Nearly six-months after the close of the Public Health Emergency, FEMA issued a newly revised, 27-page Duplication of Benefits (“DOB”), Recipient and Sub-Recipient Guide. Advis has experienced many of these policy changes recently, and this new guidance confirms FEMA’s positioning on these matters.

This DOB policy is used to determine whether applicants have overlap in expenses with patient care revenue, such that FEMA should reduce project awards by this overlap. FEMA does not apply this policy to expenses that it determines to be “low likelihood” for duplication with patient care revenue. Historically, FEMA did not specifically define non-clinical contract labor/services and cleaning and disinfection supplies/services as low vs. high, and the guidance was typically interpreted (and enforced by FEMA in earlier reviews) to define these as “low likelihood”. Now, in seemingly the most impactful change in this policy, these expenses are clearly identified as “high likelihood” and subject to review for DOB.

In contrast to the October 2022 DOB policy, FEMA now encourages applications to undergo their standard methodology. The standard methodology utilizes publicly available data (obtained through HCRIS or EMMA) to calculate a “ceiling” for each eligible cost category, by comparing the year-to-year change in operating expenses with the change in operating revenue. FEMA will be conducting this analysis for all high-risk projects (e.g., those >$1M that include any “high likelihood” expenses).

The policy still allows applicants to provide an alternate methodology in the event they disagree with results from the standard methodology. However, FEMA no longer considers the following methods of calculating a DOB deduction viable for contract labor and force account labor claims:

  • The creation of cost ceilings, as FEMA describes in their standard method, for interchangeable costs (i.e., force account and contract labor) such as creating an allowable ceiling for contract labor alone rather than for all labor.
  • Utilizing methods to compare pre-pandemic wage rates to 2020-2022 rates without all wage components in both (base wage, benefits, etc.), or not accounting for inflation.

There are additional changes in the policy that may disallow DOB models that have been previously approved by FEMA on past projects. Additionally, FEMA now confirmed that applicants should use the same DOB method for similar costs across all time periods (e.g., a labor filing from 2020 should use the same DOB model as a labor filing from 2022). It is unknown at this time whether this policy will be applied retroactively to projects that have already been obligated, and/or paid by the state. FEMA also does not provide any insight into how this new guidance will impact project review timelines.

Advis recommends each entity analyze the impact of this new guidance on past and present projects. Please reach out to us via our website or at 708-478-7030 for assistance with these reviews.

Published: December 18, 2023