Many rural hospitals on the financial brink as pandemic loans come due; stopgap funding bill has some relief

Federal loans in the form of advance payments from Medicare kept many struggling hospitals afloat during the earlier days of the pandemic, but the loans must be repaid this month, unless hospitals get a reprieve in a stopgap funding bill moving through Congress.

Officially, full repayment of the loan is due this month, and many hospitals say they still can't afford to pay up. If they don't, federal regulators are supposed to "stop reimbursing the hospitals for Medicare patients’ treatments until the loan is repaid in full," Sarah Jane Tribble reports for Kaiser Health News. 

The stopgap apprpriations measure passed by the House on Monday includes partial relief for all hospitals. It "would extend the start of the repayment period for hospitals and the amount of time they are allowed to take to repay," Tribble reports. "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."

Some rural hospitals are afraid to spend the loan money because losing Medicare reimbursements would be crippling; at many such hospitals, Medicare payments make up 40 percent or more of their revenue, Tribble reports.

"The federal Centers for Medicare and 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." Hospital leaders across the country told Tribble that CMS has not communicated with them about when or whether they'll adjust the payment deadline, and a CMS spokesperson didn't respond to questions by press time. 

More than 65 percent of the nation's small, rural hospitals, many of which were already struggling before the pandemic, took out loans from Medicare's Accelerated and Advance Payments Program because they were the first funds available, Tribble reports. CMS cut off new loan applications for the program in April.

"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," Tribble reports. "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.

Health officials and researchers fear the pandemic could accelerate the closure of rural hospitals, which would reduce rural health-care access, rural economies, and trigger a rise in local death rates. Another pressure many are facing: a federal appeals court recently ruled that the Department of Health and Human Services can continue to cut certain drug reimbursements for safety-net hospitals by nearly 30%.