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Buyer Beware: FEMA Claw Backs Could Require Hospitals to Return Funds Received from FEMA for COVID-19 Purchases and Expenses


In the height of the COVID-19 pandemic, hospitals did what they needed to do to control the spread and keep patients alive.  That meant purchasing more of certain specialized equipment than they ever would have needed in non-pandemic times.  Sometimes that even meant converting a storage shed on a hospital’s parking lot to a drive thru for rapid testing and vaccinations – improvements that are useless to the hospital outside of the surge in need for pandemic-level testing and vaccinations. 

Many hospitals took these steps without any promise of return value for it, because it was the right thing to do to meet their communities’ needs.  Some hospitals obtained partial funding from FEMA (Federal Emergency Management Agency) for these expenditures.  FEMA funding was a welcome relief for any hospital that received it, but even more so for hospitals already in financial distress, exacerbated by the decrease (and in some cases total cessation) of elective and other services for an extended period during the pandemic, and increased costs of labor and supplies. 

But hospitals that received FEMA funding must read the fine print and understand its limits.  FEMA funding is not a windfall and an award of funding is not the end.  FEMA has the ability to recoup funding under certain circumstances.  See 2 C.F.R. §§ 200.313 (c) and (e), 200.314(a), and 200.311. Accordingly, entities that received FEMA funding for COVID-related expenses should be aware of the possibility of reimbursement to FEMA if/when those entities are no longer using the equipment, supplies, property and improvements for COVID-related (or other FEMA-approved/federally funded) purposes.  There are options of how to fund the reimbursement, including selling the property or equipment and reimbursing FEMA with a portion of the proceeds, but the regulatory mechanisms do not fit every possible scenario and may ultimately leave FEMA funding recipients holding the bag.


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