheet #548183A, the Department of Homeland Security (DHS) engaged the RAND Corporation’s Homeland Security Research Division (RAND), through the Homeland Security Operational Analysis Center (HSOAC), to assist with the administration of disaster grants to health care providers related to COVID 19. Additionally, 2 CFR 200.303 requires non federal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Conditions Found On March 3, 2023, FEMA obligated and paid project worksheet #548183A for $2,719,181 related to Remdesivir drug costs and reimbursements which were included in the total expenditures for this program of $16,310,090 for the year ended June 30, 2023. Most insurance providers, including the federal government, pay hospitals a single flat fee for an entire patient stay (known as a ‘bundled payment’) rather than paying for every individual item used. As a result, when the System receives a payment for an inpatient stay, it isn’t possible to determine exactly how much of that payment was for a specific drug like Remdesivir. However, FEMA program requirements require the hospital to offset claimed costs by payments from other sources. Since there is not a payer level breakdown of the payment for Remdesivir, management applied a cost based allocation methodology to estimate the portion of bundled inpatient reimbursement attributable to Remdesivir. In June 2023, HSOAC issued an Applicant Review Memo indicating that they had evaluated project #548183A and determined the methodology utilized by management to calculate the estimated payments received from other sources related to Remdesivir drug costs and reimbursements to be unreasonable. The System could not provide the additional information requested by RAND to support actual payments received from other sources related to Remdesivir costs within project #548183A since that information does not exist under prevailing inpatient reimbursement structures. Therefore, at the request of the System, FEMA de obligated $2,719,181. Cause The System used a methodology to calculate the estimated payments received from other sources that was not in accordance with FEMA’s regulations. Further, the System was unable to provide requested documentation related to actual payments received from other sources to RAND because that information specific to the Remdesivir drug costs does not exist under prevailing inpatient reimbursement structures. Effect The funds obligated for project worksheet #548183A were subsequently de obligated at the request of the System and the System returned these funds to FEMA. Questioned Cost $2,719,181 Statistical Sample The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding in the Prior Year Not a repeat finding. Recommendation We recommend that the System strengthen controls over the management review process to prevent unallowable costs and inaccurate amounts from being charged to Federal programs as well as ensure all relevant documentation is maintained in accordance with Federal requirements. View of Responsible Official For project worksheet 548183A, Wellstar Health System, Inc was not provided with methodology or approach to FEMAs request for patient level financials, including all costs incurred directly with each patient. Wellstar Health System, Inc. believed the request for information from FEMA was in conflict with FEMA’s "COVID-19 Patient Care Revenue Duplication of Benefits Recipient and Subrecipient Guide", published in October 2022, as well as overly burdensome and unreasonable. Wellstar Health System, Inc. subsequently requested FEMA to de obligate project worksheet 548183A and repaid all funds. Corrective Action Plan Wellstar Health System has trained responsible internal team members on approach and methodology of FEMA published guidelines. Wellstar Health System, Inc. will also engage external, experienced consultants as needed for future FEMA claims. Anticipated Completion Date: Wellstar Health System, Inc has already implemented the corrective action. Name of Contact Person for Corrective Action: Beth Loudermilk, VP Financial Planning & Analysis