Blog | Coronavirus

CARES Act payback problem for some healthcare providers

Blog | Coronavirus

CARES Act payback problem for some healthcare providers

  • 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:

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

  Total dollars available for distribution (or distributed) Total number of facilities/providers receiving funds Average payment per facility/provider
CARES Act Provider Relief Fund $175,000,000,000 179,305 $975,991
Medicare AAP Program $100,000,000,000 45,000 $2,222,222
Provider APP Program repayment shortfall $75,000,000,000 134,305 $(1,246,232)

The terms of the loan are summarized in the table below. CMS will start holding 100% of recipients’ Medicare allowable payments 120 days from when the recipient received their loan. As of April 26, 2020, CMS will not be accepting any new applications for the Advance Payment Program, and CMS will be reevaluating all pending and new applications for Accelerated Payments. Based on this, HFMA estimates that by August 24, 2020, over 45,000 hospitals and providers will have 100% of their Medicare Allowable payments withheld. This could impose a cashflow crisis on most, if not all, hospitals, physicians and other providers.

Further, CMS through its Medicare Administrative Contractors, will issue letters demanding repayment to physicians and other providers after 210 days and hospitals after 365 days. Physician practices and other providers who received an APP Program loan will have a 9.625% interest rate applied to the outstanding balance of the loan by November 23, 2020. This date for hospitals is April 27, 2021.

CMS APP Program loan terms

  Hospitals Physicians & other providers
Amount of payment advanced/accelerated* 6 months of Medicare allowable 3 months of Medicare allowable
Interest rate applied Currently 9.625% Currently 9.625%
Time from receipt of advanced/accelerated payment to repay before recoupment begins 120 days 120 days
Latest date for recoupment to begin 8/24/2020 8/24/2020
% of Medicare claims recouped after 119 days 100% 100%
Time from receipt of advanced/accelerated payment to repay before interest imposed 365 days 210 days
Imposition of interest begins 4/27/2021 11/23/2020
*Critical access hospitals (CAHs) may request 125% of Medicare allowable.

Why some providers may struggle to repay loans

Most physicians and health systems are beginning to expand the non-emergent services they offer in accordance with CMS’s and their state’s guidelines. The shortfall between the Provider Relief Funding payments for lost revenue received by APP Program loan will require providers to “make up” the difference through increasing the volume of services provided to individuals who have delayed necessary care during the pandemic. Even absent the lag effects of the COVID-19 pandemic, we do not believe it is possible for some providers to deliver a sufficient volume of services to repay the APP Program loan and sustain ongoing operations.

There are only so many hours in a week that physicians and their staff can provide services. And, even if there was no constraint on capacity, it assumes the demand for all services will instantly revert to normal. While it is difficult to project volumes given the uncertainties of the COVID-19 pandemic, conversations with HFMA’s members suggest that hospital and physician service volumes over the next 12 months will be much lower than their volumes during the same timeframe in 2019 due to the real need to preserve capacity (including PPE) for future flare-ups, the public’s perceived fear of contracting COVID-19 in a healthcare setting, capacity constraints on delivering non-emergent services and structural changes in the way care is delivered as a result of the pandemic. This is congruent with surveys of select specialists like orthopedists who anticipate volumes will be 33% lower a month from now and 7% lower three months from now compared to the period before the COVID-19 pandemic.   

If CMS enforces the terms of the APP Program loans as they are currently structured, it may bankrupt some independent practices (particularly primary care providers) and hospitals that were financially challenged before the COVID-19 pandemic. In markets where this occurs, it will limit access to care and reduce available jobs at a time when our nation desperately needs both.


Congress needs to either forgive the loans or significantly modify the terms to extend the time before recoupment begins, reduce the recoupment percentage to less than 30%, extend the period of time providers have to pay the loans back before the imposition of interest (or waive the interest). And if Congress insists on charging interest, it needs to reduce the interest to a level that approximates short-term federal borrowing costs. 

About the Author

Chad Mulvany, FHFMA,

is director, healthcare finance policy, strategy and development, HFMA’s Washington, D.C., office.


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