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Medical Group Management Association

Medical practices turn to small business loans, provider relief funds in wake of COVID-19

MGMA Stat - April 15, 2020

Claire Ernst JD


The Medical Group Management Association’s most recent MGMA Stat poll asked medical practice leaders, “Have you applied for a loan under the Small Business Administration’s Paycheck Protection Program?” The majority (76%) responded “yes,” while 24% indicated “no.” 

The poll was conducted April 14, 2020, with 923 applicable responses. 

According to a recent MGMA survey, 97% of medical groups have experienced a negative financial impact directly or indirectly related to the COVID-19 epidemic. Due to the severity of this financial impact, practices have been forced to reduce provider and administrative pay, temporarily furlough and lay off staff, reduce practice hours and close locations. Due to the dire financial situation that many practices face, the federal government has developed financial assistance programs in an attempt to help small businesses and the healthcare system. 

An overview of the Paycheck Protection Program 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law March 27, 2020, authorized $349 billion in loans to cover small business payroll costs under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) with the purpose of helping employers retain employees at their current pay. Medical groups with less than 500 employees are eligible to apply for a maximum loan amount of up to 250% of their practice’s average monthly payroll (capped at $10 million).  

Update: The money allocated under the CARES Act to the PPP ran out as of Thursday morning, April 16, the SBA said, leading to a freeze in accepting new applications. The SBA previously reported that more than $247 billion in PPP loans had already been approved as of April 13. For practices to continue applying for PPP loans, Congress must further fund the program. Although attempts by Congress to replenish the PPP with an additional $250 billion failed last week, it is likely that Congress will try again to fund the program in coming weeks.  

If 75% of the loan is used for payroll costs, the medical group can qualify for loan forgiveness. For reference, “payroll” includes salary, wage, commission or similar compensation; payment of cash tip or equivalent; payment for vacation, parental, family, medical or sick leave; allowance for dismissal or separation; payment required for provisions of group healthcare benefits (including insurance premiums); payment of any retirement benefit; or payment of state or local tax assessed on the compensation of employees. The PPP loans can be used for additional purposes, such as utilities and rent, which are not considered payroll costs.  

The amount of loan forgiveness will be reduced if there is a reduction in the number of employees or a reduction greater than 25% in wages paid to employees. The amount of loan forgiveness will not be reduced if you rehire an employee between Feb. 15 and April 26, 2020. For the amount that is not forgiven, there will be an interest rate of 1% with a two-year term. To apply for a PPP loan, contact your bank to find out if they are an SBA lender and processing applications. Note that these loans are “first come, first served,” and applications must be submitted by June 30, 2020. See MGMA’s resource for more details on the program. 

Although a loan under the PPP could provide a lifeline to practices struggling to cover payroll expenses, the program has experienced a series of roadblocks. Not all lenders were ready to begin accepting applications on April 3, 2020, when the program launched. The SBA loan application platform, which banks must use to authorize the loans, crashed just three days later, on April 6. 

A need for funds 

In a recent survey, MGMA members were asked what actions they have taken in response to COVID-19-related financial challenges. Almost half (48%) of respondents reported they had already furloughed staff and 22% stated they have laid off staff. If the current economic conditions persist over the next 30 days, 60% of respondents stated they would have to furlough employees and 36% reported they would have to lay off staff.  

A small independent practice in Mississippi specializing in pain reported, “All doctors and administrative staff have deferred their salaries during this time. We have laid off most of our staff except for five people.” An independent nephrology practice admitted, “Truthfully, the Paycheck Protection Program with be the only thing that will keep us from laying off employees.” 

Financial relief for businesses of all sizes 

Relief Fund under CARES Act. On April 10, 2020, the U.S. Department of Health & Human Services (HHS), began distributing $30 billion of the $100 billion appropriated to eligible healthcare providers and hospitals under the CARES Act. These payments are not loans and will not need to be repaid. Providers will be distributed a portion of this initial $30 billion based on their share of total Medicare fee-for-service reimbursements in 2019. Eligible healthcare entities must sign an attestation confirming receipt of the funds and agreeing to the terms and conditions of payment within 30 days of receiving payment. HHS states that it will focus on providers in geographic areas particularly impacted by the COVID-19 outbreak, rural providers, and providers of services with lower shares of Medicare reimbursement for the remaining $70 billion in the relief fund.  

Advance Payment Program. On March 28, 2020, the Centers for Medicare & Medicaid Services (CMS) announced nationwide expansion of the accelerated Advance Payment Program (APP), making the program available for most Medicare physicians and group practices. The APP can provide a quick mechanism for healthcare entities to obtain an accelerated cash flow, but it is subject to repayment after 120 days. Eligible Medicare providers and suppliers can request an advanced payment of up to 100% of the Medicare payment amount based on a three-month lookback period. For more information on the APP, visit CMS’ fact sheet.  

Access the MGMA COVID-19 Action Center

MGMA Stat

Would you like to join our polling panel to voice your opinion on important practice management topics? MGMA Stat is a national poll that addresses practice management issues, the impact of new legislation and related topics. Participation is open to all healthcare leaders. Results of other polls and information on how to participate in MGMA Stat are available at: mgma.com/stat

Additional resources: 

About the Author

Claire Ernst
Claire Ernst JD
Associate Director MGMA
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