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Second Appeal Analysis
PA ID# 147-90300; Pitt County
DSR ID# 05072; Pitt County Memorial Hospital
Hurricane Bonnie struck Pitt County, NC on August 26, 1998. Pitt County Memorial Hospital (PCH) is the only hospital in the county, and it experienced emergency expenses during the period of August 25-28, 1998. The hospital operated in an emergency mode per its emergency operating plan; expenses were incurred due to emergency mode operations. The narrative in Damage Survey Report (DSR) #05072 stated that prior to the storm, PCH took preparatory measures in conjunction with the county emergency management operations center to track the storm, plan capacity and coordinate with other regional hospitals. During the storm, additional staff was mobilized, and staff already on duty was required to work overtime. During the emergency period, 14 ambulance transports were employed to move patients. These transports were necessitated by the storm and the patients were not billed for these services. There was no damage to the hospital facilities. Expenses were incurred for labor, equipment, materials, food/lodging and contracts.
The original DSR was obligated for $330,923. The applicant had claimed expenses of $330,923. The Federal share for the first 72 hours of the disaster was 100% for emergency work. Based on the final inspection and financial review, the expenses claimed by PCH were determined to be increased operating costs and not eligible for FEMA funding. PCH appealed the full amount of the disallowance. In the response to the first appeal, the Regional Director denied the majority of the costs as routine and ongoing medical care to be provided to patients who had preexisting conditions unrelated to Hurricane Bonnie. These costs were made ineligible in accordance with 44 CFR §206.225 and the Public Assistance Guide (1996), pp. 43-44. The costs in question, $323,909.72, were de-obligated on February 25, 2002. The remaining costs related to the evacuation of seven patients were approved.
The applicant submitted a second appeal letter to the North Carolina Division of Emergency Management that was received on May 7, 2003. The Regional Director forwarded the second appeal to Headquarters on July 9, 2003. The applicant is requesting reinstatement of costs that were de-obligated ($323,909.72) for emergency medical costs.
The applicant bases its appeal on two arguments. The first is that FEMA obligated the questioned costs and is not authorized to subsequently deobligate the expenses. The second argument is that FEMA policy at the time of Hurricane Bonnie authorized reimbursement of the type of costs which are being appealed by the hospital and that FEMA is not authorized to base a denial of this appeal on a policy that was issued after the hurricane.
Based on the DSR and final inspection report, costs incurred by PCH included preparatory work and expenses incurred due to emergency mode operations. These costs included labor ($319,465), equipment ($2,430), materials ($5,870), contract ($2,627), and food/lodging ($530). There was no damage to the hospital facilities. The first appeal response identified the work done by PCH as unrelated to Hurricane Bonnie and therefore not eligible.
Emergency work is defined in 44 CFR §206.225 and further defined in the Public Assistance Guide (1996), pp. 43-44. Examples of eligible work include: 1) emergency mass care and shelter when such cannot be provided by volunteer agencies; and 2) emergency medical care to the extent that a State or local government is responsible. None of the expenses incurred by PCH that are the subject of this appeal relate to either the provision of emergency mass care and shelter or to the provision of emergency medical care directly caused by Hurricane Bonnie. The majority of the costs incurred by PCH were for staff that would have provided emergency medical care if it had become necessary to provide such care as a result of the hurricane. However, the hurricane did not result in a need for emergency medical care. The amount requested by PCH in this appeal is for costs incurred while performing ineligible work. Costs that were related to the evacuation of seven patients who were disaster victims have already been reinstated by FEMA.
We do not agree with the hospitals argument that because FEMA obligated the funds at issue shortly after the hurricane, the Agency cannot subsequently deobligate the funds. The applicant incurred the costs at issue in this appeal before the DSRs were processed, so it is clear that the hospital did not rely to its detriment on the processing of the DSRs in the course of its expenditure of these funds. In addition, the government is not bound by any unauthorized actions of its employees. See Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 1947. Although the applicant may have believed that reimbursement of these expenses was consistent with FEMAs policy on emergency protective measures, we have determined that in fact reimbursement was not consistent with FEMAs policy (see the discussion in the preceding paragraph). In summary, FEMA is authorized and in fact is required to deobligate the costs at issue in this appeal because the Stafford Act and FEMAs implementing guidance do not authorize reimbursement of these costs.
Nor do we agree with the applicants argument that FEMA policy at the time of the hurricane was to reimburse these types of expenses. The Public Assistance Guide that was in effect at the time of the hurricane cited several examples of expenses that were eligible for reimbursement by FEMA as emergency protective measures. The relevant example was emergency medical care, to the extent a State or local government is responsible. See p. 44 of FEMA 286. As FEMA determined in the course of its response to the hospitals first appeal, the expenses under appeal were not incurred in the course of providing emergency medical care. Rather, they were incurred in anticipation of a possible need to provide medical care which ultimately was not required. Although FEMA Policy No. 9525.4 was issued in August of 1999, that policy statement did not change FEMAs pre-existing policy relating to reimbursement of emergency medical care expenses. On the contrary, the 1999 policy merely clarified the previously established policy. Therefore, we do not agree with the argument that FEMA changed its policy relating to emergency medical care after-the-fact and as a result cannot apply the 1999 policy statement in this appeal.
The applicant did not perform eligible work in the context of the costs which are questioned in this appeal, and it is therefore not eligible to receive the questioned costs of $323,909.72. The appeal is denied.