Changes of Ownership and Provider Relief Funds: HRSA Issues Guidance on Phase 4 Funding and Reporting of CHOWs

In a previous article, we discussed the Health Resources & Services Administration’s (HRSA) Phase 4 Provider Relief Funding (“Funding”). In the Funding announcement, HRSA and the Department of Health & Human Services (HHS) announced the intent to more closely audit healthcare providers that have undergone a merger or acquisition:

To help ensure that these provider relief funds are used for patient care, Provider Relief Fund (PRF) recipients will be required to notify the HHS Secretary of any merger with, or acquisition of, another healthcare provider during the period in which they can use the payments. Providers who report a merger or acquisition may be more likely to be audited to confirm their funds were used for coronavirus-related costs, consistent with an overall risk-based audit strategy.

Providers were left wondering how mergers and acquisitions would need to be reported and what level of scrutiny should be expected. HRSA recently released the following Frequently Asked Questions, which help answer some questions, though they do not provide clarity on what, in particular, HRSA will be looking for when it receives information related to mergers and acquisitions.

If a merger or acquisition was planned before receiving Phase 4 General Distribution payments, will healthcare providers still need to report these activities?

If a Reporting Entity that received a Phase 4 General Distribution payment undergoes a merger or acquisition during the Period of Availability, as described in the Post-Payment Notice of Reporting Requirements, that corresponds to the Payment Received Period, the Reporting Entity must report the merger or acquisition during the applicable Reporting Time Period.

What type of review will HRSA do after a merger or acquisition has been reported by recipients of a Phase 4 General Distribution payment?

If a Reporting Entity that received a Phase 4 General payment indicates when they report on the use of funds that they have undergone a merger or acquisition during the applicable Period of Availability, this information will be a component that is factored into the entity’s audit risk score.

Certain recipients are required to notify HHS of a merger with or acquisition of any other healthcare provider during the Payment Received Period (as defined in the Provider Relief Fund Post Payment Notice of Reporting Requirements). How will recipients report this information to HHS/HRSA?

To streamline the process and minimize provider burden, this information will be collected in the Provider Relief Fund Reporting Portal as part of the regular reporting process. Additional reporting information will be forthcoming for impacted providers.

At a minimum, healthcare providers that receive Funding and undergo a merger or acquisition during the Funding Period of Availability should expect their likelihood of an audit to increase. However, given the reporting process outlined months ago by HRSA, most if not all recipients should already be preparing to respond to government inquiries.

For more information, please contact Hedy S. Rubinger or Alexander B. Foster.

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The Arnall Golden Gregory Change of Ownership (CHOW) team leads all regulatory aspects of healthcare transactions for investors, operators, managers, capital partners, and developers of every size in all 50 states.  The team streamlines the regulatory process so that clients close their transactions on or ahead of schedule. Whether obtaining licensure and Medicare/Medicaid approvals, structuring transactions to expedite closings, anticipating issues to minimize cash flow disruption, negotiating regulatory terms in deal documents, creatively resolving diligence issues, or advising on CHOW guidelines and compliance, the team provides extensive experience and practical solutions. To date, the CHOW team has served as primary regulatory counsel in transactions valued at more than $25 billion.​