Critical Business Issues and Strategies for PPMs Resulting from COVID-19

Date: April 3, 2020
Hello. My name is Jerry Sokol, and I want to, first of all, welcome and thank everyone for joining us for today’s virtual conference titled “Critical Business Issues for PPMs Resulting from COVID 19”. First and foremost, we want to make sure that, first and foremost, we want to make sure that everyone is safe and healthy as they stay at home working and self-isolating. And again, we want to thank you very much for joining us today for our first virtual conference. We at, for those of you who know McDermott’s very deep in the PPM space and we had a conference scheduled for May in Nashville, which we’re not going to be convening, for obvious reasons. But in lieu of that, we’re going to be having a series of conferences that are really intended to help the PPM industry during this unprecedented time. We happen to be very excited about today’s program because over the last few weeks the McDermott specialists have been working with PPMs to address issues that they’ve been dealing with, including, really, access to various governmental monies in subsidies and tax benefits, dealing with employment issues, dealing with landlord and lease issues and lenders and various issues in this distressed environment. So, we’re very excited to be able to bring to you today a great faculty, a compelling agenda as we run through the issues that are impacting the PPMs today in today’s environment. And so again, thank you for joining us, and with that I’m going to turn it over briefly to my partner, Ira Coleman.

Thank you, Jerry. It’s Ira Coleman, and I’m chair of McDermott Will & Emery and also the practicing health lawyer. What we’re going through is unprecedented. We all understand that. I’m amazed and excited and how fast we’ve been able to pivot to still continue to provide indispensable advice to our clients during this crisis time. We all knew that there was a recession hanging over our horizons and we were all doing our recession planning coming out of a great 2019. But we didn’t know what we were in for, when on March, Wednesday, March 12th, the world kind of changed in front of us. That’s what we’re trying to do today. The helpful crisis managers walk you through the most important aspects of what you’re dealing with in the day-to-day with the decrease demand in certain areas, increased demand in other areas, and just trying to stabilize the business and be able to come out on the other side ready for it. But we want to, we put this program together based on what we’re hearing from all our clients and our friends out there in the PPM industry. We think it’s an extraordinary program. We hope it’s a good use of your time. Please give us your feedback and continue to hang in there. We’ll all get through this together. Thank you so much. And I’m going to turn it over to my partner Kris Werling, to jump on and start with first. Thank you.

Great. Thanks, Ira. And thanks to everyone joining us from all over the country. We’re going to start today’s virtual conference with a discussion of what I think is top of mind for everyone, which is what financial aid relief is immediately available to physician practices and practice management companies? I’m joined today by a group of my partners and colleagues at McDermott, McDermott Plus, and Farragut Square Group. We’re going to talk through some critical components of The CARES Act and other aspects that the government has made available to practices and companies to help get through this trying time. So, our agenda for the next 35 minutes or so, Hillary, you can pull the agenda up, we’re going to start talking about the Medicare Advance Payments Program and some related grant programs. Next, we’ll be talking about the Payroll Protection Program, and James Kim will be talking us through, what are some of the details that folks need to know as applications open up today for an unprecedented amount of cash that’s available for companies to continue operations and keep employees on their payroll? After that, we’re going to talk about some tax issues and ways that you can use the new tax changes to your advantage. And then we’ll think about what’s next, and what may be coming in our upcoming regulations and new laws. So, thank you panelists for joining me. Let’s start on this issue of the Medicare advance payments. Brian, can you take us through, what this, what this really means?

Absolutely. Thank you, Kris and thank you, everybody, for joining us. We’ve got some great content for you guys today. and I think we’re going to move through it very, very quickly. So, one thing we want to talk about right now is funding streams that are available to you right now. So, as of last week, I think many of you probably know this, but as of last week, CMS updated a guidance based on the CARES Act, but now expands something called the Accelerated Advanced Payment Program in Medicare to all AB for service providers. This is an existing program. It was originally designed for hospitals, but in the guidance over the weekend, CMS expanded that to everybody. So, what it means is, based on the last 120 days of Medicare payment, you can apply for another three months of payment based on that. You will not under the way the program works currently, obviously, that may change down the road in a way that would be more beneficial. But for now, Medicare will ask you to start repaying that or recoupment after 120 days from when you initially get this payment. And then from that point, you have, as a non-hospital provider, you have 210 days for receiving advanced payment to repay the entire amount. So, you know, again, this is basically, like, a 0% floater loan for a period of time. It’s important that everyone get on it. So, I’d also, I want to pull in my colleague Jason Caron as well to, kind of, add some additional thoughts in terms of, you know, where you go to apply for this and some other issues.

Great. Thank you, Brian. What I’m going to cover real quickly is an orientation as it relates to a couple of particular features. One, many clients have asked us what the amount will be in terms of actual reimbursement. The amounts that are going to be calculated are not clear from the guidance that was issued last Saturday, to Brian’s point, nor were they in the amended regulations. However, we’ve clarified with CMS that the payments will be calculated if you’re a supplier for the three-month period from October 1st to December 31st, 2019. For hospitals, July through December 31st, 2019. Another key feature in that element is for quote unquote net reimbursement. Another key feature that we’ve been identifying as part of this process is, well, it’s not clear on the face of, again, last Saturday’s guidance, there is an interest element that would apply here, and it’s the standard overpayment interest element. As Brian had touched upon, when you get to, respectively, that 210-day mark or the 365-day mark, depending on what you are here with PPM audience particular, the vast majority of you will be sitting in the part B supplier 200-day orientation. The 10.25% interest rate, which is the current interest rate on overpayments, would be applied in that ballpark. This interest rate does change over time, and we anticipate when we get to that point 210 days out from the payment being issued to you, that that interest rate would, in fact, change. But it’s approximately 10.25% and that is what the rate is today. What we’ve tried to depict here, as a result is to try to help folks understand some of the practical aspects of the timing. At the top of the slide, you’ll see here that we’ve identified when the federal public health emergency was declared, knowing that state and local governments have done the same, when the CARES Act was enacted, and some of the critical dates around July, August, October, November, December, and March of next year. Where we’ll be as it relates to the pandemic, and when recoupment begins, when interest attaches and the like, will be a critical orientation for the provider and supplier community to think about as you’re potentially getting back up on your feet, all of a sudden having the cash flow issues and interest attachment issues that come with this. The other piece we’re illustrating here and trying to illustrate, is that there is a material distinction between certain part A providers and Part B suppliers, like PPM community physician practices, that are measured, I guess, against this 210 day time frame, whereas hospitals are measured on a 1 year time frame. In other words, their interest does not attach for 1 year, ours attaches at 210 days within the physician community. To Brian’s point, that’s something that we would expect to continue to be as part of our part broader policy discussion. One, of course, that first issue that I had raised, which relates to, in particular, the orientation as to whether recoupment in this interest rate in this time frame makes rational sense for the provider community that is going to continue to be distressed. And two, whether we should have equipoise between hospitals and other providers that are also being adversely impacted. Those are the two points I wanted to make insofar, as they’re not clear on the face of the guidance. I’ll turn it back over to Kris.

Yeah. Jason and Brian, question for you. How are providers thinking about the amount that they should request under this program? Are we thinking about taking the full amount upfront now? Will there be multiple opportunities to request funds? Talk us through that.

Yeah so that, that’s a good question, Kris as it relates to the application as we sit here today, depending on your Medicare contractor, for which there’s a lot of diversity across the Medicare contractors in terms of how their applications are structured for national PPMs, this will present a really confounding issue. But you can request something less than the maximum amount, with some of the Medicare contractors in particular. As it relates to, in turn, if you were to say, I’ll take 50% of my net reimbursement now and theoretically more down the road, that is not a point that’s been specifically addressed in any of the guidance thus far. It’s theoretically possible, Kris, but that’s a point that I think most of our clients are thinking about as it relates to this interest element, why not take the cash at a time frame in the near term? Hold that cash in reserve, what at the max amount, and then think about if you’re going to start to repay, of course, being thoughtful about when does, when does the recoupment period start, wanting to time your application with that recoupment and interest period, knowing full while, to Brian’s point on, and what I’m advocating here is this policy is still going to be likely subject to a lot of ongoing pressure to change it in a more equitable way for providers.

That makes sense. How about M&A plans and commercial payers? Are they providing any direct additional cash flow yet that you’re seeing that’s kind of similar to this program?

So, this program, to your point, Kris, only relates to the Medicare fee for service world. It does not relate to other product categories. Medicare Advantage, for example, or the commercial markets being most notable with the number of our clients. That said, one thing to bear in mind is that most of those plans have not, themselves, received any sort of relief from the federal government in connection with the CARES Act and other programmatic movement out of Washington here. However, some of the plans are as a contractual matter, and as a business relationship matter with certain providers coming up with solutions. It’s not a national orientation, it’s a plan by plan orientation, but we have seen some plans working collaboratively with certain subsectors of providers to try to provide some relief.

That makes sense. Brian, question for you. Aside from the Medicare advance payments, I understand that the sequester limitations were dropped. How does that impact physician practices?

Thank you, Kris. That’s a great question. So, in the CARES Act, they suspended the current 2% sequestration, we just kind of call it claims tax, really, because that’s sort how it’s played out over the years. But they’ve suspended that through the end of the year. What that means, on a go forward basis, it’s interesting because, you know, I, I don’t think Jason, I have an answer for that right now, but it’s a legitimate question. For example, if you’re taking advantage of the Accelerated Payment Program, will they plus up your claims from the last 120 days by 2% to account for the fact that there’s no sequester currently? That’s a relevant issue, but, you know, in general, what it means is that, normally when you file a claim now you’re, you know, when the MAC pays you, they dive into the percent and that will cease for the remainder of the year.

Okay, great. Let’s talk now a little bit about the grant programs. A lot of us read about the CARES Act having an $100 billion grant fund, and are we seeing that impact physician practice yet, practices yet? And is there an opportunity for PPMs? Mara, could you talk us through that?

Absolutely. So, this version has gotten a ton of attention, the CARES Act included, as you mentioned, $100billion for a provider fund that is intended to get relief to hospitals and physicians and other types of providers and suppliers. The language of the legislation itself is very broad, and we are awaiting additional guidance from HHS in terms of how those funds will be divvied up and distributed. We recognize that there’s extreme financial pain, especially for physician practices right now and that HHS is moving, in many people’s view, too slowly. And just a little bit of color in terms of what’s going on, I think, in the background there, there’s been a lot of back and forth over whether HHS should just portion this money out. So, using some sort of flat approach. You all may have seen the American Hospital Association advocated for this in a letter this week saying, you know, you could use the fund to pay $25,000 per bed to Medicare, to hospitals. Or you could, you know, somehow develop a flat payment amount for primary care doctors and for specialists, and that has the advantage of being clean and moving money really fast, but the disadvantage of not being tailored to people’s unique and specific circumstances. So, you think about a rural provider or provider in New York who maybe have different circumstances than the average provider. There is another school of thought where HHS would have to develop guidance and go through the regulatory process, including the Office of Management Budget, to put out applications and criteria. And you could see that being drawn out over a longer period of time. So, we know that that money is not available yet. It is floating in the background, and the best thing, I think, for this audience to know is that McDermott Plus, McDermott, and Farragut Square are all monitoring this incredibly closely, and as soon as we see additional guidance or information on that, we’ll be pressing that out to our clients and friends.

Great. Anything from the states that you’re seeing yet in terms of grant programs?

So, I think there are individual states that are, are looking at taking action through emergency funds. And, you know, I think that’s going just vary broadly across the different states in terms of what’s available, and what are the administrative avenues that you need to take to access those funds.

Okay, great. So, we’ll keep watching on that front. So, the third … that we’re going to talk about in terms of immediately available relief is the loan program. Obviously, today, this is on the front page of every newspaper in America. The applications are opening up with SBA lenders, and we have a massive amount of cash that’s available for taking out loans, which in some cases will be forgivable. We’re joined by James Kim, one of our small business administration and federal contracting experts who has great perspective on these loan programs and the different eligibility requirements. So, we’re going spend the next 10 to 15 minutes or so talking through these, the loan programs. So, James why don’t you, why don’t we go to the next slide?
Here we are, on the, the slide is up. James, why don’t you talk us first through who is an eligible recipient for these loans?

Sure. Thank you very much, Kris. And thank you very much for everyone on the line. Really appreciate everyone’s time. This is, number one, I have to just preface, this is a fastly moving, fastly moving target. There was interim final regulations that were released yesterday. A third application and a fourth application version released a few hours ago. So, there are changes that are occurring. But first, under The CARES Act, part of the program of relief that was provided is to call the Paycheck Protection Program. Under the program, what’s eligible are businesses, including businesses with fewer than 500 employees, unless your size standard is greater than 500, in the NAICS size standard table maintained by SDA, you use whichever is greater. There are three exceptions to the rule. First, businesses in the hospitality at restaurant industries are based on a physical location store basis in terms of eligibility. Second, franchises that are approved on the SBAs franchise directory with a code identifier. And finally, small business investment company or SBIC in funded entities. Go to the next slide.

The key here, of course, is can a PC apply independent of an MSO? And for our purposes, the critical analysis here is what is called affiliation. In the interim final rule yesterday night, which I had a chance to read through at about midnight, it stated clearly that the affiliation rule does apply. And the affiliation rule that is applicable is cited here. 13CFR 121.301(f). Generally speaking, where an affiliation exists, where there is a common control between two entities, those entities are considered combined for eligibility purposes. So, if a PC were to be considered affiliated with an MSO, that would be combined with that, and theoretically, with all of the other PCs that are subsequently affiliated with that MSO. Generally speaking, that does create issues with regard to qualification in terms of employee size limits.

And so, James just pausing there and breaking it down, I think, one of the questions that we’ve gotten over and over the last few days is, I’ve got an MSO that’s got 300 employees and a PC has another 250 employees, as an example. Do those independently qualify as small businesses, and can they separately apply? And that’s the specific situation where we have to think about whether they’re an affiliate, right, James?

That’s exactly right. That’s when you look to the affiliate tests. If, unless, on the prior slide one of the three state exemptions apply, which commonly would not often apply in a PC situation. It is possible, sometimes, but it’s rare that there is SBIC funding at an MSO level. In the absence of that, the affiliation rules apply at an applicant basis. So, if you look at the PC applying for assistance, it would look at whether it’s affiliated with the MSO, and similarly the MSO with the PC. That would be the analysis and as stated here, it is case by case.

Yeah, so, as we sit right now, we’re stuck with the affiliation rules that were already in the federal regulations and the government’s been applying those affiliation rules in awarding SBA loans for years, right?

Absolutely. This is that well-established process. I have been working with the SBA federal contractor and other relationships for the last decade. This is nothing new. This program of relief and the 78 programs was used post, post Katrina and had the same affiliation rules and applied that, they’ve changed the forms somewhat, and they just changed the forms again and as stated, there will be, I stated, the guidance in 5 year—there will be additional guidance on the applicability of affiliation. So, there is more to come. It’s not quite there, but there is more information.

Yeah. We expect in this affiliation guidance that will come out, that there will be some changes related to equity investors, potentially. Can you speak to what you’re hearing about that James?

Sure. So, I’m sure people have heard about the letters that have gone back and forth with a letter for Pelosi’s office asking for a waiver of the affiliation rule related to equity investments. We are aware of other conversations that, that have been occurring, that have mentioned the same sort of information. There’s no way to tell whether or not the change will occur. But the fact that there was a specific provision in the interim final rule that was issued, that’s separated out affiliation, indicates there will be something better that’s, that’s going to be provided. It’s up to us to keep tuned as to what that might be.

Yeah. So, James, I saw a question come in on the Q&A line as to how the affiliation rules just apply to a private equity backed practice management company. Can you, aside from the PC MSO affiliation analysis, could you explain at a high level, how the affiliation rules just play out fora private equity funded company?
Absolutely. Generally speaking, when there is a private equity funded organization, the first item on the affiliation test is ownership of the of the voting equity of the other concern. Generally speaking, where there is a majority ownership in the voting equity of another interest, there is a very strong presumption of affiliation. It is not an automatic, but it is very close to being so.

So, for example, if a private equity fund has an investment in three or four different practice management companies, let’s say each of those MSOs maybe has less than 200 employees, but if there’s the private equity fund has voting control over the three different MSOs, they would be aggregated and over the 500employee limit.

That’s exactly right, and I think the question you’re trying to ask is how is it applied? And the answer is, it goes up, vertically, as well as horizontally, and it goes beyond the first left as you to continue to analysis… portfolio company, its affiliated assumption with a PE fund owner. It would, that fund, be affiliated with its other portfolio companies, and those would all be affiliated, and in fact, you would also look across funds as well to see whether there is affiliation and common control at that level as well. It goes beyond just the first level of affiliation.

Yeah, that makes sense. And that, for the audience, is why we’re thinking about the PC question, right. Because in many situations the MSO that’s private equity funded, that MSO is not going to qualify because it will be aggregated with the different private equity portfolio competence. Yeah, those maybe other MSOs, or they may be oil and gas companies or whatever else private equity fund is invested in. But frequently, your MSO itself is going to be over the 500 limit if you’re invested by, if you have private equity investment, control private equity investment.

That’s correct.

So, we’ve been analyzing whether the PCs can independently apply, and that management agreement is what you need to focus on. And the other totality of the circumstances needs to be analyzed. I want to move on from this topic, but my recommendation here is that, first of all, everyone watch this, watch for this additional guidance very closely. We expect this to be coming out in the, in the coming days, and also work with your council on running in this analysis. Like James said at the outset, this is a long-standing body of law, and, and everyone needs to analyze it on, on a case-by-case basis. So, so, James, I want to move on now. Let’s say that you have determined that you are eligible, either at MSO or PC level. How is the covered loan amount determined?

Absolutely. So, you look at your average monthly payroll. You’re looking at 2019. This is version three of the application that I’m referring to. I have not been had a chance to look at version two which got released a few, I think, within the last hour. But it was, is that calendar year, the year 2019 payroll. You take that year, you take the average monthly payroll, you multiply by 2.5 with a cap of $10 million. However, for those people where the compensation is an excess of $100,000 per year, you are tapped at that value. So, it’s prorated for the period of $8333.33 cents per month for those as a cap on each employee that’s going to be covered on the amount. It does exclude people who live outside of the United States. So, US based, US resident employees for businesses, you take that salary and multiply by 2.5 to get about 2.5 months with the payroll.

Great. So that $100,000 cap, that’s a pretty significant one in practices and for the physician practice management industry, given that we’re generally working with highly compensated, highly compensated health care professionals, how does that work? Is anyone that’s making $100,000 excluded from the calculation, or is it the amount above $100,000?

No, it’s been clarified. That was a question that was unclear previously, but the guidance clarifies it is the compensation above $100,000 is excluded. It is not in terms of– the above 1000. It is a cap. It is not a carve out of the entire employee that makes over $100,000.

Great. So, once you get the loan, how does this get forgiven?

Absolutely. So, once you receive the loan, the loan is originated. You have an eight-week period from loan origination to spend the funds on a specific category of costs. They include payroll, interest payments on mortgages incurred prior to 2/15, payment of rent, and payment of utilities. Note, included in the definition of payroll is, for example, healthy premiums. It is not simply salary. It’s important you look at the definition in the regular statute and guidance to say exactly what’s included, but you take that eight-week period of the amount incurred as well a spent, you take it, you add that up, that is your total loan forgiveness eligibility amount.

You then, go to the slide, will take, over that eight-week period, there is a measurement of a work-force retention, so you must keep the average number of people over the period of time through June 30th, 2020 to be equal to the full time number of full time employees that were in the prior. And then, you can only reduce their salaries up to 25% if you meet, if you miss those two thresholds, you are reduced in your overall forgiveness amount by a proportion, right. So, you get that 100% amount and you reduce it by an amount, but you take that eight weeks of salary and other expenses, and that is forgiveness, forgiven off of your loan as long as you meet these conditions.

Great. I thought this slide was an interesting one. Can you just walk us through the, you know, permitted uses versus forgiveness?

Yeah. No, absolutely. It’s important to remember this. Look, it’s a 1% interest loan, two-year term as of the last interim final rule, but it looks like you could get a substantial amount of the loan value forgiven if you’re strategic about how you apply the uses. The permitted uses of the money are listed on the left. Loan forgiveness requirements are on the right. Note, on the right, you have an eight-week period. It’s a shorter period of time of use. If you check off the list, most are covered, but not interest on prior debt. So, it’s important for you to be strategic about what you could do with a loan forgiveness value within that appropriate eight-week period, that does not allow you, apparently, for what we’ve read in regulations, to front load or additional rent or salary or payroll, but you take that measurement period and you look at that. There is a rule in the last guidance and the interim rule was, was seconded that there will be a maximum of 25% of forgiveness value for non-payroll related expenses. That does appear to be captured the interim final rule, so I appear that, I would expect that to be applied. So, 75% of the forgiveness in payroll, 25% in the other three categories listed below.

Yeah, when does that loan forgiveness begin? I see a question coming in on the line. Can you begin, do you need to begin spending immediately upon receipt?

It is the origination date of the loan, and yes. You, once the origination occurs, you should be funded. That is typically, again, this is a new program, we don’t know how it’s going to actually work. Typically, origination date is the date of which the funds are put into the appropriate account. They’re accessible then.

Yeah.

We have heard discussions about alternative ways that banks are thinking about administering the program, but that is the typical methodology.

Okay, great. I think, as everyone can tell, this is a pretty technical program. The government’s working hard to make it as simple as possible in terms of application and so forth. But there’s a lot of technicalities involved here. James, and we have an entire team here at McDermott that is working with our clients to analyze eligibility, amount of the loan, loan forgiveness, all of these strategies. So, I would really encourage you to reach out. After we hit our next topic, I’m going to give you everyone’s contact information, and we’re happy to help you think through this analysis. I know that time is of the absence, and everyone’s thinking about getting applications in over the next few days, so start thinking about this and working on it now. The great news is that the CARES Act forgivable loan program, payroll protection is not the last bucket of cash that’s available to help us through this difficult time. There were also some positive tax changes that came out of the new law. And, I’m pleased to have my tax partner, Alex Ruiz on with us to talk us through some of these changes and how you might use them advantageously to get cash now. Alex, do you want to start with the net operating loss or NOL changes? And how can a practice management company think about this change for their benefit?

Sure, thanks Kris. And hi, everyone. So, if, you may recall, that in the tax reform post 2018 that net operating losses could no longer be carried back. The CARES Act has relaxed that rule so that any net operating losses in 2018, 2019, or 2020 may be carried back to offset income that was attributable to the five-year period prior to the year in which the NOL was incurred. So that’s actually going to potentially provide a lot of benefit for corporations that were subject to a 35% tax rate prior to 2017 or before, because, you know, now, we’re paying about 21%. So, there’s actually a benefit in you carrying back that net operating loss, you know, those years if you’re a taxpayer in 2017, but having that operating loss, for instance, in this year.

And you’re getting that cash, Alex, by, actually, amending your old tax return and making that filing now?

Yeah, that’s right. So, for 18 or 19 if you have the net operating loss, you can carry that back. For 2020, this one will be delayed until the amendment which you can then apply for the refund. So, it is, if you had in that operating loss in 18 or 19 that you hadn’t carried back because of your tax reform, you could do that now. However, 2020 will have to wait until, see how the year ends up.

Got it. How about the business interest deduction?

Sure. Yes. So, interest expense is, post tax reform, limited to 30% of what approximates to EBITDA. However, for 19 and 20 that has moved up to 50%. And the key feature here is that taxpayers can elect to use their 2019 EBITDA for purposes of applying this 50% limitation. So, if you had no EBITDA or limited earnings in 2020 but you were profitable in 19, you can use that to apply the interest expense limitation in 2020.

So, for private equity funded practice management platforms that do have leverage on them, that sounds like it could be a pretty significant benefit.

That’s right. And I would say that you’ve likely already modeled out the interest expense limitation, as it relates to 19, or the process of doing that. And so, this just would be to talk with your accountants about how, how much more can we free up here?

Great. And payroll tax deferral is probably one of the most readily available pieces of relief. Can you give us an overview of that feature?

Sure, yes. So, this is definitely one that can free up cash today. Because the CARES Act provides that the employers made defer the payment of the employer portion of the payroll tax for this, for this year, for, for the period in, you know in 20—December 31st, 2020. That, it’s just a deferral. It’s payable at the end of 21, 50% by the end of 21 then the remainder 50% in 22. As long as the payroll taxes are paid by that deadline then they will be treated as being made on a timely basis. However, just keep in mind that if you have had a loan forgiven under the Payroll Protection Program, this will modify.

Great, Great. We’re in our last minute or two of this panel. I want to hit quickly on two other things. Our focus earlier in the discussion on loans was on the 78 program and the forgiveness aspect. James, or, could you tell us, in about 30 seconds, about the Mid-sized Loan Program?

Sure, no problem. Treasury is set to issue a term sheet that will set out the requirements and specific details of the Mid-sized Business Loan Program. But in broad strokes, it requires eligible for businesses with 500 to 10,000 employees, 2% capped interest, but the key conditions include loaners last resort, we have to see how that’s going to be determined, requires employee workforce retention and rehiring obligations at 90%. So, significant compliance obligations, including union neutrality. Again, what that means specifically yet to be seen. Treasury is going to issue a term sheet on that very shortly, and we’ll have more description on that were just in the, again, we’re in a waiting stance. There is some guidance to the legislation, but not much.

So, if you’re above the 500-employee limitation for the 7a program, this midsize loan program may be an option, but it doesn’t contain the forgiveness components. It really is a true loan to get through this difficult time.

It’s a low interest loan.

Yeah. Alex switching back to you briefly, a few questions came in on the payroll tax deferrals. I’m assuming these payroll tax deferrals are open for anyone. There’s no size requirements, are there?

That’s right. That’s right. It’s, it’s just something that you’ll, you’ll elect in connection with your … returns.

So, this doesn’t matter if you’re a practice that has two physicians employed or over 500 employees, those tax changes are immediate.

That’s right.

And then, is there any interest imposed on the deferrals?

No.

Okay, great. So, with our remaining minute, I want to throw it back to Brian. Brian, while you’re speaking, I’ll note that everyone, the contact information for outstanding panelists is on the screen. Please don’t hesitate to drop us an email. We are running these questions live fire and would be happy to respond to some of the questions that came through the Q&A and your other questions as you assess this for your company. I’m going to close with a question for Brian, though. You know what’s next, what’s coming out of DC, and what should practice management companies watch for?

Thank you. That’s the best question that we get in all these calls every week. So, listen, I, you know, whether you’re talking about the financial crisis in 2009 or 9/11 or any other time of crisis has come up, you know, that the government sometimes has to gear up. They may be slow in their initial response, but then they go all hands, and I think we are now fully on a war footing. So, you know, as you think about this moving forward, you know, we’ve brought up the fact that we’ve told you right now how programs are. But I would expect that those programs would change. And, you know, if you’re part of a clinical society or, you know, you’re talking to the AMA or you’re talking to your lobbyists or part of a coalition, you know, make sure to keep sharing what it means for you as a business. Because there is no doubt that sometimes Washington forgets that physician practices are in fact, a business. It’s not just a, you know, collection of monks who do this pro bono. So, things to watch for, as we close, a conversation about a 4 stimulus has already started. Congress is out of town until April 20th, so there are several weeks before this show will really start, and they may be out longer. If you look at CDC models, we may not be back functioning at work or in politics until maybe early June. But at this point, I think it’s very likely there will be a stimulus form. People are talking about, you know, infrastructure spending and also more tracks to individuals, but also more spending on healthcare, right now it’s focused on hospitals, but, inevitably, as people talk about what they need, it will broaden. They’re also talking about gaps. They know that the CARES Act addressed some things, but it couldn’t possibly have addressed everything. So, you know, as they gather more information, more things will come into play. And then finally, there will be, absolutely more state and local funds to help states, you know, in their Medicaid programs and their public health programs. And so, again, on the regulatory front, on the side of front, this is a running conversation, so feel free to participate in it, and so will we. Thank you.

Great. Thanks, panelists. I’m going to throw it immediately over to my partner, Dawn Helak to shift the conversation to complex PPM employment issues.

Hey, thanks, Kristian. And good afternoon, everyone, thanks for joining. Again, I’m Dawn Helak, I’m a health partner in McDermott’s DC office, where I spend a considerable amount of time helping healthcare providers PPM with regulatory reimbursement and transactional matters. A large part of our PPM client’s efforts in developing a strategy and to manage the economic and clinical response to COVID 19 directly implicates PPM employees and healthcare work force. And along these lines, we have a great panel of employment litigators and counselors who cover an array of employment law topics, including wage and hour issues, harassment, discrimination, retaliation. The list goes on and on. So, specifically, joining me today is Mike Sheehan, who is the global head of McDermott Will & Emery’s employment practice group. He is typically in our Chicago office, but is, I think, currently bunkered away in an undisclosed location. Pankit Doshi, who is based in our San Francisco office. And then Michelle Strowhiro, who is in our Southern California, based in our L. A and Orange County offices. Each of our panelists has been keenly focused on the specific issues our PPM clients are facing with COVID 19 and we’re hoping over the next half hour we’ll be sharing with you answers to some of the most pressing issues for PPMs in the employment space. So, with that, I’d like to start off with the Families First Coronavirus Response Act or the FFCRA. There’s certainly a lot to unpack in this legislation and we’ve received a lot of questions from PPM clients on how the FFCRA applies to healthcare providers, and particularly what employers PTO obligations are to those employees. Michelle, many in our audience has been focused on this as well, especially given the recent VOL guidance. Can you just briefly walk us through some of what’s most, most common of the FFCRA questions and how it applies in this context?

Absolutely. Thanks, Dawn. So, the FFCRA, the Families First Coronavirus Response Act, which Congress did us no favors and giving us that acronym. But the FFCRA is going to apply to employers with fewer than 500 employees. And for those employers, it provides a certain amount of paid leave benefits for various Coronavirus related reasons. And before we go on, I should just mention that on the employee count, the FFCRA is going to use the joint employer or integrated employer test. This is different from what our colleagues were just talking about, James and Chris, about the CARES SBA loans, which uses an affiliation rule. And then, beyond that, the CARES mid-sized business loans, yet another test, so if you have under 500 for this one, you might not have under 500 for the SBA loan. It’s a different analysis for each. So, we are actively performing that eligibility analysis for clients. I think we’ve seen that we’re seeing a bunch of great questions on this already from everybody in the audience participating. I think about 700 people right now. So, thank you for joining us, and we’re happy to address this after so feel free to reach out to any of us. We’ll put our contact information periodically. So, back to the FFCRA, just bottom line to the top, the DOL has recently given us some great guidance here. When the law was first signed into law two weeks ago, it wasn’t clear. But there was a healthcare provider exemption that health care providers can be excluded by their employers from receiving these benefits. And the big question was, who is a healthcare provider? So, this weekend, the DOL released an expansive definition for a healthcare provider that gives us the option, wide latitude, to exclude some or all of the workforce from benefits. The healthcare provider definition is expansive to reach not only physicians and employees working in hospitals, but also a lot of our MSO clients as well. So, just to give you a little bit of flavor on the definition, anyone employed at any doctor’s office, hospital, healthcare center, clinics, medical school, nursing facility, retirement facility, nursing home, home healthcare providers, and so on, is going to be covered by this exemption. Anyone employed by any entity that even contracts with any of those types of institutions is covered and any anyone employed by any entity that provides medical services or produces medical products related the COVID 19, all of those employees can be exempted by their employer. It’s an option, so we still can provide the benefits, but we can also choose not to.

Thanks, Michelle. Yeah, I think that’s, I think that’s great. I think the distinction that employers really have that option to exclude is important, particularly as so many of our clients are trying to balance the various workforce issues, the continuity of operations, the cash flow issues, I mean, the lists kind of going on right now. Can you just walk us through some of the mechanics on leave and you know how so, I think, maybe more importantly, for a lot of the audience, how the tax reconciliation works?

Absolutely. So, so, for this benefit, if we do choose to provide it to our employees, is going to be essentially fully, fully covered by the federal government. It is subject, ultimately, to a very massive cap that most employers won’t ever hit. But for those who do provides you to their employees, the benefit is fully reimbursable through tax reconciliation, so the leave, I’ll get into a little bit of the mechanics of the leave itself. It outlines a number of reasons that an employee may need to take time off. And so, if an employee is either subject themselves to a state or federal or local quarantine order relating to COVID 19, has been advised by their health care provider to self-quarantine related to COVID 19, is experiencing symptoms of COVID 19 and needs a medical diagnosis. For any of those three reasons, the employees would be entitled to take up to two weeks or 10 days of paid leave at their full rate of pay, subject to a $511 count per day. And then for additional reasons, if you are, if the employee is caring for an individual who has either been quarantined or needs a diagnosis, they will be entitled to take time off two weeks at 2/3 of their rate of pay, capped at $200 a day. And then, one more bucket, and this is the expansive bucket. If an employee needs to take time off of work to care for a child whose school or place of care is closed due to COVID 19, that employee under the FFCRA would be entitled to take up to 12 weeks of 2/3 rate pay, capped at the $200 mark. So, ultimately, the employer would front this cost as a payroll expense. And then each quarter, when it comes time to pay payroll taxes, would simply not pay whatever they paid out in benefits. So, the employers are allowed to withhold the, 100% of the amount that they’ve paid to employees instead of paying it through, you know, their social security and other, other taxes. So, I think, you know, really, Dawn, you hit on this in your question, but two of the key concerns for PPM clients are one, you know, for those that are, that don’t have a bunch of cash on hand right now, it might be difficult to front that cost. The IRS has put out some guidance that they might be able to request in advance to cover this, but there’s not a lot of detail on that right now. And the other, you know, huge concern for the healthcare community is if they do provide the benefits to employees, what happens if everybody decides they need to take 12 weeks off, take care of their kids? Is that going to shut the facility down? Is that going to shut the operation down, the MSO? And so, that’s really the motivation, I think, behind the a lot, having the healthcare carve out so that we can continue to provide these essential services.

Yeah. Yeah. You know, maybe folks can avail themselves of the Medicare advance payments in the other options that we talked about the first panel but does present some challenges. So, Mike, for the PPM clients, including the PCs, who have chosen not to provide the FFCRA leave benefits to employees, let’s just talk a little bit about what the action items are that we’d recommend. Some have asked if employers need to affirmatively obtain an exemption from the government or some sort of acknowledgment. What are your recommendations on how best to communicate a PPM FFCRA leave decisions to the employees?

Sure. Good question, Dawn. Thank you. Well, first it’s, it’s important to know, there’s no requirement that we obtain any sort of certification from the government with regard to exempt status. It’s something that is left to you to decide. You’re entitled to choose whether or not you want to exempt yourself under the Family First Act or not, okay. But the important thing to keep in mind is, even if you do exempt yourself, you need that in order to get the employees, keep them in working and back to work, you’re a covered employer under the Family First Act. And because you’re a covered employer, it’s mandatory that you, that you post the notice of, you know, what is required under the Family First Act either in the workplace or, you know, we’re working in our hospital clients, then on our web, on the internet. And, by doing that, it could be a little confusing because the notice doesn’t make it clear to employees who are healthcare providers as to why they may be exempt and that you have that option. So, it really is important, I think, to take this opportunity when we’re, especially when we’re going to exercise the right to be exempt, to communicate fully to the employees. So, if, you know, if I’ll just take it, take it a little further right now, Dawn. I think that some of the ways in which I would recommend we do that, I think I, I would recommend number one that you communicate the message that healthcare is an essential pillar in the fight against COVID 19. The work that our employees do is important to provide for essential and valued healthcare services to support clients and patients and promote continuity of healthcare services. I don’t know if any of you had a chance to see early this morning on the news, the fire trucks lined up outside of a hospital in New York City, where they just stopped for a moment and honked and cheered and celebrated the healthcare workers on the front lines. That’s just a message. I think that, that we need to communicate when we’re communicating this, we need to let them know that the Family First Act, or, you all need to know that while it requires that we post it, you all don’t need, you’ll have the option to exclude the employee. So, you remind them at the same time that while they’re excluded under the Family First Act, remind them of your current benefits that are in place. Explain how they can utilize them. Talk to them. Explain to them how they can take PTO when necessary, paid sick leave, benefits available to them, the employee assistance program, as well as any other benefits that are available. And I’d also recommend that you put a point of contact out there from human resources. So that’s someone who’s fully versed on that and is readily available to talk to.

Yeah, I think, I think that all makes a lot of sense. And, you know, I think, really, particularly focusing on that messaging is critical right now, especially when there’s so much uncertainty. And I know we all keep seeing a lot of recommendation and coverage on what makes a good leader in this type of situation, and you getting, getting your workforce on board and giving them some comfort in everything that’s going on. And, I think that, that, that disclosure and that information is really valuable too, obviously, in sort of avoiding some of the downstream risk and potential implications, making sure that everybody’s on board. So, that’s, that’s really, really helpful. You know, there’s a lot of difficult decisions that the folks we’re having to make these days, a lot of difficult things that couldn’t have imagined we’d be talking about, you know, even just a couple of weeks ago, like, like furloughs. And I’d like to, maybe shift to that at this point. Many of our PPM clients and the PCs that they’re managing are contemplating some version of furlough and I know that looks different just depending on where you are, and if it’s a reduction in employee hours or, or compensation, temporary layoffs, some combination of all of the above. Pankit, maybe you can, you can help discuss some of the employment law pitfalls, things that a lot of folks just aren’t familiar with, just haven’t had to confront this. What should our PPM clients really be watching out for as they’re making these decisions and communicating them?

Sure, unfortunately, there are a number of employment law pitfalls to be wary of when making these decisions. But I’ll highlight just to top the top few that our PPM and PC clients have been facing. First, and really, this only applies to larger employers, federal or state WARN may be triggered with large furloughs. If WARN is triggered, it means that the employer months provide certain notices to employees to unions of the applicable and then to state and local agencies as well. Second, and notwithstanding WARN in considering whether to do a furlough, generally speaking, employers have the right to modify the terms of employment or at will employees, whether it’s hours or compensation or unpaid time off. So, for exempt employees, when it comes to hours reductions and corresponding salary reductions, you want to be mindful of the applicable minimum salary requirements that must be met for exempt employees under federal law, under the FLSA, as well as certain state laws that have more regular standards. And so, if you reduce and exempt employees hours or if you reduce their salaries, then you want to make sure that no matter what that reduction comes down to, that there is still, that they still exceed the threshold as it pertains to exempt status. And so, for non-exempt employees, typically hourly. If you reduce their hourly rate, you want to make sure that, that their compensation is not reduced below the minimum wage. And then, in contemplating a significant reduction in hours or corresponding salary, it may entitle the employees to state unemployment benefits. And this is, this is really a state specific analysis that would be true.

Yeah, yeah, it’s a, that’s what I’m saying. It’s very state specific, and it’s constantly changing, right? You know, as the states are issuing new guidance and, and what not on an exemption sense of these issues. So, a lot, a lot to keep track of. One of the other questions too, is that a lot of folks have been asking about is relative to the clinicians and the employees who have written employment agreements, some of the PPMs could be also dealing with unionized employees. Then advising many clients on helping these furloughs impacted agreements that that all, you know, we’re different and need to be considered closely. In most cases, there seems to be in alignment and appreciation on both sides of the issues. I mean, again, if you’re if you’re communicating it in all the right ways. But can you just talk through some of our recommendations on this front and best practices?

Sure. That’s a great question. If you have employees with contracts, whether it’s union employees subject to collective bargaining agreements or employees that have their own contracts, your ability to modify those, the terms of the employment, will be based on what’s in the contracts. So, if you want to reduce hours, if you want to really salary, that information will be provided in the contracts. And so far, PPM clients and our PC clients, it may be prudent to enter into a simple contract amendment to cover this temporary change in employment, again, whether it’s for compensation hours or furlough, so you can avoid triggering any or cause termination provisions that might exist in the agreements.

Great, great. And, you know, what are the other employment liability issues? Anything that we should be talking about with respect to furlough related decision making?

Sure, furloughs, by in-and-of-themselves can be a very hard decision and incredibly complex. If you’re considering a furlough on top of everything that we just talked about, you want to make sure to review the populations of employees that are subject to the action. You want to assess any potential discrimination or retaliation allegations. So, the folks that are subject to furloughs, do they all happen to be of the same gender or over a certain age or part of a similar ethnicity? We want to be very careful and cognizant of what that population looks like. And to that end, one way to, protect against that, is to make sure you document your legitimate business reasons for how you might have made the selections.

Yeah. Yeah. Tricky, tricky situation, especially as trying to adjust to changing demand and whatnot. I want to, I want to spend some time now talking about the CARES Act. Which, unless folks have been under a rock, know that it was signed into law last week. You know, the CARES Act really includes a plethora of provisions, including those that are addressing direct payments to individuals and tax credits, expansion of unemployment. Michelle, maybe, if you could just spend a bit of time talking through the employment specific provisions, please.

Wait, can I just, can I just jump in? Did you say plethora? Did everyone hear her say plethora? I don’t think I’ve heard the word plethora spoken since I saw the movie Princess Bride. Plethora.

Thanks for the comic relief, Mike, I think we could all use that now. So, Michelle, though, turning back to the to the brass tacks here, maybe you could just walk us through some of the opportunities under the CARES Act… is there to help PPMs financially or cash flow issues?

Yes. I think a lot of the news articles out there about CARES really focus on the individual benefits of the $1200 checks that are going to go out at some point. But there are some really important provisions for PPMs to consider, specifically some tax credit provisions, so I’ll just go through those pretty quickly. One of them is the deferral, optional deferral of employer portion of social security taxes. So, we can, starting now, for all of our 2020 employer portion of social security taxes, so 6.2% paid on wages up to the 2020 annual limit of $137,700, and you may defer payment of those taxes throughout the rest of the year. And then what would happen is you would pay half of it in 2021, and half of it by the end of 2022. That’s available unless you’re going to receive an SBA loan under the Cares Act. And if you receive loan forgiveness, then you become ineligible for that deferral. And we’ve been working with some clients on what that might mean for them if they’re in both buckets. Another piece of the CARES Act is the employee retention tax credit. So, this is a 50% tax credit available for wages paid either in a calendar year where revenues are less than half of the prior calendar year quarter, or in a calendar year where your business has been fully or partially suspended due to government orders limiting commerce, travel, or group meetings. So, so many of our PPM clients are in California or other states where there are stay at home orders, and that would qualify you for this credit. The credit is going to be applied to wages paid after March 12th and through the rest of this year, and the credit is subject to a $10,000 cap for employees. So, ultimately, $5000 per employee because the 50% tax credit. So, the way this works is for employers, for all employers, if you’re paying employees who are currently on furlough and not performing any work, you can get the credit. And then for employers with fewer than 100 employees, you can also receive a credit for wages you’re paying to employees who are still working. And the way that the $10,000 cap works is it is paid on wages as well as benefits. So, it’s a pretty great benefit. The one caveat, again, is if you are receiving a loan under the CARES Act, you may be ineligible for this benefit. One final piece of CARES that we’re getting a lot of questions about from our PPMs are the unemployment benefits, the unemployment expansion. Now, this doesn’t affect employers directly because it’s not money paid out of the employer’s pocket. But a lot of our clients are wondering how, you know, that they’re thinking about furloughs or reductions in hours, how is that going to affect their workers? And what kind of benefits will they receive on unemployment? So briefly, the way that CARES expands unemployment is actually in several ways. One, it expands the eligibility requirements. So, there are a host of COVID 19 related reasons that will now make somebody eligible for state unemployment insurance. It adds funding so that states that have a one-week waiting period no longer will have that. So, you can start getting the benefits right away. It also gives each state 13 extra weeks on their current unemployment benefits, so each state’s a little bit different, but 13 weeks will be added to that. And then, finally, there’s a $600 additional payment for anyone on unemployment, through July 31st, it’s going to be an extra $600 per week. So, in some cases employees may actually be able to refuse 100% or, in some cases, even more than they would have received, how they continued working, which has been topic of debate politically, but that is the reality on. And so, you know, truly if we do have to turn to furloughs, unemployment is going to be a great option for employees.

Yeah, thanks Michelle. I also want to spend some time, just kind of looking to the future. I know that it’s hard to do right now. Everybody’s triaging so many different issues, but I think it’s still critical that we think about what’s next, what’s coming down the pike and trying to help mitigate risk as much as we can. And Mike, I understand there’s some wage and hour issues that, you know, especially with the supply chain issues, and lack of PPE, that’s been a hot topic continues to be a significant problem for folks and could bring some issues under OSHA. Could you just cover a little bit of that for us now, appreciating that we are running a bit short on time.

You bet, you bet. Thanks, Dawn. Look there, this doesn’t take looking into a crystal ball, really, even looking around the corner because it’s happening already. There’s already been litigation under the Family First Act for retaliation, and we know just because of our expertise and wage hour and pay practices, guidelines, and laws across the country, that there will be, you bet, all kinds of litigation and maybe even class actions on things happening. I mean, take for example, right now, many of you have your entire workforces remote, working remotely, where they may never have done this before, okay. We’re working with clients to develop work guidelines for non-exempt employees and for their managers to address proper protocols for working remotely. This is going to be very important. It doesn’t matter what your intentions are in this sort of thing, it matters what you do. So, you may have great intentions, but you really need good guidance. There’s also going to be, you bet, a slew of litigation as well as work force issues with regard to safety in the workplace. Stay tuned on that. That will be the fourth wave of litigation and money that’s coming along with it. It is going to be a lot of litigation under OSHA, which provides the work safety guidelines and rules and regulations. There’s that, together with collective action that’s protected under the National Labor Relations Act, whether or not you have a union workforce, those are going to be issues for litigation. Those are going to be issues that keep you up at night later on when we’re all back to work. It seems like, IRS spoke on March 12th as the as the marker, and it is, for many. I could tell you that Pankit and Michelle and many in our group have been at this on the phone, one after another. And I think our day began February 27th because Coronavirus, we didn’t even know about the term COVID 19at the time, became a hot, important employment issue back then. So, it’s been over a month. This is five weeks for us, I’ll be perfectly honest with you, Dawn, when I left the office five weeks ago, I didn’t have any gray hair. So, I think my colleagues are going to be a little surprised when we get back, but the litigation has started, and you bet there will be more. Our job is to put our clients in the best position possible for when that happens.

Yeah. Yeah, absolutely. If we could, yes. Thanks. We just went to the next slide. Look, we’ve covered a lot of ground today and addressed many of the critical employment issues for our PPM clients. We have spent some time instilling the must haves and the action items, which is part of what’s shown on this slide. I was hoping we would have a bit more time to cover in greater detail, but, you know, this is this is a helpful list for leaders that wants to go back to their team today and help develop those top to-do items that are critical for helping to protect the company against liability and employees from exposure. Given the number of participants, it has previously been said we’re not going to be taking any questions or answers during the session, but here’s the contact information for the panel. Of course, please feel free to contact me or any of the panelists with any follow up questions, and we also will be following up over email with folks that have entered questions in the Q&A box. So, with that, I’m going turn it over to my colleague Joel Rush to cover the real estate issues in the next panel.

Great. Thank you very much, Dawn. Appreciate the intro. I’m Joel Rush, I’m a partner in the health group in our DC office. I’m going to be moderating a quick panel, I think we only have 20 minutes, on managing complex real estate obligations for PPMs in this Coronavirus environment. As a lot of people on the phone know, PPMs are pretty heavy, in a lot of cases, in office-based real estate as a result of multi, multi-site locations. So, these are real issues that are likely cropping up, real time. We’re going to split to the next slide.

My panelists today include Ankur Gupta in our Chicago office and Dan Martin in New York. Both partners in our real estate group. And again, as mentioned, we’re short on time, so I want to want to jump right in here and give Dan and Ankur are both a chance to talk about a little bit about what they’re seeing in the national real estate market, leasing market, specifically, as a result of COVID 19, and how, how landlords and tenants are both reacting right now.

Yeah. Thanks, Joel. We have, obviously, an unprecedented situation here, not just with a global pandemic, but also from a real estate perspective on the scale of its impact on the real estate market. Healthcare real estate assets, the retail sector, hospitality, office, multifamily, industrial. All sectors are impacted at the same time, and that’s something we haven’t seen before. Landlords are, many landlords are receiving rent relief requests from tenants at the same time, which is having an impact on their business. Certainly, tenants are seeing the impact as projected revenues may be impacted by this. Landlords who pay their obligations through the rent the tenants pay, lenders, investors at all levels of the capital stack domestically and internationally. Some states and other municipalities like the City of New York and the State of New York, for example, have implemented, or are considering, certain legislation and orders that will impact the real estate market. New York, for example, has a moratorium on commercial evictions for the next 90 days. And I know other states and municipalities have done similar things and are still considering doing similar things. We expect to see a lot of further action. Things are changing on a weekly, even a daily basis, so we’re making sure to stay on top of all the latest developments so that we can advise our clients wherever they appear in the capital stack.

Great. Thanks, Dan. Jumping into our next topic, and I’m going to throw this one to Ankur, for our PPM clients out there that are dealing with lots of different landlords, what are some things they can do right now to maximize their position, mitigate exposure as a tenant, and potentially free up additional cash flow, given the cash crunch that many are facing?

Thank you, Joel. Just to, one of the things to note, in particular, is that right now we have a developing marketplace as Dan has referenced and we’re, what we’re developing right now, more than really strict guidelines, are some best practices. So, we want to highlight best practices for the group of what we’re seeing. Specifically, right now, best practices for tenants, we’re seeing a lot of work in this area, obviously relevant to this particular group. And in terms of sort of sequencing in how you approach this scenario, we recommend reviewing your leases in detail and local orders. There’s a lot of guidance in the local orders, to the extent they are, in fact, currently applicable to your particular jurisdiction in terms of what the framework is in which you can react and provide solutions. The leases also are relevant, to an extent, but candidly, right now, a lot of the true negotiations off of the terms of the lease itself, we’ll talk about the leases and the provisions that are intuitively implicated in some things that may be brought up in the future. But right now, it’s really, it’s about reaching out to your contractual counterparty. Reaching across the table, sending your landlords a notice letter, inviting a dialogue. And even putting out and ask for potential relief is very, very much encouraged. The one thing we strongly, strongly recommend is that in those outreaches that you don’t put in a position, a flag in the ground in terms of, we are not going to do this, or we are going to do this. Right now, the collaborative approach is what we’re seeing as really taking the most effective, resulting in the most effective results. We also recommend notifying your business interruption insurance carrier, again, without specifics, but simply notifying your carrier of a potential claim that may be forthcoming. The claims or something which yet we don’t know what are or are not the quantified amounts of each individual claim, that will develop over time, intuitively. But putting them on notice of a potential claim is advisable. The danger in, in putting out a position is that they could result in a number of consequences, not the least of which is tenants can put themselves in a position with their own credit facility where they, where they tripped up a potential contract of representation of warranty by making a statement that they’re unable to pay their debts as they become due. So, what could also occur from a landlord standpoint is the landlord can be provided the ability to declare an immediate default under the lease if a position has taken that is counter to the contractual provisions off the lease. This can be viewed as what lawyers refer to as anticipatory repudiation or anticipatory default, and that can result in the trip up of a number of things that, that sequentially, kind of, dominoes falling. Think of it that way. It could also allow your landlord, potentially, to draw on any security deposit you may have in place as well as pursue the guarantors immediately for claims. Now we recognize … right now, and to the extent they are available, these would not be deemed essential matters. But they would, nonetheless, give rise to a legal claim that later on could come to fruition and cause liability to be imputed to the guarantor as a result of the tenant’s actions. You could also end up causing the landlord to have to report this to their lender. if the landlords have to report this to the lender, what you’ve done is you’ve now put the landlord’s on their heels because they’re in jeopardy with their own credit facility, where they could be in violation of representations and covenants, particularly if you’re a relatively large scale tenant of theirs. So, bear in mind that you’re having an impact on the landlord’s credit facility as well, potentially, by taking that particular step. And if you do that, that makes the landlords in, put in a position where it’s more difficult for them to negotiate effectively because now they’re middle between their tenants and their credit agreement. You can also, the landlords can, although we don’t view it as a prudent remedy at this juncture, they can also terminate the leases. Now that’s obviously absent a moratorium on lease terminations, evictions, et cetera, absolute local ordinance or emergency ordinance providing for the contrary. There’s other things that can also occur. Landlord’s can begin to immediately impose default interest and other remedies, late payment remedies, et cetera. So, our recommendation is not doing that and starting those possibilities for the landlord in advance, but rather getting to a point where you have a productive dialogue off the contract, and you work with them. To the extent possible, we also recommend doing it under, what’s called a pre negotiation agreement, or pre negotiation letter framework. It can be a very simple document that basically says, whatever we discuss with you and whatever you discuss with us will not be held against you, will not be held against us and can be used later to say, hey, they told us they couldn’t pay. So that allows you to speak freely, and that allows you to then really get to a good end result that’s comfortable for both parties, where they reveal their cards and work collaboratively. So, our recommendation is to work collaboratively. Now, I’m going to flip it over to Dan to talk about the flip side of that, which is the best practices for landlords. This may be applicable to some of you to the extent your sub landlords, maybe you have sub tenants in place in your facilities. But it’s also just to give you a view on the landlord’s perspective. So, Dan, if you don’t mind taking the best practices for landlords, please.

Yeah, sure. Landlords understand, I think, that what’s happening. And they understand that tenants are having or may have a difficult time paying the rent obligations under the lease. And if tenant does come to you or a subtenant as a landlord, the first thing you should do, after speaking with your lawyers, is understand what your options are so that you could maximize your position. Be familiar with whatever local orders are in place or state orders are in place. Acknowledge the tenant has an issue that they need to resolve with you. Certainly, engage your lenders to the extent you have debt on the building. The lenders, I’m sure, have been dealing with a lot of requests from their borrowers because we’ve all been involved here, on the real estate side of McDermott, in some of those conversations. Review your loan documents, in that case, because certain loan documents will have restrictions on transfers or leases or other dispositions of the real estate, and you don’t want to accidentally, as a landlord, trip up one of your loan covenants in order to, while working with the tenant. If you have rental income loss insurance, definitely reach out to your insurer, as Ankur mentioned, but I wouldn’t cite any specifics. I wouldn’t put anything in writing or make a claim at this point without talking with the applicable consultants. Some larger scale landlords, in particular, shopping center landlords, have been a little more proactive, reaching out to tenants to kind of frame the dialogue. In other words, not waiting for a tenant to ask for something, but discussing the framework, generally, and saying, hey, here’s what we’re willing to offer, let’s sit down and have a conversation. And other landlords are finding that they need to close down operations, closing down shopping centers or hotels, for example. So, in the healthcare space, luckily, there’s still a lot of people who need that support. So, we haven’t seen that to the extent we’ve seen it in the hotel, hospitality and retail markets.

Great. Thanks, Dan. Of the things that, you know, kind of transitioning to the next step, what are some of solutions, what are some of the ways that tenants in the space can get relief? And we actually had a question, I think, kind of leads into this, someone wanted to hear a little bit more, Ankur, on the pre negotiation letter, which I think, again, feeds naturally into this next topic. What are some of the things you can, you can negotiate as attendant to address, address your real estate issues?

Absolutely. And I think that’s, that’s really the crux of a lot of this, is what kind of relief can we get? Recognizing from a tenant’s perspective right now, first and foremost, the issue is not possession. Possession, you have possession. There’s some laws coming in to protect your possession, but it’s really economic. And it’s a matter of getting your cash flow in a position where, whether it’s deferring your cash flow or providing you immediate cash flow relief on a permanent basis that’s not recouped by the landlord. There’s a number of potential solutions. Among the solutions were seeing are a very simple deferral of rent for a fixed period of time, and then taking that deferral of rent, that amount that’s deferred and re-amortizing it to the balance of the rent schedule on whatever schedule, whether it’s for the next 12 months, whether it’s for the balance of the life of the lease. There’s a couple of considerations. If you’re deferring base rent, that results in the landlord not receiving income from you. So, understand that base rent is the portion that is your rent for the space, versus the CAM charges, which are operating costs, expenses, taxes, et cetera. If you defer base rent, then that’s income to the landlord that the landlord is not receiving. If, however, you also asked the landlord to accept a deferral of the additional charges, such as common area maintenance, insurance, taxes, things that are referred to as the balance of the quote unquote triple net aspects of the lease, those remain obligations that the landlord is not only not receiving income from their tenants, but they are also then, not receiving cash flow that allows them to pay out the third party obligations. So, bear in mind, the base rent deferral may be, well it is going to be more readily received by a landlord as a conversation topic. They’re willing to engage in a base rent plus additional charges that they invariably have to continue to pay out as a moratorium on taxes, et cetera that may occur in certain jurisdictions. Another is simply a base rent reduction for a fixed period of time. That is, if you have sufficient cash flow to partially pay base rent that allows a landlord to continue to have some form of cash flow and will also give you some form of relief. And then the last is obviously a full, full on, you know, base rent, either base rent or base rent plus additional charges full abatement for a fixed period of time. One of the things that we recommend when you are doing this, if you’re looking for a time horizon, it’s very difficult to forecast right now, no one can read the tea leaves to understand where we’re going in terms of timing. One thing that you can do, so you can benchmark, is to tie your incentives or your, whatever you’re agreeing to your landlord with, whatever that time horizon that you want to tie it to. One of the things is if there’s emergency order in place, you can utilize that emergency order as your benchmark and as that gets extended, that automatically modifies your contractual rights or obligations, and you can pay for that at the very end of that. But you can put in a flexible framework right now that works with the evolving marketplace. And some retail landlords, you know, in some settings, are offering rent relief in exchange for additional percentage rent. There’s other concessions that you can make to provide landlords additional security, you can provide them, you know, an additional guarantor, additional security deposit, other types of ways to offset the risk that they’re encountering and to basically mitigate their risk by giving them credit enhancements. There’s also balloon catch up payments you can agree to at periodic times, but really, it’s just working collaboratively to find solutions that work together. Landlords are generally more sympathetic to certain types of tenants also in this scenario, so bear in mind, you have to be in a compelling industry where this is something which you’re having difficulty, and you can say, we’re particularly impacted because. And that will strengthen your argument with the landlord, so put some thought behind that before you approach your landlords if you’re in a tenant’s position, and I think that engages in a more productive dialogue. Also, if you’re lease commencement dates haven’t occurred, one of the things to bear in mind is you can ask for a deferral of that commencement date. You could ask for a revised construction schedule, bearing in mind the bill that will take additional time, and you can ask for basically for a tolling, again, tying it to the emergency order or a fixed period. But the bottom line here that we’re trying to stress is that creative, well thought out, practical solutions are well received from both tenants and landlords and lenders as what we’ve seen in the marketplace. So, we encourage people to go at this in a collaborative approach, as opposed to adversarial or overly contractually focused. And we’re seeing that that’s yielding the best results and the most expeditious results.

Thanks, Ankur. And I know we’re down to our last couple minutes here, but did want to throw out there, you know, a key part of assessing your rights here is going to be taking a look at your lease, and understanding what the, what your rights are and what your flexibility is within the lease. Dan, what are a couple of things that PPMs should be focusing on when they’re taking a look at their lease to assess their options?

Yeah, I promise I’ll be brief. In part because every lease has its own contract and every lease has different provisions that will or will not make the difference. There’s no silver bullet here. The first one that everyone points to is force majeure. And that’s where a contract party is, cannot perform their obligations under the contract because of something outside their control, whether it’s a hurricane, a weather event, labor event, which is typical, or a pandemic, which is not typical. Sometimes it is covered. And the same thing is true with respect to casualty, like a hurricane, earthquake. Insurance is important. What sort of insurance is required and any sort of insurance that either party does have. It will require an analysis to see whether there’s any relief. Condemnation and eminent domain. This is a taking for a public use by a governmental agency. I expect we’ll see, in the months to come, flowing through the course, different novel arguments about whether the issuance of an order is, in itself, a taking for a quasi-public use. And the last one in his interruption of services or quiet enjoyment. This is a requirement that the landlord make available to a tenant the space and permit them to use it, which a lot of landlords are unable to do today because of the applicable…

Great. Thanks, Dan. And I do, unfortunately think we’re out of time, and I need to transition and over to my partner, Kevin Miller. But as with the prior panelists, feel free to reach out to Ankur, Dan, or myself with any questions to follow. Again, I think it’s important at this point to assess your leases, understand your relationship with your landlords, and start to consider where there might be some flexibility to help deal with cash flow disruption. So, with that, I’ll turn it over to Kevin for our last panel.

All right. Thank you, Joel, Dan and Ankur. So, we’ve talked about the various forms of relief, you know, most of which is brand new in the last couple of weeks and still very much developing. We talked about other key issues for PPMs in terms of major operating expenses, employees, and real estate. I think what we’d like to do with this panel is, kind of, bring that all home with a review of, you know, just the general cash flow crisis that companies are facing. I think that the commonly held perception is that, that’s what this is, a cash flow crisis. The fundamentals of the PPM businesses that we advise haven’t broken down. They may change going forward, and that’s something you know, we want to end on, is, kind of, focusing on the discussion of, alright, well, seeing what we see, we may not know when the music stops, but when we get back to normal life. But, you know, what we think that’s going to look like? How do we think things are changing? So, to start it off, let me introduce my fellow panelists joining me here. First off, we have partner Stephanie McCann who is a finance partner in our Chicago office. Second, we have Felicia Pearlman, who focuses on restructuring, also a partner in our Chicago office. And then, finally Chad Beste, who is a partner in the healthcare advisory group at BDO. With that, let’s jump in, and the logical point here to jump into this, I think Steph, why don’t you get us started out by talking about what we’re seeing, you know, in kind of the current state of borrower relationships with, you know, lenders, recognizing that many of our PPM clients, you know, do have senior credit facilities.

Yeah. Absolutely, Kevin, thank you so much for the introduction. And thank you to everybody today for joining our program. With respect to when Trump announced a national emergency on March 13th, we saw a lot of borrower clients, including our MSOs and our PC entities, look at credit facilities, and really look at drawing down the maximum amount on the revolvers. Really getting cash in the door. As Kevin alluded to, you know, everybody is very tight on cash. They’re looking at cash coming into the company and they’re looking at cash outflows out of the company. So, with the maximum revolver draws pretty much behind us now, there’s still some companies looking at getting liquidity through incremental or other accordion facilities. We’ve really seen the next wave of borrower lender discussions really settle around amendment terms and forbearance on negotiation. And as Ankur, in the last program around real estate alluded to, we’re really trying to look at collaborative discussions between borrowers and their lenders on creative strategies for preserving and accessing liquidity during this unprecedented time. So, some of the amendment requests we’ve seen really flow through is around preserving liquidities. So, making sure that the companies are going to make payroll payments, making sure that they’re going to be able to keep their lights on, that they’re going to be able to pay their taxes. So, a lot of discussions have been around principal payment deferrals, access cash flow waivers, and interest deferrals or interest payments being paid in kind. The great news is at McDermott we not only have a very active and robust borrower sponsor practice on the corporate finance side, we also have the same robust practice on the lender side. So, we’re really able to see what the market is bearing. We’ve seen a lot of lenders react pretty positively to being able to waive excess cashflow, mandatory prepayments under credit agreements. We’ve seen lenders act very rationally about being able to give amortization holidays and deferrals. Where we’ve seen a little bit more push back is around interest payments. Rather than waiving the interest payments, we’ve seen lenders really ask if the interest payments be paid in kind during this time period. We’ve also seen that the amendments and forbearance discussions, while the borrower side really wants to get relief through the end of the year, even through 2021, we’ve seen a lot of lenders adopt a wait-and-see approach, more around the lines of really don’t know when this price is going to end, we don’t really have an accurate cash flow projection from the company. We have cash flow projections that are pretty much changing on a weekly or daily basis. So, a lot of lenders are saying, look, we’re happy to offer relief in maybe the first quarter or the second quarter, but after the second quarter, let’s sort of wait and see what the aggregate economy can bear. Other amendments we’re seeing come through now are around financial covenants. And that’s because most of our borrower clients have quarterly financial tests. Where we’re seeing a lot of borrower action is around the seabed EBITDA analysis, and looking at add backs, particularly as they relate to lost revenue and profits. And lenders are more saying, look, we’re more comfortable, potentially, with a financial covenant holiday, than we really are about changing the EBITDA definitions at this time. Again, this sort of is more of a wait and see approach, seeing how the full economy settles into this unprecedented time. And so, we are looking at not only borrowers looking at preserving their liquidity, but actually lenders also looking at how they have access to cash. And so, we’re seeing a lot of lender requests come in for cash collateral reviews. And this, in particular, relates to our physician practice management platforms because these are asset light platforms. Really, the only collateral here is going to be the cash flows of the doctor practices. So, we’re looking at more scrutinization around how cash is flowing in from PC entities to the MSO, and once the cash is at the MSO, whether that cash is sitting in controlled accounts which are subject to a lender’s first priority perfected security interests, and really, how the lenders can get access to that cash shouldn’t event arise. But again, I wanted to emphasize what Ankur said in the last program about just being collaborative. I think borrowers and lenders are understanding that this is not an issue about the borrower having any sort of specific business concerns, but that it’s really a macro economic downturn.

Steph, have you seen variance in, I guess… between traditional bank lenders versus private debt lenders?

So, I think the answer to that question, Kevin, is that all lenders are pretty much reacting in a proactive manner with their borrowers. There’s probably been a little bit of pressure on the private lender side just because they have their own restrictions with respect to how they call capital, and they have their own investors. So, in that sense, we do see that the private credit lenders are having more internal pressure on their own credit facilities and, frankly, their own investors. And so, those private credit lenders, I think, are more sensitive when borrowers are coming to them and saying, hey, look, we can’t pay. Payment defaults for those lenders, their own investors only allow a certain percentage of credits to go into payment default. So, it’s not that those lenders, necessarily, don’t understand the macro economic landscape or don’t want to work with the borrowers, it’s that they are simply subject, I think, to more stringent requirements themselves.

Thank you. I appreciate that. Chad, if we can shift maybe, you know, and kind of round out the compliment of tools in the tool chest, what other, in addition to, kind of, lender landlord relief, etcetera, and evaluating, you know, kind of government bailout packages, you know, in the work with your clients, where do you see PPMs doing to address their cash price issues?

Well, one of the items that we’re seeing and, in particularly, I think that the more forward thinking is what the world is going to look like in a post pandemic world. And what differences in how is things going to change. So, in addition to preserving cash, ongoing communications with patients, employees, borrowers, lenders, you know, and the like, what we see is that platforms are beginning to think about, how is this going to ramp back up when it’s done? And all these, kind of, discussions, I think they’ll bring up really impact both the short-term and the longer-term. Different platforms are likely to pick up at different kind of paces. So, for example, some of the dental platforms which are more elective in nature, may take a little bit longer to, you know, for volumes to ramp back up to where they were than for some medicine subspecialties and the like. In addition, what we see some clients doing is really rethinking managed care. Their current agreements that are in place. We see, we have one client that that is actively going to payers in their respective markets. And the amazing thing to me is that they received positive responses from everybody but one. And so, what we see is the commercial payers begin to follow suit to what Medicare is doing in terms of providing advances. There’s a number of different ways of trying to obtain an advance. One would be based on historical volumes, but another could be, you know, items like incentive funds that are going to be due at the end of the year to try to get them pre funded up front, or other creative ways of trying to, you know, work with the payers to do this. This same platform is also going and requesting rate increases today. And they think the world is going to change, and when they looked at their portfolio, they thought that in the post pandemic world that they need to make, you know, frankly, some increases in revenue. So, it’s forcing them to take another look back at their own value based, you know, proposition, how they can add value and how they can make this to the payer’s advantage to increase reimbursement rates. There are some other interesting things that we’re seeing, like on the American Dental Association website, noticed that they, under their COVID resources, they have listed the payers that are willing to give advances on their website. And so, based upon the platform and the specialty of, such as the PPMs, you may wish to look at the academic resources of that particular specialty. Everyone has tried to enter into the telemedicine business. From what we’re seeing is it’s working moderately well for some, quite well for others, but it seems to be more related to a way to stay in connection with patients than revenue generation. But when we look at the future, we don’t think this genie is going to get back in the bottle. That Medicare and the commercial payers are not going to be able to, kind of, scale this back, and frankly, we think patients are going to like this and that they’re going to continue to demand it. And so, one of the challenges that folks have to do is not only improve, you know their current telemedicine capabilities, but begin to think through how they can convert this into a meaningful source of revenue going forward. It’s very positive that the payers have responded to provide reimbursement for office visits in a similar fashion, as long as a provider has both audio and visual capabilities. We’ve seen some physical therapists that are providing telemedicine only, you know, via audio. So, a lot of different providers air getting in on this, and telemedicine, I believe, is going to be a big part of everybody’s future. Platforms also need to think through, kind of, digital help. And so, this whole COVID virus is likely going to, you know, in the short term, people might think it might slow it down, but we see it actually speeding up the anticipation. And a lot of this is related to what do patients, what do the communities want? And we see social distancing continuing into, at least for the rest of this year, probably longer than that, and it’s going to be important for platforms to try to separate themselves from their competition and find creative ways to stay in touch with patients that patients really like. We’re just beginning to have some discussions with some related facilities because I think there’s a realization that with telemedicine and digital health and social distancing with patients and the like, that we probably have more facilities and we’re going to need longer term. You know, so we already had the discussions related to how can we slow down payments to our landlords and the like, but platforms are also going to be thinking that they have too much real estate at this time and are looking at that. And the final thing I’ll just mention is new opportunities. So, this Coronavirus is definitely a crisis, as everybody has mentioned, but what we see is there’s going to be some interesting collaborations, you know, that are going to take place among a number of different folks. We see it from the, kind of the perspective that, what’s going to happen to small physician practices through this? What we see is that there’s going to be a flight to security because not all practices, particularly the small ones, are really going to be able to make it, and even if they make it, it’s really called they’re not making any compensation. They’re going to want to flock to an environment where they have a more stable environment. And that’s a good opportunity for hospitals that are looking to align with physicians, but also for the PE funds that can find unique ways of collaborating with, you know, private equity funds and the like. And so related to that, the final thing I’ll say is, is that there’s still a lot of cash available, you know, dry powder to invest. And so, you know, there’s going to be a lot of activity in the M&A world, you know, as we go through this. So, those are things I would comment on.

Yeah, I would definitely agree with you on that last point, in particular. And we’ll come back to come back to some of the, kind of, final thoughts around what that new world’s going to look like afterwards. Before we go there, though, maybe we’ll be shifted back and we’ll say all right, but what if all the efforts going on right now, working with lenders were all short? And there’s an element there that it’s just a question of time. How long is…? Felicia, we’ve talked and worked extensively, you know, thinking through and kind of preparing to positive spin on it in restructuring, being a bit of a forward nonetheless is, I think, something folks are thinking about. If it comes to that, restructuring for PPMs is not straightforward. Maybe you take us down… you know, that so we can help folks up, I think, you know, around the corner on, you know, current efforts falling short and what the next chapter might look like.

Absolutely. I think it is really important to understand that, regardless of the type of entity, and there are certainly unique aspects of PPMs that make it more challenging, that a decision to file for bankruptcy is not a decision be taken lightly. It is a strategy. It needs to have a goal that is thought out going in. So, when we initially get involved, a lot of it is not a planning for a filing, more evaluating it is part of a strategic alternative and helping a company understand its risks and use those to avoid that need, often, for the filing. And we work with them in negotiating with landlords and vendors and lenders, as discussed. So, a lot of what we’re going to discuss is a way you can use this information in having conversations with other parties so that they understand the risks and increase their willingness to partner with you to fund the liquidity hole that you’ll be experiencing during this current crisis. A restructuring filing requires liquidity as an initial matter, so you’re going to have to start to look for financing. And we understand that for a PPM, particularly, that is challenging, as that usually is a financing that is looking to what assets leans cans be put on. And as Steph already discussed, the PPMs are not an asset heavy business. So, we would encourage you to have conversations with current lenders if it gets to this point, but also for the private equity funds that are involved. We’ve been talking to a lot of sponsors about their willingness to help from this gap, either in or out of court. The benefit of restructuring chapter 11 filing can provide in that instance is that that money, by definition, is the first money out, the DIP financing that would be provided by a private equity fund or by a lender is the, is a, what we refer to as a super priority claim and comes out even before the secured lenders that are in place, provided that there is the asset value available for a court to approve that financing. One particular concern that PPM space in filing is that their biggest asset, and I’m now using this is like a small A asset, they really are the physicians. And the physicians are where the value is. And you need to be able to retain your physicians, which is challenging in this environment in any event, but, obviously, that challenge increases in a chapter 11 filing. And while for most industries, we are very adept at putting in place retention programs for employees, for key employees so that they are incentivized to retain during a chapter 11 case, obviously, in the case of physicians, those incentive programs become more complicated because of the regulatory scheme, and need to be very carefully crafted with restructuring council along with healthcare council to make sure you can come up with something that does not run afoul of any of the regulatory requirements. It still allows a company, a PPM, to retain their physicians, retain the value, and try to work through the restructuring process. One of the benefits that could exist for some PPMs of a chapter 11 filing was something that Chad raised a few moments ago. And that is there will be many PPMs that are looking to scale back their footprints as a result of this, this crisis and what their business will best look like on the other end. And, a restructuring provides you the opportunity to do that in a way that you cannot do out of court. It is through the rejection of leases, sale of property under the bankruptcy code, which is a simpler, more streamlined process that allows you to maximize that value and also allows you to change your contracts in bankruptcy to reduce that footprint in a way that you cannot outside of bankruptcy. Perhaps most importantly, it provides you the breathing space where your creditors that exist when you file and the amount that you owe to them on the day of filing gets frozen in time to give you a chance to have that economic stuff back to move forward. I would note an additional challenge of restructuring now is we discussed earlier a number of the federal programs that exist to provide funding and light of COVID 19, not all of them, but many of them specifically provide exemptions for debtors. So, it’s really important that as you’re talking about a strategy, you think through the best approach to get liquidity and financing in this time. We have been actively working with the people in DC on this to see if it could be addressed and some of the changes going forward to provide an ability for a PPM or another healthcare entity to take advantage of some of the benefits of a chapter 11 filing while not losing the ability to receive someone the funds available under these different programs.

Perfect. Thank you. So, look, we want to keep everybody on schedule. I know folks have taken time out of their busy days, and I’m sure there’s fires burning in the background. Hopefully, figuratively, but potentially, literally. You know, one closing thought. I’d encourage folks here is they’re evaluating, you know, kind of the current environment is this, you know, what we’ve been talking about here is how is life going to change? Will it change? I think the answer in my mind is yes, how will be interesting. Things at the top of my mind in addition of what have been said in the past, you know, this is going to be a great test right now of strategies for provider alignment and really emphasized the need for programs not just economically, but politically and culturally as well. We’ve been advising a lot of clients on that thinking and encourage folks to give that more thought. I think there will be changes to the way care is delivered. Safety precautions, slowing down procedure turn around, which could impact productivity, heightened increase potentially in preventive care, and the importance of that in the overall health care delivery system. Finally, you know, Chad mentioned it, I would underscore it. There is a ton of dry powder still in the system. What we have here is a cash flow crisis, not banking crisis, and so that will present a lot of opportunity for some folks as there is a flight to security, and, you know, there could be opportunities there. So folk, you should keep that in mind. I think the big question is, how long does this last and how well can folks weather the storm? With that, I will bring the final panel here to a conclusion. I’m going to invite Jerry back for some closing comments. Thank you all for attending, again, up on the screen are contact information for the speakers on this panel as well as myself. Happy to field any questions you may have and thank you… we’ll do our best to follow up with folks and address those questions. Jerry, thank you, and you want to close this off?

Absolutely. Thank you so much, Kevin. First of all, I want to thank everyone for joining us today for this program. Thank you for devoting your valuable time to listen to us. I hope you found; we hope you found the program valuable. I really want to think our faculty for putting the time in and pulling together all of this information and beyond the faculty, I really want to take a moment to thank all of our McDermott attorneys and, in particular, our partners who are really working harder than ever during this unprecedented time to really stay on top of everything and to make sure that we’re in a position to deliver wise and counsel with the issues that are rising. And so, the final thing I want to say is I certainly want to invite all of the attendees to reach out to any McDermott attorneys. We didn’t have time to do Q&A in the logistics on this program, but certainly please feel free to reach out to any McDermott attorneys to address any of the issues we discussed today, as well as any other COVID related issues that are really impacting you and your business. We also have a Coronavirus Resource Center that I would recommend people look at. It’s been very valuable. And the final thing that I’d like to say is, I just want to wish everyone and enjoyable and peaceful weekend. Thank you very much for joining us. Take care.

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