CARES Act: Key Provisions for Healthcare Providers and their Practices

Apr 1, 2020 | COVID-19 Legal Update

On March 27, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed in Congress and signed into law by President Trump.  The CARES Act became effective immediately.  This article provides a brief, high-level summary of several key sections of the CARES Act most relevant to healthcare providers and their practices:

Paycheck Protection Program
Unemployment Insurance Benefits (as applied in Tennessee)
Employee Retention Payroll Tax Credits

Note that this is not a summary of the full bill.  We will continue to monitor developments regarding the implementation of the CARES Act as it shifts to the various federal agencies charged with issuing regulations to implement the law in the coming weeks.  Please consult with a London Amburn attorney or other advisor (including your financial advisor with respect to tax matters) before relying upon the information below.

Paycheck Protection Program

The CARES Act establishes the Paycheck Protection Program, which will provide loans through the Small Business Administration (“SBA”) to eligible recipients to reduce the impact of business interruption and to incentivize keeping employees on the payroll.  Some initial, unofficial guidance from the SBA may be found here.

Does my practice qualify for a loan under the Paycheck Protection Program?

To qualify for a Paycheck Protection Program loan, your practice must meet the following requirements: (1) have 500 or fewer employees and (2) be in operation as of February 15, 2020.  Sole proprietors, independent contractors, and certain self-employed individuals are also eligible to receive loans.

How much money is available for loans under the Paycheck Protection Program?

Congress authorized $349 billion for loans under the Paycheck Protection Program.  Because this is a finite amount of money, it is our understanding that loans are available on a “first come, first served” basis.

When can my practice obtain a loan?

Hopefully very soon. The SBA has stated that lenders may begin processing loan applications as soon as April 3, 2020.  However, it is unclear whether lenders will start making loans based on the language of the statute or await further regulatory guidance from the SBA.  Check regularly with your lender and on for updates.

 How much money can my practice borrow?

Generally, eligible borrowers can apply for the maximum loan amount that is the lesser of (A) 2.5 times the total average monthly payment for “payroll costs” incurred during the one-year period before the loan is made or (B) $10 million.  If your practice was not in business between February 15, 2019 and June 30, 2019, then the calculation of maximum loan amount above is modified by multiplying 2.5 by the total average monthly payment for payroll costs incurred between January 1, 2020 and February 29, 2020.

What is included in the definition of payroll costs?

For purposes of the Paycheck Protection Program, “payroll costs” include the sum of payments of any employee compensation that is:

• salary, wages, commission, or similar compensation
• payment for vacation, parental, family, medical, or sick leave
• allowance for dismissal or separation
• payment required for group health care benefits, including insurance premiums
• payment of any retirement benefit
• payment of any state or local tax assessed on the compensation of employees

However, the following items are specifically excluded from the definition of payroll costs:
• the compensation of any individual employee in excess of an annual salary of $100,000 as prorated for the covered period
• FICA and federal income tax withholdings
• qualified sick leave wages and qualified family leave wages under the Families First Coronavirus Response Act (“FFCRA”)

What can loan proceeds be used for?

Generally, loan proceeds under the Paycheck Protection Program may be used for the following expenses during the covered period of February 15, 2020 through June 30, 2020:
• payroll costs
• costs related to the continuation of group health care benefits during period of paid sick, medical, or family leave as well as insurance premiums
• employee salaries, commission, or similar compensation
• payments of interest on any mortgage obligations (but not including prepayments on such mortgages or payment of principal)
• rent
• utilities
• interest on any other debt obligations that were incurred before February 15, 2020.

What portion of the loan is eligible for forgiveness?

The amount of forgiveness will vary from practice to practice.  The portion of the loan that is eligible for forgiveness is determined by looking at the costs incurred and payments made during the eight-week period beginning on the origination date of the loan for the following expense items:
• payroll costs
• interest on real or personal property mortgage obligations in existence before February 15, 2020, and incurred in the ordinary course of business
• rent under a lease agreement in force before February 15, 2020
• utility payments, including electricity, gas, water, transportation, telephone or internet, for which service began before February 15, 2020

The SBA recently stated, through unofficial guidance on its website, that “due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll.”

Note: these forgivable expense items are (1) a subset of the permissible expense categories for loan proceeds and (2) further limited by the eight-week time period during which these items are incurred and paid.  Therefore, any permissible use of loan proceeds that falls outside these parameters will remain subject to the repayment terms described below.

The amount of the loan that is forgiven is treated as cancelled indebtedness, but is not included in calculating gross income.

Is the amount of forgiveness subject to reduction?

Yes.  The amount eligible for forgiveness may be reduced (but not increased) based on either (1) a change in the number of employees or (2) a change in wages.  A reduction based on the number of employees is calculated one of two ways (as determined by the borrower):
• Multiplying the total amount of eligible forgiveness (see above) by the quotient of the following: (i) the average number of FTE employees employed during the eight-week period immediately following origination of the loan and (ii) the average number of FTE employees employed during the period February 15, 2019 through June 30, 2019; or

• Multiplying the total amount of eligible forgiveness (see above) by the quotient of the following: (i) the average number of FTE employees employed during the eight-week period immediately following origination of the loan and (ii) the average number of FTE employees employed during the period January 1, 2020 through February 29, 2020.

Which equation is most advantageous to your practice is dependent on the number of FTE employees on your payroll during those periods in comparison to the eight week period immediately following origination of the loan.

Similarly, the potential reduction based on a decrease in wages is determined by comparing whether there was a decrease of more than 25% of total salary or wages for any employee not earning in excess of $100,000 as compared to the most recent full quarter in which the employee was employed prior to the eight-week period following the origination of the loan.

Note: the amount eligible for forgiveness is NOT subject to reduction to the extent that (i) the number of FTE employees or wages were decreased between February 15, 2020, and the date that is 30 days after the CARES Act was enacted (i.e., April 26, 2020) and (ii) such decreases are eliminated no later than June 30, 2020.  In addition, the SBA is permitted to grant further “de minimis exemptions” to the forgiveness requirements in its forthcoming regulations.

What are the terms for the portion of the loan amount that is not forgiven?

Any loan balance remaining after reduction based on the loan forgiveness amount above shall have a maximum maturity date of 10 years from the date of application for forgiveness and shall have a maximum interest rate of 4%.  In addition, there is no requirement for personal guarantees or collateral and the SBA shall not have any recourse against any individual shareholder, member, or partner of a loan recipient except to the extent the loan proceeds were used for an unauthorized purpose.  Loans made under the Paycheck Protection Program are also presumed to be eligible for deferment for not less than six months and not more than one year.

What information will I need when applying for a loan?

Generally, the borrower needs to make a good faith certification of the following:
• that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the practice
• acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments
• the borrower does not have an additional application pending for a Paycheck Protection Program loan for the same purpose or is otherwise duplicative of the amounts applied for, and
• during the period between February 15, 2020 and December 31, 2020, the borrower has not and will not receive other loan amounts under the Paycheck Protection Program that are for the same purpose or duplicative of the loan amounts applied for or received.

The SBA will not collect a fee in connection with the loan.  In addition, the borrower is not required to show that it was unable to obtain credit elsewhere. A sample application made available by the SBA may be found here.

What is the process for obtaining forgiveness for the loan?

A borrower seeking loan forgiveness must submit to its lender documentation verifying the following:
• number of FTE employees on the payroll and pay rates for the applicable periods described above, including federal payroll tax filings and any applicable state payroll and unemployment insurance filings
• documentation, including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgages, rent payments, and utility payments
• certification from a representative of the borrower entity that the documentation provided is true and accurate and that the amount for which forgiveness was requested was used to retain employees, make interest payments on covered mortgages, make covered rent payments, or make covered utility payments, and
• any other documentation the SBA determines is necessary

No borrower may receive forgiveness without submitting the documentation described above to its lender.  The lender is required to issue a decision on forgiveness no more than 60 days after receiving the application for forgiveness.

Is there a deadline for obtaining a loan?

Yes.  The Paycheck Protection Program applies to loans made during the period beginning on February 15, 2020 and ending on June 30, 2020.

Is there other financial assistance available to my practice? What if my practice does not qualify for a loan under the Paycheck Protection Program?

Yes, other forms of assistance are available.  There is alternative relief in the form of payroll tax credits (see below).  The CARES Act also expanded the availability of Economic Injury Disaster Loans of up to $10,000 to employers with 500 or fewer employees in all U.S. states and territories.  The purpose of this advance is to provide economic relief to businesses that are currently experiencing a temporary loss of revenue. According to the SBA,funds will be made available within three days of a successful application and the loan advance will not have to be repaid.  Finally, if your practice has more than 500 but less than 10,000 employees and does not utilize the payroll tax credits under the CARES Act, then it may be eligible for direct loans through the US Department of the Treasury.  The interest rates on these loans is capped at two percent and payments are deferred for the first six months.  Certain conditions apply to these loans, including maintaining employment levels at least 90% as it existed as of February 1, 2020, and to maintain such levels until September 30, 2020, and to certain restrictions regarding dividends, stock buybacks, and executive compensation.

Unemployment Insurance Benefits (as applied in Tennessee)
If I have to close my business or significantly reduce my workforce, may I provide the State with a mass layoff list or an employer filed mass claim?

Yes. An employer may file a mass layoff list or a mass claim for employees who are furloughed or affected by a layoff.  Should an employer need to stop conducting business due to the COVID-19 virus, the employer may contact the Tennessee Department of Labor and Workforce Development at 844-224-5818 to discuss the options available for affected employees.

What happens if I do not provide the State a mass layoff list or employer filed mass claim to the State?

If you do not file a mass layoff list or an employer filed mass claim, each of your employees will need to file individual claims for unemployment at If you do not file a mass list or claim, you must provide each separating employee with a completed separation notice. You can find the fillable form through this link. Filing one of the two lists will keep you from having to issue separation notices to each employee.

If I include my employee’s name on an employer mass filed claim submitted to the State, does the employee still need to file an individual claim?

No, if an employer files an employer mass filed claim, the State has the employee’s information. The employee can log into to monitor his or her claim and do the required weekly certifications.

However, if an employer files only a mass layoff list, the employee must file an individual claim and the State’s system will match the employee’s claim to the employer’s mass layoff list.

Who is eligible to receive unemployment benefits?
Those who are unemployed through no fault of their own (laid off, furloughed, partly unemployed due to significant reduction in work scheduled) are generally eligible.  The CARES Act extends unemployment insurance to many workers whose unemployment is connected to COVID-19, including:

  • those who are unable to work because the employer is closed due to COVID-19 governmental order;
  • part-time employees,
  • freelancers, independent contractors, gig workers, and the self-employed

The benefit amount and how long benefits will last for each category of employee is determined by the State. These individuals are also eligible for the additional federal benefit under the CARES Act.

What must an independent contractor or the self-employed provide to be eligible for unemployment benefits?
Under the CARES Act, some independent contractors, the self-employed and business owners may be eligible for Pandemic Unemployment Assistance.  The individual must provide self-certification that he or she is able to work but unemployed due to one of a list of reasons related to COVID-19:

  • The individual has been diagnosed with COVID-19 or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  • A member of the individual’s household has been diagnosed with COVID-19;
  • The individual is providing care for a family member or household member who has been diagnosed with COVID-19;
  • The individual is the primary caregiver for a child or other person in the household who is unable to attend school or another facility that has been closed as a direct result of COVID-19 and such school or facility care is required for the individual to work;
  • The individual is unable to reach the place of employment because of a quarantine imposed as a direct result of COVID-19;
  • The individual is unable to reach the place of employment because a health care provider has advised the individual to self-quarantine due to COVID-19 concerns;
  • The individual was scheduled to begin employment and does not have a job or is unable to reach the job as a direct result of COVID-19;
  • The individual has become the breadwinner or major support for a household because the head of household has died as a direct result of COVID-19;
  • The individual has been forced to quit a job as a direct result of COVID-19;
  • The individual’s place of employment is closed as a direct result of COVID-19.

The TN DOL has put this statement on its website:

“Once the Tennessee Department of Labor and Workforce Development determines how the state will obtain the federal funding and implement the changes, the Department will announce details for independent contractors, the self-employed and business owners who will soon be eligible for Pandemic Unemployment Assistance.”

My employee’s doctor has ordered the employee to self-quarantine because of COVID-19. Is the employee eligible for unemployment?

Beginning April 1, the employee is entitled to two weeks paid sick leave from the employer under FFCRA.  If the employee remains out of work under a physician’s self-quarantine order because of COVID-19 after the two-week period of paid sick leave, and the employee is not able to use PTO benefits or telework, then the employee may be eligible for unemployment benefits.

How long will it take employees to begin receiving unemployment benefits?

The COVID-19 emergency has created a tremendous amount of unemployment claims. The TDLWD is processing them as quickly as possible, but has given no guidance on the amount of time between the date a claim is filed and when benefit payments begin to be received.

My employee is nervous about coming to work and would like to self-quarantine. The employee does not meet any criteria for FFCRA Paid Sick Leave benefits or Emergency FMLA.  Can the employee choose to self-quarantine and collect unemployment if there is work available and the employee chooses not to go to work?

No, the employee likely is not entitled to collect unemployment benefits.

I am closing my business under a COVID-19 order, but am choosing to continue to pay my employees while they are not working.  Are my employees also eligible for unemployment?

It depends, if you are paying your employees their full salary, the employee will likely not be eligible for unemployment benefits. If you continue to pay your employees at a reduced rate during the time the business is closed, the employees may file a claim for unemployment benefits, but will likely be required to report your compensation payments during the weekly certification. The payment from the employer may be deducted from the employee’s weekly unemployment benefit amount.

How much are unemployment benefits?

It depends.  State unemployment benefits typically cover a percentage of an unemployed individual’s previous earnings, up to a maximum amount of $275 per week in Tennessee.  Under the CARES Act, the federal government will provide an additional $600 a week to individuals who are eligible for unemployment insurance.

How long do unemployment benefits last?

Most state unemployment benefits last 26 weeks, but have been extended by an additional 13 weeks under the CARES Act. The federal government’s $600 weekly payout to unemployed workers will last for a period of up to four months through July 31, 2020.  The extended benefits will last through December 31, 2020.

Will an eligible employee receive both state and federal benefits from TDLWD, or in two separate payments from the state and federal governments?

States have the option of providing the entire amount in one payment, or sending the extra portion separately. Tennessee has not yet announced how the benefits will be paid.

My employees are able to work from home, are they eligible for unemployment benefits?

No.  Workers who are able to work from home are not covered by the CARES Act expansion.

Are any unemployment benefits retroactive?

Maybe. If an individual is newly eligible for benefits, he or she may be able to claim state benefits retroactively, back to January 27, 2020. But it will ultimately be determined by the State.

Note: The exact meaning and scope of the Act’s unemployment provisions are uncertain and guidance from the state and federal departments of labor is expected soon.
Employee Retention Payroll Tax Credit

The CARES Act will help businesses to continue payment of wages to employees by providing a payroll tax credit against employment taxes owed by certain eligible employers.  The credit is generally capped at $10,000 per employee.

What makes an employer eligible?

Employers are generally eligible if they were in business in 2020 and (i) the business was fully or partially suspended due to orders from an appropriate governmental authority limiting commerce or travel during such calendar quarter because of COVID-19 or (ii) the business experienced a significant decline of gross receipts.

What is considered as a significant decline?

A significant decline is 50% less in gross receipts compared to the same quarter in the prior year.

How is the payroll tax credit calculated?

The amount generally equals 50% of the “qualified wages” (including health benefits payments).  Qualifications are also based upon the number of employees.  For employers with 100 or fewer employees, “qualified wages” includes wages paid to ALL employees, while employers with more than 100 employees includes those wages paid to an employee during the period the employee is not working.

NoteThe CARES Act excludes wages that were taken into account under FFCRA and excludes employers receiving a loan made under the Paycheck Protection Program


May an employer delay payment of its share of federal Social Security taxes?

Yes, employers are permitted to postpone deposits of their share of the federal Social Security tax on employee wages.

How does this delayed payment work?

Employers have to pay 6.2% of Social Security tax on employees’ wages but can defer 50% until December 31, 2021, and defer the remaining 50% until December 31, 2022.

Note:  this postponement is not available if a taxpayer also has an indebtedness forgiven under the Paycheck Protection Program.
How does the CARES Act address net operating losses?

The CARES Act allows losses from 2018, 2019, and 2020 tax years to be carried back five years and applied against taxes from prior year periods. In addition, the CARES Act temporarily suspends excess business loss limitations for 2018, 2019, and 2020 tax years.

How is the Alternative Minimum Tax (AMT) for corporations handled?

The Tax Cuts and Jobs Act of 2017 repealed the corporate alternative minimum tax (AMT) but allowed a credit from previous tax years to be used against corporation’s normal tax liability in tax years 2018-2021.  The CARES Act allows 100% of an AMT credit to be treated as refundable in tax year beginning in 2019.

How is interest on business loans handled?

The CARES Act increases the allowable deduction for interest expense up to 50% beginning in 2019 to increase liquidity.

The COVID-19 pandemic and response is an evolving situation. All levels of government are engaged in the process of preparing new legislation, regulations and orders both to stem the spread of the virus and to provide relief to employers and employees.   We will continue to monitor the situation and provide updates as applicable, especially as such updates affect healthcare providers and their practices.


For more updates on this topic and other legal updates related to the COVID-19 pandemic, please visit our COVID-19 Legal Resource Page by clicking here.