Forgiving PPPs Continues to Slow Home Health Mergers and Acquisitions

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The COVID-19 crisis came in a hurry. Therefore, the government has had to rush to create programs and grants to compensate for some of the financial problems faced by health care providers.

The Payroll Protection Program (PPP), the Provider Assistance Fund, and other funding have been sorely needed to keep many home care operations afloat. But as things get more normal, certain aspects of these life paths are causing increased anxiety in the organization.

“The government has stepped up programs, and [policymakers] helped these methods cover these increased costs and [lowered censuses]”, Christina Kuta, health attorney at Roetzel & Andress, told Home Health Care News. “However, the rules regarding these programs and how money is forgiven were pretty minimal – and even then it was very confusing.”

Roetzel & Andress is a Chicago-based law firm that specializes in a wide range of areas, including home care and home health care.

Some of the larger home health care providers even refused to receive money from the Provider Assistance Fund, which was part of the Coronavirus Relief, Relief and Economic Security (CARES) Act, due to concerns about what is needed and when. will return.

As for PPP loans, they were sent out at the end of March 2020 under the CARES Act and again in December under the Consolidated Appropriations Act 2021. This funding has largely dried up, which means that suppliers are now on the way – ideally – forgiveness.

“This is what the suppliers have really been doing over the past year, a kind of minefield that allows all these government opportunities to be used legally,” said Kuta.

A large number of home care agencies have received some kind of funding. As for PPPs, they received loans in the amount of from tens of thousands to multimillion

They spent the money on safety-related operating costs such as plexiglass and personal protective equipment (PPE). They also used it to keep staff on board during the pandemic and pay them. Pay for risk at work

“The problems are not as urgent as they were, and I think the situation has improved in terms of government programs,” Kuta said. “There is more information, and it becomes clearer for agencies what is happening now and how to navigate in this area. So I think the providers are getting better. But this burden is still there, and these additional obligations still exist. It hasn’t completely disappeared. “

Most providers have now learned that these loans are not forgiven automatically

This was fresh in the minds of the providers, Kut said. In particular, they were concerned about how forgiveness might work from a tax perspective and how they are going to communicate everything to ensure that the loan is forgiven.

In addition, it created problems for providers who wanted to sell their agency or buy another. M&A deals have in many cases been blocked due to accepted PPP loans and concerns over whether sellers will be drawn in a row.

“This is something that many people did not expect. When you buy or sell a home health care business, you should get detailed information about whether all of their PPP loans are forgiven, ”said Kuta. “I recently worked on two different sales of home furnishings where everyone just thought:

“Oh, it will be easy.” They were not going to worry about PPP loans and believed that the money would be forgiven later and that they would sort it out after closing. But you cannot do it. “

There are very specific rules for sellers and buyers when making a deal when it comes to PPP loans. The parties need to notify the bank of what they are selling and place that money in, for example, an escrow.

“Acquiring companies that have outstanding PPP loans that have not yet been forgiven is an extremely formal process,” Kuta said. “Providers sometimes don’t realize this. It maintains a closing date. It is delaying finances due to money that needs to be placed on escrow. It really affects the whole deal. “

Breaking these rules can also be costly. If suppliers are considering buying or selling, it is a good harbinger for them to start the show as early as possible, so these kinks can be addressed in a more timely manner as part of the deal.

Even if an M&A deal is not on the horizon, setting aside the time and resources to forgive loans is worth it, and is one of the last hurdles that suppliers must overcome before the pandemic ends.

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