Financing Options

Karen Minich-Pourshadi, for HealthLeaders Media , June 10, 2010
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4. Build America Bonds. These are taxable notes and as of 2009 only public entities can use them, but only for new construction, acquisition, or other capital expenditures—not for refinancing. BABs were part of ARRA and they reimburse 35% of interest cost (or 45% in special recovery zones). However, this is another opportunity that's going to disappear soon; it expires on December 31, 2010.

Also, depending on the level of funds a facilities needs, it may want to look into using multiple options simultaneously. "If you put all your eggs in one basket and one falls through, you've lost a lot of time," says Hahn. "If you can multitrack the process and not duplicate cost, then as things fall off, your search just gets more refined."

There is another nontraditional path to financing that merits mentioning: philanthropy. Though not an area that healthcare facilities traditionally think of when looking for financing options—especially for larger projects—it can be used to underwrite smaller capital projects, or very long-range ones if it is done correctly, says Jeff Rooney, a partner with Atlanta-based executive services firm Tatum LLC and interim CFO for Saint Agnes Medical Center in Fresno, CA.

"Philanthropy is a huge untapped opportunity for most hospitals," he says. "One of the first hospitals I worked as a CFO did a great deal of community fundraising and basically it was an important source of capital," he says. "They were a faith-based operation, and they realized that many of their donations came from those who had a good experience with their doctors and their hospital. They made it a priority to reach out to them."

Regardless of which financing option you decide to pursue, Hahn says facilities really need to ask some hard questions and be honest about getting to the bottom of the answers.

"Get your house in order before you go looking for any money. Benchmark yourself to the credit median; get all your core operating metrics together; and don't make the banks go looking for your money," she says. "And be sure that what you are looking to finance is something that is revenue generating; you want to be able to show them how this project will positively impact your bottom line."


Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media.

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