Repaying advance payment loans that were established by the Coronavirus Aid, Relief and Economic Security Act is unlikely to place a significant burden on rated for-profit hospital systems, according to Fitch Ratings.
As part of the CARES Act, the Medicare Accelerated and Advance Payment Program allowed hospitals to receive three to six months of their typical Medicare fee-for-service payments to help offset revenue losses.
Providers are expected to start repaying the loans by forgoing future Medicare fee-for-service payments during the third quarter of 2020.
Fitch said that the repayment likely won't be a significant burden for the for-profit hospital providers given issuer free cash flow, liquidity and the agency's recovery projections for the healthcare industry.
Fitch noted that repayment could pose a greater challenge if recovery is slower than anticipated due to the rise in cases, or if Congress doesn't amend some of the terms of the loan repayment.
The hospital industry is currently lobbying Congress to extend the repayment start date and extend the repayment period. It is unclear if they will be successful, Fitch noted.
"Fitch assumes the industry does not secure relief on the AAP repayment terms and companies are subject to the original repayment schedule. Under this scenario, and based on our expectations for business recovery in the hospital sector, we expect companies to maintain liquidity profiles consistent with current rating levels," Fitch said.