PPP Forgiveness Continues to Slow Down the Home Health M&A Process

The COVID-19 crisis came in a hurry. The government, therefore, had to create programs and grants in a hurry to offset some of the financial woes that health care providers were facing.

The Paycheck Protection Program (PPP), Provider Relief Fund and other funding was much needed to keep many home-based care operations afloat. But as things become increasingly normal, certain aspects of those lifelines are causing increased organizational anxiety.

“The government did step up on programs, and [policymakers] were helping these practices be able to defray those increased costs and [lowered censuses],” Christina Kuta, a health care attorney at Roetzel & Andress, told Home Health Care News. “However, the rules regarding those programs and how the money gets forgiven was pretty minimal — and even then, it was very confusing.”


Roetzel & Andress is a Chicago-based law firm that specializes in a wide array of fields, including home care and home health care.

Some larger home health providers even denied money from the Provider Relief Fund, which was part of the Coronavirus Aid, Relief and Economic Security (CARES) Act, due to concern over what would need to be paid back, and when.

As for PPP loans, they were sent out in late March of 2020 as part of the CARES Act and again in December as part of the Consolidated Appropriations Act of 2021. That funding has mostly dried up, which means providers are now on their way — ideally — to forgiveness.


“This is something that providers have really dealt with over the last year, the sort of minefield of how to work through all those government opportunities in a legal fashion,” Kuta said.

A large amount of home-based care agencies received some sort of funding. In terms of PPP, they received loans ranging from amounts in the tens of thousands to ones in the multi-million-dollar range.

They used the money for operational costs associated with safety, such as plexiglass and personal protective equipment (PPE). They also used it to keep staff on board during the pandemic and pay them hazard pay for taking on heightened risks at work.

“The issues aren’t as fresh as they were and I think, as far as the guidance goes around the government programs, it’s gotten better,” Kuta said. “There’s more information and it’s becoming more clear to agencies what’s going on now, and how to navigate that field. So I think that has actually gotten better for providers. But there’s still that burden there, and those extra obligations are still there. It hasn’t completely gone away.”

What most providers have learned now is that forgiveness for these loans is not automatic.

That’s been fresh on providers’ minds, Kuta said. Specifically, they’ve been concerned about how forgiveness may work from a tax perspective, and how they are going to report everything to ensure that the loan is forgiven.

Additionally, it’s created issues for providers that were looking to sell their agency, or buy another. M&A deals have been stymied in many cases because of accepted PPP loans and concerns over whether sellers have their ducks in a row.

“That’s something that a lot of people didn’t anticipate, that when you are buying or selling a home health business, you have to get details on whether all their PPP loans are forgiven,” Kuta said. “I’ve recently worked on two different home health sales, where everybody just thought,

‘Oh, this will be easy.’ They weren’t going to worry about the PPP loans and figured the money would get forgiven later, and that they’d deal with it after the closing. But you can’t do that.”

There are very specific rules for sellers and buyers negotiating on a deal when PPP loans are involved. The parties need to notify the bank that they are selling and put that money into escrow, for example.

“Acquiring entities that have outstanding PPP loans that have not yet been forgiven, it’s an extraordinarily formal process,” Kuta said. “Providers sometimes haven’t realized that. It holds up the closing date. It holds up the finances because of that money that has to be put into escrow. It really impacts the entire deal.”

Violating those rules can be costly as well. If providers are considering buying or selling, it bodes well for them to get the show on the road as early as possible, so kinks like these can be worked out of the deal in a more timely fashion.

Even if an M&A deal is not on the horizon, dedicating time and resources to loan forgiveness is worth it, and one of the last hurdles for providers to clear before the pandemic is over.

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