Tag: Coronavirus Aid Relief and Economic Security Act (CARES Act)

CMS: Medical Necessity & Patient Signature Requirements During COVID-19

CMS Clarifies Medicare Requirements Related to Medical Necessity and the Patient Signature Requirement during Current National State of Emergency

By Brian S. Werfel, Esq.

On April 9, 2020, CMS updated its Frequently Asked Questions (FAQs) for billing Medicare Fee-For-Service Claims during the current national state of emergency.  This document includes guidance for numerous industry types, including ambulance services.  The ambulance-specific questions start on page 11.

Two of the more common questions that A.A.A. members have asked during the current crisis are:

  1. Whether the transportation of a patient known or suspected to be infected with the COVID-19 virus would automatically justify medical necessity for the ambulance? And,
  2. Whether CMS will be waiving the requirement that ambulance providers and suppliers obtain the patient’s signature (or an acceptable alternative signature) to consent to the submission of a claim?

CMS did provide some guidance on both of these issues.

CMS addressed the issue of medical necessity in its answer to Question #9 on page 13.  The question posed to CMS was whether an ambulance provider/supplier could consider any COVID-19 positive patient to meet the medical necessity requirements for an ambulance.  CMS responded as follows:

“Answer: The medical necessity requirements for coverage of ambulance services have not been changed. For both emergency and non-emergency ambulance transportation, Medicare pays for ground (land and water) and air ambulance transport services only if they are furnished to a Medicare beneficiary whose medical condition is such that other forms of transportation are contraindicated. The beneficiary’s condition must require both the ambulance transportation itself and the level of service provided for the billed services to be considered medically necessary.”

Basically, CMS declined to offer a blanket waiver of the medical necessity requirements for COVID-19 patients.  In doing so, CMS seems to be suggesting that COVID-19 status, in and of itself, is not sufficient to establish Medicare coverage for an ambulance transport.

Fortunately, CMS did offer specific relief on the Medicare patient signature requirement.  The question posed to CMS on page 16 (Question #14) was whether an ambulance provider/supplier could sign on the patient’s behalf to the extent the patient was known or suspected to be infected with COVID-19, and, as a result, asking the patient (or an authorized representative) to sign the Tablet would risk contaminating the device for future patients and/or ambulance personnel.  CMS responded as follows:

Answer: Yes, but only under specific, limited circumstances. CMS will accept the signature of the ambulance provider’s or supplier’s transport staff if that beneficiary or an authorized representative gives verbal consent. CMS has determined that there is good cause to accept transport staff signatures under these circumstances. See 42 CFR 424.36(e). CMS recommends that ambulance providers and suppliers follow the Centers for Disease Control’s Interim Guidance for Emergency Medical Services (EMS) Systems and 911 Public Safety Answering Points (PSAPs) for COVID-19 in the United States, which can be found at the following link: https://www.cdc.gov/coronavirus/2019-ncov/hcp/guidance-for-ems.html. This guidance includes general guidelines for cleaning or maintaining EMS transport vehicles and equipment after transporting a patient with known or suspected COVID-19. However, in cases where it would not be possible or practical (such as a difficult to clean surface) to disinfect the electronic device after being touched by a beneficiary with known or suspected COVID-19, documentation should note the verbal consent.”

Essentially, CMS is indicating that you can accept a patient’s verbal consent to the submission of a claim in lieu of a written signature.  In these instances, CMS is indicating that the crew must clearly document that they have obtained the patient’s (or the authorized representative’s) verbal consent.

Hotline to Check Status of CARES Direct Deposit

If you have not yet received your CARES Act direct deposit as described here, there is now a hotline to check the status.   Please call 866-569-3522 and have your tax ID# and the name of your ambulance service as registered with PECOS. According to HHS, all Medicare providers and suppliers should receive their deposit by April 17.

Thank you to AAA Payment Reform Chair Asbel Montes for sharing this information!

Webinar | Living Room Leadership

Living Room Leadership – Addressing Telework, IT, Compliance and Security Issues in a Remote Office Environment

Wednesday, April 17, 2020 | 1:00 pm Eastern Time
Presented by:  Katie Arens, Scott Moore, Esq., and Frank Gresh

During the ongoing COVID-19 pandemic, EMS providers have been forced to adopt new strategies for working while social distancing, though this has raised new challenges. Join Director of Customer Accounts & Mobile Health Solutions at LIFE EMS Katie Arens, EMS workforce consultant Scott Moore, and Chief Technology Officer at EMSA Frank Gresh as they discuss the challenges and solutions to the new normal of working from home. Learn best practices for IT support and maintenance, compliance, cybersecurity, and other challenges facing the at-home workforce.

Webinar April 15 | Tax Day…Not! Tax Implications from the Stimulus Packages

Tax Day…Not! Tax Implications from the Stimulus Packages for your Personal and Business Tax Filings

Wednesday, April 15, 2020 | 1:00pm Eastern Time
Watch on Demand 
Presented by:  Peter K Scott, Esq.

Join former Deputy Chief Counsel to the IRS Commissioner, Peter Scott Esq. for an informative presentation on COVID 19 tax and business relief provisions. Learn from one of the leading experts in tax law the best ways to navigate the complex IRS codes and sometimes contradictory statutes. If you are trying to discern from a TAX perspective which of the loan and grant programs are best for tax purposes, you won’t want to miss this webinar from a true tax expert.

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HHS Announces Release of Initial Tranche of CARES Act Provider Relief Funding

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).  As part of that Act, Congress allocated $100 billion to the creation of a “CARES Act Provider Relief Fund,” which will be used to support hospitals and other healthcare providers on the front lines of the nation’s coronavirus response.  These funds will be used to fund healthcare-related expenses or to offset lost revenue attributable to COVID-10.  These funds will also be used to ensure that uninsured Americans have access to testing a treatment for COVID-19.  Collectively, this funding is referred to as the “CARES Act Provider Relief Fund.”

On April 9, 2020, the Department of Health and Human Services (HHS) indicated that it would be disbursing the first $30 billion of relief funding to eligible providers and suppliers starting on April 10, 2020.  This money will be disbursed via direct deposit into eligible providers and supplier bank accounts.  Please note that these are outright payments, i.e., these are not loans that will need to be repaid. 

Who is Eligible to Receive Relief Fund Payments?

HHS indicated that any healthcare provider or supplier that received Medicare Fee-For-Service reimbursements in 2019 will be eligible for the initial allocation.  Payments to practices that are part of larger medical groups will be sent to the group’s central billing office (based on Medicare enrollment information).  HHS indicated that billing organizations will be identified by their Taxpayer Identification Numbers (TINs).

Are There Any Conditions to Receipt of this Funding?

Yes.  As a condition to receiving relief funding, a healthcare provider or supplier must agree not to seek to collection out-of-pocket payments from COVID-19 patients that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider.

How is the Amount of Relief Funding an Entity will Receive Determined?

HHS indicated that the amounts healthcare providers and suppliers will receive will be based on their pro-rata share of total Medicare FFS expenditures in 2019.  HHS indicated that Medicare FFS payments totaled $484 billion in 2019.

Providers and suppliers can estimate their initial relief payment amount by dividing their 2019 Medicare FFS reimbursement by $484 billion, and then multiplying that “ratio” by $30 billion.  Note: payments from Medicare Advantage plans are not included in the calculation of a provider’s/supplier’s total 2019 Medicare payments.

As an example, HHS cited a community hospital that received $121 million in Medicare payments in 2019.  HHS indicated that this hospital’s ratio would be 0.00025.  That amount is then multiplied by $30 billion to come up with its initial relief fund payment of $7.5 million.

The AAA has created a CARES Act Provider Relief Calculator
that you can use to estimate your initial relief payment.  |
USE DOWNLOADABLE EXCEL CALCULATOR►

Do I Need to do Anything to Receive Relief Funds?

No.  You do not need to do anything to receive your relief funding.  HHS has partnered with UnitedHealth Group (UHG) to disburse these monies using the Automated Clearing House (ACH) system.  Payments will be made automatically to the ACH account information on file with UHG or CMS.

Providers and suppliers that are normally paid by CMS through paper checks will receive a check from CMS within the next few weeks.

How Will I Know if I Received My Relief Funds?

The ACH deposit will come to you via Optum Bank.  The payment description will read “HHSPayment.”

Do I Need to do Anything Once I Receive My Relief Funds?

Yes.  You will need to sign an attestation statement confirming relief of the funds within 30 days.  These attestations will be made through a webportal that HHS anticipates opening the week of April 13, 2020.  The portal will need to be accessed through the CARES Act Provider Relief Fund webpage, which can be accessed by clicking here.

You will also be required to accept the Terms and Conditions within 30 days.  Providers and suppliers that do not wish to accept these terms and conditions are required to notify HHS within 30 days, and then remit full repayment of the relief funds.  The Terms and Conditions can be reviewed by clicking here.

How will HHS Distribute the Remaining $70 Billion in Relief Funds?

HHS has indicated that it intends to use the remaining relief funds to make targeted distributions to providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve Medicaid populations, and providers requesting reimbursement for the treatment of uninsured Americans.

COVID-19 Relief Payments Begin Today

AAA ADVOCATES FOR COVID-19 RELIEF FOR AMBULANCE SERVICES

COVID-19 Relief Payments Begin Today

Beginning today, ambulance service suppliers and providers should start automatically receiving an allocation of payments from the Public Health and Social Emergency Fund. According to the Department of Health and Human Services (HHS), an initial distribution of $30 billion of the funds appropriated through the CARES Act will be distributed to Medicare providers and suppliers over the next week. The Fund was appropriated at $100 billion but not all the funds will be distributed as direct payments to providers and suppliers.

HHS is determining the amount of individual payments based on the proportion of the 2019 Medicare payments to the provider or supplier compared to total outlays for Medicare fee-for-service that year of $484 billion. The AAA estimates a total of approximately $265 million will be distributed to ground ambulance services in the initial round of payments. While the initial payments are a good start, the AAA is pushing for ambulance services to receive ten times that amount in initial relief.

The AAA had advocated for funding in the CARES Act for ambulance services and on April 6, the AAA sent HHS Secretary Azar a letter requesting that ambulance service providers and suppliers receive $48,000 per registered ambulance for financial relief from the impact of the COVID-19 pandemic. The AAA is pushing for a similar amount within future economic stimulus packages as well as several other proposals for legislative and regulatory relief.

On Monday, the AAA will be issuing a Call To Action to its members focusing on four of the provisions on our below list.

Priority Access for EMS to PPE and COVID-19 Testing

  • Recognition by FEMA, HHS (USPHS), CDC of need for priority access to personal protection equipment (PPE) and COVID-19 testing for EMS
  • Non-governmental EMS being eligible to apply directly to FEMA for PPE under the Public Assistance Grants and waive applicant match for all emergency response providers

EMS Services Coverage and Reimbursement for COVID-19 Response

  • Waiver for Medicare coverage of treatment in place and loosing of signature requirements
  • 20% increase, similar to hospitals, for emergency and non-emergency ambulance services in treating and transporting COVID-19 patients
  • SCT reimbursement level for COVID-19 transports and waive hospital-to-hospital limitation on SCT

EMS System Financial Sustainability in Response to COVID-19

  • Grant program under HHS specific to EMS for reimbursement of costs resulting from response to COVID-19 and lost revenue. Payment of $48,000 per registered ambulance to each ambulance service provider and supplier.
  • Expand Paycheck Protection Program to ambulance service organizations with 500 or more employees
  • Fuel tax relief for ground ambulance services

The AAA greatly appreciates the work of our members on the front lines of treating, transporting and testing patients with COVID-19 and we will continue to push for help for you.

CARES Act Provider Relief Fund

President Trump is providing support to healthcare providers fighting the COVID-19 pandemic. On March 27, 2020, the President signed the bipartisan CARES legislation that provides $100 billion in relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response. This funding will be used to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19.

Immediate infusion of $30 billion into healthcare system

Recognizing the importance of delivering funds in a fast and transparent manner, $30 billion is being distributed immediately – with payments arriving via direct deposit beginning April 10, 2020 – to eligible providers throughout the American healthcare system. These are payments, not loans, to healthcare providers, and will not need to be repaid.

Who is eligible for initial $30 billion

  • All facilities and providers that received Medicare fee-for-service (FFS) reimbursements in 2019 are eligible for this initial rapid distribution.
  • Payments to practices that are part of larger medical groups will be sent to the group’s central billing office.
    • All relief payments are made to the billing organization according to its Taxpayer Identification Number (TIN).
  • As a condition to receiving these funds, providers must agree not to seek collection of out-of-pocket payments from a COVID-19 patient that are greater than what the patient would have otherwise been required to pay if the care had been provided by an in-network provider.
  • This quick dispersal of funds will provide relief to both providers in areas heavily impacted by the COVID-19 pandemic and those providers who are struggling to keep their doors open due to healthy patients delaying care and cancelled elective services.

How are payment distributions determined

  • Providers will be distributed a portion of the initial $30 billion based on their share of total Medicare FFS reimbursements in 2019. Total FFS payments were approximately $484 billion in 2019.
  • A provider can estimate their payment by dividing their 2019 Medicare FFS (not including Medicare Advantage) payments they received by $484,000,000,000, and multiply that ratio by $30,000,000,000. Providers can obtain their 2019 Medicare FFS billings from their organization’s revenue management system.
  • As an example: A community hospital billed Medicare FFS $121 million in 2019. To determine how much they would receive, use this equation:
    • $121,000,000/$484,000,000,000 x $30,000,000,000 = $7,500,000

What to do if you are an eligible provider

  • HHS has partnered with UnitedHealth Group (UHG) to provide rapid payment to providers eligible for the distribution of the initial $30 billion in funds.
  • Providers will be paid via Automated Clearing House account information on file with UHG or the Centers for Medicare & Medicaid Services (CMS).
    • The automatic payments will come to providers via Optum Bank with “HHSPAYMENT” as the payment description.
    • Providers who normally receive a paper check for reimbursement from CMS, will receive a paper check in the mail for this payment as well, within the next few weeks.
  • Within 30 days of receiving the payment, providers must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment. The portal for signing the attestation will be open the week of April 13, 2020, and will be linked on this page.
  • HHS’ payment of this initial tranche of funds is conditioned on the healthcare provider’s acceptance of the Terms and Conditions – PDF, which acceptance must occur within 30 days of receipt of payment.  If a provider receives payment and does not wish to comply with these Terms and Conditions, the provider must do the following: contact HHS within 30 days of receipt of payment and then remit the full payment to HHS as instructed.  Appropriate contact information will be provided soon.

Is this different than the CMS Accelerated and Advance Payment Program?

Yes. The CMS Accelerated and Advance Payment Program has delivered billions of dollars to healthcare providers to help ensure providers and suppliers have the resources needed to combat the pandemic. The CMS accelerated and advance payments are a loan that providers must pay back. For more information from CMS, click here.

How this applies to different types of providers

All relief payments are being made to providers and according to their tax identification number (TIN). For example:

  • Large Organizations and Health Systems: Large Organizations will receive relief payments for each of their billing TINs that bill Medicare. Each organization should look to the part of their organization that bills Medicare to identify details on Medicare payments for 2019 or to identify the accounts where they should expect relief payments.
  • Employed Physicians: Employed physicians should not expect to receive an individual payment directly. The employer organization will receive the relief payment as the billing organization.
  • Physicians in a Group Practice: Individual physicians and providers in a group practice are unlikely to receive individual payments directly, as the group practice will receive the relief fund payment as the billing organization. Providers should look to the part of their organization that bills Medicare to identify details on Medicare payments for 2019 or to identify the accounts where they should expect relief payments.
  • Solo Practitioners: Solo practitioners who bill Medicare will receive a payment under the TIN used to bill Medicare.

Priorities for the remaining $70 billion

The Administration is working rapidly on targeted distributions that will focus on providers in areas particularly impacted by the COVID-19 outbreak, rural providers, providers of services with lower shares of Medicare reimbursement or who predominantly serve the Medicaid population, and providers requesting reimbursement for the treatment of uninsured Americans.

Ensuring Americans are not surprised by bills for COVID-19 medical expenses

The Trump Administration is committed to ensuring that Americans are protected against financial obstacles that might prevent them from getting the testing and treatment they need from COVID-19.

  • As announced in early April, a portion of the $100 billion Provider Relief Fund will be used to reimburse healthcare providers, at Medicare rates, for COVID-related treatment of the uninsured.
    • As a condition, providers are obligated to abstain from “balance billing” any patient for COVID-related treatment.
  • The Families First Coronavirus Response Act requires private insurers to cover an insurance plan member’s cost-sharing payments for COVID-19 testing.
  • President Trump has also secured commitments from private insurers, including Humana, Cigna, UnitedHealth Group, and the Blue Cross Blue Shield system to waive cost-sharing payments for treatment related to COVID-19 for plan members.
Content created by Assistant Secretary for Public Affairs (ASPA)
Content last reviewed on April 9, 2020

Webinar April 10 | Navigating the COVID-19 Stimulus Loans and Grant Programs

Navigating the COVID-19 Stimulus Loans and Grant Programs

Friday, April 10, 2020 | 1:00pm Eastern Time
Watch On-Demand Below!
Presented by:  Scott Moore, Esq. and Asbel Montes

The last few weeks have pushed field providers and EMS organizations to their limits, testing their ability to prepare and respond to this unprecedented pandemic. In response, Congress has provided the first in many relief measures under the CARES Act in an effort to ensure that EMS agencies can continue to answer the calls for help. This webinar is intended to provide an overview of the financial relief that is available to EMS organizations, including loans and grant monies and will provide attendees with the advantages and disadvantages of each, as well as, the strategies and best practices for accessing funds under the FEMA or HHS grant programs. In addition, we will discuss how to best prepare your organization to apply for the various financial relief options, as well as, help you institute the appropriate cost tracking mechanisms to ensure that you are prepared for any subsequent financial relief compliance review from the granting authority.

Presenters

Asbel Montes
Senior Vice President of Strategic Initiatives and Innovation, Acadian Ambulance Service

 

Asbel has been a member of the American Ambulance Association (AAA) for eight years and has served on its Board of Directors; he currently is Chair of the Payment Reform Steering Committee. Asbel also sits on the board of the Louisiana Ambulance Alliance. He is a respected thought leader on reimbursement initiatives within the industry and is a requested speaker at many conferences. He has also been asked to testify as an expert witness before federal and state health committees regarding ambulance reimbursement.

Asbel began his employment with Acadian in May 2009. He oversees Acadian’s revenue cycle management, contract management, business office process improvements, and government relations for state and federal reimbursement policy initiatives.

In 1999, Asbel began working for an ambulance billing and consulting firm. After three years, he decided to work for a private, non‐emergency ambulance service. Since then, he has provided leadership in revenue cycle management to four ambulance agencies located throughout the Southeast.

Asbel pursued his education the non‐traditional way by attending college online while maintaining a fulltime job. He received an associate’s degree in accounting in 2007 and graduated in November 2010 with a bachelor’s degree in business management.

Asbel is married to Stephenie Haney‐Montes. He has one daughter and resides in Carencro, LA.

Scott Moore, Esq.
AAA Human Resource and Operations Consultant; Moore EMS Consulting, LLC

 

Scott A. Moore, Esq. has been in the emergency medical services field for more than 28 years. Scott has held various executive positions at several ambulance services in Massachusetts. Scott is a licensed attorney, specializing in Human Resource, employment and labor law, employee benefits, and corporate compliance matters. Scott has a certification as a Professional in Human Resources (PHR) and was the Co-Chair of the Education Committee for the American Ambulance Association (AAA) for several years.

In addition, Scott is a Site Reviewer for the Commission on the Accreditation of Ambulance Services (CAAS). Scott earned his Bachelor’s Degree in Psychology from Salem State College and his Juris Doctor from Suffolk University Law School. Scott maintains his EMT and still works actively in the field as a call-firefighter/EMT in his hometown. Scott is a member of the American Bar Association, the Massachusetts Bar Association, the Society for Human Resource Management, and the Northeast Human Resource Association.

Paycheck Protection Program Loans Summary

Summary of Loans Under Paycheck Protection Program (Section 1102)

Download PDF

Overview

Section 1102 provides $349 billion for expedited individual loans up to $10 million through approved lenders that are guaranteed 100% by the U.S. government. The loan proceeds can be used to cover payroll support (such as employee salaries, paid sick or medical leave, insurance premiums) and mortgage, rent and utility payments incurred from February 15, 2020 through June 30, 2020.1 The maximum amount of a loan equals 2.5 months of average historical monthly payroll expenses, subject to certain exclusions.

On March 31, 2020, the Department of Treasury issued preliminary guidance regarding the imminent implementation of the Paycheck Protection Program (PPP). On April 2, 2020, the Small Business Administration (SBA) issued an interim final rule providing additional implementation guidelines and requirements for the PPP.

Small businesses and sole proprietorships started to apply for and receive PPP loans on April 3, 2020. Independent contractors and self-employed individuals can begin applying on April 10, 2020. The loans are first come, first served.

Benefits for Borrowers: Borrowers are eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period after the origination date of the loan on payroll costs, interest payment on any mortgage incurred prior to February 15, 2020, payment of rent on any lease in force prior to February 15, 2020, and payment on any utility for which service began before February 15, 2020. All borrower and lender fees, collateral and personal guarantee requirements are waived. The fixed interest rate is 1 percent and loan maturity is two years. No prepayment fees will be charged. Loan repayments can be deferred for six months.

Benefits for Lenders: Allows loans to be sold on the secondary market. Provides the regulatory capital risk weight of loans made under this program, and temporary relief from troubled debt restructuring (TDR) disclosures for loans that are deferred under this program. Lender compensation for servicing the loan is 5 percent for loans of not more than $350,000;
3 percent for loans of more than $350,000 and less than $2,000,000; and 1 percent for loans of not less than $2,000,000. Interim SBA regulations provide some protection for banks in the underwriting process.

The SBA lender list can be found at https://www.sba.gov/paycheckprotection/find.

Eligible businesses include:
  • 1. Businesses with 500 or fewer employees (calculated as discussed below);
  • 2. Small businesses as defined in the Small Business Administration Size Standards at 13 C.F.R. § 121.201;
  • 3. 501(c)(3) nonprofits, 501(c)(19) veteran’s organizations and Tribal business concerns described in section 31(b)(2)(C) of the Small Business Act with not more than 500 employees;
  • 4. Hotels, motels and restaurants with either 500 or fewer employees at each physical location or in the aggregate, without regard to affiliation under
    13 C.F.R. §§ 121.103 and 121.301;
  • 5. Franchises listed in the SBA Franchise Directory without regard to affiliation under 13 C.F.R. §§ 121.103 and 121.301; and
  • 6. Sole proprietors, independent contractors, gig economy workers and self-employed individuals are all eligible.
Ineligible Businesses include but are not limited to:
  • 1. Employers who elect to take advantage of “Delay of payment of employer payroll taxes” in CARES Act Section 2302 or the “Employee retention credit for employers subject to closure due to COVID-19” in Section 2301 are not eligible to take advantage of these loans (unless, in the case of the Section 2302 payroll tax deferral, the loan proceeds were not forgiven under either Section 1106 or Section 1109).
  • 2. Financial businesses primarily engaged in the business of lending, such as banks, finance companies and factoring companies (pawn shops, although engaged in lending, may qualify in some circumstances); SBA’s Standard Operating Procedure 50 10 (SOP) provides this includes:
    • i. Banks;
    • ii. Life Insurance Companies (but not independent agents);
    • iii. Finance Companies;
    • iv. Factoring companies;
    • v. Investment Companies;
    • vi. Bail Bond Companies; and
    • vii. Other businesses whose stock in trade is money.
  • 3. Passive businesses owned by developers and landlords that do not actively use or occupy the assets acquired or improved with the loan proceeds (except Eligible Passive Companies under 13 C.F.R. § 120.111);
  • 4. Businesses located in a foreign country (businesses in the United States owned by aliens may qualify);
  • 5. Pyramid sale distribution plans;
  • 6. Businesses deriving more than one-third of gross annual revenue from legal gambling activities;
  • 7. Loan packagers earning more than one third of their gross annual revenue from packaging SBA loans;
  • 8. Businesses primarily engaged in political or lobbying activities; and
  • 9. Other businesses listed at 13 C.F.R. § 120.110.2

Counting Employees and Affiliation Rules:

SBA counts all individuals employed on a full-time, part-time or other basis, so this includes employees obtained from a temporary employee agency, professional employee organization or leasing arrangement. Contractors receiving IRS Form 1099 and volunteers are not considered employees.

The method for determining size includes the following principles:

  1. The average number of employees (including the employees of its domestic and foreign affiliates) for each of the pay periods for the preceding completed 12 calendar months.
  2. Part-time and temporary employees are counted the same as full-time employees.
  3. If a new company/venture, the average number of employees is used for each of the pay periods during which it has been in business.
  4. The average number of employees of a business with affiliates is calculated by adding the average number of employees of the business with the average number of employees of each affiliate. If the business has acquired an affiliate or been acquired as an affiliate during the applicable period of measurement or before the date on which it self-certified as small, the employees counted in determining size status include the employees of the acquired or acquiring concern. Furthermore, this aggregation applies for the entire period of measurement, not just the period after the affiliation arose.
  5. The employees of a former affiliate are not counted if affiliation ceased before the date used for determining size. This exclusion of employees of a former affiliate applies during the entire period of measurement, rather than only for the period after which affiliation ceased. However, if a business has sold a segregable division to another business concern during the applicable period of measurement or before the date on which it self-certified as small, the employees used in determining size status will continue to include the employees of the division that was sold.

The SBA’s affiliation rules substantially impact the ability of many entities to qualify for small business loans. On April 3, 2020, SBA issued an interim final rule (Affiliation IFR) about the applicability of affiliation rules at 13 C.F.R. §§ 121.103 and 121.301 to PPP loans. This supplements the SBA’s April 2 interim final rule.

The Affiliation IFR clarifies that SBA’s affiliation rules apply to all PPP applicants unless an exemption provided in the CARES Act applies. It also adds a new exemption, providing that affiliation rules do not apply to relationships of any church, faith-based organization, or entity that is based on religious teaching or belief. Affiliation rules a waived for:

  1. any business concern with not more than 500 employees that, as of the date on which the loan is disbursed, is a hotel, motel, or restaurant;
  2. Franchises listed in the SBA Franchise Directory;
  3. business concern that receives financial assistance from a company licensed under section 301 of the Small Business Investment Act of 1958 (15 U.S.C. 681); and
  4. the relationship of a faith-based organization to another organization if the relationship is based on a religious teaching or belief or otherwise constitutes a part of the exercise of religion.

Concerns and entities are affiliates of each other when one controls or has the power to control the other, or a third party or parties controls or has the power to control both. It does not matter whether control is exercised. SBA’s affiliation rules applicable to financial assistance programs, found at 13 C.F.R. §§ 121.103, provide that any of the following circumstances is sufficient to establish affiliation.

Ownership:
  • a. A concern is an affiliate of an individual, concern, or entity that owns or has the power to control more than 50 percent of the concern’s voting equity.
  • b. If no individual, concern, or entity is found to control, SBA will deem the Board of Directors or President or Chief Executive Officer (CEO) (or other officers, managing members, or partners who control the management of the concern) to be in control of the concern.
  • c. SBA will deem a minority shareholder to be in control, if that individual or entity has the ability, under the concern’s charter, by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by the board of directors or shareholders.
Stock options, convertible securities, and agreements to merge:
  • a. Stock options, convertible securities, and agreements to merge are treated as though the rights granted have been exercised for purposes of determining control.
  • b. However the following are not given such present effect:
    • i. Agreements in negotiations;
    • ii. options, securities, and agreements subject to conditions precedent which are incapable of fulfillment or where the probability of the transaction occurring is extremely remote; and
    • iii. options, securities, and agreements that give entities in control of the operative business concern the ability to divest all or part of their ownership interest in order to avoid a finding of affiliation.
Common management:
  • a. Affiliation arises where the CEO or President of the applicant concern (or other officers, managing members, or partners who control the management of the concern) also controls the management of one or more other concerns.
  • b. Affiliation also arises where a single individual, concern, or entity that controls the Board of Directors or management of one concern also controls the Board of Directors or management of one of more other concerns.
  • c. Affiliation also arises where a single individual, concern or entity controls the management of the applicant concern through a management agreement.
Identity of interest
  • a. Affiliation may arise among two or more individuals or firms with an identity of interest. Individuals or firms that have identical or substantially identical business or economic interests (such as close relatives, individuals or firms with common investments, or firms that are economically dependent through contractual or other relationships) may be treated as one party with such interests aggregated.
  • b. Where SBA determines that such interests should be aggregated, an individual or firm may rebut that determination with evidence showing that the interests deemed to be one are in fact separate.
Totality of the circumstances:
  • a. SBA may consider all connections between the concern and a possible affiliate. Even though no single factor is sufficient to constitute affiliation, SBA may find affiliation on a case-by-case basis where there is clear and convincing evidence based on the totality of the circumstances.
  • b. However, where an SBA Lender has made a determination of no affiliation, SBA will not overturn that determination as long as it was reasonable when made given the information available to the SBA Lender at the time.

Loan Amount

Eligible borrowers can seek a total loan amount equal to monthly average of payroll over the past 12 months, multiplied by 2.5. “Payroll costs” include salary, wages, commissions, cash tips, paid vacation or leave, insurance premiums and other group health care payments, allowance for separation or dismissal, paid retirement benefits and state or local taxes. The statute also allows a business to include the “sum of any compensation to or income of a sole proprietor that is a wage, commission, or income, net earnings from self-employment, or similar compensation” in payroll costs to the extent these amounts are in an amount that is not more than $100,000 in one year.

“Payroll costs” do not include individual compensation in excess of $100,000, certain taxes (including the employer’s share of the social security portion (6.2% of employee wages) and the Medicare portion (1.45% of employee wages) of payroll taxes known as Federal Insurance Contributions Act (FICA)) and ordinary income tax withholding, compensation paid to an employee if their place of residence is outside the United States and paid leave under the Families First Coronavirus Relief Act.

Example: An employer with total payroll costs of $12 million over the past 12 months is eligible for a PPP loan of $2.5 million ($1 million average monthly payroll cost x 2.5).

If you received an Economic Injury Disaster Loan (EIDL) between January 21, 2020 and April 3, 2020, you can add the outstanding amount of that loan (less the amount of any “advance” under a COVD-19 EIDL) to your calculated total (average monthly payroll cost x 2.5) for purposes of calculating your maximum loan amount.

Example: An employer calculated the $2.5 million amount in the above example, and also has an outstanding COVID-19 EIDL of $600,000, $100,000 of which was an advance. The employer is eligible for a PPP loan of $3 million ($2.5 million plus
$600,000, minus $100,000 advance).

Borrowers that were not in business between February 15, 2019 and June 30, 2019 can receive a loan amount equal to 2.5 times their average payroll costs between January 1, 2020 and February 29, 2020. Borrowers that have existing loans under certain SBA programs may be subject to different limits.

Certifications, Fees and Allowable Uses

Lenders must consider whether the borrower was in operation before February 15, 2020 and had employees for whom the borrower paid salaries and payroll taxes, (or paid independent contractors under Form 1099-MISC). Borrowers also must make a good faith certification on the PPP application form that:

  1. Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant;
  2. The Applicant is eligible to receive a loan under the rules in effect at the time this application is submitted that have been issued by the Small Business Administration (SBA) implementing the Paycheck Protection Program under Division A, Title I of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (the Paycheck Protection Program Rule).
  3. The funds will be used to retain workers and maintain payroll, or make mortgage payments, lease payments and utility payments;
  4. Any loan received by the Applicant under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 was for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule;
  5. The recipient has not received loan amounts under the same subsection for the same purpose between February 15, 2020 and December 31, 2020;
  6. The Applicant will provide to the Lender documentation verifying the number of full- time equivalent employees on the Applicant’s payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments and covered utilities for the eight-week period following this loan; and
  7. All information provided in the application and all supporting documents and forms is true and accurate in all material respects, acknowledging that knowingly making false statements is punishable by imprisonment of not more than 5 years and/or a fine of up to $250,000.

The PPP waives certain fees typically required for SBA loans, including those under Sections 18(A) and 23(A) of the statute. Applicants also do not need to certify that they are unable to obtain credit elsewhere, or provide a personal guarantee or collateral for a covered loan. However, loan proceeds received under PPP cannot be used for the same costs for which proceeds from a loan received through the Economic Disaster Loan Assistance Program are used.

Use of Loan Proceeds, Forgiveness and Reduction in Forgiveness Amount

Loan proceeds may only be used to pay: (1) payroll costs; (2) costs related to the continuation of group health care benefits during periods of paid sick, medical or family leave, and insurance premiums; (3) mortgage interest payments; (4) rent payments; (5) utility payments; (6) interest on any debt obligation incurred before the covered period; or (7) refinancing EIDL made between January 31, 2020 and April 3, 2020.

Loan amounts expended during the eight-week period following the loan origination will be forgiven, up to the total amount of the loan, if used for payroll costs (up to an annualized rate of
$100,000 per employee). In addition, up to 25 percent of the loan forgiveness amount may be attributable to qualifying non-payroll costs including: (1) interest on a mortgage obligation; (2) rent; or (3) covered utilities. The CARES Act provides an exception from the general rule that debt forgiveness is taxable, so that that amount of loan forgiveness will not be included in the borrower’s taxable income.

The forgiveness amount will be reduced if the employer reduces the number of full-time equivalent employees, or reduces employees’ salary and wages beyond a certain amount during the eight-week period.

First, the forgiven amount will be reduced by multiplying the amount of forgivable costs by:

  1. the average number of full-time equivalent employees (FTEs) employed during the eight weeks following the loan origination, divided by
  2. the average number of FTEs employed between either February 15, 2019 and June 30, 2019, OR January 1, 2020 and February 29, 2020 (the employer may elect the period used).

*Seasonal employers must measure the average number of FTE employees for the period from February 15, 2019 to June 30, 2019.

Example: Borrower had average FTEs of 300 employees per month from February 15- June 30, 2019, and average FTEs of 250 employees per month from January 1- February 29, 2020. The borrower obtains a $2.5 million loan and uses all of the loan proceeds to pay for forgivable expenses. During the eight-week period following the loan, the borrower employ an average of 150 FTEs per month. Employer elects January 1-February 29, 2020 baseline period. Forgiveness on the loan is reduced as follows:
150 Covered Period FTEs / 250 Baseline Period FTEs = 0.6
$2.5 million x 0.6 = $1.5 million forgiven
*Remaining $1 million principal must be repaid at applicable interest rate over remaining term of loan

Second, the forgiven amount will be reduced by the amount of any reduction in total salary or wages during the eight weeks after origination that exceeds 25 percent of an employee’s total salary or wages during most recent full quarter during with the employee was employed.
Employees that earned annualized pay in excess of $100,000 in 2019 are not counted for these purposes.

Example: Borrower obtains a $2.5 million loan and uses all of the loan proceeds to pay for forgivable expenses. During the eight-week period following the loan, the borrower reduces pay of hourly employees by 50 percent, resulting in a total reduction in compensation of $1,500,000. The borrower also reduces the pay of its five officers, all of whom earn more than $100,000, by 50 percent. The reduction in officer pay produces a savings of $250,000. No reduction in FTEs occurs. Forgiveness on the loan is reduced as follows:

$2.5 million – $750,000 (comp. reduction in excess of 25 percent to employees earning less than $100,000) = $1.75 million forgiven

(Remaining $750,000 principal must be repaid at applicable interest rate over remaining term of loan)

Borrowers may “cure” reductions in FTEs or compensation for purposes of forgiveness in certain circumstances. Specifically, these reductions will not reduce the forgiveness amount if:

  1. The borrower reduces the number of FTEs between February 15, 2020 and the date 30 days after the enactment of the Act and eliminates that reduction no later than June 30, 2020.
    Example: Same as above. Borrower has a baseline of 250 FTEs and lays off 100 FTEs on March 1, 2020. Average FTEs over the eight-week period is 150, but the borrower rehires 75 FTEs on June 15, 2020.
    225 Covered Period FTEs / 250 Baseline Period FTEs = 0.9
    $2.5 million x 0.9 = $2.25 million forgiven
  2. The borrower reduces the salary and wages of employees between February 15, 2020 and the date 30 days after enactment of the Act and eliminates the reduction no later than June 30, 2020.
    Example: On March 15, 2020, the borrower reduces the pay of hourly employees by 50 percent, resulting in a total reduction in compensation of $1,500,000. On June 15, 2020, the borrower restores all hourly employees to full pay.
    No reduction in forgiveness amount.

Borrowers must provide sufficient documentation to demonstrate compliance with these requirements, including: (1) payroll tax filings reported to the Internal Revenue Service; (2) state income, payroll and unemployment insurance filings; and (3) other documentation, including cancelled checks, receipts or account transcripts, to verify mortgage interest, rent and utility payments.

Borrowers also must certify that the amounts for which forgiveness is requested were used to retain employees and make covered mortgage interest, rent or utility payments.

SBA intends to issue additional guidance on the loan forgiveness provisions of the PPP loan.

Application Process

Beginning on April 3, 2020, you can apply at any lending institution that is approved to participate in the Small Business Administration’s 7(a) lending program. Additionally, upon completion of the CARES Act Section 1102 Lender Agreement (SBA Form 3506), the following types of lenders will be “automatically qualified” to issue PPP loans provided they are not currently designated in Troubled Condition:

  1. Federally insured depository institutions or federally insured credit unions;
  2. Farm Credit System institutions (other than Federal Agricultural Mortgage Corporations); and
  3. Certain depository or non-depository financing providers.

However, the $349 billion in funds may not still be available by the time additional qualified lenders submit the requisite Lender Agreement. You will not have to visit any government institution to apply for the loan. Applicants are eligible to apply for the PPP loan until June 30, 2020.

For eligibility purposes, lenders will not be determining eligibility-based repayment ability, but rather whether the business was operational on February 15, 2020 and had employees for whom it paid salaries and payroll taxes (or paid independent contractors).

Notes

  • Section 7(a)(36)(A)(iii) of the Small Business Act (15 U.S.C. § 636(a)(36)(A)(iii)), as added by the CARES Act, defines the covered period for the PPP loan program as the period beginning on February 15, 2020 and ending on June 30, 2020. However, this covered period is not further addressed in the interim final rule SBA issued on April 2, 2020.
  • Although this list of ineligible businesses also includes: “[b]usinesses principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs, whether in a religious or secular setting,” SBA issued guidance on April 3, 2020, following the issuance of its interim final rule on affiliation earlier that day, stating that this provision “impermissibly exclude[s] some religious entities” and therefore it will decline to enforce this provision with regard to PPP and EIDL. See https://www.sba.gov/sites/default/files/2020-04/SBA%20Faith- Based%20FAQ%20Final.pdf.
  • The Department of Treasury issued guidance on affiliation in conjunction with the Affiliation IFR, which largely mirrors the affiliation rules found at 121.301.
  • Section 7(a)(36) of the Small Business Act (15 U.S.C. § 636(a)(36)), as added by the CARES Act, does not place any requirement on the amount of PPP loan proceeds that must be applied to any particular eligible expense. However, the interim final rule SBA issued on April 2, 2020, requires that at least 75% of the PPP loan proceeds be used for payroll costs.

5 Steps to an Emergency Small Business Coronavirus Loan

Download PDF from Akin Gump – Five Steps to an SBA PPP Loan

Step 1. Does my business qualify?

  • Were you in business on February 15, 2020?
  • Does your business have at least one but no more than 500 employees or do you meet the applicable SBA size standards for your industry?
  • Have you faced economic uncertainty as a result of the COVID-19 pandemic? Will you use the loan to maintain payroll and other business obligations?
  • Will you decline to take the “Employees Retention Tax Credit for Employers?”

If the answer to all of the questions above is “yes,” keep reading.

Step 2. How much of a loan can I get?

First, check your payroll records to see how much you paid in total over the past 12 months:

  • Salary, wages, tips, and commissions (no more than $100,000 per employee)
  • Payments for group health insurance and retirement programs like 401(k) plans
  • Payments to the state unemployment insurance fund

Second, take that total number, divide by 12, and multiply this result by 2.5. This is your loan amount. The loan cannot be more than $10 million.

Step 3. For what can I use the loan money?

You can use the loan proceeds to pay your employees, pay health insurance premiums, pay rent, pay utilities, and pay interest on any debts your business had before February 15, 2020.

Step 4. Do I have to pay the loan back?

If in the eight weeks after the loan is issued, the following is true, the loan will be entirely forgiven:

  1. All loan proceeds have been spent on allowable expenses, and no more than 25 percent of the money has been spent on non-payroll allowable expenses (like rent), AND
  2. You have maintained the same number of employees you had previously, and none of your employees have received a pay cut of more than 25 percent compared to their historical compensation.

*If you are required to layoff employees or reduce payroll during the eight week period, only a portion of your loan may be forgiven. Any portion of the loan that must be paid back will be at an interest rate of 1.0 percent over a two year term with the first payment being deferred six months after such determination is made.

Step 5. How do I apply?

Any bank or credit union will be able to offer these loans, and most will. All you need to do to apply is go to them with proof you were in business on February 15, 2020 and provide evidence of your payroll expenses (as defined in Step 2) for the 12 months leading up to the application. You should be able to get a loan disbursed to you the same day. Deadline is June 30, 2020. Application can be found here: Paycheck Protection Program Application Form.

© 2020 Akin Gump Strauss Hauer & Feld LLP

Trump Administration Provides Financial Relief for Medicare Providers

FOR IMMEDIATE RELEASE
March 28, 2020

Contact: CMS Media Relations
(202) 690-6145 | CMS Media Inquiries

Trump Administration Provides Financial Relief for Medicare Providers

Action comes to aid providers and suppliers facing challenges in responding to COVID-19 pandemic

Under the President’s leadership, the Centers for Medicare & Medicaid Services (CMS) is announcing an expansion of its accelerated and advance payment program for Medicare participating health care providers and suppliers, to ensure they have the resources needed to combat the 2019 Novel Coronavirus (COVID-19). This program expansion, which includes changes from the recently enacted Coronavirus Aid, Relief, and Economic Security (CARES) Act, is one way that CMS is working to lessen the financial hardships of providers facing extraordinary challenges related to the COVID-19 pandemic, and ensures the nation’s providers can focus on patient care. There has been significant disruption to the healthcare industry, with providers being asked to delay non-essential surgeries and procedures, other healthcare staff unable to work due to childcare demands, and disruption to billing, among the challenges related to the pandemic.

“With our nation’s health care providers on the front lines in the fight against COVID-19, dollars and cents shouldn’t be adding to their worries,” said CMS Administrator Seema Verma. “Unfortunately, the major disruptions to the healthcare system caused by COVID-19 are a significant financial burden on providers. Today’s action will ensure that they have the resources they need to maintain their all-important focus on patient care during the pandemic.”

Medicare provides coverage for 37.4 million beneficiaries in its Fee for Service (FFS) program, and made $414.7 billion in direct payments to providers during 2019.  This effort is part of the Trump Administration’s White House Coronavirus Task Force effort to combat the spread of COVID-19 through a whole-of-America approach, with a focus on strengthening and leveraging public-private relationships.

Accelerated and advance Medicare payments provide emergency funding and addresses cash flow issues based on historical payments when there is disruption in claims submission and/or claims processing. These expedited payments are typically offered in natural disasters to accelerate cash flow to the impacted health care providers and suppliers. In this situation, CMS is expanding the program for all Medicare providers throughout the country during the public health emergency related to COVID-19.  The payments can be requested by hospitals, doctors, durable medical equipment suppliers and other Medicare Part A and Part B providers and suppliers.

To qualify for accelerated or advance payments, the provider or supplier must:

  • Have billed Medicare for claims within 180 days immediately prior to the date of signature on the provider’s/ supplier’s request form,
  • Not be in bankruptcy,
  • Not be under active medical review or program integrity investigation, and
  • Not have any outstanding delinquent Medicare overpayments.

Medicare will start accepting and processing the Accelerated/Advance Payment Requests immediately. CMS anticipates that the payments will be issued within seven days of the provider’s request.

An informational fact sheet on the accelerated/advance payment process and how to submit a request can be found here: www.cms.gov/files/document/Accelerated-and-Advanced-Payments-Fact-Sheet.pdf

This action, and earlier CMS actions in response to COVID-19, are part of the ongoing White House Coronavirus Task Force efforts. To keep up with the important work the Task Force is doing in response to COVID-19, visit www.coronavirus.gov. For a complete and updated list of CMS actions, and other information specific to CMS, please visit the Current Emergencies Website.

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Get CMS news at cms.gov/newsroom, sign up for CMS news via email and follow CMS on Twitter CMS Administrator @SeemaCMS@CMSgov, and @CMSgovPress.