- Congress, via the CARES Act, expanded Medicare’s Accelerated and Advanced Payment (AAP) Programs to a broader group of Medicare Part A providers and Part B suppliers. In total, CMS has loaned $100 billion to 45,000 hospitals, physicians and other providers since expanding the program on March 28.
- HFMA believes Congress’s intent was for the Medicare AAP Program to act as a temporary liquidity vehicle to supply bridge financing to hospitals and physician practices until HHS could distribute the $175 billion in PRF. And that recipients of loans from the APP Program would then be able to use payments from the PRF to repay the Medicare loans.
- HFMA is concerned about some providers ability to repay AAP Program loans because they will need to repay CMS an average of $1.25M more than they received from the CARES Act Provider Relief Fund.
To increase cash flow to providers of services and suppliers impacted by the COVID-19 pandemic, Congress, via the CARES Act, expanded Medicare’s Accelerated and Advanced Payment (AAP) Programs to a broader group of Medicare Part A providers and Part B suppliers. The expansion of this program is only for the duration of the public health emergency and was curtailed at the end of April.
Numbers of approved Part A and Part B applicants
Since expanding the AAP Programs on March 28, 2020, CMS has approved over 21,000 applications totaling $59.6 billion in payments to Part A providers, which includes hospitals. For Part B suppliers, including doctors, non-physician practitioners and durable medical equipment suppliers, CMS approved almost 24,000 applications advancing $40.4 billion in payments. In total, CMS has loaned $100 billion to 45,000 hospitals, physicians and other providers since expanding the program on March 28. This is an average payment of $2.22 million per recipient.
These funds have provided much needed liquidity at a time when hospitals are incurring significant expenses to provide care for patients suffering from COVID-19, and all providers have experienced precipitous declines in revenue as a result of social distancing and the need to conserve personal protective equipment, according to CMS Guidance on Elective Procedures.
On average, it is estimated:
- Hospital revenues have declined by 40% - 60 %, according to J.P. Morgan Equity Research’s, “The Stimulus Bill Isn’t Enough.”
- Physician practice revenues are down by 55%, according to MGMA’s “COVID-19 Impact on Medical Practices” fact sheet.
Included in the CARES Act was a $100 billion appropriation to the HHS Public Health and Social Services Emergency Fund (hereafter Provider Relief Fund - PRF) that was subsequently increased by $75 billion in the Protection Program and Health Care Enhancement Act. The purpose of these funds is to reimburse hospitals and healthcare for COVID-19-related expenses and lost revenue.
HFMA believes Congress’s intent was for the Medicare AAP Program:
- To act as a temporary liquidity vehicle to supply bridge financing to hospitals and physician practices — particularly organizations whose capital access became constrained due to the pandemic’s impact on capital markets — until HHS could distribute the $175 billion in PRF.
- That recipients of loans from the APP Program would then be able to use payments from the PRF to repay the Medicare loans.
Number of PRF recipients
Based on HHS data, HFMA estimates there are a minimum of 179,000 (accessed May 15) recipients of payments from the PRF. This translates into a maximum average potential payment per recipient of $976,000. HFMA notes that as of May 15, HHS has still not provided comprehensive details of how all the $175 billion will be distributed. Therefore, providers who applied for an AAP Program loans were unable to estimate their ability to repay the loan on CMS’s offered terms based on their receipt of funding from the PRF.
HFMA is concerned about some recipients — particularly independent physician practices’ — ability to repay these loans. As summarized in the first table below, on average, recipients of the APP Program will need to repay CMS an average of $1.25 million more than they received from the PRF.
Average provider APP Program repayment shortfall