Repayment of Medicare Accelerated and Advance Payments Begins for Providers and Suppliers

Baker Donelson

Baker Ober Health Law

Medicare providers and suppliers that received Medicare loans to address cash flow issues stemming from the COVID-19 public health emergency (PHE) may start seeing a reduction in Medicare reimbursement as Medicare begins to recoup a portion of reimbursement to apply to loan balances. Under the Medicare Accelerated and Advance Payment (AAP) Program, the recoupment process to repay loan balances is scheduled to begin one year from when Medicare issued an AAP payment to a provider or supplier. The Centers for Medicare and Medicaid Services (CMS) announced that Medicare began the recoupment process as early as March 30, 2021, depending upon the one-year anniversary of when a provider/supplier received its first payment. For example, entities that received AAP payments in April 2020 should expect repayment to begin in April 2021.

Below is a review of the AAP recoupment process, including potential implications for providers/suppliers experiencing financial hardships and information to help identify when recoupments occur.

Background on AAP Payments and Recoupment Process

The AAP program was in existence before the COVID-19 PHE to provide advances in Medicare reimbursement to entities experiencing financial challenges. As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020, Congress expanded the AAP program to aid Medicare entities during the COVID-19 PHE. Shortly after enactment of the CARES Act, Medicare allowed providers and suppliers to apply for AAP payments through their Medicare Administrative Contractors (MACs) equaling up to either three or six months of past Medicare payments, depending on the provider/supplier type.

As outlined by CMS in guidance issued in October 2020 and an accompanying FAQ document, repayment is scheduled to begin one year from when an AAP payment was issued. MACs began implementation of the AAP program in late March 2020, and CMS has indicated that providers or suppliers that received AAP payments could see recoupments begin as soon as March 30, 2021.

Based on the latest CMS guidance, the repayment process will be as follows:

  • For the first year after receiving an AAP payment, providers/suppliers will continue to bill Medicare as usual.
  • Beginning one year from the date the AAP payment was issued, Medicare will recoup 25 percent of reimbursement otherwise owed to the provider/supplier to be applied to the loan balance. Recoupment at 25 percent will continue for 11 months.
  • After 11 months, the recoupment percentage will increase to 50 percent and will continue for another six months.
  • After six months (17 months from when recoupment began and 29 months from when the initial payment was issued), Medicare will issue a letter notifying the provider/supplier of any remaining balance and demanding repayment.
  • Providers/suppliers will have 30 days from the date of the letter to repay the balance in full. If Medicare does not receive payment within 30 days, interest will accrue at 4 percent from the date the letter was issued, to be assessed for each 30-day period that the balance remains unpaid.

Financial Hardship Opportunities

If there continues to be an unpaid balance at the conclusion of the recoupment process, providers/suppliers experiencing financial hardships will have an opportunity to request an Extended Repayment Schedule (ERS), which could allow the provider/supplier to repay the remaining balance of the loan over a three-year period and possibly up to as many as five years in cases of extreme hardship. To apply for an ERS, a provider/supplier would need to meet financial "hardship" or "extreme hardship" criteria outlined under 42 C.F.R. 401.607(c)(2). Under the regulations, a hardship exists when the total amount due is ten percent or greater than the total Medicare payments issued for the provider's most recent cost reporting period or previous calendar year for a supplier or non-cost report provider. MACs will include information about the ERS process in letters issued to providers/suppliers at the conclusion of the recoupment process, and providers/suppliers will be able to request an ERS at that time through their MAC.

Prior Changes to Repayment Process

Under the AAP program's initial implementation, repayment was scheduled to begin after 120 days, at which time Medicare would have begun recouping 100 percent of Medicare payments to offset against the loan balance. Most hospitals would have had one year to repay the balance, whereas all other providers and suppliers would have had 210 days from the date the payment was issued to repay the balance. The interest rate owed on unpaid balances after the end of the recoupment period was also higher, at roughly ten percent.

In October 2020, Congress passed legislation to delay the repayment process for AAP payments and provide additional flexibilities under the repayment terms. The October 2020 guidance issued by CMS – the most recent guidance from the agency – implemented the changes enacted by Congress for all providers/suppliers, delaying the start of the recoupment process until one year from the issuance of payments, reducing the offset percentage during recoupment, extending the recoupment period, and reducing the interest rate owed on unpaid balances after recoupment ends.

Considerations for Medicare Entities

CMS has indicated that providers/suppliers will see evidence of the recoupments on the remittance advices issued for Medicare claims. According to CMS, the recoupment will appear as an adjustment in the Provider-Level Balance (PLB) section of the remittance advice.

Providers/suppliers that received AAP payments in 2020 should confirm when their MACs issued their payment and determine when repayment will begin by counting one year from when the MACs issued the payments. Entities may be able to estimate the financial impact of recoupment based on anticipated future Medicare reimbursement amounts and considering the applicable recoupment percentages – 25 percent for the first 11 months and 50 percent for the next six months.

Providers/suppliers that have concerns about an inability to pay the balance after the recoupment period ends should consider the qualification criteria for an ERS and whether the entity will be able to meet the financial hardship criteria to qualify upon the conclusion of the recoupment process. On the other hand, providers/suppliers that are interested in repaying an AAP payment in advance, prior to the start of the recoupment process or before the recoupment period ends, may contact their MACs for instructions on how to submit a lump sum payment.

Each MAC has established a COVID-19 hotline that is available to answer questions about AAP payments, including the repayment process. Providers/suppliers can locate their MACs here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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