In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) outbreak a global pandemic. The COVID-19 pandemic continues to cause disruption in the economy, in terms of increased costs and disruptions in the labor market. Although vaccines and booster shots for the COVID-19 virus have become widely available in the United States, COVID-19 has continued to result in a significant number of hospitalizations, and the future course of the pandemic remains uncertain, particularly due to the spread of COVID-19 variants. We will continue to closely monitor the impact of COVID-19 on all aspects of our business, including the impacts to our employees, patients and suppliers.

In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic, the Federal Reserve and Congress have taken dramatic actions to provide liquidity to businesses and the banking system in the United States. One of the primary sources of relief for healthcare providers is the CARES Act, which was expanded by the Paycheck Protection Program and Health Care Enhancement (“PPPHCE”) Act, and the Consolidated Appropriations Act (“CAA”). The American Rescue Plan Act of 2021 (“ARPA”), one relief package with numerous provisions that affect healthcare providers, was signed into law in March 2021.

ARPA provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law provides for a 10-percentage point increase in federal matching funds for Medicaid home and community-based services (“HCBS”) from April 1, 2021, through March 31, 2022, provided the state satisfied certain conditions. States are permitted to use the state funds equivalent to the additional federal funds through March 31, 2025. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.

HCBS spending plans for the additional matching funds vary by state, but common initiatives in which the Company is participating include those aimed at strengthening the provider workforce (e.g., efforts to recruit, retain, and train direct service providers). The Company is required to properly and fully document the use of such funds in reports to the state in which the funds originated. Funds may be subject to recoupment if not expended or if they are expended on non-approved uses. During the year ended December 31, 2021, the Company received state funding provided by the ARPA in aggregate amount of $1.0 million. The Company recorded revenue of $1.0 million and related costs of service revenue of $0.7 million for a state which met the revenue recognition criteria. During the twelve months ended December 31, 2022, the Company received state funding provided by the ARPA in an aggregate amount of $23.4 million. The Company recorded revenue of $1.9 million and related cost of service revenues of $1.5 million for certain states that met the revenue recognition criteria. The Company deferred the remaining $21.5 million, which was received from states with specific spending plans and reporting requirements. The Company utilized $8.6 million of these funds during the twelve months ended December 31 2022, primarily for caregivers and adding support to recruiting and retention efforts, $7.0 million included as a reduction of cost of service revenues and $1.6 million included as a reduction of general and administrative expenses in the Company’s Consolidated Statements of Income. As of December 31, 2022, the deferred portion of ARPA funding was $12.9 million, which is included within Government stimulus advances on the Company’s Consolidated Balance Sheets.

In addition, the CARES Act authorized funding to be distributed through the Provider Relief Fund to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers. In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund. The Company utilized $12.3 million remaining of these

funds during the year ended December 31, 2021 for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. The Company documented the use of such funds in 2021 in reports to the U.S. Department of Health and Human Services (“HHS”), as required, and submitted the reports to HHS prior to the deadline of March 31, 2022. During the year ended December 31, 2022, we submitted an unmodified audit report to HHS for 2021 in accordance with Generally Accepted Government Auditing Standards, as required for commercial organizations that received and expended total awards of $750,000 or more.

The CARES Act and related laws temporarily lifted the Medicare sequester which would have otherwise reduced payments to Medicare providers by 2%, as required by the Budget Control Act of 2011, from May 1, 2020, through March 31, 2022. The sequestration payment adjustment was phased back in with a 1% reduction beginning April 1, 2022, and returned to 2% on July 1, 2022. These sequestration cuts have been extended through 2032.

The ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 (“PAYGO Act”). As a result, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022. However, Congress delayed implementation of this payment reduction until 2025.

In the hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $1.4 million and $2.9 million for the years ended December 31, 2022 and 2021, respectively. In the home health segment, Medicare sequester relief resulted in an increase in net service revenues of $0.3 million and $0.5 million for the years ended December 31, 2022 and 2021, respectively

The CARES Act also provides for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes through December 31, 2021. The payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half of the eligible deferred amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Company received a cash benefit of approximately $7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020. Effective July 1, 2020, the Company began paying its deferred portion of employer Social Security payroll taxes and repaid $4.1 million and $3.0 million as of December 31, 2022 and 2021 respectively.

Government stimulus advances consisted of the following:


	December 31,
	2022		2021
	(Amounts in Thousands)
Payroll tax deferral	$	—	$	4,173
ARPA funds		12,912		—
Total government stimulus advances	$	12,912	$	4,173