CARES Act Provides Financial Relief for Healthcare Providers
The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into law on March 27, 2020 authorizes unprecedented levels of funding to support the healthcare industry. With elective surgeries around the country shut, both hospitals and physicians have been financially hurt by COVID-19.
Of particular interest to independent doctors and their practices, the CARES Act provides:
- Financial assistance for small businesses through the Small Business Administration (SBA) 7(a) loan program. The CARES Act increases the maximum 7(a) loan amount from $5 million to $10 million. The law also expands eligible uses of 7(a) loans to include payroll support, employee salaries, mortgage payments, insurance premiums and any other debt obligations. Physician practices with not more than 500 employees may qualify. The maximum interest rate for these loans is capped at 4 percent. All or a portion of the loan may be forgivable and debt service payments may be deferred for up to 1 year. These loans do not require personal guarantees and no collateral is needed.
- $100 billion in direct financial support to hospitals, physician practices, and other healthcare providers under the public health and social services emergency fund. This support is for the costs of treating COVID-19 patients as well as to ease the financial impact on those who lose revenue due to reductions in other services as a result of the pandemic.
Healthcare practices affected by the pandemic should immediately begin identifying, documenting and projecting expected additional costs and losses and be prepared to submit a succinct statement justifying their need for the funds. Here is a short list of items practices will likely need when applying for a SBA 7(a) relief loan:
- Completed application
- SBA Form 1919 or corresponding SBA Form 912, if applicable
- Article of Incorporation/Organization of each borrowing entity
- Bylaws/Operating Agreement of each borrowing entity
- All owners’ driver’s licenses
- Payroll Expense verification documents to include: IRS Forms 940 and 941, Payroll Summary Report with corresponding bank statement. If a Payroll Summary Report is not available, Employee Pay Stubs as of February 15, 2020 (or corresponding period) with corresponding bank statement, and breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
- 1099s if independent contractor
- Certification that all employees live within the United States. If any do not, provide a detailed list with corresponding salaries of all employees outside the United States
- Trailing twelve-month profit and loss statement (as of the date of application) for all
The SBA’s 7(a) loans will be administered through physicians’ bankers and its hoped that the necessary SBA forms will be finalized this week. Congress has allocated $350 billion for the SBA 7(a) program. Steve Mnuchin, the US Treasury Secretary, believes that those physician groups who timely file in April for 7(a) assistance could see monies from the program in May.