The Small Business Administration and Treasury Department Tuesday released guidelines for how small businesses, including some hospitals and physicians, can access $349 billion in loans to compensate for losses due to COVID-19.
Hospitals and independent physicians have been squeezed by delaying elective procedures and non-urgent doctors' visits, struggling to obtain personal protective equipment, and preparing for a potential surge in seriously ill patients.
Companies and not-for-profits with fewer than 500 employees are eligible for up to $10 million in grant money under the Small Business Paycheck Protection Program. The funds are intended to cover up to eight weeks of payroll costs, including benefits. The loans can also be used to pay interest on mortgages, rent and utilities.
The SBA will have discretion over how to determine whether a hospital that is part of a larger health system is eligible for a loan.
"The affiliation rules are intended to determine whether the organization, taking into account the 'totality of circumstances,' is operating as part of a larger organization and therefore not considered a small business, which will be evaluated on a case-by-case basis," according to an analysis by the American Hospital Association.
A Modern Healthcare analysis of 2017 and 2018 CMS cost reports found that only around 29% of acute-care hospitals, 49% of critical access hospitals and 16% of long-term care facilities with fewer than 500 employees reported operating independently of a health system. Hospitals and systems self-report this data.
The AHA estimated that 700 hospitals may be eligible to apply for $7 billion under the SBA loan provisions, though the group said it cannot take into account each member's exact circumstances.
The loans can be forgiven if the businesses use at least 75% of the money for payroll costs, including retaining or quickly rehiring employees and maintaining salary levels. Payroll costs are capped at $100,000 per employee on an annualized basis.
Small businesses can apply for loans beginning Friday through June 30. A list of participating providers and the loan application can be found on the Small Business Administration's website. Loan payments will be deferred for six months at a 0.5% fixed interest rate.
"Speed is the operative word; applications for the emergency capital can begin as early as this week, with lenders using their own systems and processes to make these loans," SBA Administrator Jovita Carranza said in a statement.
Drafts of the stimulus bill would have banned not-for-profit organizations that received Medicaid funds from receiving small business loans, but the ban was dropped out of the final legislation.
The American Academy of Family Physicians had asked for the provision to be dropped so that independent physician practices could access funds to help with cash-flow issues stemming from COVID-19-related appointment cancellations and volume drops.
Many private-practice physician groups, which are owned by doctors rather than by a health system or other entity, have seen in-person visits drop 40% to 60% over the past several weeks, similar to hospitals and other providers. That decline is only partially offset by virtual visits.
Tim Broderick contributed to this report.
