August 26, 2020

Back in late March, the Centers for Medicare and Medicaid Services (CMS) announced its expansion of the Advance Payment Program (APP) in response to the anticipated impact of the coronavirus pandemic on the healthcare community.  This federal measure allowed for the funneling of billions of dollars directly into the coffers of clinicians and hospitals that elected to take advantage of the program.  During the public health emergency (PHE), inpatient acute care hospitals, children’s hospitals, and certain cancer hospitals were able to request up to 100% of the Medicare payment amount for a six-month period, while critical access hospitals (CAHs) could request up to 125% of their payment amount for a six-month period.

Those who elected to access the APP funds may remember that, unlike other PHE-related relief efforts, these funds were meant to be a temporary stop-gap measure to support health facilities in their time of need.  They were not gifts, grants or forgiven debts.  They were straight-up loans; and the loans have come due.

A Time to Pay

For hospitals that requested and received APP funds in late April, they should begin seeing reductions in their Medicare payments in the next few days, if not already.  You’ll recall that recoupment on the loan was to begin 120 days after the receipt of the funds.  CMS outlined the recoupment/repayment process in a Fact Sheet, which included the following guidance:

At the end of the 120-day period, the recoupment process will begin and every claim submitted by the provider will be offset from the new claims to repay the advanced payment. Thus, instead of receiving payment for newly submitted claims, the provider’s outstanding advance payment balance is reduced by the claim payment amount. This process is automatic.

In other words, “the Medicare reimbursements that [hospitals] would otherwise receive will instead go towards repaying the loans they received from Medicare,” according to the Kaiser Family Foundation (KFF).  The CMS Fact Sheet went on to outline how long this recoupment process would be for most hospitals, along with stipulations for final payment:

The majority of hospitals including inpatient acute care hospitals, children’s hospitals, certain cancer hospitals, and critical access hospitals will have up to one year from the date the accelerated payment was made to repay the balance. That means after one year from the accelerated payment, the MACs will perform a manual check to determine if there is a balance remaining, and if so, the MACs will send a request for repayment of the remaining balance, which is collected by direct payment.

Any amount remaining after the one-year period will be subject to a 10.25 percent interest rate.

A Glimmer of Hope

Becker’s Hospital CFO Report has noted that, “because some hospitals continue to experience cash flow issues due to the pandemic, Congress is being asked to consider a COVID relief package that would extend the timeline for repaying the Medicare loans.”  In this time of continually changing circumstances and ever-evolving federal responses, perhaps there is a chance that there will be positive modifications in the APP payback provisions.

Becker’s is also reporting that the American Hospital Association (AHA) is “urging Congress to forgive the loans for all hospitals.”  In addition, the Federation of American Hospitals (FAH) sent a letter to Congress on August 18, requesting a delay in the recoupment of APP payments. “Although Congress’ expansion of this program in the CARES Act successfully prevented short-term cash flow concerns for many hospitals, the onerous repayment terms were not created with the current pandemic in mind,” the FAH’s letter states.

Despite the efforts of the AHA and the FAH to lessen the burden of hospitals during the PHE as it pertains to the repayment of advanced funds, hospital CFOs should be prepared for a soon-coming decrease in Medicare payments where an APP loan was taken out.  The piper at some point appears, and recoupment is right around the corner.