The Federal
Housing Administration (FHA) helps hospitals access affordable financing
for capital projects. Since the program began in 1968, FHA has insured
over 325 hospital mortgages for a total in excess of $9.8 billion.
Clients range from small rural facilities to some of the nation's
top urban teaching hospitals. FHA insurance enables clients to enhance
their creditworthiness because their debt is backed by the United
States Government. In fact, FHA-insured hospitals usually obtain
the lowest interest rates available to their segment of the market.
Uses
for FHA-Insured Loans
- Construction
Financing
- Refinancing
- Modernization
- Remodeling
- Equipment
- Expansion
FHA
insurance can be used for new or existing hospitals.
Coverage,
Cost and Conditions
- Loan-to-value
may not exceed 90%
- Maximum
loan term is 25 years
- One-time
fees total 0.8% of loan amount
- Fixed
annual premium is 0.5% of remaining balance
- FHA
insures 99% of the loan amount
Mortgage
Lenders
Hospital
loans may be originated by any FHA multifamily lender. A list of
lenders active in the hospital program is available on request.
Minimum
Eligibility Requirements
Your
facility must be an acute care hospital with no more than 50% of
patient days attributable to the following services: chronic convalescence
and rest, drug and alcoholic, epileptic, nervous and mental, mental
deficiency, and tuberculosis. For Critical Access Hospitals (CAHs)
this restriction does not apply.
If
your state has a Certificate of Need process, a CON must be issued
or pending.
You
must grant the FHA-insured lender a first mortgage on the entire
hospital, including property, plant, equipment, and receivables.
(Note: Exceptions may include leased equipment, off-site property,
capital associated with affiliations, etc.)
You
must be willing to make monthly payments into a Mortgage Reserve
Fund that will build to a balance equal to two years of debt service
after ten years.
Over
the last three full fiscal years, the hospital's average operating
margin must have been equal to or greater than 0.00 and the average
debt service coverage ratio equal to or greater than 1.25.
Critical
Access Hospitals
Recently
designated CAHs should calculate their historical operating margin
as if they had been receiving cost-based reimbursement to find out
if they meet the operating margin test described above. FHA has
a streamlined loan process for CAHs.
Rio
Grande Hospital in Del Norte, Colorado was the first CAH insured
under the Section 242 Program (July 2003).
How
to Get Started
If
your hospital
meets the minimum eligibility requirements described above, we invite
you to discuss your plans with us. We will ask for information such
as the past five years' financial statements, operating statistics,
business plan, and project description. Based on its analysis of
eligibility, risk, and market need, FHA
may schedule a pre-application meeting with you and your project
team. If the project initially appears to be financially sound,
FHA will invite you to submit a full application.
For
More Information
1-(877)-263-0763
toll-free or (202) 708-0599
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