Starting this month, some providers are facing the prospect of their Medicare payments garnished to repay COVID-19 loans.
The pressing Aug. 1 deadline has sparked concerns from some experts and hospital groups that worry providers couldn’t afford to lose out on Medicare revenue as they combat revenue losses caused by the pandemic. While the program was intended to be a short-term solution, COVID-19 surges are proving that is not the case for some hospitals.
At the onset of the pandemic in March, the Centers for Medicare & Medicaid Services (CMS) extended the advance payment program, which has been used previously to help providers beset by disasters such as hurricanes. Providers and suppliers could apply for advance Medicare payments to offset massive losses sparked by declines in patient volumes due to COVID-19.
Most providers could get up to 100% of their Medicare payments for a three-month period, and inpatient acute care hospitals, children’s hospitals and some cancer hospitals can request up to 100% for a six-month period. Critical access hospitals could have gotten up to 125% over six months.
CMS had given out $100 billion of loans before suspending the program.
“It was very effective because the process was already in place,” said Denise Burke, a partner with the healthcare compliance and operations group for law firm Waller Lansden Dortch & Davis.
The goal behind the program is to help providers stay afloat and was meant to be a short-term solution, as repayment starts 120 days after a provider gets the first payment. But that is the problem, experts say.
“It was intended as a short-term bridge so they could get through the summer before everything returned to normal, only problem is nothing has returned to normal,” said Dan Mendelson, founder and former president of consulting firm Avalere Health.
Now, repayment for the first loans are due on Aug. 1 as more and more states are seeing massive surges of COVID-19. Some major hospital systems, such as HCA and CHS, have been able to offset massive declines in revenue thanks to the loans and money from a $175 billion provider relief fund passed by Congress.
Hospitals have one year from the date of the accelerated payment to repay the balance of the loan, but Medicare Part A providers and Part B suppliers have 210 days from the accelerated payment to repay.
“CMS should think about relative to financial position of the provider,” Mendelson said. “Some providers are doing just fine and can repay loans just like everybody else.”
After the 120-day period is up, CMS will take 100% of Medicare claims payments that would have gone to the provider to offset the balance of the loan.
But it remains unclear whether CMS can change the terms of the repayment to give providers and suppliers more time, especially if they are struggling.
“CMS moves deadlines all the time,” Mendelson said. “The question is whether they can or are willing to exercise this discretion in this case.”
It also is unlikely that CMS will resume the program, which some provider groups have also called for.
“It seems unlikely CMS will continue to allocate money through the advance payment program that has fewer terms and conditions than allocating through provider relief fund,” Burke said, referring to the $175 billion fund that Health and Human Services is still allocating.
CMS did not return a request for comment as of press time.
A major problem for some hospitals is they may not have the liquidity available to repay the loans.
“There are a lot of hospitals struggling right now because volumes are off,” Mendelson said. “This comes down to the fact that people are staying away from the hospital to the extent they possibly can.”
Provider groups such as the American Hospital Association are imploring Congress to forgive the loans, or at the very least change the repayment terms.
For instance, some groups want to lower the interest rates to 50 or 25% of a Medicare payment as opposed to 100%.
But talks on a new COVID-19 relief package have stalled so far no deal has emerged.
Senate Republicans released their own package earlier this week that includes another $25 billion for providers and gives liability protections for hospitals and other businesses. But the package doesn’t include changes to the loans.