More than a year into a global pandemic, government shutdowns have left many healthcare organizations in a difficult financial situation.

Not only did providers lose revenue from cancelled or postponed services, but they had the burden of additional expenses for personal protective equipment (PPE) and needed to support healthcare workers struggling with burnout.

If not a panacea, the Employee Retention Tax Credit (ERTC) can be a major help to revenue-strapped healthcare organizations. First established in March 2020 through the CARES Act, it was intended to help employers in any industry retain employees during the initial lockdown. The ERTC was expanded in December 2020 and renewed as part of the American Rescue Plan Act in March 2021.1

How the ERTC Works

Under the original benefit, eligible businesses can receive a refundable tax credit of up to $5,000 per employee. The expanded program for 2021 allows businesses to recoup up to $7,000 per employee.

What’s more, the expanded program allows organizations to claim the deduction for each quarter, allowing organizations to qualify for an annual credit of $28,000 per employee. To qualify, the organization needs to demonstrate declining revenues.

Many healthcare organizations applied for the Paycheck Protection Program (PPP) in 2020 rather than the ERTC. But the new legislation is allowing businesses to qualify for support under more than one program — any organization that applied for PPP last year is eligible to apply for the ERTC as well.

Organizations can opt to receive ERTC money directly, which may take roughly two to three months after filing to arrive, or they can apply the money as a credit on their payroll taxes going forward.

Who Is Eligible

The ERTC is broadly available across industries and business types. In short, a business is eligible if:

  • A full or partial government shutdown materially affected the organization.
  • It experienced a 50% drop in revenue in a given quarter during 2020 versus the same calendar quarter in 2019.

The credit is commonly granted because of the shutdown. For example, in New Jersey there was a suspension on elective surgery in spring 2020 that resulted in lost revenue for many healthcare providers. Any of those organizations would be able to receive the ERTC for that period.

The program has been expanded in 2021 to include businesses that experienced a 20% decline in revenue (versus the 50% drop in 2020; for both years, the decline is calculated based on the comparable quarter in 2019). This will likely increase the number of organizations able to take advantage of the program.

The ERTC requirements are strict to direct money to businesses that need it most. However, a struggling organization can benefit through the ERTC. Reach out to your advisor or financial consultant to learn more about how to maximize the benefit.

In a time of turmoil, HUB International’s healthcare experts can help shore up providers’ finances through improved risk management and insurance.

1 CNBC, “Biden encourages businesses to take advantage of the employee retention credit. Here’s what you need to know,” May 12, 2021.