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CMS’s Change of Heart for the Accelerated and Advance Payment Programs

May 14, 2020

By: Becky Greenfield

In response to the 2020 Novel Coronavirus (COVID-19) pandemic, the Centers for Medicare and Medicaid Services (“CMS”) have expanded the Accelerated and Advance Payment Program (“AAPP”) to provide emergency relief in the short-term to a broader group of eligible providers. Under this program, providers may request up to 100% of their Medicare payment for a three or six month period, depending on the provider type.

Unlike the Provider Relief Funds in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which do not need to be repaid, the accelerated payments under the AAPP are loans that must be repaid within a specified period of time. To date, CMS has paid Medicare Part A providers a total of $59.6 billion and Medicare Part B suppliers (a total of $40.4 billion.

On April 26, 2020, however, CMS announced it is suspending the AAPP program for Part B suppliers and is “reevaluating” all pending and new applications for Accelerated Payments for Part A providers. CMS clarified the suspension includes payments to outpatient hospital departments and ambulatory surgery centers reimbursed under Medicare Part B.  The suspension does not apply to inpatient hospital departments, critical access hospitals, skilled nursing facilities, and home health agencies. CMS’ decision to slow down or halt the AAPP comes after its announcements that it is appropriating an additional $175 billion to providers under the CARES Act program (the “Provider Relief Fund”).  There has been some speculation that CMS suspended payments for Medicare Part B services because so many physician groups have gone out of business since the beginning of the pandemic, making it difficult, if not impossible, for CMS to recoup the AAPP payments.

AAPP payments come at a pretty hefty cost; 2 months after issuance of the AAPP, the Medicare Administrative Contractors (“MAC”) will send a payment demand to the provider.  If the provider fails to make full payment within 30 days of the MAC’s demand, the balance of the AAPP payment will be subject to 10.25% interest. For providers already feeling a financial strain from the COVID-19 pandemic, failing to pay back the loan could have a detrimental impact on their bottom line in the following year.

Yet, even with this financial baggage, the AAPP payments could serve as a lifeline for struggling providers. Part B suppliers, like physician groups, who have not received 100% of their eligible AAPP payments could be significantly disadvantaged by CMS’ abrupt change of heart. First, it is not yet clear how the additional Provider Relief Funds will be allocated to Part B suppliers. Second, because some Part B suppliers do not ordinarily submit CMS cost reports (which is how the agency determines the Provider Relief Fund payment amount), they are required to provide additional paperwork and reports, causing a delay in payment.  Therefore, physician groups who likely already lack a cash reserve may need to reduce operations, implement pay cuts, furlough employees, or even close their doors. All of this, while these providers attempt to address the COVID-19 pandemic head-on.

Additionally, CMS’ suspension has impacted smaller hospitals (typically in rural areas) that relied on the AAPP to preserve cash flow during the pandemic.  Smaller hospitals, as compared to their larger counterparts, may not have access to loans with better lending terms and likely have less cash on hand.  Unlike larger hospitals, which may have enough cash on hand to do business as usual for six months to an entire year without opening up elective services, some smaller hospitals only have enough cash for about ten to fifteen days.  Thus, the suspension of these payments will likely have a disproportionate impact on those hospitals already struggling to stay open.

Further, although CMS is accepting new AAPP applications for Part A providers, MACs are not processing new or pending applications while CMS is “reevaluating” the AAPP payment amounts.  Part A providers will experience a delay in receipt of these AAPP payments, and we do not know at this time what the AAPP program will look like once the reevaluation has been completed.  It is possible CMS will discontinue the program altogether, and Part A providers, like Part B suppliers, will be significantly disadvantaged by CMS’ hasty program change.