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March 31, 2020 04:24 PM

Hospitals may be eligible for $500 billion fund with executive pay limits

Rachel Cohrs
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    Modern Healthcare Illustration / Getty Images

    Large hospitals and health systems may be eligible for a $500 billion corporate COVID-19 relief fund, but the money comes with strings attached including limits on compensation for highly paid employees.

    Congress' more than $2 trillion economic stimulus package included several funding streams explicitly for healthcare providers including a $100 billion provider emergency fund, boosts to Medicare payments and expanding accelerated Medicare payments. But there's a chance that if those funding streams aren't enough, hospitals could qualify for a much larger corporate relief fund that has more strings attached.

    The Treasury Department has not released detailed guidelines yet, but the American Hospital Association and Federation of American Hospitals said there's a possibility that large healthcare systems and hospitals could qualify for aid under the $500 billion corporate relief fund as the law is written. The funding is available for organizations that have incurred losses that jeopardize their businesses and have not received "adequate" relief from other loans in the stimulus bill.

    Businesses accepting corporate relief loans would have to freeze compensation for all employees making more than $425,000 and agree to pay cuts for employees making more than $3 million.

    Those making more than $3 million would be paid the sum of $3 million and half of any excess above that amount that the employee was paid in 2019. Employee pay would be limited beginning when an agreement is executed and ending one year after it is repaid, according to an analysis by Holland & Knight attorneys.

    Employees making more than $425,000 would not be able to receive severance pay larger than double their 2019 income.

    The law would count salary, bonuses, stock awards and "other financial benefits" as compensation. The compensation limits would not apply to compensation determined by a collective bargaining agreement that was agreed to before March 1.

    Other limits on workforce retention and restoration after the COVID-19 public health emergency is over could potentially apply, depending on organization size and guidance from the Treasury Department.

    Heather Meade, a principal at Ernst & Young in Washington, D.C. said providers should take all the conditions into account when considering to apply for funding, and and that the loans must be paid back.

    "Consider this as another option if you are unable to avail yourself of small business funding," Meade said on a call with providers Monday.

    Hospitals with fewer than 500 employees could be eligible for small business loans that would require them to keep employees on payroll and maintain salary levels to qualify for loan forgiveness, but don't have similar limits on executive compensation.

    An AHA spokesman said the law as written does not appear to differentiate between which corporate relief funds for-profit and not-for-profit systems might qualify for.

    Provider groups have already said that they don't believe the provider-specific funding measures will be enough to offset provider costs and are already pushing for more money in Congress' next relief package. House Speaker Nancy Pelosi (D-Calif.) has said she anticipates that healthcare providers may need more funding in the next package.

    "While this legislation is an important first step forward, more will need to be done to deal with the unprecedented challenge of this virus," AHA President and CEO Rick Pollack said in a statement after the Senate passed the stimulus legislation.

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