FHA: Helping Hospitals
Get Capital Financing

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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.

• Construction Financing
• Refinancing
• Modernization
• Remodeling
• Equipment
• Expansion

FHA insurance can be used for new or existing hospitals.

• 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