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Legal Alert

Governor's Executive Order Extends Deadlines For FQHCs And DHCS In The Audit And Appeals Process During The COVID-19 State of Emergency

Governor's Executive Order Extends Deadlines For FQHCs And DHCS In The Audit And Appeals Process During The COVID-19 State of Emergency

On April 22, 2020, the Governor issued Executive Order N-55-20 pursuant to a provision of the Government Code that grants special powers to the Governor to suspend statutes during a state of emergency where the Governor determines and declares that strict compliance with the statute or regulation would prevent, hinder, or delay the mitigation of the effects of the emergency. (Gov. Code, §§ 8567 & 8571.)

Executive Order N-55-20 contains provisions that (1) may impact Federally-qualified health centers (FQHCs) that plan to submit initial rate-setting cost reports, change in scope of service requests (CSOSRs), and reconciliation requests; and (2) do impact FQHCs whose cost reports and reconciliation requests are currently under review by the Department of Health Care Services (DHCS) or that are involved in appeals of DHCS adjustments following audits of cost reports and reviews of reconciliation requests.

More specifically, with respect to FQHC cost reports, CSOSRs, and reconciliation requests, Executive Order N-55-20 provides:

… the deadlines for providers to submit, and for DHCS to review, a cost report, change in scope of service request, or reconciliation request are each extended for an additional 90 days beyond the date on which such action would otherwise be due.

Executive Order N-55-20 suspends the administrative appeal timeline that requires informal hearings to be completed no later than 180 days after the filing of a timely and specific statement of disputed issues by the provider and formal hearings to be conducted within 300 days of the filing of a statement of disputed issues by the provider, as well as the timeline that requires the Office of Administrative Hearings and Appeals (OAHA) to adopt a final decision in a formal hearing within 300 days after the administrative record has closed. The executive order also suspends the timelines for modifying a proposed decision. The executive order expressly allows DHCS to conduct administrative hearings and issue final decisions during the state of emergency and states, “[n]otwithstanding the foregoing, DHCS is encouraged to adhere to the timelines set forth in [the Welfare and Institutions Code], to the extent reasonably possible.”

Finally, to the extent DHCS delays a matter pursuant to the executive order, the provisions of the Welfare and Institutions Code section that provide for interest to accrue on any unrecovered overpayments owed by the provider to DHCS is suspended during any related delay. However, the interest owed by DHCS to a provider who ultimately prevails in an appeal is not likewise suspended and continues to run during any delay.

On June 4, 2020, DHCS issued additional guidance on Executive Order N-55-20. Of particular importance is the clarification that the 90-day extension provided under the executive order “is based on statutory deadlines that occur while Executive Order N-55-20 is in effect, not whether a provider's fiscal year ends during the state of emergency.” The DHCS guidance also advises FQHCs needing additional time to submit a cost report, CSOSR, or reconciliation review, to contact DHCS' Audits and Investigations FQHC/RHC section via email at The guidance states, “[y]our request will be considered in accordance with Executive Order N-55-20 as well as state and federal law,” suggesting that DHCS has the discretion to deny a request.

Executive Order N-55-20 theoretically provides flexibility to FQHCs who may need additional time to file their cost reports, CSOSRs, or reconciliation requests due to COVID-19. However, it would be prudent for an FQHC that intends to avail itself of the additional 90 days to notify DHCS of its intent in advance, since DHCS has suggested in its guidance that it considers itself to have the discretion to deny this flexibility to FQHCs.

The executive order also extends DHCS’ deadline for completing its review of cost reports, change in scope of service requests, and reconciliation reviews. This provision is unlikely to have much practical effect, since DHCS already gives itself three years to complete a cost report audit or reconciliation review and routinely obtains time waivers from providers to extend its time to complete audits of change in scope of service requests.

Under the executive order, FQHCs that intend to appeal audit adjustments or that are currently involved in audit adjustment appeals should now anticipate that obtaining a final decision from OAHA will take even longer than it has in the past. Until such time as the Governor declares that the state of emergency has ended, informal hearings do not need to be completed within 180 days of the filing of the statement of disputed issues, formal hearings no longer need to be conducted within 300 days of the filing of the statement of disputed issues, and OAHA is no longer required to adopt a final decision within 300 days after the closure of the record of a formal hearing. Thus, a process that can already take two years or more can be expected to take even longer.

The executive order will remain in effect until the Governor proclaims that state of emergency has terminated. (See Gov. Code, §§ 8567(b) & 8629.)