CARES Act for the Healthcare Industry – Some Relief is On the Way

April 7, 2020

The COVID-19 outbreak has brought unprecedented challenges to healthcare organizations of all sizes. The $2 trillion Coronavirus Aid, Relief, and Economic Security (“CARES”) Act provides critical financial relief and resources to individuals, families and businesses affected by the public health emergency. The CARES Act is especially vital to healthcare as entities across the country have seen disruption, ranging from the overwhelmed emergency rooms and ICU units, to diminished revenues as a result of delaying routine and non-routine specialist visits and elective procedures. Healthcare providers are engaging in a delicate dance to limit community and workforce exposure while taking care of patients.

In addition to the Paycheck Protection Program (“PPP”) under the Small Business Administration (“SBA”) 7(a) loan program (Cherry Bekaert describes in detail here), healthcare entities are also eligible to receive other funds. The CARES Act adds $100 billion to the Public Health and Social Services Emergency Fund to reimburse healthcare providers for healthcare-related expenses or lost revenues, not otherwise reimbursed, that are directly attributable to COVID-19. Other relief is coming in the form of state grants and HHS programs.

The legislation provides several other benefits to the healthcare system including:

  • Expands the Medicare accelerated payment program for hospitals experiencing “significant cash flow problems” resulting from “unusual circumstances,” offering liquidity to providers.
  • Increases Medicare payments for COVID-19 cases by providing a 20 percent increase to the DRG rate for COVID-19 patients.
  • Suspends the 2 percent Medicare sequester from May 1 through December 31, 2020.
  • Delays the Medicaid DSH cuts from going into effect until December 1, 2020, (instead of May 23, 2020,) and eliminates $4 billion of cuts in FY 2020 and reduces cuts by $4 billion in FY 2021.
  • Creates flexibility for post-acute care providers by increasing the capacity of the health care system without penalty during the emergency period.
  • Makes changes to home-based services and telehealth to increase access and decrease patient risk during the crisis.

Cherry Bekaert is recommending entities identify the right team to document expenses and lost revenue.  Expertise on the team should scale to include specialized knowledge based on the size of an organization. Guidance on these provisions is still evolving, but healthcare entities have begun to focus on reliable calculations of lost revenues and expenses incurred due to the pandemic. Teams should prioritize funding applications and documentation support to prevent claw back of funds if questions arise around use.

Timeliness is critical, as funding will be provided on a rolling basis. We expect funding requests to come from a variety of healthcare entities, including acute-care entities, community health centers, long-term care facilities, ambulatory care centers, behavioral health providers, inpatient rehabilitation facilities, critical care facilities, and others eligible for assistance.

Cherry Bekaert and our professionals focused on healthcare will continue to monitor developments and share updates on the CARES Act, the PPP and other guidance. If you have further questions, please contact us.

If you would like Cherry Bekaert’s assistance with the SBA application process, please click here and sign our engagement letter.

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