ERC for Medical Practices: Understanding Your Eligibility

Medical practices, dental offices, and healthcare providers were significantly impacted by COVID-19 restrictions—particularly bans on elective procedures. Many healthcare businesses legitimately qualify for substantial ERC claims, but the IRS is closely examining these claims. Here's what healthcare providers need to know.

How Medical Practices Qualified for ERC

Healthcare providers could qualify through several pathways:

• Elective procedure bans: State and federal orders banned elective surgeries and non-essential medical procedures during various periods in 2020-2021.
• Office closures: Many medical offices were ordered to close for in-person visits except emergencies.
• Capacity restrictions: Limits on patient volume, waiting room capacity, and appointment scheduling.
• PPE and supply disruptions: Some practices couldn't operate due to inability to obtain required protective equipment.
• Gross receipts decline: Many practices saw significant revenue drops due to cancelled appointments and procedures.

The Elective Procedure Question

For many medical practices, the key eligibility issue is elective procedures:

• What counts as elective?: Procedures that could be delayed without immediate health consequences—routine checkups, cosmetic procedures, non-urgent surgeries.
• Partial suspension: If elective procedures were more than a nominal part of your practice, banning them created a partial suspension.
• More than nominal test: If elective procedures represented more than 10% of your operations, the ban likely qualifies.
• Documentation needed: You should document what percentage of your practice was elective procedures.

Common Audit Issues for Healthcare ERC

The IRS examines healthcare claims for:

• Essential business classification: Healthcare was often deemed 'essential'—but essential businesses can still qualify if operations were partially suspended.
• Telehealth continuation: If you shifted to telehealth, the IRS may question whether operations were truly suspended.
• Definition of elective: You need to show that banned procedures were a significant part of your practice.
• Timeline accuracy: Elective procedure bans varied by state and time period—your claim should match actual restriction periods.

Documentation for Medical Practice ERC

Healthcare providers should gather:

• State health department orders: Orders banning elective procedures or limiting healthcare operations.
• CMS guidance: Federal guidance on procedure postponement.
• Practice revenue breakdown: What percentage of revenue came from procedures that were banned.
• Appointment records: Showing cancelled procedures and reduced patient volume.
• Operational changes: Documentation of how you modified practice operations.

Potential ERC Amounts for Medical Practices

Healthcare providers can claim significant credits:

• Per employee limits: $5,000 per employee for 2020, up to $28,000 per employee for 2021.
• Example: 50 employees: A practice with 50 employees could potentially claim up to $1.65 million total.
• Multiple quarters: If you qualified for multiple quarters, the credit compounds significantly.