Rural hospitals teeter on financial cliff as COVID Medicare loans come due

The money lent from the federal government is meant to help hospitals and other health care providers weather the COVID-19 pandemic. Yet some hospital administrators have called it a payday loan program that is now, brutally, due for repayment at a time when they still need help.

Coronavirus cases have “picked up recently and it’s quite worrying,” said Usher, chief financial officer at the 12-bed Edwards County Medical Center in rural western Kansas. Usher said he would like to use the money to build a negative-pressure room, a common strategy to keep contagious patients apart from those in the rest of the hospital.

But he’s not sure it’s safe to spend that cash. Officially, the total repayment of the loan is due this month. Otherwise, according to the loan’s terms, federal regulators will stop reimbursing the hospitals for Medicare patients’ treatments until the loan is repaid in full.

The federal Centers for Medicare & Medicaid Services has not yet begun trying to recoup its money, with the coronavirus still affecting communities nationwide, but hospital leaders fear it may come calling for repayment any day now.

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Hospital leaders across the country said there has been no communication from CMS on whether or when they will adjust the repayment deadline. A CMS spokesperson had not responded to questions by press time.

“It’s great having the money,” Usher said. “But if I don’t know how much I get to keep, I don’t get to spend the money wisely and effectively on the facility.”

Usher took out the loan from Medicare’s Accelerated and Advance Payments program. The program, which existed long before the pandemic, was generally used sparingly by hospitals faced with emergencies such as hurricanes or tornadoes. It was expanded for use during the coronavirus pandemic — part of billions approved in federal relief funds for health care providers this spring.

A full repayment of a hospital’s loan is technically due 120 days after it was received. If it is not paid, Medicare will stop reimbursing claims until it recoups the money it is owed — a point spelled out in the program’s rules. Medicare reimburses nearly $60 billion in payments to health care providers nationwide under Medicare’s Part A program, which makes payments to hospitals.

More than 65% of the nation’s small, rural hospitals — many of which were operating at a deficit before the pandemic — jumped at the Medicare loans when the pandemic hit because they were the first funds available, said Maggie Elehwany, former vice president of government affairs for the National Rural Health Association.

CMS halted new loan applications to the program at the end of April.

“The pandemic has simply gone on longer than anyone anticipated back in March,” said Joanna Hiatt Kim, vice president of payment policy and analysis for the American Hospital Association. The trade association sent a letter to CMS in late July asking for a delay in the recoupment.

On Monday, the House Appropriations Committee included partial relief for all hospitals in a new government funding plan. The committee’s proposal would extend the start of the repayment period for hospitals and the amount of time they are allowed to take to repay.

The continuing resolution that includes this language about relief for hospitals (among many, many other things) is still being hammered out, though it does face its own deadline: It must be approved by the House and the Senate within the next nine days or the federal government faces a shutdown.

Tom Nickels, executive vice president at the AHA, said his organization appreciates the House committee’s effort to address the loans in the new bill, but full forgiveness of the loans is still needed.

Sen. Jeanne Shaheen (D-N.H.) has called for changes to the loan repayment period for months and said Monday “our work is far from over.”

“We are still in the middle of this crisis — from both health and economic standpoints,” Shaheen said.

Meanwhile, hospital administrators like Peter Wright are holding their breath, waiting to see if, in order to settle the debt, Medicare will stop making payments to hospitals, even as facilities continue to grapple with coronavirus in their communities.

“The feds, if you owe them money, they just take it,” said Wright, who oversees two small hospitals for Central Maine Healthcare in Bridgton, Maine. He said his health care system took the money because “we had no other choice; it was a cash flow issue.”

For many hospitals, Medicare payments make up 40% or more of their revenue. Not being reimbursed by Medicare would be crippling — akin to a household losing nearly half its income.

“We have no idea what we’re going to do if we have to pay it back as quickly as they say,” Wright said.

In rural Kentucky, hospital executive Sheila Currans said she “vacillated” for about a week or so trying to decide whether to tap the loan program for her hospital — she knew it would have to be repaid and worried that could prove difficult.

“It was a desperate time,” said Currans, chief executive of Harrison Memorial Hospital in Cynthiana, Kentucky. Harrison Memorial was the first hospital in Kentucky to treat a COVID-19 patient in early March, she said.

The hospital immediately quarantined dozens of staff members and shut down elective procedures. And with COVID confirmed in the community, there was a “horrible fear,” Currans said, of getting infected that kept people from seeking outpatient care as well.

“Through March and April and most of May, I was in a complete spiral,” Currans said. By the end of April, Currans said, her hospital was losing millions of dollars. To cope with the pandemic, she furloughed staff and turned one wing of the hospital into a “cough clinic” to be used exclusively by patients whose symptoms suggested they might be infected with the coronavirus.

Currans said the hospital is still seeing COVID cases, but patients are beginning to return for other services, such as outpatient clinics.

In terms of the hospital’s finances, “it’s still not a wonderful time,” Currans said. The Medicare loan “as well as all the other support from the federal government helped us at least — for now — survive it.”

She’s hoping the repayment demand will be pushed back to 2021 or, perhaps the loan will be forgiven.

“I know it’s a pipe dream,” Currans said. “But this has been a historic event.”

Note to Readers: Sarah Jane Tribble spent more than a year and half reporting on a small town in Kansas that lost its only hospital. This month, KHN and St. Louis Public Radio will launch “Where It Hurts,” a podcast exploring the often painful cracks growing in America’s health system that leave people vulnerable — and without the care they need. Season One is “No Mercy,” focusing on the hospital closure in Fort Scott, Kan.— and what happens to the people left behind, surviving the best way they know how. You can listen to Episode One on Tuesday, Sept. 29.