Note, the information provided herein does not constitute legal or tax advice. This post was last updated on April 1, 2020.
In response to the COVID-19 health emergency, two key pieces of federal legislation were recently enacted into law that intend to benefit adversely impacted businesses and their employees.
This post provides an informational overview of components in each Act that may be pertinent to the practice management of your healthcare business. We divided the post into the sections shown below, all of which include resource links.
Before you scroll, we want to point out that you can click on any section to skip ahead to what interests you most.
CARES Act Summary
PAYCHECK PROTECTION PROGRAM (PPP)
EMERGENCY $10K FORGIVEABLE LOAN ADVANCE
ECONOMIC INJURY DISASTER LOANS (EIDL)
ADDITIONAL SMALL BUSINESS DEBT RELIEF
TREATMENT OF LOSSES
PAYROLL TAX CREDIT
PUBLIC HEALTH AND SOCIAL SERVICES EMERGENCY FUND
MEDICAL PROVIDER ASSISTANCE
Should you wish to take advantage of any of the opportunities provided by these Acts, we recommend that you consult with your legal and/or tax advisors to obtain a more in-depth analysis or additional guidance before proceeding.
AKA Coronavirus Preparedness and Response Supplemental Appropriations Act
The CPRSAA authorizes the Small Business Administration (SBA) to offer low-interest federal Economic Injury Disaster Loans (EIDL), which are intended to provide working capital to small businesses suffering substantial economic injury as a result of COVID-19.
FAQs: Small Business Loans Under the CARES Act
What qualifies as ‘suffering substantial economic injury’? The business is unable to meet its financial obligations as they mature or is unable to pay its normal and necessary operating expenses.
The loss of actual or anticipated profits or a drop in sales alone DOES NOT qualify as suffering a substantial economic injury. However, comparing weekly, monthly and/or quarterly financial key performance indicators, e.g., sales volumes, profit margins, cash burn, aging A/R, in the pre-disaster versus the disaster period can be utilized to demonstrate this.
The applying business must meet the following to be eligible to participate in the EIDL Program:
A. Either has less than 500 employees or meet certain SBA size standards specific to the applicant’s industry and North American Industry Classification System (NAICS) designation. The SBA ‘s size standards are based on average annual receipts or, in limited instances, on the number of employees.
The following are the size thresholds for the NAICS classifications that are most common among abeo’s healthcare clients:
Consideration for how to treat subsidiaries and affiliates of the business is likely necessary, which requires legal analysis in some cases.
B. From there, eligible businesses must also have:
If an applying business is approved, here is what recipients can expect.
Applications may be submitted electronically through the SBA’s website. Online EIDL Application
AKA Coronavirus Aid Relief and Economic Security Act
On Friday, March 27th, the two trillion-dollar CARES Act was signed into law. The Act includes numerous measures aimed to assist businesses that face financial uncertainty caused by the COVID-19 health emergency.
Here’s a list of the most noteworthy provisions for medical practices and health providers:
Provided below is a summary of each of the above-referenced CARES Act provisions, which we believe may be pertinent to health providers in the months to come:
A. Businesses It Applies To
The $349 billion PPP provision applies to businesses that:
Also, businesses in certain industries with more than one physical location that employ no more than 500 employees per physical location, may also be eligible. However, their gross annual receipts must be below the mandated threshold for their industry.
The portion of the loan funds used for the following purposes, during the initial eight-week period immediately following the grant of the loan, is eligible for forgiveness:
Note, eligible payroll costs do not include annual compensation above $100K in wages per individual, as prorated for the period February 15, 2020, to June 30, 2020.
It is also important to note that a borrower cannot receive both PPP loan assistance and an EIDL loan through SBA for the same purpose. Businesses should consider which is more appropriate before applying. That said, the PPP does allow a borrower who has an EIDL loan unrelated to COVID-19 to apply for a PPP loan, with an option to refinance that loan into the PPP loan.
C. When, Where and How to Apply
WHEN: Small businesses and sole proprietorships can apply for a PPP loan beginning on April 3, 2020, and independent contractors and self-employed individuals can apply beginning on April 10, 2020.
WHERE: You can apply through any existing SBA certified lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating in the PPP. Additional lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender to determine whether it is participating. Click HERE for a list of the current Top 100 SBA certified lenders.
HOW: In order to apply, you will need to complete the PPP loan application and submit the application with the required documentation (i.e. payroll documentation to support the requested loan amount) to an approved lender on or before June 30, 2020. Click HERE for the application.
Businesses that apply for the EIDL loan can get an instant $10K advance on the loan for uses consistent with those attached to the Paycheck Protection Program. This advance is to be delivered within three days of the request.
Additionally, recipients of the $10K grant will not be required to repay it if the funds are used for the specified purposes, even if they are subsequently denied an EIDL loan. However, if the recipient later applies for a PPP loan, the $10K will be deducted from the amount provided under the PPP. Applications for this advance can be submitted here, Online EIDL Application.
For any SBA EIDL loans made in response to COVID-19 before December 31, 2020, the SBA will waive:
During the covered period, the SBA may approve and offer EIDL loans based solely on an applicant’s credit score or use an alternative method for determining an applicant’s ability to repay.
Understanding the SBA disaster relief loan program for COVID-19
Online EIDL Application
SBA is required to pay all principal, interest, and fees on all existing SBA loans and new SBA loans made within six months of the Act’s enactment (excluding PPP loans), for six months for the recipient businesses negatively impacted by COVID-19.
Additionally, the maximum amount for SBA Express Loans has increased from $350K to $1M and provides borrowers with revolving lines of credit for working capital purposes.
The CARES Act allows companies to claim refunds for certain losses. Please contact your tax or legal advisor for details.
Provides a refundable payroll tax credit for 50% of employer qualified wages for companies that were wholly or partly prohibited from operating during the crisis.
The number of qualified wages taken into account for each eligible employee, however, will not exceed $10,000 per calendar quarter and the credit will not exceed the applicable employment taxes owed for such calendar quarter.
This credit is not applicable if the employer is also taking advantage of the small business interruption loan.
The CARES Act provides special provisions regarding retirement accounts. Please contact your tax or legal advisor for details.
The Internal Revenue Service will send $1,200 to individuals and $2,400 to couples filing joint tax returns, plus $500 for each child, beginning on April 6, 2020. The payments are phased out by the amount by which such eligible taxpayer’s adjusted gross income exceeds $75,000 for individuals or $150,000 for couples.
Complete phase-out occurs with incomes exceeding $99,000 for single filers and $146,500 for the head of household filers with one child, and $198,000 for joint filers with no children.
The Public Health and Social Services Emergency Fund will receive $100 billion to reimburse healthcare providers. This will come in the form of grants or other mechanisms for healthcare-related expenses or lost revenues that are directly attributable to COVID-19.
$150B allocated to hospitals and physicians for the purchase of equipment and supplies.
What the $2 Trillion Coronavirus Relief Plan Means for Doctors
Third Coronavirus Stimulus Package Includes Considerable Funding for Health Care Providers and Other Health Care Provisions
Healthcare Providers Can Receive an Advance on Future Medicare Payments
FAQs: Loan Programs for Larger Businesses Under Title IV of the CARES Act
Coronavirus: Tips for Hospitals Navigating State Emergency Management and FEMA Funding
Even more, we understand this is a lot of information to absorb. Reading other summaries on the CARES Act can help provide the clarification and understanding you may be seeking. Here are a few more articles that may be particularly worthwhile.
Some states are also deferring income tax payments, offering grants, increasing access to unemployment benefits, and/or offering short-term compensation assistance. Check with your state regarding additional programs that might be available to you. We also want to share the following state legislation and action tracking sites explicitly related to COVID-19 that we think you’ll find helpful.
State Action on Coronavirus (COVID-19), this National Conference of State Legislators link will take you to a web page dedicated to daily updates on state legislation.
What Steps Have States Taken to Address Coronavirus?, is a web page link from the National Governors Association (NGA). This page highlights state-specific actions taken regarding travel restrictions, business closures, national guard deployment, etc.
We hope our high-level CPRSAA and CARES Act summary for health providers has been helpful. We encourage you to subscribe to our newsletter, located below at the bottom of this page. We’ll alert you to new posts added to our site, COVID-19 related and otherwise. Here’s the latest, Texas Sales Tax on Medical Billing Services Is Delayed.
And as a last reminder…
We highly recommend that you consult your tax and/or legal adviser for questions you may have, specific guidance on the legislation, and its pertinence to your healthcare business.
abeo monitors legislation and policy updates aimed at lessening the financial hardships of providers during the COVID-19 health emergency, so be sure to check back here at abeo.com/resources for more information.
abeo Management Corporation (abeo) serves as a leading source of revenue cycle management and practice management with a specialization in anesthesia. The company leverages its people, processes, and software to serve independent practices, surgery centers, hospitals and healthcare systems with a scope of services that include billing, coding, transcription, practice management, and business consulting.