CMS Administrator Seema Verma on Friday confirmed the agency is holding off on garnishing providers’ Medicare payments amid congressional negotiations on repayment terms for the program’s COVID-19 loans.
The Coronavirus Aid, Relief, and Economic Security Act expanded the Medicare Accelerated and Advance Payment Program in the spring and required CMS to begin garnishing 100% of loan recipients’ Medicare payments starting four months after the loans were issued. The first loans went out in April, and recoupment should have started in August. But Modern Healthcare previously reported that CMS had not started withholding payments.
CMS is evaluating when to begin recoupment as Congress also considers the issue, Verma said in an interview with Modern Healthcare.
“You know that’s something that we’re looking at. Obviously, (it’s) something that Congress is also grappling with,” she said. “I will say that we understand that COVID has had a significant impact and what we’re seeing in the numbers is that services are starting to come back up.”
Verma noted that hospital inpatient numbers are even surpassing pre-COVID levels in some locations, but Medicare Part B has been slower to rebound.
“We’re looking at different options at this point, but we want to do everything we can to support providers on the front lines,” she said.
When asked whether CMS can unilaterally relax statutory recoupment terms, Verma said CMS and Congress are both looking into the issue.
“We provided a lot of technical assistance to many Hill members on both sides of the aisle, so I think there’s a lot of interest in this all across D.C.,” Verma said.
CMS had not previously publicly confirmed the recoupment was delayed. However, providers and industry observers have speculated that if changes to the program could come soon, CMS may want to avoid a situation where they might have to refund withheld payments if the repayment timeline is changed.
Congress has several standalone bills pending that would relax Medicare loan repayment terms or offer providers forgiveness. Both Democrats’ and Republicans’ opening offers on COVID-19 relief legislation included proposals to loosen provider requirements. However, Senate Republicans’ most recent, scaled-down proposal for COVID-19 relief excluded the policy.
Congress is hurtling toward a federal government funding deadline on Sept. 30. It remains unclear exactly what shape that package will take, but House Speaker Nancy Pelosi (D-Calif.) and Treasury Secretary Steven Mnuchin have agreed to a “clean” continuing resolution to avoid a government shutdown.
However, an administrative delay in recoupment alone doesn’t erase providers’ statutory liability, said RSM US Partner Richard Kes.
“In terms of accounting, hospitals may end up with this in their liability section on their balance sheet unless they have paid the money back, which they don’t have a mechanism to do at this point,” Kes said.
Some providers would have little trouble with the repayment, Kes said, though others may face liquidity challenges if their volumes remain at lower levels. Hospital finance experts estimated that up to 20% of hospitals that received the loans could have trouble paying them back.
Volumes have rebounded industry-wide between 70% and 80% of pre-COVID levels, though some hospitals may have seen better rebounds than others, said Brian Tanquilut, a healthcare equity analyst with Jefferies. If volumes don’t rebound quickly enough, there may be a question whether hospitals can repay the loans within the time frame CMS has given. Hospitals collect anywhere between 25% and 50% of their revenues from Medicare, Tanquilut said.
“For those hospitals that were already struggling, the advance payments helped them get through the worst of COVID. But as those funds dry up and then out of their balance sheet, then you could see some liquidity challenges again,” Tanquilut said.
If hospitals don’t pay back the loan amount in a year under current law, a 9.6% interest rate kicks in.
Federation of American Hospitals President and CEO Chip Kahn said setting an initial 120-day timeline for repayment was a mistake.
“We remain optimistic that Congress will act, though we are gratified to learn that Administrator Verma is taking action in the meantime,” Kahn said.
The American Hospital Association praised Verma’s policy said it urges Congress to provide more relief, including loan forgiveness to help providers rebuild.
“The AHA is pleased that Administrator Verma has announced that CMS is pausing recoupment of accelerated payments as hospitals and health systems remain on the front lines in the fight against this historic pandemic,” said AHA Executive Vice President Tom Nickels.
Senate aides have said lawmakers are reticent to forgive the funds because the money came out of the Medicare trust fund.
Acute-care and critical-access hospitals received more than 80% of the $100 billion that CMS sent out to providers to help improve their cash flow as revenue dried up due to the COVID-19 pandemic.