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 it 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.