FMAP Awards have been Distributed. How to Lawfully Spend those Funds.

LHCSA providers that were selected to receive FMAP funding have began to see deposits of the FMAP in their accounts and are now busy contemplating how to spend these funds in a compliant fashion.  In this alert, we review some common questions and concerns we have received from clients.

When to Spend

Initially, there is no requirement that the funds be spent immediately within the first quarter of 2022. Indeed, there is no obligation that the funds be allocated or that vendors be hired and paid in the first quarter of 2022. Providers can certainly hold on to the funds and spend them leisurely over the next several months, so long as they do so by April 1, 2023.  

FMAP For Wage Parity or Minimum Wage Increases

At this time, the funds cannot be used to fund the $2.00 minimum wage increase that is slated to take effect October 1, 2022, because the intention of FMAP funding is to cover and pay for new expenses, not ongoing or statutory obligations. For the same reason, FMAP cannot be used for the same expenses as those covered by the Wage Parity total compensation requirements of $18.22 or $19.09.

Bonuses and Pay Changes 

Providers should be mindful that any bonuses or incentives involving increases in pay are likely going to be taxable as wages. Paying a bonus on a gift card does not change this outcome. Further, for most types of pay incentives, such as bonuses, depending on how the bonus is structured, the amount of the bonus may have to go into the overtime rate for the employees receiving the bonus. For example, if the employee’s wage is $15.00, their overtime rate is generally going to be $22.50/hour. However, if a bonus is paid for work associated with the week when the overtime was worked, that overtime rate will have to be adjusted and will no longer be $22.50. Trying to pay a bonus in a week when overtime was not worked is also not going to compliant, and it is not practical. Technically, certain bonuses must be allocated to the week, or weeks, over which the bonus was earned. Similarly, premiums for travel, difficult shifts, or other similar pay-increases may also have to be accounted for in the overtime rate calculation.   It is not clear if new overtime premiums that result from these wage increases can be covered by FMAP. 

Training 

Training programs are certainly encouraged by the FMAP program, but providers should be mindful of the types of training programs that will qualify. The DOH has posted some guidance in this regard. 

Marketing

Only certain types of marketing activities will qualify for FMAP spending. Capital expenses, such as new recruitment offices, are a clear NO insofar as FMAP is concerned. 

Union Issues

Some unions are aggressively proposing the idea of a “hazard pay bonus” to the agencies employing the unions’ members.  Initially, it bears noting that some aspects of the FMAP are subject to mandatory negotiation with the union while other aspects of the FMAP are not.  Thus, not everything surrounding the FMAP is open to negotiation.  In terms of wage and benefits proposals that may be made, a hazard pay bonus would seem to be a permissible expenditure of FMAP under the DOH’s guidelines. The DOH specifically notes that payments can be made based on past performance, as long as those payments are made to current employees, among other conditions. 

Home Care Technologies

Certain technology providers have pitched the idea of developing, on behalf of providers, a certain SaaS, a platform, software, or system. Providers should ensure that the service being proposed by these vendors would qualify for FMAP. Not all technology is deemed qualifying under FMAP. 

Separately, providers should carefully consider contracting to pay a developer FMAP funds to develop a service or software at this point in time. While the funds for the development costs would theoretically be expended now, there is no guarantee that the service/software will be available within the time period within which the FMAP funds have to be spent. And, per FMAP, the funds are permitted to be used for a technology service, not the development cost without a service. 

Lastly, providers should negotiate with any vendor proposing to develop a software using the provider’s FMAP award about the provider’s intellectual property rights, royalties, and other similar benefits if/when the software is developed.  

Making Your Dollar Go Far

Lastly, providers who were selected to receive these funds should diligently consider which incentives and programs will have the greatest impact on their operations’ future, and which programs will position them for a successful RFO and MLTC rate negotiations.  Pay increases, such as bonuses and similar incentive programs will only have an impact so long as they are being paid and the FMAP award is finite.  These pay programs will not have a long-term impact.  And we now know from the Comptroller’s report and DOH statements that this type of an investment and grant is unlikely to be repeated soon.  Thus, providers should consider creative strategies to develop quality aides that will feel engaged with their work and committed to their agency employers.

If you have any questions about FMAP and how to properly structure your FMA award, please let us know.