Support for Health Care Providers During the COVID-19 Pandemic
Updated April 9, 2020
Paycheck Protection Program Loans and Medicare Advance Payments
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted in the wake of the COVID-19 outbreak. The Cares Act provides specific support to health care providers during the duration of the COVID-19 pandemic—including the authorization of small business loans with attractive forgiveness provisions to providers with under 500 employees and the expansion of accelerated and advanced Medicare payments.
On March 28, the Center for Medicare & Medicaid Services (“CMS”) subsequently issued guidance on the issuance of accelerated and advanced Medicare payments. CMS’s guidance is available here.
Since the issuance of CMS’s guidance, we have received questions from health care providers regarding whether they can jointly pursue a loan under the Paycheck Protection Program and simultaneously receive accelerated and advanced Medicare payments from CMS.
Our thoughts on these issues are set forth below.
Can you jointly pursue a Paycheck Protection Program Loan and Accelerated Medicare Payments?
We believe that a health care provider can jointly pursue a loan under the Paycheck Protection Program and accelerated/advanced Medicare payments, so long as the health care provider qualifies for both forms of funding. While the Paycheck Protection Program includes provisions to prevent “double-dipping” by borrowers, we do not believe that this should prevent qualifying providers from pursuing simultaneously both avenues of financial relief.
What are the “double-dipping” restrictions on Paycheck Protection Program loans?
Recipients of a Paycheck Protection Program loan cannot apply for or receive another loan under Section 7(a) of the Small Business Act, including an Economic Injury Disaster Loan (“EIDL”), for the same purpose and in the same amount as its Paycheck Protection Program loan. However, a borrower could, for example, receive a Paycheck Protection Program loan and another SBA loan if for different purposes, such as a Paycheck Protection Program loan for payroll costs and an EIDL for working capital.
As the accelerated and advanced Medicare payments are not issued under the Small Business Act, but through a different body of law, we do not think that the limitations placed on stimulus provided under the Small Business Act will apply to accelerated and advanced Medicare payments.
Further, recipients of a Paycheck Protection Program loan are not eligible for certain credits against applicable employment taxes under Section 2301 of the CARES Act.
If I receive both forms of stimulus, how can I use the funds?
Loans under the Paycheck Protection Program can be used to cover payroll costs, rent, mortgage interest, utilities, and certain other costs defined under Section 1102 of the CARES Act. In contrast, accelerated and advanced Medicare payments aim to sustain a degree of cash flow for health care providers during the duration of the COVID-19 pandemic, and there is currently no restriction on use of such funds.
Are there any risks to providers?
The Legislature’s “double dipping” restrictions on Paycheck Protection Program loans are designed to prevent a borrower from benefiting twice from different forms of stimulus. However, there are currently no explicit restrictions in the CARES Act that would prevent a health care provider from applying for both a Paycheck Protection Program loan and accelerated/advanced Medicare payments. Nor, as currently understood, should the receipt of accelerated/advanced Medicare payments exclude a party from being eligible for a Paycheck Protection Program loan.
However, as this area of the law is in constant flux and as further guidance is issued by each applicable regulatory body, restrictions could be placed on dual eligibility or how the cash flow created by accelerated and advanced Medicare funds may be applied to providers who also receive Paycheck Protection Program loans. We are keeping track of guidance published on this issue and will update you with any changes.
Update: April 7, 2020
Status Report Regarding CMS Accelerated/Advanced Payment Program
Late on April 7, 2020, the Centers for Medicare and Medicaid Services (CMS) issued a press release announcing that it has delivered nearly $34 billion in the past week to health care providers on the frontlines battling the 2019 Novel Coronavirus (COVID-19) through its expanded Accelerated and Advanced Payment Program (AAPP).
Importantly, in explaining that the AAPP is funded by the Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) trust funds—the same funds used to pay out Medicare claims each day—CMS clarified that AAPP funding is separate from the $100 billion that the Department of Health and Human Services (HHS) will have discretion to administer under the Coronavirus Aid, Relief, and Economic Security (CARES) Act for COVID-19 related health care expenses or lost revenues.
Why does this funding distinction matter to you?
While this CMS press release does not explicitly authorize the dual pursuit of AAPP payments and a PPP loan, given the clarification that AAPP funding is distinct from the $100 billion CARES Act appropriation, we believe other CARES Act appropriations, such as that made for the PPP, are also likely to be viewed by CMS to be funded separately from the AAPP and therefore simultaneously pursuable by a health care provider.
The implications of this CMS press release are consistent with our analysis in the above article. Relatedly, health care providers are still waiting for the HHS to provide additional information on how they can access the $100 billion in CARES Act funding for COVID-19 related health care expenses and lost revenues, which CMS advises will be forthcoming.
Our Chambliss team continues to monitor legal developments in connection with the COVID-19 pandemic. Please contact Jim Catanzaro, Justin Furrow, or your relationship attorney if you have questions or need additional information.
Visit our COVID-19 Insight Center for our latest legislative and legal updates, articles, and resources.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings, and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. In some cases, the underlying legal information is changing quickly in light of the COVID-19 pandemic. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship. Please contact your legal counsel for advice regarding specific situations.