Medicare Advance Payments – Considered Revenue in 2020?


As reported in HMA’s blog earlier this year, some HMA clients received payments from the Medicare Advanced and Accelerated Payment Program. (CLICK HERE


Under the original terms of this Advance, at the end of the 120-day period, the recoupment process would begin and every claim submitted by the provider or supplier would be offset from new claims to repay the accelerated/advance payment. The timing on the recoupment process was ultimately changed, increasing the repayment period for the APP loan to 29 months.  During the 29-month period, there will be no claims offset for the first 12 months, a 25% payment offset for the next 11 months and 50% offset for the final six months. Thus, HMA clients and others that received this Advance will receive LESS Medicare income in 2021 and 2022 than they otherwise would have received had they not been paid this money in advance.  The legislation also reduced the interest rate applied to any funds outstanding after the initial 29-month period to 4% (CLICK HERE)  


Until recently, these monies were considered “loans or advances” to physician groups that received them. However, recent guidance from numerous accountants representing HMA client practices has changed that advice, stating that this money should be included in 2020 revenue to the practice.  According to one of the accountants:


At this point in time, without any further advice, it appears that it is an advance of revenues that will be taxable in the year it is received. Case law requires that revenue advances be taken into income when “taxpayer’s right to retain the money is dependent solely upon taxpayer’s adherence to its contractual duties”.  So as long as the physician group fulfilled its contractual obligation to deliver services, it has a right to keep the payments and therefore the money received for cash basis tax payors is included.  It is an acceleration of income into 2020.


Thus, as of today and until we receive different guidance, this Medicare “Advance/Loan” will be reclassified to Medicare Revenue and needs to be considered during year-end tax planning.

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