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COVID-19 Relief Bill, PPP Funding Options for Providers

Posted by Mike Rigert on Mar 29, 2021 8:30:00 AM

Earlier this month, President Joe Biden signed the $1.9 trillion COVID-19 relief bill into law. But what does it mean in terms of financial relief for healthcare organizations and what kind of funding options are currently available to providers? Let’s unpack the new legislation a bit and see what resources may be available to providers. We’ll also take a look at the Paycheck Protection Program (PPP) and funding relief options is offers providers.

COVID-19 Relief Bill

The American Rescue Plan Act of 2021, aka, the COVID-19 relief bill, includes a number of provisions that affect hospitals, health systems, and providers. The new law contains $8.5 billion to reimburse rural healthcare providers for healthcare-related expenses and lost revenues attributable to COVID-19. For more specifics on what organizations qualify and full details on the bill, check out the American Hospital Association’s special bulletin.

The law also includes $10 billion to improve the nation’s vaccine and testing capacity under the Defense Production Act. The funding will be used for the manufacturing and procurement of medical supplies and equipment related to fighting the pandemic, including diagnostic products, personal protective equipment (PPE), drugs, medical devices, and biological products.

It also provides $70 billion for COVID-19 vaccine, testing, and workforce efforts, including $15 billion earmarked for enhancing, expanding, and improving the nationwide distribution and administration of vaccines by supporting efforts such as increasing access, especially in underserved communities; increasing vaccine confidence; and funding the research, development, manufacturing, and procurement of vaccines, therapeutics, and other supplies.

As far as healthcare coverage, the law makes several changes to Medicaid financing and eligibility to increase access to postpartum coverage and expands incentives for states to increase Federal Medical Assistance Percentage (FMAP) for their base program by five percentage points for two years. The relief bill also provides federal subsidies valued at 100 percent of the health insurance premium for eligible individuals and families to remain on their employer-based coverage.

There’s also $3.5 billion for block grants addressing mental health and substance use disorders, $100 million for behavioral health workforce education and training, and $80 million for pediatric mental health services.

Paycheck Protection Program (PPP)

The COVID-19 relief bill allocates another $7.25 billion for the Paycheck Protection Program (PPP), and modifies it to clarify that eligible applicants must be 501(c)(3) organizations that employ 500 employees or fewer per physical location.

In 2020, it’s estimated that the PPP assisted more than 5 billion businesses—including healthcare organizations—to keep their doors open. It’s back again this year to help more first-timers and returning organizations with forgivable financing. Providers can use the loans to pay employees, cover rent expenses, invest in software, and purchase protective equipment. Because PPP loans can be forgiven up to 100 percent, there’s no downside to applying for one.

PPP loans are government-backed loans in which the SBA-lenders do the lending rather than the SBA itself. The government just extends the guarantee to minimize risk for lenders, and then the SBA handles forgiveness.

Applicants don’t need to provide any application fees, personal guarantees, or collateral to qualify for a PPP loan. A loan may be eligible for full forgiveness (if used appropriately) meaning it’s essentially converted from a loan into a non-taxable grant. If for some reason the loan isn’t eligible for forgiveness, it will be converted into a five-year loan with a 1 percent fixed interest rate.

Loans are available to both first-time drawers and those who received PPP loans last year. However, eligibility requirements differ based on if you’re getting a first-time draw or a second-draw loan.

PPP First-Draw Loan Eligibility

If you didn’t receive a loan last year, this is what you’ll need to qualify for a 2021 loan:

  • Your provider began operations before Feb. 15, 2020
  • Your provider is currently open
  • Your provider has 500 or fewer employees (or 500 or fewer per location)

First-time drawers can receive a PPP loan up to 2.5 times their monthly payroll costs or a maximum of $10 million.

PPP Second-Draw Loan Eligibility

  • Your provider began operations before Feb. 15, 2020
  • Your provider is currently open
  • Your provider has 300 or fewer employees (or 300 or fewer employees per location)
  • Your provider will need to have spent all of the first PPP loan (or plan to use it before the second loan is disbursed)

PPP loans for 2021 can also be used on an expanded list of expense types:

  • Payroll
  • Rent
  • Utility payments
  • Interest payments
  • Operations expenditures
  • Property-loss costs
  • Worker protection expenditures
  • Supplier costs

For more ideas on how to recoup lost revenue in what’s been a difficult year for healthcare organizations, check out the white paper, “No-Shows No More.”

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Mike Rigert

Written by Mike Rigert