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Rural hospitals are in dire straits. Photo: Ben McCanna/Portland Press Herald via Getty Images

Small hospitals going through bankruptcy are suing the Small Business Administration, arguing it is unlawful for the federal government to deny them loans under the Paycheck Protection Program.

Why it matters: Allowing bankrupt hospitals access to PPP loans could keep their doors open, and could force the federal government to reverse its stance and allow other bankrupt firms to get PPP loans.

Driving the news: Faith Community Health System, a small rural hospital in Texas that filed for bankruptcy in February, sued the SBA Thursday.

  • The hospital wants to apply for a $2.4 million PPP loan to pay staff and remain open while it goes through bankruptcy and handles the coronavirus pandemic.
  • However, the SBA says bankrupt companies will not be approved for the bailout money because of their "high risk."
  • Faith Community argues the government agency doesn't have the authority to exclude bankrupt firms from PPP funding because the law doesn't spell out those eligibility requirements.

The big picture: Courts are starting to take hospitals' side.

  • A bankruptcy judge in Maine said the funding was a "grant of aid necessitated by a public health crisis," and that two hospitals that sued the federal government are entitled to PPP loans.
  • A separate bankrupt hospital in Vermont also should be eligible for PPP funds, a judge ruled this week.

The bottom line: Rural hospitals have been in dire straits for years, and for those that are on the precipice of or are going through bankruptcy, they may be eligible for this bailout funding despite SBA exclusions.

  • But bankrupt firms could still be in a bind if the government tries to "run out the clock" on these types of legal battles by waiting for the PPP funding pool to dry up.

Go deeper

Dion Rabouin, author of Markets
Aug 14, 2020 - Economy & Business

How small businesses got stiffed by the coronavirus pandemic

Illustration: Aïda Amer/Axios

The story of American businesses in the coronavirus pandemic is a tale of two markets — one made up of tech firms and online retailers as winners awash in capital, and another of brick-and-mortar mom-and-pop shops that is collapsing.

Why it matters: The coronavirus pandemic has created an environment where losing industries like traditional retail and hospitality as well as a sizable portion of firms owned by women, immigrants and people of color are wiped out and may be gone for good.

Why learning pods aren't a panacea for remote learning

Illustration: Aïda Amer/Axios

Pandemic learning pods — also called microschools or co-ops — are popular options for parents looking to fill in the academic and social gaps for children who will be learning virtually come fall.

How it works: Across the country, groups of parents are pooling resources to hire a teacher, tutor or child care professional to preside over a small cohort of students, direct their studies and provide general supervision so parents can work.

Aug 15, 2020 - Health

Arizona teachers' strike over coronavirus concerns cancels class

Illustration: Sarah Grillo/Axios

A school district near Phoenix, Arizona, said it will not reopen on Aug. 17 as planned because too many teachers have refused to show up over health and safety concerns.

By the numbers: More than 100 of the approximately 250 teachers who work for the district said they would be absent on Monday, a district spokesperson told AZCentral on Friday.