Update: Funding Opportunities

For Hospitals, Long-Term Care Facilities & Medical Practices

The finances of hospitals, long-term care facilities, and medical practices have been adversely impacted by the coronavirus pandemic. Opportunities for loans, grants, and mechanisms to stabilize cash flows are important elements in the federal government’s response to date. ERDMAN is monitoring these efforts and will periodically issue updates as new information is available.

Emergency Economic Injury Disaster Loans (EIDL)

Companies including provider organizations with not more than 500 employees are eligible for an “emergency” EIDL, which is a lower interest loan of up to $2 million with principal and interest deferment up to four years. EIDL is targeted to fund operating expenses that could have been met had the coronavirus not occurred, including payroll and other operating expenses. An eligible entity that has applied for an EIDL loan can request an advance on that loan, of not more than $10,000, which the SBA must distribute within three days. Advance payments may be used for providing paid sick leave to employees, maintaining payroll, meeting increased costs to obtain materials, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses. Note: operators are eligible to participate in both the PPP and EIDL programs, so long as the losses for which the loans are based are not duplicative.

Small Business Debt Relief Program

This program provides immediate debt relief to small businesses with non-disaster SBA loans, and microloans. SBA will cover all payments on these loans, including principal, interest and fees, for six months. New borrowers are eligible for this relief if they take out loans within six months of the president signing the law.

Coronavirus Economic Stabilization Act (CESA) Main Street Lending Program

Low interest loans, loan guarantees and subsidies for businesses between 500 and 10,000 employees for losses incurred as a result of coronavirus. The interest rate has an annualized rate capped at 2 percent and with no principal or interest due for at least six months. The loans are not eligible for loan forgiveness. In the CARES Act, $454 billion is set aside for this program. Notable eligibility requirements of special significance to healthcare organizations include:

• Funds must be used to retain at least 90 percent of the recipient’s workforce as of February 1, 2020, at full compensation and benefits, until September 30, 2020.
• The entity or business must be domiciled in the United States with significant operations and employees located in the United States.
• The recipient is not a debtor in a bankruptcy proceeding.
• While any principal on the loan is outstanding, the organization is precluded from paying dividends to its shareholders or using its equity to do a transaction or stock repurchase.
• The recipient will not outsource or offshore jobs or abrogate existing collective bargaining agreements for the term of the loan and two years after completing repayment of the loan.
• Companies must remain neutral in any union organizing effort for the term of the loan.
• Executive compensation limits: No officer or employee earning more than $425,000 in 2019 can receive a pay increase or severance upon termination exceeding twice the maximum compensation received in 2019 and no officer or employee whose 2019 total compensation exceeded $3 million may receive total compensation in excess of $3 million and 50 percent of the excess over $3 million that they received in 2019, including salary, bonuses, awards of stock, and other financial benefits.

• Temporary elimination of Medicare sequestration from May 1 through Dec. 31, 2020. This applies to all Medicare providers, but is especially impactful for Critical Access Hospitals (CAHs), who had been receiving 99 percent — rather than 101 percent — of allowable costs during sequestration.
• Expanded option for accelerated payments will be expanded to CAHs, children’s and cancer hospitals. These providers, along with acute care hospitals, may request accelerated payments that cover a time period of up to six months. The amount of payment is up to 125 percent for CAHs (up to 100 percent for other providers) of what the hospital would have otherwise received, and payment could be made periodically or as a lump sum. The bill stipulates that hospitals will have up to 120 days until their claims are offset to recoup the funds, and at least 12 months before being required to pay any outstanding balance in full. Note: On March 28th, the accelerated payment program was extended to other Medicare providers and suppliers impacted by COVID-19, which includes skilled nursing facilities and others that provide Medicare-reimbursable services. For most non-hospital providers, the accelerated payments are limited to a 3-month advance of Medicare payments (not the 6 months provided to hospitals) and advances must be recouped within 210 days (not the 120 days provided to hospitals). However, it allows the receiving non-hospital provider to request up to 100 percent of the advanced reimbursement and 12 months to repay the advance. After submission of a request by the provider to the Medicare Administrative Contractor (MAC), the MAC will strive to cause the payment to be issued within seven days of such requests.
• Inpatient Prospective Payment System (IPPS) Add-on Payment. During the emergency period, the legislation provides a 20 percent add-on to the diagnosis related group rate for patients with COVID-19. This add-on will apply to patients treated at rural and urban inpatient IPPS hospitals to address the high costs associated with COVID-19 patient care.
• Section 3711 of the CARES Act provides flexibility for post-acute care providers to increase their capacity during the emergency period by waiving the rule for inpatient rehabilitation facilities that requires a patient to be in three hours of inpatient rehabilitative therapy, five days per week or 15 hours of rehabilitation therapy over a week. Section 3711 also waived the site neutrality rules for Long Term Care Hospitals (LTCHs) whereby Medicare reimburses LTCHs for certain intensive care unit and coronary care unit patients and patients who received at least 96 hours of ventilator services in the LTCH.

What’s Next

Congress is scheduled to return to DC the week of May 4th and authorization for a new round of funding is expected to be approved. It will likely include aid for front line responders (i.e. hazard pay/ student debt forgiveness), aid for state and local governments, relief for the oil and gas industry, nursing homes and additional relief for restaurants, small businesses, institutions of higher education, and direct aid payments to individuals and families.