Financial Relief for Physician Practices: A Brief Guide for the Coronavirus Pandemic
Last updated: 04/14/2020
In a short time, COVID-19 has forced physician practices to make big changes: modifying hours of operation, shifting to telemedicine, canceling appointments, and reducing staffing. All of these adjustments translate to reduced revenue. If your group practice is under financial strain, now is the time to seek aid.
The CARES (Coronavirus Aid, Relief and Economic Security) Act was passed on March 27, 2020 to provide financial relief to Americans and businesses across the country. The act enables Small Business Administration (SBA) loans and funding options to help practices like yours to retain staff and weather this crisis. Below are the loans and programs you may qualify for—and how to take advantage of them to mitigate the impact of lost revenue.
SBA Loans and Grants Under the CARES Act
There are a handful of forgivable or low-interest SBA loans available to small businesses right now. Your practice can apply for more than one of these options.
- Paycheck Protection Program (PPP): The Paycheck Protection Program is available from April 3 through June 30, 2020, to provide small to medium-sized businesses with up to 2.5x your monthly payroll costs (averaged over the past year). If secured, the loan can be used for typical expenses, including salaries, sick leave, insurance, and rent. The best news? The amount can be forgivable (i.e. doesn’t need to be paid back) for expenses paid 8 weeks from origination.
- The fine print: If you lay off staff or decrease wages, you risk reducing the forgivable amount. If you conducted layoffs after February 15th and can rehire and retain those employees through June 30th, 2020, you still qualify for forgiveness. You have two years to repay unforgiven portions of the loan, at an interest rate of 1%.
- How to apply: Apply for this loan through your existing bank (make sure they’ve handled SBA loans in the past). The Small Business Administration has provided a sample application for reference.
- Economic Injury Disaster Loans (EIDL): Small business owners are now eligible to apply for working capital loans of up to $2 million—through December 31, 2020. This loan is available in addition to the Paycheck Protection Program, and can cover general operating expenses and overhead while margins are tight.
- The fine print: There is no forgiveness provision under EIDL, but it can provide much-needed relief during this crisis.
- How to apply: The SBA has an online application page that is live now. The organization estimates the application will take up to two hours to file.
- EIDL Grants: Business owners can now secure an advance of up to $10,000 that is available through September 30, 2020.
- The fine print: EIDL grants do not need to be repaid.
- How to apply: These grants can be secured in conjunction with the Economic Injury Disaster Loans.
- Main Street Lending: The lending program enables small and medium sized businesses to apply for 4-year loans for amounts between $1M and $25M. The loans are unsecured and are more broadly accessible than the PPP and EIDL loans offered through the Small Business Administration.
- The fine print: To loans offered through the program must go through customary underwriting standards and therefore your business must be in good financial standing. The maximum amount is 4x your business’ 2019 EBIDTA and there is a 1% origination fee with variable interest rates that are currently between 2% and 4%. Payments are deferred for a 1-year period.
- How to apply: Apply for this loan through your existing bank.
HHS Stimulus Payments
In addition to SBA loans, the CARES Act outlines future financial aid opportunities for the healthcare industry. The government has allotted $100 billion for the Public Health and Social Services Emergency Fund, designed to reimburse providers for expenses and lost revenue incurred during COVID-19.
On April 10th, 2020 the HHS began delivering $30 billion in stimulus payments to Medicare participating providers. Providers are automatically enrolled and should expect to receive approximately 6.5% of their 2019 Medicare FFS reimbursement through an EFT or check. These funds do come with terms and conditions that must be agreed to within 30 days of receiving the funds.
Guidance on how the remaining funds will be distributed is still pending, but providers should begin quantifying revenue loss and additional expenses to get ahead.
Additional Aid Measures
If your practice is grappling with financial uncertainty, know that there are other loan opportunities and programs your business may qualify for outside of the CARES Act. These opportunities include:
- Medicare Advanced/Accelerated Payment: Medicare participating providers can apply for an advance on future Medicare billing. The program provides 3 months of advanced payments within 7 days of making a request. Applications can be filed through your local Medicare intermediary.
- Payroll Tax Credits: Additional tax relief measures include Employee Retention Credits for up to 50% of employee wages (and up to $10,000 per employee) for wages paid between March 13, 2020 and December 31, 2020, excluding those who received PPP assistance. Eligibility is determined if you experience a 50% decline in revenue in a given quarter (compared to 2019 numbers). Certain small to medium-sized businesses can receive tax credits for up to 80 hours of paid sick time per employee.
- Tax Filling and Payment Extensions: To provide tax relief, federal IRS deadlines tax deadlines have been extended to July 15, 2020. Many state deadlines to file and pay taxes including California have also been extended.
If your practice is hurting, help is on the way. We’re here to support you as you navigate this crisis —and champion your courage as healthcare warriors on the unenviable front lines.
Matt Haberman, CEO