ERC for Medical Practices
Although many medical practices are familiar with the ERC, questions remain regarding the criteria and application process. Did you know that medical practices held by private equity may qualify for the ERC? Even if you have taken out PPP loans, you are still qualified to receive an ERC.
ERC Qualifications for Medical Practices
Healthcare practices or hospitals that had their operations entirely or partially halted due to orders from the government orders restricting commerce, travel, or group gatherings as a result of COVID-19 may be regarded as qualifying employers for the purposes of the ERC. The employer is required to pay employees wages that are eligible during that period as long as the government rules are in effect. This was standard in early 2021 and in 2020.
The healthcare center should be regarded as an eligible employer if its gross receipts in the first, second, or third quarters of 2021 are more than 20% lower than the organization’s gross receipts in the comparable calendar quarter of 2019. The criteria for 2020 may be more challenging to achieve because a larger than 50% reduction in gross receipts must be shown.
Medical practices are qualified for the full benefits offered under the 2020 ERC calculations if they continue to be an eligible employer under the government mandate test or the gross receipts test and has 100 or fewer full-time employees (on average in 2019). For the 2021 ERCs, this restriction was loosened by increasing the minimum number of full-time employees to 500 or fewer.
Credit Rate
- 2020 Credit: Each employee will receive 50% of their qualified pay, which includes any employer-paid healthcare benefits. $10,000 is the maximum eligible pay per employee.
- 2021 Credit: For the first, second, and third calendar quarters, each employee was entitled to receive 70% of their quarterly qualified wages, which included any healthcare benefits given by the company. Each employee may receive up to $10,000 in eligible pay per quarter.
PPP Loan
The ERC is also open to medical practices that have received loans through the Paycheck Protection Program (“PPP”). When the ERC was first established as a component of the CARES Act, it was prohibited for any healthcare center to submit an ERC application if it received money from a PPP. The restriction against PPP customers receiving ERC benefits was later repealed when the ERC was later extended and strengthened as part of the Consolidated Appropriations Act in December 2020.
All medical centers, particularly those owned through private equity, should consider reevaluating their eligibility for ERC even if they have already received PPP loans. Due to the huge number of government limitations restricting regular activities in 2020 and 2021, many medical practices are earning sizeable cash benefits in addition to the PPP benefits they already receive.
