Facilitating Change. Preserving Access.

CMS is coming for their AAPP loans

Payback Time…

So, here we go!! The accelerated payments program that Medicare established to distribute $100 bill to healthcare providers shut down by the Pandemic (AAPP) is about to come due. The dilemma for rural and community hospitals is clear. None of them are back to full strength in clinic volume or elective and diagnostic procedures and the claims submitted during the past six months have not created the operating surplus to weather the repayment storm.

What the general public doesn’t understand is the fact that providers don’t write checks or send ACHs as compensation for the advanced funds, Medicare recoups the loans through their holding (assignment) of filed and approved claims revenue until the “loan” is repaid.

When a large proportion of your patient base is Medicare and Medicaid, as most rural hospitals experience, this creates a huge cash flow problem for facilities already operating on the margin. See Beckers article, below:

CMS accelerated payments to hospitals and other healthcare providers at the beginning of the COVID-19 pandemic to help temporarily relieve financial strain. It’s time to begin repaying the Medicare loans but that isn’t possible for some rural hospitals, according to NPR

CMS expanded the Accelerated and Advance Payment Program in late March to help offset financial damage caused by the COVID-19 pandemic. CMS announced April 26 that it was reevaluating pending and new applications for advance payments due to the availability of funds under the Coronavirus Aid, Relief and Economic Security Act. As of May, CMS had paid out $100 billion in advance payments, the bulk of which went to hospitals. 

Hospitals and other healthcare providers are required to start repaying the Medicare loans this month. Most hospitals will have one year from the date the first loan payment was made to repay the loans, according to Kaiser Family Foundation.

Ozarks Community Hospital, 25-bed critical access hospital in Gravette, Ark., is one of the hospitals that applied for and accepted the Medicare loans. The hospital also received grants made available under the CARES Act, which do not have to be repaid. 

CEO Paul Taylor said Ozarks Community Hospital’s revenue is still constrained, and he doesn’t know how it will pay back its $8 million Medicare loan. Payments for new Medicare claims will be offset to repay the loans, but losing those payments could force the hospital to close, Mr. Taylor told NPR

“If I get no relief and they take the money … we won’t still be open,” he said. 

Ozarks Community Hospital is one of more than 850 critical access hospitals in rural areas that received Medicare loans, according to NPR. Given the shaky financial footing of many rural hospitals before the pandemic, the strain of having Medicare payments withheld could be enough to force others to shut down. 

Before the pandemic, more than 600 rural hospitals across the U.S. were vulnerable to closure, according to an estimate from iVantage Health Analytics, a firm that compiles a hospital strength index based on data about financial stability, patients and quality indicators. If the financial pressures tied to the pandemic force any of those hospitals to shut down, they’ll join the list of 131 rural hospitals that have closed over the past decade, according to the Cecil G. Sheps Center for Health Services Research

Will we see an “epidemic” of closures in 2021 as a result of this? It’s time to rethink rural healthcare and the critical nature of timely access diagnosis and stabilization. Total closure of these healthcare Oases is NOT a safe option.