AMARILLO, TX – As promised in our Jan. 4, 2021 Medtrade Monday article, this article discusses additional details arising out of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) that was enacted December 27, 2020. While we still do not have complete clarity on all the important programs included in the Act, we can provide some additional details particularly relevant to Medtrade Monday readers.
It is important to note that some of the information below may change before this article is even published. Congressional Democrats are currently fast tracking a $1.9 trillion relief bill via budget reconciliation that may alter some of the programs we describe below. As always, check with your health care attorney and CPA to ensure that you have all available information before you take any action.
Provider Relief Fund Reporting
Our hope to provide a comprehensive update on the reporting program and the timing of required reports has, unfortunately, fallen flat. While the Department of Health and Human Services (“DHHS”) issued updated Provider Relief Fund (“PRF”) reporting requirements on January 15, 2021, the reporting portal remains open only for the purposes of registration. There is no indication at this time about when providers will be required to begin reporting data under the new guidelines. For now, if you received PRF monies and have not yet registered in the portal, we encourage you to do so. DHHS’s January 15, 2021 guidelines do, however, provide us more details on what to expect when reporting data. Important updates include a reversion in the lost revenue calculation back to the standard issued in June 2020. Recipients can use any one of the following methods to calculate lost revenue:
- Difference between 2019 and 2020 patient care revenue;
- Difference between 2020 budgeted patient care revenue and actual 2020 revenue using a budget that was created and approved prior to March 27, 2020; or
- Any other reasonable method provided that the PRF recipient provides HHS with a full explanation of the methodology and why it is appropriate.
The use of the previously permitted measures is a welcome change for many. We encourage you to continue to monitor the HHS PRF website as well as trade publications like Medtrade Monday for updates. It is clear that there will be much more to come.
PPP Second Draw Loans
The application period for second draw Paycheck Protection Program (“PPP”) loans opened on January 11, 2021, for some and on January 13, 2021, for everyone. Borrowers are generally eligible for the program if the entity:
- Has no more than 300 employees;
- Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020; and
- Previously received a first draw PPP loan and has used, or will use, all of those funds for permitted uses.
Other aspects of the PPP second draw program are materially different from the first draw program. Important changes include:
- PPP loans can cover a broader range of expenses including property damage costs, supplier costs, and worker protection expenditures;
- The program expanded eligible types of entities;
- The program provides a broader range of flexibility for seasonal employers; and
- Applicants for the program are required to provide additional attestations in the application form.
We encourage you to carefully explore the new PPP requirements to ascertain your entity’s eligibility for the program. It is expected that second draw PPP funds will not be quickly drained like under the first program. There are funds available as of the date of this article.
Employee Retention Credits
The most important part of the legislation for many employers may also be one of the most underreported in publications. The Employee Retention Credit (“ERC”) program, originally included in the CARES Act, has been extended for the first two quarters of 2021. Further, the Act altered the requirements to qualify for ERCs retroactively to allow more business to claim the credits from fiscal year 2020. Specific key details to discuss with your professional team include the following:
- A business operating in the first two quarters of 2021 is eligible for ERCs if that business:
- Experiences a full or partial shutdown of the operation of its business during this time period due to a government order limiting commerce, travel, or group meetings due to COVID-19; or
- Experiences a decline in gross receipts in a calendar quarter in 2021 where the gross receipts in that quarter are less than 80 percent of the gross receipts in the same calendar quarter in 2019. The IRS is expected to issue guidance on an alternative measure for 2021 that would allow comparison of a quarter to the one immediately preceding it, but such guidance is not yet available.
- The definition of qualified wages has also been expanded. In 2021, all employers with fewer than 500 employees may use qualified wages paid to all employees for the purpose of calculating ERCs for any quarter in which that employer qualifies for ERCs.
- Retroactive to 2020 and applicable to 2021, an employer may claim ERCs even if the employer received a PPP loan, so long as none of the wages paid to an employee using PPP funds are used in the calculation of the ERCs. Previously, the receipt of a PPP loan disqualified an employer from the ERC program. Functionally, this means that many employers may be able to file revised 941s for 2020 to claim credits during those time periods where they otherwise meet ERC criteria and were not using PPP funds to pay employees.
- The Act also made changes to the amount of the credits that may be claimed:
- The CARES Act created a payroll tax credit equal to 50 percent of an employee’s wages and health benefits (not to exceed $10,000) for the fiscal year. Functionally, this meant that ERCs were capped at $5,000 per employee for 2020.
- For the first two quarters of 2021, the ERC program will now allow employers to claim 70 percent of an employee’s wages and health benefits (not to exceed $10,000) per quarter. Practically, this will allow ERC-eligible employers to claim credits of up to $14,000 per employee in the first two quarters of 2021.
This is a complicated area of tax law that you should explore with your CPA and attorney. The ERC amounts could add up very quickly and have a significant positive financial impact for those employers that qualify for the credits retroactively to 2020 or during the first six months of this year.
The Act is an important piece of legislation for many in our industry. It provides multiple means of accessing cash flow infusions, including second draw PPP loans and ERCs. The changes in the PRF reporting requirements are also significant, particularly if DHHS intends to bring enforcement actions against those that may not meet the revenue requirements that are eventually finalized. Given the budget reconciliation process now underway, it is likely that many more changes will be coming our way. Before then, be sure you do not miss any of the programs your business may be able to utilize now to ensure continued patient access to the vital patient services you provide in your community.
AAHOMECARE’S EDUCATIONAL WEBINAR
Changes to Stark and the Kickback Statute: What They Mean to DME Suppliers
Presented by: Jeffrey S. Baird, Esq., Brown & Fortunato, P.C.
Tuesday, February 16, 2021
1:30-2:30 p.m. CENTRAL TIME
The federal Stark physician self-referral statute (“Stark”) and the federal anti-kickback statute (“AKS”) came into existence when health care was primarily operating under a fee-for-service (“FFS”) model that did not encourage provider collaboration nor tie reimbursement to achieving certain metrics. The FFS model has proven to be costly and inefficient. As a result, third party payors (including Medicare) are pushing health care delivery into a collaborative/value-based model that does (i) encourage provider collaboration and (ii) ties reimbursement, at least in part, to the achievement of certain metrics. Because of the shift of health care away from FFS towards a collaborative/value-based approach, CMS and the OIG recognized the need to modify Stark and the AKS. The goal of the modifications is to ensure that these two statutes do not unnecessarily impede the transition to collaborative/value-based care. The world of provider collaboration and value-based compensation results in referrals of patients among providers, sharing of risk by providers, and (among certain conditions) the sharing of value-based reimbursement. These activities ran up against the restrictions contained in Stark and the AKS. That is why, on November 20, 2020, CMS and the OIG issued a final rule that modified these two statutes. These modifications include (i) three new safe harbors to the AKS; (ii) modifications to existing AKS safe harbors; (iii) four new Stark exceptions; and (iv) modifications to existing Stark regulations and definitions.
By attending the webinar you will:
- Understand the modifications to Stark and the AKS.
- Learn how to structure value-based arrangements to comply with the new Stark exceptions and AKS safe harbors.
- Understand how the modifications to the Personal Services and Management Contracts safe harbor to the AKS provide flexibility in structuring arrangements with referral sources.
- Understand how the modifications to the Stark definition of commercial reasonableness expands the possibilities for joint ventures and service agreements.
Register for Changes to Stark and the Kickback Statute: What They Mean to DME Suppliers
on Tuesday, February 16, 2021, 1:30-2:30 p.m. CT, with Jeffrey S. Baird, Esq. of Brown & Fortunato, PC.
Jeffrey S. Baird, JD, is chairman of the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, manufacturers and other health care providers throughout the United States. Mr. Baird is Board Certified in Health Law by the Texas Board of Legal Specialization and can be reached at (806) 345-6320 or firstname.lastname@example.org.
Kelly T. Custer, JD, is an attorney with the Health Care Group at Brown & Fortunato, a law firm with a national health care practice based in Texas. He represents pharmacies, infusion companies, HME companies, and other health care providers throughout the United States. Mr. Custer can be reached at (806) 345-6343 or email@example.com.