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On Friday, the President signed the $2 trillion emergency aid bill passed by Senate earlier last week in response to the economic blow of the coronavirus outbreak. The legislation, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), is the largest emergency aid package in U.S. history. In provisions specific to healthcare, the bill will provide approximately $150 billion to support healthcare providers and researchers in the fight against the COVID-19 outbreak.
Public Health and Social Services Emergency Fund
The Act allocates $100 billion to a new program, called the “Public Health and Social Services Emergency Fund,” to provide grants to eligible health providers to cover unreimbursed health care related expenses or lost revenues attributable to the coronavirus pandemic. Qualified recipients include public entities, Medicare or Medicaid enrolled suppliers and providers, as well as for-profit entities and not-for-profit entities not otherwise described in the Act as the Secretary of Health and Human Services (HHS) may specify. To be eligible, recipients must be directly engaged in diagnosing, testing, or caring for individuals with possible or actual cases of COVID-19.
Eligible recipients can submit an application to the Secretary of HHS. Applications must include a statement justifying the need of the provider for the payment, along with a valid tax identification number. The Secretary of HHS will review applications and make payments on a rolling basis. Payments may be made as pre-payments, prospective payments, or retrospective payments as the Secretary of HHS deems appropriate. As of now, we are not aware of how the payments will be distributed, whether through existing grant channels, state hospital authorities, or via direct payment. We anticipate that the application procedures will be published soon.
Emergency Loan Programs
The Paycheck Protection Loan Program is the subject of an earlier alert and applies to businesses and non-profits, with fewer than 500 employees.
For businesses and non-profits with 500 or more employees, the CARES Act allocates $500 billion for loans to be made by or through the U.S. Treasury. The Treasury is directed to create a Mid-Size Business Loan program. A “mid-size business” is defined as having between 500 and 10,000 employees. The interest rate on any loans issued through the Program cannot be higher than 2% and no principal or interest will be due for at least the first 6 months of any loan. To obtain a loan, the applicant must certify the following:
- The uncertainty of economic conditions as of the date of the application makes the loan request necessary to support the ongoing operations of the recipient;
- The funds it receives will be used to retain at least 90 percent of the recipient’s workforce, at full compensation and benefits, until September 30, 2020;
- The recipient intends to restore not less than 90 percent of the workforce of the recipient that existed as of February 1, 2020, and to restore all compensation and benefits to the workers of the recipient no later than 4 months after the termination date of the public health emergency declared by the Secretary of Health and Human Services on January 31, 2020, under section 319 of the Public Health Services Act (42 U.S.C. 247d) in response to COVID–19;
- The recipient is an entity or business that is domiciled in the United States with significant operations and employees located in the United States;
- The recipient is not a debtor in a bankruptcy proceeding;
- The recipient is created or organized in the United States or under the laws of the United States and has significant operations in and a majority of its employees based in the United States;
- The recipient will not pay dividends with respect to the common stock of the eligible business, or repurchase an equity security that is listed on a national securities exchange of the recipient or any parent company of the recipient while the direct loan is outstanding, except to the extent required under a contractual obligation that is in effect as of the date of enactment of this Act;
- The recipient will not outsource or offshore jobs for the term of the loan and 2 years after completing repayment of the loan;
- The recipient will not abrogate existing collective bargaining agreements for the term of the loan and 2 years after completing repayment of the loan; and
- That the recipient will remain neutral in any union organizing effort for the term of the loan.
Please review the certification provisions above carefully with counsel as there are substantial restrictions on the operations of the applicant during the term of the loan in the form of “certifications.” For example, the applicant is required to certify that while any Program loan is outstanding, the applicant cannot pay any dividends to its shareholders or owners, cannot abrogate an existing collective bargaining agreement and must remain neutral in any union organizing effort.
Other Key Funding for Healthcare Providers
Below are some other key provisions of the CARES Act specific to healthcare providers:
- $27 billion to support the research and development of vaccines, treatments and diagnostics of coronavirus
- $16 billion to produce personal protective equipment, ventilators, and other medical supplies for federal and state response efforts
- $11 billion for vaccines, therapeutics, diagnostics, and other medical preparedness
- $1.3 billion to health care centers for the prevention, diagnosis, and treatment of COVID-19
- $250 million for grants through the Hospital Preparedness Fund for the purpose of responding to medical events
- $185 million to support rural critical access hospitals, rural tribal health programs, and poison control centers
- Medicare payment increases to hospitals and providers by way of lifting the 2 percent sequester on all Medicare payments from May 1 through the end of the year and extending the sequester an additional year
We will follow up this alert with more specific information of interest to healthcare providers in the coming days.
JMBM’s Health Care Group understands the dynamic nature of the health care industry and provides practical and effective advice to health care providers. Our multi-disciplinary team of lawyers assist with numerous areas of legal expertise required by the health care industry including labor and employment, corporate transactions and finance, corporate and government investigations, real estate, land use, bankruptcy and restructuring, privacy and cybersecurity, and intellectual property.
Marta M. Fernandez
Barbra A. Arnold
Robert E. Braun
R. Scott Brink
William F. Capps
Michael A. Gold
Jay T. Thompson