fah hospital policy blog

Perspectives on health policy affecting America’s hospitals and the patients we serve.

Fixing Medicare Accelerated & Advance Payment Programs are Critical to Patient Care Across America

June 16, 2020 | FAH Policy Blog Team

Category: FAH News, Financing, Medicare

“Time is running out” – FAH President and CEO Chip Kahn

The Medicare Accelerated and Advance Payment Programs’ loans saved access to lifesaving care and provided hospitals and other providers vital funding to weather the COVID shutdown.

But if the loan repayment terms aren’t fixed, this lifeline could become an anchor that sinks the recovery of hospitals across the country.

Despite the fact we are still very much in the COVID fight, starting on or about August 1st, hospitals around the country will lose Medicare fee-for-service payments. These payments will be zeroed out until the borrowed funds are repaid. The repayment schedule does not account for the continued strain on our nation’s hospitals, including that many patients are reluctant to come back for care, COVID remains a scourge in increasing parts of the nation, and hospitals must prepare for an anticipated second COVID surge.

Losing all Medicare fee-for-service payments means an average of approximately 25 percent of a hospital’s payments disappear once repayment begins – a massive hit that will put patient care in jeopardy.

There is a better way that respects the purpose of the program without weakening hospitals at the very time they should be supported and strengthened by federal policy.

The future is now. Decisions hospitals make today based on their anticipated resources will affect their ability to serve our communities and patients weeks and months down the road. We can’t wait for Medicare reimbursement to be reduced to zero to take action – it will be too late; the damage will be done.

Every day of inaction creates more uncertainty for hospitals, our patients and our caregivers - jeopardizing our recovery and patient access to care.

The terms of the Medicare Accelerated and Advance Payment Programs must be adjusted NOW – time is running out!


Pandemic Plunges Health Care System in Chaos

COVID-19 charged through every facet of our society like a tornado, shuttering schools, restaurants, large and small businesses, and throwing the entire health care system into chaos.

Hospitals have been hit particularly hard by an unprecedented triple whammy:

Instructions from federal, state and local officials to shut down all but the most essential services. Facilities had to stop all non-emergency scheduled services and procedures - like cancer treatments, placement of cardiac stents and joint replacements.

Preparations for a surge (and resurgence) in COVID-19 cases, including increased costs for supplies to protect frontline caregivers, and building additional and alternative ICUs.

Facilities in hotspot areas experiencing an overwhelming number of COVID-19 patients - straining resources and stressing staff.

These factors combined have already resulted in $200 billion in hospital losses (approximately $50 billion per month) through June 2020 alone, fueled by dramatic and devastating declines in patient volumes. Hospital volumes declined by as much as 62% compared to pre-COVID levels. This includes a whopping 42% drop in emergency department visits, and screenings for many common cancers, such as cervical, colon, and breast cancer, were down between 86% and 94%.  

Medicare Accelerated and Advance Payment Programs Save Hospitals – Temporarily

Congress and the Trump administration didn’t waste any time jumping into action, working together they quickly passed and signed into law the largest series of relief packages in the history of our nation, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The CARES Act established two vital policies for health care providers – the Provider Relief Fund and the Medicare Accelerated and Advance Payment Programs, the latter of which was expanded by Congress and the administration to meet this extraordinary crisis.

The Medicare Accelerated and Advance Payments Program has been around for years. It was established as a small-scale program to assist distressed hospitals and providers for a very short time. No one ever thought it would be used the way it is now – providing a critical infusion of operating capital to hospitals coast to coast to help them care for patients during a crippling pandemic.

Under the CARES Act, hospitals and other entities eligible for accelerated or advance payments can:

  • Receive either three or six months of their typical Medicare fee-for-service payments similar to a cash advance, and most health care providers that applied received these funds in March and April.
  • Repayment now begins only 120 days following the receipt of funds – around August 1st – in the form of zero percent Medicare reimbursement until the advance is recouped.
  • Acute care hospitals must repay the loans in full within 12 months, while clinicians and other health care providers must complete their repayment within seven months.
  • If a provider is unable to complete the repayment by the deadline, interest begins to accrue on the balance at a rate of approximately 10 percent – an astonishing rate that is totally disconnected from fiscal reality and is at odds with low rates Congress specified in the CARES Act for other industries.  

The timeline and terms of repayment have essentially just delayed the crisis for hospitals as the COVID case count stays steady or even increases in many areas.

Think about it this way - withholding 100 percent of Medicare payments is similar to garnishing all of a worker’s wages, rather than a regular, modest payment more typical of a conventional loan. For most hospitals, it will result in a complete loss of Medicare fee-for-service payment – approximately 25 percent of a hospital’s total payments on average - until the loan, and any interest that accrues, is repaid. This is simply not tenable for already struggling hospitals. The continued financial impact caused by the pandemic, which is nowhere near over, may make it difficult for some hospitals to afford to ever pay back the full amount of the loans, let alone do so under the current tight timelines.

Healing Hospitals Requires Urgent Action from Policymakers

Policymakers at both ends of Pennsylvania Avenue acknowledge that further action is needed to stop this Medicare health care provider payment crisis before it has a devastating lasting effect on access to patient care.  

After the passage of the interim emergency package in April, Speaker Pelosi and Minority Leader Schumer publicly said they had reached an agreement with the Trump administration to make important adjustments to the program. According to their statement, this included significantly lowering the interest rate and lengthening the repayment schedule.

But these important adjustments haven’t happened yet, and time is running out.

FAH is calling on Congress and the administration to include the following changes to the Medicare Accelerated and Advance Payment Programs in the next COVID relief package or for CMS to make them through regulation:

  • Extend the start of repayment of the loans from 120 days to at least 12 months
  • Reduce the amount of repayment taken from each Medicare claim during repayment from 100 percent to 25 percent
  • Extend the repayment period from 12 months for hospitals (or 210 days for other providers) to a minimum of 36 months before providers must pay the outstanding balance and before interest begins to accrue
  • Waive the interest rate or at least limit it to no more than 1 percent  
  • Resume the Program, which was paused on April 27th
  • Increase the amount that can be advanced to hospitals from three or six months of Medicare payments to 12 months of Medicare payments
  • Allocate the funds from general Treasury revenues rather than from the Medicare Hospital Insurance Trust Fund
  • Authorize loan forgiveness in cases of hardship.

We applaud the administration and Congress for their work to protect patients and assist the health care providers that care for them, but the job isn’t finished, and it will be much harder with the looming loss of Medicare payment. COVID-19 continues to wreak havoc on patients, their communities and the health care providers that serve them. These changes to the Medicare Accelerated and Advance Payment Programs must be made quickly so we can continue to move forward in the fight against COVID. To delay jeopardizes our progress and threatens to put hospitals, clinicians, and other health care providers right back where they started – on the brink.