The Coronavirus Aid, Relief, and Economic Securities (CARES) Act is a $2.2 trillion economic stimulus package that was signed in to law on March 27, 2020. This legislation is a mix of new laws and regulatory reliefs that home health and hospice agency administrators and owners should be aware of to help those struggling financially during the coronavirus (COVID-19) pandemic. This article focuses on the financial relief for businesses and the Accelerated Advance Payment components.
Small Business and Payment Protection Program Loans
The CARES Act allows the Small Business Administration to offer a new type of loan, which could be 100% forgiven if the proper requirements are met. This loan program is not specific to healthcare providers but is available to all businesses with fewer than 500 employees. These loans are also unique in the fact that there is no burden on the agency to show that they have directly suffered financial loss related to the coronavirus (COVID-19) pandemic.
Loans are capped at 2.5 times the average monthly payroll costs (not to exceed $10 million) of the business. Payroll costs include salary, wages, tips, sick/family leave/PTO, group health benefits, retirement benefits, and state and local taxes. An SBA website offers further guidance.
Borrowers may receive only one loan. The loan must be used to cover payroll costs, a continuation of group healthcare benefits, including insurance premiums, paid sick/medical/family leave, interest on mortgage obligations, rent, utilities and interest on other outstanding debt. Any portion not forgiven will be repaid in fewer than ten years at a maximum interest rate of 4%. The amount forgiven will be the sum of payroll costs, mortgage interest payments, rent, and utilities incurred by the borrower in the eight weeks after the loan is issued. To encourage workforce stabilization, the forgivable amount will be reduced proportionally based on any employees who were laid off or had wages reduced between February 15 and June 20, 2020.
Accelerated Advance Payments
To speed cash flow to Medicare Part A and Part B providers, the CARES Act includes a provision for pre-payment of service to be provided. The Accelerated Advance Payments Program will be in place through the duration of the public health emergency. Eligible entities include those who:
- Have billed Medicare in the past six months,
- Are not in bankruptcy,
- Are not under active medical review, and
- Are not delinquent with Medicare overpayments.
Home health and hospice agencies that are interested in participating in this loan option are eligible for advanced payment of up to 100% of their Medicaid payment amount for three months. Submission is made to your Medicare Administrative Contractor (MAC), and payment will be issued within seven calendar days. Agencies will begin repaying this advance 120 days after issuance and will have 90 days to pay in full. Money advanced to agencies will be recouped from payments that would be made during the 90-day payment period.
Remember, debt should be used wisely but can assist businesses through this uncertain time. The SBA provides resources that offer counseling related to the different types and uses of funding. The Accelerated Advance Payments from CMS function like a line of credit and must be repaid at the end of this crisis. Agencies may be able to take advantage of the many options available to find the right solution for their circumstances. Additional resources to help organizations deal with the coronavirus (COVID-19) crisis are available in Axxess’ resource center.