Saturday, March 9, 2024 was a busy day for a weekend. CMS announced the Change Healthcare/Optum Payment Disruption program, offering accelerated payments to Part A providers and advance payments to Part B suppliers, including physician practices, that cannot bill because of the outage. The same day the President signed the Consolidated Appropriations Act, 2024, which among many other things raised the Medicare physician conversion factor from $32.74 to $33.29 for services from March 9 through December 31. And on Sunday, March 10, HHS and the Department of Labor sent a letter to payers asking them to advance funds and ease administrative requirements for affected providers.
For a practice manager staring at a payroll date, the question is simpler than any of that: how do we get to April? This article covers the CMS program in detail, because it is the most concrete new option, and then the cash plan that we think every practice in this position should be running, whether or not it applies for anything.
Key takeaways
- The CMS advance is up to 30 days of your historical Medicare payments, recouped at 100 percent of new claim payments for 90 days. It moves cash forward; it does not add any.
- Apply if Medicare is a meaningful share of revenue and cash on hand is under about four weeks of operating expense. Model the recoupment period before choosing the amount.
- The conversion factor rises to $33.29 for dates of service from March 9. Update fee schedule tables now or every Medicare payment will look wrong in underpayment review.
- Run a rolling thirteen-week cash forecast, updated every Friday, with pessimistic assumptions about when held claims will pay.
- Use the sources of cash in order: post what you already have, collect patient balances, reroute claims, then external advances, then the credit line.
How the CMS advance payment works
The program is run through your Medicare Administrative Contractor. The main terms, as published in the March 9 fact sheet:
| Term | Detail |
|---|---|
| Who can apply | Part A providers and Part B suppliers, including physicians and practices, that have been unable to submit claims or receive payment through Change Healthcare and meet the program's conditions |
| Amount | Up to 30 days of your historical Medicare claims payment amount, based on a defined look-back period set by CMS |
| Conditions | Certification that the practice was affected by the outage and cannot obtain sufficient funding from other available sources, among other statements; the certification carries legal weight, so read every line |
| Repayment | Automatic recoupment: Medicare offsets 100 percent of your new claim payments against the advance for 90 days from issuance; any remaining balance is then demanded, and interest applies after the demand |
| How to apply | Through your MAC, using its published request form; each MAC has posted instructions |
The repayment mechanism is the part to think hard about. Once your claims start flowing again, Medicare keeps every dollar until the advance is repaid. If you take a 30-day advance in March and the connection is restored in late March, you will receive no Medicare payments for most of April and May while the advance is recouped. The program moves cash forward; it does not add any. That is fine if the alternative is missing payroll. It is a trap if you take it "just in case" and then face a second dry spell during recoupment.
Put numbers on it. A practice that normally receives $80,000 a month from Medicare takes the full 30-day advance of $80,000 on March 15. The connection is restored on March 25 and claims start paying again around April 10. From that day, every Medicare remittance is offset in full. At the practice's normal pace it takes about a month of paid claims to clear $80,000, so Medicare cash resumes around May 10. If the practice took only $40,000, it would be back to normal Medicare cash by about April 25. The right amount is the gap in your forecast, not the maximum available.
Our guidance: apply if Medicare is a meaningful share of your revenue and your cash position without it is under four weeks of operating expense. Do not apply for the maximum reflexively. Model the recoupment period first.
The conversion factor change
The 1.68 percent increase in the conversion factor from March 9 is real money over the rest of the year, but it changes nothing this month. Claims for dates of service on or after March 9 will pay at the new rate once they are processed. Update your fee schedule tables so expected reimbursement is right, and make sure your contract management or underpayment review uses $33.29 for those dates, or every Medicare payment from March 9 will look like an overpayment. Commercial contracts written as a percentage of the current Medicare fee schedule may or may not follow the mid-year change; read the definition of "Medicare fee schedule" in each contract before assuming.
The thirteen-week cash plan
A payment interruption is a cash flow problem before it is a billing problem. The tool is a rolling thirteen-week cash forecast: one column per week, cash in and cash out, updated every Friday. Practices that have never built one can do it in a spreadsheet in an afternoon.
Cash in. Start with what is actually arriving: EFTs from payers whose route was not affected, patient payments at the desk and through statements, and any advance or funding program. Do not put "restored Change claims" in a week until you have a date from the vendor. Be pessimistic; a forecast that is too optimistic is worse than none.
Cash out. Payroll and payroll taxes first, then rent, malpractice, utilities, EHR and clearinghouse fees, supplies, and provider distributions last. For each line, mark whether it can be delayed, reduced or deferred by agreement. Most landlords and vendors will accept a phone call and a plan; none will accept silence.
The gap. Where the cumulative balance goes negative, that is the week you need funding, and the size of the line tells you how much. This number is what you bring to the bank, to the Optum program, or to the MAC.
Here is what the first four weeks look like for a three-provider practice with $95,000 of monthly operating expense, about 40 percent of its collections routed through the failed connection, and $110,000 in the bank on March 11.
| Week starting | Cash in | Cash out | Ending balance | Note |
|---|---|---|---|---|
| March 11 | $14,000 | $48,000 | $76,000 | Payroll week; only unaffected payers and patient payments arriving |
| March 18 | $13,000 | $21,000 | $68,000 | Rent and malpractice; rerouted portal claims from week 1 not yet paid |
| March 25 | $22,000 | $48,000 | $42,000 | Payroll week; first portal-route claims paying |
| April 1 | $20,000 | $21,000 | $41,000 | Still no date for restored claims in the forecast |
Carried forward with the same assumptions, this practice goes negative in the week of April 22, and the low point is about $35,000 short. That is the number to bring to the bank, and it is far less than the 30-day Medicare maximum this practice would qualify for. The forecast keeps it from borrowing $80,000 to solve a $35,000 problem.
Other sources of cash, in the order we would use them
- Payments you are already owed but have not posted. Many practices have EFTs sitting in the bank with no posting because the 835 stopped. Post them from payer portals. This does not create cash, but it shows you what you have and stops the AR report lying to you.
- Patient balances. Send statements on schedule and collect at the desk. Patient payments do not route through the clearinghouse.
- Claims through alternative routes. Every claim moved to a payer portal, a secondary clearinghouse or paper this week is cash in three to four weeks. Prioritize by dollar value.
- The Optum Temporary Funding Assistance Program, launched March 1, for practices whose payments were processed through Change. Interest free, weekly, repaid when claims flow resumes.
- Payer-specific advance programs. Several large commercial and Medicare Advantage carriers have announced their own advances in response to the March 10 letter. Ask each of your top payers directly.
- The CMS advance payment, with the recoupment modeling described above.
- A bank line of credit. The most flexible source and the slowest to arrange from scratch. If you already have one, draw on it before taking an advance that recoups at 100 percent.
Mistakes we are seeing
Taking the maximum advance without modeling the recoupment. Stopping patient statements "because patients are confused enough already", which removes the one cash stream that still works. Letting providers draw their usual distributions in March while staff payroll is at risk. Treating the forecast as a one-time exercise instead of a weekly habit. And the most expensive one: pausing charge entry and coding because "we can't send them anyway", which turns a cash delay into a permanent loss when the connection returns and the backlog cannot be cleared before filing deadlines.
Questions we hear
Can we apply for both the Optum program and the CMS advance?
The CMS certification asks about your ability to obtain funding from other sources. Read the exact wording with your accountant or counsel before signing. We are not in a position to tell you how a MAC will interpret it.
How do we account for the advance?
As a liability, not as revenue. When recoupment begins, the claim payments being withheld are revenue and the liability decreases. Your accountant will want the MAC's remittance detail showing the offsets.
What if the outage ends next week?
Then you have a thirteen-week forecast and a tested secondary route, and you are better run than you were in February. The Revelrex RCM audit reviews cash forecasting and payment posting as part of its scope, and for the practices on Revelrex billing we reconcile posted cash against bank deposits every week, which is the check everyone needs right now.
What to do this week
- Build the thirteen-week forecast on Friday with real bank figures, and find the week and size of the gap.
- Update the Medicare fee schedule table to $33.29 for dates of service from March 9, and tell whoever does underpayment review.
- Post every EFT that has arrived without an 835, using payer portal detail, so the AR report is true before you borrow against it.
- Call your bank about a line of credit sized to the forecast gap, and ask your top three payers whether they are offering advances.
- If the forecast still shows a gap, read the MAC's advance payment form and the certification language with your accountant, and apply for the gap, not the maximum.
