On October 8, 2020, the Centers for Medicare & Medicaid Services ("CMS") announced amended repayment terms for loans ("AAP Loans") issued under the Accelerated and Advance Payment Program (the "AAP Program"), to help ease the terms of repayment and recoupment. Originally, repayments by providers and suppliers were required to start 120 days after the AAP Loan was issued, which in some instances could be as early as August of this year, and recipients could face recoupment up to 100 percent of Medicare payments during the repayment phase. However, as a result of congressional and CMS action, repayment for each AAP Loan will now begin one year from the issuance date of such AAP Loan, and recoupment percentages are now reduced, as further detailed below.
As you are probably aware, CMS expanded the existing AAP Program in March of this year and issued AAP Loans to healthcare providers and suppliers in order to assist with the financial burden of the COVID-19 pandemic. CMS paid a total of more than $98 billion in accelerated payments to more than 22,000 Part A providers. In addition, more than 28,000 Part B suppliers, including doctors, non-physician practitioners, and durable medical equipment suppliers, received advance payments totaling more than $8.5 billion.
The Continuing Appropriations Act, 2021 and Other Extensions Act (P.L. 116-159) (the "Continuing Appropriations Act"), enacted on October 1, 2020, amended the repayment terms for all providers and suppliers who requested and received AAP Loans during the COVID-19 Public Health Emergency. "In the throes of an unprecedented pandemic, providers and suppliers on the frontlines needed a lifeline to help keep them afloat," stated CMS Administrator Seema Verma. "CMS' advanced payments were loans given to providers and suppliers to avoid having to close their doors and potentially causing a disruption in service for seniors. While we are seeing patients return to hospitals and doctors providing care we are not yet back to normal," she added.
Using CMS' revised repayment guidelines, below is an overview of the repayment requirements and milestones with respect to an AAP Loan:
- Day 1 - Provider or supplier receives the AAP Loan.
- Day 1 through Month 12 of the AAP Loan - No AAP Loan repayments are required, and CMS does not recoup any amounts to apply to the AAP Loan.
- Month 13 through Month 23 of the AAP Loan - Repayment begins through offset of Medicare payments. Medicare will automatically recoup 25 percent of the Medicare payments otherwise owed to the provider or supplier and apply such recoupment to the outstanding AAP Loan balance. Note, CMS will not reduce the repayment percentage or defer recoupment at the request of a provider or supplier, as these terms are specified by Congress in the Continuing Appropriations Act.
- Month 24 through Month 29 of the AAP Loan - Medicare will automatically recoup 50 percent of the Medicare payments otherwise owed to the provider or supplier and apply such recoupment to the outstanding AAP Loan balance. Again, CMS will not reduce the repayment percentage or defer recoupment at the request of a provider or supplier, as these terms are specified by Congress in the Continuing Appropriations Act.
- After Month 29 of the AAP Loan - If the AAPC Loan isn't paid off after the 29th month after the AAP Loan is issued, the Medicare Administrative Contractor ("MAC") in the provider or supplier's geographic area will issue a letter (the "MAC Demand Letter") to the applicable provider or supplier requesting payment of the remaining balance. If payment is not received in full within thirty (30) days from the date of the MAC Demand Letter, interest will accrue on the outstanding balance at the rate of four percent from the date of the MAC Demand Letter, and such interest will be assessed for each full 30-day period that the balance remains unpaid. The FAQ to this CMS announcement indicates that the above mentioned automatic recoupment of Medicare payments (25 percent and 50 percent respectively) cannot be extended after the 29th month of the AAPC Loan in order to avoid receiving the MAC Demand Letter. After the MAC Demand Letter is issued, providers and suppliers may submit a request for an Extended Repayment Schedule ("ERS") to attempt to obtain a statutorily authorized debt installment payment schedule by meeting specified criteria related to financial "hardship" or "extreme hardship." If met, the ERS would allow repayment over the course of three years, which may be extended to as many as five years where certain extreme hardship criteria are met.
Also worth noting with respect to AAP Loans: (i) providers and suppliers may contact their assigned MAC to confirm the outstanding balance of their AAPC Loan, and may prepay their AAPC Loan in one or more lump sum payments (but should contact their MAC for pre-payment instructions); and (ii) any payments made to CMS for outstanding overpayments will be applied to any outstanding interest on the oldest debt first, followed by the principal on the oldest debt. Any other existing Medicare debt owed by a provider or supplier will not be subject to the special repayment terms for AAP Loans.
Anthony Romano is a Partner at Burr & Forman LLP practicing in the firm's Health Care Industry Group.