Medicare suspends COVID-19 advance payments for Part B providers

• The suspension of advance Medicare payments is limited to Part B and includes payments to outpatient hospital departments.
• Hospital inpatient departments can continue to seek advance Medicare payments.
• Some large systems have spurned the program, but smaller hospitals have relied on it.

Medicare has suspended advance payments to Part B recipients, including payments to hospital outpatient departments paid under Part B.

An expanded Accelerated Payment Program (APP) has provided about $100 billion in upfront payments to Medicare providers since March 28 to improve their cash flow as treatment demands increased for COVID-19 patients and revenue slumped from suspensions of elective procedures.

But on April 26, a CMS statement said it was suspending the part of the program for Part B providers “immediately.” A CMS spokesperson later clarified that the suspension applies to hospital outpatient departments, which are paid under Part B.

Additionally, the agency was “reevaluating the amounts that will be paid”  under the program. A CMS spokesperson said the only part it is “reevaluating” and continuing was the Part A payments.

Medicare providers to which the suspension of the advanced payments–effectively loans–are expected to apply include:

• Physician practices
• Nonphysician clinicians
• Ambulatory surgery centers
• Hospital outpatient departments    

Apparently unaffected providers that can continue applying for the advance Medicare payments include:

• Hospital inpatient departments 
• Critical access hospitals
• Skilled nursing facilities
• Home health agencies

Limiting access to the program to hospitals may lead to a rush by them to obtain the direct payments “before that side closes,” said David Snow, JD, an attory for Hall Render.

Significance of advance payments

While some large health systems have spurned the advance Medicare payments because they can obtain better lending terms than are available through the program, smaller providers have depended on the program to maintain their cash flow as states moved to ban the key revenue stream of elective procedures, Snow said. For most hospitals, the loss of that revenue was not replaced by a large number of COVID-19 cases.

“It’s been a lifeline for a lot of smaller, rural hospitals,” Snow said.

Similarly, the APP, which was launched before Congress starting appropriating provider grants related to the impact of the pandemic, gave physician practices needed financial support.

“For some groups facing dire financial situations, quick access to APP funds provided a lifeline,” Gelburd said.

MGMA would like to see the APP continue alongside the $175 billion in grants provided by Congress, although the program would need changes.

The program has drawn physician criticism because it requires recoupment through the withholding of all Medicare payments starting 121 days after the advance is provided. If the recoupments are not enough to repay the advance payment within 210 days, physicians can apply for a multiyear repayment plan with a high 10.25% interest rate. Provider advocates have lobbied CMS to drop the interest rate and application process and give all providers automatic access to the longer repayment period.

Why end advance payments?

CMS said the suspension of advance Medicare payments was tied to a growing pool of provider cash assistance — grants, not loans — appropriated in recent weeks by Congress. Legislation enacted last week, the Paycheck Protection Program and Health Care Enhancement Act, increased the available grants to $175 billion.

Sean Cavanaugh, chief administrative officer for Aledade, which advises physician practices, said CMS officials may have thought the Medicare advances were no longer necessary.

“Despite this, it’s clear that there’s a long way to go before practices return to their normal patient volume and revenues, so it’s important that support of some kind continue to reach them,” Cavanaugh said in an emailed response.

Some industry experts speculated that CMS cut off the program for physician practices because many were closing their doors and Medicare may have difficulty recouping the money. For instance, an MGMA survey found that by early April, 31% of practices had to close at least one practice location.