On February 23, 2026, the Office of Inspector General (“OIG”) released findings from its audit of 30 selected Indian Health Service (“IHS”) and rural providers that received Provider Relief Fund (“PRF”) payments during the COVID-19 pandemic. The audit determined that 14 of the 30 providers either did not comply or may not have complied with the terms, conditions, and federal requirements governing the use of PRF funds—resulting in over $90 million in unallowable expenditures or unsupported lost revenue claims. The Health Resources and Services Administration (“HRSA”) concurred with OIG’s recommendations and indicated it will seek repayment from the noncompliant providers.
This latest headline from OIG is the latest in a campaign of audits against providers who received PRF funding, and the 14 targeted in this audit join the ranks of 7 hospices, 10 nursing facilities, 28 hospitals (June 11, 2025 report; September 19, 2025 report), 4 dental providers, and 9 assisted living facilities to receive similar treatment over the past two years.
Background: Provider Relief Fund
At the onset of the COVID-19 pandemic and as operational costs increased, providers reported revenue declines as operational costs surged. Many facilities (particularly rural hospitals and Critical Access Hospitals) faced heightened financial uncertainty compared to providers operating within larger health systems.
In response, Congress appropriated $178 billion to HHS to establish the Provider Relief Fund to provide financial relief for (1) health care-related expenses attributable to COVID-19, (2) lost revenues (such as revenue declines from canceled elective services) attributable to the pandemic, (3) COVID-19 testing and treatment for uninsured individuals, and (4) the administration of COVID-19 vaccines. According to the OIG’s recent report (the “Report”), of the $178 billion HRSA disbursed, the vast majority of funds (approximately $145.9 billion) went directly to eligible hospitals.
Providers who accepted PRF payments were required to agree to various terms and conditions, including that the funds would be used only for COVID-19-related purposes, that expenses would not be duplicated by other funding sources, and that salaries paid with PRF funds would not exceed federal Executive Level II thresholds ($197,300 in 2020 and $199,300 in 2021).
How the 30 Providers Were Selected
OIG’s audit focused on a nonstatistical sample of 30 IHS facilities and rural providers (from a population of 4,516 IHS and rural providers that received and retained one or more PRF payments) that collectively received approximately $1.56 billion in PRF payments during the period from April 10, 2020, through June 30, 2021.
OIG selected the 30 providers based on a risk analysis considering multiple factors: the total amount of PRF payments received (each sampled provider received more than $5 million during the audit period), geographic location (with emphasis on states with high percentages of rural populations), and organizational structure (including providers with parent-subsidiary relationships). The sampled providers were located across 20 states. Of the 30 providers, two were IHS facilities and 28 were part of rural provider systems that included hospitals.
For each selected provider, OIG reviewed expenditure reports submitted to HRSA and examined nonstatistical samples of expenses based on materiality and expense descriptions (such as salaries, supplies, and equipment). OIG also reviewed the providers’ lost revenue calculations to ensure compliance with HRSA’s reporting requirements.
Findings Regarding Improper Use of Funding
Of the 30 providers examined, OIG found that 16 used their PRF payments appropriately—for allowable general and administrative expenses, health care-related expenses, and to offset legitimate lost revenues attributable to COVID-19. The OIG found that the remaining 14 providers demonstrated various forms of noncompliance totaling $90.3 million, including:
- Excessive Salary Payments. Four providers used PRF payments for salaries that exceeded the federal Executive Level II salary cap. These payments totaled approximately $1.2 million for a combined 72 executives, medical professionals, and other employees whose compensation surpassed the allowable threshold.
- Unsupported & Unallowable Costs. Many providers failed to maintain adequate documentation, used the funds for non-COVID-19 related purposes, or miscalculated their lost revenue. In one instance, a provider could not furnish supporting documentation for $7.1 million in salaries and other expenses that had been reclassified between accounts. Another provider reported using $35.2 million for personnel and general administrative expenses that the provider itself acknowledged were not for COVID-19-related purposes. One provider incorrectly excluded expenses, overstating lost revenues by $8.2 million, while another could not provide documentation after undergoing a “substantial information technology update.”
- Duplicate Funding & Reporting. Six providers used PRF payments for expenses or lost revenues totaling $20.4 million that were already reimbursed or obligated to be reimbursed by other funding sources, such as Medicare, the Federal Emergency Management Agency, or other federal programs. Another four providers used PRF payments to cover duplicate expenses totaling approximately $766,000—including salary costs and equipment purchases that had already been reported in the same or prior reporting periods.
Despite the various errors found, OIG’s Report does not suggest intentional wrongdoing by the facilities. OIG attributed these deficiencies to clerical errors in reporting, failure to correctly interpret HRSA guidance, and inadequate documentation practices.
What’s Next?
OIG issued three recommendations to HRSA:
- First, OIG recommended that HRSA require the 12 providers that used PRF payments for unallowable expenditures (totaling $70,590,911) to return those amounts to the federal government or, alternatively, to properly replace the unallowable expenditures with allowable unreimbursed lost revenues or eligible expenses.
- Second, OIG recommended that HRSA require the two providers with inaccurately calculated lost revenues (totaling $19,709,036) to identify and return any improperly used PRF payments or replace those amounts with allowable lost revenues or expenses.
- Third, OIG recommended that HRSA work with the two providers that may have used $382,656 in potentially unallowable expenditures to determine which amounts should be returned or replaced.
HRSA concurred with all three recommendations, indicating that it will review the relevant records and seek repayment as appropriate from the non-compliant providers.
OIG’s substantial audit of PRF funds distributed over half a decade ago underscores the importance of compliance with federal funding requirements and highlights that time does not heal all wounds; instead, adherence to program requirements remains the essential safeguard. Moreover, given OIG’s continued auditing of PRF fund recipients, the 14 providers targeted in this last round are surely not to be the last.
