Dr. John Meis: Alright, welcome everybody to this edition of The Strategic Thinker, I’m Dr. John Meis of the Spark Dental Network here with Drew Schaefer, how are you doing Drew?

Drew Schaefer: Good, how are you Dr. Meis?

Dr. John Meis: Fantastic. Well, there’s been an awful lot of further government action on support based on Covid, and I thought it would be a good for us to just swing through the current status of all of those things. Sound good?

Drew Schaefer: Sounds great.

Dr. John Meis: And, of course we’re not giving any specific legal or tax advice here, whatever information we have here is general in nature. States are applying these rules differently, so make sure that you get qualified tax and legal advice from your own advisor. So, hang on, let me share my screen here Drew, and we’ll dig in. And, Zoom’s a little slow today. There we go, alright Drew, let’s dig in.

Drew Schaefer: Sounds good. So, obviously everybody is quite familiar with the PPP, it finally closed. There were a couple extensions, additional funding, and so it closed just at the end of last week. So, there’s no more applications being accepted and I’d be very surprised if not everybody watching this had already applied for that. And, hopefully received that. But, what’s kind of in a holding pattern right now is the forgiveness process. I think everybody’s pretty comfortable that theirs will be forgiven based just on what we’re hearing across all industries and really as Covid continues to be persistent in sticking around, the government obviously wants to make sure that the business are propped up and supported. And so, I think everybody feels pretty comfortable as far as the forgiveness aspect, assuming that everybody did the right things through their applications and tracking everything. So, it’s going to be a little different based on banks since that is the primary lender. But, most banks are not accepting or processing the forgiveness applications yet. You can see on the SBA website, the easy application for forgiveness. And, it is very basic. And, it’s no surprise, it’s based off of what we heard through the application process. But, what’s changed is similar to what happened in the initial rollout, is the rules kept changing as far as how you qualify, what amount, what measurement periods, etc. So, these banks, the larger ones, had to put a lot of resources into putting up their own website and programming, and then it kept changing which led to a lot of stress for a lot of people. So, what they’re trying to do with the lenience of how the plan was structured is make sure that everybody has good insight as far as what forgiveness will ultimately look like, which is something that’s been passed around in the most recent proposed relief bill which, as of this past week, there’s no been no bill. And obviously, President Trump came out that he had some ideas he wanted to implement, but there’s still a negotiation ongoing as far as whether an executive order could even be enforced. So, I think the timeline on that is really going to dictate the timeline on forgiveness.

Dr. John Meis: And, since the payments don’t start for some time they’re really under no pressure to get this done quickly, right?

Drew Schaefer: Exactly. And, due to the size of the loan program and the complexities, they want to make sure everybody’s treated equitably, and not compounding with further work down the road just with the limited resources that both the SBA and the banks have as a result of pushing all of this through. So, there’s no time constraint. The payback is specified as starting 6 months after the measurement period ends. So realistically, that’s a pretty long period, and if they didn’t make the decisions on forgiveness in a timely manner then I would doubt they would even charge interest during that period. Ultimately, the way it is now, the banks have 60 days to review the forgiveness application and then the SBA has 90 days after that. But, ultimately what we’re hearing is a move to automatically forgive loans under $150,000 with nothing more than a good faith certification. So, you don’t have to show your evidence of payroll or rent checks or any of that, it’s just a good faith certification. And realistically, those loans wouldn’t have been a good target for audit anyway for the SBA or any other agencies due to size and once again, lack of resources.

Dr. John Meis: So, they know there’s going to be fraud when they try to push this much money into the economy that quickly and the way they were given very little information. We know there’s going to be fraud, they’re just trying to limited it to make sure that it’s small bits of fraud, right?

Drew Schaefer: Right. So, that’s probably just formalizing and making it easier if they would have, in all practical circumstances, moved forward with any sort of investigations. So, I think that’s where a lot of the individual practices would fall, under that. The group size would kind of fall in the next tier, most likely, between $150,000 and $2 million. And, that’s not dissimilar to under $150,000. The only difference really is that they’re basically saying, “hold onto your proof for 3 years because, who knows, down the road we might want to come back and look at this and you could be subject to an audit or investigation.” But, really focusing on the $2 million and above, those are the ones they’re going to focus on for investigation and make sure there’s not anymore people like the fella down I think in Florida that was out buying Ferraris or something with the PPP money. That’s what they’re focused on, not the mom-and-pops that are just trying to survive. And then, the other thing they’re talking about is potentially a second round which, as this persists and there continues to be shutdowns across the country and there obviously is a lot of guessing as far as what will happen now that schools are kind of opening up as well, is a second round of PPP for borrowers if they can show a pretty drastic decrease in revenues, between 20-50%. That’s probably going to be more going to be on the hospitality and restaurant side.

Dr. John Meis: Entertainment.

Drew Schaefer: Exactly. In the dental industry, I think everybody we’ve talked to has come back relatively strong and it would take a large, extended shutdown to have that decrease in revenue year-over-year.

Dr. John Meis: So, now onto the next one.

Drew Schaefer: Yes.

Dr. John Meis: They’ve done such a great job creating clarity around this one, haven’t they Drew? (Laughs)

Drew Schaefer: Well, they make sure to be as vague as possible so they can interpret it however they want to later is what I’ve concluded. (Laughs) And, I’ve essentially had somebody tell me as much from the Department of Labor. So, this is regarding the FFCRA, and if you’ll remember this was put in place in April and it was a way for individuals, whether they were showing systems of Covid, taking care of somebody at home who had symptoms or has been diagnosed with Covid, or just doesn’t have childcare, which is really in our industry, the bigger issue is childcare. I know our schools came out today saying in our school district that they’re starting out online, where they had already pushed it back 2 weeks. So, it’s one of those things, as schools open up, then they don’t open up, what all of these parents are supposed to do. So, this when it originally came out in April it was interpreted more to be more for the first responders, hospitals, that are directly dealing with treating the coronavirus. So, this is for all companies under 500 employees as well. So, you could get an exclusion if you could show hardship but that’s always kind of challenging as well.

Dr. John Meis: Dicey and unpredictable, yeah.

Drew Schaefer: Exactly. And, you might say it’s a hardship and they might say, “nope, sorry.” But, there was a specific carve-out for healthcare providers or emergency-responders and the key was in how they defined “healthcare providers” that really kind of goes to my comment earlier about being purposely vague. So, if you go to the next slide Dr. John. And, it defines anybody that works in a doctor’s office, hospital, etc., which obviously dentists are a doctor’s offices. And, when I talked to a DOL representative, they said the key is that last line, “or any similar institution, employer, or entity.” So, the feedback I got is if you so much as look at gauze pad, you qualify for this exemption.

Dr. John Meis: And, with the current links between periodontal disease and the more severe form of Covid, it would be hard to exclude dental practices in this, really, because there is a link and it does make sense.

Drew Schaefer: And so, the exclusion is, as I mentioned for dentistry, I think a little more important on the side of looking at long-term absences of employees for childcare potentially. And, the ability for an office to stay open and provide patient care becomes impacted, that person’s job is still protected but it makes it very challenging for all parties involved. So, different firms have been following up on this since April as far as giving clarity to who’s a healthcare provider. It’s really hard to get anybody to put anything in writing but we’re getting feedback from talking to different resources at the Department of Labor that were saying consistently across different resources, saying the same thing, that by this definition, a dentist office would qualify. And my interactions with the DOL, her comment was they kept it purposely kind of vague and open to interpretation. So, I think a lot of groups have moved towards the exclusion. I mean, the important thing is to be consistent in however you treat it so that you’re not favoring any individuals or classes versus others. So, the most important thing is consistency, and that link and that slide come straight from the DOL website, so that is their literature. But, the best thing you can do if you want to claim an exemption is to call your DOL office and they’ll ask you what your size is, the nature of your industry, and then more likely than not they’ll tell you something consistent or they’ll point you to the PDF that’s referenced there. Ideally, try to get a name of the representative and request it in writing. I got a first name, I didn’t get a last name and I wasn’t able to get it in writing, so like most things there’s so much ambiguity and inconsistency that nobody’s going to put their name to anything. What’s happened more recently, just last week, is that a federal judge in New York basically said that the “healthcare provider” definition is too broad, and so in New York, I would say you probably would not want to try to claim yourself as exempt since the judge in New York has specifically ruled on that. The thing to be decided is how the DOL responds. And, I think as we’ve seen through many different levels of things that have come out with Covid, no different than when the PPP loans were said to be tax-free, any forgiveness would be tax-free and then the IRS says, “well, yeah the forgiveness is tax-free but not the expenses that has paid for them.” So, you’re going to pay for it in taxes, I think that’s where a lot of the different branches and organizations are getting sideways of each other, which makes it very hard for companies to know which direction to go and do the right thing within the guidelines. So, it’s one of those things that will continue to evolve, but you can only do your best with the information that you have at any given time.

Dr. John Meis: For sure. Now, the next one.

Drew Schaefer: So, the last one is the most recent development as far as nationwide funds specifically for dentistry. So, there was some very large funding in the original CARES Act for healthcare services, healthcare providers, really intended to help with all the extra PPE required to be bought, lost revenues if you think about a hospital setting, just the lost revenues due to the elective surgeries and everything else being cancelled over that period. So, the initial funding out of the CARES Act went more towards hospital organizations, most important, to keep them all afloat with liquidity to treat what was expected to be a huge surge in Covid patients. So, what came out more recently, around July 10th, is that they added another $4 billion and expanded the definition to specifically include dentists. I think when this first came out people were focused on the PPP, and with the definition not specifically stating dentists, I don’t think too many even went down this road. So, originally rolled out July 10th to dentists, and the original deadline was July 24th I believe, so you had 2 weeks just to get your... what they were doing is basically confirming your taxpayer ID number and confirming that, interfacing with the IRS just to determine eligibility. And so, the calculation was pretty simple as it shows on the HHS website, it’s a calculation, just 2% of gross revenue from your most recently-filed tax return. So, I guess the key there is “most-recently filed tax return”. I think it could go back to 2017, but since it is a percentage of gross revenues, if you have not yet filed your most recent tax return and your 2019 shows a higher revenue, it could be worth your while to file that, because that’s what they’re going to confirm against. So, the deadline was originally set for over 2 weeks ago. It’s been extended twice now, and it’s currently at August 28th, and that’s just getting your TIN approved. I have a feeling they have a certain amount of money and they might just keep extending it until they run out, but obviously you want to get it in before it runs out. I have heard about offices getting funded already. So, there is money funneling through for dental organizations.

Dr. John Meis: This is just a giveaway, this isn’t a loan, right?

Drew Schaefer: This is a giveaway, yes.

Dr. John Meis: So, for the typical million dollar practice, it’s $20,000. And, as you go up in groups higher than that, it’s a significant amount of money.

Drew Schaefer: Yeah, and it’s a very easy application. Getting your TIN approved, that application ideally could take as few as 10-15 minutes. And ultimately since it’s tied to your tax return, my expectation is really that’s going to be the main proof. And, since their coordinating with the IRS, they probably already have that information. So, there are a few requirements, and the one that’s not on here that’s most important is that you must not be excluded from participating in Medicaid, that’s the key. It doesn’t say you have to actively participate, you just can’t be excluded, whether it be for fraud or anything else. There’s been some other Medicare general distributions that you can’t have been a part of. Really the most important ones are: you have to have filed your tax returns recently, which they’re a stickler for that for some reason (laughs), you had to have been providing dental care by the end of January. Basically, you’re an existing dental practice and you’re continuing to provide care, because that’s the ultimate goal, to help with the lost revenues, the additional PPE cost, etc. The application, for DSO structures out there, it makes it a little harder to think through. It‘s clearly set up more for the sole practitioner, but regardless, for the free money that comes to 2% of revenues, it’s well worth the time to invest and you won’t be out a whole lot of time if, for some reason, it doesn’t come through.

Dr. John Meis: Yeah, sure. Awesome. Well Drew, thanks for that update. I so appreciate you being on the team here at Spark, you bring a lot of expertise and I really appreciate you spending this time to bring all of our listeners up to date. So, thanks everybody for being on another session of The Strategic Thinker. We’ll see you next time.

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