The CARES Act Offers Medical Practices Relief and Support
Like other businesses, medical practices face exceptional financial burdens from the COVID-19 pandemic. Medical practices nationwide have been forced to close, delay non-essential surgeries and procedures, furlough staff, cut costs, and withstand shrinking reimbursement, among other challenges.
On Friday, March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act” or the “Act”). The Act, the largest emergency spending bill in history, offers businesses $2.2 trillion in economic relief. The Act delivers critical relief and support to medical practices that, through no fault of their own, have been adversely impacted by the COVID-19 pandemic. The Act contains a variety of emergency relief provisions that apply to many different businesses and industries. This alert will focus on the portions of the Act that are most helpful to medical practices, including physician and dental practices. To the extent the Act limits funding to Medicare providers and suppliers, it is unlikely that dental practices will be eligible for relief.
Paycheck Protection Program Loans
The Act provides Paycheck Protection Program (“PPP”) loans to any business with less than 500 employees. PPP loans may be particularly helpful to those physician and dental offices that have closed due to restrictions on “non-essential businesses” or have decreased patient volume due to COVID-19. Eligible borrowers must certify that the funds will be used to retain workers and maintain payroll or make mortgage, lease, or utility payments. The amount of the PPP loan varies depending upon the borrower’s average monthly payroll costs. The borrower is also eligible for forgiveness of the PPP loan up to the amount of certain costs incurred during the eight-week period following the loan’s origination. Borrowers can apply for a PPP loan starting on April 3rd. Interested borrowers should review the Small Business Administration (“SBA”) Final Application and can apply through existing SBA 7(a) lenders and other authorized participating lenders. The SBA recommends interested borrowers consult with their local lenders to determine whether they are participating in the program. As of April 12th, participating lenders have processed 820,000 loans totaling roughly $205 billion of the $350 billion in available funding. Interested borrowers have until June 30th to apply for a PPP loan or until the PPP funds are exhausted. For a detailed summary of PPP loans and the availability for your practice, see Page 1 of Honigman’s CARES Act and COVID-19 Quick Reference Guide and the SBA’s Interim Final Rule. Medical practices that are associated with a private equity sponsor must consider the SBA Affiliation Rules. For more information on the SBA Affiliation Rules, see Page 2 of Honigman’s CARES Act and COVID-19 Quick Reference Guide and Honigman’s alert Small Business Administration Affiliation Rules Relaxed under Coronavirus Aid, Relief, and Economic Security Act.
Economic Injury Disaster Loans
The Act expands the SBA’s long-standing Economic Injury Disaster (EID) loan program with an additional $562 million in funding. An EID loan is available for any business with fewer than 500 employees affected by COVID-19. Eligible businesses may apply for an emergency advance of up to $10,000 and a loan of up to $2 million. Interested borrowers can apply through SBA’s Disaster Loan Assistance
Economic Stabilization Loans
The Act also provides Economic Stabilization Loans that encourage lending to mid-size businesses (between 500-10,000 employees). For more information on the Economic Stabilization Loans, see Page 2 of Honigman’s CARES Act and COVID-19 Quick Reference Guide.
The Act includes tax-related amendments that provide relief to taxpayers adversely affected by COVID-19. Eligible employers can qualify for a refundable credit of up to $5,000 per employee against their payroll tax liability. This applies to employers that have fully or partially suspended operations due to COVID-19 or that have experienced specified decline in their gross receipts. Employers can also defer payments of the 6.2% employer payroll tax attributable to certain wages paid during 2020. Other amendments expand the availability of various deductions under the federal tax code. For more information about the CARES Act tax provisions, see Honigman’s alert Tax Provisions of the CARES Act.
Medicare Accelerated Payments
The Act authorizes advanced Medicare payments to accelerate cash flow to participating Medicare providers and suppliers. The accelerated Medicare payments can be requested by physicians and other Medicare providers and suppliers through their Medicare Administrative Contractor (“MAC”). MAC’s must review and issue Medicare payments within seven calendar days of the request. The Centers for Medicare and Medicaid Services (“CMS”) released a Fact Sheet on how to apply for accelerated Medicare payments. Instructions should also be available on providers’ MAC’s website. On April 9th, CMS issued a press release saying that it has already delivered $51 billion in expedited Medicare payments to providers.
Suspending Medicare Sequester
The Act temporarily suspends the 2% reduction in Medicare payments by suspending the Medicare sequestration. The Budget Control Act of 2011 established that Medicare spending is subject to an across the board reduction of up to 2% from 2013 to 2029. The Act suspends the Medicare sequestration from May 1, 2020 through December 31, 2020. The sequestration will now be extended, however, through 2030, instead of 2029, to make up for the temporary suspension.
Payment Rates for COVID-19 Testing
The Act requires health insurers to reimburse providers for COVID-19 diagnostic testing and related services. According to a FAQ released on April 11th, health insurers must cover items and services furnished to an individual during a health care provider office visit (which includes in-person visits and telehealth visits), urgent care center visits, and emergency room visits that result in an order for or administration of a COVID-19 test. Health insurers are only required to provide this coverage to the extent the items and services relate to furnishing the test or evaluating an individual to determine the individual’s need for a test. Health insurers are prohibited from imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization requirements, or other medical management requirements for these items and services. Health insurers must pay for these services at the negotiated rate the insurer had with the provider before the public health emergency was declared. Alternatively, if the health insurer does not have a negotiated rate with the provider, the health insurer is required to reimburse the provider in the amount equal to the cash price for the service listed on the provider’s public facing website or the health insurer may negotiate a rate with the provider for less than the cash price. If a provider does not make its cash price public, the provider can be penalized $300 per day.
Grants to Eligible Health Care Providers
The Act allocates an additional $100 billion for the Public Health and Social Services Emergency Fund. The new funding is available, through grants or other mechanisms, to reimburse eligible health care providers for health care related expenses or lost revenue attributable to COVID-19. The relief funds are not loans and do not need to be repaid. Eligible health care providers include suppliers and providers that provide diagnoses, testing, or care for individuals with possible or actual cases of COVID-19 or have expenses or lost revenue attributable to COVID-19. Among other things, the funds appropriated under the Act are available for building or construction of temporary structures, leasing of properties, medical supplies and equipment including personal protective equipment and testing supplies, increased workforce and trainings, emergency operation centers, retrofitting facilities and surge capacity, and costs related to care for uninsured individuals.
On April 10th, CMS posted additional guidance on the $100 billion in relief funds on the CARES Act Provider Relief Fund page (the “Provider Relief Fund Page”). That same day, CMS began distributing the first $30 billion in relief payments to eligible health care providers and suppliers. Health care providers do not have to apply for the initial $30 billion in relief payments. Instead, eligible providers will receive payment automatically via direct deposit by April 24th. Providers will receive a portion of the initial $30 billion based on their share of total Medicare fee-for-service reimbursements in 2019.
All relief payments are being made to providers according to their tax identification number (“TIN”). Employed physicians should not expect to receive payment directly. The physician’s employer will receive the relief payment as the billing organization. Individual physicians and providers in a group practice are also unlikely to receive individual payments directly, as the group practice will receive the relief fund payment as the billing organization. Solo practitioners who bill Medicare will receive payment directly under the TIN used to bill Medicare.
Receipt of relief funding is conditioned on the provider’s acceptance of CMS’ Terms and Conditions. If a provider does not agree to the Terms and Conditions, the relief funds must be returned. Providers should carefully review the Terms and Conditions as they contain many important requirements and limitations. For example, providers can only use the funds to prevent, prepare for, and respond to COVID-19, providers must provide a detailed report on how the funds are used, and providers cannot use the funds to pay the salary of an individual in excess of $197,300, among other things.
The remaining $70 billion in grants will be targeted distributions that focus on providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominately serve the Medicaid population, and providers requesting reimbursement for treatment of uninsured individuals.
The Act adds federal liability protections for volunteer health care providers that cause harm in the provision of health care services during the public health emergency. These volunteer liability protections are important for physicians that are volunteering and medical practices accepting volunteers. The limitation on liability protects those professionals providing health care services in response to the pandemic as a volunteer, if the services are provided in good faith, and within the professional’s scope of licensure and practice. Limited exceptions apply, such as the provider’s gross negligence and providing care under the influence. States are implementing similar liability protections. For example, see Honigman’s alert Michigan Suspends Restrictions and Requirements on Scope of Practice, Supervision and Delegation and Provides Immunity to Health Care Facilities and Providers.
The COVID-19 pandemic has spurred an unprecedented pace of regulatory change for health care providers. We expect that laws impacting medical practices will continue to rapidly evolve in the following weeks. Honigman attorneys are actively working on all aspects of the COVID-19 pandemic. For more information, contact your Honigman relationship attorney.