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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.

  1. Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSAA), signed by President Trump on March 6, 2020
  2. Coronavirus Aid, Relief and Economic Security Act (CARES Act), signed by President Trump on March 27, 2020

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.

CPRSAA Act Summary
BUSINESSES THE ACT APPLIES TO
ELIGIBILITY
APPROVAL
APPLICATION FORM

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
RETIREMENT ACCOUNTS
INDIVIDUAL ASSISTANCE
PUBLIC HEALTH AND SOCIAL SERVICES EMERGENCY FUND
MEDICAL PROVIDER ASSISTANCE

State Specific Legislation

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.

 

CPRSAA Act Summary

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.

Additional Resources:
FAQs: Small Business Loans Under the CARES Act

BUSINESSES THE ACT APPLIES TO

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.

ELIGIBILITY

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:

  1. NAICS 621111 (Offices of Physicians, except Mental Health Professionals) <$12M
  2. NAICS 621493 (Freestanding Ambulatory Surgical and Emergency Centers) <$16.5M
  3. NAICS 621399 (Offices of All Other Misc Health Practitioners, e.g., CRNAs) <$8M
  4. NAICS 622110 (General Medical and Surgical Hospitals) <$41.5M

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:

  • an acceptable credit history,
  • the ability to repay the loan, and
  • used all reasonably available funds.

APPROVAL

If an applying business is approved, here is what recipients can expect.

  • Recipients can receive loans up to $2M, at an annual rate of 3.75% for up to 30 years, for use in paying fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred.
  • Some restrictions on acceptable uses of the funds do apply.
  • Loans over $25K will require collateral to the extent it is available. SBA will not decline a loan if the applicant lacks a particular amount of collateral as long as it is reasonably sure that the applicant can repay its loan. If the applicant refuses to pledge available collateral when requested by SBA, however, SBA may decline or cancel the loan.
  • There are no upfront or early termination fees, and EIDL loans are now eligible for a 12-month repayment deferment.

APPLICATION FORM

Applications may be submitted electronically through the SBA’s website. Online EIDL Application

 

CARES Act Summary

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:

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

RETIREMENT ACCOUNTS

INDIVIDUAL ASSISTANCE

PUBLIC HEALTH AND SOCIAL SERVICES EMERGENCY FUND

MEDICAL PROVIDER ASSISTANCE

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:

PAYCHECK PROTECTION PROGRAM (PPP)

A. Businesses It Applies To

The $349 billion PPP provision applies to businesses that:

  • were in business as of Feb 15, 2020, and pay both income and payroll taxes
  • have 500 or fewer employees, or
  • meet the current SBA small business size standards, or
  • are self-employed individuals, or
  • are non-profits.

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.

B. Eligibility

  • Eligible applicants may apply for a forgivable loan, equal to 2.5x their average monthly payroll (up to a maximum of $10M), through SBA certified banks.
  • The loans are available immediately and capped at a maximum annual interest rate of 4% with a maximum repayment term of 10 years.
  • The covered loan period is from February 15, 2020, through June 30, 2020.

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:

  • payroll, paid sick leave,
  • supply chain disruptions,
  • employee salaries (including those of terminated or furloughed employees brought back to work),
  • health insurance premiums,
  • retirement contributions,
  • covered leave,
  • mortgage/rent payments (excluding prepayment of principal on mortgages)
  • or other debt obligations.

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.

Additional Resources:
US Chamber Coronavirus Emergency Loans: Small Business Guide and Checklist
Payment Protection Program FAQs for Small Businesses
SBA Payment Protection Program Site

EMERGENCY $10K FORGIVEABLE LOAN ADVANCE

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.

ECONOMIC INJURY DISASTER LOANS (EIDL)

For any SBA EIDL loans made in response to COVID-19 before December 31, 2020, the SBA will waive:

  • any personal guarantee on advances and loans below $200,000,
  • the requirement that an applicant needs to have been in business for the one year before the disaster, and
  • the credit elsewhere requirement.

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.

Additional Resources:
Understanding the SBA disaster relief loan program for COVID-19
Online EIDL Application

ADDITIONAL SMALL BUSINESS DEBT RELIEF

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.

TREATMENT OF LOSSES

The CARES Act allows companies to claim refunds for certain losses. Please contact your tax or legal advisor for details.

PAYROLL TAX CREDIT

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.

Additional Resources:
President Trump Signs into Law the CARES Act
$2 Trillion Stimulus Bill Brings Major Tax Changes
IRS Coronavirus Tax Relief

RETIREMENT ACCOUNTS

The CARES Act provides special provisions regarding retirement accounts. Please contact your tax or legal advisor for details.

INDIVIDUAL ASSISTANCE

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.

PUBLIC HEALTH AND SOCIAL SERVICES EMERGENCY FUND

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.

MEDICAL PROVIDER ASSISTANCE

$150B allocated to hospitals and physicians for the purchase of equipment and supplies.

Additional Resources:
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
FEMA Grants

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.

What’s Inside the Senate’s $2 Trillion Coronavirus Aid Package

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Is Enacted into Law

 

State Specific Legislation

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.

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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.

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