General Publications July 12, 2023

“Recent Provider Relief Fund Audits Are Just The Beginning,” Law360, July 12, 2023.

Extracted from Law360

On April 26, the Health Resources and Services Administration's Provider Relief Bureau sent letters to a group of Provider Relief Fund recipients informing them that the HRSA will assess their use of PRF payments attributed to lost revenues for reporting periods 1 through 3.

The HRSA has two main goals with these opening audits: (1) to ensure that the recipients' reported lost revenues are attributable to the coronavirus; and (2) to ensure that the lost revenues were not obligated to be reimbursed by another source.

These notification letters, sent to dozens of recipients, mark the HRSA's opening salvo in its attempts to conduct rigorous oversight of the PRF program.

The Provider Relief Fund

At the outset of the COVID-19 pandemic, Congress appropriated billions of dollars to the HRSA to reimburse certain health care entities for lost revenues and health care-related expenses.

As a condition of using these funds, recipients needed to attest that the lost revenues and expenses were attributable to the pandemic and not reimbursed by another source of funding.

Congress appropriated additional funds to the PRF program throughout the pandemic and created the American Rescue Plan Act rural fund, which followed similar conditions.

The HRSA provided three means for recipients to report their lost revenues.

First, they could compare their actual revenues during a pandemic period quarter to that same quarter in 2019, e.g., calendar year 2019 Q1 versus calendar year 2021 Q1.

Second, recipients could compare their budgeted revenues for a quarter to their actual revenues for that same quarter so long as the recipient had a budget covering the entire pandemic period approved before March 27, 2020, e.g., budgeted calendar year 2020 Q1 versus actual calendar year 2020 Q1.

Finally, recipients were permitted to utilize an alternate reasonable methodology that "provides maximum flexibility" to recipients.[1] The HRSA has offered little guidance on what might constitute a reasonable methodology, but stated that all recipients using this approach will face an increased likelihood of audit.[2]

The Current Audits

While recipients could use their PRF distributions for lost revenues or health care-related expenses across nine reporting periods, the HRSA's current audits are limited to reported lost revenues in reporting periods 1 through 3.

These reporting periods cover PRF payments received from April 10, 2020, through June 30, 2021. To assist in these audits, the HRSA indicated that it will contract with several certified public accountant firms to conduct the assessments.

These audits will consist of a review of the recipients' general ledgers, chart of accounts, financial statements, cost reports and documentation supporting the attribution of PRF and ARPA rural distributions to lost revenues.

The nature of this first wave of audits appears narrow both in terms of the auditee — e.g., letters were sent to individual recipients, not the reporting entity — and audit scope, i.e., limited to lost revenues only.

However, the nature and structure of PRF reporting calls into question whether these audits can operationally be performed at this granular level without taking information from other entities or health care-related expenses into consideration.

More Audits on the Horizon

The current audits mark only the beginning of the government's oversight of the PRF and APRA rural distributions for several reasons:

  • The HRSA has six more reporting periods, which cover a significant proportion of PRF distributions and the ARPA rural distribution that will likely be audited.
  • The current audits only address lost revenues, leaving potentially billions of dollars attributed to health care-related expenses unaudited.
  • Both the U.S. Department of Health and Human Services' Office of Inspector General and the Pandemic Response Accountability Committee, a committee of the Council of Inspectors General on Integrity and Efficiency, have oversight authorities and mandates, which will likely require additional audit activity.
  • Congress has a noted appetite for recovering misspent or misappropriated pandemic relief funding and may flex its oversight authority.

The current audits also appear to be focused on high-dollar recipients. However, the HRSA has indicated that several categories of recipients will face additional scrutiny. These recipients include:

  • Recipients that were a party to a merger, acquisition or divestiture;
  • Recipients that transferred their targeted distribution payments;
  • Recipients that utilized the alternate reasonable methodology for calculating lost revenues; and
  • Recipients that made changes in their reporting period submissions from period to period.

In short, if an entity received PRF or ARPA rural distributions and is not currently under a government-backed audit, it could still face scrutiny even if it underwent a single audit.

While a clean single audit may provide some assurance that PRF recipients are ready for additional scrutiny, a single audit does not relieve these entities of additional scrutiny or dismiss the possibility of later government-determined disallowances and recoupment.

As a result of ongoing and future government oversight, high-risk recipients should begin preparing for an inevitable audit. Recipients, working with counsel, should consider preemptively preparing for the following concerns.

Health Care-Related Expenses:

Recipients should have contemporaneous supporting documentation to justify each expense attributed to their PRF or ARPA rural payment. Recipients should also have policies and procedures in place to allow them to track each expenditure applied to their funding.

Lost Revenues

Recipients should ensure that their revenue calculations align with the HRSA's definition of revenue. Recipients that utilized the alternate reasonable methodology should collect documentation supporting their methodology and reasonableness considerations.

Other Assistance Received

Recipients need to account for every source of funding they received, including additional funding they may have received after submitting a PRF report. Such funds may need to offset previously reported uses of PRF or ARPA rural funds. Recipients should also consider what policies and procedures were in place to ensure that no expenses or lost revenues were counted against more than one source of funding, i.e., double-dipping.

Effective Guidance

The HRSA's guidance on PRF and ARPA rural funds has changed many times over the last three years. Recipients must be able to tie their allocation decisions to a specific guidance and should ensure that the guidance was still in effect when they submitted their reports. If there were material changes to the guidance before a recipient submitted its report, it should consider reworking its internal documentation to account for these changes.

Other Considerations

With any government audit or investigation, it is possible that the regulatory agency may disallow certain expenses or allocations. Federal law permits and encourages regulatory agencies to allow recipients to offset any disallowances with additional allowable costs.

If recipients have incurred additional lost revenues or health care-related expenses that could be applied to their PRF or ARPA rural payments, they would benefit from calculating these potential expenses before a formal disallowance.


The HRSA, HHS OIG and other government oversight bodies have a clear mandate to ensure the appropriate use of federal funds, which includes examining and, if necessary, recouping any of the billions of dollars the government provided in pandemic relief funding.

The HRSA has begun its oversight process, albeit in a rather limited fashion. Recipients, particularly those with noted risk factors, should be prepared for additional oversight, scrutiny and disallowances.

Given the true lifeline the PRF provided to health care providers affected by COVID-19, recipients should seriously consider and prepare for audit activity before the HRSA, HHS OIG or any other regulatory agency takes action that could result in repayments.

[1] HRSA, "Provider Relief Programs: Provider Relief Fund and ARP Rural Payments Frequently Asked Questions" at 34 (last updated May 5, 2023),

[2] HRSA, "Provider Relief Fund Distributions and American Rescue Plan Rural Distribution Post-Payment Notice of Reporting Requirements" (April 7, 2023),

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