Toolkit for Healthcare Businesses in Financial Distress
As part of our firm’s commitment to staying abreast of COVID19-related issues affecting our clients, we are continuing to monitor financial relief program requirements and other important topics. While applying for various forms of aid and loans, we urge you to also consider the variety of other ways to alleviate the financial impact of these extraordinary circumstances. Examples include:
- Negotiating with vendors– Consider asking for extended net payment terms, i.e., if you typically pay within 30 days of the invoice, request ‘net-60’ or ‘net-90’ payment terms. If you utilize a centrally hosted subscription software program, but have temporarily reduced your workforce, the contract should be modified to account for fewer users.
- Negotiating with banks and credit unions– When seeking deferral of loan or LOC payments and/or reduction of applicable interest rates, be sure to get written confirmation of the length of the deferment period, repayment due date, interest rate, and/or amended loan maturity date. Given the well-documented impact on healthcare providers, request that your bank prioritize your lockbox/remote deposit processing.
- Lease payment deferrals– You may be able to defer payments on certain items of equipment or arrange to return unused or minimally used equipment.
- Furloughing employees or reducing compensation– If you have made the difficult decision to furlough or layoff employees, seek competent advice regarding your rights and responsibilities under state and federal law, including whether any legal obligations related to continuation of certain benefits. For schedule and compensation modification, a brief letter agreement or addendum to the employment agreement is prudent.
- Financial relief programs– We have covered the various financial relief programs in depth in our other published articles and provider alerts (See https://www.frierlevitt.com/articles/covid-19-resources/ ). Please note that certain disbursements require attestations and reporting with respect to stewardship of the monies.
- Insurance– Aside from professional liability premium relief, this is a good time to explore relief options for other insurance policies, ideally without a reduction in coverage. If you have a business interruption policy, obtain a copy of the policy and the declaration page so they can be analyzed. Policies tend to be written in vague language, and even where “outbreak of disease” is mentioned as a covered event, it is important to pay close attention to the policy verbiage regarding exclusions and limitations.
- Procurement of supplies– In a marketplace full of disreputable players and supply chain problems, particularly in the personal protective equipment (PPE) space, cashflow-compromised providers may be tempted to price-shop supplies. Providers should exercise caution and refrain from doing business with unknown suppliers or distributors.
- Future considerations– Though we are optimistic about an eventual return to normalcy, we recognize that the “new normal” may be different for some providers. Solo practitioners may seek to consolidate their practices with other practitioners or groups. They will likely make greater use of telehealth platforms and midlevel providers. Additionally, we are watching closely to evaluate the impact of COVID19 on private equity speculation in the healthcare space. Providers who have been (or desire to be) identified as targets for private equity investment are well-advised to continue responsible fiscal practices and regulatory compliance through the duration of COVID19’s impact.
How Frier Levitt Can Help
For more information on any of these topics or other legal concerns, call Frier Levitt to speak with an attorney.