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...Financing Future series found that more hospitals with broad access capital were rural than was expected. This indicates an improved capital access environment for rural hospitals and a greater market acceptance of rural hospital credit risk.
Recent regulatory changes have improved the financial viability of rural hospitals and increased their eligibility for capital financing options. Under the federal critical access hospital program, rural hospitals now can receive cost*based government reimbursement for their capital expenditures. This added reimbursement allows more small hospitals to qualify for 'AAA'-caliber financing rates secured by mortgage insurance and direct guarantees of the HUD/FHA Section 242 program and U.S. Department of Agriculture community facilities program.
Presented here are the thoughts of four professionals who have experience in the financing of construction projects--a banker and three executives from rural hospitals that are replacing facilities or have undertaken other construction projects.
ROUNDTABLE DISCUSSION
How critical is the need for America's rural hospitals to be replaced?
Richman: Over the past a5 years, operating losses at many small hospitals have left facilities in disrepair and with obsolete medical equipment. These factors contribute to the loss of patients and physicians to tertiary hospitals. Rural hospital closures jeopardize local economies and the health of residents. Yet there is new optimism for the financial viability of small hospitals. The critical access hospital program, growing political support for rural America, and improving hospital profits now make financing a construction project possible for many rural hospitals. Although loans to rural hospitals may still be considered risky, the federal government and, to some degree, the capital markets now recognize the credit strengths of rural hospitals and the urgent need to deliver affordable capital to rebuild these essential hospitals.
Moore: The physical state of our a5 bed hospital, built in 1959, can shed some light on the problem. You cannot get a wheelchair into a patient's bathroom unless it is folded up. The boilers, elevator, plumbing, and electrical infrastructures are antiquated and it is hard to find parts for them. The low ceilings in our facility wouldn't meet current air exchange ratios. All of these problems were only going to get worse with each year. So we decided to replace the whole facility with a new one, which opened in January 2005.
Hays: Many rural facilities are plagued with old and inefficient mechanical systems, code compliance issues, and the presence of asbestos. The layout is geared...
NOTE: All illustrations and photos
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