Are CAAP Recoupments Taking a Bite Out of Your Margins?

In March 2020, the Centers for Medicare & Medicaid Services (CMS) expanded the COVID-19 Accelerated and Advance Payments (CAAP opens in a new tab) Program to additional Medicare Part A providers (including hospitals) and Part B suppliers (including doctors, non-physician practitioners and durable medical equipment (DME) suppliers). These payments were designed to help offset cash flow disruptions due to the sudden cessation of elective procedures, hospital admissions and doctors’ visits, and ensure providers had the financial resources needed to battle the virus.

Under the CAAP opens in a new tab, approximately $107.3 billion was issued and of this, approximately $83.6 billion went to short stay hospitals. These funds act as loans and must be paid back according to terms outlined in the Continuing Appropriations Act 2021, and Other Extensions Act opens in a new tab:

• Beginning one year from the date the CAAP was issued and continuing for 11 months, CMS will recover the CAAP from Medicare payments due to providers and suppliers at a rate of 25 percent.
• After the 11-month period ends, CMS will continue to recover remaining CAAP at a rate of 50 percent for six months.
• After the six-month period ends, a provider’s or supplier’s Medicare Administrative Contractor (MAC) will issue a demand letter for full repayment of any remaining balance of the CAAP.
• If payment isn’t received within 30 days, interest will accrue at a rate of 4 percent from the date the MAC issues the demand letter.
• After that, CMS will assess interest for each full 30-day period that a provider or supplier fails to repay the balance.

CMS began to recoup CAAP funding on March 30, 2021, from those organizations that received payments at COVID-19’s outset.

As of late May 2022, approximately $24.4 billion in CAAP funding was still outstanding opens in a new tab, with the majority of the balance ($22.3 billion) owed by 2,875 short stay hospitals.

For hospitals and health systems continuing to struggle with lost revenue and cash flow disruption due to the pandemic, Medicare repayments and interest penalties associated with CAAP recoupment exacerbate financial pressures – compounded by today’s higher inflation and labor costs. Fortunately, there’s the new Remitra Cash Flow Optimizer (CFO) technology, which can provide much-needed relief during this challenging time.

With Remitra, the first-of-its-kind AP automation solution built for healthcare, Premier is tech-enabling outdated supply chain procure-to-pay (P2P) processes to address ongoing financial pressures opens in a new tab hospitals and health systems are facing, including declining Medicare reimbursement. What’s more: Remitra technology is both enterprise resource planning (ERP) and group purchasing organization (GPO) agnostic.

All too often, back-office functions in healthcare like purchasing, processing invoices and payments, and managing price match exceptions are paper-based, manually driven and fraught with human error. This creates unnecessary waste and costs that could be alleviated with automation. Further, these operational inefficiencies wreak havoc on providers’ payment cycles opens in a new tab – and that’s where Remitra CFO comes in.

Unlocking Working Capital and More in Healthcare Supply Chain

Remitra CFO launched two years of ahead of schedule to help hospitals and health systems optimize their payment cycles and unlock working capital that may be hiding in their manual, paper-based accounting processes. Remitra CFO can make payments on behalf of providers within contract terms, extend their payables timelines by up to 30 days and reduce the number of payments across multiple suppliers.¹ This helps give providers additional bandwidth to maximize working capital rather than paying suppliers by the contract date.

The bottom line: Remitra CFO is designed to uncover billions of dollars that could be used to offset the effects of the CAAP as well as finance new growth opportunities.

Here are five additional ways AP automation can help ease financial strain and alleviate CAAP repayments:

1. Extend a finance team’s labor force and increase productivity so hospitals and health systems can better manage staffing shortfalls and effectively manage the hiring process.
2. Free up AP staff to focus on strategic opportunities that yield savings like sourcing new prompt-pay discounts and other financial incentives from suppliers, as well as rebates from credit card processors.
3. Cut the time and cost associated with issuing paper checks, which estimates show can be between $4 and $20 to cut and process just one check.
4. Reduce the chances of check and invoice fraud and theft as well as data breaches and cybercrime, which are costly to the healthcare industry.
5. Eliminate late payment penalties imposed by suppliers when invoices aren’t paid on time.

The Financial Road Ahead

The impacts of the COVID-19 pandemic reverberated across our nation’s healthcare system, overwhelming our providers and taking a toll on their financial sustainability. The CAAP was a lifeline for many healthcare organizations facing dramatic drops in revenue – but with payments due and reimbursements declining as a result, those organizations could be headed into deeper financial peril.

AP automation is a promising solution offering healthcare organizations operational efficiencies, savings opportunities and even the potential for uncovering significant additional working capital – all of which adds to existing margin improvement efforts.

As an industry, we need to embrace the technology that’s available to us today and reap its benefits for a better, more financially secure tomorrow.