By Michelle Mann, CPA, Tax Senior Manager and Leah McLain, CPA, Advisory Practice Consulting Executive
On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 into law. This legislation is a $2.3 trillion spending bill which includes $900 billion in stimulus relief as a response to COVID-19. Several of the provisions of this legislation affect those in the healthcare industry in particular.
Provider Relief Fund
- In June 2020, HHS indicated that recipients of Provider Relief Funds could use “any reasonable method” to determine lost revenues for purposes of reporting lost revenues due to COVID-19. A specific example was given of comparing 2020 budgeted revenues without regard to COVID-19 to 2020 actual revenues. HHS later changed their position, indicating that providers must compare 2020 calendar year revenues to 2019 calendar year actual revenues. The legislation clarifies that providers can indeed use 2020 budgeted revenues to determine lost revenues, so long as the budget was established and approved prior to March 27, 2020. This change will allow providers who had higher revenues during 2020 as compared to 2019 but who did not meet their 2020 budget to apply some or all of the Provider Relief Funds they received to reimbursement of these lost revenues.
- An additional $3 billion in grants for hospital and health care providers to reimburse health care related expenses or lost revenues due to COVID-19. This brings the total funds allocated to the Provider Relief Fund up to $178 billion to date.
- The Department of Health and Human Services (“HHS”) will be required to allocate at least 85% of unobligated Provider Relief Funds for the purpose of reimbursing healthcare providers for financial losses incurred in 2020. Providers will be able to submit an application via portal.
- As of the date of publishing this article, HHS has not updated the Provider Relief Fund section of their website to reflect changes made by the legislation. Providers impacted by these changes should monitor the HHS website for further details and direction.
Paycheck Protection Program
- Expenses paid with PPP loan proceeds are fully tax-deductible. Second draw PPP loans are available for companies with under 300 employees through March 31, 2021. Applicants for second draw PPP loans must be able to demonstrate a 25% reduction in quarter-over-quarter gross revenues during 2020 as compared to 2019.
- To read more about clarification on taxability, qualifying expenses, second draw PPP loans, and more, refer to our article highlighting Updates to the Paycheck Protection Program.
- Physician Fee Schedule payments are increased for 2021 by 3.75%; $3 billion in increased payments for physician services.
- Medicare sequester cuts of 2% have been eliminated through March 31, 2021; a 3-month delay.
Health Coverage and Medical Billing
The legislation makes a number of changes increasing pricing transparency and minimizing medical billing surprises, including, but not limited to, the following.
- Patients will be protected from surprise medical bills from certain out-of-network care without the patient’s informed consent, beginning January 1, 2022. Generally, patients will pay the cost share amounts for in-network services.
- Health plans will be required to pay out-of-network providers subject to the surprise medical bill protections for services within 30 days. An independent dispute resolution process has been established for disputes between providers and health care plans. Patients are shielded from any payment disputes.
- Patients using air ambulance services are shielded from surprise medical bills and disputes, as discussed above.
- Individuals will be able to carry over any unused Flexible Spending Arrangement (FSA) balances from 2020 to 2021.
Tax Changes and Arkansas Highlights
Also see our article entitled, Congress Has Enacted Historic Pandemic Relief Bill…Again.
- The employers’ tax credit for payments of paid sick and family leave created under the Families First Coronavirus Response Act have been extended through March 31, 2021.
- Limitation on corporate charitable contributions is increased to 25% of taxable income or 100% for qualified disaster relief payments (through early 2021).
- Business meals in restaurants will be 100% deductible for 2021 and 2022.
- Payroll taxes originally deferred through May 1, 2021 are now deferred through January 1, 2022.
- The 2020 Employee Retention Credit created under the CARES Act has been made retroactively available to employers who received a PPP loan, so long as the same payroll costs are not counted for both. Additionally, the Employee Retention Credit has been extended and expanded for 2021. In 2021, the credit is expanded to 70% (previously 50%) of qualified wages up to $10,000 per employee per quarter (previously per year). To be eligible, employers must have 500 or fewer employees and must show a 20% decrease in revenue (formerly a 50% decrease). Eligible employers should evaluate amending 2020 payroll tax returns and taking the credit prospectively during 2021.
- Arkansas income tax rates are decreasing for 2021 from 6.5% to 6.2% for corporations.
- Businesses who received an Arkansas Ready for Business Grant from the Arkansas Economic Development Commission (AEDC) now have until September 30, 2021 (previously December 30, 2020) to utilize the funds, and the expenditure reporting deadline has been extended to October 31, 2021 (previously January 31, 2021).