As countless U.S. businesses face unprecedented challenges due to the 2019 novel coronavirus (COVID-19), federal and state government and private organizations have mobilized to provide financial support to businesses impacted by the pandemic. The healthcare industry is a specific focus of many of these relief efforts, but the relief programs vary dramatically in terms of eligible businesses and attractiveness of terms. Thus, healthcare companies are moving at a dizzying pace to understand which relief programs are available to them.

In an effort to consolidate the programs, below and in the accompanying chart are 10 key areas of financial support established for healthcare companies in the wake of COVID-19 at the federal level or by federal prompting. There are a host of other municipal and state-level relief programs that may also be available for healthcare companies, which we will continue to monitor.

1. CMS Accelerated and Advanced Payment Program. On March 28, 2020, the Centers for Medicare & Medicaid Services (CMS) released guidance expanding its Accelerated and Advanced Payment Program (AAPP), which now allows most Medicare Part A and Part B providers and suppliers to request an advance of up to 100 percent (or more) of the Medicare payment amount for a three- or six-month period, depending on the provider category. The AAPP offers healthcare providers and suppliers critical liquidity to help with cash-flow issues related to the postponement of non-essential surgeries and procedures, staffing challenges and disruption in billing related to COVID-19. As with all of the avenues of financial support summarized in this article, providers and suppliers need to review their contractual arrangements, including credit agreements and other lending documents, and consider how any advance payments received may impact existing or anticipated debt financing prior to seeking such additional funding. More information regarding the AAPP can be found in a prior McGuireWoods legal alert.

2. SBA Paycheck Protection Loans. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) made available government-sponsored emergency loan programs for U.S. businesses during the COVID-19 pandemic through the U.S. Small Business Administration (SBA). The CARES Act established a new paycheck protection loan program making available up to $349 billion of loans by banks and other lending institutions to small businesses and others. These loans are intended to cover the cost of maintaining payroll, insurance and other expenses arising from maintaining pre-COVID-19 employment and compensation levels (COVID-19 Paycheck Protection Loans) for eight weeks after funding of each such loan. All COVID-19 Paycheck Protection Loans are guaranteed by the SBA and are subject to cancellation/forgiveness of all or a portion of the principal amount if the applicable borrower satisfies certain full-time equivalent employment and compensation requirements. The new loan program will be available, retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020. Prior to applying for a COVID-19 Paycheck Protection Loan, borrowers should review other contractual relationships (e.g., credit documents) to ensure the loans do not violate any covenants. Small businesses can apply starting April 3, 2020, and independent contractors and sole proprietors can apply starting April 10, 2020. The Paycheck Protection Program is subject to the affiliation rules of the SBA, which may preclude participation by certain private equity-backed portfolio companies and may require affiliation of affiliated physician practices in physician practice-management structures. Additional information regarding COVID-19 Paycheck Protection Loans is available in a prior McGuireWoods legal alert as updated with the application and additional guidance by a prior McGuireWoods Consulting alert. We will continue to update this information as new regulations are released.

3. SBA’s Economic Injury Disaster Loans. In addition to COVID-19 Paycheck Protection Loans, the CARES Act extended the availability of SBA’s Economic Injury Disaster Loans (EIDLs) to small businesses affected by COVID-19 until Dec. 31, 2020. The CARES Act appropriated approximately $10 billion for EIDLs, which will be offered as loans with interest rates of 3.75 percent for small businesses and 2.75 percent for nonprofits. Small businesses located within SBA-designated zones are eligible to receive up to $2 million in loans, in addition to any COVID-19 Paycheck Protection Loans they receive, so long as the expenses for each loan amount are distinct. The CARES Act waives the previous requirement of personal guaranty for EIDLs. It also allows for a $10,000 emergency advance during the period of time that a business’ loan application is pending. Additional information regarding EIDLs is discussed in McGuireWoods’ previous legal alert.

4. Main Street Business Lending Program. Language in the CARES Act alludes to a Main Street Business Lending Program that may be established by the Department of the Treasury or another facility that supports lending to small and midsized businesses on terms and conditions consistent with its authority under the Federal Reserve Act. Additional information regarding these loans has not yet been released.

5. Public Health and Social Services Emergency Fund and Hospital Preparedness Program. The CARES Act provided $100 billion to the Public Health and Social Services Emergency Fund for eligible providers (including hospitals) to prevent, prepare for and respond to the COVID-19 pandemic. Specifically, the fund seeks to reimburse providers for healthcare items, expenses and lost revenue directly related to the COVID-19 outbreak. The CARES Act provides that the funds may be utilized for, among other things, construction of temporary structures, leasing of properties, medical supplies and equipment, and emergency operation centers. The CARES Act also sets aside $250 million for the Hospital Preparedness Program, which supports regional collaboration and preparedness/response among health systems and includes the National Ebola and Special Pathogens Training and Education Center; regional, state and local special pathogens treatment centers; and hospital preparedness cooperative agreements. Additional information regarding this emergency fund can be referenced in a prior McGuireWoods legal alert. To date, however, application criteria for these programs have not been released.

6. Suspension of Medicare Sequestration. From May 1, 2020, through Dec. 31, 2020, the CARES Act temporarily suspends the Medicare sequester, which will increase payments to hospitals and other providers during the COVID-19 outbreak. The Medicare sequestration policy reduces fee-for-service Medicare payments by 2 percent. Additional information regarding these changes is available in a prior McGuireWoods legal alert.

7. COVID-19 Government Program Reimbursement. The CARES Act provides for Medicare hospital payment increases of 20 percent for patients diagnosed with COVID-19. The CARES Act provides this add-on by increasing the weighting factor for diagnosis-related groups (DRGs) that a COVID-19 discharged patient is assigned by 20 percent, without any budget neutrality adjustment. Also, as discussed in a prior McGuireWoods legal alert, the CARES Act permits state Medicaid programs to pay for home- and community-based attendant services rendered in an acute-care hospital. The concept of this program is to allow caregivers to assist patients with activities of daily living to reduce the length of such patients’ hospital stays, particularly patients with disabilities. The CARES Act also provides additional Medicare payment adjustments, including but not limited to halting scheduled Medicare payment reductions for durable medical equipment and preventing scheduled reductions in Medicare reimbursement for clinical diagnostic laboratory tests furnished to beneficiaries in 2021, among others, and delays reporting private payer data for one year.

8. Expansion of Telehealth Reimbursement. As discussed in a previous McGuireWoods legal alert, CMS has expanded coverage and reimbursement for telehealth services rendered on or after March 6, 2020, by waiving the “eligible originating site” requirement so that telehealth services can be provided in all care settings, including a patient’s home. Also, to the extent any telehealth service requires a patient to have a prior established relationship with his or her provider, HHS will not conduct audits to ensure such prior relationship existed (i.e., reimbursement is available for new and established patients). For reference, CMS published a fact sheet that identifies the most common HCPCS/CPT codes for reimbursable telehealth services. The full list of covered Medicare services that are reimbursable when furnished via telehealth are set forth on CMS’ website and summarized in a previous McGuireWoods legal alert.

9. Federal Tax Relief. As summarized in a prior McGuireWoods legal alert, the CARES Act includes a number of targeted tax provisions designed to allow businesses deeply affected by COVID-19 to maintain operations and keep their workforce in place through the crisis. As part of such relief, the legislation temporarily reverses certain taxpayer-unfavorable changes to the Internal Revenue Code that occurred under legislation enacted in late 2017, commonly referred to as the Tax Cuts and Jobs Act. The CARES Act includes providing (i) refundable employee retention tax credits, (ii) employer payroll tax deferrals of the employer’s share of the Social Security employment tax, (iii) changes to net operating loss limitations, (iv) changes to “excess business loss” limitations, (v) acceleration of corporate AMT credits, (vi) modifications of business interest limitations, (vii) increased charitable contribution limitations for 2020, and (viii) expenses for qualified improvement property.

10. CMS Encourages States to Enhance Medicaid Funding. States across the country are implementing changes to provide financial relief to healthcare companies impacted by COVID-19. On March 24, 2020, CMS provided guidance to states concerning enhanced federal Medicaid funding during the COVID-19 crisis. Section 6008 of the Families First Coronavirus Response Act provides for a possible 6.2 percent increase in the federal match (FMAP) for each state and territory. The increase will be retroactive to Jan. 1 2020. The funds are available for each calendar quarter during the public health emergency. Since the emergency was declared on Jan. 31, 2020, increased Federal Medical Assistance Percentages are available for qualifying expenditures incurred on or after Jan. 1, 2020, and through the end of the quarter in which the public health emergency ends. For additional information on enhanced Medicaid funding, refer to your state Medicaid agency and the prior McGuireWoods Consulting alert.

Please contact the authors for additional information on each of the funding mechanisms listed above that are available to healthcare companies. McGuireWoods has published additional thought leadership on how companies across industries can address crucial coronavirus-related business and legal issues. The firm’s COVID-19 response team stands ready to help clients navigate urgent and evolving legal and business issues arising from the COVID-19 pandemic.

SUMMARY OF KEY FORMS OF RELIEF FOR HEALTHCARE COMPANIES

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