As of March 27, 2020, three pieces of legislation had been passed to address the economic impact of the COVID-19 coronavirus Public Health Emergency (PHE) and more legislation is expected.  Because they were hastily drafted and passed, technical corrections and interpretations are being issued regularly.  At the same time, certain agencies like the Centers for Medicare and Medicaid Services (CMS) are using the declared PHE to amend their own regulations to assist the healthcare community.  The legislation covers vast areas of the economy, but we will focus on those features that might be of interest to a medical practice or any other small business with fewer than 500 employees.

Here is a summary of the various acts to date:

• Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 enacted March 6. This opened up the opportunity for the use of telemedicine services as described in our recent article.  On March 30, CMS added many additional temporary regulations related to the telemedicine rules under the CARES Act described below.
  
  
• Families First Coronavirus Response Act (FFCRA) enacted March 18. This act mandates that employers provide enhanced paid sick leave and expanded family and medical leave to employees affected by the PHE. 
  
  
• Coronavirus Aid, Relief, and Economic Security Act (CARES) enacted March 27. This sweeping economic stimulus bill is the most complex of the three.  Among many other things, this Act:
  • provides further relief to allow telemedicine services,
  • temporarily removes the 2% Medicare payment sequestration through the end of 2020,
  • expanded Medicare’s Accelerated and Advance Payment Program, as described in our article,
  • makes loans available to practices through the Small Business Administration (SBA) and local lenders, including the Paycheck Protection Program,
  • provides payroll tax credits that are intended to allow employers to retain employees, and
  • allows deferral of employer payroll tax payments.

Telemedicine

Building on the first act in the series, CARES expanded the opportunity for practices to remain in operation through the use of telemedicine.  CMS issued a series of temporary regulatory waivers on March 30 that included 80 additional codes that can be reimbursed using telemedicine.  Of interest to the radiology community is Radiation Treatment Management Services (CPT 77427).  For more on this topic, review our recent article Relaxed Telemedicine Requirements for Radiologists in the Wake of COVID-19.

Advances on Medicare Payments

The Accelerated and Advance Payment Program is within easy reach of any practice.  This amounts to a short-term loan equal to 100% of Medicare payments based on a three-month lookback period.  The advance is then repaid through Medicare’s retention of payments otherwise due for claims beginning 120 days after the advance was made, with full repayment due within 210 days from the date the advance was made.  Note that any remaining balance of the advance not repaid within the specified time period will bear interest at the rate of 10.25%.  Upon a request submitted to the appropriate Medicare Administrative Contractor (MAC) for your locality, processing and funding is expected to take place within seven (7) calendar days.  More information, including a link to the CMS Fact Sheet, is available in our recent article Expansion of the Accelerated & Advance Payments Program for Providers and Suppliers During the COVID-19 Emergency.

Medicare Payment Sequester Suspended

The reduction of Medicare payments by 2% that has been in effect for many years is being suspended for payments from May 1 to December 31, 2020.  Thus, Medicare reimbursement to practices has effectively been increased by 2% for the remainder of 2020.  No action is required by the practice. 

Loans from the Small Business Administration

Paycheck Protection Program

The CARES Act includes the Paycheck Protection Program (PPP) through the SBA that provides a loan of up to $10,000,000 at an interest rate of no more than 4% to cover up to eight (8) weeks of payroll for its employees earning up to $100,000 per year, along with some other expenses such as retirement plan contributions, group insurance premiums, mortgage interest, rent and utilities.  Employees who earn more than $100,000 per year can be included, but the loan funding and forgiveness for their compensation will be capped at that level; however, the non-cash benefits for those employees will be included in addition to the $100,000 of compensation.  The PPP loans are non-recourse, without personal guarantees, and are in some cases payment will be forgiven in full or in part.  Loan forgiveness is predicated on the practice retaining its workforce at a level equal to what it had been in prior periods and using at least 75% of the funds for payroll with the remainder for payment of mortgage interest, rent and utilities.  Note, however, that the loan forgiveness under the PPP will be impacted if the practice has received another SBA loan.  Any unforgiven balance has a maturity of two (2) years and an interest rate of 1.0%, according to the SBA literature.

Disaster Relief Loans

The SBA is making  Economic Injury Disaster Loans of up to $2,000,000 at a 3.75% interest rate available to businesses affected by the COVID-19 PHE.  An initial advance of up to $10,000 is available within three (3) days of application, which will not have to be repaid.  Collateral and personal guarantees will be required in most cases.   Receipt of a disaster relief loan will impact the practice’s ability to obtain funding under the PPP described above.

These SBA loans are being administered through local banks, so practices should contact their regular bank for further details and applications.  Not all banks are able to handle SBA loans, and not all are equally ready to accept applications for the PPP as of the promised April 3^rd start of the program, so some shopping might be necessary.  The documentation required by each bank seems to be different as well.  Check with the bank of your choice for more specific information.

Programs That Help Employees

Paid Sick Leave and Extended Family Leave

Although medical practices are allowed to be exempted from the FFCRA’s paid sick leave requirements, as is any employer with fewer than 50 employees, a practice that wants to keep its employees’ paychecks funded for as long as possible may opt to comply with the program.  Employers are required to allow up to 80 hours (pro-rated for part-time employees) of paid sick leave in addition to any regular paid vacation or sick leave the practice might already have in place.  The additional leave can be used for the employee’s own illness or to care for a family member, including children who are at home due to school closures, as described in the table below.  The practice is reimbursed for the cost of FFCRA paid sick leave or extended family leave taken from April 1 to December 31, 2020, through refundable payroll tax credits. 

Employee Retention Credit

Practices that do not choose to participate in the Payroll Protection Program may obtain funds through a payroll tax credit for keeping their employees on the payroll.  The credit is equal to 50% of the first $10,000 paid to employees through salary, wages and health insurance coverage during the period March 12 to December 31, 2020, and it is applied against the employer’s 6.2% Social Security tax by reducing regular payroll tax deposits.  Note that payments under the FFCRA Paid Sick Leave and Extended Family Leave are not included for this credit.  The credit is refundable if it exceeds the amount of tax available.  In order to be eligible for this credit, the operations of the practice must be fully or partially suspended due to governmental orders related to COVID-19, or its gross receipts for a calendar quarter are less than 50% of the gross receipts for the same calendar quarter in 2019.  Once its quarterly gross receipts have returned to 80% of the gross receipts in same 2019 quarter, the practice is then no longer eligible for the credit.

Delayed Payment of Employer Payroll Taxes

Any practice that is not participating in the Payroll Protection Program may elect to defer payment of its 6.2% Social Security tax on salaries and wages paid between March 26 and December 31, 2020.  Fifty percent of the deferred tax is due by December 31, 2021 and the remaining 50% is due by December 31, 2022. 

Other Sources of Funding

Business Interruption Insurance

Most of the property and casualty, or Business Owner’s, insurance policies carried by practices include Business Interruption coverage.  The calculation of damages under this type of coverage is done retrospectively, after the amount of the loss is finally able to be determined.  However, it might be prudent to check with your insurance agent now to see if you have this coverage and ask about the documentation you will need to file a claim.  Unfortunately, some insurers wrote exclusions into their policies for losses due to a viral epidemic but there is some indication that certain states might try to adopt legislation that would invalidate such a provision.

Healthcare Provider “Lost Revenue / Increased Cost” Grants

The CARES Act establishes a $100 Billion Grant Fund exclusively for healthcare providers who are enrolled in the Medicare and Medicaid program. The purpose of this fund is to provide grants to practices that have experienced a reduction in revenue or an unexpected increase in costs due to the COVID-19 PHE.  

Conclusion

Practices will have to decide the best course of action in their particular set of circumstances.  We have provided a menu of available options, some of which are mutually exclusive, to help with that decision.  The funding for the SBA loans is limited under the CARES Act, so if the practice thinks this might be a viable path, the application should be made as soon as possible in order to obtain a share of the available pool.  If the loan is approved, the practice has the option to turn it down so there really is no down-side to applying. 

Each of the options described have more detailed provisions than we can include in this article, so be sure to fully investigate them before acting.  Note that nothing in this article should be construed as legal advice, and practices should consult with their accountants, attorneys or other advisers as necessary.  Finally, the Public Health Emergency is continuing to develop, with changes being made continually to these programs and new programs under development at the state and federal level.  We will do our best to keep you apprised during this difficult time.

Rebecca Farrington is the Chief Revenue Officer at Healthcare Administrative Partners. 

Recent Articles

Expansion of the Accelerated & Advance Payments Program for Providers & Suppliers During the COVID-19 Emergency

Quality Payment Program Modified Due to COVID-19 Outbreak

Relaxed Telehealth Regulations for Radiologists in the Wake of COVID-19

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